Chain Management and the Creation of Competitive Advantages - Case Study Example

Supply Chain Management and the Creation of Competitive Advantages Chain Management and the Creation of Competitive Advantages Supply chain management refers to a design and management with a purpose of adding value to the process of meeting customer needs, which transcends the organizational boundaries (Fawcet, Ellram & Ogden, 2007, 8). Moreover, it can be regarded as a management and control of relevant materials, financial resources, and information thought the logistic process. Hugo, Badenhorst-Weiss & Biljon (2004, 5) contend that supply chain management is a philosophy that is focused on integration of network of upstream interconnection, internal connections within the organization and downstream interconnection. In this case, upstream interconnection focuses on source of supply while downstream interconnection deals with distribution of commodities to customers. Therefore, SMG focuses creation and optimization of value in processes and activities for services and products that are offered in order to satisfy customer demands. SMG may also be considered an interrelationship and management of inflow and outflow of commodities and relevant information through a network that interlinks producers, manufactures and consumers (Samaranayake, 2005, 48). However, there is a need for a change in SMG, which is facilitated by a shift from individual functions of management to integration of necessary activities in the process. Some of the processes managed through SCM include management of customer relation, suppliers’ relationship service, returns, demand, flow of manufacturing processes and order fulfilment. Moreover, there are functions and facilities, which are entailed in the supply, chain activities such as conversion and transportation of commodities from a stage of raw materials to finished goods. Therefore, SCM can be conceptualized as a network through which suppliers and consumers are able to integrate demand and supply. In order to create a competitive advantage with through supply chain management, there are supply chain connections in the upstream and downstream flow of materials and information (Monczka, Trent & Handfield, 2005, 9). There are both physical and informational elements entailed in the process of SCM, which is perceived as creation of value chain network that consist of individual functional units. In addition, it entails upstream supplier network and downstream channels, whereby organization forms an integral part of the SCM. In this case, this calls for equitable performance in a way that facilitates achievement of organizational objectives. In other situation, supply chain management is applied as a way of gaining competitive through maximization of value, whereby it leads to generation of disparities between finished products. In fact, these different is vital to the customer and for supply chain as well, whereby it offers a means of satisfying customer needs (Chopra & Meindl, 2007, 22). On the other hand, SCM offers a platform for a competition based on value of products and services offered by an organization and collaboration with suppliers and customers. This leads to acquisition of a substantial market share, which is derived from consumers through satisfaction (Martin & Grbac, 2003, 25). Therefore, SCM creates an opportunity of gaining a competitive advantage through collaboration and cooperation aimed at improving the efficiency and market effectiveness that is vital to the customers. Nevertheless, gaining a competitive advantage through SCM requires planning of operations, whereby it is vital for facilitating the process of distributing commodities in the market to the consumers (Giménez & Ventura, 2002, 4). Moreover, there other issues considered in the process of designing and monitoring the supply chain; in fact, these issues include integrations with technology, collaborations with customers, partnership, outsourcing, and dealing with other social and environmental issues (Zigiaris, 2000, 7). Companies acquires competitive advantage through superiority of its products or better-quality services to their customers, though in a situation where there is an advantage of that is obtained from the superiority, the supply chain process is fully utilized by the company (Sehgal, 2011, 1). Nevertheless, some examples of competitive advantages obtained from supply chain management include: The company acquires time advantage from SCM, whereby business operations become faster compared to other organization focusing to achieve the same results. In fact, time advantage is well manifested through time spent to get commodities to the market place; thereby it creates a substantial analysis of all activities to support the process. Moreover, this SCM ensure that all activities in the supply chain process that are unnecessary are removed (Sehgal, 2011, 1). Therefore, this offers a chance of creating a premium product, which increases revenue, product life. In addition, intangible differentiators such as the value to brand or status of the organization are facilitated by time advantage. In this case, the organization is able to gain competitive advantage through development, which facilitates launching of new products. The other cost advantage gained through SCM involves superior businesses that are cheaper due to reduced expenses. In this case, a cost advantage is established through elimination of process that causes wastage in the organization (Mentzer, 2007, 1). Therefore, cost advantages optimizes the business processes that are within constrains faced by the organization in the distributing their commodities to consumers. In situations where supply chain processes are falling, there are increased chances of creating a finite cost advantage through effective implementation of SCM strategies. For example, the organization can focus on planning process that involve inventory through supply chain function. On the other hand, companies benefit from cost advantages through engaging in substantial manufacturing processes that require cheap inputs and a high level of technological integrations. In fact, technology integrations within the SCM improve automation of processes that increases the level of efficiency (Zigiaris, 2000, 7). Moreover, there are situations that require a reduction of set-up alteration, frequency of changes and increase of batch size through methods that reduce per unit manufacturing costs (Marcus, 2010, 9). There are superior manufacturing processes that increase comparability of structure, thereby allowing the short batch sizes, which lead to increased flexibility of factory schedules. Changes experienced in the business processes lead to improvement of existing structure of costs, which offer a superior process that is affordable to the organization. In fact, cost advantages facilitate improvements that are necessary to sustain advantages in the organization leading to expansion of the market share and profitability of the company. SCM offers efficiency advantage, which create superior businesses process that offers a high throughput that is evaluated on basis of the out of process per unit time. For example, efficiency advantages facilitate utilization of assembly in manufacturing companies. It also facilities full utilization of blast furnace in production of steel or utilization of warehouses for business dealing with merchandise. Moreover, some of the assets utilized in the context of effective advantages include machinery, technology, human capital, and thing that maintain or offer substantial function of business processes. Therefore, effective advantage acquired through efficiency is facilitated by automation of processes, simplification, and expedition of processes in the organization (Giménez & Ventura, 2002, 4). In addition, efficiency advantages offer a favourable condition that facilitates implementation of strategies that support cost based business. Effective advantage is also considered a form of organization flexibility, whereby process can be changed and the level of adaptability and response to change in the business environment is high. Moreover, organization are able to take opportunities offered by processes that are built improve quality of their commodities. For example, in manufacturing companies, the environment is typically depicted through a set-up of change time and the manufacturing industries are expected to respond to the dynamic demands in the business environment. Quality advantage is established through superiority of the business processes, which are created through reduction of defects on finished products that are offered to customers. Therefore, SCM offer a chance of creating quality advantage that is facilitated by standardization, automation and simplification of processes. For example, in the manufacturing companies, SCM offers companies of monitoring their performance through a statistical process control (SPC) in order to reduce the number of defects on products produced. However, there are conventional quality control processes that are applied in detection of defers on products before packaging. Therefore, SPS are approaches aimed at preventing production of defective products through monitoring of fundamental processes involved in the manufacturing process. By gaining a quality advantage, an organization is able to establish consistent processes that lead to the same results, which are dependable to the customers. In fact, this form of quality advantage is applicable to firms that not in manufacturing businesses. In this case, this advantage is aimed that improving the business function is a way that customers are able to get order fulfilment, establishment of ways to replenish their demand and services offered to customers. Moreover, there are chances that quality advantages assist on prevention of defects that are introduced, thereby reducing the cost incurred, and this results to improved customer fulfilment, amplified brand value and product permanence. Creation of a competitive advantage through SCM requires processes and capacity to fulfil two conditions; in fact, these conditions are the creation of value through superiority of the commodities offered by the organization. These commodities should be in a state that meets the customers’ expectation through value. The other condition involves creation of cost through a process of superiority, which is less compared to premium that is generated through processes. Therefore, meeting these conditions increases forms the fundamental step that ensures that the competitive advantage can be achieved by a company. However, in case cost-creating differentiation is higher than the premium generated, the entire system becomes cost competitive and these are not desirable results to the company. Where differentiation is lower based on cost or product features to purchaser; thus, they lack willingness to incur cost through premium payment. In this case, this leads to wastage of company resources; thus, a company is expected to deploy resources after analysis that can facilitate identification of cost-benefits involved in production of certain commodities. Therefore, the company is able to generate value through the differentiator based on the perception of the customers. According to Porter (1995, 55), competitive advantage is achieved when a firm becomes the lowest cost-competitor or through differentiating. In this case, in the supply chain context, competitive advantage is acquired through a consideration of factors such as reduction of cost and increase of responsiveness to customers’ needs. Therefore, a company seeks to reduce their cost through the effort of coordinating, collaborating and integrations with other parties (Skjoett-Larsen, Thernøe & Andresen, 2003, 531). Moreover, the objective established in the supply chain management is to satisfy the customer needs; thus, this creates a need to seek reliable understanding of the services and customer in a certain market segment (Mentzer, Myers & Cheung, 2004, 20). SCM strategies have been applied in different market situations such as internalization of dynamic markets conditions. For instance, companies require strategic logistical remedies in order to derive competitive advantage from their SCM processes. In conclusion, the paper has explored relevant ideas to support the notion that SCM is a creator of competitive advantage for an organization. Supply Chain Management has been applied as a tactical tool for various operations aimed at deriver of inputs and outputs in an organization. In fact, these activities also entail customer services, control of inbound and outbound logistics of information in a way that eliminates inefficiencies, costs and severance that extends form acquisition of raw materials to manufacturing, delivery and consumption of final products. In fact, it also focuses on final return of waste materials from the products for recycling or disposal. However, all the information that have been offered in this paper resonating around creation of competitive advantage through SCM. Therefore, the processes involved can be summarized through a model that simplifies the supply chain process into three management processes (Yusuf, Gunasekaran, Adeleye & Sivayoganathan, 2004, 379). One of the processes involves planning, which seeks to create a balance on the aggregate demand and supply in a way that develops a way of conforming to business rules, which are preferred by organization. Source as the other management process involves engagement in procedure that facilitates meeting of plans and demand of goods and services. Moreover, it entails management of sourcing infrastructure such as vendor contracts and payments. On the other hand, make as a function of management in the SCM focuses on the process that facilitates transformation of goods to finished state in a way that satisfies the demand. References Chopra, S. & Meindl, P., (2007), Supply chain management: Strategy, Planning and Operation, Upper saddle River, New Jessey: Pearson. Fawcet, E., Ellram, M. & Ogden, J., (2007), Supply Chain Management: from Vision to Implementation, Upper Saddle River, New Jersey: Prentice hall. Giménez, C. & Ventura, E., (2002), Supply Chain Management as a Competitive Advantage in the Spanish grocery sector, Universitat Pompeu Fabra and GREL-IET, Retrieved from: http://www.econ.upf.edu/~ventura/my-public-files/scm-gv.pdf Hugo, J., Badenhorst-Weiss, J. & Biljon, V. (2004), Supply chain management: logistics in perspective, Pretoria: Van Schaik. Marcus, I. (2010), Agile Supply Chain: Strategy for Competitive Advantage, Journal of Global Strategic Management, Retrieved from: http://www.isma.info/dosyalar/05-17_AGILE_SUPPLY_CHAIN_STRATEGY_FOR_COMPETITIVE_ADVANTAGE_%28Intaher_Marcus_AMBE%29.pdf Mentzer, J., (2007), Achieving Competitive Advantage through Supply Chain Management, IndustryWeek, Retrieved from: http://www.industryweek.com/articles/achieving_competitive_advantage_through_supply_chain_management_13355.aspx Monczka, M., Trent, J. & Handfield, B., (2005), Purchasing and Supply Chain Management, Cincinatti: South Western Mentzer, T., Myers, B. & Cheung, M., (2004), Global market segmentation for logistics services, Industrial Marketing Management, Vol. 33, pp. 15-20. Martin, H. & Grbac, B., (2003), Using supply chain management to leverage a firm’s market orientation, Industrial Marketing Management, Vol. 32, pp. 25-38. Porter, M. E. (1995), The Competitive Advantage of the Inner City, Harvard Business Review, May-June, 55-71. Samaranayake, P., (2005), A conceptual framework for supply chain management: a structural integration. Supply chain management: An international journal, 10:1, 47-59 Skjoett-Larsen, T., Thernøe, C. & Andresen, C. (2003), Supply chain collaboration, International Journal of Physical Distribution and Logistics Management, Vol. 33, No. 6, pp. 531-549. Sehgal, V., (2011), Understanding Advantage, Supply Chain Musings, Retrieved from http://www.supplychainmusings.com/2011/03/understanding-advantage.html Yusuf, Y. Y., Gunasekaran, A., Adeleye, E. O. & Sivayoganathan, K., (2004), Agile supply chain capabilities: Determinants of competitive objectives, European Journal of Operational Research, Vol. 159, pp. 379-392. Zigiaris, S. (2000), Supply Chain Management INNOREGIO: dissemination of innovation and knowledge management techniques, Bprhel Lassa, Retrieved from: http://www.adi.pt/docs/innoregio_supp_management.pdf Read More