Coordination of Supply Chain Management - Research Paper Example

Supply Chain Management Supply chain management (SCM) is larger in scope than both physical distribution and marketing logistic. SCM encompasses the task of material management as well. In fact, SCM refers to the whole business chain involving procurement of input, in- bound logistics, conversion of inputs into products, physical distribution/ marketing logistics and channel functions, which finally take the end product to the ultimate consumers. In fact it is a combination of material management and end product distribution. These two aspects constitute the two vital components of business process and form the key tasks at the front and back ends of the process respectively. Supply chain management is in effect a value chain. That is why the research study undertaken in this paper indicates that it is a management of those relations that add value to the supply chain. There are a number of hardships or interruptions that usually occur in such management of supply chains. But strategic approach to supply chain management helps in overcoming such interruptions or limitations. The strategic approach to SCM facilitates the integrated handling of the functions of the business, especially the procurement function and the logistic functions at the front and at the back ends of the business. As a result SCM comes handy in value creation as well as value addition. But supply chain management has a demerit, as SCM gives prominence to materials management and treats the customer requirements of logistic as an appendix to the business. Researched Study Michael H. Hugos (2) states that “Supply chains encompass the companies and business activities needed to design, make, deliver, and use a product or service. Businesses depend upon their supply chains to provide them with what they need to survive and thrive. Every business fits into one or more supply chains and has a role to play in each of them.”i In other words every business action is a process in the supply chain of which it is a link somewhere. The objective is to develop relationships of many such actions whereby products or services are developed and delivered to the ultimate consumer. In simple language supply chain is a network of activities that combines the actions from production or procurement of product or services till its delivery to the consumer. Management of such a network is a tricky affair and only experience hands achieve proficiency in the management of supply chains. It must be understood that “at the end of the day, supply chain management is a relationship management. A supply chain is managed, link by link, relationship by relationship, and the organizations that manage these relationships best will win.”(Douglas M. Lambert, 6)ii Normal supply chains are often infested with problems that occasionally interrupt its functioning. An appreciation of these problems, as stated hereunder, is necessary to understand the functioning of management of the supply chain. Competiveness: The basic concept of SCM is to coordinate all aspects of the chain organically. In this competitive world supply chains are the only source of perfect marketing strategy. Things have reached a stage where different supply chains have started competing with each other. The winner always is the supply chain that is comprised of effective and efficient organizational features. Coordination: Corporate culture is necessary for smooth operation of any supply chain. “Modern supply chain management needs conscientious coordination, opening consciousness, and cooperative spirit between the members of supply chains.” (Qi Yan, page 159)iii Collaborations: Purchasing and supplies are integral parts of any supply chain, and these functions should not operate independently of each other. There should be collaborative approach of all the functions of supply chain. Globalization: Supply chain management is now facing an opportunity as well as challenges of globalization. At the same time managerial activities are influenced by local traditional cultural and the economic approaches. Such influences put the supply chain into a web of traditionalism using orthodox techniques. The challenge is how to get out of these traditional problems and rise to meet competition within parameters of local regulations. Personnel management: It is a challenge for an efficient SCM to meet workforce requirements from hiring of personnel to training, promotion, and layoffs. Strategic supply chain management is the answer to these problems of supply chain as well as a source of innovation to drive forward the strategic objectives of the management. Strategic approach considers the supply chain management from its five strategic components, namely operations, outsourcing, channel strategy, customer service, and asset network. Operational strategies involve decision making about the type of manufacturing or service rendering required for the stores. It may be made to order strategy or a hybrid strategy to include customizations as well as maintaining a minimum level of stocks. Operational strategies are for longer term and core planning is required to establish these strategies. Outsourcing is in effect an extension of chain. At the same time, strategic outsourcing enables SCM to strengthen the business model of the chain. Supply chain management pursues strategic outsourcing as “it offers to promote differentiation, reduce costs, and increase flexibility. It allows for more efficient movement of raw material and components parts between a company and its suppliers and distributors.” (Charles Hills and Gareth Jones, 448)iv Channel strategy involves the management of sources whereby the products or services would reach actual consumers. This is very important aspect of supply chain management, as channel strategies directly impact the development and implementation of best practices required for meeting customers’ demands. “Formulating a strong channel strategy also requires the insight into the influence of trading partners (including distributors, wholesalers, jobbers, and retailers) over how a product is purchased, promoted, and sold.” (John Gattorna, 229)v Customer service is the objective but not everything in supply chain management. “From supply chain and logistic perspective, what is most important is to know the service level required by different customer group as this influences inventory decisions, the warehousing decision, and transport decision.” (Ray, 11)vi Lastly the management of network of assets under supply chain is crucial as asset network provide the real framework of supply chain. The asset network depends upon certain business factors like size of the business, customer service demands, location of suppliers, labor cost factors and others. Under a global approach manufacturing is done in a county that provide low cost material and labor. If the approach is regional the assets network is laid based on a mix of factors like production center specialization, customer service level, duties and taxes etc. If the approach of supply chain is local, then manufacturing is done in areas near the market, as it saves a lot of transportation cost. There are certain limitations as well under supply chain management approach. The requirements from the side of the customer/ market get diluted in such an approach. Moreover, in the nature of things, the focus as well as the requirements of material management and physical distribution of end products is somewhat different from each other. Conclusion Physical distribution of goods covers functions such as transportation, warehousing, inventory management, and facilitates the flow of the product. Marketing logistics covers physical distribution in full measure, plus a part of the function of marketing channel. But supply chain management (SCM) has a larger role to play as it includes both physical distribution and marketing logistic as well. Supply chain constitutes a value delivery network. That is why it is said that firms compete in the market place using their supply chains as their weapon, not their products and brands. This superiority in supply chain is thus a major competitive advantage. But any company can attain the maximum benefits of supply chain only when it coordinates its internal processes. This coordination of processes is called effective management of supply chains. A company can attain maximum benefits of its supply chain only when the management of its supply chain is considered as strategic for attaining the objectives of the company. There are certain limitations of supply chain management approach, like the actual requirements of the market or customers sometimes do not take prime stage in the SCM. Also material management and physical distribution of products is not the same as SCM is different from management of each of these functions separately. But benefits of SCM far exceed its limitations. SCM is flexible towards the market or consumer demands. The management gets committed for lower costs under efficient SCM. Above all the committed customer loyalty is one of fringe benefit of supply chain that is managed efficiently and effectively. Word Count: 1527 References Read More