The purpose of Supply Chain
Management is to enable a linkage of the flow of goods from the raw
materials to its end-users thereby including a broad network of
Company’s various parties such as the suppliers, the intermediaries
and finally the customers. When this network is managed with
Enterprise Resource Planning (ERP) systems, then the flow of goods
as well as money from one end to the other alongside flow of
information in a unified way becomes more feasible. In the age of
e-business and integration of supply chain with that of
Globalization for such activities in the designing of a firm’s
Supply Chain network, there is higher efficiency established in the
system that gives rise to the income generation power of the firm
and adds value to the end product that reaches to the customer.
The firm’s Supply Chain Management
would therefore include effective marketing channels in its network
designing part that could be typical to countries (due to
globalization) or regions in terms of the Market segmentation. It
is to be also noted that a Company’s supply chain network can never
be static and evolves in response to various scope available in a
specified regions and the conducive conditions helping the
same.
With the advent of Globalization,
the role of Supply chain has become more significant. The
distribution of supply chain could be intensive or selective or
exclusive, depending upon the Market segmentation. Intensive
distribution is aimed at maximum market coverage; selective
distribution is aimed at making the product available to selected
dealers or retailers only in a given territory while an exclusive
distribution is most restrictive form of market coverage. Based
upon the category of classifications, under the Market
segmentation, the firm’s supply chain design helps in easier
differentiation of its offered products to the target audience. It
further takes into consideration the Target market factors, product
related factors and Company-related factors more efficiency and
effectiveness of the supply network channel so resorted to which is
all in turn depending upon the Market segmentation concept. Further
it also enables to manage the channel relationships by empowering
the channel, controlling the same and undertaking the channel
leader role. In case of the service channels, minimizing the
waiting time, managing service capacity and improving service
delivery mechanisms also help in making the network efficient, more
effective and differentiated from that of the others. Therefore, in
this entire manner, Supply Chain Management has resulted in
enhancing the Customer value.
For example, in countries such as
China and Russia, there are constant political changes and the
economies being unstable; it is believed that the application of
the management technologies for the enterprises is also therefore
limited. Hence so many firms are concerned about logistics issues
when they move into new markets such as China and Russia thereby
hindering effective Supply Chain Management. These countries are
geographically vastly spread over a larger piece of land and the
issue here arises as to link the Global logistics strategies with
that of the logistic system typically prevalent in these countries.
Therefore these constraints could be overcome if market
segmentation is efficiently undertaken to cater to the
peculiarities of each of these geographical segmentations. The
Supply Chain Management issues could be further addressed to by
switching to the local Supply Chain Management network based upon
effective market segmentation to avail the best from the host
country though the same shall not be integrated to the global
standards.
However, as an operations manager,
what are the important issues you need to deal in logistic
management following are the few main issues that are related to
the Supply Chain Management:
- Sharing of
Information: With the lack of appropriate incentives given
to the channel partners, aligning of the same has become an issue.
In case of purchasing, the cost data information is needed to
design the pricing of the purchase accordingly. However, the issue
is that the channel partners may either abuse this information or
conceal the same in order to the gain the informational superiority
by delivering the information to the Company as against a hefty
price for the same. Another issue is that the information is
subject to the trust of the channel partners and their cooperation
to share the same, in order to determine the selling price of a
commodity that would in turn determine the trend of the purchases
in the Company.
- Procurement
management: The next challenge pertains to the procurement
challenges. Often the raw materials required to produce a product
is purchased either on cash basis or on credit. However, the issue
arises when such a purchase is prone to the monopolistic approaches
of the suppliers. Hoarding the materials to create artificial
crisis in the market and then eventually increasing the prices of
the procurement, affect the purchasing power of the Production
companies significantly. Also, at the times of genuine crisis, the
procurement could come with a major cost thereby increasing the
overall cost of production in the business.
- Logistics
issue: When the channels of logistics are not properly
designed or when it is prone to frequent changes owing to the
influence of the external factors, there is a disruption that is
caused to the supply chain process. Frequent disruption may result
into receiving lesser volumes of purchased goods on time and
thereby delay in the production processes which in turn affect the
sales volumes of the business.
- Effect of
Globalization: Globalization impacts the businesses either
positively or negatively. The issue becomes when the fluctuations
in foreign exchange rates adversely affect the purchasing activity
of the Company. Further, the demand for the Company’s goods could
also fall in the global markets thereby making the purchases
undesirable. Also the political scenario and regulations guiding
the host countries may act as deterrence to the Company’s products
thereby affecting the purchasing activity for the same.
Moreover, In a Supply Chain
Management, when the power is exercised over the vertical layers in
upward succession, there occurs double marginalization. The
unintended consequences of double marginalization would be as
under:
- It raises the retail prices to be higher with the sequential
mark-up cost however, the overall profits is relative lesser in
case of double marginalization than in case of vertical
integration.
- Results into higher buyer prices but profits remaining lower to
the sellers.
- The dead-weight losses are increase in the process of double
marginalization that also reduces the profits in the whole
market.
Due to e-businesses, the
significance of ERP has also gathered momentum in Supply Chain
Management. In case of Supply Chain Management, ERP can help in the
following ways to enhance the customer value:
- Managing interrelated activities “from your suppliers’
suppliers to your customers’ customers.”
- May involve-
- changing information flows and decision-making within a
firm
- changing information flows and decision-making between
firms
- using new software tools to enable these changes
- ERP systems » Cross-organizational planning, scheduling, and
optimization tools
- Increase responsiveness to supply and demand fluctuations
without sacrificing margins
- linking with suppliers, customers, and transportation
providers
- Reduce inventory
- Improve reliability of delivery commitments
- ATP (Available To Promise)
- Manage changes in product mix
- including new product introductions
SUPPLY CHAIN COLLABORATION
PROGRAMS:
Due to globalization, the Supply
chain has now got integrated with various kinds of collaboration
programs. To the Supply Chain Collaboration Programs, following are
the keys to the same:
- Collaborating with other Companies not to compensate for the
weaknesses but to build upon the strengths of both the Companies in
establishing joint-venture is a key to success. For this, the
infrastructural assistance is also essential to ensure the
collaborative effort is a success.
- Such models could be incorporated in the collaboration process
such as that of the Right-benefit sharing that could ensure that
the joint-venture is fruitful to both the Companies in order to
bridge the gap of the strategic priorities of each of the
Company.
- The foreign partner so selected for the venture could be on the
basis of the value creation potentialities that it can generate,
the strategic goals that they plan to realize and the overall
capabilities that they possess. Further, there should at least some
common strategic interests between the two Companies that could
make the venture possible.
- The resources employed in the collaboration process needs to be
evaluated well and especially when it comes to dealing with the
Human resource because it is this resource that can ensure the
success of a collaboration. Additional resources, in whichever
form, if required needs to be pumped into the collaboration so as
to facilitate the process of building this new venture.
- In Supply chain collaboration process, it is essential that the
performance evaluation process is common for both the Companies
such that it ensures the joint-monitoring of the performance
management system possible.
MITIGATION OF RISKS IN SUPPLY CHAIN
MANAGEMENT:
“Mapping your supply chain’ is a
useful tool because it helps to deal with the risks of the natural
and artificial disasters that could impact the supply chain network
of an Organization and also, in Today’s world, the regards to
health and safety has gradually increased in an Organization and
therefore, any negligence in maintaining the health and safety
regulations within the structure, would cause a deterrence the
smooth working of the supply chain network. Moreover, the concept
of Corporate Social Responsibility has also gathered momentum
globally. Organizations that do not involve itself in the CSR
activities in their Supply chain model may stand to lose a
considerable share of the market in the future. Therefore, any risk
associated with these activities, need to be identified and
mitigated.
Accordingly, mapping of supply chain
is used as a tool in order to deal with these risks. Following are
the ways as to how a supply chain could be mapped:
- Understanding the Suppliers across all the Tiers apart from
merely Tier I, because the supply chain manager would be interested
to know the extent of their criticalities to the supply chain
network management. The sources of the Suppliers materials and the
impact of the low tier-suppliers on the network when they fail to
supply goods due to certain disaster situation that they might had
to face. Further, the higher tier-suppliers may also be resorting
into wrongful and unethical practices while supplying goods to the
managers and therefore their nature could have a negative impact in
creating a brand value of the Organization’s products. Hence, the
Suppliers across all the tiers, need to be evaluated in the light
of the risks associated with it.
- When the managers fail to the tap the visibility of all the
Tiers of their suppliers, there arise risks in identifying the
Supplier’s activities especially in the times of disasters thereby
making it difficult to adapt to the changes successfully. Hence a
lot depends upon the degree of visibility that the Suppliers have
upon the managers and thereby in order to mitigate the risks, it is
essential to make all the Tiers visible to the buyers so as to
enable them to also know what kind of compliance standards to these
Suppliers hold.
- Database with the information that has the element of veracity
is essential for the buyers to know well about their Suppliers in
the Supply Chain network. For this, an invitation could be sent
down the Supplier’s Tiers wherein the Tier I Suppliers would join
the mapping process by further passing the invite to the subsequent
Tiers in the network. In this way, mapping shall help to identify
the risks associated with various Tiers of the Suppliers at the
manufacturing sites and therefore the dependency on one particular
Tier of suppliers could be adjusted accordingly.
- The flexibility in the business could be improved with the help
of mapping which could be explained well to the Suppliers at each
Tier such that they feel inspired to join the mapping process and
thereby attempt in making their own business more robust in nature.
Here, providing the information to the manager is the key.
Therefore the challenge for the manager would be to convince the
suppliers that they shall handle the information with full
confidentiality and with an ethical approach.
SKILLS OF A SUPPLY CHAIN
MANAGER:
Owing to globalization and
e-businesses models, the primary skills of a Supply chain manager
need to be as under:
- Accommodating nature to response to the changes in the
customers or suppliers relationship with the Supply chain or
Purchasing managers in an Organization.
- Internet skill set is necessary to penetrate in to the
e-commerce segment of the market place for enhancing the customer
base.
- Efficient staffing and recruitment activities such that with
minimum recruitment of staff, optimum utilization could be achieved
by the managers, thereby reducing the burden upon the Operating
costs.
- Leadership skills with respect to alignment of individual
interests with that of the overall Organizational values and
Business-level strategies.
- Capability of integrating the Supply Chain Management model
with that of the Purchasing department’s activities to achieve the
outcomes efficiently.
- Foresightedness towards Business exigencies and the according
back-up plans.
- Analytical skills towards rationalizing of centralization of
logistics planning and procurement procedure, cost tracking
measures, integration of the supply base to the suppliers in the
network, etc.
- The managers need to be customer-centric to survive in the
business in long run.
- Various Project management skills
- Purchasing managers should be pro with the cost accounting
knowledge to control the costs in the unit.
- Also, both types of managers should possess the knack to
analyze the financial statements of the Organization.
- Being approachable in nature so as to be a leader who can be
consulted in events of problems or issues. The skill should also
include the problem-solving nature of the managers as well.
- Abiding by the Business ethics.
- Conversant with various legal affairs pertaining to their
units.
- Strong communication skills by way of presentations, oratory,
team discussion, etc.
- Sound with the Technical knowledge of their respective
units.
- Keeping the learning desire always going.
- Empathetic approach and mentoring skills.
- Overall confidence in leading the team.