Supply chain management in operation

INTRODUCTION

Background

The term ‘supply chain management’ was first used in the early 1980s to refer to the concept that manufacturing firms should think of their own internal operations as an included whole, rather than as separate departments such as purchasing, stores, production, finished good warehouse, distribution and so on. It was quickly extended to cover relationships with suppliers and with immediate customers – the idea being that working more closely and co-operatively with these counterparts would enable a kind of mixing and co-ordination that would lead to reduced inventory, better quality and delivery performance and reduced cost for everyone involved.( Skjoett, L,T. 1999) Today, supply chain management is an important concern in large organizations, and is among the most active areas of research in the academic operations management community.

In modern business environments characterized by ever-increasing competition and economy globalization, supermarket companies have been exploiting innovative technologies and strategies to achieve and sustain competitive advantage. As an effective business philosophy, supply chain management has gained a tremendous amount of attention from both the academic and practitioner’s community in the recent years. (Burnes, B. and New, S.1996). Nowadays, more than ever, companies face an increasing pressure of customer’s requirements in product customization, quality improvement and demand responsiveness. On the other hand they need to reduce the production cost, shorten lead time and allow inventory level to ensure profitability. In order to survive under these pressure more and more enterprise are serving to develop long-tern strategic partnership with a few component suppliers and collaborate with then in product development, inventor control and non-core process outsourcing. Moreover various value-adding process from materials purchasing, production and assembly to distribution and customer order delivery are integrated and synchronized to achieve the common goal of enhancing customer satisfaction. (Beamon, M. B. 1999)

A narrow view of supply chain management would restrict it to relatively high-volume industries such as retailing and manufacturing, and would focus on the use of close, ‘partnership’ style relationships to optimize inventory and production planning, and to eliminate quality problems arising from poor inter-organizational communications. (Haag, S. Cummings, M. McCubbrey, D. Pinsonneault, A. & Donovan, R. 2006). It also tends to neglect the service sector and the purchasing of things other than inputs to the final product facts that organizations often spend a large proportion of their total spend on such inputs.

Supply chain management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. It is the combination of art and science that goes into the way of a company finds the raw components it needs to make a product or service and deliver it to customers. (Chopra, S, Meindl, P. 2003) Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. It is all about managing the flow of information, materials, services and money across any activity, in a way which maximizes the effectiveness of the process. This is a continuous process, not a one-time fix. (Chandra, C. & Kumar, S. 2000). Supply Chain Management helps to reduce the costs of both clients and suppliers, while sustaining or improving added value and margins. Consequently, companies that have effective supply chains are most successful. The definition one America professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, 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. (Giannakis, M, Croom, S. 2004)

Supply chain management deals with the management of materials, information and financial flows in a network consisting of suppliers, manufacturers, distributors, and customers. The coordination and integration of these flows within and across companies are critical in successful supply chain management. It is important that the information, material and financial flows are coordinated effectively in a supply chain. Material flows involve both physical product flows from suppliers to customers through the chain, as well as the reverse flows via product returns, servicing, recycling and disposal. Information flows involve order transmission and delivery status. Financial flows involve credit terms, payment schedules, and consignment and title ownership arrangements. These flows cut across multiple organizations within a company as well as across companies and industries. In the last few years, the coordination and integration of these flows have attracted major interest on the part of researchers, management, consultants and practitioners in academia and industry. (Cooper, M, C, Douglas, M, Lambert and Janus, D, P, 1997).

Rationale

As we have the family business of superstores in Bangladesh, this study would help me to achieve the competitive edge for our own business. My decision to do dissertation on Supply chain management and the recent due to my desire to aim for a career in Bangladeshi Superstore Companies. This initiated from our own business in Supply chain, where I had the opportunity to experience the deeply fascinating influences of supply chain.

During my stay in Bangladesh I succeeded is establishing a pressure in our own business within a field I knew very little about. In fact, I manage to occupy myself in a supply chain where apart from being given a chance to be involved in the management of the business I was given an opportunity to test my creative skills, by creating a web page to promote the company.

Furthermore, the Business Management courses I attended during my stay at London School of Accountancy and Management gave me the opportunity to utilize and put into perspective the knowledge I had previous acquired through personal experience. This made me realize the effect that a Business School education would have upon me both as person and as future professional.

In addition to helping out and run my father’s business more effectively in future and establish my own career, this project will help me to broaden my knowledge about supply chain management in Supermarket Company and also helps me to understand about the new innovation in supply chain management in SCM resulting improved in company performance.

Purpose of Study

The main purpose of this dissertation is to obtain an understanding of the term “Supply Chain Management” and its recent innovation.

To find out the different factors required to improve the supply chain management in International Business Environment.

To understand the fundamental issues of supply chain management in different organizations.

To suggest some recommendations and identify topics for further research to better tackle Supply Chain Management in multinational organizations.

Research Objectives

To determine the importance of supply chain management in British supermarkets.

To establish the role played by these new innovations in improve company relationship.

To determine critical success factors of recent innovation of SCM

To determine any limitation of SCM in British Supermarkets.

Research Questions

1) How important is supply chain management in today’s business?

2) How SCM in different British Supermarkets solve problem’s related to:

1) Proper Logistic management

2) Controlling Over Cost

3) Time efficiency

4) Proper way of exporting

5) Relationship with customers.

3) What are the new innovations in SCM? And how do these innovations in SCM can improve company performance?

4) What is the role of technology in SCM?

5) How SCM improve company performance?

Statement of Problem

The basic assumption was “the more integration – the better the management of the chain”. This study discusses what the term “management” in the concept of SCM stands for. The integration assumption as a “cure all” prescription for SCM is challenged, and questions raised as to when it is possible and desirable to exercise management in supply chains. The main thesis is that it depends very much on the “environment” of the supply chain and the power relations between the participants in the supply chain. Problem of integrating the individual activities into key supply chain processes.

Significance of Study

This study has examined the supply chain management function in the British supermarkets. And how far are the recent innovations in supply chain management successfully achieving the SCM goals and objectives in improved company performance.

It has also delineated the changing way of doing supply chain management which is likely more technology based. To enhance the supply chain management in the super market industry the study has highlighted areas requiring innovation in supply chain management.

Building customer-supplier relationships:

SCM is the securing, coordinating and maintaining of formal links with all parties that perform a vital function. In order to do this, company needs first to develop a SCM process map describing the activities of all members involved in the supply chain and the relationships among them in successfully achieving the SCM goals and objectives. Information and communication technologies changed the way firms conduct transactions, particularly in understanding and restructuring relationships because relationship creation and maintenance helps to breed future success. Communicating benefits of relationships, clarifying customer needs and expectations, assisting in problem solving and conflict resolution, improving performance measures with suppliers, and creating competitive advantage help to maintain effective relationships (Foggin, J.H., Mentzer, J.T. 2003). Developing partnerships is one of the most important steps in building and maintaining customer-supplier relationships.

Implementing information and communication technology:

Information and communication technology (ICT) is a very important strategic factor in managing supply chains; it acts as the disseminator and enabler for process and product communication along with reducing paperwork and lead times.

Rapid developments in technology have created numerous choices from information technology software. However, the brand of technology used is not as important as how effectively it is coordinated with internal and external supply chain partners; along with its compatibility with other relevant technologies used by them. (Graham, G., Hardaker, G. 2000).

The role of transactional IT is to acquire process and disseminate raw data about the company’s supply chain and to compile reports to summarize these data. This is particularly important because supply chain managers need timely and accurate information about existing and projected manufacturing capacities and costs, finished and semi- finished goods inventories, transportation costs, and customer demands across the firm’s supply chain. Enterprise resource planning (ERP), manufacturing resource planning (MRP II), distribution resource planning (DRP), electronic data interchange (EDI), and other e-commerce systems are intended to provide supply chain managers the complete and accurate information of this transactional data. (Gunasekaran, A., Ngai, E.W.T. 2004). Thus analytical IT heavily involves problem solving modelling process and use of various descriptive and normative models to find solutions to various supply chain problems. The SCM managers need to know the form and purpose of these models before they apply them in their modelling process.

The development of web-based/internet applications is another tool to process information pertaining to supply chain such as processing procurement activities both operationally and strategically. Use of e-mail/faxes, worldwide web (www), EDI, electronic funds transfer (EFT), internet auctions, etc., are the few examples that web-based/internet technologies can offer to perform SCM activities more efficiently.. It is not expected that intranet use will fully replace the use of electronic data interchange (EDI) systems in the near future (Bharadwaj, A.S. 2000). Technologies including EDI are slower, but the efficiency with which it transfers information allows it to maintain its value. New technologies similar to EDI will increase the speed of operations, reduce cycle times and aid management of materials.

Re-engineering material flows:

Many practitioners of SCM have recognized that effectively managing the flow of materials across the supply chain as one of the important strategic success factor. This is because the costs involved of providing end customers and supply chain member organizations with the materials required, in the right quantities, in the desired form, with the appropriate documentation, at the desired location, at the right time, and at the lowest possible cost are very high. (Duclos, L.K., Vokurka, R.J., Lummus, R.R. 2003).

Quickly communicating with suppliers enhances the use of inventory management techniques as like just-in-time (JIT), which is an inventory system intended to minimize stock levels (White, R.E., Prybutok, V. 2001). Technology will help in managing inventory flow and supply within a given supply channel and is key in evaluating and in reducing resource consuming processes. The development of integrated SCM increased the importance of logistical activities to move materials in a timely and cost effective manner across the supply chain. A supply chain wide logistics strategy became an important strategic goal for many companies.

Implementing logistics strategy involving distribution networks, transportation modes, carrier management, warehousing, inventory management, order processing and fulfilment, and all other related activities encompassing the entire supply chain became a necessity to achieve this goal.

I am confident that this study will provide significant inputs to the innovations in supply chain management resulting in improves company performance as well as academicians towards unleashing the immense potential of the British super markets and enable to realize its rightful place in the global economic place.

Nature of Study

Nature of this study is more theoretical and depends more on secondary resources like literature reviews and case studies. The research methodology of this study entails a literature study, and survey with senior managers in some of the multinational companies in UK by questionnaire sent through mail survey methodology.

Assumptions and limitations

The research was limited by two factors: time and resources. Due to large expenses, the research was conducted on the limited number of companies in a relatively short period of time.

There might be some biases like sampling bias, response bias and questionnaire bias. Because of limited time I had to depend more on secondary resources like literature study and case studies.

2.0 LITERATURE REVIEW

2.1 INTRODUCTION AND OVERVIEW

The post-World War II supply chain was a set of linear, individualized processes that linked manufacturers, warehouses, wholesalers, retailers and consumers together in the form of a human/paper chain (Ganeshan, 2002, in his journal New Directions in Supply Chain and Technology Management, Strategy and Implementation,)

Beginning in the 1960s and 1970s, firms started to view themselves as closely linked functions whose joint purpose was to serve their customers. This internal integration was often referred to as material logistics management or materials management. During this period, SCM innovations such as material requirement planning (MRP) were developed (Lummus, R., Vokurka, R.,1999, in their journal Defining supply chain management: a historical perspective and practical guidelines,). Those firms that successfully integrated these functions did improve their performance. However, some constraints, such as customers’ or suppliers’ unresponsiveness did hinder the improvements. These constraints prevented the firms from instantly responding to market changes.

In late 1970s and early 1980s, US firms faced fierce competition from their Japanese counterparts. Especially in the automobile industry, Japanese carmakers utilized just-in-time delivery to achieve efficient inventory management. Detroit’s Big Three had to find ways to communicate with suppliers effectively. The solution at the time was to communicate through batch orders and via a standard called electronic data interchange (EDI) (Claycomb, C. Drogue, D. Germain, R. 1999)[1].

Since the 1990s, the pervasive adoption of Internet and Web technology have promised an omnipresent and less costly way to tie companies and their business partners together in the supply chain. The great collaboration made e-Commerce buzzwords like “B2B” and “B2C” known to almost everybody in business circles (McKeown, P.G. 2000, in his journal Information Technology and the Networked Economy). With the advancement of information technology, the collaboration of business partners will continuously improve the effectiveness of SCM.

Supply Chain:

Supply chain has become a vast and strong part of an organization, its work place with regards to creativity and sustainability. More importantly it was always regarded as just being a tool for distribution and logistics. But in the recent decade Supply Chain Management has evolved itself as part of the information and financial flow of any particular organization.

The work of Supply chain is to get the right commodity at the right place, at the right time with the required level of quality. “In the search for a solution to get the right product to the right place at the right time, there are five areas that companies should focus on to improve the synchronization of information flow through the supply chain: demand, supply, manufacturing/scheduling, transportation, and network optimization” (Lummus, R. Vokurka, R. 1999, in his journal Defining supply chain management: a historical perspective and practical guidelines).

Supply chain has been discussed in many different ways by different authors:

According to (Quinn F. J.,1997) the supply chain as “all of those activities associated with moving goods from the raw-materials stage through to the end user. This includes sourcing and procurement, production scheduling, order processing, inventory management, transportation, warehousing, and customer service. Importantly, it also embodies the information systems so necessary to monitor all of those activities.”

(Swaminathan, J.M., Smith, S.F. and Sadeh, N.M, 1996,in their journal multi-agent framework for modeling supply chain dynamics) defines a supply chain “to be a network of autonomous or semi-autonomous business entities collectively responsible for procurement, manufacturing, and distribution activities associated with one or more families of related products”. [2] Dainty, A.R.J., Briscoe, G.H. and Millett, S.J. (2001) has a similar definition: “A supply chain is 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.” (Ganeshan, R. 2002) has yet another analogous definition: “A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.”

Supply Chain Management:

The famous way of defining SCM stated by (Cooper, M, C, Douglas, M, Lambert and Janus, D, P, 1997,in their journal Supply Chain Management: More than a new name for Logistics) where they defined SCM as: “The integration of business processes from end user through original suppliers that provides products, services, and information that add value for customers”.

Supply chain management is described by (Ferguson, B.R. (2000,in his journal “Implementing supply chain management” Production & Inventory), as to being to “. . . remove communication barriers and eliminate redundancies through coordinating, monitoring and controlling processes”.

According to Professor (Martin Christopher,2005) “supply chain management is the management of upstream and downstream relationship with suppliers and customers to deliver superior relationship with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole”.

Supply Chain Management (SCM) is “an integrative philosophy to manage the total flow of a channel from the earliest supplier of raw materials to the ultimate customer, and beyond, including the disposal process” (Cooper, M, C, Douglas, M, Lambert and Janus, D, P. in their journal Supply Chain Management: More than a new name for Logistics”, The International Journal of Logistic Management, 1997).

Supply chain management is defined as the systemic, strategic coordination of the traditional business functions and the tactics across these 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 (Mentzer, J.T. DeWitt, W. Keebler, J.S. Min, S.Nix, N.W. Smith, C.D. Zacharia, Z.G. 2001).

Supply chain management is “treated as key to building a sustainable competitive edge through improved inter and intra-firm relationships” (Chopra, S, Meindl, P., in their book Supply chain management, strategy, planning & operation,2003) A range of benefits has been attributed to supply chain management, including reduced costs, increased market share and sales, and solid customer relations

From these definitions, a summary definition of the supply chain can be stated as: all the activities involved in delivering a product from raw material through to the customer including sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, delivery to the customer, and the information systems necessary to monitor all of these activities. Successful Supply Chain Management reduces the costs of both clients and suppliers, while sustaining or improving added value and margins. Consequently, companies that have effective supply chains are most successful.

{In recent times, the theory of purchasing and supply operations has been widely studied under a variety of labels and for a number of reasons. Each of these focuses on different operations within an organisation but SCM is the single most wide-ranging approach in its range of study in considering how “Firms utilise their suppliers’ processes, technology, and capability to enhance competitive advantage (Houlihan, 1985; Cooper et al., 1993; DTI, 1995). Tan and Kannan (1998) consider how all strategic suppliers in the chain can integrate to act as a single entity and enhance overall performance in SCM. One definition of SCM is offered by La Londe (1998) as: `the delivery of enhanced customer and economic value through synchronised management of the flow of physical goods and associated information from sourcing through consumption. Johnston (1995) States it as: `The process of strategically managing the movement and storage of materials, parts and finished inventory from suppliers, through the firm and to customers. The various definitions which have been proposed indicate that SCM prescribes organisational restructuring, extended to the achievement of a company-wide collaborative culture. For Rich and Hines (1997), it embraces a strong sense of integration of all activities controlling the timing and synchronisation of material flows. With regards to SCM implementation, a study by-

Lambert et al. (1998), conveys the SCM implementation process as a more straightforward matter. In their view, senior management must address the process and they identify three closely inter related elements to aid the SCM task, namely: the supply chain network structure; the business processes; and the management components. For Bushnell (1999), implementing SCM requires a thorough understanding of the concept and its technology over a lengthy and diverse range of activities and organisations. He states: There is nothing worse than trying to train for a technology when employees do not really understand or fear the concepts that it supports. And there is nothing worse than managers pursuing a concept when they do not understand the importance of, or the difficulties related to, the technology on which the concept depends.

The supply chain can be regarded as a business process to construct enterprise-wide methods. It is defined in many ways. The International Centre for Competitive Excellence defined it to be (S. Changchien, H.Y. Shen, 2002) ‘‘the integration of key business processes from end user through original suppliers that provides products, services and information that add value for customers and other stakeholders.” With the implementation of supply chain management, the narrow focus of managers and the adversarial relationships between logistics providers, suppliers, and customers are replaced by strategic alliances and long-term cooperative relationships. Suppliers and customers are viewed as partners instead of adversaries with the objective of ‘‘maximizing competitiveness and profitability for the company as well as for the whole supply chain net-work including the end-customer” (K. Patterson, C. Grimm, T. Corsi, , 2003) Levary (R. Levary, 2000) suggests that the benefits of a supply chain include:

(1) Minimizing the bullwhip effect,

(2) Maximizing the efficiency of activities,

(3) Minimizing the inventories,

(4) Minimizing cycle times,

(5) Achieving an acceptable level of quality.

The major success factors for a supply chain are effective management of strategic alliances, extensive data management capabilities, and advanced inter-organizational IS to enable better information exchange; this provides more up-to-date information and allows for more accurate inventory responses to change in demand and appropriate inventory levels

(M. Whipple, R. Frankel, 2000).}

THEORETICAL FRAMEWORK

Increasing global cooperation, vertical disintegration and a focus on core activities have led to the notion that firms are links in a networked supply chain. This strategic viewpoint has created the challenge of coordinating effectively the entire supply chain, from upstream to downstream activities. While supply chains have existed ever since businesses have been organized to bring products and services to customers, the notion of their competitive advantage, and consequently supply chain management (SCM), is a relatively recent thinking in management literature. (Carr, A.S. and Pearson, J.N., in their journal The impact of purchasing and supplier involvement on strategic purchasing and its impact on firms & performance, 2002) Although research interests in and the importance of SCM are growing, scholarly materials remain scattered and disjointed, and no research has been directed towards a systematic identification of the core initiatives and constructs involved in SCM. Thus, the purpose of this study is to develop a research framework that improves understanding of SCM and stimulates and facilitates researchers to undertake both theoretical and empirical investigation on the critical constructs of SCM, and the exploration of their impacts on supply chain performance.

To this end, I have analyzed over 40 articles and synthesize the large, fragmented body of work dispersed across many disciplines such as purchasing and supply, logistics and transportation, marketing, organizational dynamics, information management, strategic management, and operations management literature.

The following are five basic components of SCM.

1. Plan – This is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers.

2. Source – Choose the suppliers that will deliver the goods and services you need to create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. And put together processes for managing the inventory of goods and services you receive from suppliers, including receiving shipments, verifying them, transferring them to your manufacturing facilities and authorizing supplier payments.

3. Make – This is the manufacturing step. Schedule the activities necessary for production, testing, packaging and preparation for delivery. As the most metric-intensive portion of the supply chain, measure quality levels, production output and worker productivity.

4. Deliver – This is the part that many insiders refer to as logistics. Coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.

5. Return – The problem part of the supply chain. Create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products. (Christopher, M., in his book Logistics and Supply Chain Management, 3rd edition, 2005).

Research Methodology

A literature survey was employed as one of the research methodologies in the study to develop a framework for best practices and innovations in supply chain management of British supermarket industry. The literature on SCM practices, application of IT and innovations was collected primary from journals in the areas of operations management, supply chain, operations research, and information systems. In addition to classifying the literature on SCM practices and innovations, the tools used to model and analyse various SCM environments are also presented.

The literature search included journals published by numerous publishers, in particular Elsevier, Emerald, and Taylor and Francis, together with journals such as Management Science and Operations Research.

The literature search was aimed at primarily helping researchers and practitioners in implementing a successful IT system for achieving an effective SCM. With this in mind, I looked at the literature that deals with IT-enabled SCM.

The primary aim of the literature search was to help researchers and practitioners develop an effective SCM practice. The literature on SCM and some associated references Ire classified according to this objective and are reviewed in the following sections.

This would be useful to researchers who are interested in modelling and analysis of various decision-making environments with reference to IT in SCM. The literature search has been conducted wi