Tuesday, August 20, 2013

Integrating the Supply Chain Network

Global pressures on retail production have put more emphaisis on supply chain management. Businesses are no longer single entities but part of larger economic chains and vines. These organizations seek to create efficiencies by managing relationships with others within the chain to reduce transaction costs as well as integrate services to ensure their chain is operating at a maximum.  According to the paper by Ohdar and Ray (2012) new ways of managing the supply chain management system are needed and worthy of study. 

Supply chain management is not confined to logistics alone and includes components of relationship management. It may include concepts such as forecasting, procurement, manufacturing, distribution, inventory control, transportation, and customer service. The integrated approach to supply chain management may also apply to customers and suppliers as they fit within this general process and seek to maximize opportunities. 

Each company determines the extent to which they desire to manage this process. Generally, the larger a company is they more ability they have to create efficiencies in the distribution process by building shared software platforms, sharing resources, tracking arrangements, and developing automatic purchasing algorithms. One can see this at work with bar codes and other tracking methods. Such systems allow for wider control and analysis of the entire chain. 

A number of models and frameworks exist:

-Outsourcing and Strategic Alliance: Contractual agreements and long-term strategic relationships with related industries within the economic chain. 

-Transportation and Logistics: Shipping, storing, materials management and general flow of goods.

-Performance measures and evaluation:  A system of metrics that determine the quality and performance of the supply chain management system.

-Vendor-managed inventory: The manufacturer or distributor uses systems to automatically make purchases and deliveries to the buyer. 

-Postponement Strategies: Systems that help to manage inventory and customer need to ensure economies of scale improve as well as reduce inventory costs by delaying purchases.

-Information Sharing and SC Integration: Working collaboratively with suppliers and buyers by sharing information and working together to created entire supply chain efficiencies.

-Agile: The ability to be agile and respond quickly to demands, the environment and customers. 

-Reverse Logistics and Environmental Issues: Generally short-term leases on equipment and containers that make their way back to the main company.

-Marketing and Distribution Planning:  A system that tries to mirror real world distribution needs. 

-Optimization: The process of creating efficiencies in the system that may include safety stocks.

Each of the frameworks provides a way to view and see the distribution system. Creating efficiencies requires an analysis of the overall supply chain, needs of suppliers, and the needs of customers. By viewing the entire supply chain process it is possible to develop stronger systems that service customers, maximize cost efficiencies, integrate information, and reduce inventory. An integrated model helps the various businesses within a particular network coordinate their activities and create additional savings in transactional costs. 

The paper helps one think about the entire supply chain that moves from the input of materials, the development of products, the association of companies that foster that development, and the distribution of products. Such chains works a little like a loop in that the first part is concerned with productive creation and development, the second part with sales and distribution, and the third part with financial management. The paper does not discuss these concepts or the loop but certainly it would be worthwhile to view such a loop to understand the entire process. 

When companies study such economic chains they often look at the specific interactions within the entire process. This has a benefit in terms of understanding how these interactions contribute or detract from the efficiency of the system. However, it is also important to view the entire chain in order to determine if integrative platforms through developments in software and information sharing would provide even higher levels of competitive structure.

Ohdar, R. and Ray, P. (2012). Models and methodologies in supply chain management: review and reflections. IUP Journal of Supply Chain Management, 9 (4).

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