¶ … Improvement of Supply Chain Management Tools and Processes for Ultimate Strategic Achievement of Success in Military and Civil Business
Today, both public and private sector organisations of all sizes and types are faced with the same need to optimize their supply chain management processes to the maximum extent possible in order to achieve and sustain high levels of performance and productivity. Because supply chain management systems are frequently highly complex, it is vitally important to understand how these systems operate and what factors contribute to their successful management. Moreover, innovations in information technologies have changed the manner in which companies manage their supply chains, but these innovations have introduced yet additional management challenges. In this environment, identifying opportunities to optimize the supply chain management process represents a timely and important enterprise. To this end, this study reviews the relevant literature to provide an overview of supply chain management and the importance of effectives supply chain management practises and a discussion concerning developing and maintaining good supply chain relationships with partners. In addition, an assessment of recent and current trends in information system and technology application requirements for supply chains is followed by an analysis of new initiatives and applications that are introduced in military organizations and the differences between performance achievement in military and civil sector organizations. Finally, an examination of the importance of supply and integrated logistical systems for achieving strategic objectives in military organizations and in comparison with the civil sector is followed by a summary of the research and important findings concerning these issues in the study's concluding chapter.
Table of Contents
Chapter 1: introduction to Supply Chain Management
Chapter 2: Literature Review and Methodology
Chapter 3: Developing and Maintaining Good Supply Chain Relationships & #8230;..
Chapter 4: Information System and Technology Application Requirements
for Supply Chains
Chapter 5: New Initiatives and Applications that are Introduced in Military
Organizations and the Differences between Military Organizations and Civil Sectors Better Performance Achievement
Chapter 6: The Importance of Supply and Integrated Logistical System for Achieving Strategic Objectives in Military Organizations and in Comparison with Civil Sector
Chapter 7: Conclusion
Chapter 1: introduction to Supply Chain Management.
Identification of supply chain management system
In sum, supply chain management can be defined as "the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer" (Chimni 2015, p. 2). In this context, supply chain management concerns the coordination and integration of these processes within and between all supply chain partners (Chimni 2015). Although every organization's supply chain is unique in some fashion, the overarching objective of any effective supply chain management system is to "reduce inventory (with the assumption that products are available when needed)" (Chimni 2015, p. 3). It is important to note, though, that even small- to medium-sized enterprises (SMEs) may have supply chains that are enormously complex. For example, Ogulin (2014) points out that reduced product lifecycles and altering management philosophy concerning supply chain management has grown increasing convoluted in recent years, particularly for multinational organisations. Taken together, it is clear that identifying the supply chain management system is just the first step in optimising it, and it is also essential to understand the importance of a supply chain system for an organisation as discussed further below.
Understating the importance of supply chain system for an organisation
Because a supply chain has numerous points at which business operations can be facilitated or impeded, formulating optimal supply chain management processes represents an important and timely enterprise for companies of all sizes and types. In the private sector, the importance of an effective supply chain system directly corresponds to how much profitability it provides. For example, according to Smith (2003), profitability remains the overarching consideration involved in the management of supply chains in the private sector because this is a prerequisite to any future success. It is therefore not surprising that a great deal of attention must be paid to how well a supply chain system is functioning to ensure that waste is eliminated and value is added at every opportunity. In this regard, Smith (2003) emphasises that consumers have become savvier with respect to how they go about selecting a vendor and organizations that effectively manage their supply chains will develop and sustain a competitive advantage. Therefore, it is reasonable to suggest that companies competing in the private sector that achieve optimal supply chain configurations will enjoy a competitive advantage over those companies that do not. For example, as Agas and Hussan (2008) also stress the need to optimise an organisation's supply chain in order to remain competitive in an increasingly globalised marketplace.
Similarly, in the public sector, organisations that achieve optimal supply chain systems will provide the most return on the investment of scarce taxpayer resources, thereby helping them to achieve their concomitant mandate of judicious management of these resources. The implications of effectively managing the supply chain system for public and private sector organisations are therefore enormous, but their requirements differ from organisation to organisation. There are some commonalities involved in supply chain systems that make their importance to organisations clear. For instance, Ogulin (2014) notes that the supply chain management process has assumed increasing importance in recent years because it is the fount from which all other business success flows. These points lead to the next issue which involves the specific requirement of a supply chain system as discussed below.
The requirements of supply chain system
As noted throughout, every supply chain system is unique is some way, but there are some shared common requirements that characterise all supply chain systems. For example, Ogulin (2014) reports that the supply chain management process is focused on developing efficient methods that can be used to better coordinate the distribution of resources along the supply chain upstream and downstream. Therefore, the requirements of a given supply chain system will include its supply chain partners, as well as the organisational resources that are used to support these supply chain process along its entire continuum.
A supply chain system also has five constituent management requirements that are common to private sector organisations:
1. The first constituent element is termed the plan, which is the strategic vision the company uses to guide its day-to-day operations in order to achieve long-term goals (Parts of supply chain management, 2015).
2. The second constituent element concerns sourcing, including whether to single- or multiple-source the raw materials and services that are needed by the organisation.
3. The third constituent element is the actual process by which the organisation manufactures a product or provides services (Parts of supply chain management, 2015).
4. The penultimate element is termed the logistics that are required to deliver products or services, including requisite warehousing and transportation requirements (Parts of supply chain management, 2015).
5. The final constituent element is a mechanism for handling any returned defective products or responding to customer service issues (Parts of supply chain management, 2015).
Taken together, the requirements of a supply chain system are highly complex, making the need to manage them effectively all the more critical for business excellence as discussed further below.
Business excellence achievement utilising effective means of supply chain
The importance of an effective supply chain system to achieving business excellence is well documented, and there has been a great deal of research devoted to identifying best practices. Nevertheless, there are some profound challenges that are involved with developing and sustaining an optimal supply chain and the process is not static. Even when optimal results have been achieved, the competitive environment continues to change, making ongoing oversight of the supply chain system an essential part of successful operations. For example, one consultant reports that all successful organisations recognise the fundamental requirement to respond to changes in customer preferences in a timely and responsive fashion (An Effective Supply Chain is Essential to Dealing with Seasonal Changes, 2014). In the overwhelming majority of cases, private sector organisations must adjust their product lines according to changes in consumer preferences as well as seasonal changes that require new product features (An Effective Supply Chain is Essential to Dealing With Seasonal Changes, 2014, p. 2). This means developing a lean and agile supply chain system that can respond effectively to these changes in the competitive environment in a timely and efficient fashion.
These are important considerations for both public and private sector organisations that are faced with the need to maximise their available resources to achieve their organisational goals. As discussed at length in chapter two that follows, this also means that effective supply chains require good relationships between supply chain partners and a mechanism for ensuring that communications flow seamlessly. While information technology resources have facilitated this process, these technologies also carry their own special constraints that must also be taken into account. In sum, the supply chain represents a critical component of organisational success and supply chain managers are on the front lines of ensuring that their organisation's supply chain is optimized to the maximum extent possible.
Chapter 2: Literature Review and Methodology.
Part One: Literature Review
What is meant by effective supply chain system?
A useful definition of a supply chain provided by Ogulin (2014, p. 64) is that it "is a network of participants who trade goods, services and information in front of purchase and sales orders." A supply chain system can therefore be regarded as the administrative framework in which these processes are conducted. An effective supply chain system is characterised by a number of features, including the quality management approach that is used as well as the thoughtful integration of the procurement and logistics functions (Baldwin, Camm, Cook & Moore 2002). In this regard, Chopra and Meindl (2007) report that the goal of every supply chain should be to maximise the overall value that is generated by the supply chain process. Achieving optimal results requires the effective management of the supply chain, of course, but all of the five constituent elements described in chapter one above. In addition, Chopra and Meindl (2007) describe a number of different points in the supply chain that must have an effective means of management in place, including manufacturers, vendors, distributors, retailers and end consumers.
There is also an upstream information flow and a downstream material flow in each supply chain that requires an effective logistics function (Brookman & Smit 2012). According to Camm (2001, p. 9), "Logistics processes ensure that an organization receives the inputs required to produce its primary products, gets those products to its customers, and continues to support those products cost-effectively over their lifetimes. Thus, logisticians have created the concept of an integrated supply chain that links all the relevant processes, from the production of the raw materials that an organization uses to create a product to the ways its customers use the product it provides." It is possible to discern the extent to which a constituent element of the supply chain system is optimised by evaluating the efficiency of the downstream and upstream flows of information and goods in a process termed "walking the box" wherein these flows are conceptualised as a box that exists along a continuum in these flows (Camm 2001).
Therefore, an effective supply chain system includes all aspects of the supply chain along its entire point-to-point operations, including the most important issues of sources, logistics and merchandising (Camm 2001). Although supply chain management considerations are different in virtually every situation, the practice shares some commonalities that make it possible to identify important goals and practices. For example, Thierauf (2001) notes that the overarching objective of effective supply chain management is to provide the best possible quality of products in the most timely fashion possible in any operative environment. This level of comprehensive supply chain integration, though, demands a seamless link that allows information to be shared and timely feedback distributed among a company's entire supply chain, including all marketing, procurement, logistics and financing considerations (Thierauf 2001). All of these foregoing factors comprise the essential requirements of an effective supply chain management system as discussed below.
What are the essential requirements of effective supply chain management system?
Beyond the essential requirements of an effective supply chain management system described in chapter one above, other requirements include the administrative ability to manage the upstream and downstream flows of information and products along the supply chain. The flows that are used by the supply chain management process can be grouped into three main flows as follows:
1. The product flow: this includes the movement of goods from a vendor to a consumer and the associated return or customer service function;
2. The information flow: this flow includes communicating orders and monitoring the progress of deliveries; and,
3. The finances flow: this flow is comprised of payment schedules, credit terms, consignment arrangements and title transfer policies (Chimni 2015).
Each of these flows must therefore be managed effectively in order to achieve an effective supply chain management system. For instance, according to Smith and Smith (2013), the key issues involved in effective supply chain management concerns the seamless flow of materials along the supply chain from points of origin to end users, together with the upstream and downstream flow of information concerning inventory and demand levels in order to determine what steps are required next. Although the specific processes by which public and private sector organisations accomplish these requirements differs, it is clear that the requirements of an effective supply chain system include all of the constituent elements of the supply chain as well as ancillary organisational functions that contribute to achieving organisational goals.
In addition, Linton (2014) identifies four elements of supply chain management that can also be regarded as essential requirements. The four elements are as follows:
1. Demand Management: This element is a critical requirement for all supply chains that involves determining how best to satisfy the needs of consumers instead of the production process. The principal organisation in a supply chain should ensure that information is provided to all supply chain partners concerning the information they need to facilitate order fulfilment and to minimize the logistical requirements that are involved.
2. Communication: This element drives the efficiency of the supply chain system by ensuring that all supply chain partners have access to the information they need to remain flexible in responding to changes in the competitive environment.
3. Intregration: An integrated supply chain system makes it possible for cost saving to be achieved at each point in the supply chain by reducing waste and adding value whenever possible.
4. Collaboration: Given the mutually advantageous aspects of an effective supply chain for all supply chain partners, it is little wonder that collaboration is needed between these partners to coordinate the supply chain process and to identify the need for additional training or other resources required to optimize the supply chain (Linton, 2014).
Taken together, these essential requirements of an effective supply chain management system can be viewed as the backbone of public and private sector organisational success, but there are some profound challenges and implications involved in supply chain management that must be taken into account as discussed further below.
What are the challenges and implications for supply chain management system?
There is a growing awareness among business practitioners that competition is no longer strictly between businesses only, but now rather extends to competition between entire supply chains to provide the best outcomes for consumers (Brookman & Smit 2012). There is also a growing recognition that demand is driving supply chain, there is an increased demand for customised products at a lower cost with diminished lead times (Brookman & Smit 2012). These challenges mean that supply chains must become more flexible and nimble in order to remain responsive to changes in the competitive environment (Brookman & Smit 2012). According to Barrios (2014), there are several main challenges confronting supply chain managers today as follows:
1. Increasing complexity of supply chains: As noted above, reduced lead time and demand-driven supply chains have become the norm in recent years, and companies are faced with the need to deliver products and services in a far more timely fashion that in the past.
2. Globalisation: The same forces that are driving the globalisation of the marketplace are creating new challenges for effective supply chain management. These challenges extend to determining optimal domestic and international logistical approaches for procurement as well as the cross-cultural constraints that go hand-in-hand with these processes.
3. Customer Preferences: There is a growing need for supply chains to become more responsive to changes in customer preferences, making the need for lean and agile supply chain processes all the more essential.
4. Market Growth: Although there is a need to retain existing consumers of a company's products or services, there is an ongoing need to recruit new generation of consumers to take their place.
In addition, there are also ethical constraints involved in supply chain management with respect to where sourcing is accomplished and the environmental impact of the supply chain's operations. In this regard, Gordon and Kung (2014) report that in the recent past, it was accepted thinking that there would be voluntary compliance from suppliers as well as customers with relevant regulatory guidelines concerning their proper practice with respect to corporate social responsibility issues but the realities of practice has shown that voluntary compliance may be especially challenging when there are no clear-cut financial incentives involved.
All of the foregoing challenges and considerations have coalesced to present supply chain managers with a challenging enterprise in effectively managing their supply chains in this dynamic competitive environment (Barrios 2014). Consequently, there is a need to not only manage these challenges, but the concomitant uncertainty and risk that are associated with them as noted below.
How we can manage uncertainty and define risks?
A number of risk management approaches are available to supply chain managers that can help mitigate the impact of uncertain eventualities, but defining the risks that are associated with these uncertainties remains problematic. Nevertheless, managing uncertainty and defining risks represent an essential part of the effective management of any type of supply chain. In some cases, it is possible to manage uncertainty most effectively by developing contingency plans that provide for thoughtful responses to various scenarios that have the most likely potential for occurring (Anklesaria 2008). In other cases, especially the types of events that are most difficult to foresee, it may be necessary to respond to these situations in a case-by-case basis, but always with a view towards reducing risk in any event (Anklesana 2008).
There are some types of uncertainties, though, that can be reasonably expected to materialise over time, particularly when companies expand their operations to the international marketplace. As Atkinson (2006) points out that although lean supply chain practices can provide valuable outcomes for organisations in terms of cost savings and more efficiency, these same practices can also introduce new disruption threats to the supply chain itself. Based on the results of a survey of purchasing executives by Purchasing Magazine, just 50 per cent of these practitioners monitor their supply chain risks on an "often" basis, with the other 50 per cent monitoring supply chain risk on a "somewhat frequent" basis (17.4%), on a "rarely" basis (29.6%) and some (3.6%) never monitoring their supply chain risks (Atkinson 2006). These findings should serve as a wake-up call to supply chain managers who are failing to actively monitor their supply chain risks given the centrality of these processes to organisational success in both the public and private sectors. In terms of military settings, these issues assume even greater importance because of the need to ensure combat readiness with a reliable supply chain.
Some of the steps that supply chain managers can take to better manage their supply chain risks include assigning higher priorities to long-term agreements with supply chain partners with a demonstrated track record of reliability, develop alternative sourcing options, promote the use of forecasting and long-term planning exercises, slight increase inventory levels, and use hedging for essential resources such as raw materials and energy supplies (Atkinson 2006). In addition, it is important for supply chain managers to determine how much risk avoidance the organisation's top management desires and to take steps to address this level of monitoring (Atkinson 2006). Furthermore, it is also the supply chain manager's responsibility to advise top management concerning what levels of risk management are most appropriate, particularly if these executives lack risk management experience and training (Atkinson 2006). Rather than asking top management generic questions such as "What are your views about risk?," Atkinson recommends tailoring such inquiries with more specificity with respect to issues such as profitability, market share, and percentage of revenues top executives are comfortable with risking.
Other steps that can help mitigate supply chain risk include developing an optimal blend of sourcing alternatives that can best satisfy the supply chain's requirements at any given point in time and using methods such as the Collaborative Planning, Forecasting, and Replenishment approach to optimise warehousing requirements (Boyson & Harriington 2004),. For supply chain managers who want to develop a lean supply chain, this may require more outsourcing of basic services, especially for organisations with far-flung business units because the greater the geographic distance, the greater the potential for disruptions in the supply chain (Atkinson 2006). Likewise, supply chain managers should perform the appropriate level of due diligence in evaluating the vulnerable points of their supply chains in order to formulate the most appropriate contingency plans (Atkinson 2006).
Similarly, it is also important to determine what types of events can disrupt the supply chain and plan accordingly. This process includes identifying risk events as well as determining their respective risk vector probabilities and severity levels (Atkinson 2006). This step can assume the form of a four-block quadrant that assigns a probability and severity level to each type of supply chain risk. An example of the application of this model to develop a risk profile for nondelivery or late delivery follows below:
1. Low Severity/Low Likelihood (for example, maintenance, repair and operations supplies provided by domestic suppliers);
2. High Severity/Low Likelihood (for example, manufacturing components needed for products that are regulated provided by domestic suppliers);
3. Low Severity/High Likelihood (for example, commodity parts needed for manufacturing household appliances provided by a foreign vendor);
4. High Severity/High Likelihood (for example, specialised electronic chips that are needed for manufacturing products that are regulated that are provided by a foreign vendor (Atkinson 2006).
After categorising supply chain risk using this model, the risks should be quantified and assigned priorities. In addition, it is vitally important that everyone is in agreement with respect to these decisions (Atkinson 2006). In sum, it is clear that there are some solid steps that supply chain managers can take to help manage supply risk and respond to uncertainties, and their effectiveness in doing so will have a direct impact on the performance of their organisations and their ability to achieve their strategic objectives as discussed below.
How supply chain can affect business performance and achieving strategic objectives?
As noted above, the same forces that have been driving globalisation have had a correspondingly significant impact on the ability of organisations of all sizes and types to respond to changes in the competitive environment in an effective fashion (Kumari & Usmani 2013). Indeed, Kumari and Usmani (2003) emphasise that in recent years, private sector organizations have increasingly recognised that merely streamlining their internal supply chains is no longer sufficient to develop and sustain a competitive advantage, and the entire supply chain must be taken into account when formulating optimal supply chain management procedures. This point clearly underscores the importance of effective supply chain management for optimal business performance and supporting the ability of organisations to achieve their strategic objectives. In this regard, effective supply chain management is key to developing and sustaining a competitive advantage in an increasingly globalised marketplace (Kumari & Usmani 2013).
The research to date also clearly indicates that organisations that place a high priority on training and retraining their workers also have correspondingly effective supply chain management practices in place (Kumari & Usmani 2013). The research to date also suggests that in order to respond to changes in the competitive environment most effectively, organisations will ensure that their workforce receives the requisite levels of training and retraining that are needed to sustain their competitive advantage (Kumari & Usmani 2013).
How the flow of materials can be managed through supply chain system?
Innovations in information technology have fundamentally changed the manner in which materials are managed through the supply chain system. Technologies such as radio frequency identification (RFID) and bar codes, for example, have facilitated the real-time tracking of materials as they flow through the entire supply chain. This situation is a far cry from the one that existed just a few years ago when organisations were forced to rely on general metrics such as monthly factory shipment data to develop forecasts concerning likely product consumption levels (Kiely 1999). While factory shipment information is not the optimal choice for forecasting, it was the only inexpensive source available to many organisations because other data that was more appropriate for this purpose was either unavailable or prohibitively expensive (Kiely 1999).
By sharp contrast, demand driven data resources are now widely available for free or through inexpensive online vendors that can provide organisations with the timely information they need to better manage the flow of materials through the supply chain. Because the supply chain consists of a number of points along a continuum, the effective management of the flow of materials requires site-specific practices that can be used to both monitor material status as well as report this information to supply chain managers who may need to intervene in cases of supply chain disruption. As noted above, one of the key requirements of all supply chains is the need to integrate the disparate constituent elements into a cohesive whole. In this regard, Munoz and Clements (2008) report that supply chain integration represents the first step in optimising the supply chain, but this step also requires the free flow of information upstream and downstream.
This optimal outcome, though, becomes increasingly difficult to achieve when there are disruptions of this information flow, a problem that has been shown to occur with regularity in the management of the flow of goods through the supply chain (Munoz & Clements 2008). Consequently, the effective management of information flows is a prerequisite for the effective management of the flow of materials throughout the supply chain system. Unfortunately, even the best information management methods will fail to produce optimal outcomes unless there are good relationships between supply chain partners, and this need is discussed at length in chapter three that follows the description of the study's methodology below.
Part Two: Methodology
This study used a systematic review of the relevant literature to develop informed views concerning the supply chain issues of interest. This approach is consistent with the guidance provided by a number of social science researchers who emphasise the need to review what is known about a given topic in order to determine what is already known (Fraenkel & Wallen 2001). In addition, a well conducted systematic review of the literature can serve to identity gaps in the existing body of knowledge concerning an issue of interest (Wood & Ellis 2003). The database of stud consulted included public and university libraries, as well as reliable online resources such as academic research resources including EBSCO and Questia, organisational Web sites dedicated to supply chain management issues, and governmental Web sites that provided relevant information of interest to the study.
Chapter 3: Developing and Maintaining Good Supply Chain Relationships
It is axiomatic that business models should ensure that organizational resources are used in the most effective fashion possible in order to respond to changes in the marketplace and achieve and sustain a competitive advantage (Griffith & Myers 2005). This need extends to developing and maintaining good supply chain relationships as well. In recent years, it has become increasingly apparent to most business practitioners that developing and maintaining good supply chain relationships represent an important part of this process. In this regard, Griffith and Meyers (2005, p. 255) emphasise that, "The strategic fit of the relational norm of solidarity across a firm's global supply chain relationships enhances firm performance."
One of the main themes that quickly emerges from the relevant literature concerning effective supply chain management is the fundamental importance of developing and maintaining good relationships with all supply chain partners. Indeed, this point is made time and again in the relevant literature to the point where it has become a widely accepted dictum. In order to determine how best to develop and maintain good supply chain relationships, though, it is important to first operationalise the terms that are involved. In this context, the term "relationships" includes a wide range of relationship types in supply chain management. For instance, Ackerman and Bodegraven (2007) note that supply chains are characterised by relationships of all types, including tactical and strategic relationships, as well as relationships with internal and external customers as well as others. Likewise, Dong-Hua and Zailani (2011, p. 36) report that, "The term relationship covers a lot of grounds in supply chain management. These include strategic relationships, tactical relationships, transactional relationships, internal relationships, and possibly more." In addition, the term "supply chain relationship" is used to describe the type of relationship that develops between two or more organisations in the supply chain that are committed to achieving specified goals and mutual benefits from the relationship (Dong-Hua & Zailani 2011).
It is also important to note that the very nature of supply chain management invariably involves a variety of relationship types. To the extent that these relationships are good will therefore likely be the extent to which the supply chain operates effectively and efficiently (Kildow 2011). In this regard, Kildow (2011, p. 133) reports that, "A relationship always exists between a customer and a supplier whether it is good, bad, or ugly." In order to achieve optimal outcomes, supply chain managers must evaluate the needs of their supply chain to determine how best to develop and maintain good relationships with their supply chain partners (Kildow 2011).
In sum, supply chain relationships can be viewed as being roughly grouped into three categories as follows:
1. The first group is comprised of the academic community;
2. The second groups consists of software developers and consultants; and,
3. The third group are actively working supply chain managers and other supply chain practitioners (Ackerman & Bodegraven 2007).
At the outset, it is important to stress the need for balanced relationships among all supply chain partners because an inordinate amount of power wielded by any single partner can diminish the supply chain's effectiveness (Ackerman & Bodegraven 2007). There are some nationwide resources that are available to help achieve this balance such as the Warehousing Education and Research Council and the Council of Supply Chain Management Professionals (Ackerman & Bodegraven 2007).
Beyond the foregoing, there are also important relationships between public and private sector organisations and the various levels of local, state and national government. These types of relationships are salient for public and private sector organisations because these entities can positively and negatively affect the competitive environment through regulatory actions or taxation schemes (Ackerman & Bodegraven 2007). As Ackerman and Bodegraven (2007) point out, external sources of influence on supply chains can extend to governmental actions and policies that influence the manner in which the supply chain is managed as well as where the physical resources are situated throughout a country.
While the foregoing types of relationships can have a significant effect on supply chain management, perhaps the most important type of relationships are those that exist on the day-to-day level where the majority of business dealings take place. In this area, businesses must forge and maintain solid relationships with a host of actors, including primary vendors and consumers, as well as ancillary positions such as consultants or software engineers (Ackerman & Bodegraven 2007). These types of relationships can become highly complex, requiring even more investment of time and other resources, particular for those relationships that have been marked by adversity in the past (Ackerman & Bodegraven 2007).
Although changing these types of poor relationships into good ones can require a significant investment of time and effort, if the supply chain partner is otherwise regarded as a long-term supply chain partner candidate, this investment in time and effort is well worthwhile. As Kildow (2011) points out, despite the significant amount of time and effort that is required to transform suboptimal relationships into good relationships, the positive outcomes for supply chain management make the effort more than worthwhile.
Despite the significant return on investment that can be achieved by developing and maintaining good supply chain relationships, it may be difficult to persuade top management of the need to make these levels of investment without some assurances that they will be justified by an improved supply chain system (Kildow 2011). In reality, the process can be enormously expensive because of the wide-ranging actors that are involved in the supply chain system itself. In this regard, Kildow (2011, p. 133) emphasises the need to reconceptualise the role that supply chain partners play in helping organisations achieve their goals: "When developing supply chain business continuity strategies, use a cooperative approach among all those involved in your supply chain. View suppliers, domestic or international, as strategic partners. Develop and then build on good relationships with suppliers, forwarders, logistics services companies, brokers, and contractors, just as you do with your customers. Work with your supply chain partners" (emphasis author's).
Irrespective of how many supply chain partners are involved, it is essential for supply chain managers to forge relationships with these key actors that are characterised by high levels of trust and open communication lines in ways that make the relationships mutually advantageous (Ackerman & Bodegraven 2007). Certainly, some major corporations such as Walmart enjoy the ability to unilaterally determine the nature of the business relationship by stipulating specific performance requirements from supply chain partners, but the overwhelming majority of enterprises do not possess this level of economic clout (Ackerman & Bodegraven 2007). As Ackerman and Bodegraven (2007) emphasise, the key to supply chain management success is the development and maintenance of good relationships with all supply chain partners with a view towards achieving long-term corporate goals.
Optimal supply chain relationships are characterised by a number of features, including the ability of organisations to share information with their consumers in a real-time, transparent fashion (Ackerman & Bodegraven 2007). Although the specific manner in which these features are accomplished may vary from supply chain to supply chain, they generally require the open exchange of demand data and what types of strategic planning are in place. Sharing this type of information with supply chain partners can help them develop more effective management methods that can contribute to supply chain success in a number of ways (Ackerman & Bodegraven 2007). Many organisations, though, overlook the need to help their supply chain partners reach this level of collaboration and some partners may require training and retraining over time in order to attain optimal supply chain partner status (Ackerman & Bodegraven 2007).
Conversely, supply chain relationships with consumers require a similar approach, only operating in a different direction. Organisations need information concerning what their consumers want, and when they want it (Ackerman & Bodegraven 2007). Likewise, the collaborative planning, forecasting, and replenishment (CPFR) approach operates in both directions wherein consumers must have access to information concerning the organisation's abilities to provide them with what they want and need as well as how the supply chain partner can help them contribute to supply chain success (Ackerman & Bodegraven 2007).
The importance of applying the CPFR approach to develop and maintain good supply chain relationships was the focus of a study by Boyson and Harrington (2004) who report that in the majority of private sector supply chains, there remains a dearth of research concerning best industry practices with respect to optimal inventory management practices that can help streamline the supply chain management process. One approach that has been shown to be effective, though, is the increased sharing of inventory and demand data along the entire supply chain using a collaborative planning, forecasting and replenishment (CFPR) approach.:
While the details may differ from organisation to organisation, CPFR can facilitate the development and maintenance of good supply chain relationships by virtue of its design. The CPFR process is inherently focused on seamless information-sharing practices in real time that can facilitate the supply chain's operation (Boyson & Harrington 2004). For instance, Boyson and Harrington (2004, p. 63) add that, "By its very nature, CPFR is all about sharing information (about demand forecasts, component availability and inventory, manufacturing schedules, and so on) in real time and providing an environment in which dialogue and discussions can occur with regard to the shared information."
Regardless of which point on the supply chain a given organisation exists, the supply chain process can be improved by developing a better understanding of the flows that take place in the supply chain and the implications of these factors for the end consumers (Ackerman & Bodegraven 2007). An important point made by Ackerman and Bodegraven is the need for organisations to develop internal practices that are supportive of their supply chain preparatory to developing and maintaining good supply chain relationships. In this regard, Ackerman and Bodegraven (2007) point out that prior to forging and maintaining good relationships with supply chain partners, organisations must develop effective communication lines of their own.
Developing this level of open communication requires internal integration of all operating functions including manufacturing and distribution as well as marketing and sales to ensure that all divisions can function in a holistic manner in achieving the organisation's business goals (Ackerman & Bodegraven 2007). Developing this level of open communications also requires organisations to take steps such as creating cross-functional teams and providing opportunities for all stakeholders to provide their feedback concerning issues that affect their ability to contribute to supply chain success (Ackerman & Bodegraven 2007).
For supply chain managers who are faced with a wide array of suppliers, determining which ones are best suited to become mutually beneficial supply chain partners can be a daunting task. Nevertheless, because the long-term success of supply chains depends on good relationships, it is vitally important for supply chain managers to identify those vendors that are in the best position to become viable long-term supply chain partners in mutually advantageous ways (Ackerman & Bodegraven 2007). In this regard, Ackerman and Bodegraven (2007) report that the assessment of vendors for inclusion in the supply chain must consider a number of factors, including the level of congruency between organisational cultures as well as which organisations will make the best supply chain partners over time.
Developing and maintaining good supply chain relationships, though, does not just happen but is rather the result of ongoing and thoughtful interactions with supply chain partners in ways that are mutually beneficial and characterised by trust. For instance, according to some supply chain management consultants (Ackerman & Bodegraven 2007, p. 38), "Supply chain management by its very nature depends on relationships and connections." This observation reinforces the fundamental need to develop and maintain good supply relationships, but the process can be challenged at several points.
Because agent theory indicates that all supply chain partners will act to maximise their benefits of the business relationship, it is vitally important to ensure that relationships with supply chain partners are based on mutual trust and seamless information sharing practices to the maximum extent possible in order to optimise the outcomes. As Ogulin (2014) emphasises, this step is critical and central to developing and maintaining good supply chain relationships, and without it, all other efforts will likely fail to achieve their desired results. Developing and maintaining this level of alignment, though, is a challenging enterprise that requires more than an intuitive approach to supply chain partner selection. In this regard, Tangpong and Ro (2009) note that aligning organizational capability with supply chain partners to forge stronger relationships has become one of the more effective approaches to developing optimal supply chain management practices in recent years.
The advantages of developing and maintaining good supply chain relationships are multiple, and include a reduction in long-term negotiation costs as well as forging the type of mutually advantageous relationships that can contribute to supply chain success (Tangpong & Ro 2009). In the context of supply chains, relational norms can be regarded as being those values that are shared by supply chain partners concerning what types of behaviours are most appropriate. To the extent that supply chain partner relationships can be viewed as having high relational norms will likely be the extent to which these relationships are solid and hold promise for long-term supply chain success (Tangpong & Ro 2009).
Developing this level of trusting supply chain relationships can provide a number of valuable outcomes for both public and private sector organisations. For instance, Tangpong and Ro (2009, p. 59) note that, "Over the last two decades, closer supply chain relationships exhibited by high relational norms such as trust, collaboration, long-term relationship, and increased information-sharing have evolved in many industries to help firms respond to changes." Here again, though, while every supply chain is different, there is a shared common need for all supply chains to streamline their interactions, reducing waste and adding value at every opportunity. In this regard, Ogulin (2015) concludes that effective supply chains are characterised by strong relationships with supply chains partners that extends to information-sharing practices.
An integrated supply chain therefore requires the effective management of the relationships that make up the system and like the competitive environment, these relationships are constantly changing in different ways (Handfield 2002). Despite the challenges that are involved in develop and maintaining good relationships with supply chain partners, relationship management has implications for the entire supply chain's performance (Handfield 2002). In the majority of instances, information technology and support systems are available to facilitate this process, and these resources can be readily deployed in a short period of time unless disrupted by unexpected events or unforeseen circumstances (Handfield 2002). Suboptimal communications, though, can derail even longstanding relationships between supply chain partners (Handfield 2002).
In this regard, Handfield (2002) points out that developing and maintaining good relationships with supply chain partners is not one-time requirement, but is rather on ongoing enterprise that requires careful attention from supply chain managers.
Once again, although all supply chains are unique in some fashion, one of the common factors that characterises good relationships between supply chain partners is trust and the confidence that other partners will conform to their contractual obligations and even go the extra mile in supporting other supply chain partners when the situation calls for it (Handfield 2002). Despite the difficulties that are involved in developing and maintaining good supply chain relationships and ensuring the appropriate communication tools are in place, these elements are essential to producing the type of value-added services that supply chains can provide. One of the most important steps in this regard is to ensure that all stakeholders in the supply chain process are kept informed of how their role affects the entire supply chain system and what they can do to improve its functionality (Handfield 2002). This view is shared by a majority of supply chain managers who agree that developing and maintaining good supply chain relationships is a critical aspect of effective supply chain management practices (Handfield 2002).
The process is linear and as well as iterative in nature, with organisations typically eliminating vendors and customers that are incongruent with the supply chain's operational areas or due to other factors that make them unsuitable as supply chain partners. Once this step is accomplished, organisations can invest the time and resources needed with the remaining supply chain partners to develop solid business relationship and pursue additional initiatives to fine-tune their supply chain operations for longer-term, strategic objectives (Handfield 2002). Indeed, the goal of strategic supply chain alignment is to develop good relationships with all supply chain partners (Collins 2008). For example, according to Collins (2008), supply chains that are thoughtfully aligned tend to outperform those that are not, but the process can be particularly challenging when there are cross-cultural issues that require alignment in an increasingly dynamic, globalised marketplace.
Developing and maintaining good supply chain relationships may also require a complete review and shift in the manner in which organisations do business. As Handfield (2002, p. 4) points out, "In creating new value systems, companies must re-think how they view their customers and suppliers. They must concentrate not just on maximizing their own profits, but also on how to maximize the success of all organizations in the supply chain." Because organisations tend to operate in ways that maximise their own interests, though, forging supply chain relationships that can "raise all boats" can be a complicated endeavour. Nevertheless, even if an enormous amount of effort is needed over time, this investment of resources can pay major dividends by creating a supply chain that truly maximises the profitability or performance of all supply chain partners. This level of supply chain relationship requires ongoing sharing and coordination of relevant information in ways that allow each supply chain partner to make the maximum contribution to the process (Handfield 2002).
Moreover, achieving this level of collaborative and trusting relationships may also require a revamping of the organisational culture and supply chain structure (Handfield 2002). In fact, this may be the most difficult part of developing and maintaining good supply chain relationships for many organisations today. Notwithstanding these constraints, though, like the other requirements for effective supply chain management, developing and maintaining good supply chain relationships represents a critical part of the process (Dong-Hua & Zailani 2011). In this regard, Dong-Hua and Zailani (2011) emphasise that developing and maintaining good relationships with supply chain partners represents an essential aspect of effective supply chain management, but the process requires time and effort and it just makes good business sense to focus on supply chain partners that hold the most promise for long-term relationship success. Therefore, because organisations can achieve and sustain a competitive advantage by forging good supply chain relationships, identifying those businesses that can contribute to long-term success and taking the steps needed to develop a trusting relationship are also essential requirements of the process (Dong-Hua & Zailani 2011).
It is in this area that a change in corporate culture may be required as a prerequisite to forging these types of supply chain relationships. For instance, Dong-Hua and Zailani (2011) note that because optimal supply chain management practices require good relationships with supply chain partner, it is essential to overcome any adversarial aspects of the relationship in order to forge trusting relationships wherein the flow of information can become seamless. Some private sector executives, though, may be reluctant to engage in this level of trust with other enterprises based on the concern that proprietary information or other trade secrets can be divulged unintentionally. Despite this concern, developing and maintaining good supply chain relationships demands that at some point companies recognise the need for such open practices and take the steps that are needed to alter their organisational culture to place a high priority on their supply chain relationships. These issues assume even greater importance when information systems and technology applications are used to support the supply chain's operations as discussed further in chapter four below.
Chapter 4: Information System and Technology Application Requirements for Supply Chain.
The introduction of innovative information systems and specially designed technological applications has truly revolutionised the supply chain management process for a growing number of enterprises, but many organizations remained mired in a sea of inefficient legacy systems that are no longer up to the task. For instance, according to Vokura and Zank (2003), far too many organizations continue to rely on outdated supply chain management practices that are no longer capable of satisfying the demand requirements in a rapidly changing marketplace.
As noted throughout, effective supply chain management requires a great deal of attention to both the logistical aspects of the chain as well as the relationships that comprise it. Both of these aspects demand the free flow of requisite information in order to facilitate the achievement of the supply chain's mission. It is in this area that information systems and technology applications can play a vital role. In this regard, Vokura and Zank (2003) add that all supply chain partners can benefit from the introduction of information systems that facilitate the flow of information upstream and downstream through increased productivity and cost savings.
Likewise, Boone and Ganeshan (2012) cite the manner in which IT solutions have fundamentally altered the supply chain management process. For example, Boone and Ganeshan (2012, p. 9) emphasise that, "Technology has revolutionized supply-chain design, management, and control. It has enabled a paradigm shift from inventory to information; from competition to collaboration; and from cost to value. Supply-chain partners now share product design and planning -- often in real-time. Performance is frequently assessed using systems, rather than incremental measures."
In spite of these numerous advantages, though, there remains a compelling need for supply chain managers to maintain a close watch on external factors that may adversely affect their logistical networks and the impact that changes in the competitive environment can have on supply chain requirements. For instance, Banerji (2011, p. 7) reports that supply chain IT applications are highly effective in communicating data, but human managers must still analyze this data in terms of what is taking place in the real world at the same time in order to separate the relevant wheat from the irrelevant chaff: "Information technology systems perform flawlessly in transmitting supply chain data. What they lack is the 'I' of IT -- the information that a cyclical downturn may be imminent."
There are also some other constraints to the implementation of IT solutions in supply chain systems that must be taken into consideration. According to Boone and Ganeshan (2012, p. 9), "While technology promises supply-chain efficiency for those who embrace it, it also raises several concerns that must be addressed before its potential can be fully realized." Some of the factors that must be taken into account preparatory to implementing an IT solution include the following:
Determine the scope of the collaboration that is needed;
Determine the optimal approach for implementation;
Identify the amount of type of information that is to be shared with supply chain partners and in what format;
Select the types of products that will use collaboration to develop;
Identify appropriate logistical channels; and,
Determine how best to measure supply chain performance (Boone & Ganeshan 2012).
In sharp contrast to the limitations of past years, supply chain managers today can effectively use a wide array of logistical and consumer data to coordinate supply chain operations to satisfy their consumers' needs (Cook et al. 2001). Although methodologies differ, some common approaches in this area include the use of demand forecasts which are provided by the customers themselves (Cook et al. 2001). In addition, in recent years, there has been an increased focus on applying cloud-based IT solutions to logistical operations to streamline the supply chain process (Thierauf 2007). . Innovations in technology have provided organisations of all sizes and types with these advantages through the use of platforms such as e-business, e-commerce, advanced transportation networks and improved methods for planning distribution requirements. As also noted throughout, the thoughtful integration of the disparate constituent elements of the supply chain system is essential in order to realize the benefits that can accrue to the use of these innovations in technology. For example, Thierauf (2007) notes that achieving this level of integration can provide a number of valuable outcomes, including the optimisation of the supply chain in ways that reduce costs for all supply chain partners, including the end consumers. Depending on where the organisation is situated on the supply chain, increased efficiencies can result from these types of information-sharing practices. In this regard, Thierauf (2007, p. 274) observes that, "Overall, for manufacturers, efficiency comes from integrating distributed data sources to better link segments of the supply chain."
Achieving this type of integrated supply chain that extends to all supply chain partners represents a valuable addition to the supply chain management process, but it is easy to become overwhelmed by the sheer volume of information that can flow through these types of information networks. In other cases, organisations may attempt to implement software solutions that are either inappropriate for their needs or which are incompatible with their supply chain partners. In a growing number of instances, organisations are turning to cloud-based solutions to help overcome these constraints to supply chain productivity. For instance, Vokura and Zank report that the results of a survey evaluating supply chain managers usage of the Internet determined that nearly all (>90%) used the Internet as an essential component of their supply chain management system.
The Internet is also cited by Rosenbaum as fundamentally reshaping the supply chain management process. In this regard, Rosenbaum (2001) reports that two of the main factors that have had the most impact on the manner in which organisations manage their supply chains has been the introduction of technologies that are specifically designed for the purpose. By providing organisations with a shared platform in which to interact in a unrestricted, full-time fashion with suppliers and customers, the Internet has facilitated the supply chain management process in countless ways, and these applications also continue to increase on a seemingly daily basis. Indeed, a Google search for "supply chain management" and "information technology" produces more than 42,300,000 results.
The Icarus syndrome, though, can become salient when companies expand their operations online and their supply chain capabilities are inadequate to satisfy order fulfilment or customer services requirements (Rosenbaum 2001). For example, Rosenbaum (2001, p. 8) cautions that, "The supply chain challenge is to ensure that the goods ordered are delivered to the consumer when promised. The downfall of some popular Web sites has been their inability to deliver on promises." Consumers are becoming increasingly demanding concerning what they expect from the companies they do business with online, and those companies that fail to live up to these expectations can expect less than stellar results. As Rosenbaum (2001) concludes, far too many organisations have failed to realise the full complement of benefits that can accrue to the integration of information systems into their supply chains due to a lack of knowledge concerning what their customers want and expect from them.
According to Rosenbaum (2001), who is a director of global business-to-business supply chain services with Cap Gemini Ernst & Young, companies that have Internet businesses that are supported by supply chains:
Customer today have higher expectations, especially those customers who use online platforms for ordering; these customers have exceptionally high levels of expectations for quality customer service.
Order fulfilment for online companies requires more responsive approaches that can satisfy smaller, more frequent ordering process vs. The bulk shipments that are used by brick-and-mortar enterprises.
The ability to efficiently process defective merchandise returns or customer service problems involves more complex logistical issues.
Customers are increasingly demanding customized products that require alternatives to mass production; nevertheless, customers are still interested in obtaining the lowest possible price.
Customers are demanding information concerning their order's real-time status and if there are any unexpected delays involved in their shipment.
All of the foregoing issues must be taken into account when incorporating IT solutions into the supply chain system (Rosenbaum 2001). Nevertheless, supply chain managers may lack the IT expertise needed to formulate optimal technological solutions that will optimise their supply chain system, and any previous efforts that have failed may unfairly affect the decision-making process concerning future IT initiatives (Banerji 2002). Therefore, it is also important for supply chain managers to convince top management of the ongoing need for reevaluation of the organisation's IT requirements despite any previous mishaps (Banerji 2002).
Succeeding in implementing and administering complex IT solutions may be a challenging enterprise, but the net result will be more agile and lean supply chains (Gunasekaran & Ngai 2004). In the supply chain management field it therefore becomes ever more important to collaborate and integrate all supply chain processes with supply chain partners in order to deliver the best possible end product to the customer (Brookman & Smit 2012). It is not surprising therefore that information sharing is one of main concepts for coordination among the supply chain, and the seamless exchange of information represents the cornerstone of collaborative supply chain practices (Brookman & Smit 2012).
While convincing top management about the ongoing need to evaluate the adequacy of existing IT resources for supply chain management applications may be challenging, there is a growing recognition among executives that these resources are an essential part of their organisational structure that can provide them with the competitive advantage they need to succeed in an increasingly competitive marketplace. As Rosenbaum (2001) points out, the strategic importance of effective supply chain management practices has been increasingly recognised by top executives and there is a growing consensus that technological solutions can help optimise the supply chain management process in ways that provide improved organisational performance and profitability.
Because supply chain management is highly focused on collaboration and integration, the use of IT solutions also extends to the integration of processes and functions in the supply chain. Given the increasing requirements for supply chain integration and collaboration among supply chain partners, it is not surprising that IT solutions have assumed growing importance in achieving successful supply chain systems (Jhakharia & Shankar 2004). Since the supply chain is comprised of a number of points along a continuum of information and material flows, it is also important to determine what type of IT solutions are best suited for each point along the supply chain. There has been some research to date in this area in recent years that can help determine some best practices for supply chain managers. For example, a study conducted by Iskandar, Kurokawa, and LeBlanc (2001) evaluated the role of IT systems for first- and second-tier automotive industry suppliers. Based on their analysis, Iskander et al. determined that supply chain managers assign different levels of importance to IT solutions for different positions in the supply chain. According to Jharkharia and Shankar, there is a basic need to forge a consensus among supply chain partners concerning the need for IT solutions and which are best suited to satisfy their unique requirements.
The research to date in this area has also identified some specific IT enablers for the supply chain management function, including the types of disruptive elements that can derail these applications, thereby creating what is termed a "bullwhip effect" that can disrupt operations along the entire supply chain (Jharkharia & Shankar 2004). Some of these IT-related constraints include delayed information sharing or the provision of erroneous data (Jharkharia & Shankar 2004). Nevertheless, as Jharkharia and Shankar (2004, p. 37) point out, "The exchange of information is the foundation of collaboration in the supply chain. And with the increase of new practices, such as vendor managed inventory, information sharing is becoming even more important." Some of the roles that IT solutions can play in a supply chain system include cost savings, the provision of timely information for decision-making purposes, improved customer service and increased flexibility (Jharkharia & Shankar 2004).
In addition, the study by Jharkharia and Shankar (2004) identified ten specific IT enablers and evaluated the degree to which a given IT enabler represents a driver for IT-enabled supply chain management. These researchers ranked these ten enablers according to their level of importance for an SCM. In this way, they ranked the enablers on order of importance for enabling an IT-enabled supply chain as follows:
1. Supply-chain wide IT strategy
2. Profit sharing due to IT enablement
3. High level of supply chain integration
4. Top management commitment
5. Security of online information
6. Trust in supply chain linkages
7. Collaborative planning
8. Reliable IT infrastructure
9. Funds for IT enablement
10. Awareness about use of IT in supply chains (Jharkharia & Shankar 2004).
These findings have special implications for supply chain managers who are faced with a legacy system that has become inadequate for their organisation's supply chain requirements. For instance, according to Boyson and Harrington (2009, p. 62), the same technology makes both real-time supply chains and strategic real-time control possible, can also be constrained by "a loosely connected set of software solutions will not lead to the achievement of these objectives. The real-time supply chain will be possible only with the adoption of an emerging construct the Internet mega-portal." In this context, an Internet mega-portal is defined as "an online, Internet-based hub of information and services accessible through a variety of devices (a personal computer, a cell phone, or a handheld PDA), capable of providing personalized content and views to help managers better run their enterprises" (Boyson & Harrington 2009, p. 62). This cloud-based IT solution is capable of providing supply chain managers with the type of real-time data sharing they need to optimise their supply chain operations (Boyson & Harrington, 2009).
Two information technologies that have had particular importance for the supply chain management process are radio frequency identification (RFID) and electronic product codes (EPCs) (Sabbaghi & Vaidyanathan 2008). According to Sabbaghi and Vaidyanathan (2008, p. 72), the integration of radio frequency identification (RFID) and electronic product codes (EPC) into the supply chain management process has proven enormously effective in overcoming many of the previous problems that have been associated with inventory management. Both of these technologies are specifically suited to the requirements of supply chain management because they help track the flow of goods along the entire supply chain continuum. Although they differ in composition, both technologies share some common attributes for supply chain applications. For instance, RFID technologies provide the ability for supply chains to accurately monitor inventory levels and consumer preferences in real time, and EPC technologies provide a unique product identifier that can contribute to this process (Sabbaghi & Vaidyanathan 2008). Likewise, both of these technologies have enjoyed significant reductions in cost due to efficiencies of scale and further innovations that have reduced their size and increased their functionality (Sabbaghi & Vaidyanathan 2008).
These features provide supply chain managers with the ability to save on labour costs as well as warehousing and logistical costs (Sabbaghi & Vaidyanathan 2008). For example, Sabbaghi and Vaidyanathan (2008) note that there are already a wide array of implementations available for both of these technologies, and additional applications continue to be identified that can optimise the supply chain management process along its entire continuum. More specifically, RFID technologies are facilitating supply chain operations for a wide range of public and private sector organisations, and new opportunities for applying these technologies continue to be identified. It would seem reasonable to posit that the more experience that supply chain managers and software engineers receive with these technologies, the greater the conceptualisation of the additional potential for supply chain optimisation. In this regard, Sabbaghi and Vaidyanathan (2008, p. 73) emphasise that, "RFID technology can help a wide range of organizations and individuals such as hospitals and patients, retailers and customers, and manufacturers and distributors throughout the supply chain to realize significant productivity gains and efficiencies."
Unfortunately, there is no "one-size-fits-all" IT solution that will satisfy the requirements of all supply chains, but it is becoming increasingly apparent that there are not only viable solutions available, the correct decisions in selecting these resources can have an enormous impact on organisational productivity and performance. Nevertheless, there remains a paucity of recent relevant research concerning the specific financial impact of implementing IT solutions in the supply chain system in various industrial sectors (Cagwin & Ortiz 2008). For instance, Cagwin and Ortiz (2008) point out that despite the growing number of success stories concerning the integration of technological solutions for optimising the supply chain management process, there has been little empirical research directed at determining the precise economic effects of these improved supply chain management practices (Cagwin & Ortiz 2008).
Based on the results of their analysis of IT uptake by supply chain managers, Cagwin and Ortiz conclude that the financial impact of IT solutions on supply chain operations is directly related to the complexity and diversity of these networks as well as the ability of supply chain managers to expertly manage them. This also means that IT expertise has become an essential part of the supply chain manager skills set needed for the 21st century in both the public and private sectors. Supply chain managers who lack IT expertise and experience would be well advised to obtain the training they need to manage these complex systems effectively or risk jeopardising their organisation's survivability. For military supply chain managers, these needs have special implications as discussed in chapter five below.
Chapter 5: New Initiatives and Applications that are Introduced in Military Organizations and the Differences between Military Organizations and Civil Sectors Better Performance Achievement
As noted in chapter four above, innovations in technology have fundamentally changed the manner in which supply chains are managed in both the public and private sectors, and these innovations have had significant implications for improving organisational performance. In many cases, these improvements in the public sector have resulted in enormous cost savings of scarce taxpayer resources, improved efficiencies in the flow of materials along the entire supply chain and more responsiveness to changes in consumer preferences.
When it comes to evaluating the performance of military supply chains, though, there are some different metrics involved that must be applied in order to determine how well these systems are operating with regard to their respective missions. For example, during peacetime, a military supply chain's performance might be evaluated based on its cost effectiveness. During times of war, though, a military supply chain might be better judged on its ability to provide combat forces with the materiel they need to prosecute the war, virtually irrespective of the financial costs that involved because the nation's interests are at stake. Although each military branch may employ a different supply chain approach, some indication of what current practices are being employed can be discerned by an examination of supplier sourcing strategies, policies and techniques that are currently being used by the UK's Royal Air Force as discussed below.
What are supplier sourcing strategies, policies, and techniques that the Royal Air Force implements?
According to Humphreys and Wilder (2008), there have been some important changes to supplier sourcing policies for the Royal Air Force since the publication of the 1998 Strategic Defence Review the UK Government. In this document, the Air Force's previous policy was rescinded and a newly implemented competition policy has been used to improve Defence procurement relationships through the forging of strategic partnerships with the private sector but this has not been as straightforward as expected (Humphreys & Wilder 2008). In this regard, Humphreys and Wilder (2008, p. 2) report that, "The Smart Procurement Initiative intends to improve Departmental processes but, at a time when the Defence industries are concentrating and globalising, substantive relationship improvements are hard to find."
As with several other areas of modern supply chain management practices, there remains a dearth of relevant and timely research concerning what best practices can be applied by the Air Force to improve its supply chain management practices in terms of developing and maintaining good supply chain relationships. For example, Humphreys and Wilder (2008, p. 3) add that, "The Supply Chain, Relationship Marketing and Transaction Cost Economics (TCE) literatures offer numerous 'recipes' for optimising business-to-business relationships. However, advice on how to undertake successful partnering arrangements within an increasingly monopolistic, Defence industrial market is lacking."
As also noted above, in some rare situations, a private sector organisation such as Costco or Walmart is in a position to dictate terms to its supply chain partners, and this is also the case with the military establishment in any country including the United Kingdom. For example, Humphreys and Wilder (2008, p. 3) point out that, "The relationship between the Ministry of Defence (MoD) and the UK Defence Industries has always been a difficult one. With equipment expenditure of £9,803 million in 1999/00, the MoD has immense power as British industry's largest single customer." Consequently, by virtue of its purchasing clout and regulatory position, the MoD can virtually dictate various terms to its supply chain partners provided they fall within the parameters of the law.
Notwithstanding this largely asymmetrical relationship, though, the UK private sector also enjoys some bargaining power with the MoD that can affect supply chain management practices and behaviours. For instance, Humphreys and Wilder (2008, p. 4) note that, "Industry is a major exporter and contributor to the UK's balance of payments and by extending production for foreign sales ensures that the MoD's equipment unit costs are reduced." In addition, the UK private sector also plays an important role in the development of vital technologies that are used by the military establishment, including most especially the Royal Air Force's need for innovative aero engines (Humphreys & Wilder 2008).
Furthermore, given the lingering after effects of the recent global economic downturn, the private sector's exports have assumed even greater importance and this importance is projected to continue to increase well into the foreseeable future. At present, the UK's major exports include many resources that are used by the military complex, including aircraft, ships, motor vehicles, electronics and communication equipment, metals and various textiles (UK economy 2015). The UK's major export partners are set forth in Table 1 and depicted graphically in Figure 1 below.
Table 1. Major UK Export Partners
Country
Percentage of Exports
Switzerland
13.6%
Germany
9%
United States
8.8%
Netherlands
7.6%
France
6.4%
Ireland
5.7%
Belgium
4.3%
Source: UK economy 2015
Fig. 1 -- Major UK Export Partners: Percentage of UK Exports
Source: Based on tabular data in UK economy 2015
As can be readily discerned from the data in Table 1 and Figure 1 above, the private sector in the UK is well situated to provide its major export partners that are members of the North Atlantic Treaty Organisation with high-quality, sophisticated military materiel and the potential for further strategic alliances is clear. This means that despite the MoD's position of relative power vs. The private sector in the UK, the private sector also has some clout in the calculation as well. As Humphreys and Wilder (2008, p. 4) point out, "The major companies such as British Aerospace Systems, Rolls Royce, VSEL and Royal Ordnance who are virtual domestic monopolies have considerable opportunity to team with foreign companies to further reduce competitive forces."
These issues have special implications for both private and public sector supply chain managers in the UK where there remains an overarching need for good relationships between supply chain partners that are characterised by trust. In this regard, Humphreys and Wilder (2008, p. 4) add that, "The relationship between the MoD and its industrial suppliers is dominated by a monopoly market in which each side wields considerable power and where potentially, lack of trust can reduce efficiency and value outcomes." Because the mission of the UK Royal Air Force is so central to the nation's welfare and best interests, this constraint represents a major opportunity for improving the supply chain management process between the private and public sectors and this issue was the focus of a Defence White Paper published in 1999 that outlined the UK Government's commitment to revitalising the collaborative and trustworthiness of supply chain relationships to provide improve collaboration and competition (Humphreys & Wilder 2008).
This is an important shift in military supply chain thinking in the UK because it aligns with best industry practices in the civil sector. In this regard, Humphreys and Wilder (2008) report that the logistical aspects of the armed forces is the foundation for supply chain management practices in the military the world over, but it has only been fairly recently that the need for good relationships with supply chain partners has been taken into account. By very sharp contrast, the thrust to align military supply chain management with the private sector through improved collaborative practices that can produce better outcomes for the end customer of the military supply chain -- the troops on the front line of war. According to Humphreys and Wilder, when these supply chain practices are optimised, the result can provide the support that military organisations need to remain combat ready and responsive to changes in the operating theatre. In order to achieve this level of optimisation, though, the goals of the 1998 Strategic Defence Review and follow-up White Paper in 1999 to achieve improved collaborative practices between the private and public sectors must be realised, an outcome that remains uncertain at present. In this regard, Humphreys and Wilder (2008, p. 4) conclude that, "There is a need for closer relationships, including trust, commitment and collaboration between supply chain members to ensure success in these arrangements is clearly inferred. In sum, SCM provides a business environment in which firms closely co-operate rather than compete to achieve mutual goals."
How are the production, scheduling and control system working and functioning and what are areas for improvements?
There have been a number of initiatives that have been implemented over the past decade or so by the MoD to improve the production, scheduling and control systems used by the military supply chain systems. For example, Humphreys and Wilder (2008, p. 5) report that, "Over the last 10 years the MoD has been driven relentlessly by operational, financial and political pressures to become smaller, flatter and more flexible by using out-sourcing, rationalisation, redundancies and stock reduction programmes." There have been some high-profile reports that have also affected the prioritisation of these initiatives in recent years. For example, there have been reports published by the National Audit Office and Unfavourable Public Accounts Committee that have compelled changes in the supply chain management processes used to supply the military complex in the UK (Humphreys & Wilder 2008).
In addition, a recent report from the House of Commons Committee of Public Accounts (2012-2013) notes that the MoD readily acknowledges the wastage of "significant amounts of public money buying more inventory -- its store of supplies and spares -- than it uses" (p. 4). During the period April 2009 through March 2011, the MoD purchased £1.5 billion in excess consumable inventory (e.g., ammunition and uniforms) more than it used, an excess rate of 38 per cent (Managing the defence inventory 2014). In addition, the MoD concedes that it routinely retains stock that is no longer required or used on a regular basis (Managing the defence inventory 2014). The House of Commons Committee of Public Accounts (2012-2013) report also notes that, "Over £4.2 billion of non-explosive inventory has not moved at all for at least two years and a further £2.4 billion of non-explosive inventory already held is sufficient to last for five years" (Managing the defence inventory 2014, p. 4).
As early as 1991, the National Audit Office had determined that the MoD was in dire need of reforming its inventory management procedures, but the fundamental causes of problem remained unaddressed (Managing the defence inventory 2014). Some of the major causes of the current inventory management problems include the following:
The MoD has failed to provide effective incentives or accountability for those responsible for ordering, retaining, and disposing of inventory;
A lack of investment in information systems and professional inventory skills is also limiting the Department's visibility of the problems, and its ability to manage its inventory efficiently (Managing the defence inventory 2014, p. 4).
To its credit, the MoD acknowledges these constraints to more efficient supply chain operations and that there is a great deal of work remaining to be done to resolve these issues. In its defence, though, the MoD also points out that it has already taken some steps to resolve these issues, including a number that are specifically intended to address inventory management issues.
Other initiatives that have been implemented in an effort to improve the MoD's supply chain administration include the following:
Measures to increase the number of competitive contracts, to focus on life-cycle costs, to reduce specification rigidity, to promote more cost effective operations and to open up defence activities to external funding have been initiated.
From 1994 the formation of Multi-Disciplinary Groups brought together formerly disparate teams of engineering, procurement, commercial and finance personnel to improve the in-Service support and procurement functions.
More recently the Smart Procurement Initiative introduced the concept of Integrated Project Teams to bring about further process improvements (Humphreys & Wilder 2008, p. 5).
Further in their support, the MoD emphasises that these supply chain constraints did not occur overnight, but are rather the result of policies and practices that have been in place for a long period of time (Managing the defence inventory 2014). Nevertheless, the snail's pace of the changes that have been implemented remain a source of concern for policymakers who are alarmed at the ongoing waste of scarce taxpayer resources despite having made these issues a priority nearly 20 years ago. In order to overcome this bureaucratic malaise, the House of Commons Committee of Public Accounts (2012-2013) report emphasises that senior management has taken an interest in these issues and there have been steps taken to oversee the process through completion (Managing the defence inventory 2014)
Taken together, it is reasonable to suggest that although the Ministry of Defence and by extension the Royal Air Force have experienced some profound constraints to developing and maintaining effective supply chain practices, these constraints have been identified and meaningful steps are being taken to resolve them. Nevertheless, there are still some inappropriate supply chain management practices in place that adversely affect the ability of the Royal Air Force to manage its supply chain in an optimal fashion.
A salient example of this type of constraint includes the UK Chinook helicopter programme (Downing & Chipulu 2011). The Chinook helicopter is a combination attack and utility rotary-wing aircraft that is routinely used by the Royal Air Force in its peacetime and combat roles (Downing & Chipulu 2011). Consequently, this aircraft is a strategic asset of the Royal Air Force that must be maintained in a combat-ready fashion. A study by Downing and Chipulu (2011) analysed the systems-based forecasting methods that are used by the Royal Air Force to determine the efficacy of its inventory and forecasting systems used to support the Chinook helicopter maintenance programme. Based on their case study, Downing and Chipulu found that there are still some major constraints involved in the Royal Air Force's approach to supply chain management in this programme. According to Downing and Chipulu (2011, p. 128), "Analysis of the current inventory and forecasting system suggests a possible lack of forecasting precision. Current nonspecific formulation of forecasting techniques implied several of the cost driver's demands were being miscalculated." These researchers attribute this lack of precision to the inappropriate statistical modelling used by the Royal Air Force and recommend a re-evaluation of the current parameter values that are used in making these forecasts (Downing & Chipulu 2011).
In reality, though, these constrains to optimal supply chain management practices can be more readily understood when the scope and extent of the logistics that are involved in supporting the UK's armed forces are taken into account. For example, there have been nearly continuous overseas military operations prosecuted by the UK's armed forces since the early 1990s, placing an enormous strain on its logistics capabilities. Moreover, the scope of the logistical requirements is staggering. In this regard, the Royal Air Force's Air Vice-Marshal Matt Wiles (2003, p. 50) points out that, "One of the most critical areas of military logistics is the supply chain: the set of processes, infrastructure, equipment and personnel that moves a force to the theatre of operations and sustains it by maintaining stocks and transporting additional goods and people." Not surprisingly, the Royal Air Force's supply chain is truly globalised and extends to more than 11,000 destinations that include ships, garrisons and domestic and overseas air bases, in excess of 200 million supply chain requisitions annually, hundreds of vendors, dozens of internal organisations and billions of dollars in annual expenditures (Wiles 2003).
The Royal Air Force has sought to improve its supply chain management function by evaluating the best supply chain practices used in the private sector, following for example the practices used by FedEx or Amazon for order fulfilments (Wiles 2003). As noted throughout this study, though, the criticality of the mission of the Royal Air Force transcends its civilian counterparts in ways that make direct side-by-side comparisons problematic. In this regard, Wiles (2003, p. 50) emphasises that, "Commercial practises are far from adequate in meeting all of the challenges a military force faces when engaged in a theatre of operations." In response to these constraints, the Royal Air Force has consolidated its disparate supply chains into a holistic approach termed the Joint Supply Chain that is intended to resolve many of the remaining constraints to efficiency identified in the series of high-profile reports that have been issued since the early 1990s (Wiles 2003).
Many of these constraints to the Royal Air Force's supply chain capabilities became apparent during the prosecution of the war in Iraq, but the reforms that were implemented to resolve these constraints had time to take effect before the Royal Air Force was called upon to fight in Afghanistan. Despite these constraints, the Royal Air Force's top leadership maintains that the problems with the Joint Supply Chain have been identified and aggressive steps are being taken to resolve them, including the pilot testing of reformed supply chain operations during the war in Afghanistan and the implementation of a Defence Logistics Transformation Programme (Wiles 2003). The latter initiative is intended to improve the logistics support provided by the Royal Air Force to the other armed services (Wiles 2003). Three areas in particular were identified by the Defence Logistics Transformation Programme as requiring close attention as follows:
1. Supply chain planning: The responsibilities of the Royal Air Force's supply chain partners include identifying supply routes and air- and seaports, estimating volumes, and negotiating contracts with suppliers. These methods were shown to be largely based on the experiences and lessons learned during the Cold War which were determined to be no longer adequate to support the Royal Air Force's mission in the 21st century. In addition, supply chain planners were using outdated methods and lacked a coherent planning process. In response, the Royal Air Force has been implementing new planning methods since 2006 that are capable of integrating real-time data concerning actual consumption and delivery times, and formulating alternative courses of action to develop optimal supply chain planning practices (Wiles 2003).
2. Performance management: The Royal Air Force's performance management practices suffered from one of the same major constraints that characterises many private sector enterprises: supply chain data was stored in an array of outdated legacy systems that were unable to provide decision-makers with the information they required to formulate timely and effective decisions concerning supply chain operations (Wiles 2003). Moreover, many processes were still being completed manually, and these constraints introduced lengthy delays in the delivery of requisitioned materiel (Wiles 2003). In response to this constraint, Royal Air Force supply chain managers implemented a manual, colour-coded tracking system that monitored the order and delivery process and provided management reports concerning the status of all logistical operations. Although the Royal Air Force had the technologies needed to use barcodes and electronic product codes for this purpose, there was still a lack of integration of systems in the Afghanistan theatre that precluded their use (Wiles 2003). Based on these experiences, the Royal Air Force created a full-time performance management team tasked with replacing the manual tracking methods with an automated data warehouse (Wiles 2003). The impact of this transition has been impressive, with delivery times of materiel to overseas destinations having been reduced by fully 75 per cent (Wiles 2003).
3. Supply processes: The supply processes that were being used prior to the prosecution of the wars in Iraq and Afghanistan were one of the most important to be addressed by the Royal Air Force and have the potential to affect the most service members by changing the manner in which supplies are delivered to units preparatory to their deployment overseas (Wiles 2003). Because each unit was required to gather a 30-day supply of stores prior to deployment to provide stock until the supply chain operation could become fully operational and these units did not know what type of mission they would be assigned, units frequently stored materiel that they did not need. This procedure was changed and individuals unit no longer maintain their own stock of materiel. Today, a centralised supply chain provides both standardised, destination specific packages of stores as well as standard packages of stores that have been far more effective in provisioning deployed military forces (Wiles 2003).
Perhaps the most telling aspects of these supply chain reforms are the transparency with which they were made, the ready acknowledgment of the constraints that remain firmly in place and the high priority placed on effecting needed changes. These issues are especially significant when it comes to ensuring that the armed forces have the equipment and supplies they need to remain combat-ready, and these issues are discussed further in chapter six below.
Chapter 6: The Importance of Supply and Integrated Logistical System for Achieving Strategic Objectives in Military Organizations and in Comparison with Civil Sector.
As noted in chapter five above, the same type of logistical approaches that are used by private sector firms may not be appropriate for a military force faced with uncertain priorities and a dynamic operating environment. In essence, achieving strategic objectives in military organisations where lives are at stake is a far different matter than in the civil sector where profit is at stake. Indeed, although some of the material that is provided through military supply chains may be identical to their civilian counterparts (i.e., clothing, foodstuffs) and their destinations just as far-flung, the underlying missions of military and civilian organisations are so divergent as to make across-the-board comparisons virtually meaningless. There is a major difference between consumers failing to receive a new shirt ordered through Amazon on time vs. The failure of a deployed military unit receiving a re-supply of ammunition during a fire fight. As Cohen (2003, p. 4) emphasises, "Soldiers can be killed if they run out of fuel in their tanks or ammo. If I run out of dresses in the store, I have time to react."
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