supply chain management

supply chain management

The Evolution and Impact of Modern Supply Chain Management Practices

1. Introduction to Supply Chain Management

In a supply chain, the purchaser is the retailer and final customer. The supplier is one link in the chain and consequently, the cost reduction resulted in profit made at the expense of the other links in the chain, and that is the reason why strong resistance was encountered. Supply chain management is concerned with collaboration and trust – collaboration is necessary to provide a strong active relationship between the members of a supply chain, providing a deeper understanding of the product flow and cost to all parties, and trust must be developed. Confidence is built and responsibility is shared in order to ensure that the chosen path is continuously developed and the network sustains a competitive advantage. In supply chain management, contracts cannot contain all the details that are needed to include in a contractual relationship. The need arose for strategic alliances between customers and suppliers instead of adversarial relationships.

Supply chain management (SCM) is concerned with the flow of products and information between and among supply chain stages, including the collective entities engaged in the downstream markets in which products are grown, processed into final goods, and delivered to end users. The improvement of supply chain efficiency has gone well beyond a focus on cost and has taken on many larger issues that all link together the trade of a country. The primary focus of the emerging supply chain management concept is on cooperation. Traditionally, the manufacturer insisted on cost reductions from the supplier. These cost reductions were profit that the supplier lost, hence the manufacturer’s gain. However, this occurred between the manufacturer and supplier.

2. Key Concepts and Components of Supply Chain Management

Good organizations take things a step further. They also aim to reach consumers by using reliable, cost-effective, flexible, and fast distribution systems that are capable of handling a range of products and customer service conditions. These require careful management in their own right. The forward distribution system is developed to match the requirements of the market. Information, product quality, the image of the supplier, and factors such as delivery, response times, and flexibility are all important considerations in the purchase decision, and together they have an enormous impact on the supply chain. Finally, reverse distribution, leading to improved product collection or return and recycling procedures, ensures that the product’s life cycle is fully completed and adheres to environmental restrictions and regulations. Sustainable consumption is the global solution that emphasizes the performance of a system rather than that of a single product.

Supply chain management has a number of components; one of the most important is the way manufacturing or production is undertaken. ‘Lean’ production, where inventory levels are low and delivery schedules crucial, is essential in many types of business. Another task of supply chain management is ensuring that the end consumer is reached as quickly and effectively as possible. Advertising, marketing, and the research and development of new, improved products are important components in this instance.

Defined in many different ways and variously referred to as materials management, logistics management, or simply business management, supply chain management is the concept of looking at the entire business as a single unit rather than as a series of largely autonomous parts. The aim of supply chain management is to avoid any major disruption in the flow of goods and services throughout the business and to ensure high-quality service. It is not just a matter of cutting delivery costs but also of ensuring that products and services are delivered when needed, in the right place, and in the correct quantity. This is a comprehensive philosophy and strategy of managing the movement of raw materials, work-in-progress, and finished goods from raw materials producers to end-use consumers and back again through the properly managed distribution paths.

3. Technological Innovations in Supply Chain Management

In addition to technology, regulatory requirements are also a key driver in supply chain innovation. For example, during the 2002-2003 era, many supply chains had to react to new governmental regulations such as the new Bioterrorism Act, which required more stringent document control and management as well as meeting critical timeline controls. Another external pressure is customer requirements. These requirements can arise for various reasons, such as a manufacturer’s energy cost reduction and inventory cycle time compression. These are very important requirements, and there are fine models to research and implement the reduction of energy use and inventory cycle times along integrated supply chains. After 9/11, sustainability of supply chains and a focus on green practices have been raised. The recovery task can also be seen in the context of moving from disaster response recovery to long-term sustainability after 9/11, 2003 BSE, SARS, avian flu, and Katrina/Rita. These regulations have motivated the redesign of supply chains, enabling greater responsiveness and enhanced partner communications.

One major contributor to supply chain innovation is technology, as it allows supply chain partners to have more timely and accurate information on shipment status. To implement technology-based applications, supply chain partners may install both hardware and software elements. Partners usually communicate with and transmit information through these technologies. However, technology alone cannot lead to superior supply chain performance. This is because technology can also increase supply chain partners’ operational complexity without offering commensurate benefits. Consequently, it is important to collaborate effectively with partners and integrate their business processes to capitalize on the full potential of technology and improve supply chain service.

4. Challenges and Opportunities in Supply Chain Management

Many enterprises invest heavily to improve their level of customer service by upgrading their IT infrastructure, fortifying their security systems, and managing online operations. Online retailing enhances customer convenience and may increase a firm’s revenues. Recent technological breakthroughs in data capture, processing, and mining provide the analytical tools required to enhance a firm’s forecasting capabilities. In the realm of pricing strategy, a retailer can use a technique called point-of-sale data mining to extract insights about consumer preferences, buying habits, and reservation prices. Sharing these insights with top-tier suppliers helps them to tailor their promotional offers. By offering products that are more aligned with consumers’ choice and price-quality sensitivity, the supplier increases its likelihood of getting its products (the most profitable ones) featured online by the retailer.

Internal integration, collaboration, and information sharing among key members of the supply chain community have been recurrent research themes. The information-sharing dilemma refers to the difficulties of determining the incremental value associated with investing in the acquisition, analysis, application, and enforcement of information technology (IT) systems, software solutions, and business processes that are designed to share data and business intelligence within the firm’s internal stakeholders and supply chain partners. Price dispersion is referred to the price differences of the same commodity, which are usually due to various market frictions, nonconcave price-for-quality function, and information asymmetry. This issue affects all participants in the supply chain, most prominently consumers who compare multiple retail prices online and then make purchase decisions. In some cases, price dispersion also leads to the “my-brand-just-a-click-away” problem, whereby people search for items offline, but then they buy them from online sellers.

5. Future Trends and Implications of Supply Chain Management

Key trends that seem to be developing will have a significant influence on how businesses reshape their supply chains to meet future market demands. These trends include: 1) the forced merging of SCM and E-Business Concepts, 2) externalization/focusing on core competencies, 3) incorporating strategies that specifically relate to services, 4) increasing supplier flexibility and cooperation, 5) the evolving concept of agile SCM, 6) risk management/strategies, and 7) striving for supply chain integration. Each trend, while defined from a supply chain context, holds important implications for the future scope of supply chain management and relevant performance measurement.

Supply Chain Management (SCM) is still a relatively young academic theory and business practice. While many firms have incorporated the basic elements of SCM into their daily operations, for most companies, the programs behind their SCM initiatives are still a work in progress. Several academics, consultants, and marketing firms have offered insight into the future of SCM theory and best practice. Some trends are consistent with weaknesses found in SCM research. Other trends reflect the advancement of new technologies. In all cases, it is important to understand the potential business benefits of these future shifts in supply chain management techniques, which in turn allows firms to shape the development of their supply chain processes in ways that address important strategic issues.