The Wider Concept Covering All Business Processes Between Organisations Essay Example

order to meet customer demand, the rhythm of decision-making processes, material, financial, and information flow must be managed effectively throughout different stages of the supply chain. Outsourcing and purchasing are activities involved in supply chain management, and developing good relationships with distributors and suppliers is crucial for improving logistics efficiency, flexibility, quality, and productivity (Kaeli, 1990). As a result, organizations can gain a stronger market position, enhance customer satisfaction, and receive better responsiveness from their customers (Goldhar & Lei, 1991). Additionally, effectively managing and coordinating the value chain can help improve the efficiency of the supply chain management system (Al-Mudimigh, Ziri & Ahmedm, 2004).

An first-class value concatenation will ensure that interactions between organisations along the value concatenation are efficient and effective. Additionally, value concatenation expression occurs at each step from the raw material to the end consumer, as the goal of supply concatenation management is to provide high value to consumers at a low cost. The diagram above represents the model for supply concatenation management. Support activities encompass human resource, accounting and infrastructure, and procurement and technology. Human resource is defined as the organizational function that deals with people, including compensation, hiring, performance management, training and development (Heathfield, nd). Human resource is crucial because individuals have unique personalities and managing them well is important for the organization.

Accounting involves the recording, reporting, and analysis of financial transactions in a business. This information is crucial for companies to determine their profit or loss using the accrual method. Infrastructure refers to systems that support a population, such as water supply. Procurement encompasses the acquisition of goods and services from both external suppliers and internal sources.

Technology, such as the

internet, facilitates easy communication among employees to simplify work processes. In-bound logistics encompasses material and goods storage and receipt. The company stores the received goods. Manufacturing involves utilizing raw materials for processing and manufacturing finished products.

The concept of the supply chain refers to the transportation and distribution of goods to customers. Selling and sales responsibilities lie with the provider and marketer, who understand customer needs and sell products. Service and support involve assisting customers after a purchase. Satisfied customers support the company and spread positive word-of-mouth.

The Importance of Supply Chain Management for Organizations

Gaining a Competitive Advantage

Efficient supply chain management is crucial for meeting market demand profitably (Hugos, 2006). Effective management allows organizations to offer the best value to consumers, resulting in high demand for their products or services. Sharing information within supply chain networks promotes efficient flow, reduces inventory levels, and lowers costs (Anand & Mendelson, 1997; Yu, Yan & Cheng, 2001), benefiting the entire network.

Furthermore, an organization that effectively manages its supply chain will add value and gain access to business information that enables supply chain members to make decisions and increase their responsiveness and efficiency towards customer demands (www.cisco.com). Effective supply chain management is also recognized as being important for achieving and maintaining a competitive advantage in the market (Hsiao, Purchase, & Rahman).

As a result, inventory moves more quickly in the supply chain, leading to reduced inventory carrying costs, overall product costs, and shorter production cycle times. This allows customers to receive products faster and increases the market share of the organization, ultimately leading to competitive advantages. Additionally, the organization can engage in mass production and mass customization, which further enhances its competitive

position. This is especially beneficial when the product life cycle is improved as the organization can offer a variety of products tailored to different market segments and consumer preferences.Dell became the dominant global manufacturer of personal computers by implementing supply chain management and shifting their strategy to direct sales. They achieved this by custom-building computers to order and delivering them directly to the customer (Klinker, Terrell & Mahfouz, 2006).

Communication

According to Samaddar, Nargundkar & Daley (2006), communicating with other organizations in the supply chain management allows for effective competition in the environment. Fawcett & William (2004) state that communication procedures facilitate open and honest communication among supply chain members, establishing trust and promoting the sharing of information. Kwun & Suh (2004) add that trust builds commitment within the supply chain network. Additionally, Ghosh & Fedorowicz (2008) emphasize that effective communication among supply chain members is essential for maintaining and increasing trust between organizations. Overall, effective supply chain management increases communication within and between organizations, promoting a continuous flow of products.

Furthermore, the organization can improve its relationship with end clients by maintaining regular communication with the marketer, which is essential for a successful supply chain (Ghosh & Fedorowicz, 2008). Additionally, supply chain management communication can be categorized into two directions: downstream communication, which involves the flow of information from suppliers to clients, and upstream communication, which involves the flow of information from clients to suppliers (www.guidance.echa.europa.eu, nd). Downstream communication includes details about capacity and delivery schedule, while upstream communication includes orders and point-of-sale data (Groznik & Trkman, 2009). Therefore, effective communication within the supply chain is crucial for maintaining an efficient and

effective network that benefits all organizations involved and adds value to the end consumers.

Supply chain management is based on trust and commitment among its members (Lee & Billington, 1992). Trust creates honesty, loyalty, transparency, and competency within the trusted partnership (www.psiplanner.com). The commitment of the partnership in supply chain management leads to the allocation of resources to achieve the goals of the supply chain and improve performance (Chen & Paulraj, 2004). Organizations increasingly rely on trusted suppliers to enhance product quality, speed up production, and reduce costs in order to compete with their rivals (Liker & Choi, 2006).

Trust is essential for providers and organizations to work together and reduce costs through shared thoughts (Monczka, Handfield, & Giunipero, 2009). Towill (1996) emphasizes the need for decision-makers to see the supply chain as a unified company for effective management. This requires continuous feedback and information flow to reduce uncertainty. When there is trust between providers and organizations, communication becomes more open and information can freely address concerns. Trust in the supply chain gives organizations a competitive advantage (Lynch, nd). Additionally, increased trust leads to knowledge sharing among members of the supply chain (Tang, Teo, & Wei, 2008).

Trust is crucial in the supply chain as it fosters the exchange of information among members, leading to new knowledge and benefits (Kidd, Richter & Li, 2003). Efficient operation and customer satisfaction require organizations to effectively manage their supply chain members and establish trust for mutual benefit. However, some members hesitate to share information due to mistrust and concerns about competition (Mazlan & Ali, 2006). Consequently, a lack of trust leads to inefficiency and ineffective performance within the organization by increasing

transaction costs among supply chain members (Spekman, Kamauff & Myhr, 1998).

Trust in the supply chain partnership relationship is dependent on evaluating whether there is risk involved (Mazlan & Ali, 2006). Effective supply chain management allows members to manage and reduce their risk within the partnership (Mazlan & Ali, 2006). High levels of customer satisfaction are achieved when trust exists within the supply chain (Andaleeb, 1996). Dell serves as an example by establishing strong relationships and trust with suppliers and customers to meet demand for computer components (Taylor, 2005).

Suppliers play a significant role in the competitiveness of the supply chain process through their long-term relationships within the supply chain (Choi & Hartley, 1996). Information sharing is crucial for integration and joint interorganizational relationships (Huang, Lau & Mak, 2003). Long-term relationships offer opportunities for capturing synergy between intra and intercompany integration and management (Lambert et al., [year]).

Lee, Padmanabhan, and Whang (1997) state that restricted information flow in the supply chain can lead to the Bullwhip effect. This effect results in consequences such as unnecessary inventory investments, poor customer service, incorrect capacity allocation, reduced revenue, and missed production.

According to Lee et al. (1997), planning and organizing information along the supply chain can help control the Bullwhip effect and improve supply chain relationships and performance. Fiala (2004) states that information exchange is crucial for coordinating actions. If supply chain members have access to free-flowing information, it can reduce the lead time for information regarding orders, demand, capacity forecasts, and point-of-sale data throughout the entire supply chain. In a study by Lee, So, and Tang (2000), the advantages of sharing sales information were identified, along with the drivers that have

significant impacts.

Long-term relationships between organizations and their providers can result in a larger stock list or cost reduction when there is a strong association with demand and long lead time. Ultimately, clients will receive higher quality, cost-efficient merchandise in less time. For instance, Chrysler Corporation decreased their provider base by 50% and involved the remaining providers in designing new generation cars to establish trustworthy long-term relationships. These relationships have helped increase profits for the organization (Braun, Guthrie, McCampbell & Sit).

Cost reduction

An organization's supply chain management system can impact its costs through administrative personnel and information planning as well as controlling the flow of inventory (Jonsson, 2008).

The main objective of supply chain management is to reduce costs by eliminating non-value added activities in the flow of goods from suppliers to end customers (Vorts, 2004). Effectively managing the supply chain can lead to decreased inventory and inventory costs for companies (Steckel, Gupta, & Banerji, 2004). It ensures that the organization has the correct product, at the appropriate time, and in the right location (Ketchen & Hult, 2007), enabling timely delivery of products while minimizing costs associated with late deliveries. Furthermore, it aids in lowering the cost of goods sold, shortening order lead times, and reducing inventory expenses (Li, Ragu-Nathan, Ragu-Nathan & Rao, 2006). By eliminating the need for inventory holding, organizations can also lower their warehousing costs.

Without utilizing warehouse organization, the cost of transporting goods from the warehouse to the organization can be saved. Additionally, reducing the production cost of the organization can create value for customers by lowering the price of the end user's product (Ketchen A, Hult, 2007). For example, Apple Computer experienced losses in

1997; however, Steve Jobs made changes to the supply chain management that saved the organization by reducing inventory costs (Taylor, 2005).

Challenges of Supply Chain Management

Planning

An appropriate plan for supply chain management can bring benefits, but mishandling it can lead to tragedies (Taylor, 2005).

In addition, it is important to have accurate planning. However, if there are mistakes in planning, it can lead to significant changes in plans (Stadtler, 2004). Planning in the supply chain involves selecting and evaluating future activities for decision-making in organizations (Gunther & Meyr, 2009). The overall goal of the plan remains the same, which is to minimize production time, costs, and effectively utilize resources while maximizing efficiency. Additionally, proper planning is necessary for transportation schedules, production schedules, and distribution. Failure to plan adequately can result in complexity (Stadtler, 2004), such as increased transportation costs due to improper planning.

Furthermore, the job starts with the client demand that the organization is going to meet in the production planning and production programming (Gunther, Meyr, 2009). Additionally, the organization's forecast of future demand may be inaccurate because forecasting is inevitable and organizations must plan to respond to demand uncertainty (You, Wassick, Grossmann, 2008). Poor planning to respond to demand uncertainty will result in a loss for the organization. For example, Kmart Corporation made a planning mistake by underestimating its ability to match the prices offered by Wal-Mart. Furthermore, when the organization was able to attract back customers, the supply chain was not able to deliver the products on time. As a result of the incorrect forecast and planning, Kmart is now bankrupt (Konicki, 2002).

Supplier attending
The challenge of lack of supplier attendance in supply chain

networks. Lack of supplier attention can result in delays in orders due to conflicting objectives and goals. Potential issues with sellers include late and incorrect deliveries, which can hinder effective supply chain management (Craig, 2009).

Early acquisition of materials helps minimize risks such as additional costs. Internal procurement issues also depend on supply chain management (Henrie, 2006). Therefore, a lack of supplier attention results in inefficiency and ineffectiveness in the supply chain, leading to increased organizational costs (Byrnes, 2003). This problem makes it difficult for companies to manage the timing of material arrival, when to purchase materials, how much to purchase, and when the materials should be delivered. Moreover, when suppliers in the supply chain provide their business information and raw materials late, it creates a bullwhip effect (Lee et al).

, 1997). Consequently, the organization needs to wait for the raw materials to be processed, workers need to work extra time to produce the product, and additional costs need to be paid. Furthermore, supply chain management is a horizontal process that involves organizations including suppliers, customers, and logistics service providers (Craig, 2009). Hence, if processes, products, and information from suppliers do not flow smoothly across the organization, it will create organizational inefficiency. For example, NASA Company has experienced this problem because the project will face shrinking costs, breakage, and extra cost for warehouse (Galluzzi, Zapata, Steele & Weck, nd).

Customer value
Customers' perception of the value of a product is constantly changing, forcing organizations to respond to or anticipate these changes (Flint, 2004). As a result, it is challenging for organizations to meet ever-increasing customer expectations at a reasonable cost. Therefore, organizations must address this challenge by

researching how customer perception of value changes and improving their anticipation and planning processes. An organization can gain a competitive advantage by predicting how customers will perceive the end-user product (Slater, 1997). Additionally, customers' income and education levels influence their perception of products from different organizations (Gunther & Meyr, 2009). Consequently, some customers are willing to pay a higher price for a product from a specific organization, even if the quality does not match the price paid.

Professional Sellerss, good client and community support will enhance an organization's reputation among clients (Davey, 2010). Additionally, it is challenging to meet client expectations as they are often reluctant to seek information from other organizations due to word-of-mouth communication, which is the most effective way for an organization to gain a larger market share. Furthermore, customer perceived value plays a role in determining customer satisfaction towards the organization's products. Therefore, managers should assess each customer's individual perceived value in order to design products that can increase customer satisfaction (McDougall & Levesque, 2000). However, measuring customer value and satisfaction is not enough for future purposes, as customer perceived value is constantly influenced by past experiences and word-of-mouth communication (Bolton & Drew, 1991).

Barriers of Supply Chain Management

Supply chain process

The three types of generic processes in supply chains are ordering, production, and shipping.

The supply chain procedure includes function such as logistics, distribution, sourcing, client service, gross revenues, accounting and fabrication in order to meet the satisfaction of the clients ( Craig, 2003 ) . The ordering procedure begins when a purchaser places an order with the provider and concludes when the

provider accepts the order. Additionally, each process is associated with various types of information. The characteristics of business processes in the supply chain that enhance customer demands and add value are explained by process information. In order to meet the demands of clients, a company must effectively manage the internal function of the supply chain process.

Furthermore, the inability of companies to effectively manage the ordering process creates barriers in the supply chain. Despite good intentions, many companies struggle with this process, resulting in inventory and lead time issues (Donovan, 2010). These challenges increase costs and frustrate management. Additionally, some managers may fear losing control and resist decentralized decision making, hindering effective supply chain management (Satcher, 2009). This resistance to change and reluctance to let go of control can create obstacles in supply chain management.

Bullwhip Effect

The bullwhip effect refers to the amplification of demand variability from a downstream site to an upstream site (Lee, Padmanabhan, & Whang, 2004). It is considered an uneconomical phenomenon resulting from a lack of information across the supply chain (Buchmeister, Pavlinjek, Palcic, & Polajnar, 2008). Essentially, the bullwhip effect is a situation where suppliers and retailers hold excess stocks to compensate for uncertain demand. When there is a lack of information sharing between manufacturers and retailers, this can lead to increased safety stock and higher costs due to shortages.

The Bullwhip Effect can result in operating costs ranging from 13% to 25% in certain supply chains (Lee et al., 1997). Therefore, it is crucial for supply chain managers to prioritize efforts and resources to address and mitigate this effect. The bullwhip effect is a significant concern

in supply chain management for various reasons (Li, Chao, Chen & Liu, 2009). Firstly, the increased order variability requires each supply chain member to maintain excessively high inventory levels to accommodate the boom-and-bust demand pattern. Secondly, the lack of synchronization between supply and demand can lead to stockouts at specific times, despite overall overstocking throughout the supply chain. Lastly, the bullwhip effect not only increases operating costs but also impacts physical inventory levels.

The unpredictable capacity planning and loss of production agenda can be caused by inaccurate demand forecasts, which are based on flawed orders. Supply chain nodes only have access to local information and are unaware of what is happening outside their level, with no information sharing (Chatfield, Kim, Harrison & Hayya, 2004). Each node's supply chain knowledge-base is dependent on the incoming demand flow from the downstream partner and the surplus flow of orders placed with the upstream partner. Information sharing allows each node in the supply chain to receive information on customer demand and orders from its downstream supply chain partner. Additionally, the supplier only has information on the orders received from the buyer and must rely on historical data to supplement the order information when preparing demand forecasts without information sharing (Gavinern, Kapuscinski & Tayur, 1999). Without information sharing, each node independently generates its own forecast based on local information. Subsequently, the forecast is used to generate a new order-up-to value (Chatfield et al., [year]).

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2004) .

Solution

Electronic Data Interchange
The solution for the supply concatenation procedure is to use Electronic Data Interchange (EDI) and Computer Aided Ordering (www.Quickmba.com, neodymium). EDI refers to the transmission of standard structured, unambiguous information of business or strategic

significance between computers of independent organizations. By using this software, a company can reduce the administrative cost of doing business and can transfer documents with high speed, accuracy, and cost reduction (b2b.statefarm.com/b2b/guides/edi.asp, neodymium). By utilizing EDI, an organization can minimize unnecessary administrative costs such as hiring an IT company to set up a database. Therefore, organizations that adopt EDI will have a high speed of transferring information in the supply chain web.
Leadership
Another solution for improving the supply chain process is effective leadership.

Leadership is the process of directing, controlling, and collaboration among individuals to achieve a common goal (Kotelnikov, neodymium). An effective leader must always be resistant to change and find solutions to problems. Leaders and followers differ in how they approach problems, with leaders making good decisions when faced with challenges (Kehler, neodymium). An effective leader will solve their problems by making good decisions, and they may delegate tasks to employees to improve efficiency at certain times.

Information sharing

Information sharing in the supply chain refers to the exchange of knowledge between partners for the efficient and effective service of downstream clients.

There are three types of sharing manners: sum, seasonableness, and vicinity. When there is a higher sum of shared information, the degree of information sharing also increases. In a study on an additive supply concatenation, three different manners of information sharing were examined: end demand, downstream stock list, and shipment information (Tan, 1999). By sharing the terminal demand information of the supply concatenation with all supply concatenation members, the bullwhip consequence can be reduced (Tan, 1999).

The sharing of cargo and stock list information is not as effective as sharing demand information. Sharing demand information can lead

to greater cost savings compared to sharing stock list information. Sharing planned order information can generate cost savings for providers, but it may harm retail merchants (Zhao, A., & Xie, 2001). The timeliness of information sharing indicates how early or late the information is shared. Delayed sharing of information also results in the withholding of information, which is recognized as one of the main causes of the bullwhip effect (Lee et al.).

In 1997, the service level increases through timely demand information under various conditions. Additionally, there has been a proposal to enhance supply chain performance by sharing information in real-time. Gibert and Ballou (1999) examine the trade-off between the cost of acquiring advanced demand information from customers and the benefits of shared information. Similarly, Zhao et al. (2001) analyze the interaction between the timing of demand information and other factors using a simulation model.

Karaesmen and colleagues (2002) studied the best approach for utilizing demand information in a make-to-stock supply chain system. The concept of information sharing proximity refers to the extent to which information is shared with other parties. This degree increases as information is shared with a greater number of parties, resulting in a larger proximity.

Wei and Krajewski (2000) conducted an analysis on three different types of sharing methods in a manufacturing supply chain: first tier providers, providers on critical way, and all providers of sharing order agendas. The researchers discovered that the cost savings from intermediary sharing methods are very similar to those from full sharing methods in certain situations. This suggests that full information sharing may not always be beneficial, especially if the cost of sharing information is significant.

In a separate

study, Tsung (2000) focused on the directional aspect of sharing quality information between a provider and a manufacturer. The researcher examined the benefits of both one-way and bilateral exchange of quality information. The main concept behind information sharing is that if the nodes in the supply chain were aware of the current customer demands, they could make forecasts based on that information and adjust their inventory system parameters accordingly (Chatfield et al.).

, 2004). It is assumed that a node using client information will have a discrepancy in the demand order watercourse that is less than or equal to the discrepancy of the orders coming from the downstream spouse.