Global Trends in Supply Chain Management - Essay Example

Supply Chain - The Global Trend Supply chain management is essentially an altered philosophy of business organization, based on the concept of partnerships in the marketing channel (Waters, Donald, ed. Global logistics 231-233). The traditional setting was based on interest of individual firms, in the trending setting, the organization has its fundamental rules, and the constitution based on an agreed agenda. In the recent developments, more companies are expanding their programs to include suppliers, and are coming up with the implementation of sustainability in their projects. The main aim is to carry out business without negatively affecting the culture of the people related to the organization, the natural environment, and the economy. Preservation of available resources is highly advocated. The inclusion of sustainability into a company’s supply chain may be complex but the absence of such action is a larger risk to the operating environment than the cost of incorporation itself. Companies should take initiative to implement sustainable supply chains. The parties of the chain should ensure participation, since the operating environment affects the business-and they are all stakeholders of the same. The focus on environmental management and procedures should cover more than just the responsible use of the environment during the production process, to the packaging, transportation and so on. Through handling and improving environmental, social and economic performance in the supply chains, the company can also preserve its resources. The trend involves green business, involving use of cheaper degradable material for packaging. The aim is to use less monetary resources while preserving the natural environment while avoiding unnecessary costs of production. Customers are after benefits, not necessarily products (Martin Christopher 23-24). The product should serve to capture interest, and the benefit (inclusive of quality) is the functional aspect of the product. Unless the product on offer is different from the competition in its own way, value advantage is the determining factor. The employment of value advantage serves to preserve the economy of the region of operation. The customer goes after the cheapest supplier, in the case where the product is similar. Use of cheaper methods of production means that the market does not have to suffer price shifts, which affect the regional economy. The need for sustainability of prices is clear, if a company is to stay relevant amongst its competition- who may be applying similar policies. Cost advantage is advised- in terms of economies of scale. The fixed costs are spread over larger volumes, and thus use of resources is optimized. This can be coupled up by the fact that the organization becomes the low- cost producer in the market and fully uses the available resources. The same also gives the company a reputation; amongst its competition as well as the customers for particularly competitive (affordable) products. Companies can map out their supply chains to start with- and by gaining a comprehensive understanding of the effects of sustainability projects in their chain. The companies can also prioritize the efforts with suppliers. This will include the level of spending by the company, the importance to the business community and geography as a risk pointer. Reduction of expenditure is a step towards cost reduction. Companies should begin incorporating cost reduction options in procurement and structure of projects. This way they end up promoting choice of consumers and performing value optimization. There exists a balance between value advantage and cost advantage. When cost advantage is optimized with low value advantage, there is the existence of the ‘cost leaders’. This player attracts high-end customers. This is poor strategy if the producer is after sustainability, since they use resources heavily and end up hurting the regional by increasing the price value index. The producer with both low value and cost advantage offers the ‘commodity market’, which includes a lot of cost reduction, sometimes offering products lower quality. This type of organization also upsets the price index (lowers it). High value and cost advantage application is for the ‘cost and service leader’, this party is fixed, as they focus on provision of high quality and service- they have similar effects as the cost leader. With high value advantage and low cost advantage comes the ‘service leader’. This player is flexible, changes with the market- and cannot affect the price index- this organization has sustainable practice. There has emerged a trend towards commoditization, it includes the presence of a perceived product equality (in the eyes of the consumer), and a high preparedness by the producer and related parties to substitute the make of one product for another. This trend serves to preserve the culture of consumers. The culture may involve loyalty to specific brands or the whole range of products (Martin Christopher 174-177), an example being kosher food. They might be willing to purchase a different product, in case of changes in the availability or features and technicalities. This is only advised in adverse and cutthroat competition markets; otherwise, preservation is key in sustainability. Shoppers have differing behavior when faced with an out-of –stock situation, as opposed to the notion that they would just pick another item. According to a May, 2004 study; 9% would not purchase the item, 15% would delay the purchase, 19% would substitute with the same brand, 26 % would substitute with a different brand and 31% would seek out the product in another store (Corsten D.& Gruen T. 6-7 ). This is an indicator of consumer loyalty to the standard product. Looking at the larger picture the majority opts to remain loyal to the product. This is a large percentage, and the option of diversifying the product to align with the pre-existing cultural setting offers the product longevity of life, at the same time preserving the culture, enhancing sustainability. The transport intensity of freight has been changing, along the lines of the changing trends. There has been a decrease in freight of low-value bulky goods, with the increase if higher value goods. The aim is to try to add value to the product nearest to the point of production. This ensures better utilization of the transporting facilities, and easier manipulation of the product nearer to the end (the consumer). This applies to many trades, across agriculture, manufacturing industries and other products. Higher value goods are obviously better at accommodating the costs than lower value goods; hence, transport cost sensitivity should be considered (Mangan John, Chandra Lalwani and Tim Butcher. 5-6). The preservation of the monetary resource leads to preservation of the cost index, and the economy. Another method involves material substitution, and is a virtual exchange. This contributes directly to the sustainability by preserving regional economy. There has been emphasis on inventory reduction recently. Inventory management is carried out, to find out where the funds of the company are tied up, and lining up of expenditure to ensure better usage of the monetary resources. This also involves avoiding cases of fraud, and unrecorded losses. The same is also done in other organizations such as transport, purchase and marketing. Management of inventories also helps in cost saving and elevated efficiency in an organization. (Mangan John, Chandra Lalwani and Tim Butcher. 17) The main drawback of adopting sustainability is the initial cost in the changeover. Some critics argue that it is an unnecessary step to preserve the operating environment. This is partly true, as there is a cost. Its necessity is however underrated. The future of business is in sustainable systems, and the trends are catching faster with time. New businesses are building on sustainability as advertising strategy, and since the trend is being adopted, it here to stay. Some critics have also termed it as a move by the major companies to stamp out the minor players in the market, by installing expensive methods of environmental preservation. This is only true in the case that the company in question decides to make the transition instantly. Sustainability is a process that is a long-term investment in the operating environment. Its returns are to be seen in the future as the market transforms to accept this concept further. In general, organizations should adopt newer methods in their operation, to enhance performance and quality of the product. Practicing supply chain managing personnel should integrate sustainable methods of production such as practicing green business. The supply chains should attempt cost reduction, which has benefits to the company as well as the economy. The long- term investment has obvious benefits in terms of public recognition and cheaper products. Preservation of the cultural state of the operating environment is also important in the sustainability program. Works cited Waters, Donald, ed. Global logistics: New directions in supply chain management. KoganPage Publishers,2010. Corsten D., Gruen T.: Harvard Business Review. Harvard University Press. 2004. Stevenson, William J. and Mehran Hojati. Operations management. Vol.8. Boston: McGraw-Hill/Irwin, 2007. Mangan, John, Chandra Lalwani, Tim Butcher. Global logistics and supply chain management. John Wiley & Sons,2008. Carter, Craig R., and P. Liane Easton.Sustainable supply chain management: evolution and future directions. International Journal of Physical Distribution & Logistics Management 41.1 (2011): 46-62. Linton, Jonathan D., Robert Klassen, and Vaidyanathan Jayaraman. Sustainable supply chains: an introduction. Journal of Operations Management 25.6 (2007): 1075-1082. Wisner, Joel D. Principles of supply chain management: a balanced approach. Cengage Learning, 2011. Dyckhoff, Harald, Richard Lackes, and Joachim Reese. Supply chain management and reverse logistics. Springer 2004. Read More