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This document delves into the intricacies of supply chain management, outlining key objectives, methods, and best practices. It explores the importance of minimizing costs, optimizing supply levels, and ensuring timely and reliable delivery. The document also highlights the role of information technology, resource sharing, and benchmarking in enhancing supply chain efficiency. It provides a comprehensive overview of the subject, making it a valuable resource for students and professionals seeking to understand the complexities of supply chain management.
Typology: Summaries
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Obtaining particular results in the functioning of the distribution logistics system is connected with incurring costs: service of orders, maintaining the warehouses and stocks, transport and packaging.
The systemic approach concept in the logistics of distribution enables to minimize the logistics overheads with keeping t standard.
In a knowledge-based economy, an enterprise takes on a new dimension following the emergence of different modern organizational forms, e.g. web or virtual constructs which are governed by methods divergent from the classical approach.
A traditional organizational business model is defined as a combination of human, material and financial factors of production organized and coordinated to perform business/commercial activities involving the production of goods and the provision of services thus undertaking the economic initiative and, ultimately, the production of wealth which generates the national income. This final element distinguishes an enterprise from a household, the second major real-economy entity that acts merely as a beneficiary of the goods and services provided by the enterprise. The characteristics of an enterprise include individually distinct identities: economic, organizational, legal and technically-productive, as well as the economic rationale and entrepreneurship.
Any entry into a collaborative supply chain partnership should be preceded by an evaluation of the business partner in question to check if his enterprise is physically located with regard to the following aspects 218 :
Proximity to the output market it ensures cuts in transport expenditure and close relationship with clients; The degree of integration with other organizational units every newly formed enterprise within a group should merge into the existing economic system as its integral element; Availability of skilled labor force in knowledge-based economy, there is a growing demand for well-educated and highly skilled workers who are usually
(^218) Cf: A.P. Muhlemann, J.S. Oakland, K.G. Lockyer, Production Management and Services, PWN, Warsaw 1995, pp. 164 167
dimension to management, thus laying foundations for the development of the global network economy.
Slowly but surely, networks will modify the existing organizational forms, and the process of change is bound to move through the following stages 219 :
Centralization and increased bureaucracy; Decentralization manifested by divisionalisation; Increase in complexity resulting in matrix structures; Emergence of the network enterprise as a result of the development of modern information and communications technologies and progressing globalisation; Creating partner client-supplier relationships or alliances leading to the development of extended enterprises; Creation of business federations, stemming from co-opetition, co-evolution and the building of alliances. The most important and distinctive features of a network organization 220 (which are far less prominent in other forms of business cooperation) include the following:
Unity of goals and objectives; Sovereignty and independence of partners; Voluntary participation; Division of functions and responsibilities between the partners; Integration of different facets of partner collaboration; Easy and fast access to information; Highly effective use of information . Table 7.1.presents the comparison between a traditional enterprise and a network model.
(^219) Cf: J. Brilman, , PWE, Warsaw 2002, p. 429. (^220) Network organization and network enterprise are not equivalent, though they are often used interchangeably in literature.As a term, network organization is broader than a network enterprise -profit organizations.
The literature mentions four different divisions of network enterprises. J. Brilman identifies four major types of network 221 : Integrated a collection of disperse units which are legally owned by one group or one entity, with controlling power institutionally located at the head office, i.e. the main administrator of financial reserves (examples include
Federated any cluster of natural or legal persons acknowledging the unity of their needs and wishing to satisfy them on their own (e.g. co-operatives); Contracted based on concession or franchising contracts signed by statutorily independent partners (e.g. bulk goods distribution, running restaurants, hotel industry, etc.); Unmediated (e.g. network based on door-to-door sales).
Distinguishing characteristics of the traditional and network organization Traditional model Network model
Hierarchic structures Flat structures
Subordinates
Vertical communication Horizontal communication
Maintaining physical contact with clients through agencies, selling points, representatives
Keeping contact with clients through computer networks which compete or coexist with diverse forms of physical contact
Data and information protection Data and information sharing
Microcomputers Internet and intranet development
(this type of linkage is characterised by a high degree of independence granted to the members collaborating with one another on an informal basis). While analyzing the modes of network organizations it must be made clear that networks may not be created by autonomously independent business entities only. There also exist inside network organizations integrating in-house organizational units of the company.
Virtual companies belong to the state-of-the-art cooperation platforms for contemporary business entities. In an era of progressing economic globalisation, a number of new, previously unknown and non-existent organizational or managerial hurdles have emerged. One of them is how to ensure cohesion among dispersed economic systems by means of brand new coordination mechanisms which are less human-centred and much more focused on the merging and overlapping of the processes concerning e.g. the supply chain.
Definitions of virtual organizations are numerous 223 , and often rather discrepant. Generally, there are two distinct approaches: institutional and functional.
In the former, an organization is defined as 224 : a temporarily arranged network of independent entities brought together by means of information and communications technologiesfor the purposes of skills, costs and markets sharing.
For the latter approach, more apt for our discussion, I propound the following definition: avirtual organization is acluster of entities, spatially scattered (even on a global scale), representing a common economic undertaking, chosen dynamically according to the process criterion to realise and for the time of realisation of specific tasks^225_._
223 224 organizacjach wirtualnych , 225 Difin, Warsaw 2007, p. 160. Ibid., p. 161.
In order to comprehend the concept of a virtual organization, one should become acquainted with the following ideal features of the virtual organization model 226 :
Focus on the key competences of virtual organization members the selection of players on the basis of their skills, knowledge or rare resources with a view to creating a world-class organization; Networking a virtual enterprise comprises a network of independent, legally diversified entities which are brought together to fulfil a specific purpose; Flat structures the structure of a virtual organization is not hierarchical, power is significantly decentralised; Boundary blurring the way a virtual organization is established often makes it difficult to determine where one company ends and another begins; Temporariness a virtual organization ends once the ultimate goal for the sake of which the organization was formed has been reached; Flexibility a virtual organization promptly responds to changes in its surroundings; little formality partner-partner relationships are less formal and less binding (notwithstanding the constraints of reciprocity, the partners may still exist on their own); Common goal a virtual organization is working towards a common goal, e.g. realisation of a specific project, provision of a product or service; Risk, resources and knowledge sharing know-how, expertise, task-related costs, the risk of failure and access to international markets are all shared by the partners; Trust in a virtual organization, an entity which lacks legal rules and regulations to achieve the common goal, mutual trust between partners is of the essence (organizations should encourage win-win solutions);
Process-orientated a subjective arrangement/system, i.e. decision makers, is abandoned (plans, rules, regulations and operating programmes serve as the vehicles of coordination); Human-orientated an employee is the core instrument of coordination. In a leading virtual company (the concept of company integrator typical of especially Japanese corporations: Honda, Mazda, Mitsubishi, Sanyo, Sony and many central enterprise with key competences. A part of classified expertise (e.g. technology), essential for effective cooperation, is distributed by the company integrator, whereas the remaining companies in the virtual enterprise network are forced to submit to a set of imposed standards. This type of coordination may be referred to as process- technological.
In a concentric virtual enterprise, where a company integrator performs a chief regulatory function, there are rigid, structural and process-based instruments of coordination, embracing e.g. the following 228 :
Knowledge maps; Information communication platforms;
(^228) K. Perechuda, Instrumenty koordynacji , www.pwi.edu.pl/upload/, 1408.2010.
CRM (Customer Relationship Management) coordination managing a interactions with clients; a marketing concept or a software package; TQM Total Quality Management; Kaizen involvement in and a readiness for continuous improvement of company and product quality; procedures for the creation, dissemination and storage of knowledge and information; SCM Supply Chain Management. By contrast, a dispersed virtual enterprise is controlled by soft, humanistic, personal coordination instruments, such as 229 :
Best practices; Discussion forums; Working meetings; Trust; Getting to know each other: who is who?;
Frequent swapping of organizational roles; Training sessions; Empowerment; Support; Implementation of changes; Knowledge internalization. To sum up, it may be said that networks are founded upon enterprise cooperation and typically formed as a result of linkages between them, and subsequently they emerge on the market as a wide array of types. The underlying reason for the evolution of a network enterprise towards a virtual enterprise organization is the extensive development of IT systems.
manufacturing, physical distribution and after-sales services, as well as a system of deliveries run by external bidders^231_._
A successful supply chain must prove efficient and effective in practice and needs to generate added value for all the members across the chain. It is responsible for the coordination of the flow of material goods, services and related information. It affects the minimization of costs of the flow and the level of customer service dedicated to the delivery of specified goods to a particular client, at the right location and at the right time, in the agreed quantity and at the agreed cost. It also helps to ensure the facilities:
of location, by moving goods to where they are in demand; Of time, by maintaining the proper amount of stocks (inventory) and arranging material goods and services. In essence, a supply chain is a system with specific invariant properties (attributes) typical of its structure and the processes it embraces in time and space. These features comprise, among others, six properties^232.
Relativity which relies on the purpose of observation, selection of supply chain links, instrumentalisation of observation (namely the devices, methods, techniques and procedures used in research), and the language of description. The analysis may take into account the whole supply chain or only its part, i.e. for example the upstream or downstream 233. Diversity of a supply chain gets the answer to the question of how many diverse elements a given system or set contains. Supply chain components are largely dependent on the tasks content the chain performs and the process models for creating value which may span the following 234 :
(^231) http://www.biznesowe.edu.pl/94-lancuch_dostaw/, 09.08.2010. (^232) Cf: , ed. A. Rokicka Broniatowska, SGH, Warsaw 2006, pp. 34-
Model I applicable to enterprises with an invariable profile of production of a number of alike products (as is the case in chemical plants or sugar factories); Model V applicable to enterprises with a limited number of materials or components processed into various finished products capable of undergoing multiple modifications (the model being characteristic of the clothing, footwear and spirit industries); Model A applicable to enterprises with a wide variety of materials and a limited number of finished products (normally in such factories, a supply chain is extensive; the typical examples of this model include: aerospace, automotive or shipbuilding industries); Model T applicable to enterprises with a complex combination of individualised finished products, manufactured from few components (the examples being the electronics industry or household appliances manufacturers). Complexity of a supply chain is the degree of complexity of its internal
steady amount of its parts, and the focus is on the properties between the parts, i.e. their quantity, direction and the number of conditions affecting either a section of the system or the liaisons between particular parts. The example of complexity may be symbolically illustrated by a network entity V, combining three global-scale companies: X , Y , Z , which can be subject to relations and liaisons, e.g. between the delivery and distribution subsystems: Inside the company X (Y, Z); Companies X and Y, Y and Z, Z and X; Company X (Y,Z) and V; Cohesion of a supply chain is manifested by the fact that there exist no isolated parts within the system. It is particularly vital in those supply chains whose foundations rest on network or virtual entities where control , the major function of management, is replaced with partnership and trust. Increase in cohesion is ensured by reinforcing the liaisons between particular parts,
Absence of face-to-face (unmediated) communication; Miscellaneous religious, political, legal, social and economic systems; Different working hours in specific geographical zones; Varying degrees of disposition towards virtual team work; Different conceptualisations of trust; A varied level of advances in the 21 st^ century technologies; A varied level of expenditure on research and development. Additionally, the efficient and effective operation of a supply chain depends on the degree of implementation by its participants of the multiple standards defined by eligible organizations. One of such standards, the GS1System, is a series of international solutions designed to improve the efficiency of management of global supply chains spanning many branches by means of the unique identification of products, consignments, resources, locations and services. The worldwide System of standards is managed by the GS1 head offices based in Brussels (Belgium) and Princeton (USA). It is estimated that daily over 5 billion transactions are made using the GS1 System. Today it is used by 1 000 000 companies the system members from over 150 countries.
The GS1 System is composed of the following standards 235 :
Bar codes graphic representations of data with a combination of dark and light elements predefined in line with the accepted rules of a given code structure. Bar codes are intended for electronic readers. In broadly understood logistics, the primary purpose the bar codes serve is product identification. Electronic Data Interchange (EDI) the transfer of business data from one computer system to another using a set of standardised and accepted message formats. EDI specifies the computer-to-computer interchange of strictly formatted messages which contain data other than monetary instruments. EDI defines a sequence of messages between two parties, either of whom may act as originator or receiver. The data representing documents may be transmitted
(^235) CF: http://www.gs1pl.org/, 15.08.2010.
from the originator to the receiver via telecommunications or physically transported on a storage medium. Global Data Synchronization Network (GDSN) a network of compatible electronic data pools ensuring safe and continuous data synchronisation. It helps all trading partners to acquire consistent data on a specific entity at the same time. GDSN comprises: the Global Registry, certified data pools and standards for the communication between the pools. Electronic Product Code (EPC) object identification standards using RFID technology. It is a system designed to control the flow of commodities via remote, transmitted by radio waves data readers and storage by means of special electronic tags attached to tracked items. Sometimes the RFID technology is referred to as the radio bar coding. Towards the end of this chapter, there is yet another issue which deserves further scrutiny, namely trust. It is critical to the handling of all business operations by member organizations.
Contemporary supply chain entities must realise that they function in the changing environment. Unfamiliarity with business partners, the establishment of economic organizations, e.g. global chains, on an ad hoc basis, sometimes merely for the sake of fulfilling one single task, together with a lack of adequate legal regulations are the common challenges facing organizations while managing their business processes, to mention only a few.
Activities performed in an era of the creation and development of information society may foster unethical practices, especially in the business sphere, such as:
Non-compliance with its commitments by a business entity, i.e. a company or a human consumer involved in e-business (e.g. B2B, C2B) with the other party; Access by an organization which aims to discredit and damage the good name of another company on the market, usually one with a global reach; it holds particularly true within the confines of virtual or network entities;
nonconformist, innovative and atypical actions. On a social scale, individual cases lead to increasing mobilization, activity and innovativeness 237.
element of any transaction.
Building up trust and management by trust are not easy because generally business partners are perfect strangers with no previous experience in shared business dealings. The Internet, as the most ubiquitous environment of the kind, provides a basis for the creation and development of modern supply chains with an infinite number of buyers and sellers persons totally unknown to one another.
There are no expensive intermediaries who would extend the deadlines and generate costs. Allowing for the low costs of data transfer and the gradual expansion of transmission bands, the number of transactions should be legion. In practice, however, the opposite is the case.
It occurs that the limitations are imposed not only by the following factors 238 : strategic (e.g. the choice of the channel of distribution), operational (e.g. the redevelopment of the processes based on information technologies), organizational (e.g. the acquisition, development and upkeep of the competences necessary for operation under altered conditions), but also a lack of trust on the part of both: the suppliers and the purchasers. In modern supply chains, there is a fear of an intrusion of privacy with equested during transactions.
The organizers and members of supply chain linkages and binding strive to build up trust by^239 :
transaction in question;
(^237) P. Sztompka, Kultura zaufania 2005, p. 321. 238 239 J. Brilman,^ NOWOCZESNE KONCEPCJE^ 151. cit., p. 132.
Persuading a prospective customer to make a purchase; Increasing a sense of loyalty in already won customers;
at the expense of reductions in the traditional channels of distribution, as well as other e-shops; Enhancing customer satisfaction; Collecting data in the expectation that the ties with the customer will be strengthened. Communication, a fine and useful tool for developing trust-based relationships, may be regarded as a precursor to trust as it is involved in formal and informal sharing (exchange) of vital information (often strategy-related) by interested parties. The high level occurs when communication is frequent and of high standard, i.e. the exchanged data load is adequate, up-to-date, reliable and comprehensible. In order to build trust through communication, a relevant strategy of communication must be employed encompassing: frequency, duration, content, transmission channel and the direction
(Fig. 7.2.) 240.
