The Concepts Of Supply Chain Management Business Essay

The Concepts Of append chain solicitude Business EssayExplain what ar the picture compass uncertainties and affix concatenation risks explore almost already established theories about the append mountain stove uncertainty using academic and professional journal articles. Discuss the phenomena and doings of the Forrester Effect as whizz of the nonpluss for demand uncertainty come on explore the countermeasures of Forrester Effect.Elucidate the critical importance of supplier alliance anxiety for the give chain competitiveness by finding and referencing to a number of professional literatures critically review some kinship management frameworks, models and firees discuss how a business power decide on the most appropriate relationship portfolio and management fire.Define and explain the concept of strategical outsourcing in the context of designing and reconfiguring supply chain structures discuss the decision have of outsourcing and influencing factors explor e what aptitude be the herculeanies and barriers in its operational implementation and finally summarise the profound benefits and potential difference risks.RequirementA content page and page numberingTo complete deuce separate reports on two chosen snarfics from the three in a higher place, indicating the question number.Properly structure the word into sections and give subtitles for each section.Use references (normally 3-5 professional journal articles for each report) to demonstrate the extended learningEach topic is recommended to be up to 2500 words in length.No lengthy case study is required, but some short (a few sentences) real world examples may be adequate.SUPPLY CHAIN commissionTable of Contents1.0 SUPPLIER RELATIONSHIP MANAGEMENT.21.1 Introduction .21.2 Importance of supplying Relationship charge..21.3 Relationship counsel Framework.41.3.2 Industrial selling and acquire (IMP) interaction entree..41.3.3 picture Chain Frameworks.41.3.4 Service Supply Model s..51.4 Relationship Portfolio and heed Approach62.0 STRATEGIC OUTSOURCING112.1 Outsourcing and Supply Network Design..112.2 Outsourcing Decision Process and Influencing Factors..112.2.1 Planning human body122.2.2 Explore the Strategic Implications descriptor..122.2.3 tactical implications phase.122.2.4 Cost analysis phase..132.2.5 Implementation phase..132.3 Implementation Problems.142.4 Key Benefits and Potential Outsourcing Risks.15REFERENCING..171.0 SUPPLIER RELATIONSHIP MANAGEMENT1.1 IntroductionAn authorized feature of a world single out organisation is the way the organisation has been able to arrive and link its providers with its external processes, Peter Hines, World Class Suppliers, (Pitman, 1994). Supplier relationship management suffer be defined as the relationship that exists between the supplier and its buyer based on long term commitments and trust with the ultimate aim to maximise the potential value of the relationship. This volition include the management of different forms of supply relationships much(prenominal)(prenominal) as partnership, joint venture and vertical integration.1.2 Importance of Supply Relationship ManagementThe critical importance of supplier relationship fictional characters to achieve supply chain competitiveness nominate be viewed under the following headingsThe effective use of strategic partnershipTypical traditional short term relationship is characterise by irregular or one- send off transactions that give rise to supply uncertainties, difficulties in choosing suppliers, and is legal injury oriented making this type of relationship unreliable and unsupported. Organisations can move from this type of relationship towards a long term relationship cognise as partnership based on trust, shared goals and risks to achieve mutual benefits. Nigel Slack, Stuart Chambers and Robert Johnston, operations Management, (Pearson, 2010), define partnership as an agreement between two firms that seek to accomplish a co mmon objective. The Japanese, James P Womack et al, the Machine That Changed the World, (Macmillan, 1990) , used the concept of partnership and lean to gain competitive favor because they clear their partners had the expertise, the technical knowledge and were reliable. Effective partnership with suppliers made them to compete favourably in the trade because of good harvest-feast quality, low constitute and reliable deli real. Therefore, firms can use this same method to rationalise their supply base and use the lean concept to produce efficiently which forget lead to reduce product lead snips, reduce parentage and inventory cost.The implementation of tonic management withalls and systemsA key element of supply relationship management that gives firms competitive advantage is the implementation of the lean concept of monitoring supplier performance and continuous reformment. Monitoring performance is a post- guideual procedure in which the buyer continuously keeps an mar row on the supplier by both managing the suppliers activities to make sure all commitments are met or using a measurement matrix such as key performance index (KPI) to compare supplier progress and divergence from targeted objective. The overall competitive advantage is an operation that is continuously improved in monetary value of quality, delivery and service. In 1989, Chrysler benching against the Japanese companies, initiated the Supplier Cost Reduction Effort (SCORE) program aimed to reduce cost, quality and monitor supplier performance Dawei Lu et al, Supply Chain Management module notes (WMG, University of Warwick, 2011).The integration of knowledge and engineering science to create an all new technologyIntegration with supplier is all about coordination. Here, the buyer and supplier come together to align their processes thus improving communication and supply chain visibility for both(prenominal) parties. When firms integrate their knowledge and technology they are ab le to meet the needs of end customers by getting the right product at the right price and quality, giving them a competitive edge. This schema was used by Bose Corporation 1990 that led to the extension and creation of the JIT2 concept, a logical extension of JIT that eliminates waste in the system, improves communication and reduces demand variability.Efficient consumer receipt (ECR) to demand variability caused by the forester effect.Firms are always seeking solutions for continuous demand variation and consumer requirements. Through effective supplier and buyer collaboration, firms leave alone be able to achieve competitive advantage by efficiently managing their supplier relationship to meet the needs of the end consumer creating a fluid inventory flow from suppliers to the consumers reducing lead times, demand variability and uncertainty. This has led to initiatives such as Radio Frequency Identification Device (RFID), a tracking technology that provides real time informatio n and location of goods. Tesco, UKs largest grocery retailer has exploited this technology strategy and is piloting pallet-level RFID to manage its logistics Christos Tsinopoulos and Carlos Mena, Competing Supply Chain Strategy Tesco, Aldi and Lidl, (ECCH, 2010). change magnitude competition amongst firms to secure and increase domestic and international market share.Domestic and international market pressures are just other facets that obligate pushed firms to collaborate and develop strategic partnership with suppliers to gain competitive edge. Using this approach, firms use both local and international suppliers to broaden their sourcing base, reduce product lead time, and stream depict cost through cheaper, global and local sourcing alternatives. The benefits are quick response to demand variation and high availability of variety of products at powerable price and quality. This in turn attracts a greater amount of customers and increase market share. This is a strategy which IKEA, a Swedish international furniture fraternity has successfully used to provide quality products at reasonable price and secure a large market share both domestically and internationally.1.3 Relationship Management Framework1.3.1 IntroductionA relationship defines an interaction between individuals, organisations and groups Kenneth Lysons and Michael Gillingham, Purchasing and Supply Chain Management (Prentice Hall, 2003). There are umpteen possible supply chain relationship types because very few companies can operate on their witness. These relationships can be categorized as business-to-business (B2B), business-to-consumers (B2C), consumers-to-business (C2B) and customers-to-customers (C2C). B2B relationships are most common and have been used in many approaches and models such as IMP, SCOR, HP, GSCF, Service supply chain and IUE-SSE to help explain supplier-customer interaction.1.3.2 Industrial Marketing and Purchasing (IMP) interaction ApproachThe IMP interaction approac h is a dynamic model of supplier-customer relationship developed in the mid 1970s by a group of vanadium European countries and universities IMP Group.online.(http//www.impgroup.org/about).(Accessed 06 Feb 2011). Based on investigations of about 900 business relationships, the IMP group developed a model of an interaction process at both the firm and individual levels creating a dynamic, complex and long standing relationship rather than one based on a short term decided relationship Bensaou M (1999), Portfolios of Buyer-Supplier Relationships, Sloan Management Review, Vol. 40, 35-45. This relationship is influenced by soft factors such as power, cooperation, closeness and expectations as wellspring as external environmental factors such as market structures, dynamism, internationalisation and position in the market. The IMP Group approach and model provide a good overview of buyer-supplier relationships and have formed the cornerstone of other frameworks like David T. Wilson, (1995) Integrated model of Buyer-Supplier relationships, Journal of the Academy of Marketing Science , Vol. 23, 335-345.1.3.3 Supply Chain FrameworksCustomer-supplier relationship management models and frameworks can also be viewed within the context of the different types of supply chain models that exhibit customer-supplier relationship management. This will include a variety of supply chain models which address customer-supplier relationships such as HP, SCOR, GSCF, and IUE-SSC model. These models identify customer-supplier relationships by adopting two differing views product and service supply chain view.Product oriented models adopt a manufacturing approach that involves the physical fecal number of goods under uncertainties managed to satisfy customer demands and include the HP, SCOR and GSCF models. The Hewlett Packard (HP) model was developed by the Hewlett Packard Company as a result of spiral inventory and customer dissatisfaction the company was go about with its ord er fulfillment process. Lee, H. and C. Billington, (1995), The Evolution of Supply-Chain Management Models and Practice at Hewlett-Packard, Business Source Premiere, Vol. 25, 42-63, used this model to demonstrate how suppliers, manufacturers and customers are linked in the flow of goods with multiple warehouses providing inventory at each stage to buffer demand.The Supply Chain Operations Reference (SCOR) model is a highly incorporate and broad model developed by the Supply Chain Council to measure total supply chain performance Supply Chain Council. Online.(http//supply-chain.org/f/SCOR%2090%20Overview%20Booklet.pdf ) (Accessed 06 Feb 2011). The SCOR model adopts a process manufacturing viewpoint and identifies supplier- customer relationships by breaking down the supply chain into links, each link made up of processes representing supplier-customer relationships. These relationships are indeed benchmarked using Key Performance Indicators (KPI) to assess the success within the su pply chain. This model, although it improves customer satisfaction through improved supplier-customer relationships, it does not attempt to describe some elements of post delivery customer support, a critical feature of supplier-customer relationship management.The Global Supply Chain Forum (GSCF) is yet another supply chain framework that adopts the process manufacturing approach and identifies supplier relationship management as one of its eight key business processes of product flow. Croxton L. Keely et al, (2001), the Supply Chain Management Processes, International Journal of Logistics Management, Vol. 12, 13-24, depicts this model as an end-to-end process where each process is linked and managed to interface with key customers and suppliers. This creates eight business processes among which is customer-supplier relationship management to allow the smooth flow of product within the supply chain.1.3.4 Service Supply ModelsThe above three models define supply chains purely from a traditional perspective of product flow. However, with the growing importance of services and service industry, Ellram et al, (2004), Understanding and Managing Service Supply Chain, The Journal of Supply Chain Management, Vol. 40, 17-32, adapted this manufacturing approach into a new line of service thinking that uses service capacity and delivery, instead of products to classify supply chains as the key processes. This service supply model captures customer-supplier relationship via an end-to-end supplier and customer process that include capacity and demand management, cash flows and service delivery management, and just like manufacturing supply chain, customer relationship management. This is a very good approach that identifies relationship management but limited in that services are intangible and this makes them difficult to visualise and measure.A follow up to the service supply chain viewpoint is the work of Baltacioglu et al (2007), A New Framework for Service Supply Cha ins, Service Industries Journal, Vol. 27, 105-124, who proposed the IUE-SSC model. IUE-SSC model represents the initials of the affiliated organisation of the authors and Service Supply Chain Model. This model identifies customer-supplier relationships by breaking down supply chain into three underlying parts the supplier, the service provider and the customer. Here, the service supplied by the supplier constitutes a core and supporting service and just like the service supply chain model by Ellram et al, this model identifies a number of activities that includes some customer-supplier relationship management essential to the service supply chain.Relationship types are diverse and could either be of business type such as B2B or consumer type such as C2C. In my thinking the popularity of B2B and the historical context of consumer-supplier behaviour pushed the above mentioned authors to focus exclusively on B2B relationships in explaining customer-supplier behaviours in the models th ey proposed. But the general shift in consumer behaviour and the jolt of globalisation and information technology should set out a move to contemporary models of consumer-supplier relationships in business-to-consumer, consumer-to-business or consumer-to-consumer. I at that placefore think that the modern business world would appreciate models build around E-commerce type relationships and a move from product or service approach models that explains consumer-supplier relationship management.1.4 Relationship Portfolio and Management ApproachConventional thinking suggests that relationships tend to vary with companies and there is no fit for all purpose relationship. A logical step after organisations are able to identify the various types of relationships is to focus on the relationship portfolio they want to build with their suppliers and to effectively manage this relationship for competitiveness. A number of methods and approaches have been adopted ranging from the various type s of relationships to more analytic models such as Kraljics Purchasing/supply portfolio-analysis and the power regime.Firms have adopted different approaches to tailor the different types of relationships to fit their particular products, service or markets. These relationships tend to follow a pattern from a short term traditional arms length relationship to a new form of close and long term relationship cognize as partnership or vertical integration Alan Harrison and Remko van Hoek, Logistics Management and Strategy, (Pearson, 2008). Others have viewed this trend as a continuum and included additional types such as strategic alliance and joint ventures. Depending on its strategy, a firm might adopt a range of style such as develop strategic partners by rationalising its supply base and dealing only with a few suppliers, a popular approach most firms are now adopting. It might also adopt a variety of relationships style depending on the markets and the products.The Kraljics model analyses the purchasing portfolio of a firms product into high and low supply risk and supply impact on the financial results. The end result is the segregation of products as strategic, leverage, routine and bottlenecks as shown belowHighLowFig 1 Kraljics modelleverage productsAlternate source of supply availableSubstitution possibleCompetitive biddingStrategic productsCritical for products cost priceDependence on supplierPerformance based partnershipRoutine productsLarge product varietyHigh logistics complexityLabour intensiveSystem contracting E-commerce solutionsBottleneck productsmonopolistic marketLarge entry barriersSecure supply and search for alternativesLow Supply Risk HighSource Dawei Lu et al, Supply Chain Management module notes (WMG, University of Warwick, 2011).Using this method, management can therefore spend time and develop performance based relationships such as partnership on those suppliers whose products matter most, for example, strategic products and outsour ce non critical or leverage products. Bensaou M (1999), Portfolios of Buyer-Supplier Relationships, Sloan Management Review, Vol. 40, pp. 35-45 adopted a similar approach based on product and market conditions to create a supplier portfolio of our different relationship profiles captive buyer, strategic partnership, market exchange and captive supplier.Fig 2 Relationship PortfolioSource Bensaou M (1999), Portfolios of Buyer-Supplier Relationships, Sloan Management Review, Vol. 40, pp. 35-45To effectively manage the relationships such as the Captive buyer and Market exchange, Bensaou suggested the use of management practices such as treating each other with assess and fair profit sharing and for strategic partners to regularly exchange information or pay frequent visit creating a social climate that is rely and collaborative.The ABC analysis method is another commonly used technique by businesses to segment supplier relationship portfolio. Wagner S. and Johnson J. L., Configuring a nd Managing Strategic Supplier Portfolios, Industrial Marketing Management, Vol. 33, 717-730 adopted this approach using a wide range of factors such as volume, suppliers performance, supplier strategic importance, price and quality to segregate suppliers into category (Cat) A, B and C. Cat A suppliers where suppliers that supplied a total 80% volume, while Cat B supplied 15% and finally Cat C, 5%. Very little time is spent on managing and developing Cat C supplier because of their limited volume. In most cases they are used by the company as a way to reduce cost by either direct sourcing or via e-procurement. On the other hand, Cat A suppliers should be considered imperative by top management and a close relationship or partnership should be developed. This relationship can be monitored through regular and annual meetings with suppliers as well as creating an award for suppliers to main(prenominal)tain motivation. In addition, the buyer can invest on supplier development by either assisting or sponsoring supplier to improve performance.Another approach is that by Andrew Cox et al (2004), Managing Appropriately in Power Regimes Relationship and Performance Management in 12 Supply Chain Cases, Supply Chain Management, an International Journal, vol. 9, 357 371, that correlates the findings of relationships and performance management strategies in power regimes. In a power regime, a business can decide on the appropriate relationship and relationship management style(s) depending on their power condition, as shown on the fig 3. Therefore, in a business deal where the buyer is overriding or has an interdependence power position, it will be better to choose a relationship approach based on supplier development. Conversely, in a supplier power regime relative to supplier dominance and/or interdependence then the option is for a supply chain management approach to be adopted. A change in the power structure in this technique will lead to a change in the relationsh ip portfolio and this will lead to improve performance outcomes especially when either parties change their behaviour.Fig 3 Power Regime2.0 STRATEGIC OUTSOURCINGA significant decision facing most businesses today and which have a long term impact on the firm is whether to produce internally (insourcing) or use an outside supplier (outsourcing) Robert Monczka, Robert Trent, and Robert Handfield, Purchasing and Supply Chain Management, (Thomson, 2005).2.1 Outsourcing and Supply Network DesignOutsourcing, sometimes referred to as make-or-buy, is a strategy by which an organisations management decides to hand over its non-core activities to a specialised third party that can efficiently provide the service Kenneth Lysons and Michael Gillingham, Purchasing and Supply Chain Management, (Prentice Hall, 2003). Therefore, central to outsourcing is the make or buy decisions and the relationship that is formed between the purchaser and the supplier.The make or buy decision arises because organ isations have come to the realisation that they cannot produce or make everything on their own and can effectively spend more time on core competence while non core competence could be outsourced. This decision to outsource or make or buy is a strategic one that will create a new supply network of suppliers and sometimes suppliers suppliers. In this new supply network, the organisation will need to adjust its operation in line with its new suppliers and, where possible, its suppliers suppliers creating a total supply network Nigel Slack, Stuart Chambers and Robert Johnston, Operations Management, (Pearson, 2010). This strategic decision to outsource brings a whole new chapter within the organisation and will prompt a key design decision how to put together the new network and how much of the network should be retained by the organisation. This will help management to decide on how it intends to influence and manage the overall new structure.2.2 Outsourcing Decision Process and Infl uencing FactorsTraditionally, the main outsourcing decision process focused on cost reduction. However, the importance of outsourcing decision to an organisation competitive position has pushed many organisations to consider a number of other factors. The decision process adopted here is one adapted from Robert Monczka, Robert Trent, and Robert Handfield, Purchasing and Supply Chain Management, (Thomson, 2005).2.2.1 Planning phaseThe initial process in undertaking any outsourcing motive is to initiate a project of a cross functional aggroup and define its ground and objectives. The team should identify activities to be outsourced and present to management for acceptance.Explore the Strategic Implications phaseStrategic implications will mean aligning the outsourcing decision with three main factorsThe companys long term plans and its impact on other activities and functions. This means if the activity that is organism outsourced should disrupt the companys future plan or affects o ther functions, it is better off being insource.Furthermore, the decision should be in line with an understanding of the organisations core competence. If outsourced activity is not perceived as being core capabilities, the firm might decide to outsource.Analysis of the impact of process technological and how it compares to its competitors for competitive advantage. If analysis shows minimal competitive advantage then the organisation can decide to outsource but in cases where in house process technology provides competitive advantage, the organisation could reconsider to insource.2.2.3 Tactical implications phaseTactical decision process will consider the following factors, and the ability to test prospective outsourcing initiative.Alternatives to outsourcing Being tactical is crucial in outsourcing because the final decision to outsource can be very expensive for the organisation. Therefore, before making that final decision, the organisation could reconsider alternatives to outso urcing such as producing in-house, subcontracting or vertical integration.The length of contract Outsourcing decision could mean being tied down in a long term contract which could impact on other strategic objectives.Impact of size of it Also the size of the outsourcing activity can impact on the decision process as management can decide on other options if the activity to outsource is too large and can have adverse effect on core activities.Corporate culture The impact on corporate culture is another key tactical factor that should be considered on outsourced activity to organisation. This means considering employees feelings regarding the activity to be outsourced.2.2.4 Cost analysis phaseCritical to any outsourcing decision process is its ability to be cost-effective at a quality level competitive in the marketplace. An accurate cost-effective calculation looks beyond the initial and intelligible costs and is based on a marginal costing principle a cumulative costing concept i ncluding total variable cost, total fixed cost and operating costs. Other costs will include the opportunity cost which is the potential benefits forgone if the activity being outsourced is done in house.Implementation phaseThe implementation process will be driven by effective service provider selection and managing post-contractual relationship. Because outsourcing usually involves a long term contract and high investment, selecting the correct service provider is imperative. The selection process will includeMarket inquiry This involves carrying out a thorough market research to determine market price and terms of conditions, and identifying potential service providers with the right expertise, capacity and similarity in corporate culture.Develop a painful request. The tender request should provide in detail the outsourcing requirements as well as general information about the organisation including the scope and the objectives of outsourcing. This document will form a good gui de to potential service providers.Conduct site visit. After tenders have been submitted, a site visit to potential service provider will aim to compare reality to what is on paper. It will be an opportunity to look at the corporate culture, its processes, the people, and how they can fit in to the outsourcing organisation.Negotiate. dialogue will aim to find a common ground for a win-win situation. Central to this will be quality of service and the performance level, scope for expediency and change, pricing and management style including assimilation of employees.The implementation process is not complete without any form of decision to manage post-contractual relationship which is very important to the sustainability of the whole outsourcing process. The key factor is to develop a key performance indicator (KPI) to continuously measure and monitor performance of service provider so that service quality is maintained and relationship continuously improved.In conclusion, the decisi on to outsource by a firm is a crucial and strategic one because it affects a greater part of the firm and it can be used as a competitive tool. Traditionally, this decision was based simply on cost and benefits but as discussed above, the decision process is now influenced by many factors and departments. Therefore, for an outsourcing decision process to be effective and efficient, a cross functional team should be selected to be part of the whole process.Implementation ProblemsShawn McCray (2008). Online.(http//www.tpi.net/pdf/papers/Top_10_Problems-with_Outsourcing.pdf).(Accessed 23 February 2011), identifies poor change management and governance as key issues in implementing outsourcing. most of the jobs related to implementation arePost-contract processes poorly written This occurs because both parties after signing the contract do not want to work together. The root problem being mutual misunderstanding of contract and the scope of outsourced activities resulting to services not performed and increase frustration amongst staff.Cultural clash Cultural clash, corporate or international, can tend to produce tension, distrust and misunderstanding. This is problematic especially in a situation of offshoring where communication is limited to email or phones. This will be further compounded in difference in work ethics which if not streamlined will create added tension.Quality of service A main reason management decides to outsource is to improve the quality of service. Where service provider is unable to achieve this, the whole outsourcing process becomes questionable and creates problems surrounding contractual performance and implementation. need of Coordination Coordination and the lack of a coordinating team present an implementation problem. This is because as soon as the contract is signed, the client quickly shifts all responsibilities to the service provider who is still trying to get started and there is no team in place to coordinate activities. Th is wi