Introduction
Supply chain management primarily entails the coordination of functions within an organization as well as tactics used to execute those functions. Also, it involves tasks’ coordination across the partners participating in the supply chain with the principal objective of ensuring improved organizational performance. The definition of the supply chain clearly depicts the nature of the coordination between the partners involved in the business and appreciates the primary purpose of the supply chain management. Apparently, this approach aims at improving organizations’ as well as the individual performance (Lee et al., 116). There are two main components of the supply chain, which are the flow of information and materials.
Coordination of activities within the chain of supply requires strong operational strategies that enhance the supply of both materials and information. All businesses rely on the supply chain for the provision of materials and the information needed for their survival. The dynamisms in the markets and the unpredictable markets conditions necessitate the supply chains and understanding of the roles of markets in facilitating the operations of the companies. The essay aims at discussing the key concepts in supply chain management and how their relationships contribute to the overall achievement of chains of management in the modern economy.
Supply Chain Management and the Conventional View of Logistics
Ideally, logistics entails the activities that take place within one organization while the supply chain involves an arrangement of interconnected companies, facilities, as well as distribution systems that deliver materials and information to the customers. Additionally, the functions of traditional logistics and the supply chain differ in the sense that the latter incorporates all the functions of the former and includes new activities such as marketing, development of new products, and advanced service provisions to the customers.
The increased customers’ needs are served best by more advanced systems of production and distribution. Additional activities included in the supply chain management enhance its efficiency in customer service, making it preferable to traditional logistics. From the management’s viewpoint, organizations and the supply chain itself are a single entity, unlike in the traditional logistics where the two are different entities by the virtue of their purposes. The chain of supply evolves in a systematic approach to the management and understanding of activities needed to coordinate activities and the flow of goods and services that will serve the customers best.
There are conflicts among the different requirements in the supply chain; most of these requirements tend to conflict for satisfaction hence the need for a well- coordinated system of management. For example, to maintain high customer service level, high inventory levels are required, but efficiency in operations calls for low inventory levels. Thus, an efficient management system is necessary to ensure harmony between the operational efficiencies and the varying customer needs.
An efficient supply chain must ensure high levels of customer satisfaction by making sure that the rates of products and service delivery are high, and returns inwards are minimal. Therefore, organizations should maintain a high level of internal efficiency to achieve high internal rates of returns and low operating costs.
Lean manufacturing
Unquestionably, most organizations are looking for survival means due to increase in business competition across the globe. They search for ways they can maximize competitive advantage through optimal resource utilization at minimal costs. The primary objective of setting up a business is to make profits. However, most organizations have failed as a result of reduced capacity to fight stiff completion in most aspects of organizational activities
The achievement of high profitability, high level of customer focus, and flexibility in most of the manufacturing firms in the world is due to the application of the lean principles in their operations. The implementation of lean principles involves practices that result in ultimate improvement in the performance of an organization. According to Shah and Ward, lean principles emphasize the need to focus on the customers preferences by addressing all tasks whether they add value or not (Arkader 91).
The lean concept has been used as a management philosophy where the primary focus is to enhance customer satisfaction, waste elimination, and the overall improvement in performance of an organization. The concept is also applied in the supply chain, resulting in efficiency in raw materials transformation, information dissemination, and product distribution.
The application of lean principles in manufacturing started with Toyota, and since then it has helped many companies to gain more at low costs and less human efforts (Womack et al. 12). Manufacturing environment and the routine work are today characterized by scarcity of raw materials and short cycles of production. As such, there is high pressure due to increasing demand and completion, leading to more challenging decisions among the manufacturers.
Efficient manufacturing systems are necessary to ensure quick response to increasing customer demands. These systems need the capacity for reconfiguration and expansion to accommodate changes in the manufacturing process and assembling techniques without compromising the investment. Lean manufacturing is a modern advancement in manufacturing techniques that depends on the structure of an organization and level of flexibility. It is an approach that entails the elimination of losses and capital outlays, resulting in high efficiency of the manufacturing process.
Lean manufacturing results in an environment where losses are reduced through the production of goods according to the market demand rather than batch production that would lead to stocks accumulation. The aim of lean manufacturing is to produce the only quantity that is required by the markets; hence, the need to change the process on a daily basis so that different parts can be accommodated, as there is maximum utilization of space, equipment, and personnel. Effective lean manufacturing entails having the necessary information regarding customers, effective manufacturing of goods that best serve the market, efficient workplace organization, and effective relationship among participants in the manufacturing process. It also entails the analysis of value steam, problems solving, and elimination of wastes.
Obtaining information about customer needs
Lean manufacturing aims at meeting the exact requirements of the customers, which vary according to several, factors such as price, quality, and efficient product delivery. According to many scholars, a thorough investigation must be conducted to obtain information on the needs of the markets for a particular product as well as their complexities so that the best value chain can be realized. Taylor argued that information about customers’ requirements is not supposed to be overlooked or assumed, and there is a need to carry thorough research to gather accurate information as possible (315).
Waste elimination
Elimination of waste is essential in a manufacturing process. Efficiency ensures that raw materials that go to waste are minimal, which in turns promotes profit maximization. According to Ohno Taiichi (14), high efficiency in manufacturing is achieved through the use of appropriate technology and efficient machining process. It also depends on how facilities are organized within the manufacturing system. Waste occurs in various forms such as overproduction, waiting, and production of defective products. Also, waste can be identified in the form of movement, transportation waste, and inventory waste. If there are no proper waste control systems, a realization of high efficiency in manufacturing and other related activities in the supply chain will be difficult (Ohno Taiichi 15).
System organization
The organization of workplace entails proper machines arrangement, tools, as well as other facilities in the organization to ease accessibility, reduce wastage of space, and enhance smooth flow of work and materials. According to Julien and Tjahjono (329), a system where activities are not well-organized results in loss due to mistakes and delays. Thus, the workplace should be organized to improve efficiency and reduce waste.
Exact production
According to the lean manufacturing system, profit maximization is realized through optimal production that reduces waste and best meet customer requirements. The lean approach to manufacturing is quite different from the traditional system because it emphasizes production that is based on market demands and exploitation of comparative cost advantage. The traditional systems emphasized on high levels of production without considering the demand side of the market, resulting in the accumulation of stocks and wastage due to overproduction.
Effective relationship
The participants in the lean manufacturing have a strong relationship to enhance proper coordination of activities within the organization. This relationship is essential for aligning the activities of the organizations with their visions. Additionally, the success of any business undertaking is primarily based on the kind of relationship among the players. Thus, proper coordination of players within the supply chain will ensure efficiency in both material and information distribution.
Supplier Development
Profoundly, supplier development entails a management philosophy that companies use to minimize costs, reduce the percentage of defective products, and streamline their operations. This strategy was first used in Japan though it has spread to other countries. In the United States, supplier development strategies were introduced three decades ago (Humphreys and Chan 39). Essentially, the supplier development entails establishing strong business-customer relation through teamwork and joint confidence. Most companies embrace the strategy of supplier development to enhance their competitive power and control a significant market share that will improve their profits.
Firms in the United States faced stiff competition from Japanese products, which instigated them to develop counter strategies to offset competition.
Dealing with supplier development requires long-term and short-term cooperation between the business and customers. According to Krause, majorities of firms aim to achieve short-term goals and not long-term projections like expansion in supplier development scheme (35). Also, Watts and Hahn state that most companies prefer short-term benefits to long-term achievement in these programs (38). Thus, it becomes apparent that most organizations do not take supplier development strategies for a long-term relationship, but they involve their customers only for short-term benefits.
Supplier development strategy is used to evaluate the efficiency of a firm and shows how best a firm utilizes its resources in various activities. Most companies over the world have not embraced this program because they feel inadequate to commit resources to it. According to Krause, supplier development constitutes a great potential for expansion of firms and long-term profitability (42). It is an opportunity that has not been explored and could lead to efficient utilization of organization’s resources for long-term growth.
In the supply chain activities, supplier development constitutes a strategy for firms’ survival in the markets, and therefore, the parties involved should invest in this program. Galt & Dale claimed that to succeed in this program, information sharing, and efficient communication is good prerequisites (44). According to Krause (61), high commitment, effective communication, and relationship continuity are the core pillars of success in supplier development. Information- sharing between the suppliers and the customers help in reducing costs. Also, it promotes the rationalization of the value adding process. Therefore, exchange of information must be highly efficient between the players in the program.
Supplier development results in the improvement of different areas within an organization. Primarily, it leads to the introduction of new products, improvement in production, and enhancement of feasibility testing. Besides, it ensures high delivery rates, cost reduction, and facilitates value analysis. However, a reliable supplier development strategy must be chosen for firms to realize the anticipated benefits (Mikkelsen & Johansen 38).
An excellent demonstration of the success of supplier development scheme is Motorola’s development program that has attracted attention from many entrepreneurs due to its high success. This program was initiated when the company recognized the importance of relationships between the performance of the firm and the suppliers Gadde & Håkansson 52). Motorola Company first started by stating the expectations from the suppliers and realized that it would be difficult to operate efficiently if their relationship with the suppliers was not good.
For successful implementation of supplier development program, a firm must raise the competence of their customers. For example, the Motorola Company has various organs that facilitate information flow with their supplier and formulates the main activities in the development program (Lee and Humphreys 58). These activities include technical symposia, an advisory board, and annual conference. Also, the program involves the supplier show to strengthen the linkage between the company and the supplier.
Benefits of supplier development practices
Numerous researches have over time been conducted to evaluate the benefits of supplier development to firms that adopt the approach and the players they engage with, such as customers and suppliers. Notably, supplier development improves the suppliers’ performance within the supply chain. The responsibility of suppliers is to distribute materials and information to other players involved in the chain. With supplier development plan, stronger relationships and linkages are developed, thus making it easier for the supplier to carry out their roles.
Firms adopt supplier development mainly because of the associated long-term benefits and advantages, as the strategy supports the suppliers and enhances their capacities, thereby influencing their customers (Modi and Mabert 51). Additionally, systems of supplier development result in a high-income generation through reduction of time wastage, increasing the working time of the suppliers. Besides, supplier development leads to desirable outcomes such as up-gradation, quality improvement, enhanced delivery services, and improved level of inventory. For instance, manufacturing firms with supplier development strategy have been experiencing the best services with their suppliers. For example, companies like Honda and Toyota have experienced improved quality of services they over and drastic reduction of costs of production and operations (Forker, Ruch, and Hershauer 46).
Supplier development strategy helped the lean manufacturing sector in the Toyota Company to increase the capabilities of their suppliers. This program was of high value for the Toyota Company in the United States and Japan (Carr and Kaynak 358). The program improved customer’s awareness. Additionally, brands of products, as well as sales increase, resulting in high profits.The presence of supplier development is visible in the modern world with numerous benefits.
Barriers to supplier development
The supplier development strategies have mutual benefits both to customers and the suppliers. The success of the firms involved in supplier development programs is highly dependent on the performance of the suppliers. Many new companies have been developing and expanding in the supplier development program because of the benefits that result from the program.
However, there are several barriers and issues associated with supplier development. Although firm’s competitiveness relies on several elements of supplier development program, some factors obstruct smooth operations of the program. One of such barrier is the communication breakdown. Supplier development program is meant to facilitate the information flow between the parties involved (Giannakis 65). Barriers to effective communication constitute a significant obstacle to the implementation of the supplier development program. Unreliable information is sometimes relayed to the buying firm regarding the products or services. As a result, the firms that buy from the suppliers discontinue the business. Furthermore, suppliers fail to give reliable feedback to the customers, resulting in mistrust from the buyers.
Another fundamental barrier to the implementation of supplier development strategy is the conflicting objectives that companies set for the improvement of the suppliers. As a result, effective implementation of the program becomes complicated. Suppliers make an analysis of the buyers and make judgments concerning their reliability.
Nevertheless, some scholars have suggested remedies to the barriers of effective implementation of the program. Handfield et al., (n.p.) provided some solutions by differentiating supplier specific drawbacks and obstacles relating to the buyers. Suppliers-specific barriers involve shortages of technical skills, lack of suppliers’ commitment, and reduced human resource. The failure of buyers to describe the rewards due to the suppliers indicates that they lack commitment. This action causes the suppliers to mistrust them, leading to the ineffective implementation of the supplier development (Saccani and Perona 129). Additionally, insufficiencies human resources result in deprivation of skills needed for efficient supplier development plan implementation.
Impacts of supplier development to firms
The Motor Industry is one of the major firms where supplier development holds great impacts. Predominantly, this program has spread throughout the Japanese auto firms over the past several decades. In America, the program was given due considerations from the beginning of 1990 after their markets were flooded with automotive from Japan (Ali and Saker 37). Upon the realization of the competitive high power of Japanese Automotives, most industries in the United States like General Motors, Honda, and Ford embraced the supplier development plan.
Wanger (45) carried out an investigation on the effects that supplier development has the supplier’s performance and capabilities to deliver best services. He found out that supplier development strategy was widely applied in the most automobile industry. In contrast, most textile industries had not embraced the supplier development plan, and the supply chain management was less efficient.
The decisions to invest made by the suppliers in the textile industry as indicated by the global chains of supply show the relationship between global suppliers and buyers. From an empirical study in the United Kingdom, it is apparent that supplier development is an important tool for assessing the relationship between the suppliers and buyers (Johnsen and Ford 478). Thus, it is crucial to evaluate the supplier-buyer relationship by considering the cost, quality of services, and the delivery time.
Conclusion
The supply chain management is one of the key management techniques that have gained a global reputation. The efficiency of management determines the success of an organization and the capacity to remain in the market. Lean manufacturing is a major mark of dynamism in the modern firm’s manufacturing process; it has led to efficiency in production and quality improvement. The practices involved in the supplier development are essential parts of the supply chain management. In the modern life, ignoring the importance of these practices is difficult because of increased global competition. Thus, the business firms should not overlook the importance of supplier development strategy.
Works Cited
Ali, Farooq, Gareth Smith, and Jim Saker. "Developing Buyer-supplier Relationships in the Automobile Industry A Study of Jaguar and Nippondenso." European Journal of Purchasing & Supply Management 3.1 (1997): 33-42. Print
Arkader, Rebecca. “The Perspective of Suppliers on Lean Supply in a Developing Country Context.” Integrated Manufacturing Systems 12.2 (2001): 87–93. web
Carr, Amelia S., and Hale Kaynak. “Communication Methods, Information Sharing, Supplier Development and Performance.” International Journal of Operations & Production Management 27.4 (2007): 346–370. Print
Forker, Laura B., William A. Ruch, and James C. Hershauer. “Examining Supplier Improvement Efforts from Both Sides.” The Journal of Supply Chain Management 35.3 (1999): 40–50. Print
Galt, J.D.A. and B.G. Dale. “Supplier Development: A British Case Study.” International Journal of Purchasing and Materials Management 27.1 (1991): 16-22. Print
Giannakis, Mihalis. “Facilitating Learning and Knowledge Transfer through Supplier Development.” Supply Chain Management: An International Journal 13.1 (2008): 62–72. Print
Humphreys, P.K., W.L. Li, and L.Y. Chan. “The Impact of Supplier Development on Buyer–supplier Performance.” Omega 32.2 (2004): 131–143. Print
Johnsen, Rhona E., and David Ford. “Exploring the Concept of Asymmetry: A Typology for Analysing Customer–supplier Relationships.” Industrial Marketing Management 37.4 (2008): 471–483. Print
Julien, Denyse M., and Benny Tjahjono. “Lean Thinking Implementation at a Safari Park.” Business Process Management Journal 15.3 (2009): 321–335. Print
Krause, Daniel R., Robert B. Handfield, and Beverly B. Tyler. “The Relationships between Supplier Development, Commitment, Social Capital Accumulation and Performance Improvement.” Journal of Operations Management 25.2 (2007): 528–545. Print
Lee, Peter K.C., and Paul K. Humphreys. “The Role of Guanxi in Supply Management Practices.” International Journal of Production Economics 106.2 (2007): 450–467. Print
Modi, Sachin B., and Vincent A. Mabert. “Supplier Development: Improving Supplier Performance through Knowledge Transfer.” Journal of Operations Management 25.1 (2007): 42–64. Print
Ohno, Taiichi. Toyota Production System: Beyond Large-Scale Production. Cambridge, MA: Productivity Press, 1988. Print.
Saccani, Nicola, and Marco Perona. “Shaping Buyer–supplier Relationships in Manufacturing Contexts: Design and Test of a Contingency Model.” Journal of Purchasing and Supply Management 13.1 (2007): 26–41. Print
Taylor, David. “Parallel Incremental Transformation Strategy: An Approach to the Development of Lean Supply Chains.” International Journal of Logistics Research and Applications 2.3 (1999): 305–323. Web
Womack J.P., Jones Daniel., From Lean Production to the Lean Enterprise, Harvard Bus. Rev.(1994): 93–103. Print
