A Supply Chain Management Guide to Business Continuity, Chapter 3: Business Continuity Best Practices

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First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances, and business partnerships, significant success factors were identified, complementing the earlier " just-in-time ", lean manufacturing , and agile manufacturing practices. Many researchers have recognized supply network structures as a new organisational form, using terms such as " Keiretsu ", "Extended Enterprise", "Virtual Corporation", " Global Production Network ", and "Next Generation Manufacturing System".

Supply-chain management is also important for organizational learning. Firms with geographically more extensive supply chains connecting diverse trading cliques tend to become more innovative and productive. Supply-Chain Management draws heavily from the areas of operations management, logistics, procurement, and information technology, and strives for an integrated approach. Six major movements can be observed in the evolution of supply-chain management studies: creation, integration, and globalization, [34] specialization phases one and two, and SCM 2.

The term "supply chain management" was first coined by Keith Oliver in However, the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line. The characteristics of this era of supply-chain management include the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to Japanese management practices.

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However, the term became widely adopted after the publication of the seminal book Introduction to Supply Chain Management in by Robert B. Handfield and Ernest L. Nichols, Jr. This era of supply-chain-management studies was highlighted with the development of electronic data interchange EDI systems in the s, and developed through the s by the introduction of enterprise resource planning ERP systems. This era has continued to develop into the 21st century with the expansion of Internet-based collaborative systems.

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This era of supply-chain evolution is characterized by both increasing value added and reducing costs through integration. A supply chain can be classified as a stage 1, 2 or 3 network. In a stage 1—type supply chain, systems such as production, storage, distribution, and material control are not linked and are independent of each other.

In a stage 2 supply chain, these are integrated under one plan and enterprise resource planning ERP is enabled. A stage 3 supply chain is one that achieves vertical integration with upstream suppliers and downstream customers. An example of this kind of supply chain is Tesco. It is the third movement of supply-chain-management development, the globalization era, can be characterized by the attention given to global systems of supplier relationships and the expansion of supply chains beyond national boundaries and into other continents.

Although the use of global sources in organisations' supply chains can be traced back several decades e. In the s, companies began to focus on "core competencies" and specialization. They abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies.

This changed management requirements, as the supply chain extended beyond the company walls and management was distributed across specialized supply-chain partnerships. This transition also refocused the fundamental perspectives of each organization. Original equipment manufacturers OEMs became brand owners that required visibility deep into their supply base. They had to control the entire supply chain from above, instead of from within. Contract manufacturers had to manage bills of material with different part-numbering schemes from multiple OEMs and support customer requests for work-in-process visibility and vendor-managed inventory VMI.

The specialization model creates manufacturing and distribution networks composed of several individual supply chains specific to producers, suppliers, and customers that work together to design, manufacture, distribute, market, sell, and service a product. This set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands.

Specialization within the supply chain began in the s with the inception of transportation brokerages, warehouse management storage and inventory , and non-asset-based carriers, and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution, and performance management. Market forces sometimes demand rapid changes from suppliers, logistics providers, locations, or customers in their role as components of supply-chain networks.

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This variability has significant effects on supply-chain infrastructure, from the foundation layers of establishing and managing electronic communication between trading partners, to more complex requirements such as the configuration of processes and work flows that are essential to the management of the network itself.

Supply-chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of specific, best-in-class partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain-specific supply-chain expertise without developing and maintaining an entirely unique and complex competency in house is a leading reason why supply-chain specialization is gaining popularity.

Outsourced technology hosting for supply-chain solutions debuted in the late s and has taken root primarily in transportation and collaboration categories. This has progressed from the application service provider ASP model from roughly through , to the on-demand model from approximately through , to the software as a service SaaS model currently in focus today.

Building on globalization and specialization, the term "SCM 2. The growing popularity of collaborative platforms is highlighted by the rise of TradeCard 's supply-chain-collaboration platform, which connects multiple buyers and suppliers with financial institutions, enabling them to conduct automated supply-chain finance transactions.


Web 2. At its core, the common attribute of Web 2.

A Supply Chain Management Guide to Business Continuity

It is the notion of a usable pathway. SCM 2. It is the pathway to SCM results, a combination of processes, methodologies, tools, and delivery options to guide companies to their results quickly as the complexity and speed of the supply-chain increase due to global competition; rapid price fluctuations; changing oil prices; short product life cycles; expanded specialization; near-, far-, and off-shoring; and talent scarcity.

Successful SCM requires a change from managing individual functions to integrating activities into key supply-chain processes. In an example scenario, a purchasing department places orders as its requirements become known. The marketing department, responding to customer demand, communicates with several distributors and retailers as it attempts to determine ways to satisfy this demand. Information shared between supply-chain partners can only be fully leveraged through process integration. Supply-chain business-process integration involves collaborative work between buyers and suppliers, joint product development, common systems, and shared information.

According to Lambert and Cooper , operating an integrated supply chain requires a continuous information flow. However, in many companies, management has concluded that optimizing product flows cannot be accomplished without implementing a process approach. The key supply-chain processes stated by Lambert [38] are:. Much has been written about demand management. One could suggest other critical supply business processes that combine these processes stated by Lambert, such as:. Integration of suppliers into the new product development process was shown to have a major impact on product target cost, quality, delivery, and market share.

Tapping into suppliers as a source of innovation requires an extensive process characterized by development of technology sharing, but also involves managing intellectual [41] property issues. There are gaps in the literature on supply-chain management studies at present [ citation needed ] : there is no theoretical support for explaining the existence or the boundaries of supply-chain management.

A few authors, such as Halldorsson et al. However, the unit of analysis of most of these theories is not the supply chain but rather another system, such as the firm or the supplier-buyer relationship. Among the few exceptions is the relational view , which outlines a theory for considering dyads and networks of firms as a key unit of analysis for explaining superior individual firm performance Dyer and Singh, In the study of supply-chain management, the concept of centroids has become an important economic consideration. In the US, two major supply chain centroids have been defined, one near Dayton, Ohio , and a second near Riverside, California.

The centroid near Dayton is particularly important because it is closest to the population center of the US and Canada. In addition, the I corridor is home to the busiest north-south rail route east of the Mississippi River. In , Wal-Mart announced a big change in its sourcing strategy.

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  • Initially, Wal-Mart relied on intermediaries in the sourcing process. To cut these costs, Wall-Mart decided to do away with intermediaries in the supply chain and started direct sourcing of its goods from the suppliers. It later engaged the suppliers of other goods such as cloth and home electronics appliances directly and eliminated the importing agents. The purchaser, in this case Wal-Mart, can easily direct the suppliers on how to manufacture certain products so that they can be acceptable to the consumers. In other words, direct sourcing reduced the time that takes the company to source and stocks the products in its stock.

    Creation of procurement centers- WalMart adopted this strategy of sourcing through centralizing the entire process of procurement and sourcing by setting up four global merchandizing points for general goods and clothing. The company instructed all the suppliers to be bringing their products to these central points that are located in different markets. The procurement and sourcing at centralized places helped the company to consolidate the suppliers.

    The company has established four centralized points including an office in Mexico City and Canada. As a result, the company intended to increase centralization of its procurement in the North America for all its fresh fruits and vegetables. Strategic vendor partnerships are another strategy the company is using in the sourcing process. WalMart realized that in order for it to ensure consistency in the quality of the products it offers to the consumers and also maintains a steady supply of goods in its stores at a lower cost, it had to create strategic vendor partnerships with the suppliers.

    It then made a strategic relationship with these vendors by offering and assuring the long-term and high volume of purchases in exchange for the lowest possible prices. This enables the company to offer competitive prices of its products in its stores hence, maintaining a competitive advantage over its competitors whose goods are a little expensive compared to those of WalMart. Efficient communication relationship with the vendor networks to improve the material flow is another sourcing strategy Wal-Mart uses. The company has all the contacts with the suppliers whom they communicate regularly and make dates on when the goods would be needed so that the suppliers get ready to deliver the goods in time.

    Cross-docking is another strategy that WalMart is using to cut costs in its supply chain. Cross-docking is the process of transferring goods directly from inbound trucks to outbound trucks. Cross-docking helps in saving the storage costs. Tax-efficient supply-chain management is a business model that considers the effect of tax in the design and implementation of supply-chain management.

    As the consequence of globalization , cross-national businesses pay different tax rates in different countries. Due to these differences, they may legally optimize their supply chain and increase profits based on tax efficiency. Supply-chain sustainability is a business issue affecting an organization's supply chain or logistics network, and is frequently quantified by comparison with SECH ratings, which uses a triple bottom line incorporating economic, social, and environmental aspects.

    Consumers have become more aware of the environmental impact of their purchases and companies' SECH ratings and, along with non-governmental organizations NGOs , are setting the agenda for transitions to organically grown foods, anti-sweatshop labor codes, and locally produced goods that support independent and small businesses. For example, in July , Wal-Mart announced its intentions to create a global sustainability index that would rate products according to the environmental and social impacts of their manufacturing and distribution.

    The index is intended to create environmental accountability in Wal-Mart's supply chain and to provide motivation and infrastructure for other retail companies to do the same. It has been reported that companies are increasingly taking environmental performance into account when selecting suppliers. This law requires SEC-regulated companies to conduct third party audits of their supply chains in order to determine whether any tin, tantalum, tungsten, or gold together referred to as conflict minerals is mined or sourced from the Democratic Republic of the Congo , and create a report available to the general public and SEC detailing the due diligence efforts taken and the results of the audit.

    The chain of suppliers and vendors to these reporting companies will be expected to provide appropriate supporting information. Incidents like the Savar building collapse with more than 1, victims have led to widespread discussions about corporate social responsibility across global supply chains. Wieland and Handfield suggest that companies need to audit products and suppliers and that supplier auditing needs to go beyond direct relationships with first-tier suppliers.

    They also demonstrate that visibility needs to be improved if supply cannot be directly controlled and that smart and electronic technologies play a key role to improve visibility. Finally, they highlight that collaboration with local partners, across the industry and with universities is crucial to successfully managing social responsibility in supply chains. By reducing resource input and waste leakage along the supply chain and configure it to enable the recirculation of resources at different stages of the product or service lifecycle, potential economic and environmental benefits can be achieved.

    These comprise e. SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level of components added to the link. Literature on business process reengineering [62] [63] [64] buyer-supplier relationships, [65] [66] [67] [68] and SCM [18] [69] [70] suggests various possible components that should receive managerial attention when managing supply relationships.

    Lambert and Cooper identified the following components:. However, a more careful examination of the existing literature [22] [71] [72] [73] [74] [75] [76] [77] [78] leads to a more comprehensive understanding of what should be the key critical supply chain components, or "branches" of the previously identified supply chain business processes—that is, what kind of relationship the components may have that are related to suppliers and customers.

    Bowersox and Closs state that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement. A primary-level channel participant is a business that is willing to participate in responsibility for inventory ownership or assume other financial risks, thus including primary level components.

    Third-level channel participants and components that support primary-level channel participants and are the fundamental branches of secondary-level components may also be included. Consequently, Lambert and Cooper's framework of supply chain components does not lead to any conclusion about what are the primary- or secondary-level specialized supply chain components [80] —that is, which supply chain components should be viewed as primary or secondary, how these components should be structured in order to achieve a more comprehensive supply chain structure, and how to examine the supply chain as an integrative one.

    Reverse logistics is the process of managing the return of goods. It is also referred to as "aftermarket customer services". Any time money is taken from a company's warranty reserve or service logistics budget, one can speak of a reverse logistics operation. Reverse logistics is also the process of managing the return of goods from store, which the returned goods are sent back to warehouse and after that either warehouse scrap the goods or send them back to supplier for replacement depending on the warranty of the merchandise.

    Supply chain systems configure value for those that organize the networks. Value is the additional revenue over and above the costs of building the network. Co-creating value and sharing the benefits appropriately to encourage effective participation is a key challenge for any supply system. Tony Hines defines value as follows: "Ultimately it is the customer who pays the price for service delivered that confirms value and not the producer who simply adds cost until that point". Global supply chains pose challenges regarding both quantity and value. Supply and value chain trends include:.

    These trends have many benefits for manufacturers because they make possible larger lot sizes, lower taxes, and better environments e. There are many additional challenges when the scope of supply chains is global. This is because with a supply chain of a larger scope, the lead time is much longer, and because there are more issues involved, such as multiple currencies, policies, and laws. The consequent problems include different currencies and valuations in different countries, different tax laws, different trading protocols, vulnerability to natural disasters and cyber threats, [81] and lack of transparency of cost and profit.

    Supply-chain consulting is the providing of expert knowledge in order to assess the productivity of a supply-chain and, ideally, to enhance the productivity. Supply chain Consulting is a service involved in transfer of knowledge on how to exploit existing assets through improved coordination and can hence be a source of competitive advantage; Hereby the role of the consultant is to help management by adding value to the whole process through the various sectors from the ordering of the raw materials to the final product.

    On this regard, firms either build internal teams of consultants to tackle the issue or use external ones, companies choose between these two approaches taking into consideration various factors. The use of external consultants is a common practice among companies. Supply chain professionals need to have knowledge of managing supply chain functions such as transportation, warehousing , inventory management , and production planning. In the past, supply chain professionals emphasized logistics skills, such as knowledge of shipping routes, familiarity with warehousing equipment and distribution center locations and footprints, and a solid grasp of freight rates and fuel costs.

    More recently, supply-chain management extends to logistical support across firms and management of global supply chains. Supply chain professionals play major roles in the design and management of supply chains.

    That same week, roughly a third of the United States was affected by a winter storm that closed major airports and interstate highways, delaying countless shipments. This book arrives, then, at an opportune moment as its central point is the importance of planning for supply chain disasters, of all shapes and sizes.

    While the author, a consultant with the Disaster Recovery Institute International, does a good job offering an overview of how to identify risks and subsequently reduce or eliminate the incidence of supply chain disruptions, what sets this book apart is its supplemental material. Ultimately, unforeseen disasters are always going to happen, but this book provides plenty of tactical advice on how to mitigate the effects of those disasters. As a consultant with the Disaster Recovery Institute International, the author offers an overview of how to identify risks and subsequently reduce or eliminate the incidence of supply chain disruptions.

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