Strategic Supply Chain Management And Logistics

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Strategic Supply Chain Management and Logistics

Strategic chains management refers to the interconnection of organizations that relate

to each, and are involved in providing services and products through downstream and

upstream linkages. Some of the upstream linkage activities performed by an organization

include; obtaining law materials, manufacturing, warehousing and distribution. On the other

hand, downstream are those activities that move materials to the final consumers such as

retailing. In order for a company to have a successful chains supply management, there are

several factors that should be considered. One of them is logistics cost.

Some of the logistics cost that an organization should be concerned with are; fleet and

transportation, transfer between fleet, handling, distribution and environmental costs.

Business environment is another factor that should be considered. The third factor which is

important to consider in supply chains management is the competitive advantage of the

organization. Some of the measures that can be put in place to ensure an organization has the

competitive advantage in the business environment include ensuring there is minimum

inventory across supply chain, shortening the lead time if cost is not increased, putting in

place a responsive system with buffer stocks to ensure constant supply, investing

aggressively to reduce production lead time and having measures that enhance capacity speed

and flexibility.

Through examination of porter’s generic strategy theory, organizations can enhance

their strategic chains supply management. This is because the theory stipulates that when a

market segmentation strategy is combined with a strategy for product differentiation, it

becomes an effective way to match a firm’s product strategy to the characteristic of the target

market. Porter’s generic strategic theory also puts forward three strategies which, if properly

executed could help an organization have a competitive advantage in the market. The three

strategies are; cost leadership, differentiation and focus strategies.

Out-Sourcing

Outsourcing is the practice of using outside resources strategically in order to perform

activities that would have been handled by an organization’s staff and internal resources. It

therefore, involves one business organization transferring its management and delivery

processes to another organization. Business organizations outsource some of their processes

due to lack of resources to supply the needs of the organization. Before an organization

makes an outsourcing deal, it first evaluates which one of its capabilities provides it with a

competitive advantage and which one does not. This evaluation helps determine which

activity will be outsourced.

There are several companies in the world which have been involved in outsourcing

deals. One such example is the Kodak Company, which made a 250 million dollars

outsourcing deal with the international Business Machines Corporation (IBM) in 1989. In this

deal, Kodak gave out four of its centers to be controlled by IBM. This transfer also saw three

hundred workers become IBM employees. One of the activities closely associated with

Outsourcing is off-shoring. Off-shoring is the transfer of specific processes to locations in

other countries where the labor costs are lower.

Some of the most preferred countries which provide good off-shoring opportunities

related to information technology processes include India, China, Israel, Philippines, Canada

and South Africa. Commonly off-shored activities including invoicing, call centers, generic

customer, account management, and debt collection. Companies carry out outsourcing for

various reasons. Some of which include the need for reducing, direct and indirect costs,

capital costs, taxes, and logistical costs. Outsourcing also helps to overcome tariff barriers,

provide better customer service, spread foreign exchange risks, and built alternative supply

sources. However, not many companies are willing to venture into outsourcing deals because

of various reasons. Some of the reasons include fear of losing control and flexibility, negative

reactions from customers as well as resistance from employees.

Total Quality Management

Total quality management is an approach or a philosophy of how an organization can

achieve a long term success by keeping its customer satisfied. In order to achieve this, total

quality management focuses on areas such as meeting the customers’ needs and expectations,

involving all the people in an organization, as well as developing systems and procedures that

bring improvement to an organization. Some of the approaches that can help attain total

quality management are the just-in-time and the lean approaches. Lean approach refers to the

processes of promoting the activities that add value to an organization and eliminating the

ones which do not have any importance. This helps an organization develop operations that

are faster and more dependable. The lean approach incorporates the Just in Time strategy

(JIT).

The just-in time strategy helps an organization focus on producing only when needed,

having lower capacity utilization, keeping low inventory so that problems are exposed and

solved, and having no surplus production. By adapting the lean approach, an organization can

identify the activities that consume time, space and resources but do not contribute to

customer’s satisfaction. Some of these activities are such as overproduction, delays,

unnecessary movements, over processing, unnecessary information materials than required

and incorrect customer details. Lean approach identifies a five step (5S’s) strategy that can

help organizations achieve total quality management. The five steps are; eliminating what is

not needed and keeping what is needed(sort), positioning things in such a way that they can

easily reached (straighten),keeping things clean and tidy (shine), maintaining cleanliness and

order( standardize), and developing a commitment to keep high standards (sustain). These

five steps help to simplify operations and processes. They also create an environment for

standardized work.

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