Challenges and Concerns With Global Supply Chain Operation PT. II, Essay Example

Even though, a global supply chain has assisted companies leverage lower costs in manufacturing, several challenges still exist. There are several obstacles that logistics manager face in the process of delivery. They have to ensure their products arrive on time, and they are delivered to the right client. Transport and logistic costs typically account for 5% to 6 % of a company’s revenue. It is the primary cost that often inflates the overall price of the product. Prudent transportation and logistics management help firms enhance their overall supply chain efficiency.

Whether your company uses air, rail, sea or land for logistics, stochastic variable will at one time come into play. These include fuel price fluctuations, longer lead times when dealing with global suppliers, and unfavorable weather conditions. Such situations make time and cost estimation related to TLM complicated. As a consequence, companies experience high inventory and expedite costs (Samson, 2011). Under typical conditions for logistics, departments will often use the same quantity that is supplied during a specified time. This occurs between shipments or transport of large bulks of newly manufactured products. This theory is evident in almost all areas of logistics, including merchandise sales and production.

Unfortunately, logistic manager finds it challenging to predict expected demand for a given product. As a consequence, inventory is used to compensate for times when supply is lower than the supply. In order to reduce transportation expenses and ensure that the correct items reach the right location on time, transportation and logistics managers need to employ a centralized view in relation to the entire transportation schedules (Luo, 2012). Furthermore, the ability to analyze the impact of logistics and transportation on inventory fluctuation is vital.

Literature Review

In 2013, Price Waterhouse Coopers (PWC) released a study that highlighted the challenges that the modern-day supply chain faces on a daily basis. The research surveyed 500 executives and they highlighted four main areas they are concerned about on a daily basis. They include (1) profitability, (2) customer satisfaction, and (4) cost management (PriceWaterhouseCoopers, 2013, p. 4). The PWC study echoes the results from the 2014 BVL studies, customer satisfaction has become an integral aspect of the supply chain. Its importance cannot be understated as the 500 executive highlighted the increasing demands and need of the modern-day client. Keeping the customer satisfied determines the ability to realize customer loyalty.

However, this study highlighted one challenge that most studies fail to recognize, flexibility. According to the study, supply chain flexibility is gradually becoming a problem owing to the divergent nature of the modern-day customer. Supply chain operators and managers have to develop personalized offerings for each customer segment to realize customer satisfaction. However, this becomes a challenge when companies cannot realize flexibility as a result of constraints, mainly financial.

In 2015, Natalie Privet and Robert F. Wagner released a study that depicted a fragmented and generally inept pharmaceutical supply chain. While the study mainly focuses on the pharmaceutical industry, it highlights numerous challenges that are evident throughout the supply chain in most industries. The study highlights 10 main challenges that plagues the modern-day supply chain. Privet and Wagner’s entailed a sample of 22 individuals actively participating in one or more functional areas in supply chain management. The study highlights the following issues with the global health pharmaceutical delivery (GHPD) supply chains; (1) Lack of coordination, (2) Inventory management, (3) Absent demand information, (4) Human resource dependency, (5) Order management, (6) Shortage avoidance, (7) Expiration, (8) Warehouse management, (9) Temperature control, and (10) Shipment visibility.

The future trends associated with RFID technology is that the technology would be applied across all fields even in the purchasing of goods by clients. However, there are underlying issues that may arise with the technology;

• The technology is prone to external attack in the form of software hacking. This can enable an intruder to change the information in a given RFID tag.
• The technology has a fatal weaknesses. That is obstruction by metals and liquids limit its operability.(Reyes, 2011)

The GHPD supply chain study revealed that even though all ten issues may occur independent of each other, the lack of coordination was identified as the trigger the remaining issues, while further exacerbating them whenever they occur independently. The article highlights how the lack of coordination within GHPD supply chains is the root cause for the high level of pilferage recorded.

PRTM Management Consultants, a global management consultancy firm conducted a study that span 2010 to 2012, collecting information from senior management from 350 companies. The study involved companies from a wide range of industries in Asia, Europe and the Americas, concentrating on the efforts of recovering from the damage caused by the 2008 global recession (Geissbauer & D’heur, 2010). The report highlighted how the financial constraints that resulted from the global recession considerably affected the flexibility of the supply chains of most of the companies in the study. Very few companies were able to improve on supply chain flexibility.

The complexity of the supply chain has also been identified as a critical issue in the supply chain management. Over 85% of the PRTM study participants highlighted the anticipated growth in complexity of their supply chains, a result of expansion of supply chains to the global market (Geissbauer & D’heur, 2010). As international trade and commerce improves with each passing day, supply chains open up businesses to global consumers from markets abroad. The growing complexity of the supply chain is also heighted as the cause of cost pressures throughout the supply chain. A more complex system is associated with potentially increased costs. This is the cause of the increase in price sensitivity of the market. Consumers are more responsive to price change, and as such are not loyal to any specific brand.

The Global Supply Chain Institute of the University of Tennessee, Knoxville released a report that highlighted trends in supply chain that are gradually transforming the landscape of the business world. The report highlights that prioritizing on customer service is a trend that has become synonymous with supply chain management the aspect of profitability often client comes into play. Prioritizing on service without determining customer profitability mat be costly for any business (Stank, et al., 2013).  The study also highlights that a largely unintegrated supply chain causes the characteristic inefficiencies and high costs associated with the supply chain. The relationship between players in the supply chain are mainly adversarial. This lack of collaboration is leading to duplication of work and functions within supply chains.

Chandra and Kachhal delve into the issues and challenges that face the healthcare supply chain. They identify a number challenges that mainly stem from the fragmented supplier base. With more than 26,000 medical suppliers in the market, it is considerably difficult to manage relationships between [players within the healthcare supply chain (Chandra & Kachhal, 2004). This is exacerbated by the fact that managing vendor relationships on an industry-wide level would be considerably costly. Supply chain inefficiencies are a huge challenge for the healthcare supply chain in the United States. The ordering process is currently not integrated owing to the fragmented supplier base, causing the process to be more costly than required.

Chandra and Kachhal also identify supply chain integration as a key issue in the supply chain management in the 21^stcentury. The supply chain is currently segment in a manner that is detrimental to the system as well as the parties involved. While information sharing is a trend that has been positively influencing integration, it is still a far off the required minimum for an efficient supply chain (Chandra & Kachhal, 2004). The fragmented nature of the supply chain creates situations where work is duplicated. This points to the general lack of collaborative operational planning.

Christopher M. states that the biggest challenge to the supply chain of the information age is the market is constantly changing and evolving towards the reduction of costs through reduction of inventory (Christopher, 2005). This reduction in inventory causes an increase in the amount of risk associated with inventory. The changing trend to lean and just-in-time practices. This is where the efficiency is given preference over effectiveness. Through the employment of the Just-in-time practice, the company becomes more dependent on suppliers. This kind of practice is feasible in a stable market condition. The volatile market conditions of the 21^st century make this practice not feasible and is prone to the volatility of demand increases. With the increase in the trend of the globalization of the manufacturing and assembly, most companies rely on off-shore manufacturing and sourcing (Christopher, 2005). This is motivated by cost. However, the cost is defined by the value of manufacturing and outsourcing. When the total cost of the supply chain are considered, then it causes higher risk levels that are triggered by greater buffer stocks, extended lead times and an increased level of obsolescence.

Muzumdar and Balachandaran postulate that the unpredictability of demand is characteristic of the 21^st century markets. This is caused by the high market turbulence levels. This volatility in demand is caused by shorter life cycles that are mostly driven by the change in technology (Muzumdar & Balachandran, 2001). This increases the risk of obsolescence for the customer service and sales department. This forces the department to constantly keep up-to-date with the latest technology. As a result the organization will experience increased obsolescence for the company. Companies will also realize centralized manufacturing and distribution and therefore the company may experience delays as transportation will consume more time due to the greater distances that have to be covered from on production site to another. The company’s customers will be affected by late delivery of orders and the probability of the obsolescence of the product from the company. The organization’s suppliers will be affected by longer lead-times of response and long planning horizons characterize the planning process and thus there is a longer transaction periods. Suppliers will also be segmented for specific raw materials rather than bulk buying from one supplier

With the onset of lean and just-in-time practices, the inventory management functional area of the supply chain is particularly vulnerable to potential risk (Muzumdar & Balachandran, 2001). This is because numerous sectors of industries aim to reduce costs by concentrating on the reduction of inventory. While these models function well in stable market conditions, they become less feasible when demand volatility increases. Companies are mainly forecast driven, where long lead-times of response and long planning horizons characterize the planning process. As a result, this functional area is vulnerable to the potential risk of the wild swings of demand.

In conclusion, research has depicted the logistics and transportation management in the 21^st century is particularly prone to the effects of market drivers. A highly fragmented supply chain has been identified as a high priority issue when it comes to supply chain management. While financial constraints have also been highlighted as critical inhibitors to supply chain efficiency, the lack of collaboration and coordination exacerbates all other challenges that supply chains face. The unpredictability of demand, coupled with a highly demanding market dictates the need for flexibility within the supply chain. Supply chain managers are finding it increasingly difficult to develop, improve and customize their products and services to meet their customers’ needs while facing financial constraints.

References

Bala, K. (2014). Supply Chain Management: Some Issues and Challenges – A Review. International Journal of Current Engineering and Technology, 946-953. Retrieved July 5, 2015, from http://inpressco.com/wp-content/uploads/2014/04/Paper90946-9531.pdf

Chandra, C., & Kachhal, S. K. (2004). Managing Health Care Supply Chain: Trends, Issues, and Solutions from a Logistics Perspective. Dearborn: University of Michigan. Retrieved July 5, 2015, from https://www.iienet2.org/uploadedfiles/SHS/Resource_Library/Details/24_chandra.pdf

Christopher, M. (2005). Managing Risk in the Supply Chain. Logistics and Supply Chain Management, 231-258.

Ditmann, P. J. (2014). Managing Risk in The Global Suppluy Chain. The University of Tennessee, Global Supply Chain Institute. Knoxvile: The University of Tennessee. Retrieved July 5, 2015, from http://globalsupplychaininstitute.utk.edu/publications/documents/Risk.pdf

Geissbauer, R., & D’heur, M. (2010). PRTM Global Supply Chain Trends 2010-2012. New York: PRTM Management Consultants. Retrieved July 5, 2015, from http://www.consultancy.nl/media/PRTM%20Supply%20Chain%20Trends%202010-2012-1019.pdf

Hammond, J. H., Fung, W. K., Shih, W. C., & Yang, M. M. (2009). Global Supply Chain. The Centennial Global Business Summit (pp. 2-6). Harvard: Harvard Business School. Retrieved July 5, 2015, from http://www.hbs.edu/centennial/businesssummit/global-business/global-supply-chain.pdf

Luo, Z. (2012). Innovations in Logistics and Supply Chain Management Technologies for Dynamic Economies.Hershey: Business Sciwnce Reference.

Manuj, I., & Mentzer, J. T. (2008). Global Supply Chain Risk Management. Journal of Business Logistics, 29(1), 133-155.

Marucheck, A., Greis, N., Mena, C., & Cai, L. (2011, November). Product safety and security in the global supply chain: Issues, challenges and research opportunities. Journal of Operations Management, 29(7-8), 707–720.

Muzumdar, M., & Balachandran, N. (2001). The Supply Chain Evolution: Roles, Responsibilities and Implication for Management. APICS The Performance Advantage, 59-62.

PriceWaterhouseCoopers. (2013). Next-generation Supply Chains: Effecient Fast and Tailored.PriceWatehouseCoopers (PWC). Retrieved July 5, 2015, from http://www.pwc.com/gx/en/consulting-services/supply-chain/global-supply-chain-survey/assets/pwc-next-generation-supply-chains-pdf.pdf

Reyes, P. M. (2011). RFID in the supply chain. RFID: McGraw-Hill.

Samson, R. M. (2011). Supply-Chain Management: Theories, Activities/Fuctions and Problems. Hauppauge: Nova Science Publishers.

Stank, T., Autry, C., Bell, J., Gilgor, D., Petersen, K., Dittmann, P., . . . Bradley, R. (2013). Game-Changing Trends in Supply Chain. University of Tennessee, Global Supply Chain Institute. Knoxville: University of Tennessee. Retrieved July 5, 2015, from http://www.ey.com/Publication/vwLUAssets/Game-Changing_Trends_in_Supply_Chain/$FILE/UT%20Game%20Changing%20Trends%20in%20SC_FINAL%20Online.pdf

The Economist Intelligence Unit. (2006). The global supply chain: Challenges for small and midsize. New York: The Economist Intelligence Unit. Retrieved July 5, 2015, from https://www.identrust.com/pdf/EIU_GlobalSupplyChainPaper.pdf