Posted: November 30th, 2013
Supply Chain Management
Supply Chain Management
According to Dutton, (2009), “The more profitable a company becomes, the less managers see the need to address supply chain issues.” Managers in the top level do not see logistics as an important area in the organization. As stated, one of the reasons is the profitability of the organization. They base their concern on the profit margin of the company. Where a company has a higher profit margin and transport and logistics becomes a minor cost, managers hardly devote them selves to supply management. They focus on what has higher returns. However, when the company is in a mess or profit margins are going down, managers swill recognize the need of efficient supply chain since every little cost will make a difference. Therefore, when the profit margin is going down, every possible means of regaining it is sought. Supply chain management is one of the ways that a company can increase its profit margin through timely delivery and management of inventory from procurement to delivery to the consumers. Through supply chain and logistics, management cost can be saved, thus increasing the profit margin.
Normally, supply chain management will combine several operations, staring with procurement, financing, legal regulations, distribution, sales and transportation. Managers at the top level may not comprehend the relationship of all this. Thus, lack of understanding or lack of enough knowledge about supply chain for the management may cause their ignorance of supply chain. Thus, there is need for highlighting the importance of supply management to make the top executives understand that supply chain plays a crucial role in the performance of the organization. Robert (2008) contends that management ignores supply management because they are not fully aware of its full potential in solving some of the problems that keep them awake in the night. He asks whether this should be blamed on the top executives or to the supply chain managers for failing to educate the top management about the potential of supply chain management. This is hard to answer, but would depend on an individual firm. However, one thing can be blamed as the reason why top management will ignore supply management. This can be lack of coordination between the top management and the supply chain department as well as other departments involved.
In order to benefit or realize the full potential of supply chain management, there is need of having cooperation between the senior management and the supply chain management as well as the other department. There is need for a continuous flow of information and support among the department considering supply chain will touch most of the department. Therefore, a strategy to include the senior management in cooperation in order to realize the full potential needs to utilize. The strategy would mostly involve selling the idea that supply chain management will solve some of the issues they are concerned to achieve.
The first step would be aligning supply management with some of the goals the senior management wishes to accomplish. Some of this include, increasing the earnings of the company beyond the target, achieving growth year after year, reducing risks to protect earnings and revenues, increasing the return on capital for shareholders as well as achieving competitive advantage (Robert, 2008). The strategy would involve defining how supply management would achieve this. After defining the means through which this can be achieved through supply chain. Communicating with the management to create awareness about its potential in achieving their goals would be next. This will require persuasion to woo the top management. This would require details of how supply management can improve and achieve dome of their goals such as increasing the return on capital. This can be done through cost reduction which in achievable through supply chain and increasing revenue through customer satisfaction. This increases the profit margin while at the same time reduces costs, which has a tremendous effect on the organizational performance. To sell the idea, several other strategies to convince the management can be used, such as showing the experience of other companies that have achieved success through supply chain management. Showing the top management the difference before such as company implemented supply chain an after implementing it within the senior management to improve company performance can help in convincing the top management further to buy the idea. In addition, the assessment of the company and its current position compared to such a company illustrating advantages of supply chain management (Dutton, 2009)
In order to promote the idea of supply management, it would be worth using some of the stakeholders that play a key role in making the supply chain a success. This includes the suppliers and vendors as well as working closely with 4PLs and 3PLs. One benefit of working with these stakeholder such as the 4PLs and 3PLs is that they posses a wide exposure to different companies within different industries (Dutton, 2009) They can help the organization in minimizing errors and trials since they have a vast of experiences to offer as well as the required metrics. Additionally, considering they are neutral to the company, they stand a better chance of persuading those that might be opposing the use of supply chain in improving organizational performance (Robert, 2008).
Additionally, considering that supply chain requires more coordination between the organization and the venders or suppliers, working closely with them in selling the idea to the senior management helps in showing the devotion of the involved stakeholder. This proves to the management that what is needed is available. According to Dutton (2009), “Vendors are our eyes on the ground and we work together to increase efficiency.” Therefore, vendors are a partner of any supply chain management if success and deficiency is to be achieved. Thus, in selling the idea to the senior management, vendor plays an important role to convince the management that the needed partner for efficiency is available.
Dutton, G. (2009) Selling the supply chain upwards. World Trade, Troy, 22 (9): 34, 37
Rudski, R. (2008). Supply Management Transformation: A Leader’s Guide. Supply Chain Management Review, New York, 12 (2): 12, 1pgs.
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