The CEO asked you to have lunch with him and explain exactly how you, in your role, could help the firm achieve a competitive advantage through improved supply chain management. He asked you to discuss the following specific points with him:
What supply chain management refers to and how it might differ between service type businesses and product type businesses, and between retail and manufacturing type businesses.
How you would assess whether a firm has an effective versus ineffective supply chain?
Give and explain one example of a firm with an effective supply chain and one with an ineffective supply chain.
Improving Competitive Advantage in Supply Chain Management
Supply chain management refers to the process of planning and coordinating the flow of materials, information, and finances across the entire supply chain encompassing suppliers, manufacturers, warehousing, distributors, and the end consumer (Ramachandra, 2010). Supply chain management enhances the smooth flow of materials, information, and finances among the various players involved in the manufacturing process. The major aim of supply chain management is to ensure that commodities reach the intended intermediaries at the right time and in the right quantities. The organization can achieve this by developing demand and supply forecasts, which are a critical process of the supply chain management.
Supply chain management differs significantly between service type and product type businesses. Supply chain management is labor intensive in service type businesses compared to product type businesses (Zhou, Park, & Yi, 2009). This is because service products often require manual processes and the direct interaction of the provider and the consumer. Another difference concerns intangibility of services in service type businesses, while in product type businesses the products are tangible. In service type businesses, it is difficult to account for services unlike in product type businesses where suppliers can easily account for or even store products physically (Zhou, Park, & Yi, 2009). Another difference concerns the co-occurrence of production and consumption in service industry. In the products industry, the concept of lead-time is critical in supply chain management.
There are various differences in supply chain management between retail and manufacturing sector. In retail sector, supply chain management involves coordinating the merchandise in stock or that flowing through the network. In the manufacturing sector, supply chain management involves coordinating raw materials and finished goods (Sehgal, 2008). There are constant efforts to ensure that the flow of raw materials and finished goods matches the production capacity. Another difference concerns the size of the network chain. Retailers have a wide network consisting of multiple facilities that could be in different locations. On the other hand, supply chain management in manufacturing environments concerns a few manufacturing facilities and warehouses.
There are certain characteristics present in a firm having an effective supply chain. Firms having effective supply chain report increased customer satisfaction. This is because goods reach the consumers at the required time and in the right amounts (Ramachandra, 2010). Another way of assessing whether a firm has an effective supply chain is the application of modern technology in the supply chain. The effectiveness of the supply chain is also related to its ability to ensure inventory optimization. Another way of assessing the effectiveness is by evaluating the flexibility of the supply chain. An effective supply chain should be able to respond quickly to changes such as sudden spikes in demand. Another factor is customization to fit the needs of particular customers.
An example of a firm with an effective supply chain is Colgate-Palmolive. The company develops oral hygiene products that are distributed to various parts of the world. The company provides excellent customer support for all its products and in various countries. In addition, the oral hygiene products are distributed in different avenues including supermarkets, pharmacies, convenience stores, and others. Target Corporation has a poor supply chain. This is evident by the recent withdrawal of its operations from Canada, sighting supply chain management issues (Malcom & Horovitz, 2015). The major issue affecting the stores in Canada was supply issues, which led to consistent understocking.
Malcom, H., & Horovitz, B. (2015, Jan. 15). Target to shutter all stores in Canada. USA Today. Retrieved from https://www.usatoday.com/story/money/2015/01/15/target-canada- retailing-liquidation/21798843/
Ramachandra, M. (2010). Web-based supply chain management and digital signal processing: Methods for effective information administration and transmission. Hershey, PA: Business Science Reference.
Sehgal, V. (2008). Untangling the Supply Chains: Retail vs. Manufacturing. http://www.supplychainmusings.com/2008/03/untangling-supply-chains-retail-vs.html
Zhou, M., Park, T., & Yi, J. (2009). Commonalities and Differences between Service and Manufacturing Supply Chains: Combining Operations Management Studies with Supply Chain Management. California Journal of Operations Management, 7(1): 136-143.