Essay on "SCM Supply Chain Management"

Essay 8 pages (2318 words) Sources: 1+ Style: APA

[EXCERPT] . . . .

SCM

Supply chain management is an extremely important aspect of business management. The implementation of the proper supply chain can spell the success or failure of a business. The purpose of this discussion is to describe and evaluate the current system for supplier assessment, selection and evaluation. Discuss how the system could be improved. Particular attention should be given to the role of supplier certification in the system. The actual and potential use and benefits of the ISO 9000 family of standards in the supplier certification will also be discussed.

Quality Management

According to Powell (1995) Total Quality Management is defined as "an integrated management philosophy and set of practices that emphasizes, among other things, continuous improvement, meeting customers' requirements, reducing rework, long- range thinking, increased employee involvement and teamwork, process redesign, competitive benchmarking, team-based problem-solving, constant measurement of results, and closer relation- ships with suppliers ( Powell, 1995)." Proponents of TQM assert that it can be implemented into the business strategy of any organization regardless of the type of industry. Proponents of TQM also assert that the strategy produces reduced costs, enhanced products and services, satisfied customers and employees, and enhanced financial performance (Powell, 1995). Additionally empirical studies have consistently found that firms that incorporate a TQM strategy consistently outperform those that do not have a TQM strategy.

Description and evaluation of current system

One of the aspects of TQM is supply chain management. For the purposes of this discussion the supply chain system that will be evaluated is late customization, also known as mass customization or postponement. This particular supply chain management system will be discussed in the context of the Personal Computer industry. The late customization system "involves the modification of project configuration, presentation and performance of value added services to meet exacting customer expectations ("Form the supplier…")." A late customization system is propelled by demand driven product deployment as a way of augmenting the elasticity of the supply chain and accommodate fluctuations in volume ("Form the supplier…"). This particular type of supply chain has existed for quite some time; however in recent years technology has advanced to the point where the use of late customization is more feasible for companies who offer certain types of products ("Form the supplier…").

If we examine a company such as Dell the details of the supply chain are quite simple. Firstly, customers that want a personal computer can call Dell or order the computer(s) on the internet. Dell provides customers with standard systems and includes pictures, specifications and options. Options also include prices above the standard price. One the customer deigns the computer with specified options, the computer is paid for. Dell then transmits the order to workers responsible for building the computer. Dell then builds the computer for the customer and the computer is sent directly to the customers' home or office building. This particular strategy completely avoids the middleman and as such cost can be reduced for the consumer.

This type of supply chain strategy is advantageous for companies because it allows them to co-create products with consumers. The companies still have control over what is created because they control which options are available to consumers, however consumers have the power to choose the options that they desire. Many organizations choose to employ this type of strategy because it can greatly reduce cost associated with just creating standard products. For instance a company such as Dell has built a substantial empire utilizing this strategy along with a direct model. This supply chain management strategy allows the company to create a specific computer for a specific customer and the customer pays for the computer before receiving it. This reduces the amount of unneeded or unwanted inventory because the computers that are created are already sold. Compare this to other computer retailers that develop standard computers and sell them in regular retail stores. These companies manufacture and ship products to stores that may or may not be sold.

Most business strategists assert that late customization is best utilized for certain types of products such as computers. Strategists also assert that the adoption of this type of supply chain system can be extremely beneficial to companies that provide certain types of products. Since this is the case

"companies looking at the example of other firms who have already managed to successfully implement this strategy may suffer from the illusion that successful MC is only about technical and organizational aspects. Yet the main question to be answered before deciding in favor of MC is whether customers actually appreciate this new concept and for which group of customers it could be an option (Kaplan et al., 2007, 102) ."

From personal experience customers seem to appreciate this type of supply chain system. This appreciation of a late customization system is particularly clear as it pertains to personal computers. The late customization system allows consumers to add customized options to both desktop and laptop computers. This customization is not only appreciated, but in some cases it is absolutely necessary. For instance, a large corporation that orders a large number of office computers may have different needs than a college student who orders a laptop. Late customization allows consumers, in both instances, to design computers with exact specifications.

"Dell is structured around its customers -- literally. A significant portion of our revenue comes from our business customers, and our operations strategy reflects that. We help our business and public-sector customers establish standard configurations that keep their total cost of ownership low and, in turn, make it easier to forecast future demand. Our strong consumer business gives our customers an opportunity to own the latest technologies at affordable prices while giving our suppliers the fastest route to market (Hunter, 2005)."

Obviously dell and other companies that utilized this type of model understand the importance of providing consumers with the products and services that they need. In return Dell is able to predict future demand and alter its overall business strategy based on this future demand. In many ways the supply chain management strategy assist the company in being productive and remaining productive.

According to an article entitled "Benefits of Mass Customization" there are three main benefits associated with late customization. These benefits include the following:

1. Higher Profits- because the company providing consumers with a customized product that is consistent with their needs, comparative shopping becomes difficult ("Benefits of Mass Customization"). In making comparative shopping obsolete the company also shifts the focus on the customer away from price and toward the benefits of owning the product. The article also explains that although "it is possible to manufacture at a mass produced price, you have the option to charge a premium whilst still retailing below the price of a custom product. This in turn will open your product to a wider market."

2. Lower Costs- Mass customization gives ordinary people the ability to purchase a product that has been created incongruence with their own specific needs; however, they are able to attain this product at a price that is competitive. As such there is a great deal of value that is provided for the money ("Benefits of Mass Customization").

3. Market Exploitation- companies have the power to differentiate from commodity like products because the products are customized ("Benefits of Mass Customization"). The customized products are even more attractive than other products because the cost is almost identical. This strategy also allows for market exploitation because "lead customers will provide a rich source of new ideas that can also be exploited with other customers or with new prospects. As a result, NPD has lower risk of failure and a higher chance of beating the competition ("Benefits of Mass Customization")." Additionally, continuous service can be given to the customer throughout the life of the product. In addition, companies utilizing this type of strategy are able to form strong and lasting relationships with customers, distributors and suppliers. This relationship develops because these individuals will keep returning to the company to get the unique products being offered. Finally customers that are loyal and satisfied with the product will refer others to the company ("Benefits of Mass Customization").

The aforementioned benefits play an important role in a company's decision to implement mass or late customization. In the computer industry the adoption of such a strategy has proved to be quite beneficial. Companies such as Dell are able to keep prices relatively low while also providing a customized product. In addition the system is extremely efficient and customers receive their customized computers within a short period of time. Because factors such as comparative pricing and differentiation are no longer present the company has a profound advantage over the competition.

Also quality management is closely connected to supply chain management; when the proper supply chain management system is in place, all aspects of business work better. For instance, companies understand their customers better and therefore they can produce better marketing strategies. In addition, because this type of supply chain management increases profitability the company… READ MORE

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