Logistics and Supply Chain Management - Literature review Example

Student Name ________________________________ Student ID ________________________________ Signature ________________________________ Introduction Over the last two decades, there has been growing attention on logistics and supply chain management from practitioners. This is because it has been proven that it makes an organization more competitive in terms of delivery, cost, quality and flexibility due to its resulting reduced operational costs, better delivery performance as well as improved levels of customer satisfaction. Logistics and supply chain management are used interchangeably in most literature, although there are various differences between the two. One of the major differences is that while logistics is biased towards operations, supply chain management biased towards strategy (Rui et al., 2007). Furthermore, while logistics entails the integration of different functions in order to achieve a system-wide objective, supply chain management widens the scope by incorporating customers and suppliers in the organization’s system, in addition to coordinating the flow of information and materials from all levels of production, beginning from acquisition of raw materials to consumption of the end product (Douglas, 2004). However, supply chain management aims to eliminate redundancies as well as to minimize cycle time and inventory with a view to providing improved customer service at minimal cost. Although this paper focuses on Australian companies, the supply chains performance has greatly been influenced by the competition and globalization of economy. According to Douglas (2004), companies spend millions of dollars with a view to improving their supply chains performance through employee training, process engineering as well as adoption of new systems. Both raw data and measures are used in understanding the companies’ supply chain performance as well as in improving decision making. The main importance of a supply chain is to aid its market. Various supply chain indicators need to be measured and analysed with a view to identifying whether the supply chain delivers. Linking supply chain performance indicators by the proper analysis helps in revealing issues and mistakes that had previously occurred and having the root causes and changes recorded is important during the learning phase (Rui & Xiaomin, 2007). This project focuses on two types of logistics/supply chain performance indicators, and these include supply chain efficiency and supply chain quality management. Moreover, the three practices for logistic/supply chain that have been selected in this paper for the purpose of discussion how they improve the performance of logistic/supply chain including continuous improvement, lean six sigma, and customer relationship. Literature review A supply chain is a network of service providers and manufacturers working together for the conversion and movement of goods and services from the stage of raw material until the consumption by the end user. According to Cecil and Robert (2006), the service providers and manufactures are links though the monetary flows, physical flows as well as information flows. The management of supply chain operation involve managing various supply chain activities and relationships so as to increase customer value significantly as well as to reach a competitive advantage which is sustainable (Roger & Christina, 1999). Sunil and Peter (2007) stated that the management of supply chain operation is an indication of an effort by a company or a group of companies for developing and running supply chains in a manner which is most effective and efficient. A supply chain, in its simplest form, consists of a company, suppliers and the company’s customers. A supply chain is created by this basic group of participants. However, three additional participants are necessary to make an extended supply chain. These include the supplier of the supplier (also referred to as the final supplier) who is at the initial stage of an elaborate supply chain, the customer of the customer (also referred to as the final supplier) who is at the end of an outer supply chain, and the entire group of companies who provide services to various companies within the supply chain. According to Michael (2007), such companies are responsible for the supply of services in finance, information technology, marketing, and logistics. A combination of companies perform various functions in any given supply chain such as production, distribution or wholesaling, retailing, and final consumers of a product (thereby acting as customers). Furthermore, there are other supporting companies that provide various services needed by these combination of companies. However, Sodhi (2007) reported that there are some companies in which all these entities exist within the same company. LOGISTICS/SUPPLY CHAIN PRACTICES CONTINUOUS IMPROVEMENT There is need for continuous improvement in order to have a sustainable supply chain program. To achieve this, there is the need of evaluating the business case for action as well as to understand both internal and external landscape. Such efforts helps in the identification of the supply chain issues that are esteemed highly by the company, opportunities and risks evaluation, as well as building the internal support for forward movement. Furthermore, companies have the motivation of acting by expectations that they identify as well as addressing the impacts on people and the environment related to the company’s supply chain, regardless of the possible risks posed by these to the company. This calls for value added logistics as a way of ensuring continuous improvement. Value added logistics combines logistical activities and light duties with the company with a view to finalizing a product. The final activities are preferably carried out as late as possible before the product is sent to target market. The activities carried out are usually categorized in terms of the magnitude of value added to the service or product as follows: Low-end value added logistics activities whose purpose is the addition of low value to the product (such a labelling, adding parts and manuals, making the product customer- or country-specific); High-end value added logistics which add high value to the product (such as sterilization, mixing of liquids, final assembly) (ESCAP & KMI 2007). LEAN SIX SIGMA According to Groeber (2012), Lean Six Sigma adopts statistics when analysing process errors in addition to identify all the possible wastes in a delivery process. The principles of Lean Six Sigma follow sequential steps targeting cost reduction and profit increase in addition to identification of opportunities for collaboration increase. Companies that adopt Lean Six Sigma usually use software that performs specific statistical and mathematical calculations (Kiemele et al., 2007). The success of Lean Six Sigma in companies have prompted other manufacturing and process industries to imitate the practice and principles of Lean Six Sigma. Lean Six Sigma, as a tool used in analysis, defines both factors that facilitate and hinder customer satisfaction as well as factors that prevent companies from achieving their operational and financial goals (Sehwail &DeYong, 2003). Any industry can utilize the principles of Lean Six Sigma. For instance, the principles of Lean Six Sigma was adopted by health care firms to evaluate how cost could be minimized while improving the performance conventional manufacturing companies (Sehwail & DeYong, 2003). Sigma Pharmaceutical is one of the Australian health care companies that have adopted Lean Six Sigma. Sigma pharmaceutical reported that they have attained a lot with the Lean Six Sigma implementation such as minimizing complexity and cost all over their supply chain, reducing medial errors, job performance improvement by the adoption of visual aid, improving patient processing and discharge, measuring and capturing metrics, and display of actual performance measures (Sehwail &DeYong, 2003). The applicability of Lean Six Sigma in most of the industries has encouraged companies experiencing cost, service or quality issues to implement Lean Six Sigma as it is usually the fastest and appropriate method for the correction of the companies’ issues as well in optimizing their supply chains and consequently increasing customer service (Kiemele et al., 2007). According to Palagyi et al. (2003), Lean Six Sigma provides tools and techniques which have been proven in evaluation, measuring and improving various areas within a company, especially areas which are inefficient and have poor outcomes, including products being damaged or not being delivered on time. CUSTOMER RELATIONSHIP Customer relationship management in a supply chain ensure that services reach the customers as soon as the sales are complete. Customer relationship and supply chain management are integrated in order to maximize a company’s operation. Supply chain management ensure that every department within a company get the required raw materials for the completion of their work whereas the customer relationship management ensures that customers receive services and support they need. For example, in Vet Supplies Australia, supply chain management ensures that veterinarians have medical supplies that are needed for conducting routine health care services and treating their clients’ animals medical conditions, whereas customer relationship management personnel work with the owners of the animals (customers) to ensure that they get the correct medication for their animals. The customer relationship management also ensures that there is product flow to the customers. They take and transit orders in addition to ensuring that customer support needs are well handled. For example, Alumina Limited, aluminium processing company in Australia, customer relationship personnel take orders from customers (businesses) who want to have aluminium delivered. The customer relationship personnel work together with supply chain management in ensuring that there is uninterrupted movement of products from their development up to their sale. Customer relationship management personnel are important in ensuring information flow between the company and the customer. Thus, customer relationship management personnel need to have access to data regarding availability of services to customers. This is because customer relationship management personnel work closely with customers by taking the customers’ orders and by solving their problems. For instance, in a catering business, the supply chain management ensures that the cooks are provided with all the necessary raw ingredients for making meals and they pass information to the customer relationship management personnel in case problems have occurred in getting the necessary ingredients such as flour, sugar, or any other fresh product. Customer relationship management personnel help the supply chain management personnel in getting accurate responses from customers regarding the products. Customer relationship management personnel need to respond very fast to the needs of the customer. LOGISTICS/SUPPLY CHAIN PERFORMANCE INDICATORS SUPPLY CHAIN EFFICIENCY It is necessary for a company to analyse the efficiency of its supply chain and the individual production as well as supply process. The system for measuring the performance should rely upon the strategy, goals, and value drivers of the company as well as the entire supply chain. The company’s management and decision makers can retrieve a lot of helpful information from the performance measurement, helping them to identify success and potential management strategies as well as in facilitating understating of the situation. Furthermore, performance measurement help in directing the attention of the management, revision of the goals of the company, and reengineering business processes. According to Chan (2003), supply chain performance measurement is essential in the continuous improvement of supply chain management. Melnyk et al. (2004) stated that the three basic functions of performance metrics include control, communication and improvement. Control as performance metrics helps the management and employees in the evaluation as well as in controlling the performance resources. The metrics communicate the performance for internal needs as well as external stakeholders’ purposes. Improvement entails the possibility of identifying the gaps between expectations and performance as well as in the identification of areas in which there is need for development work (Melnyk et al., 2004). According to Gunasekaran et al. (2001), it is necessary to study metrics and measures by taking into consideration the lack of balanced approach, lack of comprehensive decision regarding the amount of metrics to be adopted, and absence of clear difference between metrics at different levels including strategic level, tactical level, and operation level. The lack of balanced approach usually comes about when considering the balance that exist in financial measures and non-financial measures. Financial performance measurement are necessary when making strategic decisions as well as for external reporting whereas non-financial measures are helpful in the handing of manufacturing control as well as distribution operation. Absence of comprehensible decision regarding the amount of metrics to be adopted comes about due to the large number of performance measures that are continuously added due to suggestions by consultants and employees. SUPPLY CHAIN QUALITY MANAGEMENT Although there exist various definitions of quality management, as far as supply chain is concerned, quality can be defined as “meeting or surpassing the expectations of the customer” (Evans & Lindsay, 2002). However, the American Society for Quality stated that quality as a term is quite subjective and different individuals and sectors have their own definitions (American Society for Quality Online Glossary, 2011). Quality can either mean the characteristics of a product or service to satisfy stated or implied needs of the customer or a product or a service without any deficiencies (American Society for Quality Online Glossary, 2011). According to Tague (2004), the common quality management tools cause analysis (such as scatter diagrams, cause and effect diagrams), tools for evaluation and decision making (multi voting and decision matrix), process analysis (including flowchart, effect analysis, spaghetti diagrams, mistake-proofing, and failure modes), data management (collection and analysis, including box plot, design of experiment, histogram and stratification), idea creation (benchmarking, brainstorming and affinity diagram), an improvement project (Grantt chart) and management tools (tree diagram, arrow diagram, process decision program chart, and relations diagram). According to Brockwell (2011), quality management and supply chain have a positive correlation. For instance, improvement of quality management in the reduction of process variation has direct impact on various performance measures of supply chain. Furthermore, defects as well as process and production variation is significantly reduced with continuous quality improvement. Consequently, cycle turns (the duration in which two successive replenishments occur) are reduced and on time delivery gets better with the improvement in the consistency in the supply chain courtesy of minimal in variation (Flynn & Flynn, 2005). Quality management practices in which decisions regarding product and process develop simultaneously in new products, like in the case of design for manufacturability, result in less process and product variation. Flynn and Flynn (2005) explained that reduced variance in the processes results in improvement in quality, as the processes adopted during the design allows the management for switching faster from one product to another. Thus, design manufacturability results in faster set-up times between products. According to Simchi-Levi et al. (2008) faster setup times enables firms to minimize lot sizes because fewer cycle and safety stock is required. Conclusion and Recommendation It is very important to analyse both the logistics/supply chain practices and logistics/supply chain performance indicators in any company in order to have a better understanding of their performance as well as to compare the accuracy of current and previous decisions. The analysis should go beyond the three logistics/supply chain practices and two covered in this paper. Companies should consider sharing data and information with all their trade partners to allow for the transfer of data across the supply chain. Sharing of data goes a long way in boosting logistics/supply chain practices such as continuous improvement and also logistics/supply chain performance indicators such as supply chain quality management. References American Society for Quality Online Glossary (2011). Quality. Accessed on March 6, 2011. http://asq.org/glossary/q.html Brockwell, J. (2011). Strategies for Strategic Sourcing. Industry Week/IW., Jan2008, Vol. 257, No. 1, pp. 28-30. Cecil, C. Bozarth, R. B. (2006). Handfield. Introduction to operations and supply chain management, 1st Edition. Pearson Education, Inc. ISBN: 0-13-944620. Douglas M. L. (2004). The Eight Essential Supply Chain Management Processes, Supply Chain Management Review, pp. 18-26. Evans, J., & Lindsay, W. (2002). The Management and Control of Quality, Fifth Edition. SouthWestern College Publishing, Cincinnati, Ohio. Flynn, B. B., & Flynn, E. J. (2005). Synergies between supply chain management and quality management: emerging implications. International Journal of Production Research, Vol. 43, No. 16, 15 August 2005, pp. 3421-3436. Groeber, J. (2012, February). From green produce to green programs. Stores Magazine. 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