The purpose of this essay is to explore and evaluate the various approaches that can be taken to facilitate the management of supply chains.
supply chain Management – A terminological background
The Institute for Supply chain management has defined supply management as “the identification, acquisition, access, positioning and management of resources an organisation needs or potentially needs in the attainment of its strategic objectives.” The essence is a shift of focus away from business units such as warehouses or factories to a more holistic view of a supply chain. For a given company this might include parts suppliers, manufacturers, transport, logistics and retailers.
Origins of SCM
SCM has is origins in organisational extension theory first proposed by Mallen in 1963. Mallen’s theory was developed within the context of marketing and advocated the extension of an organization to include all members of the distribution channel.
The Essay on THE TASK OF PURCHASING AND SUPPLY MANAGEMENT
... purchasing and supply management is executed as an integrated part of the firm’s broader management (as part of the logistics management or supply chain management approach) Purchasing ... and supply PLANNING is part of the ...
Why use SCM?
Supply chain management as a concept has been evolved to address a number of issues that effect modern companies as follows.
The number of suppliers that companies use has tended to increase greatly, for example Sun Microsystems has three factories of its own but uses its supply base to increase its productivity by a factor of a hundred. Sourcing from such a large supplier base allows a company to choose the best value components available from the world market giving added value to the customer; the downside is the obvious extra management burden that comes as a result.
Economic factors such as global recessions and increased global competition have forced companies to focus not just on their product but also on streamlining every process across the value chain from the component suppliers to the end vendor.
As supply chains grow in size and complexity it can become apparent that there are dependencies between companies in the supply chain. For instance a smaller size supplier may maintain a line purely to service a larger company. When this happens it makes sense to share information between the companies and maybe even to go as far as integrating systems for mutual benefit.
IT approaches to SCM
In the 1970s procurement professionals played a key role in cutting costs to help companies compete during the energy crisis, in the 1980s procurement had to again find ways to cut costs to fight against the competitive advantage of high quality and low priced Japanese products. From the mid 1990s to present, procurement professionals are combining best practices with technology to streamline processes, control costs, achieve operational efficiency and deploy strategic procurement initiatives across the enterprise.
Data Storage
Step one when looking at any company would be to examine how it stores its information. Many companies will still be using antiquated databases of different types or may even still be reliant on paper records. Centralising the companies’ data into a modern relational or object orientated database would immediately reduce the amount of redundant or duplicated data. This approach would allow departments the ability to use data from other departments to reconcile their own data, highlighting errors that would otherwise have not been apparent.
Whilst this is probably the most important factor for any company, it is often the most difficult to make changes in due to the extremely high initial costs and disruption incurred. However, without a well structured database a company will find its ability to make progress in other areas hampered.
The Essay on Company Profile of Executone Information Systems
Executone Information Systems, based in Milord, Connecticut, which designed and marketed telecommunications products for small-and medium-sized businesses, has become a major telecommunication company competing with AT&T and Northern Telecom since 1988. Because of economic recession in 1993, many companies had to change their product strategy to overcome this unbreakable situation. Not only ...
Operational Processes
In this area are grouped together procurement, factory/warehouse management and logistics. These areas can all be greatly assisted by modern improvements in communications and software. A great deal of time and money is wasted by companies still relying on the use of the telephone, fax or post to communicate between these departments and with external sources. Once a company has rationalised its data storage it becomes possible to automate many inter-departmental processes. It need not stop there either, systems are available to transfer information between various trading partners; systems such as these are known as inter-organisational information systems (IOIS).
The virtual corporate integration that results when such systems are adopted can lead to a reduction in what has been termed supply chain uncertainty. All companies within the IOIS will have a greater awareness of the state of play at any given time resulting in increased operational efficiency. The company that has access to this information is also going to be able to offer value added services to its customer such as order tracking.
New approaches to manufacturing become possible such as Just-in-Time (JiT) and Build-to-Order (BTO).
A large company is now able to react to a change request from a customer, giving more added value.
Inventory
Carrying unsold inventory costs U.S. businesses about $332 billion per year.
As can be seen from the above statistic there is huge scope for clawing back lost potential revenue in this area. If, for example, at the end of a supply chain, company A is supplying vendor B; it is quite possible that both companies might keep a reserve surplus stock or worse still, they may both run out of stock. The solution here, as I hinted at earlier, is to share information between the companies or even to integrate systems. This has been implemented in a number of different ways; we shall examine VMI (Vendor Managed Inventory) and CRP (Continuous Replenishment Program).
The Essay on Expanding The Year Field To Four Company Solution Systems
Using a 100-year logic window The logic window approach allows the system to determine the century or decade of a given year by comparing the value of the two digit field against an application window. One version of this technique allows for a sliding window, in which one changes the boundaries of the window and the user is notified when the window is about to advance. This technique does require ...
With VMI: Company A is able to access B’s inventory records and when they fall below a level, set by B, send more stock and raise the appropriate purchase orders.
With CRP: Data from the whole of the supply chain is analysed with the goal being that when an item is purchased from the vendor (B) a message travels back through the supply chain requesting the production of a new replacement item. So far this would seem to be similar in effect with VMI, CRP however, makes use of the extra data it has, to make a prediction of the likely sales on a given day and sets the recommended level of stock. This is known as demand forecasting. Depending on the complexity of the implementation CRP may be able to take into account general trends, seasonal trends or other known patterns specific to a given product.
Potential Pitfalls
The obvious major drawback when thinking of redesigning a supply chain is cost. A very large company without these systems faces a fairly stark choice: invest millions in restructuring or watch market share slip away to those competitors willing to spend and give their customers better service.
There are off-the-shelf customisable solutions available from companies such as SAP and Peoplesoft which are often referred to as Enterprise Resource Planning applications. Large companies are often tempted by these systems as a comparatively cheap alternative to having a bespoke system built from scratch. As usual there is a sting in the tail with SAP consultants being among the most costly in the market and the various modules that make up these applications often needing ‘tweaking’ to bring them into line with business changes.
As with any major development project a company may undertake there will be a resistance to change from employees, especially those who have served for a long period and are used to doing the job a particular way. A full impact analysis is always advised before embarking on any major project.
Implementing a JiT or BTO system is very desirable for a producer will not be nearly so attractive to the suppliers. A supplier will be quite happy to deliver 10,000 widgets a month to the producer but will be much less amenable to being asked to supply variable amounts on a weekly or even daily basis. For a producer to implement such a system, it will generally require the producer to be in a powerful bargaining position with many competing suppliers.
The Research paper on Military Supply Chain Ammunition Management Time
Considering that the military's logistical structure hasn't had a major improvement in over 60 years, the idea of streamlining and consolidating systems would be a welcome and much needed change. I currently work in the ammunition field for the U. S. Army and have done so for the past 18 years. The changes that the Marines are beginning to implement will help to free up resources and cut funds ...
Alternatives to SCM?
Underneath the bonnet most SCM software that has been written in the last twenty years uses a technology called Electronic Data Interchange to implement the communications required between processes, departments and companies. With the advent of the internet and the dominance of TCP/IP transport, new powerful concepts are beginning to emerge. Companies have understandably been reluctant to use what is essentially a public network to transmit their sensitive data but the introduction of 128+bit encryption is able to offer as least as much security as EDI over a phone line.
Business to Business Integration (B2Bi) is the name given to the standards for inter-company communications over the internet. These are open standards and they all revolve around the use of extensible mark-up language, better known as XML. This user-definable mark-up language can be used to describe interfaces to services that a company wishes to offer. The success or failure of B2Bi is largely dependant on the uptake of the various proposed standards such as Web Services Description Language (WSDL) – for defining services – and Universal Description, Discovery and Integration – which is like a yellow pages services for customers to look for available services.
A few leading B2Bi solutions include: IBM MQSeries Integrator; Extricity; BEA eLink; webMethods B2B Enterprise; NEON eBusiness Integration Servers; Vitria BusinessWare; and Microsoft BizTalk Server.
Summary
It has been suggested that SCM will provide a sustainable competitive advantage to those organizations implementing it. Whether or not an advantage in business can ever be sustainable for eternity is doubtful; in the field of SCM when a new technological advance is always just round the corner it is highly unlikely. Successful supply chain management strategies do, however, enable organizations to reduce costs while simultaneously improving service and product quality. The realisation of these benefits can provide a significant competitive advantage over other organisations. In order to gain this advantage, it is important to implement a comprehensive supply chain management initiative that includes technological, organizational and attitudinal changes.
The Essay on Value Chain as Competitive Advantage
Customer-centric businesses focus on consistently delivering a differentiated experience designed to satisfy the customer. The ultimate goal is to sustain competitive advantage in the marketplace. The purpose of this paper is to demonstrate why an effective value chain creates competitive advantage. Review of Concepts Value Chain The value chain is a concept developed by recognized Harvard ...
References
Duffy & Roberta, 2002, New Frontiers Defining Supply Management. Inside Supply Management, January, 2002
Green, 1998, Supply Chain Management: Literature Review
Sun Microsystems, 2001, Sun’s Breakthrough Supply Chain
CoreHarbour, 2002, The First Step in the Supply Chain
Kosynski, 1993, Strategic Control in the Extended Enterprise, IBM Systems Journal, Vol. 32
Kumar & Dissel, 1996, Sustainable Collaboration, MIS Quarterly, Vol20, Issue 3
Pickering & Carol, 2001, The Price of Excess
Handfield & Nichols, 1999, Introduction to Supply Chain Management, Prentice-Hall
Gagliardi, 1996, Tightening The Flow, Manufacturing Systems, Wheaton, Vol. 14
Burgess, 1998, Avoiding Supply Chain Management Failure, International Journal of Logistics Management, Vol.9
