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Executive summary
This paper will base its discussion on the importance and role played by the information technology sector using system integration in supply management to achieve its goal when supplying. This paper will look at the demerits and merits that are to be faced by a manufacturer as he applies the idea of system integration in the supply of his products to a string of supermarkets in a country.
Introduction
Supply Chain Management
This is a process that develops or creates, facilitates a network system through which retailers, distributors, transporters, storage facilities, and suppliers are enabled to participate in the sale, delivery, and production of a certain product to their customers’ network system in a supply chain management can be defined as a direct or un-indirect link that is interdependently serving the same consumer. Meaning a group of firms coming together to facilitate the offering of a certain service or good to reach its intended consumer in good condition and time. This link comprises sellers that offer the raw materials, which are bought by the producers, who in turn add value to it by converting it into finished products, the finished goods are then stored in warehouses as they wait for distribution which is affected by the rule of demand and supply. Transportation then takes place which enables the retailers to satisfy the consumer with the end product. Producers compete with each other using this form of the supply chain by knowing how to save costs in their network systems, thus an effective management system should be implemented. (Michael 2006)
Discussion
The art of managing the events in a supplying chain is known as supply chain management. For effective management of the links, the manufacturer is supposed to be able to be as fast as possible in supplying his goods while maintaining the quality of his goods and trying to put his operating costs down, while increasing customer satisfaction. For the manufacturer to do the above he has to obtain a customer order, after which he is supposed to organize for production of the goods and services that the order implies. Storage facilities should be provided by taking into factor the durability of the product, the time it will be needed by the consumer, and the space that the product will need for ease in storage. Transportation comes third, whereby if the client is far and the good being offered is perishable in nature then essential transport should be implied for example air transport to save costs that can be incurred if it gets stale. If the nature of good is bulky and durable and the consignment is not urgent then water transport can be used.
Good coordination in all these activities is inevitable hence the need of having an information service network. To keep track of these activities which at times may expand to a global market that needs adequate attention to avoid losing business and aiming to decrease costs in relation to making more sales and maximizing profits. (Michael 2006)
Principles found in a Supply Chain (vertical).
There are six main elements found in a supply chain these are, production, supply, inventory, location, information, and transportation. These are the elements that make a supply chain successful if managed well. Production (manufacturer), this is the area that focuses on the level of demand specifically what does the customers want, this first stage is the determinant factor that tends to determine the quantity of product to be produced, what specific product is to be produced, and at what factory will the product be manufactured in and if not possible then can the company outsource the manufacturing process to other suppliers. Other vital areas that need to be looked into in the production stage are the volume of goods to be produced, quality of goods, and capacity of the goods these decisions should be carried out in significance to customer satisfaction and market demand. (Edward 2001)
Principles governing IT developments in supply chain management
For a company to fully enjoy the advantages of a virtual integration system in supply chain management, it has to incorporate and understand the requirements that should be meted when it comes to e-commerce. In our case, the manufacturer should be able to work with other participants in the supply chain in order to benefit from the sector. This can prove to be a difficult endeavor because supply chains are always revolving thus they can’t be pinned down by a certain rule that defines them in a hierarchical order. (Hopp and Spearman 1996)
In a vertical chain it would suggest that mergers be created, geographical restructuring and having direct market options, this will mean that no single entity would be able to dominate a supply chain this calls for a principles that can govern the supply chain management making it as holistic as it can be this principles are as follows:- there should be an established and a shared view of wholeness that allows all members to derive value from the virtual chain of supply, each member in the virtual chain should be able to chip in cooperatively with the aim of creating an incentive-based on a virtual supply chain, the environment should be a harmonious one that promotes the betterment of a virtual supply management, dominion by one entity should be deterred in that there should be a governance structure that should implement the practice of equal rights by the participants finally competitive and proprietary information should be secured as component to safeguard the interests in a virtual setting. All these principles can be melted into one goal that is all participants in the virtual system should work together in the realization of a mutual benefit. (Edward 2001)
For the principles to be realized then; a governance structure needs to be put in place this will create a legal entity owned and run by the members of the virtual chain. Members should join the governance structure because they will be able to access their profits information about the supply chain which is unavailable elsewhere. It would also enable the members the capability of pinpointing supply chain dependencies along the chain. Any members can increase their platform in the chain by creating sub-structures as long as they are following the said governing structures. This governing structure includes the need of developing a centralized virtual chain and the ability to address industry challenges based on the relationships defined in a virtual setting. These initiatives may include expanding the foreign market, common data sharing, raw material management, and regulatory issues. In order to create a good governance structure, it should have the following characteristics, all service suppliers, product suppliers, customers, and distributors should be identified as members, its main function is that of furthering its membership goals, it should instill the usage of incentives to build participation other than coercion, it should support competition and cooperation among its members, it should be empowered at the periphery and unified at its core, it should be practice self-governance and organization, it should deal with conflicts that arise in its membership, (Hopp and Spearman 1996)
E-business and supply chain governance
As the virtual chain moves the essence of deploying strategies to the wholesome benefit of the members intensifies. Members will want to add lists of suppliers and customers in the unified virtual chain, this will enhance the growth of the virtual chain bringing along with it complexities in relationships in the model virtual chain, the above will bring the problem of insecurity to the customer such hardships should be incorporated to the main core of the governing structure. The government structure should be able to leverage the virtual supply chain which the vertical supply chain couldn’t do alone. Instead of each company synchronized to deal with its own myopic e-business solutions the governing structure makes an avenue where the unification of the e-business solution that affects the supply chain and the customers would be leveraged collectively and effectively.
A unified set of e-business objectives include the following:- the need of establishing pre-eminent e-commerce websites for end customers, the manufacturers should be able to track the demand on their products through the supply chain, the retailers should be able to know the supply through the virtual chain, the companies should be able to collectively know inventory management, material usage, production, and related processes, standardization of contracts in the industry should be enabled, it should ensure that invalid data should be corrected on time on the virtual chain, it should be able to define common solutions for linking internal ERP systems with business environments. Therefore ERP is a system that entails the applications of software that offers the management the skills to manage their activities, for example, managing human resources in a company.
This technology is based on databases that are easily reached on real-time foundations. ERP systems perfectly provide the management with the opportunity to produce steadfast, consistent, and timely information necessary for the attainment of organizational goals. Approximately four years ago there was high demand for ERP systems, however, for the last two years there has been a significant decline in the sales of such systems in the market, however; it also reported that ERP systems are now on-demand again due to the nature of activities that firms are engaged in and also due to advancements that have been incorporated in the system as a result of the development of new innovations and technologies. (Hopp and Spearman 1996)
ERP systems can be utilized by the management in monitoring and evaluating the performance of employees. This implies that the management does not have necessarily to physically supervise the workers since through ERP which facilitates integration and networking managers can pass their desired guidelines to the employees through such technology. ERP systems can also be designed to facilitate employee’s payroll activities in an organization; for example, the manual preparation of the payrolls in the organizations will be done away with and replaced by an ERP system which is faster and more accurate when compared to manual applications.
The ERP systems can be used in financial departments of organizations which can replace manual activities carried out in the department; for example, the use of traditional accounting will be replaced by ERP systems because it will incorporate the concepts of computerized accounting in the department. ERP systems are useful in planning and therefore can replace techniques such as Time Series analysis which involves the use of the manual application in forecasting and modeling of firm’s future trends; ERP system can be designed in such a way that it can forecast with less ease thus saving time and other related costs that could have been incurred by a firm. (Mowery and Rosenberg, 1989)
Role of Integration and its Importance in Supply Chain Management
Virtual integration can be defined as a system whereby a link is established to form a value chain management in supply chain management. This is done by creating informal arrangements among the suppliers and customers. For instance, in this report, we shall concentrate our discussion on a manufacturer-supplying supermarket using the internet (integral system). if a supermarket needs products from the manufacturer arrangements can be done through a networked computer system, all it needs to do is to use the internet to surf for information on the number of products needed, their quantity, their availability, their prices while at it, it can also compare the services being offered by the different companies. Thus the manufacturer should use this opportunity to advertise his company well due to the stiff competition aroused on the internet; this is caused by the fact that it provides a wide range of offers dealing with the same kind of products. (Sridhar 1999)
Merits and Demerits of a Virtual Supply Chain
The gaps created by the vertical supply chain such as inefficiency, are covered by virtual in the sense that it enables to save time. Volumes of paperwork and bureaucratic procedures are not considered hurdles as compared to the vertical way, where invoicing takes a span of two weeks to be processed. Virtual integration brings about a leveled playing field where each person involved specializes in his line and benefits from the arrangement in a mutual way this saves operational costs. In comparison to a vertical chain supply, the network is tedious and cumbersome; each person who is involved wants to gain from it on his own specified terms. The issue of looking for reputable distributors is negated since they will be all found in the network system making it easier for the supply management company. All in all in a virtual chain system the interest of the supermarkets, those being our customers are placed first. (Hopp and Spearman 1996)
E-commerce or e-business in relation to virtual integration has its own demerits such as congestion which may lead to overbuying of certain products that are understocked. In supply management, it can lead to losses if they don’t take action fast of restocking at a convenient time. In Incase requesting customers to get substitute products, in this case, can lead to consumers feeling betrayed hence losses can be incurred in the sense of losing customers’ trust. Virtual integration benefits from economies of networking which validates outsourcing of managerial resources hence division of labor are materialized in the sense that information can be accessed by logging in at any time that is needed by the suppliers. It enables the management to react to unforeseen changes in real-time by emails from customers and all other related fraternities. The management team is able to speed up on its decision-making skills and strategic planning. (Sridhar 1999)
Recommendation
The need to adopt a more economical way of managing supply management through virtual integration that makes the world a global village increases the chances of the manufacturer increasing its market share. Enabling the manufacturer to reap on benefits of trade based on scales of sales. This brings the need of adding technology into the business to avoid bureaucracy, disappointments caused by natural calamities; the losses incurred, and increased operational costs when a company takes all the roles in making a complete product other than outsourcing. The issue of locality is played into nonconsequential because customers can access the products from far away places without having to travel to the premises or be in the actual locality or vicinity. Again the manufacturer has to market his products well in order for him to be able to catch attention in a field or window that has too many viewers and players to it. (Handfield, Nochols1999)
Conclusion
Supply chain management is a cross-cultural approach to managing. This is in line with managing the flow of raw materials into the organization and also the movement of finished products from the company to the final consumer. Many organizations strive to spotlight competencies and become flexible. Through this, the ownership of distribution channels and raw material sources is greatly reduced.
In each and every organization, there is normally the pressure of reducing costs so that profits are maximized. As human resource managers develop a cost-cutting strategy, it is important that there be some reconciliation with the commitment in the organization. Before looking at the extent the consequences of cost-effectiveness and commitment reconcile one has to have a broader picture of the effects of reducing costs within an organization.
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