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Supply Chain Management (SCM): The 4V’s in SCM

Background

Global operations by commerce and industries that initially served within their local markets create the need to form promotional plan of supply chain management (SCM). The globalized operations increased the use of information system technology which boosted the construction of a self-proliferating and complex chains of supply (Clauson et al., 2018). An organization has to stay competitive in the market force for the logistics to evolve digitally and adopt new technological foundations (Robert and Filip, 2019). A compromised security system of a supply chain leads to failures in the delivery services of a company such as high costs and competitive advantage loss (Chu et al., 2017). Companies need systems promoting the efficiency and security of their products since it will make them relevant.

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SCM manages the relationships between the suppliers and their customers to ensure deliveries are value-based with less costs incurred to complete the supply chain. Application of SCM requires knowledge on supply chain since it is a complex model handling managerial and coordinated activities within the chain (Pérez-Salazar et al., 2017). SCM seeks to realize a cooperative linkage within the entities associated with the organization’s activities (Robert and Filip, 2019). SCM is embedded in the logistical framework of planning seeking to foster the organization’s resilience (Pettit, Croxton and Fiksel, 2019). SCM needs vigilance to assist in identifying weaknesses and the ability to deal with unexpected hazardous occurrences.

Supply chain integration seeks to develop a partnership link between the supplier and the customer. The partnership link is effective for sharing information among the participants in the supply chain (Othman et al., 2016). Integrating the supply chain will foresee adopting the initiative such as just-in-time manufacturing and purchasing initiatives to ensure the continuous flow of activities between the supplier and the customer (Robert and Filip, 2021). These initiatives are beneficial since they reduce lead time, improve quality, reduce inventories, reduce costs of material, improve flexibility, improve lead time reliability, revise layouts, ensure adoption of simple production systems, and reduce the set-up periods (Othman et al., 2016). Integrating SCM is beneficial to the performance levels of logistics of the organization.

Sustainability in SCM is vital for organizations. The sustainable development of many businesses organizations’ supply chain is rapidly increasing (Kot, 2018). Sustainability ensures that all links associated with SCM participate in creating value-added advantage important for both the future and the present generations since it aims to avoid investment overlapping (Yu et al., 2016). The supply chain seeks to develop, protect, coordinate, and increase the advancement of values considered economic, environmental, and social by stakeholders in the supply chain (Blossey, Eisenhardt and Hahn, 2021). Sustainability is vital to an organization’s supply management system.

Competing Through logistics

Logistics is the efficient and effective management material flow between and within organizations. Logistics function is the main determinant of business performance since it ensures there is a smooth and continuous flow of products, information, and services in the supply chain (Yu et al., 2016). The understanding of logistics provides a lead time, a vital component ensuring timely deliveries of services and products to customers.

Measurement of logistics’ performance shifts the focus to operations performance, allowing the sharing of information between the suppliers and their customers (Othman et al., 2016). The need for effective competitive advantages prompts organizations to identify the importance of strategic logistics functions (Othman et al., 2016). The development in technology results in various sectors appearance, disappearance and being emergent (Atlurri, Dietz and Henke, 2021).

For example, the Philips semiconductor plant in Case 2 was generated through mergers with Nokia and Erickson ensuring receive silicon products. Furthermore, the relationship among the players in this environment is contractual with commercially formally regulated terms of trade (Atlurri, Dietz and Henke, 2021). Opportunities are vital in boosting and assisting an organization in realizing its competitive advantage within a market.

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Digitalization will assist an organization logistics to realize its competitive advantage and meet its client expectations. Digitalization reduces the costs of friction associated with trading and trust since artificial intelligence assists customers to access personalized solutions within seconds (Atlurri, Dietz and Henke, 2021). For example, in Case 1, the automotive company provides stability in its operations by ensuring there is equality in the quantities total, scheduled quantities and the call-off quantities. An organization’s logistics need to know their customers since it provides an integrated digital experience with services for connecting with them (Atlurri, Dietz and Henke, 2021).

The automotive company understands the needs of his/her customers and seeks to adhere to the production schedule. Therefore, the supplier is required to ensure the scheduled demand equals the call-off quantities.

The value advantage is a wide logistical step aiming at realizing a certain pool of revenue. Value at stake assists in measuring the levels of participation in the final formulated strategic plan for the organization (Othman et al., 2016). The present trends, economic paths, and regulation frameworks are critical in keeping the balance between the environmental aspects of the suppliers and the customers (Atlurri, Dietz and Henke, 2021). These trends hold despite the complexity faced during logistics to cater to the global advancement in the customers’ behavior and the shifting market trends (Yu et al., 2016). A properly designed information management system will assist in the coordination of the participants in the market.

The Generic Performance Objectives

SCM generic performance objectives include speed, cost, flexibility, speed, quality and dependability. Speed assists in managing inventories, production, logistics, and transportations to develop and search effective procedures for minimizing waste (Oeize, 2017). SCM depends on speedily solving of unexpected occurrences through provision of rapid responses, payment processing, delivery of orders and meeting customers’ deadline. Philips semi-conductor plant fails to resolve the problem with production within the shortest time while WestCo ensures the processing of customers’ orders are done earlier.

Costs aims at reducing possible losses but maximizing the profits. Costs are managed through reducing logistics and transportation costs, and work with minimum inventory (Oeize, 2017). Costs is managed in inventories, production, logistics and transportation through exploring opportunities leading to cost-cutting procedural changes. WestCo applies a formula ensuring its production does not create shortages or surpluses.

Dependability ensures the supply chain is consistent with service delivery. A supply chains’ stability seeks to retain a stronger association with the network participants (Chu et al., 2017). The ability of a customer depending on a supply chain is determined by the timely deliveries, rate of processing payment, accurate order fulfillment, and nature of after-sale services. Philips semi-conductor plant was depended on by Nokia and Ericsson until the unexpected occurrence disrupted its operation. Similarly, WestCo is depended on to supply vehicles to its customers, an obligation it fulfills.

Flexibility aims at checking the ability of a supply chain to shift with the supply or demand pattern changes. For example, WestCo and Philips semi-conductor plant should be in a position to adapt to the changing internal and external business environments. WestCo is faced with customers shift in demand through the daily call-offs. Similarly, Philips semi-conductor plant fails to quickly manage the unexpected occurrence leading to disruption of the supply chain with their customer Ericsson losing their market margin to competitors.

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Quality aims at ensuring the product and customers’ experience develops in a positive way. The ability to communicate feedback by the customer to the supply will assist in understanding what need to change to improve the quality of the service (Chu et al., 2017). For example, the customer of WestCo fails to communicate but opts to make daily call-offs. Similarly, Philips semi-conductor plant fails to reveal the problem to its customers despite some (Nokia) willing to assist in resolving the same.

The 4V’s (Visibility, Variation, Variety and Volume)

Visibility in SCM uses blockchain technology in seeking penetration points. Blockchain technology facilitates the sharing of information regarding the status and location of products between the supply chain participants (Blossey, Eisenhardt and Hahn, 2021).

For example, Philips and Ericsson companies blockchains have failed. Ericsson learned of the problem affecting Philips company late resulting leaving the market. SCM is faced with inefficiencies causing distorted transparency network and bullwhip effect (Othman et al., 2016). For example, Philips semi-conductor plant hid information regarding the problem in the production system. Visibility ensures there is easier tracking of items since this improves the accuracy of data, enhancing collaborative planning, execution and implementation of management precautionary and preventive risk measures (Iyer, Seshadri and Vasher, 2020). These measures will help the SCM eradicate the inefficiencies.

Selection of variety has a major concern requiring loops of feedback concerning the current market situations (Iyer, Seshadri and Vasher, 2020). For example, Nokia is concerned with the one-week delays since their market demand was at stake. They are forced to seek for alternative supplies in Japan and America as they tried to request Philips to allow them in addressing the problem. Balancing between demand in the market and the operation’s efficiency will reduce losses to the market participants.

Variation is used to indicate the emergent difference in the supply chain. Minimization of variation helps improve quality processes since they will not be subjected to interruptions, therefore facilitating the continuous reduction of costs but improving quality (Iyer, Seshadri and Vasher, 2020). For example, Philips semi-conductor plant fails in informing their clients of the existing problem which would take months to rectify resulting to Ericsson losing 3% of the market. Losing the market made Ericsson to exit from the handset phone market. Therefore, the performance of the supply chain is established by the variation interactions.

The supply chain volume provides a vital concept manifesting itself in nearly all the SCM processes. Supply chains focus on maintaining the steady flow of products across the system to facilitate the planning capacity incorporation across the network (Iyer, Seshadri and Vasher, 2020). For example, Philips semi-conductor plant was obligated to Ericsson and Nokia companies to ensure delivery of silicon chips. The problem in the production of chips affected its supplies volume to both Nokia and Ericsson companies. Maintaining volume in a supply chain will ensure there are no surpluses or shortages, resulting in losses.

Discussion of the Points to 4V’s (support or not)

Delivery reliability to customers

The SCM mechanism of delivery should be reliable to customers. A sustainable SCM requires the coordination of supply chains using integrated voluntary aspects such as economic, social, and environmental, coupled with inter-organizational core business systems designed to manage supplies in the production and distribution (Adamczak et al., 2016). A supplies system ensures the customers’ expectations of timely deliveries (Kot, 2018). For instance, the automotive industry is obligated to WestCo. to deliver certain specified quantities, and therefore provides its schedule in preparation for next month’s deliveries. A good reliable delivery customer system will boost the organization’s profit, provide a competitive advantage, and safeguard its long and short-term vulnerability prospects.

Call-off orders

A customer may call-off orders if there exist a mistrust about the supplier’s ability to competency, commitment and intentions. Goodwill or intentions is the ability to pursue the interest of concern rather than selfish ambitions and requires timely actions towards meeting deadlines. Customers may call-off orders if the attributes are missing in a supplier since no one anticipates making losses (Robert and Filip, 2021). Despite WestCo. bestowing the obligation to the automotive industry to deliver vehicles, it issues daily call-offs producing different varying figures of required vehicles. Mistrust makes suppliers lose their customers in a supply chain, therefore, reducing their market segments.

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The automotive company provides stability in its operations by ensuring there is equality in the quantities and total scheduled quantities despite the call-off quantities. An organization’s logistics must know its customers since it provides an integrated digital experience with services for connecting with them (Atlurri, Dietz and Henke, 2021). The automotive company seems to be understanding the needs of their customers and seeks to adhere to a production schedule which will avoid over-production or under-production. Therefore, the supplier is required to ensure the scheduled demand equals the call-off quantities.

Efficiency in terms of labor costs and inventory holding

SCM employees manage the storage and logistics of the supply chain flow inventory. Efficiency in labor costs and inventory holding in a supply chain depends on accessibility and security of information. For instance, the supplier has a hard time coping with the call-offs ups and downs of quantities which are problematic in balancing between the scheduled demand and the call-off quantities. This call-off escalate the frustrations of the automobile supplier since they are made on a daily basis.

SCM checks how information is accessed and integrated into all participants in a chain. Similarly, a supply chain with proper and timely relaying of communication builds trusts between participants hence efficiency in labor costs and inventory holding (Robert and Filip, 2021). For instance, the supplier might be losing faith with WestCo. because of his undecided and uncalled for the behavior of daily conducting call-offs. If the supplier works to schedule, he will end up overproducing while he/she fails to perform to schedule, under production is witnessed. A supply chain will invest in timely information and limit access to avoid vital information from falling into the wrong hands.

Disruptions to the supply chain

SCM is faced with inefficiencies in its operations. The inefficiencies result from the distorted transparency network, which is responsible for the bullwhip effect. Failure to divulge vital information about the supplier’s supply chain to the customer will disrupt operations ((Iyer, Seshadri and Vasher, 2020). For example, WestCo. is disrupting the supply chain. The company issues call-off to the supplier daily, which is disgusting, irritating and uncalled for since the supplier already has a schedule of productions quantity that he/she has to fulfil. Informing the participants in a supply chain about a problem earlier will help them provide alternative ideas for solving the problem (Basheer et al., 2019). Similarly, it will allow the customers to seek other alternative suppliers in time before they suffer losses.

Hard Advantages

The Quality Advantage

Supply chains apply blockchain technology in the distribution of shared ledger through the created supply networks. Blockchain technology enacts transparency, automation, validation, and tokenization, giving an allowance for larger transactions between different individuals simultaneously in their ledgers. Therefore, the technology encourages economic association, increasing productivity and timely delivery of products and services (Atlurri, Dietz and Henke, 2021). SCM is advantageous to the participant in a supply chain since they can acquire their supplies on time, and therefore, their operations continue normally.

The Time Advantage

Logistics and SCM gives the participants of a chain time advantage. The use of information technology in the supply chain has improved effectiveness and efficiencies in delivering products and services to the appropriate destination (Yu et al., 2016). The use of new technology to facilitate the flow of information and coordinated approaches to distribute products between the supply chain participants has seen faster delivery of goods (Othman et al., 2016). Customers are relaxed since the supply chains ensure they receive products at their specified convenience.

The Cost Advantage

SCM creation of supply chains networks have reduced customers’ cost of receiving the required products and services. The supply chains have impacted the financial performance of organizations positively (Othman et al., 2016). For instance, the supply chains comprise different types of participants such as retailers, manufacturers, wholesalers, raw materials suppliers, and customers who form a network (Robert and Filip, 2021). The network pools together resources and, therefore, use the supply channel as a group to achieve their delivery anticipations.

The Dependability Advantage

SCM form supply chain networks made up of retailers, manufacturers, wholesalers, raw materials suppliers, and customers. The supply chain participants form a complex network with dozens of contributors to ensure success (Robert and Filip, 2021). Success occurs by creating a sustainable chain, measuring performance, and creating a competitive advantage over its competitors (Morten, 2019). It is evident from this supply chains that the participants are dependent on each other in numerous aspects though the major benefit is the consistent and continuous timely delivery of products.

The Agile Advantage

SCM requires recognizing the strategic importance embedded in the logistics functioning rationale of the supply chain. Measurement of the strategic usefulness depends on the players’ participation in the organization’s planning and formulation (Othman et al., 2016). Similarly, possessing the relevant information on SCM boosts the business performance in terms of the logistics’ functioning, therefore ensuring there is free, smooth movement of products, materials, and information within all the levels of the supply chain (Pérez-Salazar et al., 2017). Coordination among the players in the supply chain will help protect the network during unexpected occurrences, trying to form turbulence.

Soft Objectives and their Importance to Logistics

The effectiveness of any SCM depends on goals such as increasing efficiency, unexpected occurrences, rapid responses, reduced logistics and transportation costs, and minimum inventory. An organization’s priority is to increase the efficiency both in the inbound and outbound levels of logistics. Opportunities boost and assist an organization in realizing its competitive advantage within a market. Developing a cost-effectiveness transport means while decreasing the overhead costs, processing cost per order and inventory costs is highly recommended. Rapid responses are required for customer satisfaction to foresee success (Ketchen and Craighead, 2020). Designing an approach prompting and aiming at satisfying the customer goals and expectations is recommended.

Reference List

Adamczak, M., Domanski, R., Hadas, L. and Cyplik, P. (2016) ‘The Integration between production-logistics system and its task environment – chosen aspects’, ScienceDirect, 49(12), pp. 656-661. Web.

Atlurri, V., Dietz, M. and Henke, N. (2021) Competing in a world of sectors without borders. Web.

Basheer, M., Siam, M., Awn, A. and Hassan, S. (2019) ‘Uncertain supply chain management’, Growing Science, 7(2), pp. 275-288. Web.

Blossey, G., Eisenhardt, J. and Hahn, G. (2021) ‘Blockchain technology in supply chain management: an application perspective. In: Proceedings of the 52nd Hawaii International Conference on System Sciences. Heilbronn, Germany: German Graduate School of Management and Law, pp. 6885-6893.

Chu, S., Yang, H., Lee, M. and Park, S. (2017) ‘The impact of institutional pressure on green supply chain management and firm performance: top management roles and social capital’, MDPI, 9(5), p. 764. Web.

Iyer, A., Seshadri, S. and Vasher, R. (2020) A strategic approach to the principles of Toyota’s renowned system: Toyota supply chain management. Web.

Ketchen, D. and Craighead, C. (2020) ‘Research at the intersection of entrepreneurship, supply chain management, and strategic management: opportunities highlighted by COVID-19’, Journal of Management, 46(8), pp.1330-1341. Web.

Kot, S. (2018) ‘Sustainable supply chain management in small and medium enterprises’, MDPI, 10, pp.1-19. Web.

Morten, B. (2019) ‘Conceptualization and value creation of big data in supply chain management: A business process perspective. Web.

Oeize, N. (2017) ‘Sustainable supply chain management implementation – enablers and barriers in the textile industry’, MDPI, 9(8), p. 764. Web.

Othman, A., Sundram, V., Sayuti, N. and Bahrin, A. (2016) ‘The relationship between supply chain integration, just-in-time and logistics performance: a supplier’s perspective on the automotive industry in Malaysia’, International Journal of Supply Chain Management, 5(1), pp.44-51. Web.

Pérez-Salazar, M., Lasserre, A., Cedillo-Campos, M. and González, J. (2017) ‘The role of knowledge management in supply chain management: a literature review’, Journal of Industrial Engineering and Management, 10(4), pp.711-788. Web.

Pettit, T., Croxton, K. and Fiksel, J. (2019) ‘The evolution of resilience in supply chain management: a retrospective on ensuring supply chain resilience’, Journal of Business Logistics, 40(1), pp. 56-65. Web.

Robert, M. and Filip, M. (2019) ‘The potential of blockchain in supply chain logistics. Sweden: Linköping University Department of Management and Engineering. Web.

Yu, Y., Wang, X., Zhong, R. and Huang, G. (2016) ‘E-commerce logistics in supply chain management: practice perspective’, Procedia CIRP, 52, pp.179-185. Web.

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