Supply Chain Management as One of the Greatest Company's Aspects - Term Paper Example

Sustainable Supply Chain Management Table of Contents Introduction 2 Literature Review 3 Methodologies of Supply Chain Management 5 Implementation of sustainable supply chain 6 Requirement of Strategy Formulation 8 Introduction to Toyota 9 SCM in Toyota 10 Agenda 21 11 Toyota &Agenda 21 14 Conclusion 15 References 16 Bibliography 19 Introduction The supply chain management is one of the most used words in the present day business. In order to cope with the changing scenario of the trading environment, supply chains of the present day business needs to be essentially sustainable. Supply chain management holds important part in any business. SCM or supply chain management is defined as the proper flow of resources, information and money from suppliers to producers to distributors and then to end users. Often, it includes after sales service and recycling. Supply chain management has received tremendous importance in recent years and it also gave birth to the term ‘bullwhip effect’ (phenomenon in which variability increases in moving up the supply chain from consumers to grocery stores and up wards). The three basic principles of supply chain management in any organization are procurement, internal operation and product development and stewardship. In the procurement chain, the goods and service are source from exterior supplier and in internal operation, the impact of logistics and exchange process from unrefined materials through to the consumer and again back to the logistics are done and whereas in product development and stewardship, the association will only work with customer and sales channel. Literature Review The supply chain management is defined as a theory of management which helps an organization to get a summary of the whole supply chain environment and helps them to administer assistance in the network of supply chain based on the complete view of the environment (Jespersen & Skjott-Larsen, 2005). The supply chain can be broadly categorized into three categories namely the basic supply chain, extended supply chain and the ultimate supply chain. A basic supply chain consists of an association directly linked with an instant customer and an instant supplier, connected with the one or more than one of the upward or downward progress of products, information, finance and services. The extended supply chain mainly consists of second line of suppliers of the instant suppliers and the second line of customers of the instant customers connected with the one or more than one of the upward or downward progress of products, information, finance and services. The ultimate supply chain involves all the companies that are associated with all the upward and downward progress of products, information, finance and services to the final end user from the original supplier. Thus, supply chain management is an essential factor for an effective organizational operation (Mentzer, 2001). The supply chain management is basically classified into twelve areas namely: Location: It is mainly concerned with the qualitative plus quantitative side of the location pertaining to geographic information system, duties and taxes, transportation costs etc. Transportation and logistics: It covers all the functions from transportation to warehousing and material handling etc. Inventory and forecasting: It includes inventory and forecasting models to analyze the existing inventory and future needs. Marketing and channel restructuring: It deals with the main structure of supply chain and its boundary with marketing with respect to dealing with downstream customers. Sourcing and supplier management: It mainly looks upward to the suppliers. Information and electronic arbitrated environments: It uses information technology to decrease inventory. Product design and new product introduction: It usually looks after the issues of mass customization and new product introduction. Service and after sales support: It mainly looks after the very vital but usually over looked aspects of sales and after sales. Reverse logistics and green issues: It is mainly concerned with the environmental factors and concern of product revisit concerned with reverse logistics. Outsourcing and strategic alliances: It mainly analyzes the impact of outsourcing logistics on the supply chain. Metrics and incentives: It usually analyzes the external factors pertaining to other organization and economic issues Local issues: It mainly analyses the impact on the above mentioned factors as the company works in other countries. (Johnson & Pyke, 1999). Methodologies of Supply Chain Management The process of supply chain management comprises of the following methodologies: Planning: This is an essential part of the supply chain management as companies need a precise plan to administer their resources that would provide the final product to the customers. The main aspect of the planning strategy of the supply chain management is that to develop a sustainable strategy that is competent of delivering high quality goods to the end users, at an optimal cost. Source: It is another vital part of the supply chain management as it refers to the main source / suppliers that are needed by the companies to create their products / services. The supply chain managers must create a monitoring system that could look after the fee process, pricing and delivery and to create and maintain cordial relation with the suppliers. Make: This phase is completely associated with the manufacturing process. Here, supply chain managers creates plan essential for producing, checking, packaging, preparation and delivery. Delivery: This process is completely linked with the entire gamut of logistic process which ranges from order reception of customers to delivery to the customers via warehousing facilities. Return: This is a network of the SCM that looks after the inward movement of defective and excess goods from the customers to the company and also from the sustaining customers who have problem with the delivered goods. (Wailgum, n.d.). Implementation of sustainable supply chain In today’s dynamic environment, it is no longer enough to have efficient supply chain management in place. Rather, the business organizations essentially require sustainable supply chain management. Sustainable supply chain management can be implemented with the following steps: Step 1: Look at the inner process first and plan the personal risks The organization needs to be familiar with what they have to recognize, understand and manage issue within their association before they begin tie up with new organization in their supply chain to test out that their issues are effectively managed throughout the organization. Step 2: Recognize the supply chain This implies that the organization at some point of time, fit within other supply chains. There may be some trouble for the company with particularly difficult supply chains. In this case, the companies assign a supply chain manager that gives him the whole responsibilities for purchasing to forwarding and even reversing the logistics that provides with necessary focus. Step 3: Making the business sustainable In many of the organizations, the organization appoints a sustainable development manager that facilitates an organization to provide responsibility in one person’s hand which benefits the organization. Step 4: Adopt measurement utensils which work for the organization In this process, the written policies and communications materials, prequalification of suppliers using social, economic and environmental criteria while purchasing guidelines and suppliers’ partnerships are precisely notified and documented. It is very important measure for the overall success. Step 5: Recognize initiative throughout the organization which can get everybody involved within and externally The initiatives need to be driven from the top but the organization will only succeed if all the group members are involved. For the purpose, the overall commitment of the organization is very much desired. The prime advantage of supply chain has been to help the business organization in re-evaluating their supply chain from purchasing, scheduling and even managing the use of the material to shipping as well as distributing final product with an emphasis on improving ecological and social performance that helps the organization to resolve their mistake about their products (New Zealand Business Councils for Sustainable Development, 2003). Requirement of Strategy Formulation Strategic formulation is an important division of strategic management procedure. It comprises of three stages: 1. Diagnosis: It is basically the analysis of the internal environment of the organization, its potency and flaws, its objectives and strategies etc. 2. Formulation: Formulation mainly deals with the modifications of the existing policies and strategies to make the organization more successful. This phase tries to create a sustainable competitive advantage irrespective of the opposing efforts of the competitors. In this phase there must be a complete fit between resource, competencies and also the opportunities. 3. Implementation: This phase mainly deals with the formulation of all the strategies and policies as how good a strategy may be but it is void without a proper implementation (Mitchell, n.d.). Also, it can be said without much hesitation that a good strategy formulation is only viable if it is a combination of three main things namely the competence, opportunities and governance. Competence - Competence is that aspect of a human being (or the organization, as the case may be) which reflect his/hers capability to perform a job. Competence is the most important concept in today’s world and is the most decisive factor for a business to succeed. Competence is required in diversity of activities ranging from task management to recruitment and training and development to advancement. Competence is particularly required to achieve the desired result for a business. Principally, competency concentrates on the important factor, namely, principals, skills, behaviors, process and techniques of an individual or an organization (Competency.Org, n.d.) Opportunities: Opportunity is defined as favorable circumstance that primarily brings benefits if utilized optimally. Identifying opportunities is a critical part for an entrepreneur as opportunities acts as a portal for success for any business firms. As a matter of fact, the letter ‘O’ of the SWOT analysis stands for opportunity. So, opportunity is one of the most important aspects for the organization (Shane & Nicolaou, n.d.). Governance: Governance is defined as the exercise of power and power to manage an organization effectively. Governance is an important factor of strategy formulation as it governs the whole program (Australian Government, n.d.). . Introduction to Toyota Toyota Motor Corporation, also known as Toyota, is a multinational company, whose headquartered is located at Japan, is a world leading automobile creator by sales. Around 320,000 people are working in this organization worldwide (Marr, 2009). The company was established by Kiichiro Toyoda in the year of 1937. The company also offers economic service through its Toyota Financial Service Division and also has diversified in to the segment of biotechnology and also build robots. The key team of this vehicle producing major organization comprises of Fujio Cho (Chairman and Representative Director), Katsuaki Watanabe (Vice Chairman and Representative Director), Akio Toyoda (President and Representative Director) and Shoichiro Toyoda (Honorary Chairman). Toyota has its presence all over world and the organization uses the principal of assembling or manufacturing vehicles for narrow markets. They have manufacturing or assembling plants at Japan, The United States, UAE, Australia, Mexico, Malaysia, India, Sri Lanka, Canada, Indonesia, Poland, South Africa, Turkey, Colombia, The United Kingdom, , France, Brazil, Portugal, Argentina, Czech Republic, Thailand, Pakistan, Egypt, China, Vietnam, Venezuela, The Philippines and Russia, among others. They also have non automotive activities like that of aerospace, philanthropy, higher education, robotics and agricultural biotechnology, to name a few. SCM in Toyota Many researchers have pointed out the importance of supply chain management (SCM) in competitive environment. As one knows that Toyota Motors has a manufacturing unit located at Jackson, Michigan and manufactures steering wheels and air bags and organization needs to manage cost issue effectively to buy necessary equipments and make the shape to the organization to make or buy decision. Toyota is using physical processes in operational procedures. They are using combine planning, sales arrangement planning, forecasting, production scheduling, logistics, managing suppliers and dealer location. The 4P model used by Toyota is firstly ‘problem solving’ in which non - stop improvement and knowledge process are done. Secondly, the organization duly respects to the ‘people’ and associates who are working for the organization. Thirdly, the company has developed ‘process’ in which all the waste products are eliminated and lastly, the ‘philosophy’ of the organization facilitates long term thinking is done for improvement of the organization. Agenda 21 Agenda 21 states that the policies that have an effect on trade along with the flow of worldwide finances have a major impact on sustainable development. The aim of these proposals is to liberalize trade, provide sufficient financial capital that would make trade and environment mutually helpful, and deal with worldwide debts and loans that would encourage macroeconomic policies related to environment and development. The developing countries should spread their economies in order to shrink dependence on commodity exports and trade policies should be jointly supportive within the countries. The role of the General Agreement on Tariffs and Trade (GATT) should be clarified and industries should be confident to play a positive role. It requires increased investment in developing countries and the efficient use of financial capital. The macro - economic environment should be confident, including steady interest and key exchange rates, inspiration of savings and reduction of fiscal deficit. The countries should remove barrier caused by bureaucratic inefficiencies and always give confidence to private sector and foster entrepreneurship. It also cover residents policies, education and health care, the right of women and the role of young people, local people and local community in order to enable all people to achieve a quality living. Women should also have full participation in decision-making. According to Agenda 21, it states that population factors should be carefully researched and a better understanding is needed among technology, cultural behavior, demographic dynamics, natural resources and life support system. The primary health care needs, facing various diseases, reducing health risk from environmental pollution and defending vulnerable groups such as infant, women, and various types of poor people are the part and parcel of the Agenda 21. It proposes for improvement in the social, environmental, economic quality of human resolution and working and livelihood environment of people in particular urban and rural areas and provides several programs as: Improving management of urban settlements Promoting sustainable property-use preparation and management Promoting power-efficient technology Providing sufficient shelter, different and renewable energy sources and sustainable transportation systems Enabling disaster-prone countries to plan for and recover from natural disasters Promoting sustainable production industry activities Providing environmentally noise - free infrastructure facilities Promote human source development and capability-building in all the above program areas. The full combination of environmental and developmental issues for governmental decision making on fiscal, common, financial, agricultural, trade and other policies are also the part of Agenda 21. It also focus to protect the atmosphere in four major areas like stratospheric ozone reduction, uncertainties in interconnected technical knowledge, sustainable improvement in regard to energy, transport, industry, and land and marine resources, and trans-boundary air toxic waste. Agenda 21 proposes for sustainable land-reserve organization and use focus on assessment-making. Effective integration implies that environmental, social and economic issues should be considered simultaneously. It states that the priority in hostility desertification should be defensive measures for lands that are not yet tainted or which are only to some extent degraded and also focuses on improving information about ecology and sustainable development of mountain ecosystems, and on promoting breaking point development and substitute employment for group whose livelihoods are linked to practices that degrade mountains. It also focuses on environmentally noise management of e.g. food, health, and environmental protection. According to Agenda 21, the spotlights on risk are posed by sedimentation, poisonous waste, harmful fishing practice and type of weather change. The proposal also include improved risk assessment, managing hazardous wastes, minimizing waste, reuse and recycling, extending ravage services and also addresses the critical need to involve major social groups in policies and activities in all of its programmed areas (United Nations, 1994). Toyota &Agenda 21 President of Toyota Motor Sales (TMS) has announced wide-ranging environmental agenda in response to the company’s sustainable mobility dream which will protect our environment from being populated and announced to bring plug-in hybrid electric vehicles, powered by lithium - ion battery that would be essentially environment friendly (Toyota, n.d.). Toyota has introduced new ideas & technologies which help them to lead the innovation among other competitors, for example hybrid gas - electric vehicle, eight speed automatic transmissions, advanced parking guidance system which helps the environment from populating. Toyota also started environmental defense agency ravage wise program in order to promote conservation of southern US forests that is also part of Agenda 21. Conclusion From the above analysis, it is quite evident that sustainable business proves is the most desired thing of the present day business organizations. With the changing businesses all around the globe, the efficient supply chain management is one of the most important aspects for the organizations. And it is all the more effective when the process of SCM is sustainable. Agenda 21 has been one of the guiding forces for the sustainable supply chain management. It is evident from this paper how Toyota Motors have ensured sustainable supply chain management and the way it has helped the company. References Australian Government, No Date. Governance. Publications. [Online] Available at: http://www.ausaid.gov.au/publications/pdf/good_governance.pdf [Accessed May 05, 2010]. Competency.Org, No Date. What is Competency? Home. [Online] Available at: http://www.competency.org/ [Accessed May 05, 2010]. Jespersen, B. D. & Skjott-Larsen, T. Supply Chain Management: In Theory and Practice. Copenhagen Business School Press DK, 2005. Johnson, M & Pyke, D., 1999. Supply Chain Management. Dartmouth College. 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