Suppply chain management in the success of any organisation



In today's more advance and competitive world of business environment in each sector, most probably every developed or developing organisation needs to emphasis on various aspects. As we all know, there is continues race among all organisation to succeed from each other and also to sustain in this massive and rapidly changing competitive corporate environment. Every organisation takes reliable and concern steps towards achieving and taking advantage of this kind of competitiveness, which is called competitive advantage. "Supply Chain Management" is one of the robust part for any organisation to take in to consideration, Lee and Billington define a supply chain as "a network of facilities that procure raw materials, transform them into intermediate goods and then final products, and deliver the products to customers through a distribution system."

Supply chain management has gain an up most attention as a part of success of any organisation. A proper and accurate management is essential for smooth running and to maintain continuous link among supplier of raw material through out transforming process to supply of final products to customers via managed distributors. A sophisticate supply chain management is needed for any entertainment business sector like "SONY". As Sony is one of the leading industry for its quality products in all electronic, information technology and entertainment products in an international market. It would give us depth knowledge about the whole process of Supply Chain Management operation in Sony and what are the steps are being taken by the company to improve the value of the product.

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Supply chain management (SCM) is one of the most cited and analyzed concepts recently in logistics and operations management. Several researchers

deal with SCM from research areas such as logistics, transportation, strategy, marketing, organizational behaviour, economics etc. (Croom et. al. (2001) analyzing various aspects of the phenomenon. Below is the basic supply chain management figure.

Figure: 1 General Supply Chain Management figure.

Sony is well known Name in a Global Market for its quality products in all electronic, information technology and entertainment products starting from early radio transmitter to latest High definition Televisions, Laptops, SLR cameras and many more. Sony was established in 1946 just after the WWII. The founders Masaru Ibuka and Akio Morita had started the venture with capital of just 190,000 yen which is equivalent to 1500* US Dollars and approximately with 20 employees only, which represent quite remarkable growth in just five to six decades.

There three basic elements of theory, which are going to be discussed in accordance with practical approach are being followed by Sony for the overall development of the supply chain management.

Operational Chain Management

Supply Chain Management

Value Chain Management

In which operating chain management take in to account demand forecasting, resource planning systems, inventory management and process management.

While supply chain management considers purchasing and supply management, creating and managing supplier relationships and strategic sourcing for successful supply chain management. And at the end value chain management, the basic theoretical principle and procedures followed by Sony practically to increase the value of its products or services they provide. Theoretical approach surrounding operation management and supply chain management, porter's five forces and four V's will give a deep knowledge of the value added in the products and services.

Operation Chain Management:

Operation function is one of the important element of whole supply chain management of any organisation. Basically it is the part of the organisation that produces products or services. Every organisation is expected to provide product or services which contain value for product, and the proper operation style make it happens in real terms. Operation management is "the planning, scheduling and control of the activities that transform input into finished goods and services" (Bozarth & Handfield, 2008). Figure 2 below represent the basic transformation process model in the operation management.





Figure: 2 Basic Transformation Model.

While in the case of Sony (Figure 3) the inputs of Sony are the collection of the raw materials, such are electronic circuits, packing materials and parts active ingredients, information in the sense of guideline to produce electronic products and people such as designers, engineers and at last required facilities and equipments to produce final product. Second the transformation process involves the manufacturing and services operations which are essential to transform inputs into outputs, which are electronic gadgets, mobile phones, laptop, walkman, television and so on.


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Raw Material (Active ingredients, packing materials, electronic circuits & parts)

Information (production guideline)

People (scientists, marketing, finance & administrative staff)

Facilities & equipment for R&D department.

Transformation Process

Manufacturing operation &

Service Operation


Electronic gadgets Mobile Phones, Laptop,

Walkman, Television,


Music System

Radio Transmitters,

Telescopes (NASA)

Figure: 3 Basic Transformation Model for SONY.

Now four characteristics of demand, which are know as FOUR V's processes, needs to be discussed, to distinguish the whole operational process in an organisation. A prior or pre-organised process might be used during the process, but it is not necessary that all operational process should be managed the same way all the time. FOUR V's process would help to break down the whole operational process, according to needs and demands of the products or services. There are, volume, variety, variation in the sense of demand for the products and services and degree of visibility. High volume process should be managed differently in terms of technology and people, to low volume process, and the same applies to variety, variation and visibility of the process (Cowe A. et al., 2008).

In order to demonstrate Sony's place in terms of four v's, below is explanation of four v's.

In case of Sony Volume is high to medium. Volume represents the quantity of products made in one operational process. Producer of such a vast electronic products like Sony has capacity to make massive amount of products in one operational process.

While in case of Variety Sony is much higher. Varity represent how many different types of products or services are made by the operation. Sony produce vast amount of different products e.g. Electronic gadgets Mobile Phones, Laptop, Walkman, Television, Cameras, Music System, Radio Transmitters, Telescopes (NASA) etc.,

While in terms of Variation Sony is lower. Variation stands for how much does the level of demand of products or services by customers change over time. Demands for Sony's products are measurable, predictable and stable in nature. And company is capable to produce additional products to meet any future raise in demand.

Visibility of Sony is medium to low, visibility counts how much of the operation's internal working are 'exposed' to its customers. it is quite obvious that the whole internal operation process in not visible for the customers, though, some facilities e.g. call centres , internet 'track & trace' system by which customers can get visibility of their placement of order.

All above mentioned Four V's process are summarised in figure 4.

Low repetition each staff member performs more of the job less systemization high unit costs



Match customer needs

High unit cost

Changing capacity



In touch with demand

High unit cost

Short waiting tolerance. Satisfaction governed by customer perception. Customer needed received variety is high. High unit cost

Time lag between production and consumption


Low contact skills

High staff utilization


Low unit costs

Well defined




Low unit costs

High Variation Low

In Demand

High Validity Low




High utilization

Low unit costs

Low Volume High

High Variety Low

High repeatability



Capital intensive

Low unit costs

Figure 4. Typology of operations for Sony. (Source: Cowe et., al 2008 p.174 )

Now it is also important to examine organisation's strengths and weakness in detail which can act as an aid. Michel porter has developed five forces, which are know as porter's five forces (Figure: 5). Porter described return on investment depends on the entry of new competitors, the threat of substitutes, the bargaining power of buyers, and suppliers, and the competitiveness amongst competitors. All five forces have an impact on cost, price and investment needs. at the end it can be conclude that if the forces are more powerful, profitability of an organisation tends to be decreased, and if forces are liberal or weaker profitability of an organisation expected to be more.






Industry Competitors

Rivalry among existing firms

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Threat of New Entrants

Bargaining power of Buyers

Threat of Substitute Products or Services

Bargaining Power of Suppliers

Figure 5: Porter's Five Forces.

Threat of Substitute Products or Services:

It means how easily or frequently company's customers are switching to their competitors products or services. There are several reasons for customer to change their preferences, e.g. if there are enough substitute products are available in the market which are offering same product or services at the same or less price, or quality of competitors are much better than company's product or services, and if substitute competitor's earning is high in profit so can reduce the prices to the lowest level. In case of Sony more or less company is facing the same situation currently, so threats of substitute products or services is high.

Potential Entrants:

This is one of the supreme threats for an organisation to take in to account sincerely not to weaken company's power from market. As any electronic industry is highly depends on major investment in the R&D departments, high cost of machinery and equipment and also highly skilled employees to operate such facilities. If economies of scale are in place to compete on the basis of cost are more likely to be difficult to achieve. Company also needs to protect their technology, so it makes hard to acquire it by the competitors. There is no evidence noticed in case of Sony for such potential entrants' threat.

Industry Competitors:

Mainly industry competitors or rivalry depends on the number of competitors and their capabilities. How strong the competitors are and what are the possible chance of them to come out with better idea in terms of new technology and with major price change over. In case of electronic industries there are numerous amounts of organisations which are sharing the profit and still fighting to achieve leadership in the market share. Sony is behind in both cases, i.e. failing to gain considerable profit and much more behind in terms of market share from its competitors from last couple of years.

Bargaining Power of Suppliers:

It means how strong is the position of a suppliers and their controlling power towards increasing or decreasing price of the products they supplies. Bargaining power of suppliers can be high if, switching cost is much higher, or suppliers consist monopoly in terms of their effective and unique products. Electronic industries have lots of different choice to pick from, as there is a competition among the suppliers itself.

Bargaining Power of Buyers:

Which describe the strength of buyers (customers) to drive down the products prices. Bargaining power of buyers could be high in an electronic industry while, there are enough substitutes are available in the market at lower price, or if the product is not differentiated in terms of quality, innovativeness or technological order. Bargaining power of buyers in case of Sony is much higher, as there are more than enough substitutes are available.

Here Sony's complete strategic environment picture been achieved to some extend after conducting analysis through porter's five forces and PEST and SWOT analysis in course work 1. Hence, it is important to conduct analysis through these forces for such massive electronic industries like Sony, to know the position of an organisation in today's extreme competitive environment.

Supply Chain Management:

Supply chain management (SCM) is the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler and to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. It is consider as one of the most important and highly essential activity of an organisation to conduct. An effective function of supply chain management is expected by the companies head i.e. CEO's, Board of Directors and valuable Stakeholders. Supply chain management is the active management of activities and relationships in the supply chain which aims at maximizing customer value and achieving sustainable competitive advantage. (Cowe et al., 2008; Bozarth & Handfield, 2008).

Sony's Philosophy of supply chain management is unique and based on two perspectives. One relates with material procurement procedures and involves creating and maintaining sound business partnerships with suppliers, regarded as Sony's stakeholders, in line not only with relevant laws and regulations but also with internal policies. And second relates to production processes and involves providing the necessary support to realize CSR from such standpoints as the environment, human rights and labour conditions.

Figure: 6 Sony's Basic Structure of Supply Chain.


Now whole process of supply chain management consist three main and essential sub processes i.e. supply side in supply chain, product manufacturing and demand side in supply chain. All three process needs to be managed properly for the smooth and consistent running of whole process. Now onward the discussion is on principles and theoretical aspects on these three processes in brief and the comparison with practical approach of Sony.

Supply Side in Supply Chain:

In general a good supply management is essential condition for the effective management operations. But it involves three main activities 1) selecting appropriate suppliers, 2) planning and controlling the ongoing supply activity, and 3) developing and improving suppliers' capabilities. Basically a proper supply side management is important for an organisation, as it is the heart of every processes in an organisation, e.g. if the supply side is strong, it can be helpful for all other processes i.e. operation process, product manufacturing process and at the end to meet the expectation of customers from an organisation for its quality products and services.

Supplier Selection: the first and important phase of supply side begins with the selection of appropriate suppliers. It is important to identify suppliers own operations and capabilities, as they are the provider of products and services for an organisation's operation process. Selection of suppliers mainly depends on suppliers' 'scoring' and assessment process, but there are some key rating alternatives available for the selection of best suppliers from the available options, such are, range of products or services provided, quality of products, delivery and volume flexibility and reasonable price of products and services provided.

While in case of Sony, the company's expectations from its suppliers are quite unique. Company's expectations from their suppliers are to compliance by laws, regulations and social standards. Sony also has established suppliers code of conduct which cover some points such as, legal compliance, labour, health and safety, environment, management system and ethics (see appendices: 1).

Planning and Controlling Supply Activities: second phase of supply chain management starts with planning and controlling supply activities once after selection of appropriate suppliers been conducted. Planning supply activities stands for implementing new ideas and innovative thinking to make supply side more stronger and ongoing process as whole. While controlling supply activities stands for, once the implementation is done, a proper and consistency over those activities.

Developing and Improving Suppliers' Capabilities: last but not least important phase of supply chain management.

(Page 26 sony csr report 2009 for value chain.)

(Lee, H. and C. Billington, "The Evolution of Supply-Chain-Management Models and Practice at Hewlett-

Packard." Interfaces, Vol. 25: Sept.-Oct. (No. 5) 1995.)

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Appendices: 1