Impact Of Various Strategies On Supply Chain
Supply Chain Management is coordination between all the present factors under the controlling areas of the company, such as production, finance, marketing etc. Thus the collaboration is a prerequisite for SCM to work effectively for a company.
The collaboration faces many obstructions as every one pursues own objectives and so the conflicts arise, the collaboration has to keep the things normal and help both the parties to reach their objectives in a desired way without compromising on the sidelined facts. One good thing that SCM should concern with when pursuing the goal of collaboration is to having intense concerns on the customers as it say (SCM begins with the customers). When both the manufacturer and supplier would work jointly then they both can charge higher price from the customer, as if they both would be pursuing their own objectives then they could have given more benefit to the customer and not to each other, this technique is also known as vertical integration, in which both the manufacturer, supplier and even retailer work together for each others betterment. The trends are also changing as now the manufacturer is not a price decider but it is decided by the market trends, so the control is done by the manufacturers on the production processes as lessening the profit can be costly, there are yet number of factors that can affect the collaboration that is desired in SCM, such factors could be just in time manufacturing, modularization, postponement, make to order/make to sock, production strategies etc.Just In Time Systems/Manufacturing:Change doesn’t come easily.
The tendency in development is to complete as much as possible with the longest amount of time available, thereby cutting into production as well as threatening the competitive advantage of the firm. This results in even greater need for additional time. A sort of Gresham’s Law of Time goes into effect. Bad time “weeds out” the good time. Longer delivery times allow the opportunity for unscheduled work to take priority over scheduled work in order to provide quick fixes to systems failures and errors. The only way to reduce the opportunity for that circumstance to arise is to reduce time consumption; in most cases that involves cycle time.
In essence, the JITS principles, concepts, and techniques are derived from Just-in-Time Manufacturing (JIT-M). Indeed, there is a strong correlation between the two. Both attempt to compress the time required to deliver a product to the customer. They accomplish that by eliminating waste, reducing rework, minimizing lead times, creating smaller lot sizes of production, reducing inventory, compressing setup (or changeover) and throughput times, and addressing customer’s needs at the right moment, in the right place, and to the right degree. Hence, JITS says that manufacturing techniques are applicable to developing systems. This direct correspondence between JIT-M and systems development is JITS.
JITS enables meeting internal and external customers’ needs quickly, efficiently, and effectively. By reducing time and thereby accelerating development, JITS enables firms to experience a host of benefits. A benefit is that in meeting customer needs quickly computing now takes the lead and the rest of the organization follows. In other words, computing becomes an organization leader rather than a follower and an integrated part of the going concern. Other units or divisions operate in a time-compression mode.
Where JITS differs from traditional JIT-M is in its emphasis on time. JITS makes time a primary consideration; JIT-M makes time one of three considerations (inventory reduction and waste elimination are the others). JITS recognizes that time is of paramount importance but does not overlook occasional circumstances that might cause a delay. Surely a system upon which human life depends must not be released unless it is comprehensive and reliable. Delaying circumstances are rare, however, and as a general rule they do not obviate the applicability of JIT-M principles, concepts, and techniques to systems development.Because they see as their primary goal the need to address business problems, JITS developers seek to create an effective solution in the least time with the least cost.
They see that manufacturing processes have, therefore, direct relevance to systems development. Reusability, reliable estimating, predictability, structure, fast development, and statistical tracking and monitoring, for example, all play important roles in the manufacturing process and in systems development. The idea is to meet users’ needs quickly but reliably and effectively without being obtrusive. JITS principles and techniques especially apply to systems development, which in many firms is riddled with overexpenditures and thus contributes to high overhead. The tendency is to view computing in general and systems development in particular as something unique. Yet waste exists in bountiful quantities in systems development–in resources, in money, and especially in time.
Developers must recognize this waste and work to identify all its aspects, particularly those surrounding processes adding value to the product.Modularization:The overall level of complexity in the supply chain may, or may not, decline depending on the distribution of capabilities. Specifically, an OEM (Original equipment manufacture) that produces modules in-house or has suppliers with solution is likely to benefit from an overall improvement as a result of modularization. By contrast, an OEM which outsources modules without an in-house set of solutions may end up not improving the amount of complexity in the total supply chain and therefore pay more dearly for the modules than if they were produced in-house.The popularity of the notion of modularization in the United States and Europe may in part be due to the hope that it might enable the retention of, or reversion to, arm’s-length trading with suppliers without being locked into any committed relationships.
Then we would expect a greater move towards modularization where supplier relations are market-based than where they are long-term and obligational. There is some evidence in the car industry that US and European OEMs are ahead of Japanese OEMs in thinking about modular product architecture, and one may conjecture that one reason for this is the pre-existing organization architecture of OEMs and their supply chain. However, apart from the pre-existing organization architecture, there is also a difference in the mix of strategic drivers that predisposes certain OEMs to be more interested in outsourced modules than others. The next section discusses these drivers which are relevant to the global car industry.Modular Strategies: Why are OEMs and Suppliers Interested in ‘Going Modular’?The car industry has been the source of innovative management practices in production in the twentieth century.
After the 1910s, Ford’s moving assembly line, making use of standardized and interchangeable parts, revolutionalized the way cars were made, leading to mass production supplanting craft production in most locations. A second paradigm shift occurred with the advent of the Toyota Production System and its diffusion in the form of lean production that emphasized the elimination of waste and good functional quality. Now, the focus of many OEMs and suppliers is on so-called modular strategies in product design and production. What opportunities and threats are driving OEMs’ and suppliers’ wish to ‘go modular’? This section identifies four strategic drivers, and discusses their implications for OEM-supplier relations. Wherever appropriate, a comparison with the computer industry is made.
It is evident that modularity in the car industry is not just an engineering principle but part of corporate strategy. OEMs’ motives for adopting modules are multiple, and different motives lead to a varying degree of push for outsourcing modules.Postponement:Using the common sense which is not so common, postponement can have a direct impact on a company’s supply chain and entire process could be disturbed, you may say that it can take a bullwhip effect in not only the company itself but many outer sources linked with the company. But in practical means, the postponement has a positive impact on a company, the concept of postponement is related with the customer’s complete will of buying a particular product or confirmation that he/she will definitely buy it. The postponement therefore brings the company a chance to provide the right product, manufactured at right pace to the customer at the right time.
The research has shown that companies that do not follow postponement strategies, have significantly higher costs and that the profitability is less. The postponement therefore has a direct link with the overall supply chain. Further postponement can bring a balance within an organization if done with care, but it requires the key concept of SCM, that is collaboration. The postponement provides the company an opportunity to deliver exactly what the customer wants. There are many concepts that are indicating the postponement benefits in an organization such as mass customization, simplification, focused factories and agile production, mostly they are following the concepts “don’t make it until you can sell it”. Mass customization believes in building products at the last moment so they can meet the actual requirements, so there is a need of restoring operating systems, modularizing products and process designs in order to facilitate the changes at critical customer preference points.
“Product postponement delays the final process until an actual order is available. This practice can ripple through the supply chain and, as it does, it increases throughput and reduces the need for inventory and storage throughout the network” (Tersine: 2004).Make to Order:There is clearly support for the product-process matrix, i.e., firms that operate on or near the diagonal will outperform those that are significantly off-diagonal.
However, as noted, there is also some evidence that as companies adopt more flexible systems and identify inventory pooling strategies they may succeed despite operating further from the diagonal. If demand characteristics were important for defining the competitive priorities and process choice within a company, why wouldn’t end-customer demand characteristics also be important for defining the process choices across a supply chain? The association between process choice and end-customer requirements across a supply chain has not been empirically tested. Therefore, the following could be suggested:The competitive priorities and end-customer value with regard to a supply chain’s primary product line must be consistent with the supply chain firms’ process choices.While the above sentence suggests the importance of alignment, it does not imply that each company in the supply chain must have similar processes, or even that the processes would have similar capabilities (i.e., speed, volume, changeover, etc.
). What is suggested is that regardless of where the company is positioned in the supply chain, the focus must be on end customer requirements. If end-customers require a variety of products with short lead times and variable volumes, each partner in the chain must be able to react quickly to provide different varieties and ramp production up or down. An end customer focused on low cost and consistent product in high volumes requires each partner to focus on streamlined production and efficient operations. How each partner meets the capability required by the end customer may differ, but the focus must be on what the supply chain’s end customer requires.
There are key differences in the characteristics of products that affect supply chain design. Uncertainty surrounding the specific product design volume and delivery requirements increases the need for flexibility across the supply chain. Each firm within the supply-chain plan processes must understand end-customer value to maintain the flexibility required by all upstream partners. Types of uncertainty include: the need for differently defined product (make-to-order ‘ MTO’), the desire to choose from an existing group of designs (options), the need for different volume requirements, and the need to design new products. End-product uncertainty suggests that entire supply chains must be adaptable.
Therefore, the following is suggested:End-customer product uncertainty characteristics increase the need for supply chain flexibility and influence process choice.As an example, consider the level of uncertainty associated with customer demand for fashion items, such as women’s handbags. There is great uncertainty associated with how well any particular design might be accepted and eventually purchased by the end customer. Systems must be established to move product to the location with the greatest demand. Demand characteristics, including general market response and seasonality, may affect the sales or shelf-life of the product and, therefore, require a supply chain that can make adjustments in production, design, and raw materials. At the other end of the uncertainty spectrum resides a product like sugar.
Stable demand and specific product characteristics allow for the development of a supply chain where minimal flexibility is required.Another example could be the make-to-order clothing retailer must have processes that can gather size information, translate that information to drawings, and transfer the information quickly to the clothing manufacturer. The clothing manufacturer must have equipment that can interpret design requirements, quickly change from one size to another, and incorporate color and other choices. The textile manufacturer must stock or quickly produce the right color and thickness of material to match the particular customer’s needs. The entire supply chain must be able to react to customized design. At the opposite extreme are supply chains that produce a standard product in one or a very small number of options and are focused on efficient production throughout the supply chain.
These examples and the propositions offered suggest the need for a new model to define the relationship between processes and products across a supply chain. Successful supply chains will focus on end-customer demand and select the appropriate processes to match the demand characteristics.Many supply chains today are finding more and more customers requiring customized products. Companies currently mass producing products, such as shoes, are considering how to build a product specific to the customer. In this example, the customer’s foot measurements are translated into a custom-fit product. This movement from repetitive products to more mass-customized items suggests that supply chains in the future must be more responsive.
Therefore, the following is suggested:The goal of the supply chain’s firms, depending on the product and competitive environment is either to move up and to the left of the matrix without sacrificing efficiency and cost effectiveness or to move down and to the right without sacrificing flexibility and customization. Expectations for mass customization are certainly changing the competitive environment. This push requires that companies redesign processes to gain flexibility without increasing costs. As an example, a local cabinet manufacturing firm requested help redesigning a manufacturing process that would allow it to customize cabinets for product sold though a large home improvement chain. The push from the store was to provide reasonably priced custom cabinets to its customers.
In addition, lead-time from order receipt to ship was very short. The manufacturing company set a rip-to-ship goal of 24 hours. The retail chain promised high sales volume.Conclusion:Supply chain management is heavily dependent on the concept of collaboration, supply chain can easily take the impact of even a small activity which is different than planned. Just in time manufacturing can be related to the production costs and improper monitoring can be disastrous for a firm in such conditions. The modularization can help the organization in a way that it can make it easier for the organization to work without time constraints and with less responsibility.
The postponement is positively affecting SCM in a way that it helps the organization wait for the right time and proceed, same is the issue with the make-to-order which is related with the pooling of inventory.