Critically discuss how a company can sustain a long-term supply chain strategy that is well-aligned with its products and markets, especially in an increasingly complex global environment.
Supply Chain Strategy is become important part in the operation of the company. It is known that if supply chain is not aligned then it directly impacts the productivity and efficiency of the business and also increase pressure on the company to sustain their market positioning. Therefore, it is important for the businesses to supply the product and services to the customers in due time and also arranging the products from suppliers in the business to meet the expected demand of the customers (Benton and McHenry, 2010). The current report will be highlighting on the effectiveness of supply chain strategy which will help in analyzing the characteristics of demand and supply. On the other hand, the study will be focusing on how company can make best utilization of supply chain strategy in order to survive in the competitive market. Apart from that, various kinds of generic supply chain strategies will be discussed as well along with examples. Moreover, the literature review will be undertaken to have deeper understanding of the title.
Most of the companies in the global market use the supply chain management while controlling their business. The supply chain management helps the management of the company to find influential and commanding resources in the competitive market. The supply chain management encompasses all the activities which helps the management of the company to introduce and launch the products in the global competitive market and tries to satisfy their customers by fulfilling their requirements. The supply management is very essential in each and every organization because it helps the management of the organization to have a proper foundation for the organization and infrastructures for the organization (Bowersox, 2013). This will help the management of the institution to attract more consumers towards the organization by providing good quality products to their customers.
The supply chain management depicts the management of the company by manufacturing the products, operations of the company while manufacturing the product, purchasing the resources of the products and in the transportation process of the product. Mainly it helps the management of the company in the distribution process and in the selling procedures of the product. The main objectives of the supply chain management cover a wide range in the organization (Cordon, et al, 2012). The supply chain management helps the organization in the incoming and outgoing activities of transporting and warehousing process and mainly controlling the inventory process. Another parts of the supply chain management is predicting, planning for the production and scheduling for the products (Drake, 2012). The main services provides by the supply chain management is in ordering process and providing best services to their customers while trading their products in the global competitive market. Mainly, the main functions of the supply chain management tracks all the records of the activities performed by the management of the company in the information system to keep the record for the future purposes.
The main importance of the supply chain management is to track the record in the ordering process and providing best services to their customers while trading their products in the global competitive market (Lysons and Farrington, 2012). The supply chain management tracks all the records of the activities performed by the management of the company in the information system to keep the record for the future purposes.
The supply chain management plays an important role in the operational functions of the organization. It helps the management of the organization in the manufacturing process of the product, purchasing the resources of the products and in the transportation process of the product (Myerson, 2012). It also helps the managers in the warehouse of the organization to improve the transportation quality of the organization. This transportation quality services will help the management of the organization to attract more customers towards the organization and will give more chances to reach the objectives of the company set by the management of the organization by earning more profit margins from the global competitive market.
3.1 Resource-based view
It is an approach in the supply chain management, which considers that the resources are the main component required by a firm for getting a superior performance (Benton, and McHenry, 2010). For this, it is crucial that the resource should contain certain attributes, which include VRIO for long term sustaining in the market and getting an edge over the competitors. The model has many components, which are the tangible assets and the intangible as well, these two should be both heterogeneous and immobile and having the VRIO attributes would categorize the components as the VRIO resources, which would in term give competitive advantage to the organization (Burritt, 2011). Tangible assets are those, which are the physical things and can be held. The land, machineries, capitals, and various equipments are the tangible assets whereas the intangible assets are the one, which does not have any physical presence. The trade marking, the reputation of any brand, are considered as the intangible assets of a company.
The model has assumptions that the resources should be heterogeneous as well as immobile in nature. Heterogeneous means that the set of skills, and abilities should differ from one organization to another. This is essential, as in case of same capabilities all the companies would employ the same kind of strategies, eventually leading to the absence of any competitiveness among them or any advantages over one another. In short, run resources are static in one company and do not move from one firm to another. Resources that are intangible like the property, brand name are generally not mobile in nature (Christopher, 2011). The model emphasis on the fact that it is more of a sensible approach to take advantage of the opportunities available externally with proper utilization of resources in an innovative manner instead of developing a new set of skill for individual opportunity.
Figure 1: Resource based view
(Source: Drake, 2012)
It was observed by Goetschalckx (2011), that the efficiency of the production can be increased not the utilization of better heterogeneous resources but in knowing that which resource will give more productive outcome. The theory believes that a company is an entity, which is responsible for the generation, integration and the distribution of the knowledge. The value creation by a firm is not completely dependent only on the resources, or the tangible and the intangible resources. This theory completely did not support the resource-based view. It says that a company can get a competitive advantage by developing more and more knowledge-based assets instead of just being based on the resources (Ivanov and Sokolov, 2010). These assets will help in creation of more core competent dimensions. The fundamental concept of the theory is that for a process of production the essential input and the very prime source of value is the knowledge. This concept has been helpful in analyzing the abilities have brought the social, organizational level and also the human resources in the same level to that of technical resources. However as per Kildow (2011), there is a nature which is dual in the knowledge based concept which is capable of altering the prior resources that were beneficial. Therefore, it can become a liability on the long run instead of staying as a capability. This theory has three main functions, which are namely the creating of the knowledge, accumulating and then sharing it. So it can be said that the approach integrates the organizational level knowledge and the related routines in accordance to the competitiveness in the business environment.
One of the strategies of supply chain management is strategic choice theory which helps the management of the organization to reach the objectives of the company set by the management of the organization. The concepts of strategic choice theory mean that in the global competitive market, any bigger organization can give a threat to a smaller organization about their operation systems in their business. To restrict the threat given by the larger size organization, the smaller size organization takes some strategies to sustain in the global competitive market. The strategies taken by the smaller size organization to sustain in the global competitive market is known as strategic choice theory (Olson, 2012). The management of the smaller size organization choose some strategies to compete against the larger size organization is known as the strategic choice adapted by the management of the smaller size organization.
The theory of strategic choice helps the management of the organization to trend the future market conditions of the organization. It describes the relationships between the newly launched products from the organization against the market trends about the product launched by the organization. It explains the hypothesis of various relationships between the product and the market trend about various products in the global competitive market. The main function of the strategic choice theory is to avoid the threats given by the larger size organization to the smaller size organization and it also helps the management of the smaller size organization to attain the objectives of the company set by the management of the organization (Sodhi and Tang, 2012). The main functions of the organization to use strategic choice theory is to avoid the threats given by the larger size organization to the smaller size organization and it also helps the management of the smaller size organization to attain the objectives of the company set by the management of the organization (Chopra and Meindl, 2013).
Generic Supply Chain Strategy is undertaken by the companies to ensure sustainability in their supply chain operation. Therefore, it helps in supply of products and services to end users in definite time. According to Bowersox, Closs and Cooper (2010), there are two types of generic supply chain strategies such as Lean Strategies and Agile Strategies.
Lean Strategies: This strategy is adopted by the firms in order to enhance their value by removing the level of wastage from their operation. It is known that lean supply chain is majorly involved in reducing cost by controlling waste. For instance, Wal-Mart has gain large benefit from lean supply chain strategy. It helped in decreasing their operations cost by engaging them into supply chain innovations. Moreover, the company has incorporated policy store-based inventory via lean principle which helped in managing their supply lead time. Apart from that, transportation optimization and inventory optimization process are being used by Wal-Mart for reducing their lean (cost) (Burritt, 2011). As a result of that, company is successful in meeting the demand of the customers and providing quality products to them.
On the other hand, Burt et al. (2010) mentioned that prime function of lean supply chain can be attained by employing common type of data communication on stock/inventories, delivery plans, capacities and acknowledging changes in JIT framework. Therefore, it would help the company in taking order and delivering the product in promised time. It has been that many industries are involved in delivering value by lean supply chains to their customers and engaging in low cost of production and attaining logistics by ensuring economies of scale (Christopher, 2011). Therefore, lean supply chain would be effective in streamlining the process of business and ensuring better value to the customers by removing the non-value added elements and wastage.
Agile Strategies: Drake (2012) discussed agility as a comprehensive response in relation to business challenges to generate profit from the continuous changing market conditions. On the other hand, it can be mentioned that agility’s main purpose relies on corporate structure, competition, business practice, strategic response, cooperation among businesses, adaptability, etc. The agile supply chain helps in aligning the operation and network of the business or organizations in order to meet the requirements of the consumers. Apart from that, Goetschalckx (2011) stated that management of the company focuses on market knowledge to capitulate on the available opportunities for strongly surviving in the volatile marketplace. Therefore, agile supply chain involves four factors such as market sensitive, virtual, process integration and network based. On the contrary, Hugos (2011) pointed that agile majorly concentrates on customer satisfaction and gives instantaneous response in context to logistics planning. The market qualifiers in context to agile supply are those companies that focus initially on quality, cost and lead time. Therefore, it helps in maximizing effectiveness of the business. Zara is one of the best examples that adopt agile supply chain strategies. Zara is an apparel company that deals in fashionable cloths. Due to agile supply chain the company is able to reach out to foreign target market and has strongly positioned itself in international market.
Apart from that, Ivanov and Sokolov (2010) mentioned that agile supply chain helps in forecasting that assist in decreasing the need for meeting the crises of last minute. Moreover, in order to uphold agile network, the companies may need to adopt better standardized and structured approach in the selection and approval of new suppliers in relation to the markets that is witnessing temporary volatility. On the other hand, the companies may need to invest in the growth of the supplier ecosystem for better result. For instance, Nestle, IKEA and Diageo are strongly engaged in developing agile suppliers (Waters, 2010).
Effective supply chain strategy helps in gaining the competitive advantage and sustaining the customer base for longer period of time. The supply chain supports the industry in focusing on the requirements of the customers and ensuring the growth of the business. On the other hand, the companies in order to sustain their supply chain, the companies have to focus on their level of cost incurred by them in the production or manufacture of the product. Apart from that, the companies have to also acknowledge the cost that is involved in the distribution of goods or services either through online or through offline (Jacobs et al. 2009). As a result of that, the company would be successful in ensuring quality service to consumers and also firms would be able to increase the customer base.
Apart from that, the companies need to assess their efficiency in controlling and managing their level of wastage. Therefore, the company needs to develop effective plan so that chances of error can be minimized. As an outcome of that, the company would be able to ensure quality product and services to the customers (Kildow, 2011). Moreover, the company can be able to manage their lead time and time between order and delivery can be effectively managed. For instance, Tesco and J Sainsbury’s have significant success by controlling the wastage and lead time. As a result of that Tesco has become number one and Sainsbury as number two in UK’s supermarket. On the other hand, the company has to check their level of output that whether it is under production or over production. Therefore, the company needs to ensure that production is done at definite level in order to eliminate the fear of product wastage or meeting the demand of customers (Scott, Lundgren and Thompson, 2011). Apart from that, in order to gain long term benefit from supply chain, companies build strong relationship with their suppliers so that required amount of product can be arranged in the stores for meeting the demand of the clients of customers.
5.0 Conclusion and Recommendations
The study gives a clear view about the supply chain management aspects and the theories, which explain the concept further. The present supply chain operation in organizations is volatile, uncertain in nature and complex as well. This is due to the macroeconomic changes in the environment. However, with the change in the global business environment it is becoming crucial for organization to implement long-term beneficial supply chain strategies for attaining competitive advantage on the competitors (Scott et al. 2012). The study discusses the generic strategies and theories, which elaborates the concepts of sustainable supply chain. Based on the above discussion there are certain recommendations that can be made from the organizational perspective:
Optimization of the cost along with more planned and customized structures of the supply chain management of organizations.
The supply chain management should be more flexible in accordance to the global business environment. This will give a long-term competitive advantage to the firm.
Improvement in the predictions and the visibility in the operational section by reduction of the uncertain factors with utilization of analytical tools will enable the dynamic analysis, visualization and better prediction for better risk management for future. Integrating logistical processes with the suppliers is also essential and it is something that is irrespective of the size of the organization, this will facilitate the communication and the synergy between business and its respective suppliers
Another way of improved supply chain management is reducing the overheads by harnessing the variable cost delivery models. It demands the elimination of the investments in the infrastructure for increasing the internal efficiency of the operations. Real time reporting at dashboard for taking pulse of the supply chain
Supply chain management can also be enhanced by the incorporation of the approach that is science based. This adopts a stimulation, which is dynamic, and also increases the cost effectiveness of operations. Employing system that will be cloud based will offer more cost affectivity and operations that are more efficient as well.
Implementation of an ERP application, which fits within the system that already exists and fore mostly it is crucial to provide supply chain management training for the internal employees who are responsible for carrying out the operations.
Reference List:
Bowersox, D. (2013). Supply chain logistics management. New York: McGraw-Hill.
Chopra, S. and Meindl, P. (2013). Supply chain management. Boston: Pearson.
Cordon, C., Hald, K. and Seifert, R. (2012). Strategic supply chain management. Abingdon, Oxon: Routledge.
Drake, M. (2012). Global supply chain management. [New York, N.Y.] (222 East 46th Street, New York, NY 10017): Business Expert Press.
Lysons, K. and Farrington, B. (2012). Purchasing and supply chain management. Harlow, Essex: Pearson Financial Times.
Myerson, P. (2012). Lean supply chain and logistics management. New York: McGraw-Hill.
Olson, D. (2012). Supply chain risk management. [New York, N.Y.] (222 East 46th Street, New York, NY 10017): Business Expert Press.
Sodhi, M. and Tang, C. (2012). Managing supply chain risk. New York: Springer.
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Ivanov, D. and Sokolov, B. (2010). Adaptive supply chain management. London: Springer.
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