EVOLUTION OF SUPPLY CHAIN MANAGEMENT AND ITS GROWING CONTRIBUTION TO BUSINESS OBJECTIVES
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David (2003) describes supply chain management as the set of procedures to maintain quick flow of trade between manufacturers to suppliers and stores to warehouses. It makes sure that correct quantity of products are produced and distributed at the right market in time. It reduces the system wide costs while increasing the standards of services.
In the early 1980s new business manufacturing strategies were discovered by the European business tycoons, it helped them to reduce the costs and compete in international markets. A huge capital was invested for implementing these strategies like, just in time production, lean manufacturing, total quality management etc. A recent investigation has revealed that many manufacturers have successfully reduces substantial part of their cost using these costs. Manufacturing tycoons believes that erective supply chain management is the ultimate solution for profit maximization and time and cost minimization.
Distribution and supply chain costs certainly have a great interference in the British economy. In the later 20th century many organizations focused on such strategies to reduce their costs by effective relationship with their supply chain partners. For this purpose brands like TESCO and ASDA used strategic partnership with their business alliances.
The race to reduce distribution cost and time lead many manufacturers to introduce the trend of outsourcing into their organizations in early 90s. Organizations started to consider different appropriate functions for outsourcing. Many outsourced there procurement function to production and manufacturing. A recent study reveals the statistics according to which 40 percent organizations outsource their business functions.
In the recent years the organizations have discovered the correlation between the reducing costs and corporate risks. They believe that decreasing the manufacturing and distribution costs by outsourcing increases the risks levels. Hence in the recent years' firms concentrate on the strategies that ensures balance between reducing cost and managing risks.
Firms apply a range of approaches to manage level of risk in their supply chain for instance;
Building severance into the supply chain, it helps to fulfil the demand in-case one portion of the supply chain is disturbed.
To match better supply and demand needs, flexibility deals of supply contracts.
To use the historical information before dealing with disrupting events.
Recurring measure the risk in the supply chain process.
Many of the approaches are depended on the technology. The implementation of the enterprise resource planning (ERP) system and other technological corporate solutions packages helps to improve the resiliency and responsiveness in the supply chain. Similarly use of advanced inventory planning is incorporated by the organizations to facilitate their supply chains.
EVALUATE SUPPLY CHAIN STRATEGIES AND ASSESS THE CONTRIBUTION THEY MAKE TO THE ACHIEVEMENT OF KEY BUSINESS OBJECTIVES.
Different strategies used by the supply chain business are discussed below. These strategies help to achieve the corporate goals like growth, profit maximization and capturing market share.
DISTRIBUTION NETWORK STRATEGIES;
Distribution network strategies address the issues like location of warehouse and their capacities etc. It establishes the basis how should management maintain flows between facilities, this flow includes between production house to warehouse and warehouse to retailer. It helps to reduce the total holding and logistics costs. Different information technology packages are used to assist while making these complex decisions making.
INVENTORY CONTROL STRATEGIES;
This strategy addresses the decisions regarding the inventory control system of the organization. Inventory control strategy includes the phenomenon of economic order quantity (EOQ) to minimize the holding and ordering costs. It also determines the quantity to be stored by the retailer at the first trading place. Inventory control strategy also establishes the procedures to cope up uncertainty in the demands or supply process. The most effective contribution of this strategy is that it addresses what inventory turnover ration should be used.
PRODUCTION SOURCING STRATEGIES;
This strategy helps to maintain balance between logistics and production costs. It also addresses the impact of producing in large batches to reduce the fixed cost per unit. However producing in large batches may increase the transportation costs and the holding costs. However if the firm try to reduce the transportation cost it will have to produce in small batches which will increase per unit fixed cost. Hence a balance between them is necessary which is done by the production sourcing strategies.
Most recently the supply chain business is facing the issue as how much centralized distribution should be incorporated. What might be the impact of chosen distribution method on the standard and cost of the services provided? And which logistics method should be used for transporting goods from warehouse to the sales outlet? Distribution may be done by sea, air or road. All these issues are solved by developing the appropriate distribution strategies.
SUPPLY CHIAN INTEGRATION STRATEGIES;
It is difficult to globally implement the supply chain because different supply chain facilities and partners have different objectives. However TESCO, ASDA, Sainsbury etc has set the examples of successful globally optimal supply chain getting huge market share. But these companies are the large conglomerates and can employ those technologies which no one else can. However, generally most of the companies have no choice but integrate supply chain by partnering strategy. Timely information sharing and operational planning are the keys to successful integrated supply chain. This strategy address which information should be shared at how it should be done and the similar associated issues.
This strategy addresses what operations to be performed internally and which operations should be performed externally. Mostly the supply chains concentrate on the core business activities and outsource rest of the operations. This strategy evaluates the risks and rewards associated with the every type of operations and then conclude the decision which is the most effective for every one.
TECHNOLOGY & DECISION SUPPORT SYSTEM;
Information technology has an inevitable role in the effective supply chain management. No doubt today's the most advanced form of supply chain management is just possible due to the assistance available from the information technology. Information technology addresses almost every part of the supply chain from production to logistics, and order placing to inventory control. Different decision support systems are used to address the same issue.
REVENUE MANAGEMENT STRATEGIES;
This strategy is used to successfully improve the performance of the supply chain. In this strategy price elasticity of demand is set according to the market in order to maximize the revenue from sales.
EXPLORE STRATEGIES USED BY TESCO TO DEVELOP AND MAINTAIN EFFECTIVE SUPPLIER RELATIONSHIP
Determine suitable strategies with regard to the development of relationships with suppliers, using appropriate web-based technologies
TESCO is one of the most renowned supply chain conglomerates in the British markets. It has employed the ideal web based system known as CRM (customer relationship management). TESCO distinguishes customers according to their purchase frequency and the amount they spend on their purchases.
CRM employed by TESCO is one of international standards and extremely appreciated by the customers. TESCO started its customer relationship management system in 1995 by introducing 'Club Card'. It gives the customers point with every purchase of theirs and subsequently gives them discounts on the basis of these points. On the other side in the shape of club card, TESCO is maintaining a huge and useful database of the customers. It provides them information about the buying trends of the customers, TESCO gives them discounts vouchers and special deals of the areas of low interest by the clients. Similarly TESCO introduced Lifestyle Magazines that represents the mentality of the different clients. Promotional calls and emails to the customers, priority parking for the pregnant ladies and free parking with the purchase above £5 created a professional image of TESCO into the minds of the people.
In the year 1996 TESCO introduced other cards for students and mothers respectively. There were special offers with each card. TESCO by having an alliance with 'LUNN PLY' provided discounts on travel to its valued customers. Later in the same year TESCO card was combined with VISA through Royal Bank of Scotland. Tesco club members gets discounts every time they buy DIY products from B&Q.
Another milestone by the TESCO was offering financial services to its customers in the year 1997. One of the major examples is TESCO credit card. Apart from that TESCO started providing Telecommunication services and electrical services in some parts of the United Kingdom. In the year 2000 TESCO went under partnership with General Motors and it made the cars available at the TESCO for its customers.
Immediately after that, TESCO started online selling with a free home delivery service. Hence customers found it very convenient to buy all sort of products under one roof with the facility to place an order online, frequent promotions and offers increased the band loyalty among the customers. TESCO is now increasing its operations into ASIAN markets, for the reason it has taken over 'LOTUS' supermarket chain in the Thailand.
EVALUATE THE EFFECTIVENESS OF STRATEFIES USED BY TESCO;
TESCO supply chain management greatly depends on the 'Process Improvement'. TESCO considers by creating value for customer will finally get lifetime customer loyalty. 1983 to 1996 was turn around time period in the history of TESCO. It was the most innovative period during which TESCO introduced point of sale scanning, centralized ordering and distribution. Introduction of automated warehouse control system and electronic data interchange was also introduced in the same time. Director Mr. Graham Booth (Booth) recognised that it was necessary to have substitute triggered by customers and for this rationale the using the same suppliers and cross dock distribution centres (DC) would have been ideal.
The recent statistics revealed that TESCO has more than 2500 stores in the by the end of 2008. Almost 2000 stores are across the United Kingdom and remaining is located in the rest of the world. In the United Kingdom TESCO has four types of stores. Internally the organization operates in 13 countries so far. Hence without efficient supply chain management such a global level business operations would have never been possible.
Now TESCO is a brand name. It has pedigree at the core planned advantages which yield a strong brand image in terms of quality, trustworthiness and value of money.
TESCO has always been trying to improving customers shopping experience which successfully lead in terms of customer loyalty. Loyalty cards system and other similar approaches to customize services is reward for loyal customers. Same are the reasons that TESCO has become the biggest supply chain shopping centre.
IDENTIFY EFFECTIVE SYSTEM USED BY TESCO FOR PROPER RELATIONSHIP MAINTENANCE;
Proper supplier relationship management is a very important area of the business. Ignoring this element may have very negative effects in the long run. Usually smaller businesses are better able to manage this relationship because of the size of the business.
Corporate Social Responsibility reflects Tesco's System of Supplier management:
TESCO understands the psychology of the supplier better than other retailers.
TESCO has only those suppliers who are energetic and innovative.
TESCO having internal strengths provides very competitive consideration to its suppliers.
Look after all the suppliers so they can look after the Tesco Supplies
Tesco Treat Suppliers how they like to be treated
Tesco panel has the best panel of retailers.
Mutual understanding and mutual confidence on teach other
Struggle to do their level best.
Providing support to suppliers and admire more than criticism.
Tesco give opportunity to ask more than tell, and share knowledge
These types of policies are developed by the CSR (cross functional group) in Ireland. CSR team members meet every quarter with the board of directors and the senior management of the TESCO group to discuss the possible improvement into the strategic relationship maintenance with the suppliers.
INVESTIGATE HOW WEB BASED APPLICATIONS CONTRIBUTE TO THE FULL INTEGRATION OF THE SUPPLY CHAIN AT TESCO.
EVALUATE HOW WEB BASED TECHNOLOGIES ASSIST INTEGRATION OF DIFFERENT PARTS OF THE SUPPLY CHAIN NETWORK;
Tesco uses this web technology to fully integrate the supply chain
Internet: Revolutionary force:-
Internet had become a revolutionary force which changed all the operations of an organization. Which includes supply chain also, the revolutions which internet brought are:
Internet had become an important distribution channel.
Value chain activities had been made more efficient to perform.
Strengths of competitive forces are altered.
It recreated an new industry
Impact of technology on Value chain efficiency:
Supply chain management tool had become more powerful.
Internal operations made effective: JIT inventory, gear production schedules, buyer orders and production quantities, buyer preferences are monitored accurately.
Transaction costs are decreased; data can be shared with distribution channels.
Internet Technology refurbishing Company Value Chains:-
Manufactures were able to build according to the order and sell it directly instead of traditional process.
Build to order inventory has been implemented instead of build to dealer.
A supply chain is a system of business units and facilities that obtain raw resources, change them into intermediate goods and then final products, and deliver the products to customers through an allocation system. Supply chain management (SCM) is afraid with the management of this behavior such that the product passes through the chain in the shortest time with the lowest cost (Lee et al. 1995). As supply chain networks become more and more global, synchronization between processes are more vital. Information sharing is a key element in coordination of SCNs. Programs like just-in-time in production as well as continuous replacement program (CRP) and quick reply programs and reduces list costs.
Web based technologies are being used in many other parts of the supply chain like database management system, information treatment, project communication system, and security matters. The nature and the degree of these web based technologies is diverse for dissimilar businesses.
EXHIBIT HOW WEB BASED TECHNOLOGIES HAVE CONTRIBUTED TO THE EFFECTIVE MANAGEMENT OF THE SUPPLY CHAIN IN AN ORGANIZATION AND EVALUATE ITS EFFECTIVENESS IN THIS;
Role of information technology is un-evitable for maintaining an effective supply chain system. Web based technology contributes effective supply chain management in different ways;
Strategic network design; Web based technology helps the management to determine the best location, size and number of warehouses to ensure maximum utilization of resources.
Tactical planning; Web based technologies provides assistance for allocating resources over different time periods. It addresses the coordinates of production, distribution, and logistics. Another element is the inventory planning that decides quantity of safety stock and the best holding position of inventory in the supply chain business.
For short term planning, web based applications helps efficient production, distribution and logistic management services.
Web based software forecast future demand trends by interpreting historical data. It also determines the impact of new products or adopting different promotional strategies.
Web based technologies has an extremely significant role in scheduling manufacturing. Constraint-based feasibility analysis is made by these technological systems to address production limitations.
In the supply chain business various inventory plans are designed based on historical demand, lead time and holding costs. It is all possible just because of the advanced web based technologies.
Web based logistics planning helps in selecting routes and schedules according to available transportation on a lane, expenditure and client's delivery rota.
Web based technologies helps in maintaining effective customer relationship. It involves systems that bring up to date and track customers' information. These systems include order tracking and similar back end arrangement to facilitate the customers and the services advisers who are to assisting them.
It helps to keep a record for distribution activities in plants and warehouse. Besides that web based technologies also provides aid in event management.
Web based technologies has a great contribution in the Enterprise Resource Planning. ERP includes marketing, HT and financials side of the supply chain business.
INVESTIGATE THE EFFECTIVENESS OF SYSTEMS, POLICIES AND PROCESSES FOR WEB-BASED TRANSACTIONS
STUDY THE POLICIES, STRATEGIES AND SYSTEMS USED BY AN ORGANIZATION FOR WEB- BASED TRANSATIONS.
Web based transactions refers to the substitute of physical procedure with electronic and virtual collaboration with customers and suppliers. It is called as e-commerce. It can be used to ease the communication between different organizations as well as the interaction of individuals with each other. Typical example of e-commerce is trading over internet through 'Amazone' or e-bay etc.
Web based transactions are being used since years. The acceptance of internet standards has accelerated the adoption of e-commerce, especially between individual buyers and companies but also between companies.
Companies use internet standards internally-Iintranets- as well as externally extranets and exchanges. The distinction between internet and intranet is explained mainly by who has authorized access to the system. Intranets permit corporations to apply internet applications without developing custom framework and avoid irreconcilable hardware and special dial in action. Internet standards are used now a day to create private and public exchanges that allow members to trade or substitute information.
One more idea that has urbanized around internal company employ the internet is the portal. A gateway cumulate all the applications and sources of information needed in order to complete any job into a solo desktop setting, classically using the web browser. This ability not only authorizes a worker to be creative individually, but also creates an environment for workforce to cooperate with others internally and externally.
Web based transactions can take place at a number of levels of complexity, ranging from one way communication to direct access to database for retrieving private data or conducting transactions like online purchases or managing financial liabilities. Further highly developed applications usually use electronic data interchange (EDI) and more recently XML based procedure for data exchange. Another name is RosettaNet and RosettaNet based initiative. These are aimed at developing a flexible standard leading online business alliance between producers and suppliers.
Ultimately the capability to share processes electronically is predominantly appropriate for supply chain management. An example of such an application is CPFR 'Collaborative Planning, Forecasting, and Replenishment'. It is a web based standard that improve seller managed stock list and continues replenishment by employing multi forecasting. With the help of CRFP, business electronically swap a series of written remarks and supporting statistics that comprise past sales trends, planned promotions, and forecasts. This permits the participants to synchronize joint forecasts being focussed on differences in estimate statistics. CPRF was developed by the Voluntary Interindustry Commerce Standards Association (VICS) committee, made up to retailers, manufacturers and solution providers. VICS has incorporated a set of trade processes that entities in a supply chain can use for integration among a number of buyer/seller functions, to improve the performance of supply chain. According to the committee, its objective is to develop integrated relationships among buyers and sellers by multi managed processes and mutual information sharing. By collaborating demand and supply side processes, CPFR will enhance productivity, boost sales and decrease inventory for the whole supply chain without compromising consumer needs.
The VICX committee shaped the CPFR deliberate guiding principle to describe the trade processes, assisting technology, and alter organizational issues associated with implementing CPRF. The CPRF Guidelines were approved by VICS board in July 1998. The board published the CPFR statements in December 1999 which explained how producers and sellers apply a CPFR framework.
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