It is noted that there has been a considerable shift in the nature of business in recent times. This is known as Industry 4.0. New technology is the order of the day with the internet, AI, big data and robotics creating more autonomy in business, service and manufacturing so that processes require less input from humans. Because of this, operations that were located in a few cities have now spread across the world. Furthermore, these operations would have to source inputs locally and deliver them to points of consumption that could be widely distributed. Where in the past, organisations had maintained arms-length relationships with their suppliers, they recognised they needed to develop these into supply chains with many partners spread far and wide geographically. Working closely with these suppliers and supply chains has allowed organisations to improve their competitive advantage.
Supply Chain and Supply Chain Management
The notes tell us that it was only 40 years ago that there was research starting to inform organisations about the value of arranging relationships with others beyond their local boundary (Australian Institute of Business, 2022). As a result, since that time, organisations are paying a lot more attention to the organisations from which they receive their resources and where they deliver their products and services. From further research, the term “supply chain” was coined and also a number of definitions for the components of the supply chain. The links between organisations providing resources to an organisation is referred to as the external supply chain. Organisations also have internal supply chains that process the input resources to create the final product.
There are a number of definitions of supply chains. Handfied and Nichols (1999) talk about a supply chain as a network of interdependent organisations in partnership with a specific organisation. Whereas Mentzer et al. (2001 p.4) define a supply chain as “a set of three or more entities (organisations or individuals) directly involved in the upstream and downstream flow of products, services, finances, and/or information from a source to a customer”
Supply Chain for Service Industry
Supply chains are often thought of purely as relating to the manufacturing sector. However, service industries also have supply chains and similar principles apply. When we refer to services, this also includes the not-for-profit and public sectors. The bottom line is how the service can be delivered to provide maximum value to the customer at the lowest possible cost.
Found the below in the textbook and thought it a great diagram explaining perceptions between what you think of your own operations and what others think of them.
Every organisation needs supplies in order to satisfy demand. There are often Service Level Agreements (SLAs) in place to formalise this arrangement. These may set out the percentage of times a supplier cannot supply and also set down the arrangements for consistency of supply. Many organisations these days operate on a Lean or Just In Time basis. Organisations may also invest in vertical integration where they own the suppliers in their supply network.
Demand concerns delivery to customers. Demand is a variable that can sometimes be managed and sometimes it is less predictable. If you intend to build x number of computers, you will know the demand for hard drives. You may not necessarily be able to predict the demand for the computers when completed, however. This is often based on experience.
Logistics activities are responsible for getting stock to the right place at the right time and at the right cost. Supply chains can be complex and the bigger the chain, the more complex it will be. Things like packaging, shipping, customs and weather can impact these supply chains. The IoT, AI, internet and GPS tracking are all playing increasingly significant roles in supply chains.
Approaches to Lean synchronisation
Lean synchronisation was previously known as Just In Time. Its ideal is to supply quality products at the right price to customers at the right time or in synchronicity with the demand. The aim is to also have no waste.
The text identifies 3 main barriers to lean synchronisation which include a failure to get rid of waste, failing to involve people and failing to achieve continuous improvement. Of these three, the most critical is the elimination of waste. Failing to identify waste in the system will prevent the synchronisation of supply and demand.
Slack and Brandon-Jones identify waste as “…any activity that does not add value” (2022, p. 389). Given this definition, waste can then be classified into one of four broad categories. These are:-
- waste from the irregular flow
- inexact supply
Importantly, waste can filter through the whole supply chain and affect all organisations.
Lean synchronisation in services
Supply chains can be thought to be the domain of manufacturing, but there is an opportunity for lean synchronisation in services. There are some differences to be considered though.
The notes point to some reading which I found, but no mention of services. So I include here the points from the notes.
- Services are a long way behind manufacturing (but are still relevant).
- Not all lean ideas from manufacturing will be useful in services.
- Lean principles have the power to change how a company learns and responds to change (which would be equally beneficial to services).
Elimination of waste is certainly one concept that is applicable to services. Time being charged is common in services and time can be wasted.
The concepts of supply chains and the vulnerability they present to many businesses has been highlighted by Covid. Many businesses and organisations have stretched their supply chains to great distances which have exposed them to a myriad of potential issues. The concept of Lean Synchronisation which was called Just in Time is now being replaced by a slightly more expensive model of Just in Case. Customers may have to pay a little more, but supply should be more reliable.References
- Australian Institute of Business 2022, Module 4: Delivering services and goods: think supply chain, AIB, viewed 19 August 2022, <https://learning.aib.edu.au/mod/book/view.php?id=111301>.
- Handfield, R & Nichols, E 1999, Introduction to supply chain management, Pearson Prentice Hall, Upper Saddle River, NJ.
- Mentzer, J, DeWitt, W, Keebler, J, Min, S, Nix, N, Smith, C & Zacharia, Z 2001, ‘Defining supply chain management’, Journal of Business Logistics, vol. 22, no. 2, pp. 1-25.
- Slack, N, Brandon-Jones, A, Johnston, R & Betts, A 2022, Operations and process management, 6th edn, Pearson Education Ltd, Harlow, UK.