Increasing globalization has lead to an alarming concern regarding the improvement of the quality of the goods & services, customized services, inventory reduction, information timing and the most important element i.e. the satisfaction of the ultimate customer. With increasing complexities the process of Supply Chain Management as well as the logistics process has become more & more difficult as the level of demand is at its peak. In order to attain sustainable competitive advantage the firms should effectively integrate as well as incorporate the SCM systems in their work place (Figueiredo, 1994).
SCM would help the organization to have a better positioning which would also help the companies to have a competitive edge over its competitors.
Supply Chain Management
The supply chain means a type of chain that constitutes of every activity which is associated with a flow or transforming the goods from raw materials stage i.e. the extraction, throughout toward the end user, such as the associated flow of information.
The supply chain occurs to be a network which provides facilities or the distribution options which performs a function of procuring the materials, transforming this material into the intermediate or the finished product, along with the distribution of the finished product to the customers. A supply chain exists in both the manufacturing and the service organizations, whereas the complexities of this chain may differentiate greatly from organization to organization and a firm to another firm (Kleber, 1994).
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The management of Supply chain can be typically viewed as to a link between fully the integrated firms, whereas the entire flow of material is governed by the single firm or those where every member of channel operates independently. Hence, the coordination among the different players in a supply chain is the main key in the effective management. The management of supply chain is compared to the well practiced and well balanced relay team. This team is considered to be more competitive where every player exactly understands how to be actually positioned for a hand off. The relationship tends to be the strongest among the players who pass t the batons directly, but whole team should make the efforts jointly in order to achieve the success (Flores, 2008).
Components of SCM
The components of SCM are considered to be an element that comes on third position in the framework of circulation of Fourth Square. The integration level or the management of the process of business link could be a function in the level and number that ranges towards high from low, components in combination to the links (Ellram & Cooper, 1990).
Consequently, by adding more components of management or increasing the levels of every component could increase a level towards the integration of its link of business process. The literature of the business process of re-engineering, relationships of buyers and suppliers, and the SCM specifies the different components that are possible, which should receive the managerial attention, at the time of managing relationships of supply. There are following components of SCM, they are: Planning and the controlling; organisational structure; and the work structure.
A reverse chain of supply is considered to be the process in managing the returns of goods. Reverse logistics can also be regarded as the “Aftermarket Services of customers”. That is, at any point of time the money can be taken from the company’s warranty reserves or the budget of service logistics one could speak of the operations of reverse logistics (Billington, 1992).
Importance of Management of Supply Chain
Organizations nowadays increasingly estimate that they should rely on the effective chains of supply, or the networks, that competes in a global market or the networked economy. The paradigms of new management, the concept in case of relationships of business extends above the boundaries of traditional enterprise which seeks in organizing an entire process of business throughout the value chain in many companies.
From the past ten years, outsourcing, globalization, and the information technology which have enabled certain organizations, like Hewlett Packard, Dell in successfully operate the solid coordinated networks of supply where every specialized partner of business focused only on the few strategic activities (Scott, 1993). This network of supply which works around inter-organization could be identified as the new form within the organization. Moreover, along with the interactions done complicatedly between the players, the structure of networks fits neither “hierarchy nor the market” categories (Powell, 1990). It’s not specified the kinds of major impacts of performance, along with different network structures of supply could impact the organizations, and very few is known regarding the coordinated conditions or the trade-offs which could exists among different players (Zhang & Dilts, 2004).
Examples
Automotive Industry
The research provided an insight into a real problem that threatens in bringing the world’s automotive lines of production to the halt. The Automotive components limited, in Australia deals in manufacturing of engine parts. The company faced certain problems in management of supply chain and its effective delay in services.
According, to the analysis done by the specialist of an automotive logistics organisation revealed that the lean, modern, automotive chain of supply was driving the increase towards the need of emergency services of delivery. Delays towards the manufacturing of its components, mainly caused by components and materials shortages up its chain, are considered to be the main reason that the suppliers and makers of cars resorts to the emergency service delivery (Ganeshan, 2004).
The time of evolution was developed around five years back mainly to provide a high speed in the delivery of services for the suppliers and makers of car. In recent years, the organisation conducted the survey between its customers, by identifying the reasons of using the services of critical delivery. Now the time of evolution critically published and analysed a whole concept of the data which was collected on the basis of global shipments.
The supply chain of automotive is considered to be the most complex industry structures in the operation today. Decades in the efforts of cost cutting have reduced the line side inventories levels to the days or even for hours, while a drive towards the benefit from an emerging manufacturing capability of cost of low labour, countries meant that the components should travel further from a source the point of their use (Antonio, 2008).
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With the costs more than the £1million for an hour in a automotive company caused late delivery and a line of stoppage, suppliers or OEMs started resorting to the possible means of expediting the movement in the components when the delay in its management of supply chain occurred. Because of this the, the requests for an emergency delivery of services were caused within the company by the unexpected or unusual occurrence of such situations (Ballou, 1992).
The company was considered to be one an efficient organisation in the timely delivery of supply chain. In spite of this the organisation failed to be a market winner as it suffered huge losses, by not paying attention to certain important factors like Human error, problem of transportation and the delay in the production. This leads the company towards a disturbed system of supply chain management. However, it was analysed that different issues were grouped into the different structures in an automotive organisation, they are:
Delays in the production: Quality problems, equipment problems, and the delays in its supply of materials and the line of basic production which was debugging at the time of introduction of the new components could all results in different parts which arrived from the lines later on than it was expected.
The Error of Human: Cars are the complex machines which are built from around thousands of different parts. It is important to carefully examine which part to be requested, and the right part that is requested but a supply of wrong occurred, this problem occurred within the automotive company, which leads to a delay in the supply chain of their products.
The problem of transportation: Strike action, customs delay, vehicle breakdowns, bad weather, all these also resulted in the unconventional supply chain which leads the company towards failure of meeting delivery schedules.
This all factors leads to delay in the production of the company, which was the most instant cause of an emergency requests of deliveries among the customers surveyed, that accounts for around 28 percent of the emergency shipments. Human errors were the second most important cause, which leads towards the quarter of the shipments. The problems of transportation also created huge delays in the organisations supply chain. The critical deliveries which were planned made up around the final and seven percent of its European shipments that was analysed (Koch, 2004).
The avoidance of the human error, which is the second important cause in the emergency shipments, seemed to offer the makers of car a big opportunity of improvement. It is considered to be always cheaper in moving data than the parts. In any case an error in the communication could be reduced which delivers the significant benefits in financial terms.
The problem of transportation was another area which was difficult in developing a strategy which overcomes every type of the potential failure. For few product groups this could make sense of using two different solutions of transportation, so that the failure in any one would mean that the supply is dried up altogether.
Another example is of Nike
Nike is one of the world’s largest apparels and shoe manufacturing company. It had one of the finest supply chains. But all of a sudden Nike faced a huge loss, because of the failure of one of its software glitch which cost Nike around more than, $100 million in sales, its stock its price around 20 percent, which was triggered by a flurry in lawsuits of class action. The wave was big enough which compelled the company in revealing its losses at the quarterly conference calls with risk and analysts, the wrath of its Exchange and securities Commission, shareholders and both (Lee, 1992).
Nike claimed that the problem was with its software of i2 demand planning, were tactical or fixable. It was working too slowly, was not integrating well, had few bugs, and the planners of Nike were trained inadequately, regarding the use of the system when it went live. Nike faced these problems in spite of having a fine system of supply chain. With the failure of single software, the whole system of its distribution channel was disturbed. Therefore, an effective supply chain management cannot always ensure that a company could be the market winner.
CONCLUSION
The supply chain occurs to be a network which provides facilities or the distribution options which performs a function of procuring the materials, transforming this material into the intermediate or the finished product, along with the distribution of the finished product to the customers. It is not important that effective supply chain would help the organizations in becoming the market players. It is seen in case of an automotive company and in the case of the organization which deals with apparels and shoes. The management of supply chain for both the companies leads to losses, while the companies were performing better in their early stages. Therefore, it is important for the companies to effectively plan their supply chain in order to overcome occurrence of prospective problems that could disturb the whole flow of their supply chain management (Ballou, 1992).
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