As business and trade go global and the marketplace becomes more liberalised and even more competitive, supply chain management has emerged as a key strategic tool for nations and businesses to gain competitive advantage.

The struggle for trade and business supremacy is no longer won or lost on grounds of the features of products and services alone but on the efficient management of supply chains.

The composition and elements in any given supply chain depend on the goods they help to produce and deliver. There are, however, commonalities in processes of various supply chains in different economic activities.

More complex supply chain servicing multinational companies (MNCs) whose products extends to the global market may involve sophisticated cross-border processes. They may also incorporate elements such as green supply chain and recycling of used products back into the supply chains.  They are no longer just concerned with concepts such as Six Sigma, Lean Supply Chain, and Just In Time production that emphasise on maintaining an agile production system and supply chain and keeping inventory at a minimal.

Practicing green supply chain entails managing the products even at the post-consumption stage and disposing of them in a manner that sees them re-entering the supply chain.

This approach has given birth to what is known as reverse logistics, or sometimes known as recycling logistics, that denotes the products being given a “second life” to be reused.

According to the Reverse Logistics Association, the term “reverse logistics” means activity associated with a product/service after the point of sale, the ultimate goal to optimise or make more efficient aftermarket activity, thus saving money and environmental resources.

Among the activities associated with reverse logistics include logistics, warehousing, repairing, refurbishment, recycling, and handling, storage and disposal hazardous materials.

Companies operating within the realm of green supply chains constantly seek to reduce their carbon footprint and emissions of greenhouse gases, and go beyond just paying lip-service to environmental protection and sustainable development.

Going green, being responsible

According to the Stanford Business School, companies are increasingly focused on adopting a socially and environmentally responsible (SER) supply chain management approach.

Companies such as GAP, the clothing manufacturer, place great emphasis on their SER performance and go to great lengths to measure its SER compliance by monitoring the operations and performance of garment factories that do business with the company around the world.  

IKEA, the giant Swedish home living company, goes to great lengths to ensure that its suppliers use woods which are not endangered, as part of its “IKEA Green” approach to practice green supply chain which is ingrained in its corporate culture. The company believes that not only green supply chain is a philosophy that helps protect the environment but also makes business sense as it translates into lower costs of production that can be passed down to their consumers. This approach has helped IKEA build an image as a leader in sustainable corporate practices and also cultivates a strong brand loyalty among its consumers which stands testimony to the commercial benefit of ‘going green’.

In adopting SER supply chain management, companies invest significantly to eliminate bottlenecks to ensure their products reach their customers fast and in a cost-effective manner, and ultimately being disposed of in an environmentally friendly manner.

This approach has proven to have a positive impact on their bottom line as consumers have grown to prefer brands and services which are produced and delivered in an environmentally conscious and socially responsible manner.

Gaining competitive advantage via supply chain management

Companies producing global brand names and servicing the world market operate in a cross-border environment. Manufacturers of complex products such as computers, airplanes and ships for clientele worldwide outsource materials, parts and expertise across the globe to save costs of materials and labor, and to gain economies of scale and tax advantages, among others.

Globalisation and outsourcing have spawned a new discipline called Tax Efficient Supply Chain Management (TESCM) which takes into account the implications of taxation in the design and management of supply chains.

Arising from the differences in the tax structures across jurisdictions, global companies use TESCM to gain from on the efficiency of the tax systems in the host countries where they operate and where their supply chains extend across.

This approach helps companies to maximise their profits and reduce tax-related costs in their supply chains. Countries with favorable tax regimes such as Switzerland have been able to attract many businesses looking to generate savings on taxes and operating costs by reengineering their value chain and shifting functions, risks, and assets to relocate there. In doing so, they are increasingly preoccupied with reducing inventory, keeping close network of vendors and suppliers, outsourcing logistics services to third parties, and enhancing distribution capacity.

This is in line with the concept called process integration which views business as a series of interaction among separate business units and activities into several key supply chain processes.

The advent of ICT and trade transportation, especially maritime transport, has enabled goods to be transported across vast distances in an economically efficient manner.

A computer manufacturer from the US for example may conduct market forecasta and production planning from their home base in the US, manage their sourcing and suppliers from Europe and have a manufacturing base in South Asia.

The products are then transported and distributed via a Regional Distribution Center in South East Asia which also handles customer and order management. Such operations require meticulous planning and exact orchestration to ensure the smooth flow the company’s products, from the planning and production stage all the way until they reach the hands of their consumers.

In supply chain management, it is important for companies to ask several questions leading to the optimisation of key activities in the supply chain such as transportation and inventory management.

The activities and resources along the supply chain have to be orchestrated and utilised in the optimal manner to ensure that the ultimate objective of maximizing business performance and delighting customers is met.

A study by AT Kearney Consultants in 1985 found that companies which paid attention to comprehensive performance measurement managed to record improvements in their overall productivity.

TSCM advocates such level of performance by orienting companies to take advantage of supplier capabilities and view SCM and supply chain performance from a long-term perspective to improve customer service and manage customer relationships.

Supply chain management: Use it or lose

As consumers are spoilt for choices, companies can no longer manage their supply chains in a linear way. The old approach no longer works in a globalised, liberalised and increasingly competitive marketplace.

The competitive nature of the trade and business environment calls for new ways of gaining competitive advantage. Companies are increasingly focused on generating and capturing values along their supply chains. For example, an MNC in the manufacturing sector which serves the global market may appoint suppliers of parts to be located nearby its assembly plant to contain the transportation cost.  

“Shortening” the length and reducing the complexity of the supply chain, and optimising the information flowing along the two ends of the value chain, leads to improvements in its value system and creates new business models that can be taken advantage of by the MNC to serve its markets and consumers better.

With this in the background, businesses must adopt an integrated approach to manage multiple elements and aspects of their business by managing their supply chains.

Comments

R

0

 

 

Modern supply chains are more vulnerable to risks.
Risk management is very important part of the supply chain.
Minet Technologies offers a unique risk management workshop that teaches how to identify risks, assess them and evaluate mitigation plans.
www.minet.co.il/78979/Risk-Management -in-the-Supply- Chain

Thursday 19 November 2009, 05:06

Post Reply

Name *
Email (For verification & Replies)
Code   

Submit Comment

Cancel

Name *
Email (For verification & Replies)
Code   

Submit Comment