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Factors and challenges driving supply chain management

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Kira Kallio

on 16 September 2014

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Transcript of Factors and challenges driving supply chain management

Factors and challenges driving supply chain management
Based on the chapter 2 and journal by Storey et al.

Nita Päivärinta & Kira Kallio

• Companies striving to become more competitive and providing customers with added value in the supply chain
• Challenges in the global market have become more complex because of
globalization, free movement of goods and work force, expansion of trade routes, e-commerce, free trade zones and politics
• The 5 factors where to concentrate in global SCM are
Centralisation of a one-production centre
The tendering of suppliers
Continuous audit review of inbound and outbound supply chain
Carriers are driven by the needs of shippers to add value to the service
Customs planning strategy

Factors driving global supply chain management
What to take into consideration in global SCM
Journaly by John Storey, Caroline Emberson, Janet Godsell & Alan Harrison. 2006.
Study conducted between 2001-2004
Six “blue chips” companies supply chains were examined
Interviews were conducted in UK, Ireland, Italy, Netherlands and Germany
Aim was to find out the differences between theory and practice in SCM
The following questions were asked
Who is managing the supply chains?
What type of supply chain activities were they managing?
What were the key enablers and inhibitors to this process?
What external factors were driving the strategic imperative of SCM?

The article SCM: theory, practice and future challenges
Requirements and procedures
Trade agreements (NAFTA, MERCOSUR)
Duty reliefs
Duty rates
Free zones (e.g. EU)
Customs documents (ATA carnet, TIR carnet)
Possibility to reduce inventory costs, delays at frontiers and loss in supply chain responsiveness

Inventory management
Critical area in the cycle time analysis
Excess inventory can cause unnecessary costs such as labor costs, loss of sales (perishable products) and warehousing costs
Developing a strategic approach
E.g. Inventory analysis, Lean inventory, segmentation, part of overall strategy, distribution network, supplier performance and E-commerce
Should focus on customers, sales and profits

Development of logistics
Development of IT
Keeping track of goods all time
Globalization of markets (major contributor is WTO)
Development of container network
Continuing development of global infrastructure

Asset management
Key area in SCM and warehouse management
Aligned to RFID (radio frequency identification)
Provides benefits in inventory control, asset utilization, manufacturing work-in-process, loss prevention and security
Ideal asset management systems makes use of multiple technologies, choosing the best suiting type for each asset

Lean SCM
Identifying and eliminating waste in SCM (lead time, over production, personnel)
Focuses on 3 key areas
Includes a change throughout the organization
Embraces the suppliers and customers
Lean principles must be the basis of lean SC
Involves continuous focus and flexibility in all areas of the business
Requires a dedicated team
Lean workforce
Workers self-motivated and self-accountable, supervisors become coaches = management has a more productive workforce
Adds value to the SCM
What were the key enablers and inhibitors to this process?
Transparency of information and knowledge
Supply chain behavior
Performance measurement
New driver
Market polarization
Mid-high markets have disappeared and been replaced by high-end/low-end market profile
This has serious implications for SCM
Who is managing the supply chain?
Findings contrary to the theory > SCM should be managed from end-to-end
However, the SCM in the companies was fragmented
What type of supply chain activities were they managing?
Findings contrary to the theory > There should be seamless end-to-end pipeline management
However, this was far beyond from actual practice
For example in one company the scope was limited to the outbound logistical operations of their close partner in Europe > no information of products in the process of manufacture
Substantial gaps between theory and practice
Who is managing the supply chain?
Increase the scope of SCM involvement (the “arc of integration”)
Future prospects
Business models and supply chain practices are changing in tandem
SCM can be seen as part of a wider set of trends
Trend towards outsourcing heightens the need for SCM
Trend towards fragmentation and variety in product and service offerings necessitates greater thought and skill in managing decoupling points and postponement of final product composition
Globalization necessitates greater attention to logistics and to other component elements of SCM
Reasons for increasing interest in SCM
Concept: reducing delivery times and improving responsiveness to customers, reflecting the shorter product lifecycles they face
Value: Cost savings and improved service quality
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