1.1 Successful SCM Considerations
Understanding that supply chain success depends on supplier performance can make supplier relationships, or their lack of, having a huge impact on revenue, inventory, and profitability. There have been a multitude of positive and negative links between suppliers that can directly or indirectly impact the overall operational success of companies, especially in terms of cost, quality, flexibility, and delivery metrics (Ketikidis, Hayes, Lazuras, Gunasekaran, & Koh, 2013; Mateen & More, 2013). ; Park & Min, (2013). Firms and their supply chains must control suppliers, and not let suppliers control their business, through increased levels of mutual benefit and respect. This is the issue where the efforts of lean operatrions to reduce the waste of inventory and time begins (Basu & Nair, 2012; Brito & Botter, 2012). It is critical to align performance with demand planning. Otherwise, too much of the demand planning horizon is frozen by unnecessarily long-lead times and too much variability in performance. The authors, van Weele and van Raaij (2014) made a plea to the academic community for Purchasing and Supply Management (PSM) to engage in greater efforts to adhere to a more rigorous approach to research. They distinguished supply chain management (SCM) as a different entity than PSM, as SCM has moved away from simply a focus on the flow of goods to examining more closely the relationships between different players along the supply chain in an attempt to control more than just inventory management-related concerns. Through the creation of value for a specific customer market, emphasis is placed on proceeding as efficiently as possible (as opposed to effectively). This task may be accomplished through strategic management, of which certain aspects will be examined in the present case study, but van Weele and van Raaij suggested that research into this subject may hold no value unless the findings are executed. As profits became a result of customer satisfaction, firms began to focus on excelling at their core competencies and outsourcing other aspects of their business and shifting to a more supplier-dependent climate. It was suggested that competitiveness was not entirely internal, but relies on external relationships with suppliers, as well. Still, the literature contained a lack of studies that display any new finding on how to leverage this internal knowledge within a firm. One of the purposed of this chapter is to address this apparent lack of multiple industrial studies on internal leverage of SCM-related information.
If management recognizes that SCM processes require integration throughout the organization and beyond with suppliers and customers, problems that may have been historically significant are caught and dealt with prior to them becoming a current issue or problem. Otherwise, gaps in the supply chain are created that can significantly hinder results. Using collaboration with key supply chain participants to provide additional focus and resources to the total supply chain is vital. Assessing the entire supply chain is critical for identifying critical areas, including suppliers, logistics-service providers, ports, and other potential risks that could disrupt a company's supply chain. Essentially, SCM is not only concerned with the management of the flow of goods and services within and without a firm, but maintaining the relationships among all stakeholders that support the supply chain. Goods and service involved in this flow traditionally include fresh raw materials, inventory, and finished products. Raw materials need to be transported using fast and efficient means to make the production process successful. The availability of raw materials and the fast nature of the production process dictates that raw materials need to be constantly available in large quantity and in good condition. Therefore, proper storage of raw materials comes in handy and consequently, this would necessitate adequate storage capacities.
SCM has traditionally concerned with the internal planning, design, execution and control of activities connected to the supply chain (Casadesus & de Castro, 2005; Miguel & Brito, (2011). These activities are usually intended to fulfill certain objectives, but management is always pressured to strategically leverage the supply chain to create net value. This means that firms have to put forth extra effort to enhance their productivity at all levels. Management has to ensure that their overhead expenses do not balloon beyond reasonable levels, which initially would limit profitability. Therefore, the difference that is realized between expenditure on production and revenues from sales constitutes the net value. Effective SCM should strive to ensure the creation of the largest possible net value, yet maintain positive customer and supplier relationships (Smith, 2011, 2012). Logistics also play a fundamental role in the outworking of activities pioneered by an organization. These concerns with the overall oversight of activities, plans, and procedures in which a firm participates can be overwhelming at times and their complex interactions should not be downplayed. In many instances, achieving a sensible form of logistics proves elusive and unrelenting. Consequently, logistics always require to be leveraged against any discrepancy related to harmful gossip of strangers. The leverage of logistics has the potential to determine the general direction that the firm would be willing to take in its SCM activities. Hence, SCM is directly involved with the leveraging of logistics, not just for one firm on a local scale, but also on a worldwide scale as reflected in large customer and vendor databases.
Proper management of the supply chain would also ensure the building of a competitive system of infrastructure. Basically, infrastructure is concerned with streamlining the exchange of information and the flow of products from the point of manufacture to the point of consumption such as the marketplace. Firms with a streamlined system of infrastructure have an upper hand in terms of realizing their potential in the supply chain. The quality of the SCM-related activities has a direct bearing on the quality of infrastructure (Bulcsu, 2011; Carvalho, Cruz-Machado, & Tavares, 2012; Hamidi, Farahmand, Sajjadi, & Nygard, 2012; Pettersson & Segerstedt, 2011). Few firms are able to operate entirely within their own industries. Majority of firms have to work within the limits and allowances stipulated by the industries within which they operate. The prevalence of many firms within the same industry creates a significant competitive environment. Nevertheless, each firm within the industry has an opportunity to create its own niche within the market; hopefully within a sustainability framework. Different firms adopt varying systems of infrastructure depending on their relative strengths and weaknesses. Therefore, proper supply-chain strategic initiatives should be capable of producing an efficient and competitive system of infrastructure (Kumar, Shankar, & Yadav, 2011; Mathirajan, Manoj, & Ramachandran, 2011; More & Babu, 2012; Paksoy & Cavlak, 2011).