Success Factors of Supply Chain Management SCM Term Paper

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Supply Chain Management (scm)

supply chain refers to the network that links the internal and external suppliers with internal and external customers. Supply chain management (SCM) concerns with the management of such networks enabling interchange of materials and information through the network. The primary goal of supply chain management is to link the market, distribution channel, operations process and supplier base effectively at lower costs. (Hill, p.54) It is common practice to view logistics management and SCM as synonymous terms. Performance of the supply chains is done at three levels - the overall performance of the supply chain, relative performance of the supply chain and the performance of individual logistics functions. (Taylor, p.26)

Key benefits of effective supply chain management for the organizations include reduction in total cost of inventory, reduction in number of suppliers, reduction in administrative overheads involved in managing multiple relationships, higher service efficiency, quality improvement, faster responses to changes in market demand and customer satisfaction enhancement. (Johnston and Clark, p. 4) The internet has contributed tremendously in the adaptation of supply chain management practices by companies across the world. A study on the internet driven supply chain management revealed that the participant companies were able to realize the three-fold benefits of reduced procurement cost, increased procurement control and enhanced supplier management. (Croom, p. 76)

From an operational viewpoint, supply chain denotes the channel of firms and intermediaries through which products move from the basic raw material stage through conversion and then finally distributed to the ultimate consumer. For large companies such as airline companies or automobile companies, the supply chains can be innumerable and varying in size, volumes and value. It is therefore important that all supply chains are integrated in the right manner to ensure that the benefits of SCM flow to all levels in the organization. An ideal integration process would consider various aspects such as customer service levels, channels of supply and distribution, facility locations, inventories, transportation, information management and organizational structures. (Gourdin, p. 128)

One of the key issues in supply chain management is whether to make or buy, i.e., whether to make products and services internally or to go in for outsourcing. The decision to outsource or not has always been a challenge for organizations as outsourcing has its own advantages and drawbacks. In the current context, outsourcing is the preferred option as it allows firms to have access to latest technology, expertise and service value at competitive costs. The barriers to supply chain management include lack of systems capability, complacency, lack of data and information flow, and mistrust and power games within the organization. It is in the interest of the all organizations that these pitfalls are avoided and eliminated before implementing a full-fledged SCM system.

There is a general perception that the western countries such as the United States of America and Western Europe have more efficient SCM systems and practices compared to Asian countries. This paper attempts to ascertain whether the perception is a fact by comparing the SCM practices in Malaysian and American companies. The objective is to understand the similarities and distinctions between the two countries and assess how and why one country is better than the other. Effort is made to unravel the critical success factors that impact SCM in both the countries. The study attempts to measure the effectiveness of SCM by analyzing the impact on various organizational parameters such as operational efficiency, cost reduction, quality improvement, customer satisfaction enhancement etc.


Review of literature on earlier studies conducted on the subject matter indicates that American companies are better placed compared to Malaysia, in terms of supply chain management practices and implementation. Thus American firms appear to be in a position where they can leverage their competitive advantages for providing superior service value to customers and hence thus are more likely to enjoy better profitability in their businesses. Since previous research evidence is available, null hypothesis is discounted and several alternate hypotheses are considered for this research study. The focus is on the supply chain management capabilities and mechanisms of Malaysian and American companies, how they are different and the nature of the effects of the strategies being followed by the several companies in both the countries.

HA1: Malaysia has different critical success factors compared to America in the implementation of SCM: It is very important to identify the critical factors that will result in organizations realizing the benefits of supply chain management. Business conditions are not the same in different countries and hence it is important to understand the success factors before formulating the SCM strategy.

HA2: Malaysia has different problems compared to America in the implementation of SCM. This is significant issue because while designing and implementing supply chain systems and practices, the local business conditions and problems have to be understood. In other words, there is no single success formula for SCM in all countries. Companies would do well to identify all related problems and factor them in before investing in supply chains.

HA3: Users of SCM in America and Malaysia share common characteristics in terms of size. The hypothesis is based on the logic that size has an impact on SCM in the sense that with increasing size, supply chains can become more complex to manage. It is therefore important to understand the size characteristics of the companies in the two countries.

HA4: Malaysia has different motivations compared to America in the implementation of SCM. This hypothesis addresses the important question of why companies want SCM in the first place. Understanding the motivating factors will form the basis for evaluation of the scope, design and the investment levels required for implementing the SCM.

HA5: SCM has positive impact on the operational performance in Malaysia. This hypothesis serves the important purpose of establishing the relationship between SCM and operational performance. As the SCM becomes more and more effective, companies are expected to see improvement in their operational efficiencies. This hypothesis evaluates how Malaysian companies have shown improvement in operational performance with SCM.

HA6: SCM has positive impact on the operational performance in America. The objective of this hypothesis is to analyze whether SCM has enabled American companies to achieve higher operational efficiencies

HA7: SCM leads to better quality management in Malaysian and American firms. The true value of SCM lies in providing quality products or services to customers.

HA8: SCM leads to significant reduction in cost of operations in Malaysia and America. The investment in SCM and committing resources and manpower would be justified only if the supply processes are achieved efficiently at lower costs. Hence, analysis of this hypothesis is useful.

HA8: SCM leads to greater customer satisfaction in Malaysia and America. The ultimate objective of SCM is to enhance customer satisfaction, which will translate into improving the profitability of the company. Satisfaction is derived from flawless customer service and hence the study tests this hypothesis.

Literature Review:

Globalization of business has ushered in some irreversible trends in they way companies and customers or consumers see each other. One of the most notable features is the high level of significance attached to the service concept, which is understood as the way by which any firm prefer its services to be viewed by their stakeholders, their customers and by the owners themselves. The service concept leads to what is commonly referred to as the service value, which is an important element of the marketing mix. Price is based on the service value that the organization offers to customers and it is this context that supply chain management plays a vital role in determining the success of commercial firms. An effective supply chain management system strives to maximize benefits to customers, minimize financial costs to the customer and minimize costs to the organization. (Johnston and Clark, p.5)

Automobile industry is one of the sectors where supply chain management is finding critical applications in view of the value and quantum of the components to be procured before assembling the final product. In Malaysia, the industry is growing, but the opportunities are also posing challenges like the increasing need to reduce design cycle times, upgrade safety and emission standards to meet regulatory changes. Automotive firms are also required to contend with higher degree of vehicle complexity, shorter developmental cycles, and integration of design innovations with the supply chain to stimulate customer interest and finally, deliver high quality products in a scenario of reducing costs. The key for profitability will be creating and sustaining an efficient supply chain management aimed at creating hassle-free collaboration with suppliers, vendors and customers. (Wong, p.65)

Senheng, one of the leading Electrical Chain Stores in Malaysia has demonstrated successful implementation of supply chain management practices for improvement in performance. With over 60 stores all over the country, Senheng has a comprehensive SCM system in place that ensures continuous maintenance of optimum stocks at all stores, thus eliminating oversupply and short supply situations. This is achieved through a centralized online order management system that is directly linked to all…[continue]

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