Comparison of Supply Chain Models and Theories in Assignments Essay; Introduction – The notion of “supply chain management” was first used by consultants in the 1980s; however, other scholars would argue that supply chain management arose from the logistical processes, costing methods, transportation, and physical distribution. The term supply chain management is a relatively new phenomenon but has become one of the most crucial components for a business’s success.
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Author Croom et al, 2000, categorized the subject area of supply chain management into six categories; Strategic Management, Relationships and Partnerships, Logistics, Best practices, Marketing, and Organisational Behaviour. Argued that scholars have approached supply chain management from a restrictive functional view; and operationally integrated linkages (between buyers and suppliers) to end-to-end management of; for example, information and material flow, quality, and design.
Supply chain management has been referring to using terms such as “distribution channels”, “network sourcing”, “supply pipeline management”, “value chain management”, and “value stream management”. Many scholars even today would dispute over just; what supply chain management is and with various conceptual models with many different supply chain frameworks; often this poses the question as to which is the most optimal one for a company.
Supply chain models and theories came into full force when the Japanese car company Toyota revealed their “lean manufacturing”, processes to the world. As a result of their lean concept which focuses on the reduction of waste within the manufacturing environment, automotive companies around the world have aimed to perfect; their manufacturing processes, and many companies, like Nissan, aim to maximize the efficiency and effectiveness of their processes.
As with many industries, the automotive industry, especially in the modern era, relies heavily on suppliers in their manufacturing processes, long gone the days of Henry Ford’s mass production days where most cars were made in-house. As a result of economies of scale, labor costs, production costs, technical know-how, and globalization, many car companies now consider outsourcing for many components of their manufacturing process; thus making supply chain management a vital component of their business. For this paper, one can argue the “efficient” supply chain model is the driving model behind the Nissan – Renault- Mitsubishi alliance and manufacturing of the Qashqai car.
The Efficient Supply Chain Model;
The “efficient” supply chain model one could argue is the driving model behind the Renault-Nissan and Mitsubishi alliance. The efficient supply chain model outlines how managers should focus on maximizing end-to-end efficiency including high rates of asset utilization in a bid to lower costs. As to how effective this model is and how closely these companies follow; this model is under scrutiny by academics and will be critically evaluated in this paper.
Reflection to the Case Study;
The logic behind the conclusion that this case study is an example of an efficient, although failed, supply chain model will outline in this report. One of the main factors of this case study that can lead one to draw this conclusion is the agreement; which all three automotive companies aim to meet that is: “each company acts in the financial interest of the other; while maintaining an individual brand, identities, and independent corporate cultures”.
Unlike Toyota which adopted a Lean manufacturing process, this case study had a completely different aim and set of parameters. This case involved three leading car companies working together to develop a new car, the Qashqai. The Toyota Model works well and lean generally is a lot easier to manage; where it is one OEM and the suppliers of the OEM are all focused on that OEM. Toyota installed Lean thinking in its company culture, heritage, and suppliers; which all work together and prove to be very effective.
Toyota’s lean concept focuses on eliminating waste throughout the organization and supply network. The elimination of waste design to reduce costs and save time. Cost and Time are crucial elements. In this case study, cost-sharing is the crucial element not cost elimination; this is the major difference between the two conceptional models. One model eliminates waste and reduces cost, the other aims to utilize assets throughout the end-to-end supply chain; and share costs in a way to reduce the cost for each company.
According to the Industrial Marketing and Purchasing (IMP) Group; “organizational efficiency defines as an internal standard of performance”. Supply chain efficiency is related to whether a company’s processes are harnessing resources in the best way possible; whether those resources are financial, human, technological, or physical. However, the definition of efficiency does not include customer satisfaction. There may be a very efficient supply chain that minimizes costs for materials and packaging; but as in the case of the Qashqai car model, faulty components existed installed into the car; which means that more than 25,000 cars existed recalled due to a brake fault problem.
The objective of the alliance was to create a product that meant; that customers would pay less for fuel as this car would use “cutting edge technology” to be fuel-efficient. By using lighter and more innovative components, the car should “reduce fuel consumption by 20%”. Coming back to the point made in the previous paragraph; whilst aiming to achieve this objective, the development lead time from 20.75 months was to reduce to just 10.50 months; and reducing costs from 10 billion euros to 4 billion euros.
To achieve this at the time of “launching the Qashqai, they relied on the adoption and adaptation of other organizations’ best practices. This is another reason why one could conclude that the supply chain conceptional model used by the alliance was the “efficient supply chain model”. The companies aimed to utilize the assets of each company, i.e. best practices, to develop this cutting-edge technology.
In addition, it can conclude from the actions and strategies from the alliance that efficiency in terms of the supply chain model; does not always mean it is effective as stated previously the reduction in development time and the cost was an internal strategy using internal standards; which didn’t benefit the end-user as the car was faulty.
The Customer-Driven Supply Chain Model;
A customer-driven supply chain is a concept that aims to enhance the efficiency of operations in business by synchronizing activities; such as planning, production, and deliveries to appropriately react to customer requirements. The objective outlined in the case study which is what the alliance was aiming to achieve was reducing fuel consumption, increasing comfort and drivability, and increasing the degree of smoothness when traveling to and from destinations. This is very similar to the lean process model used by Toyota such as synchronization of activities; however, this model doesn’t place a strong emphasis on waste elimination where lean does; this model places the customer requirements as higher regard and in the case study.
This is apparent where the use of company best practices and innovative new designs are being utilized to react to customer requirements for the need to fuel reduction and improve the driving experience. This conceptional model also differs from the efficient model which places a stronger emphasis on internal processes; and, in this case, study: “reducing lead time and costs” not necessarily paying as much attention to creating a product that meets requirements and safety checks.
Reflection to the Case Study;
The customer-driven supply chain model relies on the company’s ability to identify the customer needs and how to deal with these needs effectively. For the automotive industry, there are many requirements to meet. The reliability of manufacturer, design, function, and cost are purchasing decisions that a customer will use to decide on which car/ product to buy. A customer is more likely to put cost and function as their core concern.
It can say that the NMUK alliance tried to respond to this by manufacturing a car that met both the cost and functional aspects. By manufacturing a car that would reduce fuel consumption by 20% by using lightweight materials; and by manufacturing a car that felt and drove much more comfortably for even greater distances. This is the general theme that was picked up and used as a focal point when establishing the alliance. Customers are more likely to place cost and functionality as primal categories in their decision-making process.
To achieve this NMUK’s corporate suite strategy was to; “systematically reduce development lead time from 20.75 months to 10.50 months, reducing costs from 10 billion euros to 4 billion euros”. By setting this strategy NMUK was aiming to reduce the costs drastically; which potentially could pass on to the end customers. Therefore, achieving one of the major purchasing decisions that customers base their decisions on, cost. Secondly, the other strategy NMUK used to meet the customer’s second decision-making aspect functionality, NMUK designed the Qashqai using “cutting edge and innovative lightweight components and materials”.
These two objectives can argue to act as the primary focus which all other decisions were based around. The idea of reducing cost while increasing functionality. NMUK adapted and adopted the best practices of its partner companies whilst on one hand from; the previous post this was considered an efficient conceptional framework. On the other hand, one can argue this was based around the customer-driven supply chain model. NMUK sourced tier-one suppliers that could achieve further cost savings of 10%, thus reducing the overall cost even more. It can be argued that NMUK’s procurement decisions were based around; this concept of delivering better materials which had the positive effect of cost minimization.
Another decision NMUK made which could interpret as a customer-driven supply chain models and theories concept was the use of offshoring and outsourcing. Offshoring and Outsourcing are inevitable, some scholars would argue. In this case study, NMUK outsourced the materials and even the technology in a bid to increase and maximize its functionality and reduce cost. However, this created a drastic consequence for NMUK; which will discuss later in the report where a detailed analysis of the supply chain decisions will evaluate.
To conclude the point, these strategies although driven by customer decisions of cost reduction and improved functionality; led to what many scholars argue as a tremendous hindrance for the effectiveness of this supply chain and overall performance. UK’s decision to outsource as much as “45% of complicated modular components” led to lower production control, lower quality checks, and increased risk and delays.
In conclusion, as discussed in the previous post two supply chain models and theories could draw from; this case study one is the efficient supply chain model, the other is the customer-driven supply chain model. Possibly, others could argue that this is an example of a learning supply chain models and theories; however, evidence from the case study suggests that the alliance group, although targeted to reduce lead time from 20.75 months to 10.50 months; and reduce costs from 10 billion euros to 4 billion euros; they did not adopt a kaizen or waste management strategy when transforming their process.
Kaizen “refers to continuous accumulations of small betterment activities rather; than innovative improvement” and will refer to in the supply chain operational process post. Therefore, in this paper, this supply chain model is disregarded as evidence shows from Toyota’s manufacturing process; this incident wouldn’t have happened. In a lean process system, all possibilities of waste would target and eliminate. The continuous improvement would occur, whereas Nissan decided to innovate rapidly and outsource unproven technology.
Furthermore, as suggested in the previous theories this case study demonstrates two supply chain models; and one could argue that these models intertwine with one another, meaning there is no one such sole model on which Nissan was based. On one hand, Nissan and the alliance were attempting to meet customer demands for innovative products at a lower cost and enhance functional ability. On the other hand, they attempted to achieve this through an efficient supply chain model; where they attempted to utilize assets from each company and adopt a cost-sharing platform to reduce costs for each company.
This could say to be an example of an efficient supply chain model. Therefore, an analysis of this case study suggests that; this supply chain model was a combination of a customer-driven and efficient supply chain model. As proven in the case study, this may not be the most effective model; as it is often difficult to meet one criterion whilst achieving another.
References; Comparison of Supply Chain Models. Retrieved from https://www.ukessays.com/assignments/comparison-of-supply-chain-models-2021.php?vref=1