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Strategic Benefits of Supply Chain Management

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Introduction

History has always evolved, and since new modifications took place, there came a massive change in the manufacturing industries. Fredrick Taylor, who was known as the Father of industrial engineering, researched ways to improve the manual loading process, and as a result, he introduced supply chain engineering (Robinson, 2016). In the past, people earned by making products and items with hands, and the labor faced problems because of the work burden on them. But then new methods were introduced by experts, and things were made easy for the laborers and product manufacturers. The supply chain is that process that provided the laborers with ease. Supply chain management is the management of the flow of goods and services; i.e., it includes all the processes related to product manufacturing. The whole process from raw materials to a complete product takes place in supply chain management. As indicated by the name, the work and production are held in a chain, i.e., stepwise, and as a result, we get our products delivered. This process represents the hard work of suppliers. They introduce evolutions in the supply chain to make it as efficient and economical as possible. It also deals with the information systems that are responsible for delivering the products. But some strategies enhance the working of supply chain management. This quote shows one of these strategies:

“Standards should not be forced down from above but rather set by the production workers themselves.” (Ohno, 1998)

Later on, due to more research, the supply chain management process evolved. The way manufacturing industries used to take more work from labor reduced, and machinery and other latest innovations take their place. Computer technology has just become a lot that the supply and logistic field cannot utilize all the new technologies in the chain management process. Supply chain management controls the production, shipment, and distribution of products. This supply chain’s benefit is that it minimizes the excess costs and fastens the product delivery to the consumers. The supply chain management process’s implementation, complete control of internal distribution, sales, and internal inventories should be kept in the notice. (Hayes, 2020)

Strategic Benefits of Supply Chain Management

Working of SCM

The basic idea of supply chain management is based on the concept that almost every product present in the market comes from various organizations’ efforts that make up a supply chain. The mechanism of supply chain management is current for a long time, but many companies have still not added it as a value-add. In SCM, the supply chain manager coordinates with logistics of all other aspects of the supply chain, and it consists of five parts. These are the plan or strategy, the source (of raw materials or services), manufacturing (focused on productivity and efficiency), Delivery and logistics, the return system (for defective or unwanted products). The process of supply chain management works as a connected network of individuals, organizations, resources, activities, and technologies, which played a part in the product service’s manufacturing and sale. There is a significant role of supply chain management in managing a company’s bottom line. From the initial stages to the final products, the supply chain counts every step in its process. There are three levels in supply chain management operations, i.e., strategic, tactical, and operational. 

Strategic Opportunities with SCM

Through strategies, supply chain management covers a large area of this process. At the strategic level, the company’s management team makes high-level strategic supply chain decisions related to the whole organization. The SCM process is carried through those strategies. The findings the management took should support the overall corporate strategy which the organization is following. The supply chain management, about which the management team has to make decisions, deals with covering the supply chain range. It includes product development, manufacturing, customers, logistics, and vendors.

Senior management teams should design strategic directions to consider which product the company should manufacture and which product should be presented. When the product cycle matures or stops somewhere, then the management has to take some strategic decisions to either modify the existing product or offer new versions of the product. In these strategic decisions, they need to acquire another company or sell the existing ones. Throughout the strategic product development decisions, the objective of the firm will be the determining factor. (Murray, 2019)

At the strategic level, the company will also identify the customers for its products and services. The key customer segments that should be identified where company marketing and advertising will be targeted. Manufacturing decisions define the manufacturing infrastructure and technology that is required or needed. The company will manufacture the products based on high-level forecasting and sales estimate. The management team will manage supply chain policies with suppliers. Throughout the strategic level, the logistics function is the key to the success of the supply chain. (Skills, Management & SCM, 2009)

Competitive Opportunities with SCM

For the past 20 years, supply chain and logistic functions were viewed as cost centers, and therefore, it became clear that it can be used for competitive advantage as well. Supply chain management is recognized as the key source of producing competitive advantage and differentiation. Companies strive to compete with each other by enabling product manufacturing and delivering as soon as possible. The companies achieve a competitive advantage by taking benefit from the management of their supply chains. The two most potent competitive advantage principles are as follows:

  • Stick to your core competencies and outsource non-core competencies.
  • Coordinate these functions across supply chain partners.

Core competencies include anything which we do well. But we look for things which can provide us an advantage in competitions. It involves superior supply chain management. It is a process to identify what the company is capable of and determines what the supply chain partners have to do well so that the overall supply chain proves beneficial and successful. (T. Mentzer, 2007)

To accomplish a competitive advantage through supply chain management, the organization sets some competitive priorities that the supply chain has to satisfy the internal and external customers. An organization’s competitive priorities should be divided into cost, quality, time, and flexibility capability groups suggested by Krajewski, Ritzman, and Malhotra (2013). These four groups are cost strategy, time strategy, quality strategy, and flexibility strategy. (Myerson, 2015)

I.T. Support for SCM

Since modernization has taken place, the new generation is evolving and producing shopping centers through eCommerce and mCommerce. It has made supply chain management an important area of concern for many businesses. This concern is critically dependent on manufacturing companies, mainly based on the supply chain partners to deliver the products. The information systems significantly impact supply chain management on processes like planning, sourcing, producing, and the levels ranging from tactical operations to organizational strategy (Kakhki & B. Gargeya, 2019).

“Leaders need to embrace and master the art of transformation for their organizations to thrive.” (Steven J. Bowen)

The supply chain manufacturing companies’ major stakeholders include manufacturers, suppliers, retailers, shippers, and distributors. The importance of increasing digitalization is increased. Technological advancements enable businesses to develop the end-to-end supply chain, and they also speed-up processes. The main benefits of information systems in supply chain management include:

  • Increased control overproduction
  • Better inventory management
  • Increased collaboration between supply chain partners
  • More effective order tracking and Delivery
Conclusion

Supply chain management is the flow of goods from manufacturers to distributors. The primary and significant role of any supply chain is to make sure a company delivers the orders according to the customer’s demands, like in the factors of time and quality, by spending as little money as possible. There is a complete cycle in which the whole process is taken place. The supply chain management is divided into three levels, and there is a connection between all those levels. The method of supply chain management is based on strategies decided by the management team. When supply chain management fulfills all of its stories, a company’s capability to achieve its goals is very high.  An example of strategic supply chain management is that of Starbucks. Strategies and designing of the supply chain include deciding the structure of the supply chain and then determining activities performed by each stage of supply chai then selecting a location and capacities of the facility. The next important step will be deciding the manufacturing process of the products and finding a suitable place to store them. And the last degree in strategic supply chain management is to select the modes of transportation and the source from where the information is to be collected. All the business requires supply chain management for producing competitive advantage. The capability groups provide their services in the given respective. Each has its role. And overall, each contributes to providing a complete image to the company. The importance of increasing digitalization is increased. Technological advancements enable businesses to develop the end-to-end supply chain, and they also speed-up processes. Overall, every factor and aspect contributes to the evolution of supply chain management.

References
  • Robinson, A. (2016). The Evolution and History of Supply Chain Management. Retrieved 24 October 2020, from https://cerasis.com/history-of-supply-chain-management/
  • Ohno, T. (1998). Supply Chain Quotes: Take it to the next level. -. Retrieved 24 October 2020, from https://www.supplychaintoday.com/supply-chain-quotes/
  • Hayes, A. (2020). Supply Chain Management (SCM): What You Need to Know. Retrieved 24 October 2020, from https://www.investopedia.com/terms/s/scm.asp
  • Murray, M. (2019). Strategic Supply Chain Management Introduction. Retrieved 25 October 2020, from https://www.thebalancesmb.com/strategic-supply-chain-management-2221231
  • Skills, T., Management, S., & SCM, S. (2009). Strategic Supply Chain Management (SCM) | CIPS. Retrieved 25 October 2020, from https://www.cips.org/knowledge/procurement-topics-and-skills/supply-chain-management/strategic-supply-chain-management/
  • Mentzer, J. (2007). Achieving Competitive Advantage through Supply Chain Management. Retrieved 25 October 2020, from https://www.industryweek.com/leadership/companies-executives/article/21956539/achieving-competitive-advantage-through-supply-chain-management
  • Myerson, P. (2015). Supply Chain Strategy for a Competitive Advantage | Introduction to Supply Chain and Logistics Management Made Easy: Methods and Applications for Planning, Operations, Integration, Control and Improvement, and Network Design | InformIT. Retrieved 25 October 2020, from https://www.informit.com/articles/article.aspx?p=2339632&seqNum=4&ranMID=24808
  • Kakhki, M., & B. Gargeya, V. (2019). Information systems for supply chain management: a systematic literature analysis. Retrieved 25 October 2020, from https://www.tandfonline.com/doi/full/10.1080/00207543.2019.1570376
  • Bowen, S. (2016). Total Value Optimization Quotes by Steven J. Bowen. Retrieved 25 October 2020, from https://www.goodreads.com/work/quotes/58238306-total-value-optimization-transforming-your-global-supply-chain-into-a-c
  • Tadepalli, M. (2014). Role of Technology in Supply Chain Management. Retrieved 25 October 2020, from https://www.directivegroup.com/ideas/tools/news/blog/role-of-technology-in-supply-chain-management/

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