SCM NETWORKS: CREATING EFFICIENCY AND EFFECTIVENESS

SCM NETWORKS: CREATING EFFICIENCY AND EFFECTIVENESS

Abstract

This paper examines the existence of clearly defined networks in a supply chain. An effort directed towards creating, maintaining and facilitating mesh structure to perform a range of activities through various organizations from completely different but interdependent industries. The entire supply chain seeks to attain customer satisfaction; this is achieved through unit value from the contribution of the various organizations in performing specialized activities

In striving to achieve high levels of performance, organizations seek to attain effectiveness and effectiveness. This among other reasons is affected by difference in organizational goals, control requirements and minimal commitment towards Supply Chain interests.

Introduction

In the modern global economy, Supply chain networks have evolved, becoming critical structures in the production and dissemination of goods in today’s modern as well as growing economies. Supply chains comprise of manufacturers, distributors, retailers, as well as consumers, all of whom are spatially dispersed and must respond to the change requirements (Nagurney2003). 

Supply chains function as open networks, where organizations in the downstream and those in the upstream operate interdependently to support the procurement, manufacture, distribution, handling, warehousing, packaging, tracking and final delivery of customer requirements

The supply chain is defined as a part of a network that supplies a specific product from raw material to final customer – it is a whole commercial chain embedded in the network (Hertz 2001). According to Ostrovsky (2008) networks are relationships between the nodes are represented by contracts.

Most often supply chain efficiency concerns the managing of financial flows in supply chains.

Financial flows in a supply chain are viewed to possess high potential for reducing processing costs. The efforts here are directed to reducing lead times; optimizing inventories. And on the other hand supply chain effectiveness focuses on customer value through increased responsiveness, value addition and satisfaction

Supply chain networks

These are combinations of demand and supply tiers that are connected to a collection processing point. Organizations exist to meet customer needs, these customers are immediate and also distant customers; this structure of clientele makes up a sequence of customers for a given product of an organization.  As organizations strive to meet the demand of their customers, they do so by getting in touch with suppliers. These could be suppliers of services, raw materials, components, semi finished or finished goods

Therefore the network is the mesh of organizations through which a range of activities are performed to ensure that customer demand is satisfied through provision of supplies at a margin for the supplier. Such activities are of an interrelated nature including procurement, production, distribution, warehousing, and consumption.

Creating effectiveness and efficiency in a SC

Organizations dedicated to attaining and sustaining SC effectiveness as well as effectiveness, introduce deliberate efforts designed to achieve this, this takes the following forms;

 SC network alignment and rationalization; suppliers, customers and all partners that make up a given supply chain are considered to impact on the performance of an organization’s goals in one way or another.  Rationalization aims at ensuring alignment of partners with organizational goals, elimination of Inconsistence in planning, operations and implementation. This can also be used as a strategic approach to reduce large numbers of suppliers to manageable few whose value to the organization is both visible and tangible.

Cost management; this includes identification of all, cost drivers and strategies to reduce cost throughout the product supply chain from sourcing, production, purchasing to customer order-fulfillment and service.
The cost management process is a combination of strategic efforts that are critical part of any firm’s overall competitiveness. All variable and fixed costs need to be analyzed for specific products and services, cost drivers determined and appropriate improvement strategies developed throughout the supply chain. In this case all aggregative costs should be both identified and classified into value-add for example direct labour, materials and non-value-add for example idle time, redundant inventory. Those costs that are non value adding to the organization’s supply chain then systematically be eliminated from the supply chain through combined concession by all concerned supply chain stakeholders. It is important for the organization to involve customers and suppliers within its cost management process to ensure that all decisions reached do benefit all fairly.

SC Relationships and cooperation; this facilities the smooth flow of supply chain activities through increased Information sharing, joint planning, and alignment of organizational interests.

Scholars Cannon and Perreault (1999), Lee and Whang (2000), Henriott (1999) suggest that a successful buyer-supplier relationship is connected with high levels of information sharing.

Close buyer-supplier relationships are also responsible for increased flexibility, lead time reduction, and reduced non value adding activities within the supply chain.

Reverse logistics networks management; Reverse logistics is concerned with the requirement to plan the flow of surplus and unwanted material back through the supply chain after or before meeting customer demand. Return systems can take the form of recycling, product recalls. Managing return can help control the escalation of unplanned costs in terms of defects, reputation, financial reinvestments, and loss of time. The principal drivers of in reverse logistics include; the increased importance attached to the environmental aspects of waste disposal and recognition of the potential returns that can be obtained from the reuse of products through innovative efforts

Conclusion

From the smallest of units to large organizational structures, well aligned, rationalized supply chains are important in increasing profitability, achieving cost efficiency and improving customer value thus efficiency and effectiveness

References;

Hertz, S. (2001), “Dynamics of alliances in highly integrated supply chain networks”, International Journal of Logistics: Research & Applications, Vol. 4 No. 2, pp. 237-56.

Michael Ostrovsky (2008), Stability in Supply Chain Networks American Economic Review

Anna Nagurney and Jose Cruz , June Dong and Ding Zhang, Supply Chain Networks, Electronic Commerce, and Supply Side and Demand Side Risk revised October, 2003; appears in European Journal of Operational Research (2005), 164, pp. 120-142.

Stanley E. Fawcett and Gregory M. Magnan (2001) Achieving World-Class Supply Chain Alignment: Benefits, Barriers, and Bridges

Cannon, J.P. and W.D. Perrault (1999), “Buyer-Seller Relationships in Business Markets, “Journal of Marketing Research, 36, 3, 439 - 460

Lee, H. L. and S. Whang (2000). 'Information Sharing in a Supply Chain' International Journal of Technology Management Vol 20 No 3/4 pp 373-387

Henriott, L. (1999), "Transforming supply chains into e-chains", Supply Chain

Management Review, Global Supplement, No.Spring, pp.15-18

By Ronald TUMUHAIRWE

BPSCM (MUK), MPSM (Student, MUK), MCIPS (UK), CSCMP (US)