The Concepts Of Supply Chain Management Business Essay Example

objective (Operations Management, Pearson, 2010).

James P Womack et Al, in their book "The Machine That Changed the World" (Macmillan, 1990), highlighted the importance of partnership and lean principles in gaining competitive advantage. They emphasized that partnering with reliable suppliers who possess expertise and technical knowledge can lead to the production of high quality products at a lower cost and with dependable delivery. Utilizing this same approach, companies can enhance their supply base and implement lean practices to achieve efficient production, reduced lead times, and minimized inventory and associated costs. An essential aspect of supply relationship management that gives companies a competitive edge is the adoption of lean principles in monitoring supplier performance and continuously improving it. Monitoring supplier performance involves ongoing supervision to ensure contractual obligations are met, as well as using measurement tools such as key performance indicators (KPIs) to assess supplier progress and deviations from targeted goals.

The overall advantage in competition involves consistently improving operations in terms of quality, delivery, and service. In 1989, Chrysler implemented the Supplier Cost Reduction Effort (SCORE) program to reduce costs, enhance quality, and monitor supplier performance while competing against Japanese companies. The integration with suppliers includes coordination between the buyer and supplier to align their processes and improve communication and supply chain visibility for both parties. By merging their knowledge and technology, companies can fulfill the requirements of end customers by acquiring the appropriate product at an advantageous price and quality level, thus gaining a competitive edge.

In 1990, Bose Corporation implemented a scheme that led to the development of the JIT2 concept. JIT2 is an extension of JIT (Just-in-Time) designed to minimize waste, improve communication, and reduce

demand variability. Companies are continuously seeking solutions to address fluctuations in demand and meet customer needs. Through effective collaboration with suppliers and customers, businesses can gain a competitive advantage by efficiently managing supplier relationships and ensuring smooth inventory flow from suppliers to consumers. This aids in reducing lead times, demand variability, and uncertainty. Innovations like Radio Frequency Identification Device (RFID) have emerged as a means of tracking goods and providing real-time location information.

According to a study conducted in 2010 by Christos Tsinopoulos and Carlos Mena (source: Competing Supply Chain Strategy: Tesco, Aldi and Lidl, ECCH), Tesco, the largest food market retailer in the UK, has implemented a technology strategy that involves using RFID at the pallet level to manage its logistics. To meet both domestic and international market pressures, companies have been collaborating with suppliers and forming strategic partnerships. This allows firms to utilize local and international suppliers to improve their sourcing options, reduce product lead time, and optimize costs through global and local sourcing alternatives. This approach provides several benefits such as responding quickly to demand fluctuations while offering customers a wide range of affordable products without compromising on quality. Consequently, this strategy attracts more customers and increases market share. IKEA is an excellent example of successful implementation of this strategy as the Swedish international furniture company has effectively used it to offer high-quality products at reasonable prices while capturing significant market share both domestically and internationally.

According to Kenneth Lysons and Michael Gillingham (Purchasing and Supply Chain Management, Prentice Hall, 2003), relationships between individuals, organizations, and groups are crucial in the field of supply chain management. These relationships can be categorized as business-to-business (B2B),

business-to-consumers (B2C), consumers-to-business (C2B), and customers-to-customers (C2C) due to the interdependence among companies. B2B relationships are the most common in this domain. Various approaches and models have been used for extensive study on B2B relationships, including IMP, SCOR, HP, GSCF, Service supply chain, and IUE-SSE. The IMP approach was developed by a group called the IMP Group in the mid-1970s involving five European states and universities. This approach offers a dynamic model for understanding interactions between suppliers and customers.

[online]. (hypertext transfer protocol://www.impgroup.org/about). (Accessed 06 Feb 2011). Based on a study of around 900 business relationships, the IMP group has developed a model of an interaction process at both the company and individual levels that creates a dynamic, complex, and long-lasting relationship rather than one based on a short-term stable relationship; Bensaou M (1999), Portfolios of Buyer-Supplier Relationships, Sloan Management Review, Vol.

The relationship between buyers and suppliers is influenced by various factors. These factors include soft factors such as power, cooperation, intimacy, and outlooks, as well as external environmental factors such as market structures, dynamism, internationalization, and position in the market. The IMP Group approach and model offer a comprehensive understanding of buyer-supplier relationships and have influenced other models, such as David T. Wilson's (1995) Integrated Model of Buyer-Supplier relationships published in the Journal of the Academy of Marketing Science (Vol. 23, pp. 335-345).

Customer-supplier relationship direction theoretical accounts and models can also be viewed within the context of the different types of supply chain theoretical models that exhibit customer-supplier relationship direction. This will include a variety of supply chain theoretical models which address customer-supplier relationships such as HP, SCOR, GSCF, and IUE-SSC model. These

models identify customer-supplier relationships by following two differing perspectives; product and service supply chain perspective. Product oriented models follow a manufacturing approach that involves the physical movement of goods under uncertainties managed to meet customer demands and include the HP, SCOR and GSCF models. The Hewlett Packard (HP) model was developed by the Hewlett Packard Company as a result of spiraling inventory and customer dissatisfaction the company was facing with its order fulfillment process. Lee, H.

Billington and C. Billington (1995) utilized the theoretical model in their research article, "The Evolution of Supply-Chain Management Models and Practice at Hewlett-Packard," featured in Business Source Premiere, Volume 25, pages 42-63. The purpose was to demonstrate the interconnectedness between suppliers, manufacturers, and customers within the flow of goods, with multiple warehouses providing inventory throughout each stage to address fluctuations in demand. The Supply Chain Operations Reference (SCOR) model, developed by the Supply Chain Council, is a comprehensive and structured model used to measure overall supply chain performance (Supply Chain Council, 1995).

The SCOR theoretical model views the supply chain as a series of links representing supplier-customer relationships. These relationships are evaluated using Key Performance Indicators (KPIs) to measure success. Although this model improves customer satisfaction through better relationships, it does not address post-delivery customer support. The Global Supply Chain Forum (GSCF) also follows a process manufacturing approach and includes supplier relationship management as one of its eight key business processes related to product flow.
Croxton L. Keely et al. (2001), "The Supply Chain Management Processes," International Journal of Logistics Management, Vol.

The text discusses different models for understanding supply chains. The first model, depicted in sections 12, 13-24, presents an end-to-end process

where each procedure is connected and managed to interface with key clients and providers. This model includes eight business processes, one of which is customer-supplier relationship management to ensure smooth product flow within the supply chain. However, as services and the service industry become more important, a new model was introduced by Ellram et al. (2004) in the article "Understanding and Managing Service Supply Chain" published in The Journal of Supply Chain Management (Vol. 40, pp. 17-32). This model adapts the manufacturing approach to service thinking, focusing on service capacity and delivery rather than physical products as the key processes in supply chains. This service supply model reflects customer-supplier relationship through an end-to-end provider and client process that includes capacity and demand management, cash flows and service delivery management, similar to manufacturing supply chains.

This is a highly effective technique that identifies the direction of relationships. However, it has limitations as services are intangible and difficult to visualize and conceptualize. Building upon the concept of service supply chains, a new framework known as the IUE-SSC model was introduced by Baltacioglu et al. (2007) in their study titled "A New Framework for Service Supply Chains" published in the Service Industries Journal (Vol. 27, 105-124). The acronym IUE-SSC represents the initials of the authors' affiliated organization and the Service Supply Chain Model.

This theoretical model classifies relationships in the supply chain as customer-supplier relationships and divides the supply chain into three main parts: provider, service provider, and customer. The provider's service is considered both core and supporting. Similar to Ellram et al's proposed model for the service supply chain, this model also acknowledges important activities in managing customer-supplier relationships

in the service supply chain. These relationships can be categorized as business-to-business (B2B) or consumer-to-consumer (C2C). However, it appears that the aforementioned authors primarily focused on B2B relationships due to their popularity and historical context of consumer-supplier behavior. Nonetheless, given changing consumer behavior, globalization, and the impact of information technology, it is essential to develop contemporary models that encompass consumer-supplier relationships in business-to-consumer (B2C), consumer-to-business (C2B), or consumer-to-consumer (C2C) contexts. Therefore, I believe that models based on e-commerce relationships rather than traditional product or service-oriented approaches would be valuable in elucidating the management of consumer-supplier relationships in today's modern business world.

According to the traditional view, company relationships can differ and there is no universal approach. To effectively manage competitiveness, companies can categorize these relationships and create a relationship portfolio with suppliers. Different methods, including various types of relationships and analytical models like Kraljic's Purchasing/supply portfolio-analysis and the power government model, have been adopted. Companies have different ways of aligning these relationships with their specific products, services, or markets. These relationships typically evolve from short-term transactions to a new form of close and long-term partnership or vertical integration (Alan Harrison and Remko van Hoek, Logistics Management and Strategy, Pearson, 2008). Some see this trend as a continuum that includes additional types such as strategic alliances and joint ventures.

Depending on its strategy, a company may adopt different approaches when it comes to managing its supply base and engaging with providers. The most popular approach nowadays is to rationalize the supply base and work closely with only a few providers. However, depending on the markets and products, the company may also choose to have a variety of

relationship styles. This allows management to focus their time and effort on building performance-based relationships with suppliers who provide strategic products, while outsourcing or purchasing non-critical products from other providers. In his article "Portfolios of Buyer-Supplier Relationships," Bensaou M (1999) used a similar approach based on product and market conditions to create a supplier portfolio with different relationship profiles: captive buyer, strategic partnership, market exchange, and captive provider.

Bensaou suggests using management practices, such as treating each other with respect and sharing profits fairly, to effectively manage relationships like the Captive purchaser and Market exchange. Strategic partners should also regularly exchange information or visit each other frequently to foster a trusting and collaborative atmosphere. Another commonly used technique by businesses to segment supplier relationship portfolios is the ABC analysis method. (Wagner S. and Johnson J. L.)

, The article "Configuring and Managing Strategic Supplier Portfolios, Industrial Marketing Management, Vol. 33, 717-730" discusses the utilization of an attack that categorizes suppliers into Class A, B, and C based on various factors including volume, provider performance, strategic importance, price, and quality. Class A suppliers contribute 80% of the total volume, while Class B supplies 15% and Class C supplies 5%. Due to their limited volume, less attention is given to managing and developing Class C suppliers. Typically, these suppliers are used by the company as a way to reduce costs through direct sourcing or e-procurement.

On the other hand, it is important for top management to view Cat A providers as imperative and establish a close relationship or partnership with them. This can be achieved through regular and annual meetings with providers, as well as providing incentives to maintain

motivation. Additionally, the buyer can support and assist in the development of suppliers to improve their performance. According to Andrew Cox et al (2004), in the article "Managing Appropriately in Power Regimes: Relationship and Performance Management in 12 Supply Chain Cases", published in Supply Chain Management, an International Journal, a different approach is suggested.

In a power government, a concern can determine appropriate relationship and relationship management styles based on their power status. Depending on whether the purchaser is dominant or has a position of mutuality power in a business transaction, a relationship approach centered around provider development or supply chain management may be more suitable. Alterations in the power structure can lead to changes in the relationship portfolio, ultimately affecting performance outcomes when parties modify their behavior (9, 357-371).

According to Robert Monczka, Robert Trent, and Robert Handfield in their book "Purchasing and Supply Chain Management" (Thomson, 2005), an important decision that most businesses face is whether to insource or outsource. Outsourcing, also known as make-or-buy, is when a company's management chooses to delegate non-core activities to a specialized third party that can efficiently provide the service. This strategic decision is based on the realization that organizations cannot do everything on their own and should focus on core competencies. Therefore, the decision to outsource creates a new supply network of suppliers and sometimes suppliers' suppliers. The key to outsourcing lies in the brand or purchase decisions and the relationship between the buyer and the provider. Kenneth Lysons and Michael Gillingham highlight this in their book "Purchasing and Supply Chain Management" (Prentice Hall, 2003).

The administration needs to align its operations with its new providers and their providers,

creating a complete supply web (Nigel Slack, Stuart Chambers and Robert Johnston, Operations Management, (Pearson, 2010)). This strategic decision to outsource introduces a new chapter for the administration and raises the question of how to configure the new web and how much of it should be retained by the administration. This decision will help management determine how to influence and manage the overall new structure. In the past, outsourcing decisions primarily focused on cost reduction. However, the growing importance of outsourcing decisions in achieving a competitive position has led many administrations to consider a range of other factors.

The determination procedure utilized in this context is derived from Purchasing and Supply Chain Management by Robert Monczka, Robert Trent, and Robert Handfield (Thomson, 2005). The initial step in initiating any outsourcing initiative is to establish a cross-functional team and define its scope and objectives. This team should identify activities to be outsourced and present them to management for approval. Strategic implications involve aligning the outsourcing decision with three key factors: 1) the company's long-term plans and its impact on other activities and functions; 2) the understanding of the organization's core competency; and 3) an analysis of the impact of process technology compared to competitors for competitive advantage. If the activity being outsourced disrupts the company's future plans or affects other functions, it is more suitable to keep it in-house. Moreover, if the outsourced activity is not perceived as a core capability, the company may choose to outsource. Lastly, if the analysis reveals minimal competitive advantage through process technology, the company can decide to outsource. However, if in-house process technology provides a competitive advantage, the company may reconsider

and keep it in-house.The tactical determination procedure involves considering various factors and the ability to prove prospective outsourcing enterprise. These factors include options to outsourcing (such as in-house production, farm outing, or vertical integration), the length of the contract, the impact of size, and the effect on corporate culture. It is crucial for the outsourcing decision to be cost-efficient and competitive in terms of quality. An accurate cost-efficient computation goes beyond initial costs and follows a marginal costing principle.The cost structure consists of three components: variable cost, fixed cost, and operating costs. Additionally, there are other costs to consider, such as opportunity cost, which refers to the potential benefits that may be lost if the activity is done in-house rather than outsourced.

The execution procedure for outsourcing relies on effective service provider selection and managing post-contractual relationships. Due to the long-term nature and significant investment involved in outsourcing, selecting the appropriate service provider is crucial. The selection process will consist of market research, which includes conducting a thorough investigation into market prices and terms, as well as identifying potential service providers who possess the necessary expertise, capacity, and corporate culture similarities. Additionally, a detailed request for proposals (RFP) will be developed, outlining the specific outsourcing requirements and general information about the organization, including the scope and objectives of the outsourcing. This document will serve as a useful guide for potential service providers.

After receiving submitted stamps, a site visit will be conducted to compare the reality to what is documented. This visit presents an opportunity to evaluate the corporate culture, processes, and people to determine their compatibility with the outsourcing administration. Negotiations will also be conducted during

this visit.

Negotiation is necessary to establish a mutually beneficial agreement, with key considerations including service quality, performance level, room for improvement and change, pricing, and management style, including personnel integration. It is crucial to have a commitment to managing the post-contractual relationship in order to ensure the sustainability of the outsourcing process. Developing a Key Performance Index (KPI) is essential for continuously measuring and monitoring the service provider's performance and improving the quality of service. Ultimately, the decision to outsource is a significant and strategic one that can have a substantial impact on the company and can serve as a competitive advantage.

Traditionally, the outsourcing determination was based solely on cost and benefits. However, the determination procedure is now influenced by multiple factors and sections. To make the outsourcing determination procedure effective and efficient, it is essential to select a cross-functional squad to be a part of the entire procedure. Some of the problems associated with implementation include:

- Post-contract procedures poorly written: This occurs when both parties, after signing the contract, do not want to work together. The main issue here is a common misinterpretation of the contract and the scope of outsourced activities, resulting in services not being performed and an increase in frustration among staff.
- Cultural clash: Whether it is a corporate or international cultural clash, it can lead to tension, suspicion, and misinterpretation. This is particularly problematic in situations of offshoring where communication is limited to email or phone. Moreover, differences in work ethics can further exacerbate tension if not streamlined.
- Quality of service: An important reason for management to decide to outsource is to improve the quality of service. If the

service provider is unable to achieve this, the entire outsourcing process becomes questionable and creates issues regarding contractual performance and execution.
- Lack of coordination: The lack of a coordinating team poses a problem for implementation.The reason for this is that once the contract is signed, the client quickly transfers all responsibilities to the service provider who is still trying to get started and there is no team in place to coordinate activities. This will result in a slow start, confusion within the system, and poor quality service provided. Additionally, outsourcing decisions create uncertainties that may lead talented employees to seek jobs elsewhere.

In addition, some employees may feel demotivated working for a new service supplier. This can lead to a decrease in the quality of service provided. Some service suppliers may lack the necessary skills and rely on hiring new staff or training existing ones. If this process takes too long, it could impact operational performance in a customer retention administration. Furthermore, the cost of outsourcing services may be higher than anticipated due to improper cost estimations and oversight of certain activities. Other obstacles include the service supplier being unable to handle the volume of tasks and struggling to maintain client equipment and facilities. Recommended books for further reading on this topic include "Logistics Management and Strategy" by Alan Harrison and Remko van Hoek, "The Machine That Changed the World" by James P Womack et al, "World Class Suppliers" by Peter Hines, and "Purchasing and Supply Chain Management" by Kenneth Lysons and Micheal Gillingham.The text below lists two books with their respective authors and publication dates, and includes :

1. Nigel Slack,
   

Stuart Chambers and Robert Johnston, Operations Management, ( Pearson, 2010 ) .