Supply Chain
Supply chain refers to the set of companies that give forward clearance of material. Usually, various independent companies are involved in product’s manufacturing and its placement to end user in a supply chain, such as producers of raw material and its elements, assemblers of products along with wholesalers, retailers, and transporters (Mentzer 3).
Distribution of Assets and Resource
Supply chain network is the composition of two basic interrelated processes like production planning and inventory control process and distribution and logistics process (Mentzer 3) (see fig. 1).
Supply chain network design is a powerful tool to reduce the costs regarding supply chain and to make improvements in services through alignment of supply chain strategies. The main reason is that it integrates end to end costs in the supply chain, including buying, manufacture, warehousing, inventory and transportation (Graham 345). Effective supply chain design not only leads to high profitability, but also contributes to enhancement of stakeholder’s value (Shah 290). The aim of the cohesive logistic network in the supply chain is to meet orders of the customer by offering place utility to distribute products and services to end consumer. Logistics has not only become a source of reducing cost, but also a key element of meeting customer needs in supply chain management. It includes the function, such as demand management, inventory management, transportation, warehousing, processing of orders and management of information (Li 216). Fig. 2 identifies logistics network in which e-procurement, e-distribution and e-commerce are the main functions.
For instance, McDonald’s uses a network of suppliers from across the world for key product (hamburger). A Big Mac, McDonald’s sell in Saudi Arabia uses Lettuce from Holland, Cheese from New Zealand, beef from Spain, onion and pickles from the U.S. sugar and oil from Brazil, buns from Saudi Arabia, and packaging from Germany (Li 216).
Supply Chain Network Designs and their Consequences in terms of high Profitability and Stakeholders’ Value (Behaviors and Drivers of Supply Chain Networks)
Lean Supply Chain Network
There are different types of supply chain designs (Reza et al. 9). One of the supply chain designs is lean supply chain network. Lean supply chain network has aim to reduce cost and increase profits by removing non-value adding activities. It enables the company to find optimal numbers of distribution centers, optimal location for each distribution center, and determination of optimum order policy as well as the safety stock in distribution centers. Through lean supply chain network, cost is minimized by fixed cost of locating facilities, shipping cost of products from distribution center to retailers, working inventory’s total cost and cost of safety stocks. Moreover, a lean supply chain is a proactive approach that facilitates the planning for uncertainty and position all resources for efficiency (Bhatnagar 120). Furthermore, Joshi (132) stated that lean supply chain contributes to high profitability and stakeholders’ value by providing quick access to relevant and correct information. As timely information leads to low costs, low level of inventory, continuous improvement, shorter lead times, and high level customer service. In turn, increases profitability and stakeholders’ value.
Agile Supply Chain Network
The need of integration of agile manufacturing and supply chain management has increased to get agility in a supply chain environment. Agile supply chain network design refers to the responsive and flexible supply chain through integration of three components like collaborative network of company’s partners, information technology and structures and information management (Reza et al. 9). This type of supply chain network helps to make quick and correct adjustments and to predict demands of customers to produce quality products or services. Through quick response to market needs (innovative products and shorter lead times) and integrating all partners in the supply chain (Basu and Nevan 226), the companies increase their profits and enhance stakeholders’ (shareholder, customers, suppliers, and society, etc.) value (Ephrem and Edem 95).
Green Supply Chain Network
Green Supply Chain (GSC) network is the combination of two components, such as forward supply chain and reverse supply chain. Apart from traditional supply chain, GSC has another role with the roles in traditional supply chain network. This role is known as dismantlers that contributes to changes in the behaviors of functions of green logistics’ processes (Reza et al. 9). This network design is driven by the need of agility, adaptability and alignment. Hence, GSC helps management to alleviate risks and to increase the rate of innovations. In addition, it facilitates innovation processes and continuous improvement (TQM). Moreover, GSC enables management to negotiate with suppliers and customers that leads to alignment of not only business, but also principles. In turn, company’s profits increases along with stakeholders’ value (Palevich 376).
Sustainable Supply Chain Network
Sustainable supply chain refers to the supply chain that is the composition of social consideration, environmental consideration and economical consideration (Reza et al. 10). It provides monetary, reputational, and risk management benefits to the companies that helps management to motivate suppliers and to increase profits. It increases profits and enhances stakeholders’ value by reducing operational costs, increasing revenues, decreasing administrative and capital costs and stock market premiums. In addition, it increases customer satisfaction, innovation regarding products, market share, and identifies new opportunities. Moreover, sustainable supply chain helps management to innovate processes, increase productivity, reduce lead times or cycles, and to decrease waste. In turn, employees’ satisfaction level also increases with improvement in stakeholders’ relationship, reduction in legal interventions and risks, and enhancement in organizational learning (Sanders and John 229).
Work Cited
Basu, Ron, and J. Nevan Wright. Total supply chain management. USA: Routledge, 2010.
Bhatnagar, Ashisha. Textbook of supply chain management. USA: Sanbun Publishers, 2010.
Ephrem Eyobe and Edem G. Tetteh. Customer-Oriented Global Supply Chains: Concepts for Effective Management. USA: IGI Global, 2012.
Farahani, Reza Zanjirani, et al. "Competitive supply chain network design: An overview of classifications, models, solution techniques and applications." Omega 45 (2014): 92-118.
Graham, Gary. Exploring supply chain management in the creative industries. Vol. 10. No. 5. USA: Emerald Group Publishing, 2005.
Joshi, Maulik, et al. Leading Health Care Transformation: A Primer for Clinical Leaders. USA: CRC Press, 2015.
Li, Ling. Supply chain management: concepts, techniques and practices enhancing the value through collaboration. USA: World Scientific, 2007.
Mentzer, John T., et al. "Defining supply chain management." Journal of Business logistics 22.2 (2001): 1-25.
Palevich, Robert. Lean Sustainable Supply Chain The: How to Create a Green Infrastructure with Lean Technologies. USA: Ft Press, 2011.
Sanders, Nada R., and John D. Wood. Foundations of Sustainable Business: Theory, Function, and Strategy. USA: John Wiley & Sons, 2014.
Shah, Janat. Supply chain management: Text and Cases. India: Pearson Education India, 2009.
