Adaptive Supply Chains that Respond to Environmental Events

Supply chains can be complex dragons that fail to adapt and change when the market changes or unforeseen circumstances rear their ugly head. Static systems are fixed and have a hard time adjusting without great cost or difficulty. Research by Dr. Dimitry Ivanov helps highlight the interconnected nature of supply chains and adaptive adjustments within networks that are interlinked to the supply chain strategy, design, planning, and operations (2009). A fundamental adjustment in the feedback information and structure of the chains is needed.

Each of the components of a supply chain functions together to create an efficient system that delivers products and services to customers. Using technology and modern theory in supply chain management helps to ensure the network is updated, adjustable, and running at maximum efficiency. Each of these components is aligned with management’s goals and the appropriate measurements that ensure goal attainment (Kreipl & Pinedo, 2004). 

There are common actions to improving supply chains that include:

1. Collaboration along the value chain to acquire raw materials, convert materials to new products, and deliver final products. 

2.  Application of modern concepts and technologies to create responsive, flexible, cost-effective, sustainable, agile, and competitive networks that raise customer satisfaction and improve profitability.

Shocks can happen to the supply chain at any time. Some of these include the adjustments from war, suppliers that go out of business, political fighting that damages the flow of products, or natural disasters that disrupt the infrastructure. Organizations should attempt to develop adaptive networks by engaging in incremental planning that seeks to predict situations based on models, understanding how the supply chain reacts to external shocks, and getting a grasp on how the supply chain interacts with the external market. 

Adaptability within supply chain networks requires the ability to think about alternatives in a systematic way.  Organizations can create multi-structural designs that ensure each of the chain components fosters the fulfillment of customers’ needs through the development of alternative strategies and delivery systems when any of the components are non-functional.  Using new technology the standard open slot system can be upgraded to provide strong feedback data that allows for faster adjustments to uncontrollable events.  This information is matched with stronger decision-making abilities of managers who implement new strategies and adjust existing strategies. 

Kreipl, S. & Pinedo, M., (2004). Planning and scheduling in supply chains: an overview of issues in practice. Production and Operations Management, 13 (1), 77–92.

Ivanov, D. (2010). An adaptive framework for aligning (re)planning decisions on supply chain strategy, design, tactics, and operations. International Journal of Production Research, 49 (13).

Supply Chain Enhancement through Collaborative Quality Management

Supply chain management is a noteworthy avenue for product reach and emerging financial efficiencies. Products are sold online and distributed across the globe placing greater pressure on organizations to enhance delivery networks. Consumers in the 24/7 virtual world want to receive their products in a few days regardless of the country of origin. Research by Soltani, et. al. (2011) investigated the relationship between supply chain management (SCM) and Quality Management (QM) systems that further makes the case for improvements in inter-firm collaboration that enhances upstream and downstream efficiencies.

In the global economy the supply chain is the life blood that keeps products moving through arteries/vines that wind their way through the hearts of companies and countries.  A product built in the U.S. may move through a number of different entities and nations in adherence to negotiated treaties before delivered at the consumer’s doorstep.  Company competitive positions are impacted by how the system works together through quality improvement to ensure high performing networks (Yeung, 2008). 

A strong supply chain network requires greater collaboration of partners to successfully move products quickly, effectively, and efficiently from one continent to the next. Supply chain quality management is a systems-based approach that develops improvements in the upstream and downstream linkages between suppliers and customers (Foster, 2008).  Upstream and downstream being relative positioning on the chain but is often designated as the manufacturer who receives upstream materials and sends the products downstream to consumers. 

Understanding the upstreams, downstreams and the way in which seemingly disjointed parts work together requires systems thinking.  Systems thinking, or otherwise termed systems dynamics, are a mental concept of how the whole of the entity may be different than the sum of its parts (Metz, 2012). In the case of supply chains, each of the individual parts works together to create real value that converts to organizational profit. Quality management ensures that slack and inefficiencies are removed from the system to create better flow of information and products. 

Each supply chain requires albeit costly investment to set up, develop and maintain.  Different companies within supply chains often engage in opportunistic behaviors and become uncooperative which results in lower overall quality and effectiveness (Brown et al. 2000). Companies that monitor these relationships find greater symmetry between the varying elements and develop powerful competitive advantages. In the global world, shaving a few percentages off the costs or improving speed of a multi-national firm’s operations leads to significant acceleration of growth.

The authors found that many of the companies focused on their internal structures for five years before moving externally into their supply chains. The ability to integrate the upstream and downstream business activities into a cohesive whole requires quality-focused supply chains that build connections between intra and inter firm operations.  The development of quality was further enhanced by a global manager that was able to understand the system and make collaborative versus adversarial relationships among the supplier, manufacturer, and customer legs of the supply chain triangle.

Brown, J. et. al., (2000). Managing marketing channel opportunism: The efficacy of alternative governance mechanism. Journal of Marketing, 64 (2), 51–65.

Foster, S. (2008). Towards an understanding of supply chain quality management. Journal of Operations Management, 26 (4), 461–467.

Metz, S. (2012). Systems thinking. Science Teacher, 79 (7).

Soltani, E., et. al. (2011). Quality performance in a global supply chain: finding out the weak link. International Journal of Production Research, 49 (1).

Yeung, A.(2008). Strategic supply management, quality initiatives and organizational

performance. Journal of Operations Management, 26 (4), 490–502.

Market Principles Presentation

2011.12 marketing principles from Stephan Langdon

Managing Distribution Networks

A distribution channel can be defined as, “an organized network (system) of agencies and insti­tutions which, in combination, perform all the functions required to link produc­ers with end customers to accomplish the marketing task” (American Marketing Association, 2013).  The definition takes into account numerous contributors to the overall success of moving products into customers hands.

Distribution channels are an important component of a successful business and marketing campaigns. Where demand is created the product must eventually be delivered. Even online businesses are not immune to taking the order and then delivering the products to the purchaser. For small batch production the use of existing distribution channels may be best (i.e. Fed Ex or UPS) but when large quantities of products are sold a much larger systems may need to be developed (i.e. Wal-Mart’s Commercial Truck Fleet).

Each distribution system should be evaluated for its ability to provide timely delivery, affordable cost, and support. Cost in distribution is important for creating strong networks that move products in a way that raises customer satisfaction and ensures the sustainability of the business. Some companies can create competitive advantages through lowering their distribution costs and continually improving on their strategies.

One way to do this is through the use of technology. New technology can improve production, risk and stock control benefits (Christi Midori Oship Nemoto, et. al., 2012). Some companies may implement scanning, integration systems, shared distribution with similar products, or even purchasing the distribution network itself. The costs and benefits are balanced and weighed against the needs of the company.  

Most distribution networks have at least one warehouse hub and many different regional distributors. Vehicles are routed in a way that limits travel and inventory costs while still maintaining the needs of the company (Bolduc, et. al. 2006).  Depending on the size of the company the hubs could spread throughout a region, country, or internationally. 

When distribution networks become global the parent company may need to work with multiple vendors within different markets to achieve their goals. For example, beverage companies may use local bottlers to distribute the products throughout their local market. Understanding how each vendor works together and what the best strategy is requires considerable research.

Whether one is in India buying an American made product or in the U.S. buying a Chinese product, it is beneficial to understand how the distribution process works. As products make their way from one location to the next, business leaders will need to understand how this process can make or break a company. Shaving a few percentages off of the cost in a large network can result in millions if not billions of saved dollars. The distribution strategy is part of the larger corporate strategy and cannot be parted. 

American Marketing Association (2013). Retrieved October 3^rd, 2013 from http://www.marketingpower.com/_layouts/dictionary.aspx?dLetter=C#channel+of+distribution

Bolduc, M., et. al. (2006). Synchronized routing of seasonal products through a production/distribution network. Central European Journal of Operations Research, 14 (2). 

Christi Midori Oship Nemoto, M., et. al. (2012). Implementation of radio frequency identification technology in multinational companies: a Brazilian case study. International Journal of Management, 29 (4).

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).