Effective Supply Chain Management and its Impact on Business

By: Michelle McNall

In Chapter 11, we are introduced to supply chain management, and the role it plays in marketing and how effective supply chain management contributes to the overall success of the business and satisfaction of the customer(s)/end-user(s). We learned that supply chain management adds value to the organization especially when considering the importance of value co-creation, whereby members of the value network (suppliers, customers, and other stakeholders) combine capabilities according to their expertise and the competencies required from the situation.

If you’ve ever wondered how products such as Dove body wash got to Walmart or CVS so that you could then purchase the product, supply chain management explains this to you. Supply chain management works by using channels of distribution which consist of interdependent entities that are aligned for the purpose of transferring possession of a product from producer to consumer/end-user or business user. However, not all channels of distribution flow directly from Point A to Point B and so forth. Frequently, intermediaries, also known as “middlemen,” play a vital role in the supply chain. There are many moving parts within a supply chain which is why effective supply chain management is so important. Truly effective supply chain management is planned and purposive (Melnyk, Steven A., Narasimhan, Ram, and DeCampos, Hugh A., International Journal of Production Research, 2014) and directly aligns with the company’s vision and operational strategy. However, while there is increasing evidence of the growing importance of supply chain management, many managers and businesses are still lacking knowledge about this concept and how to implement this effectively. In the academic journal article titled Supply Chain Design: Issues, Challenges, Frameworks, and Solutions, Melnyk, Narasimhan, and DeCampos dive deeper into dissecting the concept of supply chain management and defining how to construct the framework for effective management of such supply chains.

Before you can effectively manage the supply chain, you must have a supply chain design in place that serves as a blue print for your management strategy. This design includes planning and then executing a plan. In the beginning stages, it is important to consider the three key levels of analysis, which are influencers, design decisions, and building blocks. These three key levels create the framework for a sound supply chain management plan. Thinking of this process in the form of a three-tiered triangle, the foundation of this framework is the building blocks, which are essentially the decisions used to implement the supply chain. Such decisions include those about transportation, technology, inventory, and capacity. The second level includes design decisions, which are the social, behavioral and physical/structural design elements and the top level includes the influencers. Influencers refer to the higher level considerations, such as the business and political environment, business model, desired outcomes and supply chain life cycle. As mentioned before, effective supply chain management links directly to the overall business strategy. In relation to the idea of value co-creation, while one supplier may not meet required capability criteria, a group of suppliers as a whole very well might. This means that part of a supply chain design and framework should involve strategic sourcing which is made up of three parts including partner standards (minimum acceptable requirements), supply chain standards, and supply chain characteristics (constraining priorities). As with any process, supply chain design and management of the design involves a lot of time and effort and is often not cut-and-dry, which is what makes effective supply chain management so difficult.

It is important to recognize that supply chains have life cycles, so that we can then investigate what needs to be considered at each stage and how we can manage to transition from one stage to another. As an example, a typical life cycle will include the pre-planning stage – which occurs before a supply chain is organized, the initiation stage – which is the first step in actually organizing the supply chain, and the implementation stage – which is when the supply chain management is put into effect once potential challenges and other related issues are addressed, and plans are in place to help mitigate risk.

While supply chain designs will sometimes look similar, it is important to understand that no two designs will be exactly alike. Supply chain design is not “one size fits all” and once a plan is in place, the design is ever evolving, as times change and the complexity of the product or service may change as well. The more complex a product or service becomes the more complex the supply chain design will become. There are four key design factors that affect performance in the presence of product complexity, which include the “make/buy” decision, supplier location, shipping mode/route of distribution, consolidation and deconsolidation centers. More often than not, once a product or service becomes more complex, a “road block” is created within the process if the supply chain design hasn’t changed, which can inhibit the success of the effective distribution of such product/service. Many folks at the management level are opposed to change especially when they’ve got – what they regard as – a good system in place; however, to be truly successful in supply chain management, management teams must have an open mind and an innovative thought process on how to evolve and improve. Management teams cannot become complacent, as that’s where they could compromise success, start to see a decrease in efficiency, fall behind competition, and see a decline in the overall level of customer or end-user satisfaction. This rings true not only when product complexity increases but is true for supply chain management as a whole.

In my opinion, after reading chapter 11 and the article mentioned within this blog post, I absolutely believe that supply chain management is crucial because it impacts the overall performance of a business. Effective supply chain management can reduce cost and/or lead times, which are two key advantages, but effective supply chain management can also be designed to achieve other company goals such as increasing responsiveness, driving innovation, or improving sustainability. Supply chain management will continue to play a vital role in business because as the marketplace changes, so must distribution methods and business models. Possessing knowledge on how to effectively manage supply chains and all aspects that make up the said value network will prove as a competitive advantage for companies who do this thoughtfully and strategically. Part of sound supply chain management includes an innovative component as far as how to creatively approach managing the channels of distribution while adding value in the process. It is shocking to hear that, while supply chain management is so important and plays such a critical role in the success of businesses across the globe, there are still management teams who are unfamiliar with how to properly construct a supply chain design and execute a successful supply chain management plan. This leads me to believe that there is much more to be learned about this concept and I would recommend that more comprehensive training be done in large corporations and small business alike to build the skills of problem solvers and decision makers within these entities. What I do find comforting, however, is that now we see more supply chain management courses as part of the college/university curriculum which will better prepare young adults entering into the workforce with the knowledge and skills they need to try to put best practices in place.

Source

Melnyk, Steven A., Ram Narasimhan, and Hugo A. DeCampos (2014), “Supply Chain Design: Issues, Challenges, Frameworks and Solutions,” International Journal of Production Research, 52(7), 1887-1896.