The evolution of supply chains – part 2
The evolution of supply chains – part 3
The nature of changes in the market environment
Supply Chain Management (SCM) is no longer a new concept in the economy, although it is interpreted in various ways. SCM is an optimization oriented towards flow, processes, and demand, extending beyond the framework of individual enterprises—the participants in the network—creating additional value to realize sustainable cost reduction potential and value growth potential. When analyzing value creation chains, various layers (levels) that constitute them must be taken into account: the physical infrastructure of entities in the network, business processes, organizational structures and sets of functions, as well as IT systems.
The importance of supply chain management as a key factor in achieving economic success in the conditions of economic globalization has been known in theory and practice for a relatively long time. From the manufacturer’s point of view, SCM constitutes the management of a network of entities in the scope of procurement, production, and distribution, in order to ensure a level of customer service determined by market requirements, while ensuring the lowest possible costs. The importance of supply chain management becomes even more significant in the fight for customers and sales markets as enterprises increasingly understand high product quality as a necessary standard, and price differences—given the constantly increasing interchangeability of products—as increasingly insignificant. This recognition has been widely known for a long time, which raises the question of why not all enterprises have made use of this knowledge. Despite intensive optimization and globalization solutions, the value creation degrees of many enterprises are spatially oriented towards domestic solutions, production structures are not consolidated, and supply chains in the international dimension are not properly organized. The result is high costs and an insufficiently low level of customer service. However, the frequently cited example of the DELL company shows that it is possible to organize global chains with an excellent level of service and low costs, thanks to which the company was able to gain a decisive competitive advantage. Meanwhile, enterprises must face a reality in which the increase in the complexity of business processes and the growing complexity of market relations has become a fact, which has been largely contributed to by the following reasons:
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a larger volume of procurement and sales outside Europe, with high growth potential in the Chinese market, leads to the operation of supply chains that are longer, more complex, and less tolerant of errors
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constantly increasing customer requirements regarding the degree of delivery readiness, in particular concerning delivery time and delivery reliability
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an increase in needs regarding supplementary services of significant value. Consequently, some types of activities that were traditionally carried out in manufacturing enterprises have been shifted to distribution centers
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greater complexity and differentiation of products, leading in effect to the shortening of their life cycles and an increasing number of items in warehouses.
This increase in the complexity of processes in supply chains leads to a situation where improving the internal efficiency of a company through an emphasis on cost reduction is not enough. Logistics costs have increased in recent years and will likely continue to rise, which is why this group of costs cannot generally constitute the expected savings potential.
The article comes from the magazine “Logistyka” 5/2008.