Supply Chain Innovations are Changing how Organizations are Performing Their Logistics Operations

Abstract

Modern world is characterized by increase of economic volatility, which could be traced not only in the condition of the global economic recession, but also in rapid change of customer demands and movements of raw materials, fuel, change of commodity prices. This is the reason, why supply chain managers are to face new challenges and find the ways to develop efficient and cheap supply chain schemes, which would meet the demands of their customers in the best ways and would be based upon introduction of the innovative approaches towards speeding up of the process cycle and cost reduction. The supply chain specialists are to focus upon the current business opportunities, which developed from the changed economic conditions.

Introduction

The company leaders in the sphere of supply chain management could be only those projects, which are able to offer serious cost reduction for inventory and logistics services. This process should not be treated superficially, as short-term success could bring new risks for the future. “Organizations must prepare for the rebound while responding to the conditions of the new normal–a reduced labor pool, stagflation and deflation, and issues surrounding energy and sustainability. Effective strategies coupled with a well-defined plan and the right tools will help alleviate pressure today and ready managers for market changes in the future.” (Slade, 2010, p. 2).

Current Trends

It is not a secret that overall functioning of any organization depends upon the appropriately built supply chain and it’s functioning. Consideration and understanding of the current trends in global and local markets would be really helpful for building the supply chain of any organization. Most of the companies utilize their supply chains with the aim of supporting of their competence and gaining market share. Forward-thinking companies focus more and more upon improving of their supply chains, because supply chains become the integral parts of the business strategies. Thus there is an evident shift in general perception of the role and functioning of supply chains. Researchers have pointed out several important strategies, which impact the process of change in supply chains organization and performance.

Before most of the manufacturers were focused upon increase of their production capacities, as the key strategy for maintaining their competent positions in the market and gaining new customers. Nowadays the companies start to shift towards consideration of demands and needs of their consumers, in order to organize their work in a more efficient way. At the same time it is important to find the balance in order not to forget about operational efficiency. “Ultimately, a demand-focused approach to planning can significantly improve demand planning and management efforts and help overall costs and customer service efforts.” (Vaio, 2006, p. 4). Companies make their internal Demand Review in order to get as much as possible information from inside and later be able to find the balance between monthly sales and production and received revenues. Supply chain is one of the participants of the Demand Plan along with sales, marketing, product development and other categories and spheres of production. Such approach is beneficial for sales and introduction of the new products, for inventory planning and customer services, etc.

The world globalization is without any doubts one of the most often used terms in the modern business and organizational sphere. Companies are to consider the global trends and processes, related to globalization, if they plan to develop and be competitive. Improvements of communication forced globalization penetrate into all business spheres and have strong impacts upon managing and organization of production. If to consider supply chain as one of the parts of business process, it is evident that it is under the strong impact of globalization as well. “Manufacturing, distribution, sourcing of materials, invoicing and returns have all been significantly impacted by the increased integration of a global customer and supplier base, and many companies find that existing processes and technology are not flexible enough for this new business environment.” (Vaio, 2006, p. 4). The changes, which are caused by the process of globalization, could be properly managed with the help of correct supply chain design. Optimization of the materials flow, changing of the supply chain design are only some examples of the needed steps.

Product features and brand recognition tend to lose their weight for differentiating of the products in the markets. This means that commoditization of the products makes companies focus more upon their distinguishing strategies. At the same time brand equity and product innovation lost their meaning for supporting higher prices in the markets. Companies are to consider the ways of reducing of their costs with the help of supply chain redesigning and involvement of innovative technologies. Keeping the costs competitive is a vitally important task for modern business environment, thus companies do their best to reduce their costs with the help of efficient and effective organization of their supply chains. In some cases companies take the decision to introduce value-added services in order to correspond to the demands of their customers. Cost reduction without redesign and collaboration of the networks along with introduction of new services would hardly be the decisive strategy for supporting of the desired level of competitiveness and building strong relations with the customers.

Outsourcing belongs to the widely accepted and used trends in the modern business environment. It is often considered to be the direct result of globalization and one of the important methods for cost reduction. “As many companies step back and examine their core competencies some realize that outsourcing parts or all of a supply chain can be advantageous. With marketplace improvements around (1) information mediums and systems (2) cost and quality of global manufacturing and distribution and (3) product design capabilities companies are gaining additional synergies by outsourcing all or parts of their supply chain.” (Vaio, 2006, p. 6).  Outsourcing could prove to be economically beneficial being used in some parts of the supply chains. At the same time companies are to pay more attention to the operating of their systems in the conditions of outsource-heavy environments. Logistic operations in this case should be changed, in other words there should be the superior supply chain network design created, outsource partners should be included into the information chains, specific control mechanisms should be established in order to conduct the control of different components of the supply chain.

Innovation is considered to be the key towards success in business in the modern world. There is a great challenge of the correct introduction of these innovations into the markets, without putting pressure upon the existing products, which are still in demand. This means that more efficient production cycles, including logistical operations, are needed for meeting the needs of customers and consumers. “Typically when companies begin the process of introducing new products to market, they coordinate marketing, engineering, sales and procurement and develop sales forecasts to plan products in the pipeline.” (Vaio, 2006, p. 6). The economy is becoming more global, and packaging and logistics regulation and demands become more critical to meet. If the conditions and regulation of the local labeling and transporting are violated, then there would be problems with distribution and sales in these markets.

Along with rapid development and redesigning of the supply chains, the connections between customers and suppliers become closer and lead to intense collaboration. Collaboration is not limited only to connecting of the information systems for complete integration of the business activities and organizational structures within organizations. Instead, there is a goal to increase visibility, which would be followed by better management strategies and decisions and would lead to decrease of value chain cost.

Supply chain networks are becoming more and more complex and it is utterly important to find the improved supply chain technology solutions. Such technologies would be advantageous for introducing of innovations, cost reductions, meeting of customer needs and expectations. For making the system work appropriately, organizations are to reach the balance of investments into processes, technology and organization. It is not correct to focus only upon one of these aspects. 

Current logistic trends

“A recent report by the World Economic Forum, “Deep Shift: Technology Tipping Points and Societal Impact,” projects that wearable devices, 3-D printing, implantable technology, connected homes, automated workers, driverless cars and smart cities will likely reach critical mass in the mid-2020s.” (Vaio, 2016, p. 2).  Supply chain managers are more focused upon practical issues and the conditions of intense competition, making them find the ways of cost reduction. In order to remain competitive they are forced to support the current innovations and find the ways to meet the present challenges. All these conditions contributed to development of certain logistic trends starting from 2016. First of all most of manufacturers contribute around at least 50% into the development of their supply chains. At the same time they are interested in gaining as much value as it is possible from these relationships. Certainly the relationships with suppliers had existed long time ago already, but they are more intensified in the modern world. Rayford Collins, the specialist in supply chain optimization with the UPS Customer Solutions Group, underlined that “What we are seeing at UPS are companies reducing the number of suppliers and developing tighter business partnerships with those that remain in the chain.” (Lu, 2014). Also he adds that cost management should be seen as the major driver. Business collaboration is said to move to a different level, as it was reported by the World Economic Forum. Examples of this fact could be Airbnb or Uber, along with other peer-to-peer lending services. “Businesses are likely to use collaborative distribution, reverse logistics and cooperative sourcing to reduce costs, improve efficiency and optimize their supply chains, say the consultants at Kinaxis, a cloud-based solution provider.” (Lu, 2014).

The Aberdeen Group has conducted the study recently, which shows that one of the major aims for most supply chain managers and executives is to improve their visibility inside their companies, as well as outside them. Visibility is a decisive factor for making supply chains responsive and thus operating efficiently. Taking into consideration the present speed of development of new technologies, it is evident that technology has all the potential for becoming an important integral part for visibility plan. Technology allows the focus to shift towards the customers’ experience to maximum extent. Most of the consumers are interested in the fact where the products are at a given moment of time after they leave the factory and have not arrived to the destination place yet. Consumers like using smartphones for example for tracking the routes, comparing the prices and doing other kinds of research.

According to the predictions, made by the World Economic Forum, there is a strong tendency for the increase of the number of the Internet-connected devices, the amount of data, passed and received by these devices, is enormous and thus it would have greater and greater impact upon business choices and decisions. Data accumulating is already related to various social media resources such as Twitter or Facebook, to sending emails and clicking of “buy now” buttons. The McKinsey Global Institute pointed out a number of important areas, in which big-data efficiencies would most luckily take place: “Analyzing data close to real time can allow marketing to work with procurement on inventory, so everyone knows what to buy and where to put it based on demand,” Collins says. “We are already using predictive analytics to look for weather patterns and adjust to air or rail movement if roads are likely to flood. Another option is to overlay historical data with visibility data to put contingency plans in place.” (Lu, 2014).

Modern business environments are under the impact of such factors as rising wages in Asia, the necessity to organize faster deliveries, higher transportation costs, etc. This explains the fact why many companies start substituting of outsourcing with next-shoring approach. This approach means that there is not need to plan long transportation routes, instead products are developed “next to”. This term includes the strategies of reshoring, onshoring, nearshoring and rightshoring. All these strategies are used with the aim to make the transit periods shorter, the costs lower and to increase the level of customer services to remain competitive.  Onshoring is a popular strategy for small and high-tech businesses, when manufacturing or at least some parts of the assembly lines are moved back to the countries, where the products are sold. Onshoring also allows conducting better control over the quality of the goods produced and influences logistics management and costs.

Most of the manufacturers come to the conclusion that it is important to build closer collaboration with their suppliers, contribute to improving of visibility and predictive analysis. Inventory management is one of the aspects, which could not be ignored in working out the logistical schemes. The best option is to organize the inventory procedures irrespective of the actual location of the products; it could be even before the products arrive to the warehouse and be able to make the needed changes during the transit period in order to speed up the processes. In addition to increase of speed, it allows to reduce the inventory costs, storing costs and operational costs.

There are a lot of challenges in supply chain business and most of the companies, involved into it, are to overcome the situations of material disruption. “As reported in Supply Chain Insights, 80 percent of companies surveyed had at least one material disruption in 2013, and most had three. What’s more, just over 40 percent of supply chain disruptions came from Tier 2 suppliers and below. A study led by Paul Dittmann, PhD, executive director of the Global Supply Chain Institute at the University of Tennessee, found that if a natural disaster or equipment failure shut down a company facility, about half the firms (53 percent) had a backup plan – which means the other half didn’t.” (Lu, 2014, p. 3). Thus all companies are to consider the options for making their work flow more flexible and adaptable. Companies are to re-evaluate their supply chain structures in order to make them strictly aligned with their business strategies and final goals. Supply chain management should be organized not only in functional supply chain organization, but in many other areas.

Conclusion

Overall, business environment does not remain static, there are a lot of changes taking place in all business aspects. There are certain conditions and challenges in the modern world, which have impact upon establishment and functioning of supply chains and logistical schemes for modern companies and manufacturers. Only under the condition that the company is able to build strong and versatile strategy for organization of the supply chains, these companies could remain competitive and efficient.

References:

Lu, Clara. Apple Supply Chain – The Best Supply Chain in the World, 2014

Role of Information Technology in Logistics and Supply Chain Management, 2012  

Slade Stephen, 5 Strategies for Better Supply Chain Management in the Current Economy, 2010

Vaio, Tim. Managing Vice President of Supply Chain Solutions 2016 Supply Chain Trends: 7 of 12 Trends that Will Drive Supply Chain Management in 2016. Supply Chain Trends, 2016

Vaio, Tim. Six Key Trends Changing the Supply Chain Management Today, 2006

The terms offer and acceptance. (2016, May 17). Retrieved from

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016.

[Accessed: March 28, 2024]

freeessays.club (2016) The terms offer and acceptance [Online].
Available at:

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]
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