Management role of coordination in international supply


Before directly going into discussing the role effective coordination play in international supply chain, it is vitally important to define core words/terms like effective, coordination, international supply chain management.

The word effective is defined as "producing a desired or intended result" (Source: Concise Oxford English Dictionary, 7th edition, revised, p457) and in the context of unpredictable demand "effectiveness" takes the first priority for supply chain management to that of efficiency (Source: Martin Christopher, Logistics and supply chain management: creating value- adding networks, 3rd edition, p118).

Coordination is, similarly, defined as "A process by which team personnel resources, material resources, and responses are organized to ensure tasks are integrated, synchronized, and completed in time" (Source: David V. Day Stephen J. Zaccaro and Stanley M. Halpin; Leader development for transforming organizations: Growing leaders for tomorrow, p331).

The term "Supply chain management" is alternatively defined by "Burt, Dobler and Starling, World class supply management: the key to supply chain management, 7th edition, chapter 27, pp 621-622"as:

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An integrating philosophy to manage the total flow of a distribution channel from supplier to the ultimate customer;

It is a systems approach to managing the entire flow of information, materials, and services from raw materials suppliers through factories and warehouses to the end customer;

It is the systematic, strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole;

The supply chain encompasses all activities associated with the upstream and downstream flow and transformation of goods and information from the raw materials stage (extraction), through to the end user. SCM is the integration of these activities through improved supply chain relationships, to obtain a sustainable competitive advantage; and

It is the collaborative effort of multiple channel members to design, implement, and manage seamless value-added processes to meet the real needs of the end customer. The development and integration of people and technological resources as well as the coordinated management of materials, information, and financial flows underlie successful supply chain integration

The term International supply chain is defined as "a global network of organizations that cooperate to improve the flows of material and information between suppliers and customers at the lowest cost and the highest speed, with the objective of customer satisfaction" (Source: Manish Govil and Jean-Marie Proth, Supply chain design and management: strategic and tactical perspectives, chapter 2, p 7).

Effective coordination of the international supply chain management, therefore, can be defined as a process of organizing international (supply, demand and logistics) to ensure integrated, synchronized, and completed in time tasks to satisfy customers.

Implications of effective coordination in international supply chain management

The existence of World Class Supply Chain Management (WCSCM) can be one of the implications of effective coordination in the international supply chain management (Source: Burt, Dobler and Starling, World class supply management: the key to supply chain management, 7th edition, chapter 27, pp 622-635).

Because, world class supply chain management consists of three critical components: world class (supply; logistics; and demand) management as summarised below.

World class supply management

Its philosophy reflects those actions and values responsible for the continuous improvement of the design, development, and management processes of an organization's supply system, with the objective of improving its profitability and ensuring its survival, as well as the profitability and survival of its customers and suppliers. A world class supply manager, therefore, concentrates on proactively improving processes with the long-term goal of upgrading the competitive capability of the firm and the firm's supply chain. The world class supply networks perspective properly focuses upon a reality wherein multiple supply chains exist within the same network; and they are highly adaptive: they focus on speed; they are innovative; and they are tightly integrated that enables us to increase sales and lower total costs in an ethical manner.

World class demand management

Demand management seeks to estimate, control, smooth, coordinate, balance and influence the demand and supply for a firm's products and services in an effort to reduce total costs for the firm and its supply chain.

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At planning level, demand management seeks to reconcile problems inherent in the master schedule based on their forecast and actual orders. The basic objective of demand management is to analyze the consumption of the sales forecast by the actual sales or order rate on a continuous basis. World class demand management in a world class supply chain management context requires open lines of communication among both internal and external functional entities of the supply chain.

Demand management requires open, honest, trusting, and collaborative relationships between customers and suppliers throughout the supply chain.

World Class Logistics Management

Logistics professionals play an important role in the success of supply chain management in the management of transportation, storage, and warehousing activities that begin with suppliers and end with the customer. One of the bestselling books in logistics states: "Logistics is the part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirement."

Thus, from a total systems view point, logistics becomes the means whereby the needs of customers are satisfied through the coordination of material and information flows that extend from the marketplace, through the firm and its operations, and beyond that to suppliers.

As the competitive context of business continues to change, logistics activities and processes must be integrated into strategic-level thinking and planning. Cycle-time reduction and the elimination of waste in logistics processes have had a direct correlation to the enhancement of customer satisfaction.

The integration of these interrelationships is what separates excellent supply chains from lesser ones. Further, successful supply chain optimization depends on the coordination of cross-functional competencies in cross-enterprise teams.

The existence of responsive supply chain can be the other implication for effective coordination of the international supply chain (Source: Martin Christopher, Logistics and supply chain management: creating value- adding networks, 3rd edition, pp 117-137).

The biggest challenges facing today's organizations are market volatility and demand uncertainty. To meet these challenge organizations need to focus their effort upon achieving greater agility such that they can respond in shorter time frames both in terms of value change and variety change. Because, the agile supply chain is capable of reading and responding to real demand (market-sensitive) and it is not a single company concept but rather it extends from one end of the supply chain to the other. The concept of agility has significant implications for how organizations within the supply/demand network relate to each other and how they can best work together on the basis of shared information.

To bring these ideas together, a number of basic principles are identified as the starting point for the creation of the agile supply chain:

Synchronize activities through shared information

It implies that all parties in the supply chain shared information and process alignment there is in effect one set of numbers and a single schedule for the entire supply chain. This somewhat utopian vision is increasingly becoming reality as web-based technology enables different entities in a network to share information on real demand, inventory and capacity in a collaborative context;

Work smarter, not harder

Business process re-engineering (BPR) is the term frequently applied to the activity of simplifying and reshaping the organizational processes with the goal of achieving the desired outcomes in shorter time-frames at less cost. Many processes in the supply chain are lengthy because the constituent activities are performed in 'series', i.e. in a linear, 'one after the other' way. It is often possible to re-engineer the process so that those same activities can be performed 'in parallel' i.e. simultaneously. Time compression in a supply chain can be achieved not necessarily by speeding up activities, but rather by doing fewer value adding things. Supply chains can be transformed in terms of their agility by the rigorous application of process re-engineering principles;

Partner with suppliers to reduce in-bound lead times

One powerful way in which collaboration can improve responsiveness is through the adoption of Vendor Managed Inventory (VMI) practices. The customer no longer places orders on the supplier but rather shares with them information on sales, rates of usage or consumption. Using this information the supplier is better able to plan and schedule the acquisition, production and delivery of the product. Both parties benefit, the customer through higher levels of availability and reliability and the supplier through a reduction in their need to carry safety stock and, often, a better use of capacity;

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Seek to reduce complexity

Simplification can sometimes be achieved through seeking greater commonality of components or sub-assembly across a family of products;

Postpone the final configuration/assembly/distribution of products

Postponement refers to the process by which the commitment of a product to its final form or location is delayed for as possible. When decisions on the final configuration or pack have to be made ahead of demand there is the inevitable risk that the products that are available are not the ones the customer wants. The longer that products can remain as generic 'work in progress' then the more flexibility there will be to ensure the 'right product in the right place at the right time';

Manage processes not just functions

Processes are the horizontal, market-facing sequences of activities that create value for customers. They are cross-functional by definition and are usually best managed through the means of inter-disciplinary teams. The critical business processes that cut across the organization would include innovation, (customer and supplier) relationship management. A further reason why process management is critical to agility across the wider supply chain is that process alignment between entities in that chain is clearly facilitated if organizational structures are horizontal rather than vertical; and

Utilize appropriate performance metrics

This is particularly the case in business organizations where formal measurement systems drive the business. Therefore, if time-based metrics were to be employed then the focus could be on cycle-time reduction, set-up time reduction and other measures that encourage agile practices.

It can, therefore, be argued that, in today's challenging global markets, the route to sustainable advantage lies in being able to make best use of the respective strengths and competencies of network partners to achieve greater responsiveness to market needs.

The existence of organizations implementing the principles of balanced scorecard strategies, (i.e. mobilize change through executive leadership, translate the strategy to operational terms, align the organization to the strategy, make strategy everyone's everyday job and, make strategy a continual process) can be the other implication for effective coordination in the international supply chain.

Effectively coordinated international supply chain among members could be successful by making them implement the principles of balanced scorecard strategies (Source: Robert S. Kaplan and David P. Norton, the Strategy Focused Organization: how balanced scorecard companies thrive in the new business environment, pp 9-17).

In conclusion, the role of effective coordination in international supply chain, therefore, is to attain the fundamental objectives of increasing in sales of goods and services to the customer while decrease in inventory and operating expenses.

Relations contrary to the above mentioned justifications could be a sign of poor coordination and negatively affects the fundamental objectives of the supply chain (Source: International supply chain management PG, study guide, module 3, p 30)