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The backbone of all the organisations in todays dynamic environment is the effectively integrated supply chain system. With the help of an efficient logistics and supply chain process, an organisation is able to compete effectively in the market and make successive progression within the industry. As there are various challenges present in the business environment, the organisations have to develop the capabilities of responding to them promptly so that it is able to maintain its competitive edge in the industry and further strengthen its image. Hence, the supply chains continue to evolve with the advent of time and the firms have to incorporate the changes in their systems strategically.
Logistics and Supply Chain
Introduction to Supply Chain Management (SCM) and Logistics
In the business environment which is becoming complex and competitive, the organisations have to ensure that they have a well-integrated and efficiently operating Supply Chain and logistics framework (Mehrjerdi, 2009). The concept of SCM in development of efficient logistics systems has been studied by many researchers and they have made valuable contributions in the supply chain and logistics field to assist the organisations in enhancing their operational procedures (Janvier-James, 2012; Naslund & Williamsons, 2010).
The SCM is composed of various activities which work in collaboration to enhance the effectiveness of business operations and increase its level of productivity along with providing support in accelerating its performance in the market (Juttner, Christopher & Godsell, 2011). The key trends that have been identified in the development of SCM constitute cooperation as compared to competition (Svensson, 2010); development of a collaborative model to shift from traditional antagonistic model (Ha, Park & Cho, 2011); and increased emphasis on supplier-evaluation tools and supplier management initiatives (Ryan, 2010).
Factors influencing changes in logistics
Since the changes are taking place at a fast pace in the market, the organisations have to undertake various initiatives to ensure that they remain competitive and strengthen their presence in the respective industry. Traditionally, the supply chains were viewed as processes for manufacturing of products and services and then they developed into SCM that emphasised the need of integrating all functions involved in the upstream and downstream logistics so that they can work together as a team (Antai, 2011; Defee et al., 2010).
SCM focused on the development of a holistic approach for effective integration of logistics and operations so that everything within the procedure was well-synchronised. Afterwards, it developed into an integrated network in which every component i.e. suppliers, manufacturers, distributors and consumers were involved to ensure that the final offering is in accordance to the market demand. Now-a-days, the latest implications in the SCM are Enterprise Resource Planning (ERP), Quick Response (QR), Total Quality Management (TQM), Six Sigma, Efficient Consumer Response (ECR), Vendor Managed Inventory (VMI) RFID and many more (Kiperska-Moron, 2010; Nilsson & Gammelgard, 2012).
There are various developments taking place in the industries and the factors that are causing changes in the logistics as depicted by World Economic Forum (2012) are as follows:
Economic - Disruptions in economies worldwide have impacted the business operations significantly. The fluctuations in currency, shocks in the demand of exports and imports restrictions and failings of suppliers have contributed a major role in the logistics costs for the companies. Since the financial crisis in 2008, the automobile industry has observed many bankruptcy filings by their suppliers and such cases have doubled in European countries.
Environmental - According to various studies cited by the World Economic Forum (2012), the economic losses as a result of natural disaster has increased significantly in the last few years and it was about US$169 billion in 2011. There is growing emphasis on green production measures so that the environment remains protected.
Changing demands of customers - The customers have become too much aggressive and they want their demands to be fulfilled instantly. Since the changes in their preferences take place at an accelerating pace, the companies have to implement agile supply chains that can help them in meeting the customers' requirements promptly.
Outsourcing - Most of the manufacturing companies especially in US and Europe have started outsourcing their production facilities so that they can take advantage of the cost-effective measures and avail the opportunity of earning good amount of revenue stream.
Geopolitical - The security issues have become an important area of concern for the countries and the governments are allocating sufficient amount of money for enhancing the protection of homeland people.
Information Technology and Infrastructure - There is too much dependence on the IT systems as it has eased the information and communication exchange processes among the companies that are located in different countries. Some companies such as Qatar Airways encountered problems when its IT system got disrupted; majority of its customers switched to other airlines and it had to develop an alternative system as a backup to avoid such situations in future.
Latest trends in logistics
In order to effectively respond to the changing patterns of the international trade, the countries have developed stricter rules and regulations so that they can impose on the exports and imports transactions conducted across the region (Sun, Hus & Hwang, 2009). Similarly, there is growing emphasis on development of lean-agile supply chain that will allow the companies to be competent in curtailing its costs along with meeting the demands of the customers (Tan & Cross, 2012).
Almost all the leading companies such as Wal-Mart, Tesco, Microsoft, Dell, Coca-Cola, Apple and others have created SCM and logistics in accordance to the dynamics of their respective industries (Garver et al., 2012). With the implementation of the latest SCM systems such as SCOR Model, the organisations have been able to enhance their performance and increase the profitability rate to a great extent (Lee, Lee & Schniederjans, 2011).
Future challenges for the logistics
The key challenges that will encountered by the companies regarding the SCM and logistics will be related to the economies of the countries, increasing trend of globalisation, ever changing demands of the customers, rapid developments in the technology and emphasis on environmental friendly production mechanisms (Brosze, 2010; Janvier-James, 2012). The companies will have to remain alert about the progressions happening in their markets so that they can respond proactively and make required changes immediately.
Supply chains compete, not the companies
According to Christopher (1998), cited by Vanichcinchai (2012), the latest trend that is prevailing in the markets worldwide is that competition on the basis of an effective and value added supply chain that can help the companies in gaining a competitive edge in the industry. It has been stated by Antai (2011b) that a supply chain is an integrated network of the organisations that are involved in various interlinked upstream and downstream activities and processes that can produce value in the form of services and goods for the final consumers.
In order to understand the importance of supply chain competition, various experts in the field of academics have developed various theories and models such as complex adaptive system (Rice & Hoppe, 2001), framework of network capabilities (Langdon & Sikora, 2006), use of the economic network model (Zhang, 2006) and integrated supply chain management system (Halldorsson & Kovacs, 2010). However, there is not a single factor that can ensure that the supply chain will remain efficient all the time because there are many features that have to be considered in developing a competitive SCM for an organisation.
As the competition among business organisations is getting intensified with each successive year, the management teams have employed the processes that can help them in identifying the barriers that are present in both inter - and intra - organisational levels (Nilsson & Gammelgard, 2012). For many years, the companies have focused on the threats posed by the external environment on their supply chains but the recent literature shows that there are some internal factors that can be impede the efficient working of the supply chain.
Moreover, the inter-organisational factors that have impacted the effectiveness and productivity of supply chains are related to the cost of SCM, support from the top management for easy access to the resources, up gradation of IT infrastructure and ability to respond to the changes immediately (Martino & Marasco, 2007).
For instance, when Dell realised that by eliminating the utilisation of intermediaries for the production of their offerings it can save huge amount of cost and offer the competent products to the end-consumers, it started online selling known as direct selling technique. With the help of make to order concept, Dell was able to reap the competitive advantage benefits and has been successful in maintaining its dominant position in the computer industry (Barac, Milovanovic & Andjelkovic, 2011).
According to Christopher (1998), the effective integration of supply chain functions encourages an organisation to remain one step ahead of its competitors and gain the attention of its customers efficiently. This concept is properly evident in the Supply Chain Operations Reference (SOCR) model which stresses the need of including the business activities such as sourcing, making and delivering that will strategically link the suppliers and customers to the manufacturers (Tan & Cross, 2012). This SOCR model has helped many organisations to develop a highly integrated and networked supply chain to attain their business objectives so that they can compete successfully in the market.
Since the organisations have understood the implications of a well developed supply chain for the enhanced growth of their business, they have increased their efforts in continuous up gradation of the entire process so that they are able to maintain their positive image in the market. It has been stated by Hadlorsson et al. (2007) that for a company, a supply chain is a meta form of the logistics structure that is designed independent of the organisation but effectively linked to its core business strategy.
The supply chain has to be built up in such a way that it creates inter-organisational relationships that can be easily integrated in the business processes across all borderlines of the firms. In order to clarify the importance of SCM, various experts have classified such organisations into various categories such as a 'borderless framework', 'multi-organisation and single-site operations network', 'highly interactive firm', 'an extended enterprise' and 'virtually integrated supply chain' (Antai, 2011a; Janvier-James, 2012; Naslund & Williamsons, 2010).
The top management has to ensure that inter-organisation relationships are well-maintained and nurtured with the passage of time so that the overall profitability of involved activities is enhanced. Christopher (1998) further highlighted that a competitive supply chain is mandatory for a firm as it allows to undertake various innovative measures at a fast pace. The foremost advantage of such innovative and competent firms is that they have the ability of quickly responding to the changes that are happening at a fast pace in the market (Antai, 2011b).
Although the management still believes that the companies need to compete with the rivals that are present in the industry but they are realising the need of developing an efficient supply chain that will allow the firm to encounter the challenges proactively. The main difference between the conventional view of competition among companies and competing on the basis of supply chain is that the firms are not operating as an independent and isolated bodies and they need to provide value added offers to the customers so that they can gain their trust and loyalty; the success of the leading corporations lies in their effective and value supply chain (Ha, Park & Cho, 2011).
As the competition between the organisations is open, it is the foundation for innovative culture which breeds the economic progression in the market (Halldorsson & Kovacs, 2010). In the supply chain, the innovation can be integrated into its activities that can create value added offerings for the end consumers which will always remain the essence of the best supply chains. Hence, the competition between supply chains is mandatory and it is important for the companies to understand it and implement it in their SCM appropriately.
Supply chains evolve with the passage of time
In order to compete effectively in the industry, the organisations have to understand that the supply chain system tends to evolve with the passage of time. The market dynamic have undergone drastic changes in the last few years and it has become imperative for the organisations to remain aware about the developments that are taking place in their surroundings (Anderson, Britt & Fevre, 2011). Only those organisations can survive in the competitive world who remain ahead of their competing firms by being the foremost company in responding to the customer's needs.
The concept of SCM has evolved from a systems theory to an integrated model that mandates the requirement of developing a supply chain infrastructure that is created on the basis of the company's competencies rather than the resources (Storey et al., 2006). Most of the academic professionals make valuable contribution in this field by creating various models and frameworks such as the Total Cost Approach, use of economic network framework, Functional theory of supply chain, value chain analysis framework, Unified theory of logistics, leagile manufacturing theory and many more (Lee, Lee & Schniederjans, 2011; Svensson, 2009).
One of the main components of the SCM is the IT infrastructure and it is evident that the technological developments take place at a fast pace as compared to other external environmental factors. In order to effectively manage the operations of an organisation, the suppliers, manufacturers, distributors and other functions are well-integrated so that they operate as a single system (Chen, Tian & Dougherty, 2009). When the relationships with all the involved parties will be stronger, an organisation will be able to compete effectively in the market. The latest trend in the market is competing on the basis of value supply chain rather than the resources owned by the organisations.
The key factor that has caused such a robust growth in the supply chain competition is that the activities of a firm are dependent on their capabilities of enhanced production rather than simple allocation of resources. There is growing demand for supply chain evaluation tools and measures so that the effectiveness of the business operations can be monitored. When any revolutions are forecasted in the business environment, the organisations can handle the impacts effectively and respond proactively so that the effect of these challenges is minimised to a great extent (Antai, 2011b).
Some of the best IT systems that have received appreciation in the market are ERP, VMI, SAP, Electronic Data Interchange (EDI) and Merchandise Resource Planning (MRP). With the help of these latest infrastructures, developing a highly integrated and effectively working supply chain and logistics framework has become an easy task.
Although the up gradation of the supply chains is mandatory for the organisations but there are some challenges that have to be addressed by them. The major problems that are encountered by the firms are related to stringent legislative requirements, high cost of automated systems, increasing maintenance expenses, requirement of professional employees for managing the systems and implementation of evaluation tools (Janvier-James, 2012).
Recommendations for efficiencies in SCM and Logistics
In order to enhance the production measures and develop an effective logistics and supply chain system, an organisation has to conduct its market analysis. With the help of the market survey, the firms are able to identify the loopholes in their existing systems and make modifications in accordance to the market requirements. RFID and SOCR model are the most effective tools used by the top ranked organisations as it has helped them to compete on international level effectively and enhance their performance globally. Hence, every organisation has to understand the dynamics of its supply chain so that it can compete on its basis and ensure that its presence in engrained in the market.
In today's competitive and ever changing business environment, every organisation has to develop an effective and efficiently integrated SCM and logistics framework. With the assistance of a highly developed SCM that allows the company to compete with its rivals in the market, it will be able to enhance its performance and make valuable contribution for the end-consumers and economy as a whole. The organisations have to remain alert about the major challenges encountered within the industry and respond proactively to all of them so that it can strengthen its position in the market.