Supply Chain Management (SCM) purpose is to improve and automate the supply of products in real time process. This approach helps in minimizing the time between the supplier and the final consumer. These tools ensure that there are both physical flows and information flow in the entire chain.
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With increased globalization, supply chain management has come out to be a significant concept in businesses in order to minimize procurement costs and minimize risks associated with purchase and supplies (Chen & Paulraj 2004). In ensuring lower costs, companies should factor in issues like exchange rate and tariffs in foreign nations as part of their approach towards the global supply chains.
Organizations implore numerous approaches in this process of supplies chains in order to acquire competitive advantage in the market (Chen & Paulraj 2004). In addition, the firms are trying to access new markets and in the process make more profit.
Some of the actors in the chain supply are the consumers, demo users, demo system, retailers system, and manufacturing system. These categories of people have different authority in the supply chain that they exert. This chain is considered incomplete if one of these players is missing.
Some conceptual approaches to global supply chains include Global Commodity Chain (GCC), Mainstream Approach of SCM, Critical Approach to SCM, and Global Production Network (GPN). These approaches, clearly, helps to show how various actors in the supply chain wield power.
The GCC approach involves numerous and intertwined network of activities that leads to a finished commodity. Notably, the intertwined network comprises of labour, states, enterprises, production, and households linking one another in the globalized system of economy (Gereffi, Korzeniewicz, & Korzeniewic 2007).
There are two forms of GCC that is, buyer-driven, and producer-driven. In the producer-driven GCC, firms controls the market thus causing stiff competition among suppliers. The firms, therefore, avoid risks of production but are able to acquire the products that they need. On the other hand, buyer-driven GCC, the power is on the hands of the merchandisers, trading companies and retailers.
The buyers dictate what to purchase in the supply chain; as a result the prices of products reduces and the buyers are assured of quality. Nodes can be used to represent commodity chains, where each node shows company’s input, labour used in distribution, processing, consumption, and transportation services. Since GCC is network-centered, it is able to analyze trends and variations in the present world economy.
The variation between innovation and competition in the nodes enhances wealth distribution among these nodes. Fundamentally, innovation is higher at the core nodes as competition remains lower.
As a result, competition force shifts towards the peripheral nodes. Profit realization remains higher at the periphery with lower cost of production thereby maintaining a competitive advantage in the supply chain (Gereffi, Korzeniewicz, & Korzeniewicz 2007).
An example to illustrate the power of different actors is seen in examining the chain of wheat commodity. In analyzing consumption across the nodes, with high consumption of wheat bread at the core by the wealthy only and the upper class in the periphery.
On the other hand, rye bread consumption was by the poor group at the core and everybody in the peripheral group. Marketing only remained at the core, as distribution spread across the nodes (Gereffi, Korzeniewicz, & Korzeniewicz 2007). The GCC, therefore, shows how the actors influence the distribution, marketing, and consumption of the wheat products.
The next conceptual approach is the Mainstream Approach; it develops a streamline relationship between customers and suppliers so that the suppliers deliver valuable products at a low cost thus achieving a high profit for all actors in the chain (Supply Chain Management Approach n.d.).
The increasing demand from customers moves into the market, there is need to standardize a model that can make SCM cost effective and easily approachable. This justification should be for both small and medium-size distributors and manufacturers. A mainstreamed approach is simple to implement and monitor and easily accommodates dynamism at a fractional cost.
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In this approach, the manufacturers are at the central point, with the suppliers lying upstream. The retailer and consumer, on the other hand, are lying downstream.
This approach ensures that competent and competitive suppliers are enrolled in the chain, customers who are driven by demand and, therefore, can push the production process, developing a flow that avoid waste in order to achieve a disruption-free flow (Supply Chain Management Approach n.d.). In addition, there is increase in customers’ demand for collaboration in the supply chain.
Therefore, SCM from this approach offers immense possibilities of reducing the production costs and future business uncertainties therefore allowing small and medium business enterprises to get maximum profits. Within the chain, there exists a mutual-cooperation between firms, as the market remains sensitive and just in-time delivery. This win-win situation ensures that all the actors remain active or vibrant in the entire chain.
The approach encourages a simpler integration hence fastens the benefiting time since the customers; needs are met urgently. A further extension on the enterprise value reveals a strong customer relationship thereby enhancing their retention in the chain.
With constant market dynamism and introduction of new technological advancements, it is critical for organizations to ensure that their employees are updated on these changes (Organizational Learning – Maintaining the Competitive Advantage n.d.). This training will assist the company to have a competitive advantage over other firms.
Therefore, organizational learning has a direct impact on competitive advantage of the organization. Firms that constantly engage their employees on trainings, seminars, and workshops do realize growth.
This growth comes in hand with stakeholders trust; for example, the customers will be retained due to quality service provision. Businesses ought to be proactive and remain focussed on achieving their strategic objectives; therefore, the organizations must be open to learn new ideas to develop new knowledge.
Markedly, organizational learning starts with individual learning that experience a favourable environment for learning. The development of the knowledge foundation culminates to organizational learning. It is from this foundation that the organization develops it competitive advantage.
Therefore, mainstreaming approach enhances company value due to the low operation costs, fast adaptability to the frequent alterations in the market environment, and high shareholder value.
Moreover, there is the Critical approach to SCM deals in the customer supply chain such as information, transportation, international, and warehousing. This process begins with customer identification and comprehending both their customers and businesses. This is followed by getting hold of the customer’s present design in the supply chain (Supply Chain Management Approach n.d.).
This approach results to short lead-time as factors and logistics associated with global procurement are determined in prior. The approach shows the control that the manufacturers and suppliers exercise in the supply chain. It also ensures that the customers in the chain receive up-to-date dedication from a well-trained workforce.
This approach has distribution, purchasing, and production at the central point, and suppliers and customers at the periphery. The core actors are known as the internal supply chain (Chen & Paulraj 2004). It also puts into consideration the environmental uncertainties that can affect strategic purchasing.
There is also the Global Production Network (GPN) which shows how transportation and globalization are related or interlinked. GPN has been able to improve the production efficiency even in cases of global stiff competition that can reduce profit margins.
Markedly, attempts by manufacturers to reduce inventories led frequent and increased shipment (Global Supply Chain Management – Case Study of Dell 2012). The interaction of supply and demand affect the GPN, as it enable the consumers to have what they need at the right time, right place, right quantity and price.
It improves efficiency and productivity both regionally and nationally by linking the elements of the supply chain thus improving the physical flows.
In the commodity chain, there can be optimal market potential, where response is given to consumers’ needs, and there are possibilities of servicing additional markets. This approach ensures that all products have international recognition through the effective distribution method in the SCM.
Further, the approach can lower the production cost to a minimum possible in comparison to the global standards.
Other complex activities have also undergone fragmentation through division of production since relocation is feasible with the use of foreign direct investment (Global Supply Chain Management – Case Study of Dell 2012). This methodologically complex approach achieves its objective by analyzing three categories that is power, embeddedness, and value.
Chen, I. J. & Paulraj, A. 2004, Understanding Supply Chain Management: Critical Research and a Theoretical Framework. Dogguk, 42(1), 131 – 163. Web.
Gereffi, G., Korzeniewicz, M., & Korzeniewicz, R. P. 2007, The Shorty Method: Global Commodity Chains. The Shorty Method. Web.
Global Supply Chain Management – Case Study of Dell, 2012, Thinking Bookworm. Web.
Organizational Learning – Maintaining the Competitive Advantage n.d., Management Study Guide – Free Training Guide for Students and Entrepreneurs. Web.
Supply Chain Management Approach | Origin Cargo Order & Vendor Management (OCM) | Solutions | Yusen Logistics (Hong Kong) Ltd n.d., Yusen Logistics (Hong Kong) Ltd. Web.