Supply Chain Sustainability Assignment Help
Introduction
There is ample evidence that with rising global pressures of inflation and costs of doing business, existence in isolation is becoming an ideal condition. Companies are progressively moving towards a resource based approach in operations management because this leads to synergy, efficient knowledge sharing, problem solving and increased chances of availing new business opportunities. In the last 2 decades firms have been actively seeking close coordination with other companies in order to leverage each other’s strengths, technical know-how or tangible resources so that they could jointly deliver unique value to the customers (Stock, Boyer & Harmon, 2010).
Collaborations have become commonplace and necessary for contemporary and smooth operations of any organization which needs to compete with global changes in operations. According to Selsky and Parker in 2005, alliances have become more eminent and discernible globally over the years, especially in the past 25 years. This has resulted in major changes in the form of governance in particular since the 1980s.
It is important to explain here the meaning of cooperative agreements. Strategic associations are meant to improve and multiply the collective effect of using a firm’s resources. According to Olivier Serrat (Asian Development Bank, 2009), strategic alliances are extremely important in international scenarios. It is extremely challenging and demanding to operate while relying on the individual resources. According to Serrat (2009):
“Self-sufficiency is becoming increasingly difficult in a complex, uncertain, and discontinuous external environment that calls for focus and flexibility in equal measure. Everywhere, organizations are discovering that they cannot “go” it alone and must now often turn to others to survive.”
These collaborations and alliances are also rife in contemporary supply chain management scenarios. Organizations globally, are looking to avail increasingly more knowledge sharing techniques regarding managing the supply chains. According to Done (2011), supply chain’s earlier works have emphasized on the knowledge-sharing between various actors of a supply chain. This primarily helps in overcoming the problems on a larger scale and at the same time improving performance of the entire system. He has also emphasized that individual stance of supply chain players should not be underestimated as they provide a valuable knowledge-base for the overall supply chain management.
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Firms through supply chain initiatives have been trying to design & develop their interactions with other members in the chain in order to achieve competitive advantage by calibrating the flow of goods and services in the network. Besides that the firms have also been harnessing the advanced information management technology for the purpose of decision making (Verwaal & Hesselmans, 2004). In supply chain, members coordinate and collaborate to design, plan, source and support delivery of products and services in the marketplace.
What is Supply Chain?
Simchi-Levi, Kaminsky (2004) defines Supply Chain as “a set of approaches used to efficiently integrate suppliers, manufacturers, warehouses, and stores so that the merchandise is produced and distributed in the right quantities, to the right locations, and at the right time in order to minimize system wide costs while satisfying the service-level agreements.”
This definition infers that supply chain initiatives try to view the whole network as one single system and reduces system wide inefficiencies by integrating channel members into an efficient unique network. This enables them to placate inventory intelligently within multi-tiers, synching inventory alignment between multiple echelons towards achieving efficiency and also to minimize information distortion (Harrison, Lee & Neale, 2003).
Such partnership have helped organizations to
- Mitigate risks collaboratively
- Complement partners resources
- Increased output
- Increased financial returns
- Competitive Advantage
- Build core competence
(Kogut, 1988; Park, Mezias & Song, 2004; Kalwani & Narayandas, 1995; Mentzer et al., 2000)
Traditional view of supply chain
Traditionally, supply chain management was seen as the organizational process that facilitated supply chain in achieving the best and economical prices possible for the firm. At the same time it also ensured that supply was uninterrupted in every way possible. Spekman, Myhr and Kamauff (1998) have proposed that there are some fundamental characteristics of a traditional supply chain such as presence of numerous partners, evaluation of partners depending upon the purchase price, distant negotiations, formalized and short-term based contracts and centralized purchases. Operations based on these terms meant that a strong competition was being called for and encouraged among the suppliers. This often required putting up the suppliers against one another and then awarding the best player with incentives and discouraging the inept performance with certain punishments. The base line proves to be the fact that when business is given out to a single supplier, they may exploit the situation demanding unnecessary profit margins or curtailing the supply. Hence dependency on a single provider is not the best way to adopt. Another important assumption is the concept of a free and competitive market under which competition is maximized which leads to profit maximization. This, in turn, will further lead to a strong and vital stream of supply base which is also attributed by the authors as ‘survival of the fittest’.
Evolution of Supply Chain
The authors have also presented a comparison of the contemporary model of supply chain. This presents an exhaustive explanation and insight into the supply chain management process. They have redefined the process as a flow that encompasses multitude of aspects such as “designing, developing, optimizing, and managing the internal and external components of the supply system, including material supply, transforming materials and distributing finished products or services to customers, that is consistent with overall objectives and strategies.” They have given a very precise definition of the supply chain which compares the supply chain management to a “network of cells that process material” and the basic functions include supply, transformation and meeting demand. According to Bellington and Lee (1992), the kernel of supply chain management lies in providing a sustainable competitive advantage by means of reducing investment wherever possible and at the same time, maintaining and retaining existing customer base and also maximizing the customer satisfaction. By focusing on individual steps of the supply chain any activity that is being redundant can be significantly reduced or eliminated. Additionally, information sharing makes it easy for supply chain partners to collectively meet the customer’s requirements in a satisfactory fashion.
According to Lasalle (2008), evolution of supply chain management has been remarkable over the past half century. He stresses upon the fact that supply chain was self-contained initially. It is now an extensive and collective process involving multiple partner networks spanning the globe. The factors like steeply rising costs of energy and transportation, amplified security concerns and concerns of a healthier safe environment are also the reasons behind the evolution of supply chain. As supply chains expand globally, there would be a need for assimilated information systems which will require transparency and high visibility of goods across the network, tracking of progress, speed and lead times etc.
Importance of Supply Chain
According to Motwani, Larson and Ahuja (1998), due to global competition, organizations worldwide are regularly reviewing their supply chain routes and maps to evaluate the costs incurred and time involved in delivery of goods with an intention to lower down prices. The reason is evident i.e. the organizations are gaining competitive advantage over the local and international competitors. They have quoted Scott and Westbrook (1991) that a number of organizations had started looking forward to see the presence of a viable supply chain as crucial and necessary condition in order to simply exist in the market; there is no other choice left for firms if we look at the turn of events in 1991. Motwani et al (1998) have further quoted Ellram’s work from 1990 stating that there are no overnight solutions available for the development of a competitive supply chain, neither could there be a one size fits all situations for every organization. Nevertheless, a firm can immensely strengthen its distribution network and supply stream once its supply chain is being efficiently executed and managed prudently.
The benefits from supply chain initiatives have been researched, documented and empirically tested in various leading organizations over the last many decades. Many studies have been undertaken on how to sustain the supply chain collaborative efforts over the long run. Such tie-ups between two or more firms to plan and execute operations together for a common goal provides the kind of long term benefits which the firms could not have achieved independently (Simatupang & Sridharan, 2005).
According to Lasalle (2008), a supply chain strategy must be designed in a way that it contributes to an organization’s business objectives, maximizes the potential of customer services and incorporates growth objectives of the organization, and that too while ensuring minimum purchase prices for raw materials. More precisely, an analysis of supply-chain and logistics analysis is required in order to take the best possible decisions for the organization.
Two key underpinning factors for a mutually beneficial and successful Supply Chain partnership are relationship management between multi-echelons and the strategic intent for them. This study through literature review attempts to highlight the importance of these two attributes and their impact(s) on the stakeholders such as Supplier, Manufacturer, Distributer and Retailer etc.
An inference is gained from literature review to conclude the findings and to fuel the future studies.
Literature Review
Relationship
Various studies have been undertaken with respect to relationship and its effects on inter company performance. Some of the key ingredients for the development of relationship in a supply chain context have been reviewed in this literature.
Cerri (2012) suggests that trust has a significant impact on the relationship which has a direct correlation to the performance of the supply chain. Long term business relationship mitigates risk, reduces cost, improves visibility and reduces demand variability (Sheth & Sisodia, 2005; Sirdeshmukh et al., 2002).
Various other studies have also underlined trust as a significant element in building relationship in supply chain context. (Sahay, 2003; Svensson, 2004; Gounaris, 2005; Varma, Wadhwa & Deshmukh, 2006). Trust has been seen as a pre-requisite for inter firm relationship.
Cerri (2012) suggests following factors as being hierarchically important for influencing trust and correspondingly building relationship.
- Social Interactions
- Communication
- Competence and reputation
- Rule of law
- Personality Traits
Naude & Buttle (2000) also suggest trust, adaptation, communication and cooperation as being important and crucial for relationship quality. Supply Chain relationship has been visited through transaction cost theory, political theory, social exchange and resource dependence theory (Robicheaux & Coleman 1994). These frameworks have highlighted the key aspects which underlie the relationship management.
Organizations that trust each other will contribute to positive outcome in the relationship and not pursue actions that might deter relationship building (Anderson & Narus, 1990)
Adaptation is when the stakeholders invest in transaction-specific investments. Such investment cements the relationship in the form of financial tie up. Firms in this scenario understand the fiscal and process responsibilities of partnership.
Communication is the real time sharing of valuable information which is very important to diffuse any misunderstanding and timely information dissemination. Any flare up or process disagreements can be resolved through proper channel and timely discussion. The nature of communication may be formal or informal. Communication should be exercised to maximize the value of relationship and enhance the supply chain.
Cooperation is important in supply chain to achieve common goals. In order to manage the network, timely information dissemination to channel partners is imperative. A tactical decision can then be made regarding the production schedule, inventory placement and process streams etc. This weeds out any complacency within the network and also assists in resolving any issues or conflicts.
The above dimensions assist in establishing long lasting relationships for the purpose of effectively managing the supply chain. There is material available on the relationship constructs among the supply chain members. However there is not much research on relationship quality having an impact on supply chain performance.
As firms focus on their own strengths, manufacturers are now relying on suppliers as long term partners (Prahalad and Hamel, 1990). Firms are now engaging in more long term relationship rather than short term contracts (Helper, 1991; Ogden, 2006). Firms are now willing to keep their supplier to a few rather then keeping a large base. This allows them to purchase more quantity from key suppliers and to employ a more cost conscious approach with large volume purchases from a selected few. This has led to the suppliers being treated as strategic partners in achieving a competitive advantage. Having a selected few as vendors enables large investments to be made jointly or on Information Technology and sharing. The more communication and trust the firms have the more is the reliability and joint exercises for mutual benefit.
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