Supply Chain Management : Case Study

Effective supply chain management can provide an important competitive advantage for a business marketer, resulting in improved communication and involvement among members of the chain, increased motivation, and decreased costs. Tracking the movement of and demand for components used to manufacture a product across a variety of potential and actual suppliers, provides insight and the ability to respond instantly to shortages, surpluses, and changes in market conditions. It seeks to optimize production, decrease manufacturing time, minimize inventory, streamline order fulfillment, and reduce cost.

Better communication lets you ignore day to day fluctuations and gives you better chance of equilibrium between your chains and the demand for your product. There are various tools/techniques to increase communication with technology at the forefront. The key is to get information rapidly down the supply chain. The internet and other forms of electronic commerce have transformed supply chain management. Phones, cameras, bar code technology and computer software are all examples of technology that has improved communication. Standardized parts have also led to better supply chain results. This was only possible due to improvements in technology.

Under such a system, the vendor—subject to bounds previously agreed upon with the retailer—decides on the appropriate levels of inventory to carry at the retail stores, as well as the corresponding inventory policies to maintain such levels. In the P&G and Wal-Mart partnership, P&G committed to the development of a dedicated team to handle the Wal-Mart account. A primary objective of this team is to facilitate information-sharing between the two firms and address logistics, supply, management information systems, accounting, finance, and other issues (Handfield and Nichols, 1999). Under this arrangement, Wal-Mart shares point-of-sale information from retail outlets directly with P&G, giving the latter easy access to information on consumer transactions and buying patterns. P&G’s dedicated Wal-Mart account team effectively takes responsibility for the marketing and sales of P&G products within Wal-Mart stores. Similar VMI partnerships with other giant retailers have been established by P&G. These partnerships have dramatically improved P&G’s on-time deliveries to Wal-Mart and the other retailers while increasing inventory turnovers (Simchi-Levi, et al, 2000; Handfield and Nichols, 1999). At the same time, they save the retailer a significant amount of managerial and other resources, and demonstrate how information sharing leads to mutual advantage for both

Success for many organizations depends on the firm’s ability to balance product and process changes while exceeding customer expectations for improved cost delivery and quality. In lieu of these issues firms have started to implement principles of supply chain management. Supply chain management mainly involves managing the flow of incoming materials, manufacturing operations, and downstream distribution has to be in alignment that is responsive to change in customer demands eliminating a surplus of inventory.

To start, Schroeder, R., Goldstein, S., and Rungtusanatham define supply chain as “the set of entities and relationships that cumulatively define materials and information flows both downstream toward the customer and upstream toward the very first supplier.” Schroeder, R., Goldstein, S., and Rungtusanatham goes on to identify supply chain management as “the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer.” Organizations have to prepare themselves to the best of their ability in order to provide or their customers. Customers expect to receive the upmost service, regardless of the type of organization they make contact with.

Mellat-Parast and Spillan (2014) defines supply chain management as the method of handling material and information moves from the beginning, through the organization, and to the end-user. This is a very important factor of organizational strategy.

Supply chains must be managed to coordinate the inputs with the outputs in a firm to achieve the appropriate competitive priorities of the firm’s enterprise processes. The Internet offers firms an alternative to traditional methods for managing supply chains. A supply chain strategy is essential

The average company spends nearly half of every dollar it earns on production needs—goods and services it needs from external suppliers to keep producing. A supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material. Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

In comparison with K-Mart, Wal-Mart has better ability in responding sudden demand and marketplace changes or uncertainties, which supported by their effective distribution strategy and inventory management. Moreover, Hi-tech information technology, such as VMI and REMIX also offer real time information all supply chain participant. (Johnson 2006). However responsiveness and efficiency could not be obtained at the same time. To gain responsiveness, Wal-Mart inventory is raised and the growth of it faster than sales growth which cause increase in the cost. More inventories means higher holding costs.

Supply chain management (SCM) is the supervision of materials, information, and finances as they move in a process from supplier to manufacturer to retailer to the cessation consumer. There are three crucial flows of the supply chain: The product flow, the information flow and the finances flow. SCM involves coordinating and integrating these flows both inside and between

A goal is to replace inventory with frequent communication and sophisticated information systems to provide visibility and coordination. In this way, merchandise can be replenished quickly in small lot size and arrive where and when it is needed. Quick, frequent and accurate information transfer among members of the supply chain can counteract the distortion of information (known as the bullwhip effect) as it passes up the supply chain from the end customer. A supply chain can reduce overall inventory while maximizing customer service by efficiently redistributing stock within the supply chain using effective postponement and speculation.

Supply chain management is an integrated process that constitutes the various stages through which a product passes prior to reaching the ultimate consumer. Every product or service is designed in such a manner that it is able to meet the requirements of its target consumers. Through a well formulated and managed supply chain process, products that are manufactured are able to reach out to its consumers effectively and through the process it is possible to make it available at a convenience to the customers. The processes constituted in the supply chain system are continuously active and are always being monitored and managed by several people across the system. An efficient supply chain management system ensures that there is speedy delivery of the product from the stage of the manufacturing through the various channels for delivering it to the consumers.

A recent study conducted by the Forrester Research indicates that U.S manufacturers are dependent on the benefits of Information Technology to improve the supply chain, improve the cycle time and receive high efficiency in order to deliver the products to their customers within the time frame. Stevens defines Supply chain management as the “series of interconnected activities that are concerned with the planning, coordinating and controlling materials, parts and finished goods from the supplier to the customer and works as a transporting link between these facilities.” With the development of Information Technology the companies has adapted online communications which helps to increase the interaction between firm and the customer effectively. According to Bakos & Brynjyoolfsson (1993) Information Technology decreases transactional costs between the transaction costs between the buyers and suppliers and creates a more cooperative governance structure which finally results in closer buyer- supplier relations. The research revealed that the effect of information technology on Supply chain management are on 4 aspects which are purchase, logistic, firm, vendor relationship management and customer relationship management.

These trends are; improvement of the levels of customer service over cutting costs. Supply chain costs are continuously going down since recession started four years ago. The focus of companies is the improvement of the service levels of supply chain and at the same time reducing the costs. Execution is also been seen to be moving ahead of the planning of demand and supply. Planning for demand and supply has been the ultimate focus since o=it is a crucial part of success in supply chain. Contingency planning has also resurged, supply chains are becoming leaner (Riley, 2012).Reduction in the level of inventory require organizations to be able to react quickly incase of occurrence of abnormal events such as stock outs. Companies focus on the development of contingency plans, their execution and checking if the plans are effective.

Innovative products in supply chain management have a very high uncertainty life span in terms of demand from consumers. Not only is the uncertainty of demand an important factor, it is also important for companies to understand how and when to share information with partners and customers along the supply chain in order to please the consumers demand, and stay two steps ahead of demand uncertainty. Innovative products also have higher cost, and they are very difficult to forecast. Although, it is not an easy process, it can very well be done. The main concern is consistent communication and hard work from Distribution Center (DC) management, Supply Chain managers and directors, operation managers, etc. Furthermore, maintaining a high-quality communication through the supply chain will improve and control logistics costs, and will definitely make the supply chain more competent. Companies that create and manufacture innovative products such as Hewlett-Packard (HP) have to deal with attacking tough supply chain management challenges on a daily basis in order to remain top competitors within their industries.