Maersk. That one word is the name of a company, one which affects your life a great deal considering it’s likely you’ve never heard of it. The giant Danish conglomerate (also known as A.P. Møller – Maersk Group) is involved in a wide variety of different sectors of business. The one we’re going to focus on is its shipping arm, known as Maersk Line. Since 1996, Maersk has been the largest container ship operator on the planet. The multi-billion dollar operation is slowly but surely changing how it works, and these changes could have pretty major effects on the shipping industry as a whole. Continue reading “Green Shipping: Putting the Pressure On”
Purchasing is among the most important activities in supply chain management, since it is the primary point of contact with most supply-chain partners. A major area in purchasing management is that of Supplier Selection Problem (sometimes called the Vendor Selection Problem). Research in this domain started in the early 1960s and over 175 studies have attempted to address this highly critical issue of procurement management. “Vendor selection criteria and methods” have reportedly been the highest area of interest in operations management research.
A wide variety of selection criteria have been used in different studies for the evaluation of suppliers which have varied due to the differences in requirements in different industries and also often had been purely firm specific. Typically the variety of supplier selection criteria that has been used has exceeded 50 criteria in over 65 research papers working on finding new criteria for evaluation of suppliers. These criteria have been enlisted in the matrix shown below.
Some of the most popular criteria in supplier selection which has been used in over 10 research papers and have also been widely cited are relative price, compliance with the delivery schedule, quality of the delivered goods to specifications, production capabilities of the supplier, geographic distance (of the warehouse), technical capability of the supplier, management capability of the supplier and financial position of the supplier. All these supplier evaluation criteria have found massive application in the studies in this domain and are marked by subtle differences in terms of relative importance, as perceived by senior procurement practitioners.
Similarly another area of keen interest is the models which has been used to provide decision support to the supplier selection problem. Over 35 different mathematical models have been used for providing decision support to this extremely critical issue of procurement management. A study by Ho, Xu and Dey (2010) reveals that the Analytic Hierarchy Process, Mathematical Programming and Data Envelopment Analysis are the top 3 modeling paradigms used to provide decision support in supplier selection problems. Many other novel techniques like multi-attribute-deterministic models; mixed mathematical programming, outranking techniques; weighted sum of products; interpretive structural modeling; fuzzy set theory, neural networks; intelligent agent based techniques; TOPSIS, fuzzy multi-attribute frameworks; rule based reasoning models and multi-objective programming models have also been used. Typically the evolution of supplier selection models have been as described pictorially below, due to the evolution of the nature of selection criteria, from quantitative to a mix of quantitative and qualitative criteria.
As the trend highlights, there is a paradigm shift in the nature of the mathematical models used for supplier selection with a change in the requirements in the nature of business, mostly in the manufacturing industries and the maturity of the discipline. No wonder the area has attracted so much of attention to the consulting practitioners and theory developers in academia alike.
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Business process re-engineering is the analysis and re-designing of workflows and business processes within a firm. Business process re-engineering is also known as business process redesign, business process change management, or business transformation. Typically Business process re-engineering happens in 4 sequential steps , in a firm, as described below.
- Typically, the first step for a BPR is planning for the same. First of all the deliverable of the process under scanner needs to be clarified. Then it is important to define the scope of the project. Often it is seen that projects fail to have a well defined deliverable and scope, and this creates major management problems. Then within the project, identifying the critical mini-projects and their major drivers is crucial for success of a business process re-engineering operation. After the major drivers are identified, then the focus should be to identify the slack resources, which are less utilized and possible bottle-necks in existing processes.
- In the next step, a deeper study of the existing business processes is required. In this stage, normally the focus remains on gathering internal information about the processes, map existing capabilities with resources and more important map processes with under-utilized resources and slack variables. This often helps to determine the bottle neck in the operation of the macro process. Then a mapping needs to be done of the IT capabilities of the process with the process stages and internal capabilities (of the work force)
- In the third step, major process issues need to be identified. Often it may appear that there are multiple optimal solutions. Process gaps need to be identified and areas of major restructuring needs to be identified. Also focus should be to identify and nullify slack resources at every stage.
- Then a cost benefit analysis of all the possible optimal solutions needs to be conducted thoroughly. While analyzing optimal solutions, it is extremely crucial to investigate inter-process and intra-process linkages which may get disrupted during the implementation of the business process re-engineering plan. Finally a road-map or a blue-print for the implementation of the best business process re-engineering plan needs to be chalked out. Then a case study is developed in the last stage to set tangible targets during the business process re-engineering process implementation.
The processes for a successful BPR has been described thoroughly pictorially in the diagram below.
After a business process re-engineering project is completed, a major challenge that the management faces is that of change management. Organizations have a culture and an identity of their own. After major changes happen through the implementation of a business process re-engineering plan,major disruption of the culture and organizational harmony is likely to happen if substantial measures are not taken for managing the change. Substantial effort has to be taken by the top management to drive home the change, without coercion. Extra efforts on training the work-force and regular intervention of the top management to facilitate the process will create a major impact on the success of a business process re-engineering process. Efficient change management is the biggest factor which causes a business process re-engineering exercise to be significantly successful.
Finally, it is important not to forget the main goals for which the business process re-engineering was conducted in the first place. The project needs to be managed and metrics should be driven in place to ensure the proper management of the project post re-engineering. Also it is important to remember that performing BPR as a one-off exercise with limited strategy alignment and long-term perspective is unlikely to deliver any real benefits for the firm.
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Have you read this article : 4 Cs of Marketing – The Advanced Marketing Mix
In this article, we take you on a tour on the very basic focus of supply chain management. While there are many articles, which talk about the intricacies, the sole focus of this article is to cover all the various aspect an opening class for a grad program is likely to address.
There are few issues which are of prime importance while studying the subject. Before, one can call oneself conversant with the discipline, one needs to ask himself, can he answer the questions in details regarding these aspects? This article is off course written more on lines of a strategic view point rather than an implementer ‘ s viewpoint.
- Distribution Network Configuration: This is related to the number and location of suppliers, production facilities, distribution centers, warehouses and customers.
- Distribution Strategy: This is related to the centralized versus decentralized issue, direct shipment, cross docking, pull or push strategies, and third party logistics.
- Information: This is related to integration of systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation etc.
- Inventory Management: How should one manage stored quantity and decide the location of inventory including raw materials, work-in-process and finished goods.
- Cash-Flow: Arranging the payment terms and the methodologies for exchanging funds across entities within the supply chain.
Focus: Customer, cost saving, value adding, time from cash to cash, percentage of fill rate against customer specifications and total response times
The extension of the supply chain definition is to provide a context for measurement or to operationalize theoretical concepts. Existing definitions may not always explicitly provide a basis for measurement. The development of new measures and the development of new benchmarks, based on these measures; in developing the new measurement format, various aspects of the supply chain definition can be expected to affect the specific mix of measures used.
It is important to understand that the position of players in the chain (supplier, manufacturer, wholesaler, service supplier) affects their contribution and relevant measures, the level of integration and the strategic approach may affect the relevance of measures needs to be scrutinized. Creating benchmarks based on the new measurement systems may contribute to directing management effort in optimizing the supply chain. Thus this is of prime importance to a supply chain manager.
Also, the development of tools that can help support the implementation of the new measurement approach may be a crucial final step leading to the actual application of new measurement approaches. The tools cannot be limited to the measurement system itself; they also need to include strategic trade-off and planning frameworks in order to assure executive “buy-in” and commitment and initiate actual improvement processes in the supply chain.
Finally some finer aspects to ponder for supply chain managers while attempting to operationalize theoretical models.
- Whether the models are qualitative or quantitative will affect the plans.
- What they measure is of paramount importance: cost and non-cost; quality, cost, delivery, resource utilization, flexibility, visibility, trust and innovativeness
- Collaboration efficiency and coordination efficiency and configuration and input, output and composite measures.
- Their strategic, operational or tactical focus.
- The process in the supply chain they relate to.
These are some of the basics that a supply chain manager is expected to plan about while going about his job. By the way, did you read our article on Supply Chain Value Management
No doubt that the efficient management of the Supply Chain is crucial for any business, but the grasping question always comes is how does it create value for the firm? More still, how can that value be better managed so as to create competitive advantage for the firm?
While the Value Chain analysis as developed by Michael Porter in 1985 argues as being efficient for creating a sustainable platform for value generation for firms so that they may achieve competitive advantage in the industry, the proposition is not without major limitations, like all other popular frameworks in strategic management literature.
Theory of Economics is one of many possible ways to define and measure value.
While operationalizing the definition of value, it is crucial to note whether the exchange that creates this economic value is between business entities i.e. Business to Business (B2B) – or between a firm and a consumer – i.e., Business to Consumer (B2C).
Since Supply Chain is intrinsic to creation of economic value between business entities only, we focus on B2B value creation. There are 3 forms of value that is created in B2B type economic transactions that is widely accepted in strategic management literature focusing on Supply Chains.
- Technical value, which is intrinsic to the resource being provided and occurs in almost every economic exchanges.
- Organizational value, which is built upon the context of the exchange, and may derive from a range of factors such as ethical standards, prestige, reliability, and association. This may help the organization get more than the normal economic value from the transactional point of view, in terms of helping the same to achieve some degree of competitive advantage.
- Personal value, which is derived from the personal experiences and relationships involved in the exchange of resources and the benefits provided to the entities associated with the firms bounded by the economic exchange.
Value in supply chain gets created through the following processes:
- Supply chain modeling must be done quantitatively and objectively. Understanding of the goals objectively is crucial for its success.
- The major challenge in an excellent supply chain network is not to build a model but to model the sensitivity of one variable against others optimally. A simple model can work fine in many cases. However, supply chain experts (OR & Analytics Professionals) should be involved immediately when doing multi-layered inventory strategies, industrial engineers and operations.
- The fundamental building blocks of work are the methods and standards for the tasks. Value creation occurs when the changing business dynamics can be effectively modeled regularly to drive maximum benefits. (remember the Theories of Constraints?)
So creating value from supply chain should be a major focus for all manufacturing companies.
This is crucial to improve the effectiveness and efficiency of not only the supply chain in particular, but for the overall firm productivity.
By the way, did you read the following articles?
- Complexity and Adaptivity of Buyer-Supplier Networks
- Information sharing in Buyer Supplier Relationships
- How to manage a Lean Supply Chain
These are few of our highly popular articles
Supply Chain Management is often defined in Operations Management literature as the integrative planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities (Handfield & Nichols, 1999; Mentzer et al., 2001). Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, third-party service providers, In fact, the coordination is one of the major challenges in effective supply chain management (Thomas & Griffin, 1996). Stakeholders could be intermediaries, and even customers. At its core. Supply Chain Management integrates supply and demand management within and across companies.
Supply Chain Management can also be defined as the integrative planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Securing one of the few respected logistics companies can be a great way to have a more efficient supply chain management.
However, selection of any supply chain partner is a multi-criteria decision making process and is extremely complex. Therefore a lot of advanced decision support systems are used for partner selection for effective supply chain management. There has been lots of studies which has focussed on the challenges and approaches for supply chain partner selection (Kar, 2009; Pani & Kar, 2011, Kar, 2014; Kar & Pani, 2014a; Kar & Pani, 2014b)
So what does integrative supply chain management?
Integrative supply chain management consists of all the activities involved in logistics, supplier identification and management, reverse logistics, cash to cash management, service level distribution, management to demand and responding to fluctuations, manufacturing, management of e-SCM issues, management of technology, auctions, negotiations, reverse auctions, customer relationship management (to an extent), ware house management, inventory management and so on.
However the most crucial activities in proper management of the supply chain focuses on activities involving logistics management, supplier / vendor selection, procurement strategizing (make vs buy decisions), vendor management, value co-creation with partners and collaborators, and daily operational aspects. Essentially, the crux of excellence in Supply Chain Management lies in managing the Supply Chain Network, which extends from the many tiered suppliers (vendors) to the end customer through distributors or retailers.
Research on supply chain management started as early as in the late 1950s, and research issues were centered around few key themes as described by the diagram below.
Thus Effective Supply Chain Management encompasses the planning and management of all the ploys and strategies, including the implementation of the same, for improving the sourcing and procurement of a firm, conversion, demand creation and fulfillment, and all Logistics Management activities. Thus, it also includes coordination and collaboration with channel partners, who can be suppliers for the firm, third-party service providers, intermediaries, and as mentioned earlier, collaborating customers on the network.
Those who feel as though they have a strong understanding of the many relationships involved with supply chain management may be able to own a franchise like Quiznos or other restaurant franchises with their expertise. The act of owning and establishing a franchise or chain restaurant in one’s area is fairly complicated, but certainly not impossible. It is also an excellent way to gain an understanding of what goes into owning and managing a business. Those who are relatively new to some of the aforementioned concepts may also find that they would have an easier time managing a franchise that is already established versus managing a business from the ground up.
By the way, did you hear about Interlink Parcel Delivery? They are a part of the UK based Interlink Express. They offer an excellent courier service, based on effective management of the logistics value chain.
P.S. Article inspired by the presentation of my friend and colleague, Dr. Priyal Singh
- Handfield, R. B., & Nichols, E. L. (1999). Introduction to supply chain management (Vol. 183). Upper Saddle River, NJ: prentice Hall.
- Kar, A. K. (2009). Using Fuzzy Neural Networks and Analytic Hierarchy Process for Supplier Classification in e-Procurement.
- Kar, A. K. (2014). Revisiting the supplier selection problem: An integrated approach for group decision support. Expert systems with applications, 41(6), 2762-2771.
- Kar, A. K., & Pani, A. K. (2014a). How can a group of procurement experts select suppliers? An approach for group decision support. Journal of Enterprise Information Management, 27(4), 337-357.
- Kar, A. K., & Pani, A. K. (2014b). Exploring the importance of different supplier selection criteria. Management Research Review, 37(1), 89-105.
- Mentzer, J. T., DeWitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D., & Zacharia, Z. G. (2001). Defining supply chain management. Journal of Business logistics, 22(2), 1-25.
- Pani, A. K., & Kar, A. K. (2011, January). A study to compare relative importance of criteria for supplier evaluation in e-procurement. In System Sciences (HICSS), 2011 44th Hawaii International Conference on (pp. 1-8). IEEE.
- Thomas, D. J., & Griffin, P. M. (1996). Coordinated supply chain management. European journal of operational research, 94(1), 1-15.
Buyer-Supply networks are composed of multiple numbers of firms from a variety of interrelated industries. Such networks are subject to shifting strategies and objectives within a dynamic environment, guided by (micro factors) internal factors of the individual firms and also by the (macro factors) industry dynamics of the same. Today, supply chain management involves adapting to changes in a complicated global network of organizations. As a result, buyer-supplier network decisions and the optimization of the same have become the center stage and concerns the scrutiny of the top level managers.
Two emergent challenges that managers frequently have to address when making these decisions are the structural intricacies of their interconnected supply chains and the need to learn and adapt their organization in a constantly changing environment to ensure its long-term survival. Complex interconnections between multiple suppliers, manufacturers, assemblers, distributors, and retailers are the norm for industrial supply networks. When decision making in these networks is based on non-complex assumptions problems are often hidden, leaving plenty of room for understanding and improving the underlying processes.
Along with managing the complexity inherent in the inter-connectivity of their supply networks, organizations have also started to learn the benefits of being adaptive in their behavior. Because organizations exhibit adaptivity and can exist in a complex environment with myriad relationships and interactions, it is a natural step to identify a supply network as a CAS. Research indicates that that supply networks should be recognized as CAS by providing a detailed mapping of each property of CAS to a supply network.
- A CAS consists of entities that interact with other entities and with the environment by following a set of simple decision rules (i.e., schema). These entities may evolve over time as entities learn from their interactions. In contrast to relational modeling, which tries to use one set of variables to explain variation in another set of variables, CAS examines how changes in an individual entity’s schema lead to different aggregate outcomes.
- A CAS is self-organizing. Self-organization is a consequence of interactions between entities. Self-organization is defined as a process in which new structures, patterns, and properties emerge without being externally imposed on the system. Because the behavior in complex systems comes from dynamic interactions among the agents and between the environment and the agents, the changes tend to be nonlinear with respect to the original changes in the system.
- A CAS coevolves to the edge of chaos, just like coevolution, positing that a CAS reacts to and creates its environment so that as the environment changes it may cause the agents within it to change, which, in turn, cause other changes to the environment.
- A CAS is recursive by nature, and it recombines and evolves over time. Furthermore, from a macroeconomic viewpoint, it can be posited that industry supply networks are interrelated within a national or international context and interact together as a CAS in a larger context.
Supply chain research has gained a lot ever since the conceptualization of buyer-supplier networks was done through CAS. What do you think should be the way ahead?
adapted from pathak et al.,2007
A supply chain is essentially a network of inter-connected and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from the suppliers to the end users. The very definition shows how important information sharing plays a huge role in the management of the supply chain, since today proper SCM focuses on how firms can best utilize their suppliers’ processes, technology and capabilities to enhance their own competitive advantage. Continue reading “Information sharing in Buyer Supplier Relationships”
Today the buzz word in supply chain management is a lean supply chain. Question is, although lean supply chain offers many benefits, it has its own set of management challenges. Lean supply chain management is not only for the manufacturing companies but for any setups which need to streamline processes by eliminating non-value added activities. Continue reading “How to manage a Lean Supply Chain”
E-markets have been established in many industries as a sourcing option for buyers. Research has implied that the e-markets have substitutional effect on the traditional supply chain, yet in many situations, e-markets are used by buyers as a benchmarking tool in negotiations with traditional suppliers. The late 1990s and early 2000s have seen the rise and fall of many e‑marketplaces. Despite being hyped for their ability to benefit firms through dynamic pricing as well as lower transaction costs, most e‑markets failed, never reaching their expected potential. Continue reading “How e-markets affect the supply chain”
Today, many supply chain managers believe that there are multiple risks involved in a supply chain, and yet are often ill-equipped to handle the same. Many of the risk factors develop from a pressure to enhance productivity, minimize waste, remove supply chain duplication, and improve bottom-line. Continue reading “Risk in Supply Chain Management”
As a company gets large-scale recognition and popularity, maintaining its image and brand becomes more important than the product it manufactures. So from a product-centric view, companies have shifted their attention to other aspects which include marketing of the product, providing service to the customers and giving the product an image that differentiates it from the rest, not by virtue of its technical specifications but by virtue of customer perception. Hence the rise of outsourcing of manufacturing activities by giants across industries like footwear, iron and steel, durable and non-durable goods, household consumables and several other FMCG products, to small 3rd party manufacturers. Continue reading “Situation of Outsourcing in the Manufacturing Industries”