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The Supply Chain as the Unit of Competition

As the development of Internet and the commerce of economic times, the economic globalization and market integration are getting more powerful in the world, leading to great changes of the international market and fierce competition (Gunasekaran, 2001). In order to improve the competitiveness of the enterprises, a new model based on the logistics management-SC Management (SCM) is getting more attentions in the world (Christopher, 2005).

Many enterprises take the SCM as the important strategies in the global competition to obtain the competition advantages (Blanchard, 2007). In this essay, it will firstly discuss the characteristics of supply chain (SC), taking place of individual enterprise as the unit of competition. Following this, it will talk about the consequences of SC based on the influences of SC to individual business operation and strategy. At last, it will discuss the trend of SC in the future to the operations management and business strategy.

Supply Chain as the Unite of Competition

SC theory was developed from the value chain theory by Porter. He believed that any organization could be seen as the integration of a series of basic behaviours, which were responding to the flows of suppliers, consumers, information and capital. According to Blanchard (2007), SC is just

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the value-added chain formed by the suppliers of raw materials and accessories, manufacturers of products, dealers, distributors and the final customers.

SC is to achieve the entire process from the needs of consumers to the supply of products or services to the consumers. SC is the new type of logistics management. In the chain of providing products, SC manages the flow of products, information and capital with plans, coordination and control to establish the relationships between suppliers, manufactures, distributors as well as the customers (Holweg and Pil, 2008). SC could make the minimum costs of the system costs to achieve the optimization of the entire effectiveness of the chain.

In modern business, SC has taken place of the individual business as unit of competition (Gunasekaran, 2001). In the context of economic globalization and social marketization, the competition becomes greatly intense. The traditional price competition, quality competition, ads competition or brand competition can not establish the market barriers for competitors (Mentzer, 2001). The SC will become the new model of the competition.

The consumers in the information age will pursue the goods with more than just being practical. They need to obtain not only the product functioning values, but also the convenience of the life product value. In this context, the enterprises need to provide more quickly delivery and more flexible product transfer as well as more robust transmission system for product protection to the consumers. The utilization of traditional forms of competition needs great resources. Besides, the effects are becoming poor. The expansion of competition needs perform in new areas. The supply Chain provides a new thought.

The objectiveness of SC is to save capital utilization, reduce the cost of logistics and improve the service (Mentzer, 2001). For individual enterprises, how to deliver the products or services to the customers in the shortest time within the fewest cost is the important indicator to reflect the enterprise competitiveness. In the past, the enterprises always focused on the production rather than the logistics, and treated the production as the main aspect that created profits and the logistics as the assistant aspect of production (Christopher, 2005).

Under such mind, the enterprises treated the saving of materials in the production and reducing activities consumption as the main sources of profits, and ignored the saving of the logistics. With the progress of the sciences and technology, the potentials that create profits from the production become smaller and smaller, which means the production has walked into the meager-profit condition. However, the costs of the logistics are increasing all the time.

The logistics costs have taken half costs of the products circulation, and become the third largest profit-source after the production and sales. Moreover, the logistics activities no longer involve the single department or enterprise. The SC connects the suppliers, manufactures, distributors and dealers together into a unified management. The enterprises need to coordinate every link of the chain in order to obtain the competition environment, so that the enterprises mutually work with each other (Holweg and Pil, 2008). In this case, the implementation of SC could greatly improve the logistics efficiency, and reduce the logistics costs, enhancing the competitiveness with great significance.

Take the successful example of DELL in SCM. The supply chain channel and supply chain management have become the effective means to improve the customer satisfaction (Mangan and Lanlwano at, al, 2008). The supply chain management of DELL brings about the effective logistics, making a solid foundation for the direct sales model. Through information analysis, DELL not only is able to produce the cheapest and the latest computers, but also obtain the customers purchasing behaviours, product preference, and other first-hand information. In addition, DELL always communicates with Inter and Microsoft, DELL could grasp the key moments of the changes of the market or the clients in the generational transformation for its procurement.

According to Basu and Wright (2007), through the integration of SC, Haier Group could achieve zero-inventory, and make the implementation with order information flow-centered to lead the logistics and cash flow, and implement the “three zero” named by zero-distance of service, zero-possess of cash and zero-defect quality as the target. Through the synchronized speed, Haier Group motivates staffs by market values and customers needs, and then creates the orders to build the core competitiveness.

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