Logistics and Supply Chain Management - Case Study Example

Logistics and Supply Chain Management The statement elaborates the extent to which the benefits of logistics management (LM) and supply chain management (SCM) turn out to be threats to the organisation. One reason for such scenario underlying LM is the wide promotional strategies that CEOs opt without contemplating upon the long term effects of managing SCM even in times of crisis. The word 'crisis' reveals the manner in which one competitor, say X takes advantage of the vulnerable situation of the other firm Y. Of course Y gets threatened because of the deadly mistakes the CEO has made in the name of strategies. Thus, CEOs do this by utilising the capabilities of LM as a weapon that when counteracts with their competitors, provides them with a win-win situation. Examples like Wal-Mart and Benetton are in front of us where logistics transformed the form of core competence which is strategically positioned for bringing market success for the organisation (Drew & Smith 1995). This on one hand gives competitive advantage to one organisation, on the other hand it is achieved at the cost of exploiting the other. Such exploitation in market terms can be labeled as 'weapon' that once used against the competitor provides benefit at the cost of bringing loss to the competitor. This can be illustrated by the fact that an organisation can increase or decrease the goods supply to the market or can purchase the services of major supply chain companies irrespective of the fact he uses them or not, but to choke other companies particularly competitors from getting supply chain services for their goods supply. Unless the competitor is efficient enough to detect what is going on behind the curtain, he is unable to rectify the cold war being played against him by his rivals. However, Drew & Smith (1995, pp. 24-33) points out that excessive exploitation can produce dangerous results if the organisation adopts a rigid behavior. Similarly this 'explosive weapon' can result in fatal blind spots if used in single direction without considering other factors. For instance, supply chain integration once stop at the factory door may annoy large organisations to exploit more but since logistic firms are aimed to improve their performances, such exploitation will probably not work. Traditional supply chain deliver limited value to companies for which there is a political competition going on among competitors. In contemporary fast paced supply chains, managers or CEOs lack an insight into the ripple effects of their decision (Boyson et al 2004, p. 99). Logistical challenges are confronted by the firms who not only assume a static environment but look at each problem individually. For instance, a company when switches from long-term contracts to short-term buys it suffers temporarily for the decision will influence the logistic options available to the organisation including short-term variability, price of the product and supplies. Associated Risks With the lengthening of supply chains, logistics executives are increasingly taking onus on their shoulders for anticipating and eliminating a greater number of risks. Though contemporary stakes are high that what they were five years ago resulting in an average profitability loss of 107% (Logistics 2009). But at the same time CEOs are struggling to prioritise the overwhelming number of risks that indirectly leads to unfocused plans and poorly coordinated responses (ibid). Competing with others become critical for the logistic firms when there is a concern to reduce costs while continuing to guarantee the quality of products. This requires ensuring an efficient execution of outsourced activities in a complex trading and production scenario which is a difficult phenomenon in a competitive environment. In this context it is indispensable to identify, evaluate and extenuate potential disruptions in SCM in a systemic manner so as to control or minimise the risk of product recalls (Gomer 2009). The internal analysis of risk in supply chain includes considering the consequences of recalling a product which affects not only the brand image of the firm but also bring suppliers activity disruption where customers feel the need to alter their buying trends. With such an unstable attitude on part of the consumer, the firm experiences market destabilisation and risk the propagation of the recall scandal along with the threat to the distorted national image of the country where damage can incur to the extent that results in falling exports and strained international relations. Components of the internal analysis of supply chain crisis deal with individual links whereas the external analysis requires consideration of the whole chain together. Dependencies of one firm may be a cutting edge for the other. Therefore, a firm in crisis aims to analyse and detect the dependencies so as to examine how an interruption in one part of an organisation could affect the ability to supply goods and services (Elliott et al. 2002, p. 84). Dependencies for a supply chain are significant in assessing where and what went wrong in the firm because dependencies entail one activity to be preceded by another and in case one activity fails, all other activities associated or linked with it fails. For example, supplying consumer goods in a market requires the production and transportation of every single unit from a factory to the market during the process of which are several dependencies that escort to potential points of failure. Thus the whole process is interdependent upon the availability of raw materials, to the extent where the processing instruments are required and lorries to transport the finished goods. SCM makes it essential to identify the true nature of the most recent competition and the factors which serves to be the catalyst of competitors. Such factors can be explored on the basis of how firms identify competitors and how they use logistics to position and obtain a competitive advantage. In this context redefining marketing strategies is important to analyse the competitive positions of rivals. Therefore, effective managers are those who after considering various sources of information available to their firms enable them to determine competitors’ strengths and weaknesses (Proctor 2000, p. 102). Competition in supply chain is more than the competition that goes on intensely if there are many comparable rivals trying to satisfy the wants and needs of the same customers in the same market or market segment. What seems clear to us is the proliferation of product variety that has reached the reality to organisations to continuously seek longer term effects and in a constant manner attempt to keep one step ahead of competition (Emmet 2009). How Logistics and SCM contribute towards becoming a threat? It is true that financial crisis is the worst consequence of vulnerable strategies that dominated the most influencing factors of the supply chain. But research in 2009 suggests that over 65 percent of the CEOs when asked about logistics affairs, suggested that their strategy has been affected by the crisis for the reason that they founds their strategies deprive of 'sustainability' (Supply Chain Agenda 2009). This situation has incurred due to the over emphasis of CEOs on the short term results that has led the corporate supply chain towards ineffective strategic sourcing. Therefore, as Banfield (1999, p. 33) has pointed out the deployment of ineffective strategies have resulted in business degradation instead of improvement, bringing cost cutting, re-engineering, quality management, and integrated supply chain strategy. As we have discussed above that the process is interlinked and a single link can result in the entire disruption. Short term strategies focus on temptation to make shorter decisions based on quick fixes and immediate savings which goes well with the technology as long as it remains inexpensive. But as soon the costs raise this course of action based upon 'immediate financial attainment' fails to serve over the longer tenure. Besides emphasis on short term thinking, factors like greed and dishonesty contribute which make the managers contemplate upon taking full advantage of carriers and other service providers that are already burdened with excess capacity. This way CEOs attempt to make the most of the situation where the focus is on the best interests for logistics providers to remain available to provide the resources and choices so that the management staff do their jobs effectively. In the times of crisis, managers treat supply chain partners and competitors with hostility due to which negotiations don't work effectively and there is a lack of cooperation between agreeing over mutual courses of action (Lynch 2009). Such a situation for one firm brings failure whereas for the competitor it brings success when managed effectively. Solution The best solution is to seek a rational view where a by product of the centralised control of diversification requires standard practices and procedures from every firm. Besides this, performance measurements are crucial to transfer one's best business practice by Government with their target setting. This works as long as one competitor sticks to ethical standards while measuring its performance and taking only ethical steps in analysing the competitor. Measuring the inappropriate factors of competitors only result in creating sub optimal performances where managerial staff focuses on what they are measured on, and not what they believe should be done. A logical view of the firm requires from its staff that best ethical practices must be deployed to be specific in the rules and procedures while dealing with the SCM. The implementation of ethical practices in accordance with the policies can increase communication and cooperation even among those organisations that are rivals at successive stages of production. Such cooperation will not only reduce the risk of crisis but will also help in decreasing costs through reduced inventory and shorter order times. This will enhance production, increase quality standards and value by reducing up to 25 percent costs along a chain (Russell 2008). The problem of ethics in supply chain is that every company as a purchaser when buys unfinished inputs from suppliers send to the ultimate users for which consumers blame purchasers for ethical lapses that were actually committed by suppliers upstream. Therefore they are blamed for something they didn’t even do. Levin (2008) mentions that such a blame always befalls the biggest brand that played any role in bringing the offending product to market. This situation is though unfair but it is how the supplier ethics and compliance game now works. Supply chain can function much more than a weapon for more than one organisation through cooperation and effective knowledge-sharing mechanism. It depends upon the supply chain professionals how they act as critical knowledge integration mechanisms. Indeed, it is the effort of the CEOs that make any organisation a success for making important knowledge-based considerations to improve supply chain effectiveness. References Banfield Emiko, 1999. Harnessing Value in the Supply Chain: Strategic Sourcing in Action. John Wiley & Sons: London. Boyson Sandor, Harrington H. Lisa & Corsi M. Thomas, 2004. In Real Time: Managing the New Supply Chain: Praeger: London. Drew A. W. Stephen & Smith A. C. Peter, 1995. The new logistics Information management: transformation through organizational learning. Logistics Information Management, 8(1), pp. 24-33. Elliott Dominic, Swartz Ethne & Herbane Brahim, 2002. Business Continuity Management: A Crisis Management Approach: Routledge: London. Emmett Stuart, 2009. Supply Chain Competition or Cooperation. Available at: http://www.learnandchange.com/pdfs/article-Supply%20Chain %20Competition%20or%20Cooperation.pdf [Accessed 3 June 2009] Gomer Frederick, Jan/Feb 2009. Supply Chain Asia. Recalls when Supply Chain Management turns into Crisis Management. Available at: http://www.supplychainasia.com/downloads/jan-feb-2009/feb-09-recalls-.when- supply-chain-management-turns-into-crisis-management-by-frederic- gomer/download.html. [Accessed 3 June 2009] Levin R. Michael, August 2008. Supply Chain Ethics. Available at: http://www.integrity- interactive.com/docs/GroceryHeadquartersNewsAug2008.pdf. [Accessed 3 June 2009] Logistics 2009. Managing Logistics Risks in Extended Supply Chains. Available at: https://www.llb.executiveboard.com/Public/Managing-Logistics-Risks-in- Extended-Supply-Chains.aspx. [Accessed 3 June 2009] Lynch F. Clifford, Jan 2009. The seven deadly sins of supply chain crisis management. Available at: http://www.dcvelocity.com/viewpoints/?article_id=2159 [Accessed 3 June 2009]. Proctor Tony, 2000. Strategic Marketing: An Introduction: Routledge: London. Russell T. Crook, Giunipero Larry, Reus H. Taco, Handfield Robert & Williams K. Susan, 2008. Antecedents and Outcomes of Supply Chain Effectiveness: An Exploratory Investigation. Journal of Managerial Issues, 20(2), p. 161. Supply Chain Agenda 2009. Crisis dominated the supply chain agenda in 2009. Available at: http://www.ce.capgemini.com/m/de/tl/Crisis_dominates_the_supply_chain_agend a_in_2009.pdf. [Accessed 3 June 2009]. Read More