Global Supply Chain Management – Drivers and Activities of Global Supply Chain

Nowadays with globalization, global supply chain management is becoming a very important issue for most of businesses. The main reasons of this trend are procurement cost reduction, purchasing risks control, revenues increasing and etc. For instance, companies may set up overseas factories to benefit from tariff and trade concessions, lower labor cost, capital subsidies, and reduced logistics costs in foreign markets. Moreover, easy access to abroad markets and close proximity to customers result better organizational learning. On the other hand, improved reliability can be obtained as a consequence of closer relationship with suppliers.

There are some issues that should be considered in managing a global supply chain. First of all, the company should decide about its general outsourcing plan. For whatever reason, businesses may prefer to keep some aspects of supply chain nearer to home. The second issue that must be incorporated into a global supply chain management strategy is supplier selection. It can be very difficult to comparing bids from a range of global suppliers. Companies usually jump on the lowest price instead of taking time to consider all of the other elements. On the other hand, selecting the right suppliers is influenced by a variety of factors and thus there will be additional complexity in supplier selection due to the multi-criteria nature of this decision. Additionally, companies must make decisions about the number of suppliers to use. Fewer supplies may result reduced inventory costs, volume consolidation and quantity discounts, reduced logistical costs, coordinated replenishment, improved buyer-supplier product design relationship and thus better customer service and market penetration.… Read the rest

Green and Sustainable Supply Chain Management

Environmental changes across the world have generated a movement to identify the causes of global warming and develop solutions to end it before it is too late. In an effort to achive this, many countries are creating laws and regulations with the specific aim to reduce carbon emissions and greenhouse gas effect.

The truth is that environmental change is upon us. Not only do we have climate problems but we are also dealing with a resource depletion issue. With economies like India and China growing at near double digit rates, the population of the world continues to grow creating shortages of many resources that we use to take for granted.

Many consumers, stakeholders and businesses are becoming more involved in the growing green movement. Influenced by customer loyalty shifting towards environmentally friendly products, businesses are trying more and more to make their supply chains greener by introducing sustainability strategies throughout their organizations and supplier relationships. The recent focus on sustainability has resulted in a growing need for integrating environmentally safe choices into supply chain management practices. The concept Green and Sustainable Supply Chain Management can be defined as the process of using environmentally friendly inputs and transforming them through change agents into outputs that can be reclaimed and re-used at the end of their life-cycle therefore, creating a sustainable supply chain. The whole idea of a sustainable supply chain is to reduce costs while helping the environment.

Sustainability and Profitability

A Green and Sustainable Supply Chain integrates ecological factors and supply chain management principles to identify the environmental impact of an organization’s supply chain processes.… Read the rest

Case Study: Zara’s Supply Chain Success Story

Zara is a Spanish fashion clothing manufacturer and retailer, formed in the 1970’s It is known that only two weeks are required for Zara to complete the development and shipment of a new product to its stores, which outweighs the average of fashion industry of six months, thanks to the collaborative relationship with customers and suppliers. Zara mainly targets on young and urban female customers and acceptable prices are offered. There are always new products in Zara stores. Even though usually Zara stores are spacious but the stock is displayed in limited quantity. This kind of strategy gives customers a sense of originality and exclusivity. Most of the stores display clothes only when they have a full set of major sizes, so customers would not be upset to find out that the needed size is not available. As shoppers enter the stores, reaction between Zara and customers starts with creating a sense of “buy now since you won’t see it next time” because of the rapid turnover environment. Customer relationship between Zara and shoppers is then strengthened by, instead of offering VIP services and discounts, showing a sense of scarcity by displaying unfilled shelves, limited offer notes on certain items and deliberate undersupply impression to encourage customers to run to the counter.

Such a retail concept depends on the regular creation and rapid replenishment of small batches of new goods. Zara’s designers create approximately 40,000 new designs annually, from which 10,000 are selected for production. Some of the goods are high fashion looks-alike, but much cheaper and lower quality and that in many cases allow Zara to beat high fashion designers in sales and profit amounts.… Read the rest

Postponement Strategy in Supply Chain Management

Postponement is first implemented in manufacturing processes to reduce cost of inventory and improve service level within the company while the product variety increases. The concept of postponement is to delay the change in form, identity and place to the latest possible point until customer commitments have been obtained. It is by exploiting the commonality between items and by designing the production and distribution process so as to delay the point of differentiation. Postponement is closely intertwined with modularization where products in a certain product family are designed where all of them consist of different standardized units. With modularization, combination of different standardized sub-components allows the producing of different end products. The form, function and place of the product are altered and is in contra with the push systems in which goods are manufactured entirely in anticipation of future customer orders and stored downstream without customer’s formulated specifications.

Postponement is a mass customization technique that is applicable for certain products that can have their variety postponed until just before shipping. Here’s a list of methods for achieving mass customization:

  • Create products and services that are customizable by customers (involving design function)
  • Modularize components to customize finished products and services (involving the manufacturing, distribution, marketing function and the product design).
  • Provide quick response throughout the value chain (involving the design, manufacturing, distribution and marketing function).
  • Customize services around standard products or services (involving the distribution and marketing function).
  • Provide point of delivery customization (involving the marketing function).
Need for Postponement

The application of postponement strategies is increasing in the practice of international business.… Read the rest

Importance of Customer Service in Supply Chain Management

Supply chain is basically considered as a strategic concept that involves understanding and managing the sequence of activities -from supplier to customer-that add value to the product supply pipeline. The role of customer service in the supply chain management is not incidental. Every company in this chain, irrespective of market size mainly they thankful to its customers as the fact is that in all profit of firm there are customers are in center whom to buy the goods and services produced by each one of them. This century marks the end of monopolies and therefore customers can make an array of choices. When customers decide not to buy products in a particular supply chain, then no doubt the company would collapse without earning any revenue for the expenses incurred in launching the product on the stage of saturation and decline stage.

So, the supply chain should be structured in such a manner that there is a common link between the products as such and the end customer. It is because that the tastes of customers keep changing and their expectations goes on rising, when product cycle at saturation and decline stage at they began decreasing ‘brand’ loyalty and put in for anything that attracts them. Thus the importation must be put on conducting effective market analysis to know the needs of different groups of customers to whom the offer is to be made. Its main aim is to polish its contact with the customers. The rationale behind this strategy is to improve services provided directly or indirectly to its customers and to use the information in the system for targeted marketing and sales purposes.… Read the rest

Concept of Supplier Relationship Management (SRM)

An important feature of a world class organisation is the way the organisation has been able to develop and link its suppliers with its external processes. Supplier relationship management can be defined as the relationship that exists between the supplier and its buyer based on long term commitments and trust with the ultimate aim to maximize the potential value of the relationship. This will include the management of different forms of supply relationships such as partnership, joint venture and vertical integration.

The critical importance of supplier relationship types to achieve supply chain competitiveness can be viewed under the following headings:

The effective use of strategic partnership

Typical traditional short term relationship is characterize by irregular or ‘one-off’ transactions that give rise to supply uncertainties, difficulties in choosing suppliers, and is price oriented making this type of relationship unreliable and unsupported. Organisations can move from this type of relationship towards a long term relationship known as partnership based on trust, shared goals and risks to achieve mutual benefits. Partnership as an agreement between two firms that seek to accomplish a common objective. The concept of partnership and lean to gain competitive advantage because they realized their partners had the expertise, the technical knowledge and were reliable. Effective partnership with suppliers made them to compete favorably in the market because of good product quality, low cost and reliable delivery. Therefore, firms can use this same method to rationalize their supply base and use the lean concept to produce efficiently which will lead to reduce product lead times, reduce inventory and inventory cost.… Read the rest