Reconsidering Supply Chain Management Paradigms

Operations Management Topic- SCM- Supply Chain Management

Project Report on Reconsidering Supply Chain  Management Paradigms

Research Proposal on Reconsidering Supply Chain Management Paradigms

Fallacy of Total Optimization Paradigm

In SCM, total optimization can never be achieved because of the limit of human ability to obtain information, to evaluate it and to undertake what has been decided, as Simon (1947) suggests. What we are aiming for in logistics is in fact a solution for a very short term, which is drawn from the bounded equilibrium on the basis of numerous assumptions.Economy is a complex system and it changes every moment. If surrounding  conditions change, a solution will also change. Therefore, the longer the time span, the more difficult it becomes to find an optimum and stable solution in SCM. In this sense, logistics have so far been relying on equilibrium theories which can offer limited adaptability to environmental changes. Generalized theories in logistics and SCM are now subject to reconsideration.

First, stock minimization paradigm is to be examined. It is not easy to measure the risk of minimizing stock level. We cannot work out the amount of lost earnings that are caused by a certain product being out of stock because consumers do not usually express themselves when they go out of a shop to find what they want elsewhere. Then, just-in-case stockholding may be justified in some cases rather than always adhering to just-in-time operation. Stock level must be determined always within the range of bounded rationality.

Second, the reduction of lead time should be questioned. In order to attain reduction in lead time,  simplification of administrative procedures and the postponement of product modification can be done in a justifiable manner in any environment. However, using express service by air to shorten the lead time rather than ocean freight will be subject to argumentation from the perspective of transport cost reduction and natural environment protection. The theory of the shorter the lead time, the better service and profitability we can assure should be reconsidered. Vendors’ anxieties for the obsolescence of products that are market sensitive tend to force consumers to pay higher prices.

Third, value-adding logistics can be interpreted as mutation in the logistics evolution. Value-adding processes used to be an exclusive feature of manufacturing. However, logistics service providers have recently been increasingly involved in production on behalf of their manufacturing customers, such as labelling, packaging, coloring, modifying, inspecting and attaching accessories to the products in the warehouses or during transportation. Some of the production factories are wholly operated by logistics service providers. If more of these works are done by logistics service providers, it will affect the dynamics of SCM.

Fourth, a question should be asked as to who initiates integration of supply chains. At present, major promoters of the integration are large sized manufacturing or retailing firms. Their goal is to maximize profit by means of driving a larger part of supply chains to suit their own interest in procurement and product distribution. In the process are screening and consolidating suppliers, joint delivery, streamlining of distribution channels, etc. What is the ultimate consequence of this supply chain integration? Greater influence on the supply chains by a powerful firm leads to a vertical integration of friendly firms which means conglomeration. If the firm wants their suppliers to compete with each other for better quality and lower prices, its influence on the supply chains will become modest. Here, it should be recognized that a total management of supply chains can result in the initiator’s obligation to the sustainability of the suppliers by guaranteeing the purchase of their products. This means that the supply chain integration does not necessarily ensure the optimum status of procurement.

Fifth, dependence on ICT for decision making should be questioned. Nowadays, SCM systems generate a lot of business opportunities. By introducing sophisticated ICT, people assume that they can make rational decisions and optimize supply chains more easily. However, that expectation often turns into a disappointment. The difficult part is the investment cost for ICT and the returns on it. The solution that may be given through ICT is also bound by the data put in and the analytical ability of the persons who use the
results.

Sixth, professionalization of logistics by outsourcing is also subject to reconsideration. Logistics has been evolving towards scale enlargement, sophistication and diversification. In these processes, knowledge for managing supply chains has been built higher. Manufacturers and retailers’ desire to concentrate their resources on the core competence has accelerated outsourcing of logistics operation to the service providers. From the front line operations to logistics management planning, outsourcing has been progressing in scope and degree. Under the concept of Third- Party-Logistics (3PL), logistics service providers are trying to be involved more in the management of every aspect of their customers’ supply chains. This leads to the increase in the information asymmetry (Stiglitz, 1997) between the logistics service provider and their customers. For manufacturers and retailers, it can be a great risk to lose control in supply chains and eventually in the market competition. In the context of the above, professionalization of logistics and optimization of supply chains are not necessarily synchronized with each other.

We have examined the main elements of logistics paradigm that are widely believed to be shared both in the Western and the Asian business fields and recognized that the paradigm is based on a certain stereotype, i.e., adherence to efficiency. However, there are many ways towards efficient supply chains. Efficiency is measured differently in different time spans. What is efficient for one year may not be efficient for 10 years. Therefore, SCM theories need to take its dynamic features into account.

Source-The IUP Journal of 24 Supply Chain Management, Vol. VII, Nos. 1 & 2, 2010

If you want Dissertations, Thesis, Case Studies on Supply Chain Management, Research Proposals, Term Papers, MBA Project Reports, Research Projects, Assignments, Coursework, PowerPoint Presentations and Synopsis, than contact Mahasagar Publications, Mumbai, India by calling +91 9819650213 or +91 8081344446  or visit website www.projectspapers.com