Logistics and Supply Chain Management - Literature review Example

Name: xxxxxxxxxxxx Tutor: xxxxxxxxxxxx Title: Logistics and Supply Chain Management Institution: xxxxxxxxxxxx Date: xxxxxxxxxxxx Introduction Logistics and supply chain refers to a stream of procedures of moving products from the consumer order via the raw materials stage, supply, production and the distribution of end products to the consumer. All companies have supply chains of different degrees, depending on company size and the form of product made. The supply chain networks attain components and supplies, transform these materials into finished goods and then disperse them to the consumers. Supply chain management refers to the management of a network of interrelated businesses involved in the eventual provision of service and good packages needed by the end consumers. Supply chain management covers all storage and movement of raw materials, the work-in-procedure inventory and finished products from the origin point to consumption point. Basics of supply chain management The supply chain explains the pathway that services and goods flow so as to reach the consumer. All materials and effort and purchase involved in production and delivery of a service of product, from supplier to the customer constitute the supply chain. At every level of this pathway, supply chain professionals have the responsibility of managing the movement of goods information and services. Supply chain management needs managing demand and supply, sourcing raw materials, assembly and manufacturing, inventory tracking and warehousing, order management and order entry, distribution across every channel and delivery to the end consumer. Organizations depend on the supply chain managers to increase efficiency through integrating vital business functions. Actually, supply chain management is the sole discipline that is liable for incorporating activities like distribution, marketing, purchasing, planning and additional business functions within the supply pathway (Thompson, & Eisenstein, 2007). Levels of operation of supply chain management Supply chain management functions at three levels; operational, tactical and strategic. The tactical level entails decisions that are usually updated anywhere amid each quarter ad once each year. These decisions include production and purchasing decisions, transportation strategies and inventory policies, entailing the regularity at which the consumers are visited. Operational level defines everyday decisions, like lead time quotation, scheduling, truck loading and routing. The strategic level is concerned with decisions with a long lasting impact on the organization. This entails decisions concerned with product design, what to produce internally and which activities to outsource, strategic partnering, supplier selection and also decisions on the location, capacity and number of manufacturing plants and warehouses ad flow of materials via the logistics network (Jespersen, 2005). Factors that have led to an increasing in strategic importance of logistics and supply chain management within today’s business environment Increased cost awareness Over the years, customers have increasingly become acutely sensitive to prices. With the Internet enhancing consumers to make comparisons for any service or product easily, almost all services and products have become subject to a greater degree of commodization. Thompson, and . Eisenstein (2007) notes that so as to meet the demand of consumers for reduced prices, organizations have been required to outsource more operations so as to take advantage lower resource and labor costs in other nations. Nevertheless, in the pursuit of material and labor arbitrage afforded by the low cost offshore providers, organizations have presumed the considerable hazards of geographic dispersion ad higher costs of managing and operating more intricate supply chains. Novel competitive priorities in the manufacturing industries such as process and product conformance quality, delivery speed and reliability and responsiveness and customization to consumers, have forced several organizations to reprioritize cost factors which drive their international operations strategies. Numerous high technology industries have experience immense growth in capital intensity of their production facilities. For instance, a state of art semi conductor factory costs approximately five hundred million dollars. Correspondingly, vast numbers apply for production and development of new drugs within the pharmaceutical industry. These huge costs drive organizations to implement economies of scale strategy that will concentrate production in a sole location, usually in a nation that has a requirement of supplier and labor infrastructures. They then attain huge capacity usage of capital intensive facility through assertively pursuing the international market. In the real sense, trough off shoring business activities, businesses trade increased labor and other fixed costs for reduced variable costs. Subsequently, organizations are now faced with the requirement to manage these service providers more efficiently so as to make these variable costs as conventional as possible, whilst keeping them as down as possible in order to conserve profitability. As a consequence, supply chain performance, and particularly supply chain costs have caught attention of senior management today. Whist primarily concerned with the manner in which the supply chain may support the growth initiatives of their companies, the management is equally focused on ensuring growth is profitable. This is because the capability to execute targeted improvements to explicit supply chain functions, like transportation and distribution, can help promote an organization’s bottom line (Thompson, & Eisenstein, 2007). Technology Massive changes have taken place in supply chain due to availability of information technology. In this information age, the actuality of business activity goes on to drive a novel order of supply chain management. Senior executives are increasingly improving conventional manufacturing, purchasing, logistics, and marketing practices. Within this novel order of dealings, products may be manufactured to accurate specifications and quickly delivered to the consumers at places throughout the world. Logistical systems subsist and they have the ability to deliver goods at precise periods. The regular incidents of service failures that were a characteristic of the traditional supply chain management is highly being reinstated by an expanding managerial commitment to a zero defect or what is usually referred to as six- sigma performance(Chan, 2005). There is a rapid growth in the utilization of information and communication technology in logistics and supply chain management. Christopher (2005) states that ICT is currently being utilized in numerous companies in a variety of operation areas and has offered novel ways of storing, distributing, processing ad exchanging information within organizations ad with suppliers and customers within the supply chain. In supply chain management, information and communication technology has particularly enabled sharing of information which organizations in supply chain may utilize to eradicate bullwhip effect. Additionally, the utilization of information technology is regarded as a requirement for the efficient control of nowadays complex supply chains. There has been transmission of knowledge of technological knowledge and also low cost manufacturing sites have come out. In reaction to this transmission of technological capacity, multinational organizations need to promote their capability to tap numerous sources of technologies which are situated in several nations. They also should have the capability of absorbing technology quickly, ad effectively commercialize new technologies. For instance, there has been sharing of technology and interfirm collaboration such as the well recognized joint ventures in auto industry between Japanese and US firms (Chrysler- Mitsubishi, Ford-Mazda, and GM-Toyota). US firms are in the need of obtaining first hand knowhow, whilst Japanese producers are looking for ways of overcoming United States trade barriers and attain access to the enormous America auto market. As the competitive priorities in worldwide products markets change move towards customization of products ad quick development of new products, organizations are recognizing the significance of co-location of product design and manufacturing facilities abroad. Globalization With a great increase in globalization and offshore sourcing, the worldwide supply chain management is turning out to be a significant issue for all businesses. Like the conventional supply chain management, the underlying aspects behind this trend are minimizing procurement costs and reducing the risks linked with purchasing activities. The great disparity is that worldwide supply chain management entails an organization’s global suppliers and interests other than merely a national or local orientation. Since worldwide supply chain management normally entails a plethora of nations, it also normally comes with a surplus of novel difficulties that require to be tackled in an appropriate way. The senior management is thus required to consider the overall costs of the company (Walker, & Rushton, 2006). According to Walker, & Rushton, (2006), whereas the costs of labor may be considerably lower, organizations should also put more emphasis o the costs of tariffs, space ad additional expenses associated with conducting business abroad. In addition, the management should factor in exchange rate, conduct research and put into consideration to these diverse elements as a portion of their worldwide supply chain management approach. While organizations once imported ad exported through distributors or agents, globalization has forced many organizations to establish their individual offices in overseas markets. As these changes take place, the supply chain management dynamics are also altered, compelling executives to attain expertise in areas like labor law, transfer pricing, financial reporting, logistics, cultural sensitivity and languages. It is the capability to quickly adapt to these transformations that determines which organizations enjoys the highest levels of global success. For instance Apple Computer has built, a worldwide engineering and manufacturing infrastructure which facilitates in Singapore, Ireland, and California. This network enhances Apple to introduce novel products concurrently in the Asia, European and American markets. Organizations utilize the state of art markets as the learning ground for effective production and product development management, and then shift their knowledge to their additional production facilities in the entire globe. This basis explains why Mercedes Benz recently chose to locate a big manufacturing plat in Vance, Alabama. The organization identifies that the United States of America is the state of the art market for the sport utility vehicles. Mercedes Benz now produces these vehicles at Vance plant and introduces them to the entire world. Without an adequate understanding of the cause and impact relationships amid the macro economic deal ad requirement for tactical implementation, organizations can place prospects for profits but harm their competitive advantage. Considering that there are many drivers in a global transaction, managers are required to identify every participant within the supply chain and also define the specific role of each player in the transaction process. At the strategic level, plans that integrate supplier relationships management together with customer relationships management are crucial to the management of numerous theatres of operation ( Walker, & Rushton, 2006). Strategic supply chain management Jespersen (2005) argues that within the strategic level, the organization’s management makes high level strategic supply chain decisions which are pertinent to the entire organization. The decisions made at the strategic level reflect upon the entire corporate strategy that the company is following. The supply chain strategic decision establishes the general direction of the organization’s supply chain. These decisions are formulated in conjunction with the overall objectives of the organization as are not prejudiced towards ay specific regional location or product. These high level strategic decisions might be refined, as needed, to the precise needs of the organization at lower levels that allow for operational and tactical supply chain decisions to be formulated. Effective management should take into consideration the coordination of all diverse pieces of the chain as fast as possible without mislaying ay of the customer satisfaction or quality, whilst still maintaining low costs. The strategic supply chain procedures that the management decides upon cover the breadth of supply chain such as customers, product development, logistics and vendors (Jespersen, 2005). Product development In product development the senior management defines the strategic direction when reflecting on which products the company must manufacture and provide to their consumers. According to Christopher (2007), as the product cycle grows, or product sales go down, management formulates strategic decisions to create and introduce novel versions of subsisting products into marketplace, rationalizes the present product offering or develops a novel variety of services and products. These strategic decisions might entail the need to attain an additional company or sell the existing businesses. Nevertheless, when making these product development strategic decisions, the overall objectives of the organization must be the determining factor. Manufacturing Manufacturing decisions at the strategic level define the technology and manufacturing infrastructure that is needed. Based upon high degree sales estimates and forecasting, the organizational management makes strategic decisions on the way goods will be manufactured. These decisions might need novel manufacturing facilities to be created or increased production at the present facilities. Nevertheless, if the entire objective of the company includes shifting manufacturing to a foreign country, the manufacturing strategic decisions might incline towards utilization of third party and subcontracting logistics and as environmental matters affect corporate policy to a higher degree, it might affect strategic decisions of the supply chain with regards to the manufacturing of goods (Christopher, 2005). Customers At a strategic level, an organization is required to identify the consumers of its services and products .When the organizational managers formulates strategic decisions on the goods to be made , they are then needed to recognize the main customer segments where the organization’s advertising and marketing will be targeted. Logistics Like strategic decisions on the manufacturing locations, the role of logistics is the drive to the effectiveness and success of any supply chain. Order fulfillment is a significant portion of supply chain and organizational managers are required to formulate strategic decisions o logistics network. The operation and design of the logistics network has a considerable impact on the supply chain performance. Strategic decisions are made on distribution centers, warehouses and the modes of transportation to be used. When the overall goals of the organization identify the utilization of more third party subcontracting, the organization might strategically decide to utilize third party logistics organizations the supply chain (Christopher, 2007. Benefits of effective logistics and supply chain management Competitive edge via core competencies Supply chain management entails the maximization of added value and maximization of total cost across the whole trading procedure by focusing on the certainty and speed of response to market. As a result of globalization and information and communication technology, supply chain management has turned out to be a tool for organizations to at a local as well as global level. Supply chain management has become a requirement particularly for manufacturing industry because of the need to deliver products at competitive costs and at a greater quality than competitors (Christopher, 2005). Today’s business is operating within a competitive global environment. Businesses are required to operate at a low cost in order to compete and also develop individual core competencies to differentiate themselves from competitors and stand out within the marketplace. By creating competitive edges, organizations are required to divert their resources to focus upon what they perform excellently and outsource the tasks and processes that are not significant to the entire objective of the organization. Supply chain management has permitted organizations to rethink their overall operations and reorganize them so as to focus more on their core competencies and outsource business processes that aren’t within the center of the core competencies of the organization and as a result of the preset competitive market; it is the sole way for the survival of a company (Christopher, 2005). The strategy for the application of supply chain management not only affects marketing position of a company, but it also affects the strategic decisions on selecting the appropriate partners, manpower and resources. More focus o core competencies also allows an organization to develop niches and specialization of central areas. According to Chan, (2005), in order to develop a niche or position for competitive advantage, organizations are supposed to view the big picture of the entire process, and figure out which procedure can eliminate, reduce, create and raise competitiveness. Chan (2005) offers an example of the way automotive industries in Japan capitalize on their resources to create efficient and small cars. These automotive industries attain competitive advantage through using their supply chain to maximize their central competencies and position them in the niche market. This strategy works and currently Toyota Motor Corporation, a company in Japan, is regarded to be the best auto car manufacturer in the entire globe ahead of General Motors and Ford of the United States. Value added advantage Supply chain management has permitted today’s business to gain productivity advantage as well as value added advantage. As Christopher states, productivity advantage offers a reduced cost profile ad value advantage offers the offering or product a differential plus over competitive offerings. Through simultaneous maximization of added value as reduction of cost, more innovation is added to the process and product. Mass manufacturing offers productivity advantage but via efficient supply chain management, mass customization might be attained. Through mass customization, consumers are offered value advantage via customized adaptation and flexible manufacturing (Christopher, 2005). Additionally, product life cycles may be improved when there is effective supply chain management in an organization. According to Christopher, (2007) value advantage also transforms the conventional offerings of “one-size-fits-all.” Through supply chain management, the greatly accepted offerings by an industry to customers would be a range of goods catered to diverse customer preferences and market segments. For instance, the Toyota production system practiced by car manufacturer Toyota evaluates the supply chain of the corporation and establishes activities that are value added and that are not value added. Activities that are not value added activities are regarded to be waste ad thus are redacted. These not value added activities include waiting, overproduction, unnecessary transport, excess inventory, over processing, unnecessary movement and unutilized consumer’s demands. The Steps used in elimination of waste include just-in-time, Kanban, Kaizen and push-pull production in order to meet real customer’s demands. The Toyota production system revolutionizes the supply chain management towards growing into a leaner supply chain scheme that is highly flexible and agile towards meeting the demands of end users (Christopher, 2005). Conclusion Supply chain management has enabled modern businesses to lower costs ad deliver services ad goods in sustainable ad speedy way vial local, national and international markets. Due to globalization and communication and information technology, supply chain management has become a requirement for organizations to endorse because of the need to deliver goods ad services goods at a reduced cost ad higher quality than competitors. It has also enabled organizations to attain a competitive edge through rethinking their entire operations and restructure them in order to focus more on their core competencies ad to outsource business activities that are not within organization’s core competencies. Through strategic supply chain management, an organization is able to make long term supply chain decisions that are relevant to the whole organization. These decisions reflect upon the overall corporate strategy that the organization follows. Therefore, strategic supply chain management establisher the overall direction of the company’s supply chain and also considers the coordination of different portions of the supply chain, while maintaining lower costs and speedy delivery of goods ad services. Bibliography Thompson, R, & Eisenstein, D, (2007), Getting Supply Chain on the CEO’s Agenda, Supply Chain Management Review, 11(5)10-22. Chan, K, 2005, Blue Ocean Strategy. Harvard Business School Press, Massachusetts Christopher, M, 2007, Logistics and Supply Chain Management: Strategies for Reducing Cost and Improving Service' states, Financial Times/Prentice Hall, London. Walker, S, & Rushton, A, 2006, International logistics and supply chain outsourcing: from local to global, Kogan Page, New York. Jespersen, B, 2005, Supply chain management in theory and practice, CBS Press, New York. Christopher, M, 2005, Logistics and supply chain management: creating value-added networks, Prentice Hall, London. Read More