“Supply Chain Management has been defined by Slack as the management of the interconnection of organisations which relate to each other through upstream and downstream linkages between different processes that produce value in the form of products and services to the end customer.”
Competition, customer demands product life cycle and financial objectives are just a few of the considerations when choosing the correct Supply Chain method. This is not a decision that should be taken lightly, as the results of an incorrect choice of Supply Chain system could be catastrophic to the Supply Chain.
The author will discuss some of the options for choosing a Supply Chain system, look at the reasoning behind these decisions and assess the characteristics of a Supply Chain.
Discuss the critical issues involved in the decision to develop either an efficient or responsive supply chain
A company’s capacity to fulfil the requirements of its customers in an appropriate and/or timely manner is commonly referred to as “Responsiveness” within the supply chain and the capacity to deliver goods/services in within the customer’s expectations (i.e. use of certain quality materials, man power and within an expected cost) is referred to as “Efficiency” with in a supply chain. Which to choose is not always obvious so it’s best to plan correctly.
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When deciding what supply chain process to choose, a company must look at the factors of supply and demand to base its choice between a responsive or efficient system. It is imperative for a company to ascertain the appropriate structure to use to ensure the product / service is given the best chance of success. Failure to choose the correct framework can often lead to a detrimental outcome for the supply chain, product or service. A wide variety of systems and technologies are now available as well as many consulting firms that are there to help you decide on these technologies that would best suit your needs as well as the best possible Supply Chain Management system.
A lot depends on the product / service type and the projected demand for the product / service. If the product / service required has a foreseeable stable demand, long life-cycle, stable or well-established source of raw materials / inputs and a long life-expectancy and cost is a primary driver, then a company would have the ability to plan ahead and would most likely choose an “Efficient” Supply Chain to drive costs down by maximizing performance, minimize inventory and reduce lead time but all the while ensuring that these initiatives do not increase cost. An example of this would be “Unilever”. In 2000, they undertook an initiative to restructure the business and this included streamlining their entire Supply Chain Management System. They looked at the internal organization of their supply chain and their procurement systems and noted that significant saving could be made with the introduction of a centralized supply chain with consolidated bargaining as well as the introduction of new technologies and increased co-operation from suppliers. By introducing all of the above, they were able to make significant savings. In 2003, they reported a saving of over $14 Billion from its Supply Chain Management and procurement initiatives. (slideshare.net, 2019)
If the product / service required has an unstable demand, short life cycle, volatile raw materials / input source, short life-expectancy, then the company would find it difficult to carry out any form of long-term future planning. The need to respond quickly to a spike or shortfall in demand, and where the performance and reactiveness of the supply chain outweigh the cost as the primary driver would most likely lead to the choice of a “Responsive” Supply Chain. An example of this would be a bespoke “IT” supplier. They need to be able to respond to a customer need for personalization. This is achieved by ensuring that inventory is large to cover all the possibilities. However, “Moore’s Law” could have an impact where stock could fall in to obsolescence in a short period time means that flexibility and ability to change quickly is a requirement. This flexibility has a price that the customer is willing to pay to get the right product at the right time. (UKEssays, 2019)
Explore the possibility of developing a supply chain that is simultaneously efficient and responsive.
If we consider that the primary driver behind an “Efficient” Supply Chain is supply demand at the lowest cost and the primary driver behind a “Responsive” Supply chain is to respond quickly to demand, it may seem like these are not easily aligned as they are “Opposites” so in an “Ideal Scenario” you would always have a supply chain that is at the lowest possible cost (“Efficient” ) while meeting each and every one of your customers’ needs with little or no delay (“Responsive”) Is this always possible? Probably not but there are some cases where this is a must.
During the planning phase, it is often the case where there is the requirement for both. An example of this would be fresh food. Responsiveness is imperative. The ability to react to customer demands and needs which can include seasonal shifts in purchasing patterns is the number one goal to be achieved because if it’s not in the shop, they will just go to another shop to purchase whatever they are looking for. The restrictive timescale placed on the supply chain by the limited timeframe available for the safe transportation and consumption of the food stuffs also means that the supply chain has to be well organized to maintain the quality of the product and restrict the loss of product through spoilage. However, factors such as low margins due to competition from other suppliers then force the use of an efficient, well organized supply chain to ensure the competitiveness and / or survival of the company’s involved. (UKEssays, 2019)
Where possible a system where being “Responsive when you must and Efficient when you can” is the desired method. Unless you are either supplying something at the lowest possible cost in which case it needs to be efficient or ensuring customer demand at all costs in which case it needs to be responsive. (Carter, 2019)
From your own experience describe a supply chain and assess its characteristics.
Slacks definition of a Supply Chain is: “The management of the interconnection of organizations which relate to each other through upstream and downstream linkages between different processes that produce value in the form of products and services to the end customer” and below are the necessary characteristics of a Supply Chain
Inventory Control: For a supply chain to be effective, it must firstly control and manage its inventory. Everything from Raw Materials to finished goods as well as any other consumables must be stored in the right place, in the right amounts and available when needed. This helps a company to optimize your levels of inventory to ensure that it has the correct amount of stock on hand. Not too much and not too little. If it’s effective, a company should be able to find a particular item easily if required.
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Transport and Logistics: A cornerstone of any successful Supply Chain. These ensure that your company moves materials and goods effectively and efficiently for the best possible cost while still maintaining the requirements of the customer. Everything from Arrival of materials to ensure continuity of supply, delivery management and scheduling are just some of the functions that are controlled by Transport and Logistics.
Warehouse Management: This allows your company to develop your stock levels correctly and increase the efficiency of your warehouse. Without the correct stock levels, orders may not be completed on time causing issues further down the supply chain.
Supplier Co-operation: The right supplier combined with the correct approach from both sides can lead to a very smooth process. There are several software solutions available to help with this and they can provide a view of a supplier’s systems for the customer and the customers systems for supplier, all to ensure the relevant information gets to where it needs to be, when it needs to be there. It can highlight a problem in the supply chain before it happens and keeps both sides invested ensuring everything runs smoothly to maintain supplier confidence.
Order and Billing Controls: There are multiple Software solutions out there to assist a company with Ordering and Billing. Most are now self-controlling with automated responses sent when required thus ensuring that human error doesn’t let anything fall between the cracks and cause issues later.
Ability to see the entire Supply Chain: A company needs real-time visibility of many aspects of the supply chain to safeguard that there are no issues within the supply chain that are not being dealt with on time. Regardless of the size of the company, real-time visibility is essential to enable the correct decisions to be made at the appropriate time based on the correct “Live” data. Reaction time to issues is very important for the customer and this is shortened dramatically by real-time information from a well informed and highly visible Supply Chain. (Picone, 2019)
The author has described some of the requirements and some of the features of a supply chain, along with some of the potential decision-making processes required to choose the right supply chain system, be that “Responsive” or “Effective”. Are these the only factors to take in to consideration?? Of course, not but hopefully they will enlighten the reader.
- Carter, L. (2019, Nov 03). Incoming Goods Analyst. (S. Walsh, Interviewer)
- Picone, K. (2019, Nov 14). LOGEO. Retrieved from www.lego.nl: https://www.logeo.nl/asked-answered-essential-features-supply-chain-management-software/
- slideshare.net. (2019, November 12). Slide Share. Retrieved from www.slideshare.net: https://www.slideshare.net/RahulAuddya/unilever-supply-chain-management
- UKEssays. (2019, November 04). UK Essays. Retrieved from www.ukessays.com: http://www.ukessays.com/essays/business/responsiveness-vs-efficiency-in-supply-chain-management-business-essay.php?vref=1
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