Executive Summary
Software development is regarded as one of the most stable business environments, nevertheless, there are some aspects, which may create difficulties for the arrangement of proper Supply Chain Management strategy. The paper will be focused on the key challenges of the SCM, and analysis of the environmental and internal factors by the means of SWOT, PESTLE and KRALJIC analysis matrixes.
Introduction
Supply chain management is generally regarded as one of the most important business factors, associated with the penetration of the company into the market sphere. Consequently, the key values of the supply chain management are closely associated with the effective business performance and the aspects of traditional accounting system, which incorporates the principles of proper supply chain management. The company which will be analyzed is engaged in the sphere of software development Logic Software Inc. Considering the fact that SCM is the least vulnerable sphere for software development, difficulties, associated with product delivery may have crucial effects. Nevertheless, the Strategic Management principles, applied for the Supply chain System may be analyzed only from the perspective of SWOT and PESTLE analyses, as well as KRALJIC matrix for defining the values of the customer relations strategy and the cooperation effectiveness in general.
Supply Chain Management Analysis
Originally, Supply Chain Management is the process, which is responsible for the maintenance of the manufacturing level and arranging of the particular strategic process, required for the most effective supply. Considering the fact, that the basics of the SCM is the creation of the interconnected businesses, it should be emphasized that the original value of this management strategy is the arrangement of the proper cooperation and creation of the alliances, required for the effective functioning of all the components of the network.
The supply chain principles of the selected company heavily depend on the tendencies on the market of IT sphere, as the original values of software development are closely associated with the requirements of the informational market and the necessities of the further development. Independently on the aims and strategies of the Supply Chain Management, the problems and challenges which are faces by the companies are closely associated with the factors of distribution and trading. Thus, as it is emphasized by Wang (2000, p. 67):
Supply chain executives have a daunting daily challenge managing a global supply chain. They must keep customers or stores properly stocked and deliver the perfect order every time. They must balance the need for low costs, proper inventory levels and maximum service. They must ensure that supply chain management is an integral component of the company’s strategic direction and plan to create and maintain competitive advantage. If that is not enough, they have three more challenges to deal with.
In the light of this statement, the problems and challenges of the SCM are the following:
- Configuration of the Distribution Network. This problem is associated with the defining of the key aims of the supply management, and requires clear statement of the network missions. Production facilities, distribution centers, cross-docks and customers are the aspects of this problem. The configuration components of the company will be the companies with electronic accounting systems, and software controlled manufacturing.
- Distribution Strategy. This aspect is aimed for defining the origin of the network, whether it will be centralized or decentralized. The issues of delivery strategy are also defined by this factor. Originally, the values of the delivery strategy are very important, as IT sphere (software development in particular) presupposes not only the delivery of the created product, but also technical maintenance for the initial period of time, qualification improvement of the team, which will use the provided software, and test period, which is aimed at debugging of the product.
- Trade Offs in Logistics. The fact is that logistics is the least crucial aspect of Supply Chain Management in IT sphere, nevertheless, the necessity to reduce logistics costs is essential, and the company needs to optimize these activities by implementing the full truckload principles.
- Information. The problem of the integration process by the means of Supply Chain is of particular importance for the company, as software development generally requires effective integration and stable cooperation with other supply chain components, otherwise, the effectiveness of business performance in general will be essentially lowered.
- Inventory management. Raw materials, resources, finished products and information on the implemented and arranged projects will be required for controlling the entire business and professional performance. Control of the inventory management is one of the key elements of the entire
- Cash flow and arrangement of the payments is one of the most difficult challenges of the Supply Chain Management. This entails the arrangement of the payments and accounting strategies for exchanging funds allover the supply chain.
Thus, basing on the key principles of SCM, and aspects of overcoming possible difficulties, the structure of the Supply Chain Management within the company is subjected to particular rules, and is created in order to overcome the stated challenges, and support the values of software development, thus, creating the effective cooperation with consumers and suppliers.
From the perspective of this SCM chart, it should be emphasized that the traditional aspect of supply and delivery are covered as the tactical and operational parts of the strategy, while the strategic aspects of SCM entail the results of the strategy implementation in general. Thus, in accordance with Cheng and Grimm (2006, p. 195), the following statement should be emphasized:
Different operational research techniques (such as optimization and simulation technologies) lend themselves readily for addressing issues like: the appropriate product specialization and production capacity of the plants; location and size of distribution centers; assignment of customers to be serviced by distribution centers; mode of transportation for every link in the supply chain; optimal inventory level to meet desired service level. The end result is a globally optimized supply chains that perform robustly under foreseeable future scenarios, thus avoiding costly infrastructure changes.
In the light of this statement, it should be emphasized that the traditional aspects of the Supply Chain Management are closely associated with the matters of strategic sources are generally evaluated from the position of supply effectiveness and operational responsibility of the suppliers.
SWOT
From the perspective of this analysis, it should be emphasized that the company does everything possible to satisfy the needs and requirements of the consumers, nevertheless, the delivery system requires essential improvement, in spite of the strict delivery strategy, which is a part of SCM. Thus, the company needs to initiate negotiations with the delivery companies, included into the Supply Network. Otherwise, the independent delivery should be arranged as an alternative, or more reliable companies should be found. Anyway the transportation optimization is required for increasing the effectiveness of the entire SCM strategy by improving product delivery system. As it is emphasized by Min, Kim and Chen (2008, p. 67):
While supply chain design deals with the flow and stocking of goods, transportation optimization examines the shipment process itself. The typical transportation optimizer will search for opportunities to aggregate compatible orders or splitting orders to fit the transportation media, identify pooling points to consolidate orders for long haul using cheaper media and routing of pick-up and drop-off orders to increase backhaul.
Nevertheless, the values of the effective delivery process are covered by the fact of timely delivery and traditional procedures of signing off the product delivery. Additionally, the effectiveness of delivery and supply chain management in general may be evaluated from the perspective of PESTLE environmental analysis.
PESTLE
Political
This factor presupposes the free development of the software developing sphere of business, as the innovative tendencies are highly required for the national economy, business performance and governmental control. Originally, the political environment is rather loyal towards this sphere independently on the origins of the political course.
Economic
Economic factors are similar to any other business sphere, and the competitive environment is strict enough for the rapid and stable development. Thus, most companies are aiming to reduce the costs by resorting to outsourcing practices, nevertheless, it sometimes causes the decrease in product quality.
Social
Originally, this aspect of environment does not influence the development of Software Development business, as the traditional aspects and aims of the IT sphere are not related with the social sphere.
Technological
This factor is regarded as one of the most important environmental aspects. Technology and software development are the two interconnected spheres. Thus, the technological aspect is rather favorable, and the further development of this sphere will allow totally refuse from the delivery services, which will improve and accelerate the implementation processes.
Legal
The only problem with this sphere is the arrangement of the outsourcing networks. The fact is that, legal aspects are not loyal for the immigrant workers, and some practices of international cash flow, consequently, the necessity to avoid outsourcing makes the company rather vulnerable from the perspectives of competitive capabilities.
Ecological
Software development is the most ecologically clean industry, thus, there is nothing to worry about.
KRALJIC
The Purchasing Portfolio Analysis Matrix is generally based on the data provided by the company in marketing reports and overviews of the sphere, where the selected company operates. Thus, the matrix of the analysis is the following:
In the light of this statement the company positions the position of volume assurance, as the supply risks are close to high, and the profit impact is low, as the customers are mainly satisfied, nevertheless, all the problems are closely associated with the matters of unreliable delivery services.
Recommendations
Considering all the provided analyses, the only problem of the company in the sphere of supply chain management is the delivery of the ready production. Thus, the only recommendation, which should be given is the necessity to expand the cooperation network with the delivery companies and provide the extended services of project implementation for increasing the effectiveness of the software usage. (Boone and Ganeshan, 2002) Moreover, the company should focus on the improvement of equipment basis, which will allow arranging the project implementation processes on a remote basis.
Conclusion
Finally, there is strong necessity to emphasize that the original values of Supply Chain Management for the software development company are closely associated with the principles of project implementation and the effectiveness of the developing performance in general. The company needs to improve the technical basis for the solution of the existing delivery problem, and arrange the implementation in remote regime. Considering the fact that all the environmental factors are rather favorable for the further business development, the existing delivery and implementation difficulties should be solved within the nearest time.
Reference
Boone, T. & Ganeshan, R. 2002. New Directions in Supply-Chain Management: Technology, Strategy, and Implementation. New York: AMACOM.
Cheng, L., & Grimm, C. M. 2006. The Application of Empirical Strategic Management Research to Supply Chain Management. Journal of Business Logistics, 27(1), 1
Min, S., Kim, S. K., & Chen, H. 2008. Developing Social Identity and Social Capital for Supply Chain Management. Journal of Business Logistics, 29(1), 283
Wang, M. Y. 2000. Accelerated Logistics: Streamlining the Army’s Supply Chain. Santa Monica, CA: Rand.