Traditional straightforward adversarial supply chain model
|✅ Paper Type: Free Essay||✅ Subject: Management|
|✅ Wordcount: 1934 words||✅ Published: 1st Jan 2015|
“The traditional linear supply chain has had its days”, is the declaration made by Evan Puzey, Chief Marketing Officer of Kewill-IPACS. The globalisation of trade, sales and marketing from international markets, multiple cultures, currencies, languages and so on have been responsible for the shift from traditional straightforward adversarial supply chain model to the new era of collaborative supply chain management model.
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In this currently dynamic evolutionary business world, the changing face of competition has encouraged the development of a new revolutionary concept of “Extended Enterprise”, which in turn has changed the face of Supply Chain Management (SCM), by creating additional value to the customers (Davis, Spekman, 2004). There has been a transformation in the nature of relationships within a supply chain, changing the way in which the firms usually compete or cooperate. The long held rule of adversarial relationship between the buyers and suppliers firmly held the notion that price reduction was the only key metric to measure success. Thus, this Traditional view of supply chain thinking was relying on the belief that value addition is as a result of price reduction (Davis, Spekman, 2004). However, the current day view has rendered price to be a secondary consideration and emphasizes innovation and information to be critical in value creation (Davis, Spekman, 2004). Thus, the idea of extended enterprise has taken SCM to the next level wherein, focus is set on those factors which link the supply chain members beyond logistics and work flow and also demonstrate the previous adversarial model to be inappropriate, owing to the changing nature of competition and the way it is defined (Davis, Spekman, 2004).
The central thesis of the research paper is whether the argument that Ambidextrous supply chain strategy is more likely to be evident in collaborative supply chains rather than in adversarial supply chains, is justified or not. The author, with the aid of his research findings, clearly agrees with the aforementioned argument and supports his point of view with his well reasoned research findings.
There is a widespread discussion about the collaboration in the supply chain management and also how it could lead to provide a competitive advantage. A research team from the Tennessee University interviewed 20 supply chain executives across a wide range of industries (Mentzer, 2001) and thus, coined out a definition for supply chain management from the standpoint of collaboration:
“Supply chain management is defined as the systemic, strategic co-ordination 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” (Mentzer, 2001).
“Collaboration can thus be defined, within this definition of SC management, as means by which all companies in the supply chain are actively working together towards common objectives, and is characterised by sharing information, knowledge, risk and profits. Sharing entails understanding how other companies operate and make decisions, and goes much deeper than co-operation. Collaboration is mutual goal-setting that goes far beyond a written contract” (Mentzer, 2001).
A good example to understand the role of collaboration would be that of consumer-packaged goods. Consider two companies, Wal-Mart and Procter & Gamble, which have made supply chain a widespread word. Way back in the ’80s, before the two companies had actually started to collaborate, very little information sharing and exchange was evident between the retailers and manufacturers. However, a unique software system was built by the two giants, linking P&G to the distribution centres of Wal-Mart. Whenever the P&G’s product stocks ran low, the system would automatically send an alert to ship more. Sometimes, the communication is focussed on individual Wal-Mart store, allowing P&G to monitor the shelves via a real time satellite link up, which would then send messages to P&G whenever an item is scanned. Thus, in the last two years, the relationship between the two giants has extended to an extent to include radio-frequency identification (RFID) technologies, in order to gain better insight eliminating any inefficiency in the supply chain. This kind of real time dynamic data collection, allows P&G to anticipate when to make, ship and display more products at the Wal-Mart store, thus, ridding off unnecessary piling up of products in its warehouses. Thus, business enhancement is achieved as invoicing and payments are also automated. On the whole, P&G saves a lot in time, reduced inventory and lower order processing costs, thereby, providing Wal-Mart, the best bargain, without itself running out of business.
In the context of a manufacturer’s supply chain strategy, two important concepts, exploration and exploitation have to be dealt with. ”Exploitation refers to the use and refinement of existing knowledge, and exploration refers to the pursuit of new knowledge and opportunities” (Im and Rai, 2008, p. 1281). Varying opinions pertain regarding the implementation of the exploitation and exploration strategies, between traditional and ambidextrous strategies. While the former emphasizes that organisations would be benefited if they focus on either exploitation or on exploration i.e. both of them are complimentary to each other (Katila and Ahuja, 2002; Gupta et al., 2006; Im and Rai, 2008; Knott, 2002; Levinthal, 1997), the latter asserts that ”adaptation requires both exploitation and exploration to achieve persistent success” (March, 1991).
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However, (Abell, 1999, 73), contends that “To sustain excellence, companies need dual strategies-one for the present and one for the future.” The reason being, incurring of increased costs and risk of continuous experimentation without any distinctive benefits may result in suboptimal performance, if the exploration of radical innovation to the abandonment of exploitation is carried out (March, 1991), more evidently in dynamic environments. On the contrary, exploitation at the cost of exploration may likely lead to suboptimal performance as well (March, 1991). Thus, the implication is that, the customer value creation might suffer due to the misappropriate use of one strategy over the other. Hence, optimal customer value creation rendering a long term sustainable competitive advantage can be achieved by the organizations by employing dual strategies i.e. one for the present and the other for the future (Tinoco, 2007). Thus, the concurrent pursuit of both exploration and exploitation is generally coined in as ambidextrous supply chain strategy.
Ambidexterity can be defined as the ability to perform two different tasks simultaneously i.e. both alignment and adaptability, (Gibson and Birkinshaw, 2004), incremental and discontinuous change (Tushman and O’Reilly, 1996), exploratory and exploitative innovations (Benner and Tushman, 2003). There exists a paradoxical and yet a contradictory relationship between exploration and exploitation i.e. “the pursuit of knowledge, of things that might come to be known” and the “use and development of things already known” (Levinthal and March, 1993: 105). With the traditional adversarial strategy in place, it becomes very difficult to combine exploration and exploitation, although their combined synergy is vital for firms to survive in a cycle of periodic incremental changes, as a result of technological discontinuities (Anderson and Tushman, 1990). Additionally, both of them are well capable of standing out independently in a firm; hence, they tend to drive out one another. The consequence is that either the firms are led into a “Failure Trap”, due to a predominant exploration, or into a “Success Trap”, due to the existence of incidence of exploitation (Levinthal and March, 1993: 105-106). However, there are a few ways to counter the inherent tension involved in pursuing both the strategies. Firms can either accept the paradox of exploration and exploitation by outsourcing i.e. by spatial or temporal separation; or balance the two strategies within the different units of the firm (Jansen, 2005). Although, the concept of ambidexterity and its application is a focus on an organizational level, a completely new arena for balancing the exploration and exploitation can be witnessed by moving beyond the boundaries and pursuing ambidexterity at inter-organizational levels (Koza and Lewin, 1998: 256). Thus, firms can address the need of strategic renewal by the aid of conversion of their networks into exploration (Dittrich, Duysters and de Man, 2007).
The traditional supply chain management links the firms in a linear and adversarial relationship, making use of the traditional media and supply channels. Thus, most of the manufacturing firms are integrated in vertical manner, with their own supply and distribution channel sources. However, “Mass Customization” with the aid of the revolutionized technological advancement has brought about the much needed chain by filling in the gap of the aforesaid adversary. The three dimensions in the traditional supply chain management are: the actual physical distribution of the tangible goods, payment system and information exchange. The supply chain information flows in the traditional SC system are linear in nature, limiting to its immediate suppliers (upstream) or its immediate distributors (downstream). The non existence of formal relationship between all the members in the supply chain, due to a lack of well established data representation scheme, has resulted in the creation of information gap, which in turn, has led to delays and distortions of information up and down the supply chain. However, the current technological advancement has totally revolutionized the supply chain management fundamentals by the enablement of transaction cost reduction and also by the facilitation of reduced inventory requirements (Anderson, et al., 1997).
From the above discussions, it can be seen that, for a manufacturing firm to excel in the business world and maximize profits, it has to realign its supply chain strategy with the adoption of the new and efficient current day technologies. Now, this is viable only by the joint adoption of exploration and exploitation strategies. In order to facilitate the implementation of the dual strategy, a shift from the adversarial traditional linear supply chain model to the more efficient combinative supply chain strategy is inevitable. Hence, the underpinning rationale that an ambidextrous supply chain strategy can be, or rather, need to be implemented only in a collaborative supply chain model as against the adversarial counterpart, is well justified. In conclusion, with the focus on information centric collaborative supply chain strategy, inconsistencies can be avoided and overall efficiency of the supply chain can be realized. This would in turn result in the emergence of new marketplace models which would create new economic relationships as well as new market opportunities. In the end, it is the consumer who will realize the fruit of “value addition” and thus result in a positive economical impact as a whole.
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