The Evolution of Supply Chain Strategies and How They Can Be Used for Future Challenges - Literature review Example

The Evolution of Supply Chain Strategies and how they can be used for Future Challenges (Name) (University Affiliation) Introduction Discoursing about the international trade and investment policy without acknowledging the centrality of Global Value Chains (GVCs), would be considered irrelevant and outmoded. The discourse can use varying idioms when referring to trade in value-added, but the key notion of globally joined-up production will always remain the same (Handfield, 1994). For instance, the discussion might use idioms such an off-shoring, production sharing, supply chains, fragmented production or vertical integration to explicate the concept of Global Value Chains. Many international agents and governments are working with various aspects on Global Value Chains to understand their different dimensions. Evidently, as it is widely accepted, change is inevitable and certainly most professionals in supply chain strategy and logistics attest to this. However, no consultant or organisation has a crystal ball to tell a client or rather the stakeholders how the organization should respond to change. Instead, what an organization can do is analyse some major events that happened in the past, learn from the events and consequently use the knowledge in predicting the future challenges (Handfield, 1994). Thus, learning about the evolution of supply chain strategies is significant in predicting as well as preparing for the future. Through the studying the past events of supply chain strategies, the industry gets an idea of what might transpire in the future in terms of challenges hence strategize how to handle them. Certainly, the supply chain strategies have undergone several changes in the past decade. Consequently, they have shaped the development as well as the technologies used in the supply chain strategies. Similarly, the supply strategies are likely to change the future chain and supply strategies. As such, this paper will delineate the evolution that the supply chain strategies have gone through the last decade as well how these strategies prepare industry for future challenges. For this objective to be realised, the paper will therefore, discuss on several aspects associated with supply chain strategies. First, the paper will give and brief historical perspective of the supply and chain strategies. Moreover, the paper will focus on the evolution of supply chain strategies in the past decade. In addition, the paper will touch on some evolution that happened in the early 1990s in order to depict the transition. Second, it will discuss on the evolution of supply chain strategies conceptual framework as well as the impact of purchasing and supply perspective on supply chain strategies. Third, the research will highlight the impact of transportation and logistics in supply chain strategy. Ultimately, it will also discuss on the use of unified supply chain strategy to curb future challenges and conclude by looking into the future aspects of supply chain strategies. Literature Search/Analysis and Discussion Historical perspective of supply and chain strategies Resultantly, the traditional purchasing as well as logistics functions have evolved over the last decade. The strategies have evolved into a wider strategic approach of materials and logistics management (Christopher, 1996). During the late 1990s, many service providers as well as manufacturers sought to team up with their suppliers with the intent of upgrading their purchases and the managing their supplies. From the upgrading, they were able to change the management of purchases and supply function from a clerical role to what is currently known as supply chain management. Tentatively, many wholesalers as well as retailers have merged their logistics functions and physical distribution into transport and logistics aspect of supply chain management. Accordingly, these wholesalers and retailers had to integrate the two in order to enhance competitive advantage. Equally, during the 1990s, firms dealt with increased demands for cheaper, better and faster logistical services. Consequently, many manufacturers had to contract out logistic activities thus their focus shifting to core competencies (Christopher, 1996). The external sourcing came with the benefit of an economically means of realizing efficiency and productivity. As such, they sought to achieve a more relationship-centered approach with the customer and supplier. The manufacturers understood the benefit of having a cooperative relationship with other companies in different chains levels (Christopher, 1996). According to Christopher et al. (1998), the cooperative relationship came with various advantages as well as benefits. First, the players gained synergy through the shared expertise as well as resources. Second, the cooperative relationship benefited from better planning and support. Third, the relationship gained from an exchange of information as well as a joint problem solving. Similarly, the increased global competition was a major influence to the relationship between the supplier and buyer (Christopher et al., 1998). In the 1995, the supply chain industry benefited from the establishment of what was commonly known as Enterprise Resource Planning (ERP). The introduction of ERP boasted the buyer-supplier relationship and the evolution of supply chain management a great deal (Christopher et al., 1998). Unlike the previous Information Technology resource planning systems such as Electronic Data Interchange, which were more concerned with inter-organizational integration, the ERP dealt with the intra-organizational integration. The evolution in the early 21st century came in with the introduction of more advanced Information Communication Technology such as the use of internet based solution systems. Accordingly, the use of internet-based solutions integrated both the inter-organizational integration and intra-organizational integration. Moreover, the relationship between the buyer and supplier during this period went notch higher, from the typical relationship to a long-term partnership and strategic alliances. Accordingly, manufacturers and retailers benefited from the supplier technology, strengths and capacity in support of the development as well as distribution channels of new product. For instance, firms used supplier strengths as well as technology to create label products that contribute the firms overall image (Christopher et al., 1998). The current trend of evolution in supply chain strategies has moved towards supplier relations systems globally: Global Supply Chain Management (GSCM) (Bowersox and Closs, 1996). Ideally, GSCM is the latest concept in the supply chain literature as now day’s companies are much bigger than they used to be. Moreover, firms have achieved economies of scale as the introduction of trade liberation policies has made them internationalize their businesses. Firms have gone international with the intent of exploiting the growing markets as well finding the lowest sources of inputs. Tentatively, new concepts and managerial strategies such as GSCM are emerging because the supply chain concept is not efficient enough and competitive in the current environment (Bowersox and Closs, 1996) After the 2001 World Trade Center in New York, supply chain and logistics professionals realized that the world had become insecure, and there was a need to take precautions (Caridi, and Cigolini, 2002). As such, firms were forced to be more aware of the uncertainty and risk the supply chain faced. Though uncertainty and risk were typical of the business intelligence as well as a consideration in decision-making, the events of terrorism across the globe make the key players in the industry to come up with contingency planning. However, terrorism was not the only concern as various businesses now were operating in the global market. Accordingly, suppliers, vendors and customers are located worldwide thus risks as well as uncertainties expanded significantly (Caridi, and Cigolini, 2002). In addition, the supply chains had become more effective, responsive and efficient. However, these merits came along with major shortcomings as the supply and chains became more vulnerable to disruptions. These disruptions came in various forms: power outages, cyber attacks, political instability, natural disasters and labor strikes. By the end of 2011, the error of cheap oil came to a stop as the commodity hiked from U.S $40 a barrel to US $100 per barrel (Caridi, and Cigolini, 2002). The sudden changes in prices in turn impacted the manufacturing and transportation of goods strongly. In effect, the costs of raw materials, manufacturing, transportation as well as warehousing increased tremendously. In that regard, in-shoring and off-shoring now plays an integral role as far as significant strategic issues of many firms are concerned. Evolution of supply chain strategies conceptual framework The introduction of supply chain management concept involves many factors that are in the evolving nature of organizations in regard to how they compete and corporate. These factors include sharing risks and rewards, creating long-term bond with chief suppliers, integration of business processes, use of virtual teams and improved information sharing (Morash, 20001). Further, the concept of supply chain strategy is not limited to the dyad. However, the concept positions the dyad as an element within a larger system (Caridi, and Cigolini, 2003). Thus managing a single firm in such networks demands that managers develop several competencies. Accordingly, the management should incorporate the information system, which would enable the firm to multi-tier integration (Morash, 2001). In addition, the management should make it known that there is competition between individual firms as well as supply chains. Furthermore, the management should facilitate for the growth of philosophies amongst themselves as well as develop supply chain orientation (Morash, 2001). Ideally, systems and processes within businesses are being pressured to be agiler as well as flexible. Accordingly, through flexibility the levels of competitiveness are going to be increased and maintained. Known as the practice of flexible manufacturing systems, this trend was in practice in the early 1990s. For organizations to achieve higher levels of manufacturing agility, they need to develop competencies in several areas. Though information system is one of the key factors, it cannot be relied upon as the only primary enabler. As such, other factor have to be considered and allowed the information system to work collaboratively with these other factors in contributing to higher levels of agility. The model of agility dictates that an individual firm cannot achieve high levels of agility by depending on the set strategies and operations alone. The model suggests that an individual business is dependent on the activities and strategies of the suppliers. Thus, the concept of supply chain management should for high levels of agility to be maximized. Evidently, researchers have recognized that the supply chains cannot depend on a homogenous strategy for its operation to be successful. As such, organizations need to develop innovative strategies as they may vary depending on the competitive environment’s characteristics (Fisher, 2003). According to Fisher (2003), supply chains can be categorized according to their nature and type. First, supply chains can be categorized by its nature (efficient or responsive). Second, supply chains can be categorized according to the kinds of goods or products they produce (functional or innovative). In effect, efficient supply chains are appropriate for functional products as this type of chain supply is flexible to any potential predictable demand. Moreover, they are appropriate for functional products since the products that are of low margin are cheap to operate. On the other hand, responsive supply chains are appropriate for innovative manufactured goods since they can respond to an alteration in demand, as well as speedy product life cycles. Since the margin in these types of products is higher, the increased revenue that has been achieved through responsive will often compensate for the extra cost of operating. The cost of operating is in this case associated with this responsive supply chain and products (Fisher, 2003). Notably, revenue is lost, and costs incurred by running a great deal of inventories. Moreover, firms used to incur costs due to their failure to position stock appropriately in the supply chain in order to meet the need of customers (Christopher et al., 2001). As far as supply chain is concerned, Christopher et al. (2001) introduces the lean and agile supply chains in developing these themes. The authors define lean supply chains as a situation where the volume is high while the product’s variability demand is low. On the same note, the authors further define agile supply chains as a situation where the product’s variability is high and the volumes are low. Equally, VanHoek et al., (2001) defined agile supply chain by associating it with five dimensions: virtual integration, network integration, customer sensitivity, process integration and measurement. However, Christopher (2000) posits that it is not always necessary for lean/agile concept to have a predictable or unpredictable demand every time. Thus, the supply chains strategies must be lean at some point while agile the agile takes the rest of the time. Similarly, Sharifi and Zhang’s( 2000) theory of “agility need” asserts that not all organizations pose the same level of need as far as far as the capability to be agile is concerned. Sharifi argues that the determination of this “agility need” level is based on the intensity of change in the business environment, the organization’s and environment’s characteristics. Moreover, van Hoek et al (2001) came up with a concept called “agility audit,” which complemented the “agility need.” The “agility audit” concept aimed at measuring the level of supply chain agility, which an organization possessed. As far as the operational perspective is concerned, agile supply chains have been associated with having time compressed business processes, utilizing virtual teams and making use of contract manufacturers. In addition agile supply chains have often been characterized as facilitating increased levels of speed of change for volumes and destinations. Equally, they have been characterized as having communicating synchronized market data through information systems targeting all the parties within the supply chain. Ultimately, the agile supply chain has been associated with utilizing the inventory policy with the intent of dampening the impacts of market related variance. For an organization to survive in a competitive environment, it needs to adapt supply chain individual strategies. However, adapting the supply chain depends on the behavior of the product as well as product portfolio decisions (Caridi and Cigolini, 2002). The impact of purchasing and supply perspective on supply chain strategies Ideally, almost all the recent literature about supply chain strategies often addresses the purchasing and supply viewpoint (Farmer, 1997). This viewpoint is similar to that of supplier base integration that develops from the traditional purchasing and supply management operations. This perspective accentuates that purchasing and materials management denotes a basic strategic business process, rather than a smaller specialized supporting operation to the overall business strategy (Farmer, 1997). The perspective is a management concept that incorporates the traditional internal operations by incorporating an inter-enterprise scope thus bringing together trading partners the sole goal of optimization and efficiency (Christopher et al., 2001). Supply chain management generates a virtual organization comprising of various independent unities with a key objective effective and efficient management of all its entities and operations. Equally, the independent entities manage the firms’ integration of purchasing, manufacturing planning and control, new product design, demand management and product development. Additionally, this perspective on supply chain strategy centers its attention on the manufacturing industry and gives very heed to the wholesaling and retailing industry. This strategy’s objective is often to increase productivity as well as minimize inventory and cycle time. Conversely, its long-term objective is to enhance customer satisfaction, profits for all parties in the virtual organization as well as market share. For this strategy to work, all the strategic parties are supposed to recognize that the purchasing role is a key link between the supply sources and the organization itself. Moreover, the partners should understand that support comes from different overlapping activities, which enhances manufacturability for both the supplier and customer. The impact of transportation and logistics in supply chain strategy The transportation and logistics role as far as wholesaling and retailing are concerned deals with a different aspect of supply chain strategies. Its focus is on the location and logistics issue rather than on transformation. Historically, the reason for its establishment was because of the need for better management of transportation as well as the logistics functions (Christopher et al., 1998; Christopher, 1992, 1996). Conversely, addresses the transportation and logistics perspective by asserting that supply chain strategies depend on a theory grounded in the field of logistics. Interestingly, Hameri (1991) notes that research in logistics is divided into two: inbound and outbound logistics. In effect, he defines inbound logistics as the transport storage as well as the delivery of goods coming into a firm or business. Conversely, outbound logistics as the name suggests, refers to the same goods that came into the business, now going out of the organization or business. However, Eloranta (1991) argues that more research logistics tend to focus on inbound logistic. As far as this perspective is concerned, supply chain strategies focus on the strategic decisions of the business ( Houlihan, 1998).Accordingly, the once little emphasis on logistics becomes a more broad topic, which covers the whole chain, ranging from suppliers to customers (Holcomb, 1992). The transport and logistics aspect helps the channel members to compete as a solid unified logistics entity as this will avoid the channel members from pushing inventory back in the value chain. In such a system, La Londe (1994) recommends that forward and backward vertical integration benefits can be realized through systemizing the logistics operations of individual pendent companies in the value chain. In this regard, supply chain strategies are tantamount to integrated logistics set-up and the research on the is extensive (Bowersox and Closs) Widely defined, an integrated logistics system incorporates the integration of systems process and organizations, which control the movement of products/goods from the supplier to satisfied customers without waste (Handfield, 1994). Ideally, in the last decade logistics used to saturate the warehouses with inventory. However, today there are integrated logistics set-ups or systems that incorporate transportation distribution, vendor relationships, warehousing, inventory management and delivery services, which makes supply chain management effective and efficient. Further, in supply chain strategy, the presence of an effective physical distribution is vital in the logistics process. Importantly, goods must always be replenished promptly and made available where and when needed in small sizes ( Handfield, 1994). The objective is often to substitute the inventory with proper information. Furthermore, the existence of an effective coordination of logistics activities using excellent information technology processes is significant to organizational performance (Lewis, 1997). Evolutionary, the introduction and development of bar-coding, radio frequency scanning technology and electronic interchange has benefited the integrated logistics aspect a great deal. The extensive evidence from this area exists because of one researcher, Whiteoak (1994). This researcher delineates the distribution practice of retail grocery all the way from the 1970s up to the current supply chain management processes. Today’s research extend expands the supply chain strategies beyond the confines of one organization. Thus, it incorporates multiple businesses in the value chain, among them being the carrier/transporter that plays a vital role in an efficient supply chain (Gereffi, 1994). However, a more scrutiny into research depicts that internal organizational cultures often prevent the existence of an efficient integrated logistics operation. Nevertheless, empirical evidence shows that specific-transaction investment often has a strong positive impact on the commitments of such a partnership (Gattorna, 1991). Firms in the retail industry opt to supply chain strategies to counter the burgeoning complexity and uncertainty of the market place as well as the competitive situation to minimize inventory in the whole chain (Gereffi, 1994). Accordingly, this strategic technique is different from traditional transportation and logistics concept where the value chain was a single unified entity. Equally, Riley (1987) echoes this single entity concept, where inventories are often used as a last alternative to prevent uncertainty in the business pattern. Davies et al., (1993) and Scott et al., (1991) posit that supply chain can minimize its whole inventory through redistributing stock efficiently within the supply chain. They also argue that short as well as reliable order cycle and the capability to fill entire orders are often crucial customer service aspects in the integrated circuit logistics system. Ultimately, it is imperative to understand that the different geographical positions of members, as well as structures often determine the logistical support needed (Taylor, 1993). The Use of Unified supply chain strategy to curb future challenges Ideally, the supply chain management was integrated from the typical two perspectives to a single perspective that incorporates all the value-adding operation on the value chain. Notably, researchers recognized the significance of encompassing supply chain management in the overall organizational planning process (Narasimhan, 1994). Howbeit, Carter (1994) notes that the strategy is not widely practiced. Conversely, business-reengineering researches support the concept of closely combining the operations across the functional areas more so between the manufacturers, suppliers and customers. Thus, this strategy is significant in handling any future challenge such as the volatile commodity prices. Similarly, Pearson (1994) discovered that in spite of increased focus on the integration of purchasing into an overall strategy, the key strategy, purchasing, still played the clerical role of negotiating prices. Accordingly, this integration of purchasing will help to reduce potential costs of goods in the future thus satisfaction of the end-user. Although many strategic models have been suggested in order to bond the key role played by supply chain management in general planning, they have failed to propose any action model. They have failed to suggest a pragmatic model that the practitioners in the supply chain industry can use. Apparently, Frohlich (1997) managed to use rigorous statistical evaluation of survey data to come up with three different types supply chain strategies: ‘innovator’, ‘marketeer’ and ‘caretaker.’ In addition, Frohlich emphasized that the process of fulfilling patron’s requests or orders is of significance to all the three types. While Innovators facilitate prompt new product existence as well as design changes, Maketeers proffer broad product ventures as Caretakers focus on proffering the cheapest price possible. The primary goal of the integrated supply chain strategy is to facilitate the manufacturing process and logistic operations continuously and impeccably across the supply chain. The integrated supply chain creates an effective competitive weapon, which cannot be copied or rather manipulated by other competitors (Lee and Billington, 1995). Accordingly, an effective integrated supply chain entails coordinating the constant flow of resources and information between the manufacturers, suppliers and customers as well (Lee and Billington, 1995). The integrated supply chain also involves implementing the product postponement as well as mass customization in the chain. In the future, supply chain practitioners predict a higher level of integration with customers and suppliers. Consequently, higher level of effective competitive advantage will be realized. The most current research, deals with supply chain strategies highlights the key role that purchasing plays in formulating corporate level strategies. For Instance, Freeman (2010) suggests a four-stage supply chain model and delineates the purchasing features necessary in each stage. The conceptual framework in supply chain is significant in harmonizing purchasing with the strategic process of the company. However, it does not provide a framework that strategically bonds the purchasing aspect to other operational areas. Subsequently, watts (1992) developed a conceptual framework that connects purchasing and corporate competitive strategy as well as functional level strategies. Ultimately, the conceptual framework is a key step in facilitating a more dynamic purchasing entailment in creating and implementing a competitive strategy, which will improve a firm’s performance. Conclusion Summarily, with nations becoming more interconnected as well as independent economically, politically and militarily, governments’ activities will highly impact the global supply chain management. Thus, supply chain practitioners will have to recognize the effects of government decisions in their organizations partners as well as the customers. For instance, the U.S, many organizations are currently hiring more part-time workers to reduce mandatory healthcare costs. Equally, many countries choose to locate sales offices, production facilities and other organizational entities outside their countries. More often than not, these organizations take such measure because of the company tax rates as well as well as environmental regulations, which they consider arduous. Accordingly, supply chain practitioners should consider these and other government-influenced aspects while coming up with new supply chain strategies. Some of these issues include governments’ regulation concerning the location of a business and distribution centers, weather to depend on onshore or offshore and the stipulated types of transportation to be used. For the supply chain industry to deal with the issues of governments influencing the industry, the key players must be proactive in helping the governments craft regulations. The supply chain professionals should influence the creation of these regulations through creating lobbying groups. These lobby groups should be formal and objective in influencing the government as far as the forming f regulations, policies as well as practices are concerned. In regard to human resources, the future looks bright as well as deem. The supply chain strategy will continues to attract both men and women, as it is competitive in nature. However, more emphasis will have to be laid on job satisfaction as the efficiency and effectiveness of the supply chain management depends solely on human resources. Tentatively, clients will always expect products or services that are of quality. In effect, supply chain practitioners are the ones charged with making sure that goods are delivered on time and in good condition. Howbeit, it appear that in the future supply of labor will be inadequate compared to the anticipated demand. For example, very few young men and women are showing interest of entering the truck driving profession. References Bowersox, D.J., Closs, D.J., 1996. 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