Evolution of Supply Chain Strategies - Research Paper Example

Evolution of Supply Chain Strategies Name Institution Name Date Table of Contents Table of Contents 2 Introduction 3 Study Aims 4 Objectives 4 Report Highlights 4 Literature Review 5 Current View of the Supply Chain 9 Future Supply Chain 13 Analysis and Discussion 16 Conclusion 19 References 20 Introduction The viewpoint held particularly in the operations management literature is not new; it has been in existence since mid 20th century. Operations management is an area that has and still undergoing evolution. Supply chain has its roots in production engineering, industrial engineering, and factory management which were essential making it inclusive and combining together manufacturing strategy with operations, supply chain management as well as service operations management. Literature with regard to the steady evolution and practice of supply chain can be traced back to at least one and half decades ago (Ross 2010). Supply chain management has immense impact on operations management particularly to the modern business community. The supply chain encompasses planning and managing activities of the supply chain including procurement and sourcing, manufacturing and managing logistics activities (Shah 2009). Accordingly, collaboration and coordination with members of the channel like final customers, third-party service providers, suppliers, and intermediaries. This particular business entity; supply chain management is responsible of integrating and managing demand and supply across different entities and within companies. This paper extensively discusses supply chain strategies evolution because these strategies are continuously shifting from lean strategies to an integration of agile and lean techniques. Through evolution of technologies with regard to the supply chain, companies are moving away from stand alone and dynamic entities to global and inter-organizational systems (Khan & Zsidisin 2012). These systems are instrumental in increasing the availability of information across the entire network of the supply chain and hence it demands higher trust levels and co-operation among the partners of the channel. Given this understanding, the report provides the study aims and objectives together with expansive literature review with regard to evolution of supply chain strategies, as well as analysis and discussion of the literature. Similarly, the relevance of these strategies and how they will influence future supply chain trends will also be widely explained. Study Aims The primary aim of this research is to give expansive understanding strategies of supply chain evolution and how they affect future supply chain management trends. Objectives Specific objectives of the study include: i. To discuss different literature reviews in relation to supply chain strategies evolution ii. To provide expansive analysis and discussion of strategies of supply chain evolution iii. To determine the influence of supply chain strategies evolution on future supply chain trends Report Highlights The report provides an excellent analysis of supply chain evolution; for instance, supply chain origins including physical distribution practices are discussed. Accordingly, the current supply chain aspects together with activities involved including, coordination, collaboration, information sharing, and building of relationships among the supply channel members are discussed inherently. The future perspective of the supply chain is also discussed. Literature Review Supply chain management concept comprises of various factors in the nature of evolution with regard to how companies co-operate as well as compete. Virtual teams, sharing rewards and risks, integrating business processes, improving information sharing together with the long term relationship development with vital suppliers are some of major activities involved (Shah 2009). This concept is not limited to a company but rather positions the company as an entity within an enormous network whereby many companies work in partnership (Ross 2010). In this regard managing an independent organization within such a network requires managers to create competencies which involve developing and orienting the supply chain as well as philosophy creation among managers, supply chain vision is aligned with critical operations; discovering and acknowledging that competition is possible between supply chains as it is between independent organizations (Khan & Zsidisin 2012). Organizations’ systems and processes have been experiencing immense pressure to become agile and flexible for them to maintain as well as increase their levels of competitiveness. For instance, this trend was initially founded in the practices of flexible manufacturing systems. It was established that for any company to achieve manufacturing agility, they have to develop competencies in various different areas (Shah 2009). The information system for example is one of the key areas as it is one of manufacturing flexibility enablers (Ivanov & Sokolov 2009). Accordingly, other factors should be exhaustively taken into consideration and be addressed accordingly to make sure that information systems that are potential contribute to extended agility degree (Ross 2010). Agility model described also allude that independent organizations are unable to achieve extended levels of agility through singular concentration on its own operations and strategies. For this reason, the agility model proposes that an organization depend on activities and strategies of suppliers, and thus the supply chain management must be adopted for the company to achieve maximum levels of agility (Khan & Zsidisin 2012). Supply Chain Management (SCM) since its invention has and still is taking the logistics field by storm given the fact that many different business fields are adopting and embracing it and ensuring that all their activities areas are embedded in it. Supply chain management can be traced back or can be compared with physical distribution and logistics (Kouvelis, Chambers & Wang 2006). It is not a new concept but an evolutionary construct; for instance pioneers of logistics had many ideas that are still by the day today enthusiasts of supply chain management. For instance, as early as 1964, Heskett and others observed that goods and services transferred from one organization to the other demands for coordination and collaboration between various partners of the channel beginning with producer to the ultimate or final consumer. The figure bellow shows the evolution of the supply chain management (Shah 2009) Retrieved from: http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103-65132006000300002 Physical distribution logistics and its Emergency Extensive studies as well as practices of physical distribution together with logistics came into play and became prevalent in the mid 20th century. The costs of logistics during these times were very high. The discovery of these costs compelled one expert to describe physical distribution as “the most sadly neglected, most promising areas of American business” (Ballou, 2006, p. 24). Accordingly, during the aforementioned period, production and marketing had become relatively mature and thus physical distributions together with logistics were increasingly demanding for managerial attention (Kouvelis, Chambers & Wang 2006). With regard to this, outbound orientation of physical distribution were the first to be created given the fact that it represented a substantial percentage of costs of logistics and hence was regarded as a marketing mix element of essential components (Khan & Zsidisin 2012). The broader scope of business logistics included inbound movement emerged soon after the emergence of outbound movement. The basic definition of physical distribution is that aspect of business management that is tasked with the transfer of raw materials and finished products together with the creation of the system of movement (Ballou, 2006). Some experts have established that there is little difference when making a comparison between original physical distribution vision and logistics and supply chain management of the current times. Despite the fact that physical distribution being associated with outbound movement of products, the above definition reveals a wider concept that comprises of outbound and inbound product movements (Ross 2010). Accordingly, business logistics are also described in physical supply terms of as well as physical distribution which occur across the channel; from the initial product provider to the final customer (Shah 2009). These concepts far more similar to the current supply chain management concepts (Azadegan 2011). Regardless of the above definitions suggesting a wide perspective for logistics and physical distribution, main focus to coordinate among the activities occurring within a business unit, while less efforts were directed towards connecting and coordinating with other functions within the organization and/or with external organizations or channel partners (Khan & Zsidisin 2012). Such limitation was mainly necessitated by the lack of appropriate and relevant technologies of information systems during this period as well as the difficulty in wide area responsibility management (Kouvelis, Chambers & Wang 2006). The sections missing in the above definitions of the supply chain was referencing directly to purchasing and production (Cooper, Lambert & Pagh 1997). In some instances they were only implied and thus were not adequately considered in logistics education. Similarly, great efforts were mainly geared towards channels of transactions while physical distribution was treated lightly. For instance, logistics activities were claimed to be part of production and thus a part of production function (Khan & Zsidisin 2012). In addition to this, utilities such as place and time were also regarded as logistics or physical distribution functions (Ross 2010). Despite, production and marketing being functions established within the business and closely being associated with physical distribution, the absence of efforts and attention propagated the development of physical distribution to become an independent business function and as a completely new entity within the business organization’s structure (Ivanov & Sokolov 2009). Current View of the Supply Chain From the figure above; various components must work together; the entire supply channel is made up of coordination that must be embraced at all times to ensure the success of supply chain management (Agrawal & Smith 2009). In essence, the ideas raised in the figure above form the foundation of the supply chain management as seen and practiced by current business organizations (Ross 2010). Various attempts have been made to try and distinguish between supply chain management from logistics; due to this, logistics was established as a sub set of the supply chain. Supply chain management is defined as the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities (Ballou, 2006, p. 21). Significantly important, it involves the collaboration as well as coordination with channel partners including intermediaries, suppliers, the ultimate customers and third party service providers. In the same line of discussion, logistics are defined as that part of supply chain management that plans, implements, as well as controls the efficient forward and reverse flow and storage of goods, services, together with related information between point of origin and point of consumption in order to meet customer needs (Ballou 2006, p. 25). The above definitions significantly explicitly bring out procurement/purchasing and conversion/production and include them in the material flows management scope. Consequently, great efforts are fostered on collaboration, coordination, together with building relationships between and among channel members which are not in the management of logistics entity. In this regard, the supply chain management is regarded of being three dimensional in nature; interfunctional coordination, activity and process administration, and interorganizational coordination. For instance, it is responsible for managing inventories, transportation, and order processing activities together with warehousing which are under the jurisdiction of the function of logistics. Interfunctional coordination in this essence is collaborating and building relationships within the same firm; creating relationships with other functional areas like between finance and marketing, and production and marketing. Interorganizational coordination on the other hand involves collaborating and coordinating the flow of products among members of the channel; the relationship is between companies not owned or operated by the immediate firm (Khan & Zsidisin 2012). The figure below shows how the current supply chain manage product flows across different members of the supply channel while product flows management within the same firm is viewed as the logistics responsibility (Ross 2010). This is largely different the early visions of logistics (Kouvelis, Chambers & Wang 2006). Retrieved from: http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103-65132006000300002 Supply chain management is contemporarily is thought and viewed as responsible for a set of processes management; the process in this regard there are various activities groups that are essentially essential for accomplishing well defined processes like filling orders. Marketing is a function of the organizational which made up of a set of activities that are tasked with developing, communicating, and offering customer value to customers as well as customer relationship management in a manner which profits the company together with its stakeholders (Sarkis, Zhu & Lai 2011). Lambert et al., (1998) identified the following supply chain management processes including: management of customer relationships, management of customer service, demand management, order fulfilment, manufacturing flow management, product development and decentralization, supplier relationship management, and management of returns. Combining these activities will provide a holistic representation of the supply chain management. Furthermore, the function, it is paramount for them to be coordinated in a collaborative manner and management of relationships through different supply channel members starting with primary producers to the ultimate customers (Ross 2010). Currently, there are various discussions with regard to the advantages of collaboration among different members of the supply channel together with extending the product flow management scope to include the entire supply channel; however, the extent to which this is practiced according to the theoretical definition of supply is questionable. The investigation conducted by Fawcett and Magnan (2002) established the reality and their findings are summarized in the figure below. In practice, only few organizations achieve the potential of the theoretical integration. Approximately, 50% of the surveyed companies are endlessly working towards achieving integration within their own firms. Similarly, it is still not clear whether thisintegration of functions is attributed to the implementation of large software system like SAP or the use of actual collaboration and compromises. Accordingly, Fawcett and Magnan (2002) also found out that approximately 30% of the companies investigated their integration efforts directed towards their first-tier or immediate suppliers and further than this, less effort is given to integration of the whole channel. The main reason for these difficulties is tied to hurdles experienced in reaching effective collaboration as well as limitations that competition comes with like unwillingness share proprietary information (Ross 2010). The figure below shows the current supply chain management operations scope. Future Supply Chain Having clear knowledge of the past together with observing the current trends is essential in forecasting how the future of supply chain management and/or logistic will be. Companies are trending towards globalization, outsourcing, and free trading; these are key elements contributing to the continued logistics and/or supply chain management growth. In essence, there will be a shift in strategy. Initially, logistics/SCM focus was on efficiency; The last frontier of cost economies (Ballou, 2006). Currently, SCM is contemporarily viewed as demand generating frontier; and the weapon for competitiveness. Given these two views, the supply chain will a significantly essential element in the future; however, great efforts will be directed towards creating and supply chain operation in order to improve the company returns thus positioning its profits (Khan & Zsidisin 2012). According to this establishment it is largely possible that it will replace the initial strategic objective to minimize costs of the supply chain to make sure service requirements of the customer thus elevating the supply chain management (Craig & Easton 2011). The future goal will be established to increase revenue effects; ROSCA (Ballou, 2006). The main aim of ROSCA is maximizing returns on supply chain assets. Retrieved from: http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0103-65132006000300002 Revenue is the supply chain’s contribution to the company’s sales, Costs are the supply chain’s expenses incurred in the processes, and Assets are the facilities and equipments that the company invests in to support the supply chain processes and activities. Managers are commonly associated with calculating the returns on investment and/or ratio of costs to assets as a measure to evaluate the strategic alternatives values. For example, investments to enhance customer service, the return on investment understates the advantages of the strategy through omission of its sales improvement possibilities (Ballou, 2006). Not only ROSCA is an enhanced measure, but also is essential in estimating revenues; this is extremely difficult and thus further research is required (Ballou, 2006). In the future supply chain management, coordination and collaboration will become the backbone for companies to achieve the benefits and values of the supply chain management (Khan & Zsidisin 2012). For instance, in the event that all partners of the supply channel win equally, due to their cooperation, realization of benefits will be likely as well as relationships maintenance (Ross 2010). However, this is hard to achieve and it mostly doesn’t occur; in the future this dilemma must be solved. It has been established that there are various formal and informal mechanisms through which benefits of the cooperation of the supply channel can equally be shared across the channel partners (Ballou, 2006). These techniques include: order quantity minimum and price adjustments (Boyer & Verma 2009). For instance, the company selling the merchandise can offer incentives like sales discounts to stimulate buyers to order and purchase products in quantities that not only lowers the buyers costs through price reduction but also reduce the sellers cost. Consequently, order-size minimums can also set by the seller in order to encourage more desirable order quantities (Ivanov & Sokolov 2009). The mechanisms which are regarded as informal do not distribute funds directly across the partners of the channel; however, indirectly incentives are offered to encourage and maintain cooperation among the channel members. For instance big companies can employ coercive power strategies to force other members of the channel to do as they wish (Hugos 2011). On the other hand, referent and reward power organizations are associated with offering benefits to cooperation by using techniques like training. Collaboration among partners in the supply channel is regarded as the epicenter of managing the supply chain and thus it is the key to future success (Khan & Zsidisin 2012). Collaboration among channel members has several features including; managing supply chain of legally separate but vertically related firms; represents untapped opportunity due to the fact that members of the channel work at cross the channel; there must be trust and cooperation which avenues for developing and realizing coordination and collaboration advantages. Accordingly, advantages of redistribution need metrics for identifying and measuring benefit potentials; information sharing between members of the channel ensures trust building and cultivation; and the method of sharing should be one that ensures fair distribution of benefits. In summary, supply channel collaboration demand for information sharing, cross-boundary information system, interorganizational metrics, benefit identification avenues, and cooperation benefits sharing methodologies. Significantly important, information system that is interorganizational and one that is directed towards providing essential information in order for the channel partners to see the opportunities of supply chain enhancement is needed. Tracking the flow of benefits of cooperation will be easier by using such a system (Snyder & Shen 2011). Analysis and Discussion There are various lessons that can be derived from initial supply chain. For instance, physical distribution and logistics that are regarded as the origin of the supply chain were envisioned to encompass wide and broad responsibilities for managing all activities and processes linked to product flows from the first producer to the final consumer (Hitt 2011). Despite of the fact that the scope of the field being wide, actual practices of management was limited to activities coordination in the logistics function. Only product flow activities. Similarly, management of cross-boundary was embraced; however, less was put into practice (Khan & Zsidisin 2012). Accordingly, in the initial supply chain, the concept of total cost was basically used for managing collectively specific activities. For instance, inventory control and transportation activities were collectively managed as they were within the cost conflict. On the other hand, activities related to flow of products as well as cost trade off displays were also taken to be part of logistics and/or physical distribution. Logistics and physical distribution were embraced seriously by both production and marketing fields; however, they never took into consideration product flow issues. Due to this, physical distribution as well as logistics started developing as independent functions within the business organization (Khan & Zsidisin 2012). This undertaking was largely catapulted through realization that logistics costs were high and there was no any mechanism of decreasing them. Similarly, among production, purchasing, and areas of physical distribution, less or no coordination existed despite the fact that they impacted directly impact on the management of product flow (Ross 2010). Coordination later became a major theme particularly in the current supply chain. By critically product flow management in the current time; various conclusions can be drawn. For instance, great efforts and focus are significantly directed towards supply chain management (Ross 2010). For this reason, it can be established that, management of the supply chain is largely tasked with recognizing the opportunities of integrated management of the processes of the product flow across functions as well as between channel partners (Blanchard 2010). Furthermore, logistics is currently taken as a sub-unit of the supply chain; the scope logistics is only limited to the boundaries of the function within the company and is mainly concerned with administration of activities (Ballou, 2006). The interorganizational and interfunctional management is now under the supply chain management purview and not logistics as it was earlier viewed. Purchasing and production are currently included in the scope of supply chain management. Additionally, there are various functional entities within the company that embrace management of supply chain which increasingly in vulnerable of becoming a broad business entity to loose its identity and focus. Regardless of coordination, integration, relationship building among channel members, and collaboration across the entire supply channel being promoted by the supply chain management, the extent to which the SCM effectiveness is limited. For instance, it is on between immediate or first-tier suppliers and the firm (Khan & Zsidisin 2012). The current SCM operation is logistical in nature. In this regard company managers are called upon to exercise supply chain management particularly to make sure that benefits are measured and well documented together with the tools and techniques required to meet the benefits should be refined (Ballou, 2006). The growth of logistics and supply chain management in the future will continually grow in importance given the fact that companies will unendingly pursue outsourcing, expanding their international operations as well as expand their businesses to global economic environment (Movahedi, Lavassani & Kumar 2009). The singular objective will be managing product flows for which the current supply chain management trend is set. In order for the future supply chain to be effective, the following aspects of the supply chain must be addressed: i. Strategies for generating revenue for the supply chain will significantly be as essential as cost reduction. (Ballou, 2006). ii. Identifying SCM bboundary-spanning effects may be easy; however, they are hard to realize. iii. Trust, collaboration and coordination will the most important components of realizing boundary-spanning opportunities. (Ballou, 2006). iv. Sharing information among members of the channel will continue given the continuously advancing technology v. There is need for boundary-spanning metrics to help in identifying the benefits of the supply chain as well as track their location along the channel (Ballou, 2006). vi. Benefits sharing techniques will need to be redefined and refinement. vii. Purchasing, ooperations, and logistics, will emerge organizationally, and are likely to be under the supply chain banner (Ballou, 2006). Conclusion Supply chain issues have been discussed widely since mid 20th century. Various experts in the field conducted extensive studies and practices of physical distribution together with logistics emerged and became prevalent in the 1960s and 1970s. The costs of logistics during these times were very high. Due to these establishments, various efforts have been made to try and reduce the aforementioned costs. Physical distribution was discovered as one way to help in the management of the flow of products from the initial supplier to the final consumer. Physical distribution is the area of business management responsible for movement of raw materials and finished products together with the development of the movement system. Physical distribution was largely associated with outbound movement. The current supply chain demands various components to work together; the entire supply channel is made up of coordination that has to be embraced at all times to ensure the success of supply chain management. For instance, there is emphasis on coordination, collaboration together with relationship building between and among members of the channel that are not in the logistics management entity. The future supply chain emphasis will be directed towards designing as well as operating the supply chain in order to improve the returns of the company in a manner that is positioned to maximize contribution to profit. For this reason, collaboration and coordination will be the backbone of achieving the values and benefits of the supply chain. The growth of logistics and supply chain management will increasingly grow in importance because companies will unendingly pursue outsourcing, expanding their international operations as well as expand their businesses to global economic environment. 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