Supply Chain and Operations Strategy

1. Evaluate concepts and principles of supply chain management Principles of supply chain
can be listed as follows.

• Supply chain should cater needs of the consumers – The consumers in supply chain are divided
based on quantity or volume of sales and based on profitability. Therefore supply chain should
identify customers in which they can do business over period of time. Business organizations
and supply chain practitioners are trained on customer needs. In order to understand the
customer requirements better the different customer segments are identified. The best way to
segment the customer base is through ABC Analysis where the consumers are segmented based
on profitability and volumes. Segmentation could be done based on also product, industry and
trade channels.

• Supply chain must make-sure that different logistic network available for different customers
and hence customize logistic network. This indicates when the customer is segmented based on
service needs the organization has to cater to different logistics network to serve different
customer segments.

• Ensure that demand planning processes are aligned with supply chain. Supply chain
practitioners are taught to share demand data with trading partners so nobody has to keep
unnecessary stock. In general, this principle holds true. But in reality, only Walmart is actively
sharing demand data to trading partners.

• Outsource non value adding activities. This indicates that organization should only concentrate
on core competency while outsourcing non value adding activities.

• Encourage multi-level decision making. This will equip you with full understanding about
process deficiencies then the organization can determine what kind of technology that the
organisation requires.
The figure 1.1 reflect principles of supply chain
 2. Discuss the key drivers of effective supply chain management

Supply chain capabilities are guided by the decisions you make regarding the five supply chain
drivers. Each of these drivers can be developed and managed to emphasize responsiveness
or efficiency depending on changing business requirements. As you investigate how a supply chain
works, you learn about the demands it faces and the capabilities it needs to be successful. Adjust the
supply chain drivers as needed to get those capabilities.

In order to attain a strategic fit between the organization which is in the supply chain key decisions have
to be taken strictly within a framework. Hence, this framework is called as a supply decision – making
framework. Therefore, this allows the drivers of supply chain to function smoothly without affecting the
performance of one another. In order pursue a competitive strategy the supply chain organization must
aim to attain a some of strategic fit between the efficiency and responsiveness.

Hence, the organization which is in the supply chain should concentrate on its energy on the
performance of each and every driver which is part of the supply chain.

Therefore, main drivers of supply chai n organizations are facilities in the organization such as
production facility, and the kind of production units which is produced through the production facility,
hence the organizations inventories, the nature of transportation used from delivering the produced
items, and finally the information pertaining to consumer demand or cheap but quality suppliers’
information.

Therefore, all the drivers get together will determine the nature of the organization’s responsiveness
towards a market condition and the efficiency in which they handle given situation.

Key drivers of supply chain are described below.

a) Production – This indicates that if the organization is looking for achieving economies
of scale build factories with limited variety but to achieve large number of volumes from
the same product. Further this indicates that if the organization wants to achieve
responsiveness from the consumers operate flexible manufacturing system to produce
array of products.

b) Inventory – This indicates that high level of efficiency in inventory management system
can be attained by maintaining low inventory levels with special concern for less
frequently selling inventory items. Further this indicates that in-order to attain high level
of responsiveness the organization should maintain high level of inventory with array of
products.

c) Location – This indicates that efficiency of location can be attained through operating in
few selected locations, and further a high responsiveness to the consumer can be
achieved through operating in locations which are closer to the customer.

d) Transportation – This indicate that efficiency in transportation system can be attained

through transporting in bulk batches and not very often.

e) Information – This indicates that a high level of responsiveness could be attained if the
data is collected demonstrate most accurate information and timeliness.
The following table 2.1 indicates the responsiveness and efficiency of each driver.
 3. Explain how effective operations and supply chain management enhance competitiveness
of the firms.

Competitiveness can be defined as specific strength of the organization which would provide to
compete against direct and indirect competitors of the organization (Chin, 2000). Hence, based on the
nature of competitiveness it can be divided into three broader categories. They are
competitiveness based on nations, competitiveness based on firms and competitiveness based on
industries.

Further competition is defined as creation of capacities and capabilities when encountered competition
the advantage which a business organization has defined as competitive advantage (Roy, 2005).

Therefore, planning in supply chain is very critical as it is considered as a forward- looking activity
where the bridge between the organizations all the key functions such as production, sales and
marketing, operations and etc. are provided. With an objective of attaining the efficient and the most
cost-effective operation when compared to the competitors. Hence, this activity involves in cooperating
all the services which the organization provide all disseminating information from the supplier to the
consumer and there by strike a balance between the supply and the demand.

In fact, the primary objectives of supply chain planning are to attain production costs at lowest level and
look at means in which to increase sales with the help of the marketing team and to maintain a
sustainable relationship with the supplier. For example, world class organizations such as Dell through
concentrating on it’s logistic activities gained a competitive edge over the competitors of it such IBM
and Microsoft in the peak of Dell through effective concentration on supply chain planning.

Efficient management of supply chain activities would provide the organization with competitive
advantage (Jones & Riley, 1985). In order to achieve supply chain competitiveness the organization
should make-sure that inter and intra organizational performance are at high levels (Giménez &
Ventura, 2003).
Some of the tactics used by the supply chain organizations to attain edge over the competitors are to
have an internal mechanism to track the information relating to supply chain such as for an example
take a firm which is in the apparel industry from the point in which the raw materials are sourced track
such minute information. Thereby organizations are in a better position to change according to the
market dynamics.

Another strategy which they deploy is to make-sure that all the partners involved in the supply chain
such as vendors, distributors and etc. are working cordially with one another and thus established a
strong network with them.

Further organizations could look at using artificial intelligence in their supply chain activities thereby
increasing the productivity in the organization and eliminate unnecessary cost which is essential to have
an edge in the industry.

Finally it involves that adoption of nimble and active processes which would improve the supply chain
and to evaluate cost which the organization incurs a lot and to arrive at a cost benefit analysis.

In order to arrive at supply chain competition following aspects have to consider.

• Flexible supply chain and demand management. Flexible supply chain is required for today’s
highly competitive business environment.

• Supply chain process and relationship management. Supply chain process and relationship has
to be managed in the supply chain.

• The decision which the organization make with regard to in-house vs outsource manufacturing.
Therefore this is a strategic decision of the organization to concentrate on producing value
adding activities while outsourcing non-value adding activities.
 4. Evaluate how key decisions are made to improve supply chain and operation

The supply chain is not a business function. Hence it is a network of companies. Supply chain
management involves cross functional relationship with customers and suppliers in the supply
management network.

More sophisticated supply chain organizations have the ability to put pressure into the customer
demand in selecting the more standard customer designed products in the supply chain. Therefore, for a
supply chain organization three critical elements are designing of supply chain to meet consumer
demand, monitoring and evaluation of the current practices as to whether the current system would
enable to carry-out the process efficiently. And of course use of technology would come handy in the
process of supply chain.

Over the past few decades, most of the companies in sectors like high tech to automotive, retail to
consumer goods have realized that a supply chain involves more cost than getting the products in the
hands of their customers. They seem to have finally realized that it’s the supply chain management that
translates corporate strategies into day-to-day actions inside and beyond the company. It’s the supply
chain system that ultimately satisfies or disappoints the customers. The companies prefer to use a
broader supply chain definition: one that involves information sharing, planning, and value additions
to activities, right from raw materials to the final distribution, and not just the logistics.

Therefore, for delivering of effective supply chain service first factor to highlight is finding the correct
set of individuals which can meet the both internal and external stakeholder demand. Further, such
individuals would demonstrate strategic thinking when they carry-out work and think of adding value to
the business organization. Some business organizations what they do is they identify such individuals
and place them in various units in the business organization to get the maximum result out from them.

Another way to create an efficient supply chain is that to establish a sound relationship with the existing
and new suppliers in order to create value to the organization. Hence to, build that some kind of a
process to ensure that there is continued relationship, a mechanism to conflict resolution, ensure there is
continues development from the part of supplier and finally in establishing goals to both parties
concerned.
Further, another way is to create business organizations activities inline with supply chain thereby
ensuring that the supply chain is efficient and flexible in carrying-out its activities.

Following decisions can be taken to improve supply chain and operations.

• Traditional view on supply chain has changed now it is considered as a revenue center.
Organizations have to strike the correct balance between minimizing their stock and the need to
meet customer demands. Threats to stock shortage must be contemplated well in advance before
it actually strikes.

• Supply chain is considered as a strategic decision. The design and operation of the network have
significant influence over performance over supply chain. This determines overall actions of the
company.

• Inventory management in supply chain cannot be under estimated. Estimation off supply chain
inventory is very much critical in maintaining adequate number of inventory level.

• Through holistic view improvement in distribution network.

• Come out with a good distribution strategy. This will be key to improve supply chain
decisions.

• Get the role of playing cost leadership strategy for supply chain activities.

• Manage operational expenses. Which is essential to supply chain organization.

 5. Review the application of different strategic approaches to supply chain and operations
management

Supply chain caters to different markets where the market which expect high level of readiness supply
chain fulfills such needs and where markets expects high level of efficiency it focus on operating supply
chain activities in the most efficient way the outcome of it determines how well the market is served and
profitable (Lambert , 2000).

With today’s competitive landscape and to respond to the variations in the market demand the supply
chain business organizations have become more complex than ever before. And also the fact that
political dimension have also have changed given away to nationalistic view and hence demand newer
ways of doing supply chain.

Due to new technology being introduced to the supply chain management such as internet of things and
Artificial intelligence the organizations are in the position to forecast accurately demand and demand
prediction has come of age. Further development of various kinds of apps have further increased the
accuracy of prediction. Therefore, the organization can utilize the advantage of technology into their
supply chain.

Another strategic approach is the organization can devise a mechanism to integrate supply chain
planning with all the manufacturing effort giving away the crucial time saving and the amount of
leniency in flexible operations to be performed in the manufacturing setting. Therefore, gone were the
days where product development and the supply chain planning were considered as two separate
functions. Consider the development of mobile phone, suppose that product development team takes 12
months to design the phone by the time it is introduced to the market phone will be in adequate where
the competitors have developed a more consumer friendly product. Therefore by facilitating the same
organization to the roles of product design and supply chain the organization is in a better position to
eliminate unnecessary political climate which would creep in and also inefficiency which would halt the
progress of the entire organization.
Supply chain management operates at three levels: strategic, tactical, and operational. At the strategic
level, company management makes high-level strategic supply chain decisions that are relevant to
whole organizations.

The decisions that are made with regards to the supply chain should reflect the overall corporate
strategy that the organization is following.

The strategic supply chain processes that management has to decide upon will cover the breadth of the
supply chain. These include product development, customers, manufacturing, vendors, andlogistics.

Different strategic approaches involve

a) The consumer request the quantity – Those who prefer timeliness and closeness prefer
small quantity and those who prefer low prices buy in large quantities.

b) The delivery times – Those customers who residing do not prefer delays where as
corporate customers do not give much emphasis to the time.

c) The product category – High value products are needed to satisfy higher value needs.

d) The service delivery level. The service requirements will vary depending of theproduct.

e) The price accepted may vary. The moderate price will be accepted by customers who
are not willing to pay more.

f) The nature of product innovation. Product innovation plays a critical role in supply
chain management.
 6. Assess the relevance of performance measurement within supply chain and operation
management

Evaluation of supply chain would provide an understanding of how to attain efficiency by maximum
usage of all the resources at operating at competitive price structures. Industrial and service sectors are
widely using this system.

Performance measurement is assessed in focusing on financial, operational, quality, safety, employees,

customer satisfaction and cost. The organization measurement of performance is resource utilization,
reliability, flexibility and innovation. Based on the organizational level it is divided into strategic,
tactical and operational level.

Balance scorecard approach combines financial and non-financial metrics. Objectives are derived from
the organizations strategy and vision focused on four perspectives which are finance, customer, internal
business process and learning and growth.

The figure 6.1 reflects the balance scorecard approach

 7. Evaluate various financial and Non-financial measures, single and multi- factor
performance measures applicable to organizations.

Balanced score card is an approach which involves evaluating performance of employees and
motivating employees within the organization. The balanced score card will assess the drivers of
performance. Therefore, historically both the people who developed this metrics of performance
evaluation Kaplan and Norton twelve (12) top performing companies in the world. Further, this
includes measuring information related to non-financial information as well. Thus, it was originally
developed to measure financial companies the companies which are profit oriented firms only, however
later it was developed to measure performance of non- profit organizations and government agencies.
This model helps to achieve competitive advantage over others in the industry as it gives information
pertaining to training, skills, knowledge of the market. Further this tool furnishes important information
such as objectives, measurement, initiatives, goals resulting from four prime functions in the
organization. Hence this enabled an organization to identify factors which affect the performance of the
organizations and introduce strategic changes which will resurrect the position in the organization in
the industry. The balanced score card was developed by Kaplan and Norton which can be described as
follows.

1. Financial – This evaluate financial measures such as creditor, debtors and etc. Further, this also
can include information such as sales, expenditure, income which are variables used to identify
financial performance. This also can include budgets, variances and income targets.

2. Internal business process – This evaluates efficiency of existing business process. Therefore
this assesses how well the products are manufactured for a manufacturing plant. As such for a
government agency this will evaluate how well the operations are carried-out. Hence, this will
identify any bottlenecks, any wastage and etc.

3. Learning and growth – This evaluates learning and growth of employees within the
organization. Therefore this will evaluate the amount of training which the employees have
received in carrying-out the work, further this will assess any knowledge which need to be
imparted towards the employees.
 4. Customer – This evaluates whether the organization meets the customer expectations.
Customer expectations with regard to quality, price of the products or service, availability of
products and services and etc. Therefore this provides room for customer feedback regarding
their satisfaction with regard to purchasing of the product or services.

The advantageous of this model are it gives the business organization with an opportunity to assess all
the information in a single report rather than having to deal with multiple tools. In turn this saves
additional time and saves money and time which can be used to improve procedures and operations.

Another benefit of this model is it gives the management with an insight about the firms quality and
gives more time to train employees and provide support to other stakeholders by proving guidance.

Further it provides top management with confidence of their internal procedures with out concerning
about sub-optimization.

The intel evaluation of financial and non- financial measures are as follows.

Financial Internal Business Learning and Customer

Process Growth

Inventory Given Customer Employee Market share enjoyed by intel

turnover response time satisfaction (survey) chips
carried-out

Return on Defect-free rate of Hours of employee Number of returned products of n

assets Intel chips trained to deliver a intel Number of customer
better job
complaints with regard to intel
chips
Receivable’s Capacity utilizationof Number of Customer satisfaction (survey) of
turnover Intel employee accidents intel
or mishaps reported

Gross margin New product Employee turnover Number of customer complaints

ratio development of intel with regard to intel chips

Innovative time
 8. Evaluate the selection and application of key performance management indicators for
supply chain management and operations

Key performance indicators are the elements that the organization wants to achieve for a given time
period in order to be successful. These are quantifiable and outcome based statements to measure
whether the organization is on track to achieve its goals and objectives.

The following figure 8.1 reflects the image of KPIs

Key performance indicators of supply chain at Intel are as follows.

• Sales of intel chip ( T/O) – This measures intel’s ability move the inventory it has and it
would be a KPI for the intel. Further it assesses effectiveness in supply chain in Intel..

• Accuracy of inventory in intel – This is a KPI which measures the accuracy of the
inventory levels at Intel.

• On time delivery by intel. This variable measures how quickly they deliver the chips to
the customers. Hence, on time delivery is must to attain greater customer satisfaction.

• Cash cycle of intel. This is a variable to measure strength of its cash position. Therefore
low cash cycle will reflect access to cash.

• Accuracy of freight bill. This is a variable to measure shipment cost. This is also key
performance indicator to measure operational efficiency of Intel.
 • Employee satisfaction rate at intel increase by 20 percent. This another variable which is to
determine employee satisfaction rate at intel.

9. Explain how inter and intra organizational benchmarking can help the organization to
improve supply chain and operations management.

There are following inter and intra organizational benchmarking which intel can use.

• Strategic benchmarking – This involves benchmarking strategic concerns such as core

competence, innovations and etc. Therefore this will improve the organization in the
strategic aspects concerned.

• Performance or competitive benchmarking – This involves comparison of performance of

product within same industry. Therefore this will enable an organization to assess how well
the products have done within the same industry.

• Benchmarking of processes – This involves benchmarking processes with the best in the
industry.

• Benchmarking of functional activities – This involves comparison of different functional

activities in different industries.

• Internal benchmarking – This involves comparison of internal business operations in the

organization. Therefore this involves assessing product quality, the amount of training
required for internal employees. Knowledge about the existing products of employees.

• External benchmarking – This focus on benchmarking external organizations.

The benefits of benchmarking can be listed as follows.

• It gives an insight how well the organization is doing relative to others. Thereby
strengthening their position in the industry.

• It identifies any performance gaps. The benchmarking will allow an organization to identify
any shortages in performance which will enables them to rectify that mistake.

• Helps to develop matrices. Another advantage of benchmarking is that it gives the

organization with an opportunity to develop further matrices which can use as an internal
knowledge purposes.

• Develop culture of continuous learning and development. Another benefit of comparison is

that it creates an open environment for continuous learning and development within an
organization.
References

Chin, S., 2000. Organizations which provide competitiveness. Business Journal of competitveness ,
5(2), pp. 05 - 15.

Giménez, C. & Ventura, E., 2003. Supply chain management as a competitive advantage in the Spanish
grocery sector. International Journal of Logistics Management, 14(1), pp. 77 - 88 .

Jones, T. & Riley, D., 1985. Using inventory for competitive advantage through supply chain
management. International journal of physical distribution & logistics management, 15(5), pp. 16 – 26.

Lambert , L., 2000. Cases of Supply Chain Management. 1st ed. New York: McGraw-Hill Publication.

Roy, I., 2005. Competitive Advantage.. Journal of business research , 5(2), pp. 15 - 25.