The process of production in the modern world involves numerous concerns. One of these concerns is organizing the logistics of raw materials and goods. These operations are considered parts of the supply chain. In our paper, we will examine supply chain management (SCM) and consider some aspects that should be kept in mind when dealing with supply chains.
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The supply chain is a crucial part of any business. Proper SCM can provide businesses with numerous competitive advantages, the most obvious of which is the advantage of time and cost. Choosing a dependable supplier of high-quality raw materials is also of major importance. Customers who receive high-quality products fast eventually create a positive reputation for the company. This is why a very popular practice in the modern world of business is to document its supply chain and make it publicly available, or even use it as an advertisement. A good reputation attracts new clients, and also makes the business interesting for investors (CSR Compass n.d.). Moreover, the business, having a favorable reputation, becomes a desired workplace, which means an abundance of qualified human resources. These factors ensure the company’s functioning and development in the future. Thus, proper SCM can bring a competitive advantage concerning the time and money spent on the product, the firm’s reputation, and, as a result, the general efficacy of the business (Seghal, 2011).
Financial innovation is a key element in maintaining and improving supply chains. C. Dwight Klappich, as cited by Poirier, Quinn, and Swink (2010), states that supply chains are “three-legged stools”, and the legs of these stools are “product, information, and finance”; these three elements of the supply chain should be synchronized (p. 55). Poirier et al. (2010) provide an example of a multibillion-dollar corporation, which, having carefully analyzed the actions of its SCM, was able to conclude that a third of all the actions that were taken could be disposed of, as they had hardly any effect. The execution of a new plan which emerged as the result of the analysis was enough to double the company’s earnings for each share (p. 71-73). Authors, thus, promote close “collaboration between the supply chain and the financial groups”, as well as stress the role of the financial leaders of a company in employing innovations (Poirier et al., 2010, p. 73). Mention and Torkkeli (2014) also emphasize that innovation is only successfully implemented by executives who greet change and can turn it into profit for their organization.
As was already mentioned, a reliable supplier of raw materials is essential for any supply chain. Thus, strategic sourcing, a procurement process that unceasingly tries to reassess and upgrade the organization’s buying activity, might be considered an important element of any SCM. Being a part of the financial management, strategic sourcing aims to choose the best supplies available and to ensure that the process of production is planned and provided with the necessary components far in advance. Strategic sourcing also involves monitoring the suppliers’ activity as well as leveraging the company’s spending. The results of strategic sourcing are lower cost and better quality of the rendered services. It also maintains and enhances the production efficacy of a company (Maromonte, 2008).
As can be seen, in the modern global world of business, supply chains are becoming exceedingly advanced, and often rivalry emerges among them (Zhang & Okoroafo, 2015). This results in demand for highly qualified SCM which can successfully operate in such circumstances. Thus, Zhang and Okoroafo (2015) recommend employing third-party logistics (3PL). 3PL provides a vast number of benefits for a business. Its four main basic features are proficiencies in range, expertise, search capability, and information technology. 3PL, thus, takes the responsibility for and thoroughly resolves the complications of gathering, covering, storing, and delivering goods (Zhang & Okoroafo, 2015). The consequences of 3PL are decreasing expenditures of the supply chain and the disposal of the consumption of its time resources.
Let us now consider a simple example of a supply chain familiar virtually to everyone. To install new windows in your family’s apartment, your family can dismount the old ones, go to a windows factory or a retail outlet and buy a set of windows, transport them to the apartment, and find people to put them in. This would involve a large number of operations related to gathering information, choosing the necessary product, finding workers, and even organizing finances while deciding which people to hire, what shop to buy from, etc. Another option is turning to a firm that specializes in installing windows. The firm here will partially play the role of 3PL. It will give you options to choose from (probably more options than you could have found yourself, as it is easier for firms than for natural persons to e.g. buy something from foreign companies), and will organize the necessary actions needed to install new windows. The firm will quite likely give you a warranty as well. Thus, by turning to the windows firm, which, to a certain extent, plays the role of 3PL, you will save time. You will possibly economize some money, because it is easier for the firm to organize everything economically, and in case of problems you will be compensated according to the warranty.
As we have seen, SCM is a crucial part of any business, as it maintains its functioning, and attracts customers and investors. Financial innovations are important for making SCM efficient and can economize vast amounts of money for a company. If a business chooses to manage its supply chains on its own, it should not be forgotten that strategic sourcing results in lower cost and better quality of the company’s products. And, finally, 3PL can be a good, economical option for modern companies.
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CSR Compass. (n.d.). Benefits of responsible supply chain management. 2015. Web.
Maromonte, K. R. (2008). Corporate strategic business sourcing. Westport, Conn.: Quorum Books.
Mention, A. L., & Torkkeli, M. (2014). Innovation in financial services. Newcastle-upon-Tyne, UK: Cambridge Scholars Publishing.
Poirier, C. C., Quinn, F. J., & Swink, M. L. (2010). Diagnosing Greatness: Ten traits of the best supply chains. Fort Lauderdale, FL: J-Ross Publishing.
Seghal, V. (2011). Understanding Advantage. Web.
Zhang, H., & Okoroafo, S. C. (2015). Third-party logistics (3PL) and supply chain performance in the Chinese market: A conceptual framework. Engineering Management Research, 4(1), 38-48.