Thesis: Supply Chain Management Hypothesis

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[. . .] It requires the total dedication from organization within which it SCM implementation is being planned. SCM "expands the scope of the organization being managed beyond the enterprise level to include interorganizational relationships." (Strader et al., 1999)

Supply chain depends heavily on the relationships that organizations can develop and sustain through personal interactions and using the latest technology. Earlier studies in SCM focused on identifying the Supply chain network (SCN) developed by organizations. Later, studies focused on supply chain demands, supply chain operation and information sharing. In the present organizational environment, competitive advantages are not just single company or organization-based. Rather, they are supply chain based. (Muralidharan et al., 2002)

There are many independent models within the SCM methodology. Each of these deserve discussion. Some of the frequently discussed factors are:

Supplier relationship management (SRM); where "companies transcend traditional supplier relationships to enable collaboration and profitability." (SEAL, 2004) "Supplier relationship management is a comprehensive approach to managing an enterprise's interactions with the organizations that supply the goods and services it uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers.

Customer relation's management (CRM) is often focused on the external customer of the organization. CRM methodology attempts in "identifying, attracting and retaining the most valuable customers in order to sustain profitable growth." (Hamid and Kassim, 2004) Companies are striving to ensure that they satisfy the external customer of company but at the same time realizing that the external customer's demands might not always be the best for the company or the other stakeholders of the company. (Senior, 2004) Satisfying the external customer at the cost of the company's reputation and integrity might over the long-term do more harm than good.

Employee relationship management (ERM) While "consumers exchange economic resources for goods and services, employees exchange human resources for jobs that provide, among other things, economic resources." (Keller, 2002) It is therefore also important to satisfy this important component of the organization. The employee also is the most variable factor in the internal environment of the company.

Just-in-time manufacturing The American Production and Inventory Control Society (APICS) defines JIT as:... A philosophy of manufacturing based on planned elimination of all waste and continuous improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce a final product, from design engineering to deli and including all stages of conversion from raw material onward. The primary elements include having only the required inventory when needed; to improve quality to zero defects; to reduce lead-time by reducing setup times, queue lengths and lot sizes; to incrementally revise the operations themselves; and to accomplish these things at minimum cost.

Just-In-Time (JIT) is a key element of time-based manufacturing strategy. Here raw materials, semi-finished products and completed products are provided close to the actual customer need and as such do not need to be held in inventory. For JIT to be effective, product- suppliers to be reliable and dependable and the products supplied have to be quality guaranteed, as there is no time buffer in case of defect of product. If a defective product is offered in JIT, the entire production line will suffer due to delay. If properly implemented, it can reduce waste and capital requirements for the organization. The main object of JIT is to improve overall productivity and quality of products manufactured in an organization. (Womack et al., 1991)

Kanban systems are fundamentally part movement systems: "that relies on cards, boxes, or containers to transport parts from one workstation to another on the production line. Kanban stands for Kan (card) and Ban (signal)." (Adams and Ruiz-Ulloa, 2003) This systems allows for efficient management of the internal or external supply chain system in a manner that is efficient, cheap and effective. Kanban systems do not depend on a lot of technology and computer systems. Rather, they depend on the ability of the worker to understand the needs of the next down-stream machine or company and produce or manufacture the relevant goods. In turn, once this production starts it also generates the need from an upstream manufacturers/machine, which is prompted to start work only after the receiving of the order. Kanban systems encourage a pull form of operation system, rather than a push form of manufacturing operation within the entire system.

Optimized Production Technology (OPT) is a management model proposed by the Dr. Goldratt. The OPT philosophy: "the sum of local optimums does not equal the global optimum." (Goldratt and Cox, 1986) Financial measures that can be used to determine if an organization is making money is determining the Net Profit (NP), Return on influence (ROI) and the Cash Flow (CF). The goal for any organization is to ensure that all these metrics rise at the same time in order for the company to make money.

Any operation has a set of processes and a pre-defined methodology for completion of any task. For SCM, the first step to be considered is to understand all the processes within the organization. It is also important to recognize the paths taken by the raw material before it enters the factory and after it leaves the factory where processing is undertaken. Often, this first step of understanding and defining the various processes is the most complex and time consuming. Critical analysis of e aspect of "value addition" to the product is needed along with non-value added activity that only increases the final cost of the product but does not provide enhancement or additional benefits to the product. SCM places great emphasis on the inventory levels of raw materials, semi-finished purchased products, work-in-progress (WIP) and finished products maintained by the company.

Also included in the study of SCM are the topics of "purchasing (or acquisitions), materials management, warehousing and inventory control, distribution, shipping, and transport logistics." (Hyland et al., 2003) In the past, many of these areas were not considered strategically important for the competitive advantage of the company but rather just supporting and passive entities of the entire system. Often, the process strategies of any organization only included R & D. And the manufacturing operations. It was in these realms that cost measures and process improvement strategies were employed. With the advent of cheap and affordable global transportation and fast and efficient communication, the distribution and logistics of an organization has suddenly also become important. For example, if two companies can manufacture the same product the company that can get the product faster to market has a definite competitive advantage over the company that cannot harness its distribution channels.

Inventory can be a liability as well as an asset. (Stewart, 2001) The trend in recent times was to maintain only the bare minimum of inventory needed to support the manufacturing process. In an increasing global marketplace, this strategy has advantages and disadvantages. The advantage is that companies tend to carry more inventory than they really need. In reality, finished (goods) inventory require larger warehouses; products can be shipped and distributed faster and as needed if material is stored. But it was not prudent to maintain too much of the product. For, with time life cycles of products have been becoming shorter. Demands for products also fluctuate. The disadvantage of maintaining low inventory levels is also a factor worth considering. There can be a lot of loss incurred from missed opportunities of sales if the company does not have the finished inventory in stock, or production and manufacturing processes can come to a stand still if there in not sufficient raw material to continue the operations, wasting valuable machine and labor time.

In the past, inventory was maintained by organizations for a number of reasons. (Simchi-Levi et al., 2000) It has been always difficult to predict and forecast the demands of the customer. Many products today also have a shorter life cycle in the market. Fierce market-competition and the need for many companies to capture and maintain market share. The uncertainty of the market and the risk associated with many companies' decisions had forced companies in the past to maintain some finished safety stock.

Low confidence in the suppliers had also forced the companies to maintain larger levels of inventory. In an increasing global market, with large geographical distances between many of the manufacturing plants, companies were forced to maintain a "safety stock" just in case of any uncertainties. Lead times offered by many suppliers were long and erratic. Economies of scales also played an important role in the purchasing cycle followed by many companies.

Deming believed that the management in organizations should move away from short-term thinking and concentrate their efforts on long-term thinking for the organization. Creating constancy of purpose towards improvement, strategy planning based on long-term goals of the organization can help enlighten the management to problems that they face. (Clauson, 2000)

In studies carried out by different researchers, it was identified that the quality of product, deli time adherence and price, all play an important role in… [END OF PREVIEW]

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