An Overview of Supply Chain Management which Includes Two Recent Examples
Supply Chains as a Competitive Advantage
Supply chain management (SCM) stands at the forefront of operation management in most organizations. The concept of SCM involves how to transform inputs and add value to a product or service. The efficiency and effectiveness of a SCM function has a direct effect on how successfully the business can compete in the marketplace. Some of the focal points of SCM deal with how to remove communication barriers between and organization and its suppliers, how to effectively coordinate activities, monitoring progress, and controlling internal and external processes to make the production capabilities as reliable as possible.
Although there are many aspects to effectively managing a supply chain, one of the most important aspects to effectively managing a supply chain is to create better downstream visibility and coordination with suppliers. Through coordination and improved communication this can help avoid any surprises in the flow of information, resources, or materials that can lead to costly bottlenecks or delays. There are three basic categories that account for improvements that can be made in supply chain integration. There can be better transfers of information and financial payments which can improve the supply chain's flow. There can also be more coordination of inventories and inventory management capabilities that can less the possibilities of outages or surprises. Finally, there are also steps that can be taken to improve the relationships between the organizations in a supply chain.
Modern organizations must deal with an environment that is dynamic in nature and constantly evolving. The supply chain is a critical component that is necessary to in the new globalized environment. Organizations who have a flexible and nimble supply chain can respond to supply chain interruptions relatively quickly. Such interruptions can be caused by a range of different events from a downstream supplier's bankruptcy to a natural disaster or transportation disruptions. Organizations must create a balance between flexibility and stability in order to navigate the quick changes that can occur in a supply chain. Today's modern organizations have supply chains that are complex and span the globe which often leaves organizations with more risk than they generally account for in the operating models.
Supply Chains as a Competitive Advantage
The supply chain is one of the critical components in regard to how an organization adds value to the consumer. Different organizations' can employ a variety of supply chain strategies to achieve their unique objectives. Value can be created in the supply chain in a multitude of different ways. Different processes that can add value can include factors such as design, quality, price, or efficiency. Furthermore, supply chains should also be matched with the broader organizational objectives. For example, a quality leader in an industry will focus on suppliers who also focus on quality. However a low cost leader will be more price than quality focused when selecting suppliers for their supply chain.
Supply chains can also be optimized for tactical considerations such as proximity, capacity, capabilities, flexibility or many other tactical factors. A supply chain can also be optimized for strategic factors such as items involving product life cycle management or even trying to form stable and long-term partnerships. Some of the newest trends in SCM are managing supply chains for sustainability. Therefore the options for designing a supply chain are nearly limitless and should be constructed with the company's overall mission in mind. If the supply chain is complimentary in terms of its design with the objectives of the organization, then the supply chain can create a competitive advantage for the company. Two supply chains in two different industries have been selected to discuss how supply chains are being used by those organizations to create a competitive advantage.
Apple Inc. holds most of the details of its supply chain as proprietary information and keeps this information as confidential as possible. Therefore it is difficult to get specifics for Apple's supply chain. However, even despite having access to the supply chain specifics, Apple's supply chain is interesting because almost the entire supply chain is outsourced and it is consistently rated as one of the top in the world and the number one rated supply chain in 2010 by Gartner's (Wailgum, 2011). Many of Apple's suppliers were directly impacted by the tsunami and nuclear meltdown in Japan and the company was able to overcome challenges without any major disruptions to their organization. Supply chains are rated subjectively on factors such as speed, agility, efficiency, responsiveness, and innovation. Apple has maintained some of the most innovative products in the electronic gadget industry and they have successfully been able to do so by utilizing a supply chain that consists of entirely outsourced manufactures.
However, many of Apple's production strategies have come under intense media scrutiny in the last few years. Apple's strategy is to outsource nearly all of its production to strategic partnerships in foreign locations where there is labor that is highly skilled and comparably inexpensive; primarily China. As a result of this strategy, Apple does not have complete oversight in regard to much of the production process and instead relies on its partners for their manufacturing expertise. Apple basically hands over the product design to their strategic partners and they determine how to manufacture the product to Apple's requirements. Given the longstanding relationship that Apple has developed with its suppliers, the finished products are generally manufactured to high quality standards.
However, at the same time, many of the labor practices that Apple's suppliers use are not accepted in their domestic country and many of these practices have generated a significant amount of negative publicity. Some of Apple's suppliers in China that produces electronic goods such as the iPad and iPhone have come under criticism for using child labor as well as violating employees' human rights (Moore, 2010). Furthermore, Apple's suppliers have also been cited for violating environmental regulations in China which are far less comprehensive than the regulations in the developed world (Meyer, 2011).
One specific supplier, Foxconn, has been frequently cited of poor working conditions and harsh treatment of their employees. Foxconn is a factory in China that employees over a hundred thousand Chinese workers. The surrounding town was basically built around the factory. The company Foxconn has actually installed suicide prevention nets around the perimeter of the factory. The company actually had so many employees jump to their death from the roof of the factory that the company responded by installing nets that would prevent employees from falling to the pavement in they continued trying to commit suicide from atop the building.
Wal-Mart is the world's leading retailer that has constructed an international chain of large discount department and warehouse stores across the globe. Wal-Mart made the Forbes list of the largest companies in the world and was rated as the 18th largest corporation. Wal-Mart is also the world's biggest private employer in the world and has over 2 million employees which make it the world's largest private retailer (Faber, 2012). Wal-Mart business model is focused on being the low cost leader and their supply chain management compliments this strategy well. Wal-Mart is a world leader in supply chain technology that includes everything from automated distribution channels to radio frequency identification (RFID) tags that allow products to be scanned automatically by remote sensors.
Wal-Mart's position as the low-cost leader drives their entire supply chain. The company can actually dictate to terms and conditions associated with their suppliers due to their substantial bargaining power. In fact, Wal-Mart's supply chain has become so efficient that it is almost impossible for other retailers to compete with the company on price. This strategy has proven to work in almost all international markets that Wal-Mart…