Good Supply Chain Management In Context Essay Example
Supply chain management is an essential tool applied in various operations in an organization. It entails managing raw materials, resources, and information from the supplier to the organization and finally to the end user. This is made possible by the presence of an efficient coordination of various channels that determines how the products and services flow from one party to another, depending on its value and usability. In order to be successful, supply chain management relies on various principles and concepts that enable various stakeholders to make a critical decision on whether to attain the desired product and service or not. Essentially, supply chain management entails the management of different functions within an organization including purchasing or raw materials, processing and distribution of the processed products to the end user. It is the coordination of different operations that are essential for an organization successfully to achieve the set goals and objective, the major being making big profits with lowest costs of production, processing and distribution.
In an attempt to understand the concept of supply chain management, various scholars and researchers have come up with different definitions of the term. For instance, according to Ganeshan and Harrison (1995), supply chain management is an interconnection of facilities, materials, and distribution options that are integrated to carry out tasks of procurement of raw materials, their transformation and processing into finished and intermediate products and distribution of the end products to the customers. Thus, it involves an integration of various operations within an organization as a way of minimizing costs and increasing projected revenues while ensuring the needs of different organizations’ stakeholders are met satisfactorily. Currently, various organizations are constantly looking for new and more efficient supply chain management techniques that assure competitiveness primarily due to the emergence of issues such as globalization. This is because it is an essential tool for handling critical problems that could interrupt the routine operation as a result of mismanaged inflow and outflow of materials and finished products within the organization.
Supply chain principles and practices
The success of supply chain management is influenced by the practices and principles applied in planning, controlling, and decision making among other managerial functions involving the supply chain. The market uncertainty caused by uncertain demand of finished products and unavailability of adequate raw materials are some of the issues that affect the supply chain management practices especially if a company is not well prepared for such circumstances. As such, Muckstadt et al. (2003) suggests the application of critical principles as a way of achieving a successful supply chains management practices.
Knowing your customers is the first principle that organization management should adopt a strategy of reducing supply chain uncertainty. This is essential in understanding factors such as what the customer needs, how they perceive an organization’s products and how much they are willing to pay for particular goods and services. As a result, the company is able to purchase adequate and appropriate raw materials as well as carry out manufacturing process that ensures the right quality and quantity is achieved as per the customers’ needs while minimizing costs to correspond to the price that customers are willing to pay. The second principle involves adapting to a lean philosophy that includes setting an achievable organization and departmental goals.
For the organization to achieve a successful supply chain operations, it is essential that it adopts a lean philosophy where the staff is trained in various skills and decision-making processes. A lean organization is likely to avoid uncertainties resulting from fluctuations in demand and supply of raw materials and finished products. Application of efficient information infrastructure is also essential an essential principle that ensures that the company makes informed decisions in the supply chain process. Integration of business processes other than managing individual functions is also important principle that must be put into practice as a way of achieving a successful supply chain. Decisions made in each department are influenced by decisions of another department. For instance, the in order to satisfy customer demand, marketing department must work collaboratively with distributors and retailers in order to identify ways of satisfying such demands, and at the same time inform manufacturing and procurement departments so as to produce adequate and quality produce. Coupled with information management, this principle ensures a constant flow of materials in the supply chain. Integrating information infrastructure with business operations eases the decision-making process as the organization can operate collaboratively in accordance with the market knowledge.
In addition to the application of various principles, ethical practices are essential for these principles to be useful. Ethics determines the organizational culture, and it is also indispensable for building relations both internally and externally. Ethical considerations enable the supply chain to be effective through creation of a collaborative and transparent environment with the customers and suppliers as well as create a favorable working environment for the employees at different levels of the organization (Muckstad, 2003). Ethical decisions are necessary for most of the supply chain practices including decisions involving quality versus price of products and services, accuracy, information management and distribution channels among others.
Evolution of supply chain management operations
The supply chain principles have evolved from simple logistics management in the late 80s to the current sophisticated operations management processes. The evolution of supply chain management can be traced back in early 20th centuries, but it was first coined in 1982 by Keith Oliver. This era was mostly concerned with costs reductions, large-scale changes and essentially the adoption of the Japanese management practices. The integration era was the second phase of SCM evolution, and it was characterized by the adoption of electronic data interchange systems adopted in 1980s and Enterprise Resource Planning in 1990s. This form of SCM is currently practiced by some companies such as Tesco, which relies on vertical integration in managing SCM. The modern supply chain management has become sophisticated due to evolution of globalization and outsourcing where SCM is now used as a service.
Currently, organizations prefer to outsource supply chain management services such as manufacturing, storage, distribution and web hosting, thus reducing the costs of having to do these services on their own. Organizations such as Hewlett-Packard and Dell have relied heavily on outsourcing and information technology to streamline their supply chain processed while incurring minimum costs of production. Integration, Globalization, and outsourcing have also made supply chain management easier especially while managing international business operations for large organizations such as Coca-cola.
Process of supply chain decision-making
Supply chain management decision-making process is a critical process that determines how various operations are integrated and carried out successfully to ensure a smooth flow of materials and services from the supplier to the end user. Right decisions provide an efficient integration process, thus reducing costs and promote effective and timely deliveries, production and distribution of products and services. The decision-making process takes place at three significant levels in the organization which includes strategic, tactical and operational levels. The process itself involves a flow of decisions from the top level/strategic downward to the tactical and finally to the operation level.
Decisions made at the strategic level involve deriving long term objectives that in line with the organization’s mission statement, as well as coming up with strategic measures to achieve these goals. Decisions such as products positioning and differentiation, cost drivers, and the overall position of the company in relation to the competitors are made at this level. Decision-Making at strategic level involves the overall long term identification of the issues that are likely to affect the supply chain network, thus coming up with strategic measures to deal with such issues.
Tactical level, on the other hand, involves making short-term decisions made on monthly, quarterly or annual basis. Such decisions include planning for purchases and supplies, production schedules, marketing and sales forecasting in relations to the market demand, and logistics decisions. Tactical decisions are based on the activities of different departments and integration of these activities to ensure a smooth operation of the essential elements of the supply chain (David, 2009). In contrast, decisions made at the operations level involve decisions that determine the daily activities within the organization. Decisions such as loading, scheduling and deliveries are made on a day to day basis. However, decisions at tactical level are influenced by the decisions raised at the strategic level while those in the operational level are influenced by the decisions made at the tactical level.
Supply chain decision-making process is, however, a complex process that requires application of techniques and tools as a way of achieving a desired decision. As such, there is a variety of tools and techniques used in supply chain management decision-making process. Advanced technology and information system is a major tool that organizations use to ensure that they make informed decisions especially in handling demand issues. Effective information system also eases communication process both internally and externally, thus enhancing the process of integration as different departments make decisions collaboratively with a core aim of delivering the desired products and services. Technological advancement on the other hand aids in making decisions involving costs through simplified forecasting and financial management, logistics, marketing and distributions decisions. The modern technology commonly used in supply chain management includes the electronic data interchange (EDI) and Enterprise Resource Planning (ERP) systems.
Apart from technology, organizations use business integration both as a supply chain principle and also as a decision-making technique. According to Min and Mentzer (2004), efficient supply chain is possible through integration of various stakeholders’ needs and concerns so as to arrive at the final determination. For instance, an organization is able to determine the quality and quantity of products and services to manufacture based on the willingness of the suppliers to source in adequate materials and the ability and willingness of the consumers to buy the products.
Despite the process of decision-making being the most critical determinant in the success of supply chain operations, there are several challenges that may hinder effective decision-making process (David, 2009). Lack of collaboration between the involved supply chain stakeholders is one of the issues that may slow down the process of making crucial decision. Lack of effective information system and various communication and operational tools may also interfere with the decision-making process. Corporate cultures and human factors also determine the process of decision making within an organization while issues such as lack of a proper result measurements may render the decisions useless (Min, and Mentzer, 2004). Other factors that may hinder the process of making decisions includes the unwillingness of the managers to share information, limited finances and lack of management support for critical decisions especially those made at the tactical and operational levels.
Some of the management frameworks used for planning and control of materials and services include formation of specialized departments such as procurement and logistics where critical control functions such as that of purchasing and storage of raw materials and financial records are handled. In addition, the adoption of customer service management is another framework that enables the organization access information concerning the customer needs, thus coming up with possible plans to satisfy these needs based on the market demand information.
Supply chain is a complex process, and yet t is an essential factor that enables organizations to overcome issues that occur within the supply chain. These include procurement, manufacturing and distribution of finished products to the end user while utilizing minimum costs. While the need to have a concrete supply chain management in the organizations, the process remains costly, thus making organizations with low capital experience difficulties in handling supply chain related issues. However, with the constant development of cheap information technologies and SCM outsourcing, companies stand a better chance of gaining competitiveness through simplified supply chain management frameworks that are less expensive and more productive.
David J. 2009. Guide to Supply Chain Management: How Getting it Right Boosts Corporate Performance (The Economist Books), Bloomberg Press.
Hines, T. 2004. Supply chain strategies: Customer driven and customer focused. Oxford: Elsevier.
Min, S. and Mentzer, J.T., 2004. Developing and measuring supply chain management concepts. Journal of Business Logistics, 25(1), 63-99.
Muckstad, J. A. 2003. The Five Principles of Supply Chain Management. An Innovative approach to Managing Uncertainty [pdf]. Retrieved from http://time.dufe.edu.cn/wencong/supplychain/008.pdf.
Simchi-Levi, D., Kaminsky, P., and Simchi-Levi, E. 2003. Designing and Managing the supply chain: Concepts, strategies & case studies (2nd ed.). Singapore: McGraw-Hall Irwin.
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