Supply chain management can be briefly described as a proactive approach in the delivery of the right products into the appropriate markets at the right costs. Supply chain management faces an ever changing highly dynamic market environment. Unpredictable price fluctuation of products, fluctuating demand and supply trends, cut-throat competition, and unpredictable product life cycles are just but a few of the challenges in the supply chain market environment. Operational performance in the supply chain is pegged on the performance of the supply chain.
Three factors greatly influence the supply chain are namely availability, lead time and total cost. In the market it actually the supply chain that is in competition and really not the companies producing the various goods and services. The consumer at the end of the supply chain is the determinant on whether the supply chain is a success or a failure (Christopher 1992). In order for a supply chain to attain a competitive advantage over the competition it requires attaining customer satisfaction and a thorough understanding of the market and the market’s dynamics.
Only then can it develop a successful strategy that scores both customer satisfaction and meet the objectives of the supply chain itself. The performance of the
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However uncertainty in the supply chain cannot be fully eradicated in the supply chain simply because of the intrinsic nature of some products but still supply and demand forces have to be somehow matched through innovative strategies in the supply chain. Achieving positive results in the concept of supply chain management has remained illusive to many who have attempted to use it, regardless of its global recognition (Cohen, 2004). Theory of Supply Chain Design – Basics By focusing on the supply chain design organizations stand to benefit in addressing problems in the competitive environment.
The supply chain design enables the organization in creating a supply chain that best fits the organizations business operating environment (Willems 1999. p . 3). Today’s supply chain networks are complex multifaceted and difficult to manage. The introduction and advancement of Information technology has made the designing for supply chain easier. Advancement of information and communication technology has brought widespread availability of computing power to make realistic analysis and simulation possible in the entire lifecycle of a product.
Ease of communication in a complex network of business partners, customers and suppliers across vast cultural and geographical landscapes is key for the functional effectiveness of a supply chain (SAP AG 2005. p. 1) Clear Strategy A clear-cut strategy is important for a supply chain design. Elaborate objectives and processes that can be implemented to achieve those purposes. SP Inc objectives in the supply chain are namely; availability, lead time and total cost.
Therefore in the designing of SP Inc supply chain, the availability of customers’ products at the desired location and at the time where the customer requires them to be is paramount for the success of the company. The lead time should be taken into account so as to avoid placing unnecessary demands on the strategy planning process. Long lead times result in the customers’ inability to adjust in good time to the changes thus placing unnecessary stress on the Spare Parts Incorporated (SP Inc) supply network.
In the supply chain there could be a long chain beginning with the manufacturer (SP Inc), major distributors, small distributors and the retailers. Therefore, the chain actually extends a little further into the market (Noreck, 2008). The company should also minimize the operational costs and avoid transferring most of the costs to its customers in order to make its supply chain the preferred option in the market (Stjernfeldt 2008. p. 1-2) Integrated Organizational Structure A proper supply chain design is the one built based on an elaborate organizational structure (IBM, 2005).
Roles and responsibility of every component in the organizational structure are clear and well able to integrate with other departments in the supply chain design. While supply chain managers have over the years focused on competition in the market the niche to exploit could as well be collaboration. Collaboration in this aspect of supply chain design will encompass both internal collaboration within the various departments in SP Inc as well as external collaboration within the supply base.
Internal collaboration has been viewed by company executives as only relevant between the engineering and product development divisions (Carter et al 2007. p 3-4). However it is prudent that this internal collaboration be explored further to include the marketing, Information and Communication Technology (ICT) division and the business unit management divisions of the company. Supply chain management should be more focused on the future needs in the industry as well as potential new suppliers in the market. Conservative corporate culture will inhibit the development of an integrated program that focuses more on product development.
An integrated program in the supply chain design will require mutual trust between the collaborating divisions within the company. A co-location strategy would create the required synergies between the collaborating divisions in the company whereby different departments can actively draw assist each other for the greater good of the company (Carter et al 2007. p4-5). The hierarchical organizational structure of yester years has to give way to a more dynamic model that will create a networked organization where there is less rigidity in roles and responsibility within the organization structure of SP Inc.
Processes will have to be more proactive in order to meet the dynamic needs in the supply chain industry. At SP Inc the implementation of Product Lifecycle Management (PLM) technologies will facilitate a modern and faster design that will be inclusive of the engineering, technical and supply management divisions of SP Inc. The company in its supply chain design recommends the use of collaboration tools that will cut across the company’s top and bottom levels. Collaboration tools will enable changes be made faster as well as enable the company cut unnecessary logistics (Carter et al 2007.
p 5). Quality Processes SP Inc in its supply chain design factors in the advancement of technology. A decade ago information and Communication technology in supply chain management was still evolving. SP Inc needs to be more flexible in its embrace of technology to ensure that there are minimum hurdles in the implementation of technology. E-sourcing as a discipline in supply management is getting more complex though SP Inc will embrace e-contract management software to ensure compliance of its systems and processes.
Implementation of collaboration software in the supply chain management process will positively influence the alignment of the contract management process in the company. This technology will also enhance the supply chain management ability to monitor performance and capability mapping processes. Extensive employment of e-tools has tremendous advantages in cost implication. Integration of advanced ICT will enhance the productivity of SP Inc’s employees as well as enhance collaboration in the various divisions in the company.
The ICT adapted by SP Inc will be user friendly. It is important to safeguard data security by restricting access to unauthorized users, since the flow of data will be across the collaborating divisions (Carter et al 2007. p 5). Reliable Information The company will have to seek appropriate answers to the various issues that would crop up in the supply chain. In line with the advancement in technology, there is need to harmonize the data captured in the workflow and ensure that it can be defined by the end users.
In ensuring the dissemination of reliable information the company will need to implement changes in technology and processes as it facilitates the flow of information across its networks so as to be better placed to exploit emerging opportunities ahead of the rival companies (Carter et al 2007. p 5). The division responsible for information management will capture, process and store the necessary information for future reference, training as well for the day to day running of the company (Carter et al 2007. p 5).
The company must be able not only to disseminate accurate and reliable information along the supply chain but it must be likewise have the ability to capture information from the wider supply chain management industry on changing trends in the market and be able to rely the information to the relevant divisions and stakeholders along its supply chain. This alertness may offer direction in relation to structures in the supply chain, appropriate processes that need change or review, changes in technology, and upcoming collaboration partnerships. Advancement in ICT will give the company competitive advantage over the rivals (Carter et al 2007.
p. 7). Effective Performance Management The company needs to establish the fundamental breakpoints in the supply chain performance that are likely to generate some competitive advantage in the market (Carter et al 2007. p 3). The company’s decision makers will need to take accurate inventory of the costs involved in the entire supply chain with a view to minimize the costs and maximize on profits in relation to the focus on the future needs in the industry. It is evident that the organizational structure of the company will directly influence the performance of the supply chain design.
It is thus paramount to design a supply chain that it will facilitate the implementation of operational, tactical and strategic decisions (Shen 2007. p. 1). Supply chain performance tries to meet supply in relation to demand and as a result minimize the costs while at the same time attaining customer satisfaction. This means that the supply chain must reduce speculation and demonstrate a high degree of predictability in order to positively influence a predictable upward trend in demand for goods and services (Mason-Jones et al 1999. p. 593-596).
It is paramount that the company strikes a balance between the push and pull supply chains in line with the characteristics of the products involved in the supply chain. A push supply chains can be said to be physically efficient while the pull supply chain is more market responsive (Fisher 1997). SP Inc needs to create contingency plans as well as review the operations strategies in order to reduce the risk factors involved. Risk management policies that will implement mitigation tools such as insurance and the financial markets are appropriate in this respect.
The use of simple formulas in determining supply chain performance cannot be used as a benchmark in determining the general performance of the company (Papadakis 2002. p. 1-19). The entire supply chain must be evaluated according to the specific responsibilities of each component in order to ensure an updated and supply chain able to respond to the newest developments and challenges in the industry (Haag, 2006; Ketchen, 2006). The ideal parameters to optimize in are namely; maximization in on-time deliveries, customer satisfaction, minimal operational costs, and minimal warranty returns (Schabel 2005). Supply Chain Design of SP Inc.
Spare Parts Incorporated (SP Inc) is a hypothetical company. SP Inc is a license holder, manufacturer and distributor of motor vehicle spare parts for various Japanese automotive brands. SP Inc is based in China where there are favorable policies on foreign investment. Decisions regarding the location of a company are one of the most strategic if it is to have an efficient supply chain (Daskin et al 2003 p. 3). Its market target is the Asian region, mostly China and South East Asia where the Japanese manufacturers are absent. This design describes the simple flow of processes between SP Inc, its customers and suppliers (see Appendix A).
Most of these customers are large distributors who sell to smaller distributors. It is a commonality to find that the customers exceed the number of distribution centers assigned hence each customer becomes a small representation of the distribution center’s total capacity (Daskin & Jones 1993 pp 409-421). By operating in low-cost regions SP Inc will in eventually experience improved profits and a more efficient management (Stjernfeldt 2008. p. 2) Processes within the Design SP Inc’s processes will have to be more proactive in order to meet the dynamic needs in the supply chain industry.
The processes include uniformity when dealing with either the customer or vendor. It is important to bear in mind that the design for supply chain is a multifaceted process involving marketing, finance, manufacturing, engineering, and the supply chain team. In order to ensure the productivity of these stakeholders in the process, the process must also provide adequate and relevant benefits in relation to appropriate performance metrics estimates. Important data in this regard will be information regarding; availability, lead time and total cost (Christopher 1992). Human Resources Organizations
SP Inc’s supply chain design is built on an elaborate organizational structure. Roles and responsibility of every component in the organizational structure are clear and well able to integrate with other departments in the supply chain design. The roles and responsibilities demonstrate how operators within the supply chain collaborate (Free Management Library 2008). Responsibilities are divided within these processes and they must are clearly divided and always evaluated periodically. Tech Support There are technologies that have been developed in the ICT domain that will ensure greater collaboration within the supply chain team at SP Inc.
An example of this technological break through is the Microsoft Groove (Carter et al 2007. p 5). This process represents how departments within the supply chain develop and maintain a system of Electronic Data Interchange (EDI) that provides real time connections across the supply chain (Covalent Works Corporation 2008). Information Exchange The division responsible for information management will capture, process and store the necessary information for future reference, training as well for the day to day running of the company (Carter et al 2007.
p 5). The information exchange procedure itself needs a clear structural design. Sp Inc and partners of the supply chain use Electronic Data Transfer Sheets to generate relevant and effective communication between operators of the supply chain (health. gov. on. ca 2004). Performance Evaluation Supply chain performance tries to meet supply in relation to demand and as a result minimize the costs while at the same time attaining customer satisfaction.
This means that SP Inc’s supply chain must reduce speculation and demonstrate a high degree of predictability in order to positively influence a predictable upward trend in demand for goods and services (Mason-Jones et al 1999. p. 593-596). A monthly managerial review is performed between SP Inc managers to discuss how the supply chain system has been running for the month and how can mistakes be prevented for the future (tennessee. edu 2006). A six month managerial review is performed between members of the supply chain including vendors and large distributors.