Importance of supply chain management

Introduction

Supply chain management is a method of moving materials and associated information effectively and efficiently within inter and intra organisations. To get this task done in the desired way, use of e-business applications is essential. Supply chain management includes the coordination of the organisation involved in the supply side activities with the customers who are receiving the products (Chaffeey, 2009, pp 331).

Supply chain management starts with identifying the resources and linking them with the processes which commence with the sources of raw materials and continues until the delivery of the items done through the end consumer. A supply chain activity differs from companies to companies but they provide the benefits of specialisation of process and the economy of scale (Trkman et al, 2007).

Importance of supply chain management:

An improved supply chain adds superior value to the organisation’s operation which ultimately gives superior value proposition to the end user for which efficient customer response (ECR) is crucial because ECR deals with the demand management which is required for satisfying the demand of customer by quickly and effectively applying product assortment strategies, rapid introduction of the new product and marketing communication by reducing stocks and delivery time (Chaffeey, 2009, pp 335).

Elements of supply chain management:

The way the knowledge and flow of information is processes and its outcomes received along with protection of intellectual property are important part in a supply chain strategy. “Knowledge” here is the information that the organisation has accumulated through years of experience and applying them for planning and  implementing strategy. The improvement in the processing technology of computers and advent of software’s like MS outlook, Lotus Notes that have facilitated the arrangement of discrete information in a logical and useful manner, these abilities give rise to the concept of knowledge and information management which is crutial for effectively managing the supply chain.

For an organisation which is highly influenced by customer needs and expectations for them knowledge management is of great significance in two main areas – that are customer intelligence and new product innovation as during supplying to customers there are multiple touch points in the organisation where customer interacts with it, Therefore the ability of an organisation to reap information about the customers behaviour and choice on this touch points proves to be a critical wealth of information which helps in customer retaining and growing customer value. In contrast with the new product innovation, the knowledge which flows across the suppliers, customers and market factors by sharing it across the supply chain leads to innovation and increased involvement of supplier in the innovation process      (Croom, 2005).

Benefits of adopting Electronic Supply Chain Management:

The Following improvements can be found by adopting the e-business supply chain management:

• Cost performance: by improved productivity and lower input prices
• Customer Service: by providing service quality
• Process capability: by maintaining consistency in quality
• Productivity and dependability: by increased control of material flows along the supply chain (Tan, 2001)
• Supply chain management involves improving the internal processes, but also processes performed in conjunction with suppliers, distributors and customers. It also provides great opportunities to improve product performance and deliver superior value to the customers. As a result supply chain management can dramatically have an impact on the profitability of a company through reducing operational cost and increasing customer satisfaction and so loyalty and revenue (Chaffey, 2009, PP335).

Supply Chain Models:

The supply chain model from the system viewpoint can be seen as involving the following processes: attaining resources or inputs, transforming the resources/inputs into outputs that is the product/services and lastly delivering the outputs to the end customers. In terms of e-business the supply chain can be optimised to provide better and efficient delivery while minimising the cost.

Push and Pull supply chain model:

• Push supply chain: These involves delivery of product/service to passive customers. The objective of this model is optimising the process while attaining cost effectiveness and efficiency. The features of this model are development of new products, data integration, minimised technology utilisation, longer cycle time and the large inventory.
• Pull supply chain: This involves value delivering to end customers. This supply chain includes active customers who encourage improved quality and value of products/services. The model emphasise and identifies the requirement of customers by carrying out market research for developing and improving the products. The supply chain focuses on delivering value while reducing cost.

Upstream supply chain:

• Disintermediation: This involves directly buying from the supplier. This results in lesser costs and reduced cycle time.
• Reintermediation: This involves business to business exchange of the products.

Downstream supply chain:

• Disintermediation: This involves direct selling to customers, while incurring reduced cost of sales and enhanced cycle time.
• Reintermediation: This involves competition in newer markets by business to business transactions.

 Shell chemicals:

Shell chemicals is one of the largest petrochemicals producers in the world who supplies the bulk material to the large industries for the manufacturing of industrial and the consumer goods. It is very crucial for such an organisation like shell to have a well planned and controlled Supply chain management.

Issues:

Prior to the adoption of electronic supply chain management in shell, everything was managed manually that involves lot of time consuming activities. Due to this time consuming process there was a threat that a customer might bear a lack of important ingredient at plant time. Hence to tackle these kind of problem companies maintain safety stocks to avoid shortage, it involves cost to maintain any safety stocks.

Supply chain process:

SIMON:

In 1995 shell has adopted SIMON (Shell Inventory Managed Order Network) system that acts as a Electronic data interchange initially for managing the downstream supply chain. Soon after its success in downstream it was applied to upstream process.

SIMON facilitates supplier to get anticipated demand, calculate stock and track shipment status for which customer needs to input three kinds of data, that are current stock level, estimated demand for stock and location, timing and quantity for the shipment details.

 Elemica:

In the year 2005, shell updated itself by implementing ‘Elemica’ in its supply chain that was founded by around 22 leaders of the chemical industry. The major benefit to adopt Elemica was standardisation. It offers value to their customers by automation of the processes in the business. For instance the buying and selling of chemicals and then expand the value of that connection by making the new marketing channels and efficiency opportunities by means of our web solutions and supply chain offerings (Elemica, 2010).

 Integrated Supply chain:

Elemica’s revolutionary and new business network completely links the operational base, while eliminating the hurdles of transaction and communication between the processes. Flawless accessibility and transparency of the supply chain provides the power of efficiently carrying out the operations and removing access personnel’s, assets and inventory. Elimica utilises a standard format in its integrated supply chain structure, which is also favourable for organisations existing in similar industries.

 Process:

The supply chain Elimica records and maintain inventory and sales forecast on daily basis, that helps in analysing customer satisfaction. This is further collaborated with the ERP system of the Elimica hub ().

Global reach and connectivity:

Elimica’s founders happen to be the most renowned and established leaders in the global industry. This provides an international base for business, that helps in drawing the attention of both buyers and sellers. This phenomenon further builds up an opportunity to develop relations with new customers. Elimica acts as a facilitator for business transactions on this global platform.

Security:

Elemica has adopted several measures to protect accessibility and data flow. This helps in safeguarding the transactions of customers/participants. Strict data protection measures, encryption technology and transparent firewalls are features of security offered by Elimica. The policies and processes are regularly checked to meet the security standards.

Conclusion:

After critically evaluating the supply chain management of Shell chemicals, it was found that the benefits of adopting Elemica is seen in the form of improvement in supply chain management that includes reduced cost resulting in cost efficiency, improved quality resulting in customer satisfaction, increased capability of process and increased productivity and dependability. Ultimately these improvements fuelled the profitability of the company.

Recommendation:

• While dealing with the decisions regarding the implementation of e-business in the process of supply chain, companies should look for the strategy that is most appropriate for the unusual processes combined with the blueprint of the operation. It is mainly important for those small organisations which cannot invest huge money at particular time period.
• Managers should carefully consider coherence between the internet tools to adapt choices in terms of integration with customers and supplies.
• The internet can support and facilitate information sharing, both in collaborative or in market-type relationships, or can be used to support closer integration (system coupling) with the partners (Cagliano et al, 2005).
• Prior to a client switching to a new SCM system there should be adequate testing to see if the system meets the client’s requirements.
• When a standard supply chain template is modified to suit a customer’s requirements, particular care should be used in the implementation and provider firms should be very insistent that client forms follow the provider’s implementation methodology (Sridharan et al, 2005 ).

Reference:

Croom, S.R (2005), “The impact of e-business on supply chain management”, International journal of operations and production management, Vol. 25 No. 1, pp. 55-73.

Chaffey, D (2009) “Supply chain management” E-business and E-commerce management. Harlow. Prentice Hall,PP 331

Chaffey, D (2009) “Supply chain management” E-business and E-commerce management. Harlow. Prentice Hall,PP 335

Cagliano, R., Caniato, F. and Spina, G. (2005) “How companies are sharing their supply chain through the internet” International Journal of operations and production management, Vol15 No.12, pp1309-1327.

Elemica (2010) Supply chain [Online]. Available from: http://www.elemica.com/solutions/elemica-solutions.html Accessed on [15/03/2010].

Sridharan, U.V., Caines, W.R., Patterson,C.C (2005), “Implementation of supply chain management and its impact on the value of firms”, Supply chain management: An International Journal, Vol10 No. 4, PP 313-318.

Trkman, P Stemberger, M.I Jaklic, J and Groznic, A (2007) “Process approach to supply chain integration”, Supply chain management: An International Journal, Vol12 No.2, pp 116-128.

Tan, K.C. (2001), “A framework of supply chain management literature”, European Journal of Purchasing and Supply Management, Vol. 7 No. 1, pp. 39-48.