Supply Chain: Technology-Based Strategic Sourcing

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Table of Contents

Executive Summary
Introduction
Critical Analysis of Supply Chain Management
Technology-based strategic sourcing
Key elements
Conclusion
Recommendations
Reference List

Executive Summary

Supply chain management in modern society emphasizes efficiency in the delivery process. In this context, efficiency means delivering the right materials within the right time and of the right quality and quantity. Successful firms have learned how to form strategic alliances with suppliers to improve this efficiency.

Technology plays an important role in improving this efficiency. It creates a platform where a firm can easily communicate with its suppliers to ensure that there is close coordination in the delivery of the needed materials. The stakeholders need to ensure that they secure their communication system to avoid infiltrations.

Introduction

Supply chain management is one of the most important managerial tasks in modern society that firms are keen to address adequately to ensure that there is an overall success in the operations of a firm. According to Hugos (2011), having the raw materials or items needed for the normal operations of a firm at the right time, in the right quantity and quality has become one of the management areas where many firms are now trying to achieve perfection.

They know that their ability to satisfy the needs of their customers largely depends on the quality of the raw materials they get and the convenience with which they get these materials. This explains why supply chain management as a concept has gained massive attention from scholars who try to investigate and understand how firms can properly manage the process of sourcing for the raw materials and other items needed for the normal operations of a firm. In this paper, the researcher will focus on developing an understanding of the concept of supply chain management in the modern business environment.

Critical Analysis of Supply Chain Management

According to Jacoby (2010), the supply chain was traditionally considered a simple process where a firm would coordinate with the producers of the raw materials to delivering specific products at a given date. However, the changing environmental factors have redefined the concept of the supply chain. Many firms realized that the supply chain strategy used firms dealing in non-perishable products such as cement cannot be applicable to supply chain strategies used by firms dealing in perishable goods.

As a result of these fundamental factors, there emerged the need to have a unique supply chain strategy that would be responsive in real-time. According to Lambert (2008), firms-especially those dealing with perishable products such as in the hotel industry- have come to realize that in some cases, their trusted clients would adjust their order before the time of product delivery. If a customer cancels an order a few hours before the time of delivery, then it means that the firm may need to find a way of halting the production process in a way that will not lead to significant financial loss. In some industries such as the hotel, the raw materials used are perishable products.

This means that halting the process when the raw materials have been delivered may lead to a loss. A firm must, therefore, have a system that will help in halting the delivery of the products from the suppliers. When that happens, Waters (2008) says that a firm must be able to source for the raw materials within that short time and deliver the products as per the demands of their customers. It may be quite challenging given that sometimes it may not be easy accessing these raw materials within such short notice.

The uncertainties forced many firms to devise different approaches that would enable them to manage the challenges they faced in product delivery. Many of these firms started using a just-in-time delivery approach. This supply chain practice has proven to be very successful to many firms, especially those in the industry of perishable goods. It is still a popular concept that is used by many firms to enhance supply chain management.

A firm needs to find other useful strategies that they can use besides a just-in-time approach because this strategy has become common and is used by almost every firm in the modern business environment. Other useful strategies that have been implemented by some of the leading multinationals around the world include collaborative strategic sourcing and strategic alliance with the suppliers. In many respects, these strategies have worked. However, the emerging trends in the industry demand for more.

Technology-based strategic sourcing

According to Mangan, Lalwani, and Butcher (2008), technology-based strategic sourcing is a relatively new concept that has been in use for some time now. The strategy is now well documented by the existing literature because it combines several existing strategies into a new integrated system meant to empower firms in the area of getting raw materials. It brings together two major concepts of strategic sourcing and the use of technology in sourcing (Scott, Lundgren & Thompson 2011).

The concept is simple, but very effective and requires a highly skilled team to execute it. Strategic sourcing has widely been used in various industries as a way of bringing together suppliers, firms, and customers. In this system, when a customer makes a call adjusting the products needed, and then the firm would call the supplier to effect such changes when delivering their products. The system works well in the hotel industry where the demand for food may be adjusted at any time, making it necessary to adjust the number of supplies. This is what has helped most of the firms operating in the hotel industry to avoid massive losses that result from the cancellation of orders.

The close relationship helps the firms and their suppliers to have a forum where they understand one another and commit to offering necessary helps for the overall satisfaction of the three partners involved (the supplier, the firm, and the customer).

The use of technology in such a closely integrated system is what is referred to as technology-based strategic sourcing. It allows the stakeholders to closely coordinate their activities in a way that may not necessarily need a phone call. According to Leeman (2010), sometimes a phone call may not be the most appropriate strategy to explain to the supplier the sudden changes that have occurred in the amount of order made by the clients.

In this new strategy, the company and the supplier will have a closely-knit system that allows the two players to monitor the changes taking place in the order placed by the clients. It means that instead of the firm clarifying the supplier, the supplier will be directly enabled to monitor the changes and know the necessary adjustments needed even without making phone calls. Any cancellation of an order would be seen as soon as it occurs. The information will transmit in real-time from the system of the company to where the supplier will be able to pick and act upon it. When the data is made available in real-time, then it is easier to coordinate these activities and maintain a healthy supplier-firm relationship.

Key elements

This new supply chain practice has several elements, two of which have been discussed in the section above. As stated, the first element in this practice is the integrated relationship between the suppliers, the firm, and the customer. This relationship allows for a close sharing of information relevant to delivering high-quality service. The second element is the use of technology to relay the data. It means that the information needed by the company and the supplier about the number of supplies needed will be accessible in real-time.

The third element is the security of the system. The technology-based supply chain practice can only be effective if does pose a threat to any of the three players involved (Liang, Chaovalitwongse & Shi 2016). Companies have become very sensitive when it comes to the issue of their security because of the increasing threat of cyber attacks. The experts who developed this new system appreciated that this may be a problem that may affect their clients.

For that reason, they came up with a system that limits the ability of unauthorized third parties accessing the close communication between the client and the firm and between the firm and the supplier. Utmost good faith is another element of this system. It means that even though the information is only available to the relevant parties, is still important for the parties to ensure that they do not make it possible for other parties to access this information.

Conclusion

It is clear from the above discussion that supply chain management is taking a new shape in modern society because of the emerging trends. Technology is becoming an integral part of supply chain management because of the need for communication between supplier and firm and between the firm and its customers. In industries that deal with highly perishable products, such as in the hotel industry, a firm needs to form a strategic alliance with its suppliers and use improved means of communication to ensure that changes in demand are reflected immediately in the orders made for the supplies. This is the only way of ensuring that unnecessary losses that occur due to the delivery of orders that are not needed are avoided at all costs.

Improved communication also helps in maintaining a close relationship between a firm and its clients. However, the paper emphasizes the need for the stakeholders to ensure that they protect the information that they share from being infiltrated by individuals who may want to use it as a weapon to attack any of the parties involved. Appropriate use of technology improves the efficiency in the supply chain.

Recommendations

Based on the critical analysis of supply chain management in modern society, a firm needs to take into consideration the following recommendations.

It is necessary to develop strategic partnerships and alliances with suppliers to ensure that there is sustainability in supply chain management.
A firm should embrace emerging technologies as a way of improving efficiency in its supply chain.
Measures should be taken to protect information that a firm shares with its clients.

Reference List

Hugos, M 2011, Essentials of supply chain management, Wiley, Hoboken.

Jacoby, D 2010, Guide to Supply Chain Management, Profile, London.

Lambert, D 2008, Supply chain management: Processes, partnerships, performance, Supply Chain Management Institute, Sarasota.

Leeman, J 2010, Supply Chain Management: Fast, flexible supply chains in manufacturing and retailing, Institute for Business Process Management, Dusseldorf.

Liang, Z, Chaovalitwongse, W & Shi 2016, Supply chain management and logistics: Innovative strategies and practical solutions, McMillan, London.

Mangan, J, Lalwani, C & Butcher, T 2008, Global logistics and supply chain management, John Wiley & Sons, Chichester.

Scott, C, Lundgren, H & Thompson, P 2011, Guide to supply chain management, Springer, Berlin.

Waters, C 2008, Supply chain management: An introduction to logistics, Palgrave Macmillan, Basingstoke.

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