Background of the organization
Discuss about the Principle Of Tthe Supply Chain.
The principle of the supply chain is to is to deliver consistent and high quality service to the customers. It is important for the business organizations to have an effective and strategic supply chain in order to cope up with the market and the customer requirements. As commented by Leuschner, Rogers and Charvet (2013), the motto of having an effective supply chain is to optimize the end-to-end functions of the system by minimizing the overall cost. However, challenges such as organizational structure, well-defined roles and responsibilities and having the right people with required skills hamper the effective implementation of the supply chain. It has been seen that having an effective and functional supply chain results provides an opportunity for the business organizations to gain a competitive advantage over others in the same sector.
This report introduces the significance of strategic supply chain and how it helps in gaining competitive advantage. The report analyzes the different supply chain transformation strategies and determines how it can be used by Holden, an Australian car manufacturer for creating a superior competitive advantage.
Holden is an Australian car manufacturer with its headquarter in Port Melbourne, Victoria. The company was established in 1856 that initially manufactured saddler in Southern Australia but shifted to car manufacturing in 1908 by becoming a subsidiary of General Motors, a United States automobile company. Holden sold the cars that were produced by local car manufacturers as well as imported vehicles of General Motors (Holden.com.au, 2018). The fascination and demand for cars have increased over the years thereby, giving rise to several companies that manufacture cars. The different car manufacturers manufacture cars by considering the demand and need of the customers of varied segments. This has given rise to tough competition, as the car manufacturing sector has become overly crowded. Thus, it is important for Holden to create a superior competitive advantage by implementing supply chain transformation strategies and sustain in the competitive market.
The organizational goals and objectives need to define the supply chain goals that further need to be aligned for proper operation. The different supply chain transformation strategies include firm-level functional integration to supply chain integration, product push to demand pull and firm based competition to network competition (Christopher 2016).
The performance and the capability firms are defined by the production and the ability to meet the expectation of the customers. As commented by Dittmann (2013), in the long run, the business organizations or the firm can change their operational scale. However, as argued by Fernie and Sparks (2014), emphasizing more on firm level functional strategy results in loss of productivity. This is because the department heads emphasize more on implementing the functional strategy of the respective departments successfully rather than considering the organizational goals and objectives. As a result, departmental communication is hampered thereby, creating conflicts and productivity minimization. In the case of Holden, firm-level functional integration resulted in productivity minimization, as conflicts were evident among the various departments of the car manufacturer. Each department was more focused on the departmental agenda rather than focusing on the organizational goals and objectives.
Supply chain transformation strategies
The inclusion and implementation of supply chain integration will help Holden to create a superior competitive advantage. As commented by McCormack and Johnson (2016), supply chain integration works closely by aligning and coordinating the entire supply chain. As a result, the entire network of the supply chain is interconnected and emphasizes more on the delivering the best to the customers. The entire business organization is more focused on producing the final product from the scratch that includes manufacturing, shipping and support services. Supply chain integration will help in maximizing savings and efficiencies for Holden, as the company will be more aligned towards achieving organizational goals rather than focusing on their individual departments (Serdarasan 2013). Supply chain integration is a powerful concept and is important for surviving and growing in today’s business environment. The integrated supply chain ensures that all the departments are interconnected and working together with a single motto. As the entire organization is working with a single aim rather than focusing on departmental aims, the productivity and efficiency increase thereby, gaining competitive advantage. The use of supply chain integration will help Holden to maximize the productivity and efficiency due to aligned aim, effective communication and lack of conflicts among the various departments of the car manufacturer.
Product push is a common phenomenon that is seen prevalent among the business organization in order to communicate the product to the customers. As mentioned by Uthayakumar and Priyan (2013), the concept of product push highlights the measures undertaken by the business organization to take the product to the target customers by themselves. In spite of having advantages, the product push strategy has some limitations that hamper the competitive advantage of the business organization. According to Hinees (2014), product push is capital intensive and lead to the generation of larger quantities of scrap before errors are discovered. For example, designing and developing advertising campaigns successfully incurs millions of dollars for the business organizations that do not always yield positive results. However, argued by Schaltegger and Burritt (2014), product push requires maintenance of large and complex databases that are required to ensure product flow effectively. The use of product push strategy for Holden incurred financial expenses that were difficult for the car manufacturer to recover.
Considering the disadvantages of product push, it is ascertained that the implementation of demand pull will provide an opportunity for Holden to create a superior competitive advantage. The pull demand allows the business organizations to remove a lot of pressure and friction that is encountered while outbound marketing. As a result, the majority of the business organizations prefer inbound marketing, that is pull demand rather than product push. Thus, instead of investing huge financial resources in persuading the customers to purchase their products, demand pull allows the business organizations to let the customers get drawn naturally (Rushton, Croucher and Baker 2014). The use of demand pull will allow Holden to save money, as they do not have to invest huge financial resources in advertising and attracting the customers. In addition to, demand pull is more customers centric and provides the opportunity for make-to-order facility for the customers. Also, limited inventory results in improved cash flow thereby, saving huge financial resources for the companies (Hugos 2018). As a result, Holden will be able to create a superior competitive advantage by giving the customers what they need without spending huge financial resources.
Firm-level functional integration to supply chain integration
Competition in the market has increased extensively due to the rise of similar business organizations in the same industry sector. Thus, all the business organizations in the same industry sector have to compete with each other for attracting the customers and doing maximum sales. As commented by Liu et al. (2013), firm based competition is the competition among the similar business organizations within the same industry sector. For example, firm based competition will enable Holden to compete with other car manufacturers in Australia. Firm based competition is less preferred, as this narrows the organizational goals and objectives thereby, minimizing the competitive advantage. This also shifts the focus of the firms from fulfilling the demands of the customers to manufacture better products than other firms whether the customers want it or not.
Network based competition is more preferred; this provides an opportunity for the business organizations to attract customers by including and implementing network within the business operations. As commented by Dyckhoff, Lackes and Reese (2013), instead of competing with the firms, the business organization needs to improve the networks used by them and use the best network among the competitors. Improving the supply chain networks will provide an opportunity for the business organizations to deliver high-quality end products to the customers. Thus, Holden needs to strengthen their supply chain network, as this will automatically facilitate well-defined and well-organized system, effective communication and lack of conflict thereby, fulfilling the demands of the customers.
Conclusion
In this report, it can be concluded that it is important for all the business organizations to have a competitive advantage in order to survive in the fierce and intense market. Over the years, the Australian market has seen a rise in the number of car manufacturers thereby, giving rise to tough competition due to market saturation. In addition to, the operation has also changed over the years due to changing demand of the customers. Thus, Holden, the Australian car manufacturer can create a superior competitive advantage by using supply chain transformation strategies. The use of supply chain integration, demand pull and network based competition will allow Holden to create a superior competitive advantage for them in the Australian market. Supply chain integration will help to align the activities of the firm with the organizational goals rather than voicing the aims of the inter departments. Additionally, the use of demand pull will allow Holden to save money, as they do not have to invest huge financial resources in advertising and attracting the customers. Lastly, Holden needs to strengthen their supply chain network, as this will automatically facilitate well-defined and well-organized system. Superior competitive advantage will allow Holden to offer greater value to the customers at minimized price thereby, allowing an excess return for the organization and the shareholders.
References
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Dittmann, J.P., 2013. Supply chain transformation: Building and executing an integrated supply chain strategy. McGraw-Hill.
Dyckhoff, H., Lackes, R. and Reese, J. eds., 2013. Supply chain management and reverse logistics. Springer Science & Business Media.
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan page publishers.
Hines, T., 2014. Supply chain strategies: Demand driven and customer focused. Routledge.
Holden.com.au. (2018). Holden Australia – Discover New Possibilities. [online] Available at: https://www.holden.com.au/ [Accessed 16 May 2018].
Hugos, M.H., 2018. Essentials of supply chain management. John Wiley & Sons.
Leuschner, R., Rogers, D.S. and Charvet, F.F., 2013. A meta?analysis of supply chain integration and firm performance. Journal of Supply Chain Management, 49(2), pp.34-57.
Liu, H., Ke, W., Wei, K.K. and Hua, Z., 2013. The impact of IT capabilities on firm performance: The mediating roles of absorptive capacity and supply chain agility. Decision Support Systems, 54(3), pp.1452-1462.
McCormack, K.P. and Johnson, W.C., 2016. Supply chain networks and business process orientation: advanced strategies and best practices. CRC Press.
Rushton, A., Croucher, P. and Baker, P., 2014. The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
Schaltegger, S. and Burritt, R., 2014. Measuring and managing sustainability performance of supply chains: Review and sustainability supply chain management framework. Supply Chain Management: An International Journal, 19(3), pp.232-241.
Serdarasan, S., 2013. A review of supply chain complexity drivers. Computers & Industrial Engineering, 66(3), pp.533-540.
Uthayakumar, R. and Priyan, S., 2013. Pharmaceutical supply chain and inventory management strategies: Optimization for a pharmaceutical company and a hospital. Operations Research for Health Care, 2(3), pp.52-64.
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