Supply Chain Distribution Cycle of Product - Essay Example

A B S T R A C T Firms can no longer escape the global forces of marketing and hence to remain competitive in the industry, they need to enter into strategic alliances and partnerships in their supply chain. There can be no set rule for organizations to enter into alliances as various factors influence the decision-making process. While both the supplier and the buyer gain from such alliances, mutual trust and a long-term commitment is essential for the success of such alliances. Attitude and culture change are essential for the success of such partnerships. Supply chain allows sharing of risks but again information sharing is essential. It is also essential that barriers are removed. The factors again vary across industries. There are gaps in the literature and hence it is proposed to undertake a study to determine the variables and form a well planned supply chain to suit individual needs. In order to conduct this research, it is proposed to use the qualitative method of research employing the focus group interviews followed by a detailed case study. The participants would be selected based on their involvement in the supply chain formation process. Focus groups interviews would be better than individual interviews as it is usually a team of members that are responsible for such decisions. Besides, in a group, the members are more expressive than in individual interviews. This data would then help to study it through the case study approach which is essential to have a deeper insight. The ethical issues would be taken into account and it is expected that this research would benefit the future managers responsible in the forming strategic alliances and partnerships in the supply chain process. Table of Contents 1. Research Objectives 2 2. Literature and background reviews 2 2.1 Benefits of alliances and partnerships 4 2.2 Trust and long term orientation essential 5 2.3 Information sharing essential criteria 7 2.4 Risk hedging strategy 7 2.5 Barriers removal 8 3. Methodology 8 4. Ethical considerations and Conclusion 11 Bibliography 12 1.0 Research objectives Supply chain represents the sequence of process involved in the complete manufacturing and distribution cycle of any product. Globalization, increased price war, changes in technology and the ever increasing-demands of the customer has made the manufacturing companies conscious of these constant changes taking place. To survive in this competitive market strategic alliances and partnerships become inevitable. It became necessary to manage all aspects of the supply chain; they need to cut costs without compromising on quality of product or service. The objective of this paper is to explore and evaluate that strategic alliances and partnerships in the supply chain management have to be well planned to suit individual needs. While a lot of literature is available on how firms have benefited from supply chain management, knowledge is fragmented. A detailed study on how individual firms can leverage advantage to suit their needs is essential. This would form the framework for the proposed study. 2.0 Literature and Background Reviews When companies perceived the benefits of collaborative relationships, the concept of supply chain management emerged (Lummus & Vokurka, 1999). Supply chain management is “an integrating philosophy to manage the total flow of a distribution channel from supplier to ultimate customer”. With technology facilitated information flow, it was recognized that a coordinated supply chain could be designed to meet the strategic and business objectives. The supply chain concept originated in the textile industry with the quick response program and then to efficient consumer response in the grocery industry. In the 1990s as competition increased, companies became specialized and started searching for suppliers who could provide low cost quality materials (Lummus & Vokurka, 1999). The beneficial effect of supply chain members working together was recognized as a method to improve overall effectiveness and reduce costs for the entire supply chain through process alignment (Smart, 2005). Due to increase levels of outsourcing, competitive pressures, increasing globalization, and increasing importance of e-commerce, supply chains gained complexity (Kathawala & Abdou, 2003). Supply chain integration can only be achieved through an increase in the level of logistics sophistication which is made possible by three types of integration mechanisms – organizational, informational and technological. Technology gives a direction to the procurement, supply and production strategy. It also enhances the supplier’s ability to meet customer’s demands by ensuring compatibility of exchanges (Halley & Nollet, 2002). There has been a shift from traditional exchanges to more sophisticated relational exchanges. International B2B alliances have led to significant growth of inter-firm partnerships, especially with reference to global marketing. Emberson and Storey (2006) suggests that there are variables that can influence the success or failure of relationships and different firms are at different stages of relationship development. Shared benefits can be derived by suppliers and retailers through collaborative action through cost reduction, efficiency savings, and customer service improvements. It has also been observed that while firms may be willing to work together, attitudes, prejudices and corporate cultures have to be changed and hidden agendas exposed if full benefits have to be derived. These factors have remained unheeded and hence there have been many failures in partnerships or the alliances have not evolved beyond a particular stage. 2.1 Benefits of alliances and partnerships Alliances and partnerships allow sharing of risks and rewards while also offering opportunities for joint learning (Samiee, 2007). This requires leadership and vision and the firms must have the capability of value creation and value capture. Toyota benefited with the suppliers’ expertise when it formed strategic partnership with its supply chain to improve efficiency. Sony has suppliers scattered all over the world apart from over 75 of its own manufacturing units all over the world. They devised an “optimization sharing plan” where the channel members could share gains from supply chain innovation. Sony has thus been able to have an efficient supply chain system which incorporates upstream suppliers and downstream distributors and retailers. The clothing retailers must have tight coordination in the face of changing fashion. Ideally a retailer should place a bulk order with its suppliers and stock huge quantities while the popularity of that particular fashion clothing lasts. Limited Brands has its suppliers spread over 37 nations and they have to ensure that color, quality, size and design remain consistent across all suppliers for every item ordered. Because of a highly coordinated supply chain system, they have a competitive edge over rivals. At the same time they have gained significant knowledge and capability as an international firm, even though their global activities are limited to importing. This also demonstrates that firms can no longer escape global marketing forces and the importance of maintaining, developing and nurturing alliances and partnerships around the world. Dow Chemical started its private exchange with 200 customers in 1999 and by the end of 2001, they had 8000 customers spread across 35 countries (Hoffman et al.,). The customers benefit through this exchange as they can view their purchase histories, plan their future orders and check availability of products. The suppliers, on their part, get a clear picture of the buying habits of the customers and this helps them to forecast demand, control inventory, schedule manufacturing. The exchange can track all interactions with the customers and the company’s cost per transaction reportedly came down to $1 from about $50. 2.2 Trust and long term orientation essential Doney & Cannon (1997) point out that trust, long-term orientation and joint actions are developed through the sharing of information, the frequency with which companies interact, the investment in assets to better integrate activities and through time in which the counterpart has proven to be reliable in fulfilling transactions (cited by Claro & Claro, 2004). An effectively planned and managed supply chain strategy can impact the global organic coffee industry. According to FIBL and Naturland (2002), the global retail value of organic coffee was approximately USD223 million (cited by Claro & Claro). Besides, there was a 20% steady and annual growth in this industry. Organic food was very popular in Europe and particularly in Netherlands. In fact, in Europe, organic coffee accounted for 0.5 per cent of total coffee sales. Organic coffee was readily available in supermarkets and other outlets in Netherlands. Claro & Claro identified five issues, which needed collaborative efforts and co-ordination. Consumers were willing to pay premium for quality organic food. Traders and roasting companies did not have access to the market. Only those who sign long-term contracts with the producers have access. Those who did not have access to the markets could not get certification unless they complied with the requirements of organic production. This certification would take up to 18 months. Companies producing organic coffee had to invest in fixed assets, which have no function apart from production of such organic coffee. This investment was also essential to produce the right quality. The roasting companies needed a separate line to roast and pack the organic coffee as it could not be mixed with normal coffee. Companies supplying and buying organic coffee were looking for direct and stable relationships (Gresser & Tickell, 2002 cited by Claro & Claro). Producers faced hazards of the climate; processing plants had to select and sort the coffee beans thoroughly while the roasting companies had to store, roast, grind and pack in a way that the attributes of organic coffee are retained. Hence, the trade is marked by uncertainties and risks. If all the units collaborate, they could find a mutually beneficial solution. Calro & Claro proposed a model for the Brazilian producers, which would enhance their operations in the international markets. This model encourages trust, long-term investments, and planning. Customers are willing to pay premium, which can be done only when any industry has long-term orientation. This premium price thus collected can be reinvested for expansion and better coordination of the company. Their model ensures better coordination between the overseas producers and roasting companies. The entire supply chain can benefit from this. This model also ensures organic and fair trade practices. Cross border relationship remains healthy as there is a certification body. Personal contact between the integrator and buyers allow for proper exchange of information. Integrator helps in long-term orientation. Coffee is processed by the Processing service provider (PSP). They take care of the quality control before the coffee is shipped out. Joint planning eliminates any chances of miscommunication, assists in future production planning. This model functions on mutual trust, long-term orientation. It promotes joint problem solving attitude. The entire supply chain can be very efficiently managed. 2.3 Information sharing essential criteria Sharing information requires trust on the part of all the participants in the supply chain (Lippert & Forman, 2006). Only through information sharing and tight control can one regain control over the supply chain. Barilla, Italian pasta is a case example. Pasta is a product that has both low demand and supply uncertainties. Overreaction by the retailers leads to high level of demand fluctuations causing significant waste and losses. Barilla managed to avoid such losses by initiating information sharing and coordinated replenishment programs and the supply chain efficiency was greatly improved. Inventory dropped by almost 50% and the stockout rates were down to almost zero. 2.4 Risk hedging strategy The risk-hedging strategy in supply chain allows the risk in supply disruption to be shared. Inventory pooling strategies are quite common in retailing where different retail dealers share inventory. Internet again helps in providing information transparency amongst members that share inventory. Saturn Corporation, a major US automobile maker, is an example of sense and respond supply. It has a service supply chain strategy which matches the urgency of the customers’ needs (Dawson, 2004). Saturn Corporation has a jointly managed inventory that involves sharing inventory with Saturn dealers. Its ability to match the parts supply critical to the customers’ needs has increased after sales satisfaction. Since the demand for parts is highly unpredictable in nature, Saturn has adopted the pull system. It does not position inventory for parts as per forecast but replenishes the stocks at the retailers on one-for-one basis. 2.5 Barriers removal Managing international supply chains encounters barriers like lack of global vision and manufacturing strategy (Akkermans, Bogerd & Vos, 1999). The technical concerns in managing international operations include logistics challenges to cope with long supply chains, search for qualified suppliers, culture and language differences and duty and custom regulations. Attention also needs to be paid to the coordination of good flows. To maximize competitive advantage all members within the supply chain should “seamlessly” work together to serve the end consumer (Mason-Jones & Towill, 1997). It is essential to improve pipeline performance by optimizing their response to consumer demand. Improvement techniques like just-in-time (JIT) and manufacturing resources planning (MRP) have been found to be effective. Supply chains should be redesigned so as to limit order magnification as the information moves up the supply chain (thereby reducing uncertainty) and reduce the time delay in receiving information (thereby retaining information value). The literature review thus suggests that immense benefits can be derived by firms by strategic alliances and partnerships but this requires change in attitude and culture. The alliances also have to vary across industries and markets. Each country would require a different alliance and the needs of the industry have to be considered. Besides, collaborative efforts require sharing of information, trust and long-term alliances. This gap in literature exists, which has been considered necessary to explore. 3.0 Methodology The research approach aims to draw the research methodology that would being out the gaps in literature regarding the necessity of change management in enhancing the supply chain partnerships. It would also highlight and how different firms require a different strategy as the needs of individual firms differ. Various methods would be employed to collect the primary data. Focus group interviews and case study approach have been considered to collect data. The data derived from focus group interviews would be corroborated by secondary data collected from company reports and profiles including minutes of meetings and stakeholder analysis. The persons that would be interviewed would be identified based on their involvement and participation in forming the alliances and managing the supply chain within their organization. Their observation and analysis of the situation would help to fill the gaps in the studies. Focus group interviews have to be followed by a detailed case study which would help to verify the data collected. A detailed study would be undertaken to determine how the sourcing and the delivery processes have evolved and the hurdles that the company faced. Since the barriers and needs of industries differ, data will be collected from different sectors – retail clothing, automobile, pharmaceutical and supermarkets. This study would require an in-depth analysis which means a qualitative approach would be adopted. Logical positivism employs the quantitative and experimental methods to test deductive generalizations (Amaratunga et al., 2001). This requires independence of the observer from the subject being observed. Hypotheses have to be formulated in advance for subsequent verification. The explanations in this method are reduced to the simplest possible elements in order to facilitate analysis. The qualitative method would help to observe feelings, thoughts, intentions and behavior. Focus-groups are effective in providing information on why people think the way they do. This has certain advantages even over the personal interviews as participants tend to be more comfortable and natural. Besides, they influence and are influenced by others just as they are in real life (Redmond & Griffith, 2003). Focus groups are open yet guided and hence it would help to collect data on how the managers arrive at a decision to form partnerships. The data collected would then be used to apply the case-study approach, which is the ideal methodology when a holistic, in-depth investigation is required (cited by Tellis, 1997). Case studies bring out details from different view points and using multiple sources of data. Yakovleva and Flynn (2004) cite Robson who defines case study research as “a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real context using multiple sources of evidence”. A case study approach enables a detailed knowledge about a particular case. A case study helps to understand the complexity of a single case and its activity within a defined set of circumstances. A case study approach is an empirical enquiry and empirical evidence is essential to come to a conclusion. Case studies are multi-perspectival analysis. These are qualitative research methods that involve large amount of unstructured data of which the analysis is tedious and monotonous. The process involves three steps – data reduction, data display and conclusion drawing and verification (Amaratunga et al, 2002) Data reduction refers to selecting, focusing, simplifying, abstracting, and transforming raw data collected during interviews (Miles & Huberman 1994 cited by Weerd-Nederhof, 2001). Data display is a visual format that would display the data systematically so that the user can draw valid conclusions and take appropriate decisions. Better displays lead to qualitative analysis. Display should have the sequence of building the format, entering data, drawing conclusions, writing analytical text, and cycling onward to revised or new displays. The result thus arrived at is expressed in words rather than numerical presentation. It is basically a verbal presentation of the interviews and allows the researcher to give a full view of the context. The interviewer also gets an opportunity to narrate the emotional experience at the time of the interview. The data would be reduced as interviews are conducted and then for drawing conclusions patterns would be formed, contrasts would have to be looked into, which would clarify relationships and make the understanding coherent. Once the constructs are measured and relationships verified hypotheses can be shaped. 4.0 Ethical considerations and conclusion Ethical considerations would be kept in mind. The participants would be informed in advance of the purpose of the study and their responses would not be disclosed. Ethical concerns may arise when the managers have to reveal the corporate policies. They may be reluctant but their responses would indicate to what extent the firm is discharging its obligations in brining about innovation. Names of the persons giving the information would not be revealed in the research process. The concerned managers would be assured that the information would be confidential and the recordings of the interviews would be destroyed as soon as it is transcribed. The research is expected to help managers responsible for forming supply chain partnerships understand the difficulties that could hinder the progress in alliances and how these should be handled at the initial stages. References: Amaratunga, D., Baldry, D., Sarshar, M., & Newton, R., (2002), Quantitative and Qualitative Research in the built environment: application of mixed research approach, Work Study, Vol. 15 No. 1 2002, pp. 17-31 Akkermans, H., Bogerd, P., & Vos, B., (1999), Virtuous and vicious cycles on the road towards international supply chain management, International Journal of Operations & Production Management, Vol. 19 No. 5/6, 1999, pp. 565-581. 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