Identify Critical Parameters of Cost Competent Supply Chain

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The purpose of this study is to identify some critical parameters of cost competence supply chain. Supply chain management involves dealing with a whole range of control parameters and a large numbers of key performance indicators. This paper reports on a study for understanding the impact of control parameters for a cost effectiveness supply chain. The understanding is used to identify the potential operating ranges that balance the desired performance objectives. In today's business climate has rapidly changed and has become more competitive as ever in nature. Businesses now not only need to operate at a lower cost to compete, it must also develop its own core competencies to distinguish itself from competitors and stand out in the market.

Design/ Methodology/ approach-

The universe of this study is the cosmopolitan city of Karachi. The study was based on primary source of data for this purpose survey method was used by closed ended Questionnaire. In Measurement Scale we used 5-Likert Scales as a tool for data collection & the sample Nature was chosen on Convenient Sampling.

Research limitation-----

The study had certain limitations and those limitations included time and resources constraints which limited our research to only city of Karachi.


The importance of supply chain management in business world is playing vital role in production to finish goods stage. Supply chain management covers materials procurement, their conversion into finished products and the distribution of these products to consumers. The facilities a business sets up for attending to these tasks and the related decisions it makes can determine whether the business is competitive or otherwise.

The second most important thing is inventory management system and those costs that are directly related with inventory like, Production cost, Transportation, and Location. These are all costs combine effect on cost effectiveness. Many manufacturing business are taking advantage from SCM, they are creating strategies to cover up all aspects of today's business. Supply chain management creates betterment in production chain which is leads to end user customer. Many suppliers are very conscious about their inventory which are stock in their warehouses because inventory has its own cost.

Keywords--- Cost effectiveness, Inventory management, competitive, procurement



Figure 1: Role Played by Logistics Service Provider in Global Supply Chain 6

Table of Content









A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.

In today's dynamic business world the importance of an efficient supply chain is critical. Competition has increased and customers have learned to expect more value from their products and services. To provide more value to customers while continuing to profit in a difficult economy companies are forced to find value throughout their supply chain. This study focuses on identifying some critical parameters that helps to implement the appropriate cost effectiveness supply chain. Along with the global marketplace arrives extraordinary competition. In addition, the slow economy has heightened the competition. Even with a possible expansion in the near future, companies will need to continue cost cutting and improving their operations to remain competitive. To be successful in such a difficult environment companies are being forced to find value throughout their supply chain.

In today's competitive markets, companies strive for any advantage they can get over their competitors. This has been recognized by a number of companies that supply chain excellence is an opportunity to create such an advantage. A superior supply chain includes, on time delivery, lower cost products and manufacturing flexibility as compare to their competitor.

Supply chain management has the vital part of inventory. Inventory velocity turns assets into profits. The faster inventory turns, the greater the profitability. Inventory is the key issue to supply chain management success. Customers demand that their orders be shipped complete, accurate and on-time. That means having the right inventory at the right place at the right time. Inventory management is the Gordian knot of supply chain management. No one knows how to untie it, and it cannot be cut. The inventory quandary applies to all inventories-finished goods, raw materials, parts and components, MRO and work-in-process. It includes new products and existing products. It covers all types of businesses-manufacturers, distributors, wholesalers, retailers and others in about every industry.

Problem Statement

The purpose of the study is found out the critical parameters which are involved in supply chain management. In order to consistence study we found out the cost effective elements which shows the important roles.

To evaluate the critical aspects in supply chain management

To evaluate the utilization of production cost in proper manner

To evaluate the transportation facility fulfill the JIT process

To assess the location of production and stock sourcing points

To evaluate the stock and safety cost determination


The purpose of this study is to find the relationship between the deterministic parameters of supply chain on the cost effectiveness of supply chain. Or the impact of some critical parameters on the supply chain cost effectiveness.


H0: when inventory is high cost effectiveness is low

Ha: when inventory is low cost effectiveness is high

H0: Higher the production higher the cost effectiveness

Ha: lower the productions lower the cost effectiveness

H0: when transportation is low the cost effectiveness is high

Ha: when transportation is high the cost effectiveness is low

H0: when location is far the cost effectiveness is low

Ha: when location is near the cost effectiveness is high


Management of material and information flow in a supply chain to provide the highest degree of customer satisfaction at the lowest possible cost. Supply chain management requires commitment of supply chain partners to work closely to coordinate order generation, order taking, and order fulfillment thus, creating an 'extended enterprise' spreading far beyond the producer's location. (Business Dictionary)


This paper reports on a study for understanding the impact of control parameters for a cost effectiveness supply chain. The understanding is used to identify the potential operating ranges that balance the desired performance objectives.

Now a days a business expansion increases rapidly by globalization. Supply chain management is not only concern delivering the shipments but also provide the huge business tactics for further diversification in industries. The business environment rapidly changed from past strategies to new technological climate. Globalization has an umbrella of various businesses which are concern all types of products and services. Logistics and supply of goods industry has its core competences and standards for executes the steps of shipments and consignments.



Supply chain is the reality which has a long and the important history, either in a form of bartering or in the form of exchange of goods that would be an example of supply chain in the simplest form. The simple model for the supply chain was developed in the medieval communities and economies which were typically operated in the localized market place apparently much of the systems, structures the processes today's supply chain were in existence already (Brindley, 2004). (Mentzer,J. T., Stank, T. P. & Esper, T. L., 2008) describes that "Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, demand creation and fulfillment, and all Logistics Management activities. Thus, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence; supply chain management integrates supply and demand management within and across companies." (Hofman, 2008) Explains that how, where and when reliable value throughout the entire supply chain including flows of material, intellectual property and money in a global context can be created.

(Womack, 2003) Discusses that the operational excellence of a firm has been demanded with the increased responsibilities of supply chain and more complex process are required for supply chain risk analysis than ever before. This includes lean manufacturing principles, process control theory, process mapping and modeling to the entire supply chain. This phenomenon is also applicable to the concept of risk management in throughout the supply chain risk analysis in a broader term than ever before.

Supply chain management contains of businesses collaborating to influence strategic positioning and to expand operating efficiency. For each firm involved, the supply chain relationship reflects strategic choice. A supply chain strategy is a channel arrangement based on acknowledged dependency and relationship management. Supply chain operations require managerial processes that span across functional areas within individual firms and link trading partners and customers across organizational boundaries (Bowersox, 2002).

The Supply Chain as the network of facilities (warehouses, factories, terminals, ports, stores, and homes), vehicles (trucks, trains, planes, and ocean vessels), and logistics information systems (LIS) connected by an enterprise's supplier's suppliers and its customer's customers. Logistics is what happens in the supply chain. Logistics activities (customer response, inventory management, supply, transportation, and warehousing) connect and activate the objects in the supply chain. To borrow a sports analogy, logistics is the game played in the supply chain arena (Frazzelle, 2002).

Supply chains are complex networks of enterprises that experience continual turbulence, creating a potential for unpredictable disruptions. In fact, executives identify supply chain risk as the highest threat to their firms (Global, FM, 2007). The development of logistics services and communication technologies has revolutionized supply chain management and has created a "global" market. Shippers and consignees require efficient logistics services that can move their goods to the right place, at the right time, in the right condition, and at the right price (Grant, 2006).

It is, therefore, of great importance that linkages within and between Asian countries be strengthened to facilitate trade and integrate supply chains for better access to the global market. Supply chain management is an integrative approach for planning and controlling the material flow from suppliers to end users (Carter, J. R., and B. G. Ferrin, 1995)

The Role of Logistics Providers in Handling Supply Chain Dynamics

SCM aims are rarely fully met because of the individual behavior of decision makers in firms along the SCM, as their behavior is neither optimal nor rational (Parnaby, 1979).

Due to the changing nature of the SC, magnifications and variations occur from suppliers all the technique down the chain (Sterman, 1989).

Logistics provider is selected by critical supply chain effectiveness (Hensher, D. A., and G. Chow., 1999).

Outsourcing the logistics plays a vital role in the creation and provision of combine supply chain that responds to the buyer's needs. Logistics provider does acting like a partner with buyers in sometime. They also need to organize their buyer's orders.

Figure 1: Role Played by Logistics Service Provider in Global Supply Chain