Supply Chain Management as a Business Controversy

Introduction

It could hardly be doubted that the development of a sustainable and efficient supply chain is one of the core aspects of any prospering business. This assumption appears to be even more significant regarding the phenomenon of multinational corporations (MNCs) that have to operate in different countries around the world. It should be stated that the development of a sustainable supply chain for such corporations involves a highly complex set of risks and influencing factors. Any changes in the business environment on different scales, including the particular country’s local economy along with global economic processes, considerably affect the MNC’s supply chain. Therefore, it is apparent that the efficiency of the company’s supply chain is a highly important aspect of its success as well as failures.

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Thus, the immense significance of developing an effective supply chain is identified. In order to understand how supply chain management tools and techniques are successfully implemented, it is possible to exemplify such companies as Starbucks, Amazon, Seven-Eleven, The Coca-Cola, and several others. This paper aims to develop a deeper understanding of various aspects of current supply chain management issues, challenges, and perspectives. This goal will be achieved by referencing scholarly literature on the topic as well as statistical data. This essay will elaborate on the following aspects: the overview of the concept of supply chain management (SCM) and specific tools employed in SCM, the discussion of examples of chosen companies and their approaches to the implementation of SCM, and the observation of future perspectives in SCM. The primary thesis of the paper is as follows: efficient supply chain management promotes positive alterations in companies’ functioning by suggesting methods to build a competitive infrastructure and attain sustainability.

The Concept of Supply Chain Management: An Overview

Historical Overview of the Concept of SCM

First of all, it is essential to provide a historical overview of such a concept as supply chain management. Prasetyanti and Simatupang (2015) argue that “a supply chain consists of all activities and facilities performed to fulfill customers’ requests” (p. 146). Thus, the issue of efficient approaches to managing a supply chain is highly important. According to the study by Touboulic and Walker (2015), there were numerous definitions of SCM given by various scholars. It is mentioned that the earliest conceptualizations of SCM can be traced back to scholarly works since 1996 (Touboulic & Walker, 2015). However, the authors observe that the framework of sustainable supply chain management that was considered to be a highly integrated concept was not sufficiently developed in the works published prior to 2000 (Touboulic & Walker, 2015). It is argued by Touboulic and Walker (2015) that the authors in the second half of the 1990s viewed the concept of SCM primarily in the context of environmental impacts rather than a holistic framework.

Further, the definitions of sustainable supply chain management became more precise and detailed. Particularly, significant attention was paid to the idea of sustainability, which was developed in the context of a broader range of issues (Touboulic & Walker, 2015). Therefore, it is possible to state that sustainable supply chain management is a relatively new concept, which is within the scope of numerous contemporary scholars, who develop a more profound and insightful approach to managing a supply chain.

Theoretical Perspectives on the Topic

The previous section provides a brief overview of the development of the concept of SCM, and despite the fact that this field of study is still evolving, it is possible to provide a generalized definition of SCM, which is widely recognized and accepted in the contemporary literature on the topic. According to the definition by Touboulic and Walker (2015), sustainable supply chain management is an integral part of internal and external processes in the business sphere, which emphasizes the significance of collaboration among supply chain partners. However, there are different theoretical perspectives on how to manage the supply chain in the most efficient way.

One of the most distant in terms of time, yet a very comprehensive definition of sustainable supply chain management is provided by Wolters (2003): sustainably SCM “involves issues of sustainable development insofar as companies can be held responsible for the social and environmental impacts arising along the supply chain” (Touboulic & Walker, 2015, p. 5). The definition by Carter and Rogers (2008) could be considered as one of the better examples of the complicated and integrated nature of SCM, which is prevalent in the contemporary literature on the topic: “the strategic, transparent integration and achievement of an organization’s social, environmental, and economic goals in the systemic coordination of key inter-organizational business processes” (Touboulic & Walker, 2015, p. 6). To obtain a more profound understanding of the areas of concern involved in SCM, it is possible to mention the definition by Seuring and Muller (2008), who considered sustainable SCM to be organized around “three principal dimensions of sustainable development (economic, environmental, and social aspects) in order to manage material, information and capital flows as well as cooperation among companies along the supply chain” (Touboulic & Walker, 2015, p. 6).

Further, it is essential to dwelling upon the most recent definitions of supply chain management provided by Touboulic and Walker (2015). Spence and Bourlakis (2009) consider SCM as the framework to investigate issues beyond traditional measures of technical and legal performance of supply chain, and to develop an understanding of social and environmental benefits could be gained along with gaining economic profits (Touboulic & Walker, 2015, p. 6). The most recent definition cited in Touboulic and Walker (2015) is provided by Ellram and Kirchoff (2010), who suggest that sustainable supply chain management results from the stakeholders’ pressure on firms in order to incorporate “the triple-bottom-line of social, environmental and economic responsibility considerations into operations and supply chain management strategies” (p. 6). Thus, it is apparent that there are numerous theoretical perspectives on this question, and the development of the concept continues. However, this paper will dwell upon the selected range of the most recent scholarly works on the topic in order to support its assumptions with the actual evidence base.

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Different Approaches to Managing Supply Chain

The optimization of supply chains is impossible without the use of scientific approaches and methods. At various stages of the process of managing material flows, different models can be implemented, which reflect certain parameters and indicators of supply chains. However, there is a need for such an assessment tool that would allow evaluating the influence of each parameter separately and considering the influence of many parameters both in separate stages of supply chain management and the whole process.

The difficulty in creating such models lies in the fact that some components of the supply chain management process are both well-structured and weak decision-making tasks. For instance, according to Yu, Wang, Zhong, and Huang (2016), at the first stage (planning), methods and models of demand forecasting are used. When assessing the volume of sales, there are two approaches – the calculation of sales volume based on the end-use of their products and the market share of the enterprise. As Yu et al. (2016) remark, the methods of forecasting sales can be summarized in accordance with expert assessments and economic-statistical results. These approaches are used in practice in various fields. They involve studying the opinions of manufacturers and consumers of products, trade and intermediary firms, retail enterprises, and consulting organizations on the possible sales volumes of the venture’s products in a planned period.

Tools, Techniques, and Approaches to Managing Supply Chain

Big Data and Data Science

The practice of big data plays an essential role in the management of business organizations’ supply chains and regulates logistical processes. According to Schoenherr and Speier-Pero (2015), data science is the process through which analysts study huge amounts of information in order to identify patterns and other useful facts that help to find effective business solutions. Schoenherr and Speier-Pero (2015) argue that using big data at the supply chain level allows companies to improve their response to unstable demand and reduce potential risks. Moreover, big data technology uses the combination of data history, scenario planning, and risk mapping to assess possible problems and gives manufacturers an opportunity to control the early warning system. These advantages are valuable when speaking about managing supply chains.

Predictive Analytics

Modern solutions in the field of predictive analytics allow monitoring the behavior of customers and form individual offers and discounts on their basis. According to Schoenherr and Speier-Pero (2015), this system is connected not only with pricing but also with other aspects of the trade. In particular, many shops successfully apply predictive demand algorithms, inventory management, offer the widest range of products and use other opportunities that this approach provides. With the introduction of big data, the parallel analysis of huge amounts of information has become possible. Modern solutions allow processing the entire volume of data within a reasonable time, forming qualitative predictive models that open up new perspectives for the transfer of virtually all business aspects (Schoenherr & Speier-Pero, 2015). Therefore, such a mechanism as predictive analytics is a successful and necessary component of supply chain management.

Customer Involvement

Contemporary forms of marketing provide for the involvement of customers in the process of making a particular sales model. One of the types of demand regulation for certain goods is the supply of shares and discounts when buyers have an opportunity to purchase their desired products at a low price. According to Sigala (2014), the analysis of such an approach shows that the involvement of clients can be effective if the right mechanisms are used, in particular, a sound pricing policy and the ability to influence the volume and quality of goods. The introduction of new technologies in the process of making products often occurs due to the interest of customers, which, in turn, positively affects the quality of sales. If producers take into account clients’ opinions, the demand will be stable, and the supply chains will be sustainable.

Examples of the Successfully Operating Companies’ Employment of SCM

Starbucks as an example of Value Chain Model

This section is dedicated to the discussion of examples of companies that are successfully operating their supply chain. The first corporation under discussion is Starbucks. It is chosen to be the first element of this section because the principles of a value chain model are incorporated in the company’s SCM (Bajpai, 2015). The underlying idea of the value chain could be described as follows: the company strives to add value to its product at every stage of producing it by implementing various actions and policies that serve the initial purpose (Bajpai, 2015). Thus, it is possible to predict that the value chain model could be used to eliminate insufficient and inefficient policies from the production process, and thus the company’s supply chain and the overall position in the market will be more sustainable. In the case of Starbucks, it is essential to differentiate between the company’s primary and support activities. The first category includes inbound and outbound logistics, operations, marketing and sales, and customer service, while the second one comprises infrastructure, human resource management, technology development, and procurement (Bajpai, 2015). Each of the mentioned areas of concern is the subject of specific actions performed for the increase of the product’s value.

Another highly important perspective on the performance of Starbucks’ supply chain is discussed by Bajpai (2015), as he investigates traditional business functions (operations, sourcing, distribution, and customer service strategy) as driving factors of the company’s overall success. As the company operates in 65 countries across the world, the questions of operations and sourcing are of immense importance for Starbucks. Lombardo (2017) argues that the company’s sourcing is one of its primary strengths because Starbucks is able to control the whole process of product manufacturing. Another highly important aspect, which is often overlooked by supply chain managers, is the minimized number of intermediaries in the company’s supply chain operations (Bajpai, 2015).

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The Example of Amazon

Another giant company that has long and successfully worked in the world market is Amazon, the online trading network that offers a wide variety of products. Due to the fact that the corporation works all over the globe, the approach to supply chain formation should be thought to the smallest detail so that the company could not lose customers and suffer significant losses. According to Simpson et al. (2015), one of the promising strategies promoted by the management of Amazon is the introduction of innovative transport ways. The representatives of the corporation stated transporting that they wanted to use mobile air drones to deliver goods to customers. In addition, Amazon lobbies for permission to deliver by unmanned aerial vehicles outside the US (Simpson et al., 2015). This approach is modern and previously unused. Perhaps, it is this innovation that will increase the demand and, at the same time, improve Amazon’s supply chains.

Home Depot and Lowe’s: Home Improvement Retailers

Home Depot and Lowe’s are the world’s largest retailers selling household products. They provide identical services and therefore have always been competing corporations. Nevertheless, despite the same direction of activities, their strategic aims for logistical work are different.

The management of Home Depot works hard to upgrade its supply chain, and this activity is a priority. As Yu et al. (2016) note, for most of its history, the company has had a reputation for lagging behind its main competitor in terms of the effectiveness of this indicator. One of the key principles of the company’s work was the formation of a decentralized type of supply. It means that the representatives of Home Depot avoided intermediaries and delivered goods directly to their outlets. Such a method had some obvious disadvantages, for instance, the irrational use of transport. However, a new innovative approach promoted by the corporation’s management implies a centralized supply chain.

Lowe’s management currently pays less attention to the need to upgrade its supply chain. Instead, the company identified an improvement in customer service as one of its key objectives. According to Yu et al. (2016), of particular concern are client-centered initiatives, for instance, improving the quality of displays in the store, ensuring that store stocks are waiting and reflecting local and seasonal preferences of customers, and other ways of initiating customer involvement.

IKEA

One of the most recognizable brands in the world is the Swedish IKEA Corporation that supplies household products and furniture. Due to the fact that the company requires a stable system of goods delivery, its management adheres to the principle of trade through branches, that is, all products are distributed in different countries through local departments rather than from one major center. According to Gong, Jia, Brown, and Koh (2018), it is the level of vertical integration that is typical for IKEA. The primary advantage that consumers note is the relatively low cost of goods, which helps the company not to lack demand. Such an organized supply chain makes it possible to exclude potential risks with delivery and allows customers to receive their ordered products in the shortest possible time. In addition to official sales outlets, there is also the possibility of ordering goods online. The distribution of products by branches significantly simplifies the selling process and gives consumers confidence in the manufacturer.

Current Issues and Challenges in the Sphere of SCM

Sustainability Issues

There are many reasons that encourage companies to work towards ensuring sustainability in the sphere of SCM. According to Touboulic and Walker (2015), the main of them is keeping old clients and attracting new ones. Other essential reasons include risk management, the ability to manage reputation issues, and the enforcement of laws and regulations while respecting and supporting international principles for sustainable business (Linnander et al., 2017). They are managing and striving to improve environmental, social, and economic efficiency, companies active in the interests of their stakeholders and the society as a whole.

Public expectations are another cause of the spread of initiatives to create a sustainable supply chain. As Sigala (2014) argues, all motivational factors that establish a stable dialogue with the participants of the market can be combined into one reason – the need to protect the business against possible risks by ensuring a timely and flexible response to various changes in the external environment. Therefore, manufacturers should necessarily take into account sustainability issues.

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The Notion of Supply Chain Risk

The experience of companies around the world shows that a number of measures to reduce the cost of servicing supply chains can increase risks for the business. For example, the management of virtual stocks, optimization of supplies, and a reduction in the number of distribution centers prove to be effective but may cause losses. Heckmann, Comes, and Nickel (2015) identify two global groups – the risks of the macro environment and functional threats. In the first case, there is a danger for the entire supply chain – economic crises, restrictions on the availability of raw materials, political instability, new legal requirements, and natural disasters. Functional risks are the threats of incorrect legal or tax support, recruitment, IT work, and other activities. In order to minimize the danger to the enterprise, it is possible to pay attention to one of the effective methods of combating risks. Heckmann et al. (2015) mention an adaptive supply chain, flexible product flow planning, marketing campaigns to attract customers, and some other opportunities. If the supply chain is correctly monitored, the enterprise is unlikely to suffer losses and will be able to be competitive and sustainable.

Challenges in Logistic Model

The challenges that market participants face when implementing and maintaining a logistic model can be related to different issues. Dabbene, Gay, and Tortia (2014) give the example of the impossibility of tracking goods when there are unforeseen circumstances with delivery control. The authors mention food products, and this problem is significant in relation to such goods (Dabbene et al., 2014). However, other challenges may also arise – difficulties in the preparation of transport and customs documentation, delays for various reasons, and other problems. It is essential to think of a logistic model correctly in order to avoid any confusion.

Conclusion

An efficient and well-thought-out supply chain management system allows companies to successfully operate in the market, maintain competition with other enterprises, and strengthen sustainability indicators. The examples of different corporations prove the need for a competent policy regarding SCM and the use of modern means of attracting customers. From the theoretical point of view, the activities related to the maintenance of a stable supply chain involve the implementation of different approaches and techniques to achieve benefits and attract consumers. Despite some difficulties that may arise in the course of work, companies can maintain their credibility among clients and achieve their brand recognition if effective mechanisms for the distribution of goods are used.

References

Bajpai, P. (2015). Starbucks as an example of the value chain model. Supply Chain 247. Web.

Dabbene, F., Gay, P., & Tortia, C. (2014). Traceability issues in food supply chain management: A review. Biosystems Engineering, 120, 65-80.

Gong, Y., Jia, F., Brown, S., & Koh, L. (2018). Supply chain learning of sustainability in multi-tier supply chains: A resource orchestration perspective. International Journal of Operations & Production Management, 38(4), 1061-1090.

Heckmann, I., Comes, T., & Nickel, S. (2015). A critical review on supply chain risk – Definition, measure, and modeling. Omega, 52, 119-132.

Linnander, E., Yuan, C. T., Ahmed, S., Cherlin, E., Talbert-Slagle, K., & Curry, L. A. (2017). Process evaluation of knowledge transfer across industries: Leveraging Coca-Cola’s supply chain expertise for medicine availability in Tanzania. PloS One, 12(11), 1-16.

Lombardo, J. (2017). Starbucks Coffee SWOT analysis. Panmore Institute. Web.

Prasetyanti, L. A., & Simatupang, T. M. (2015). A framework for service-based supply chain. Procedia Manufacturing, 4, 146-154.

Schoenherr, T., & Speier-Pero, C. (2015). Data science, predictive analytics, and big data in supply chain management: Current state and future potential. Journal of Business Logistics, 36(1), 120-132.

Sigala, M. (2014). Customer involvement in sustainable supply chain management: A research framework and implications in tourism. Cornell Hospitality Quarterly, 55(1), 76-88.

Simpson, D., Meredith, J., Boyer, K., Dilts, D., Ellram, L. M., & Leong, G. K. (2015). Professional, research, and publishing trends in operations and supply chain management. Journal of Supply Chain Management, 51(3), 87-100.

Touboulic, A., & Walker, H. (2015). Theories in sustainable supply chain management: A structured literature review. International Journal of Physical Distribution & Logistics Management, 45(1/2), 16-42.

Yu, Y., Wang, X., Zhong, R., & Huang, G. Q. (2016). E-commerce logistics in supply chain management: Practice perspective. Procedia CIRP, 52, 179-185.

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