The importance of re-engineering the supply chain

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Supply Chain Models

Organisations can achieve supply chain excellence through the use of either existing supply chain models, or by developing their own model or by using a combination of the two. Current models in the furniture industry has developed over a number of years and incorporate the vital issues needed to survive in the industry. Certain problems however persist in supply chain management, the most common ones being slow stock turns, damaged stock, phased out lines, high transport costs and ineffective warehousing and ordering techniques.
These problems have persisted over the last few decades. Furniture retailers are still in a daily struggle to reduce stockholdings and order correct merchandise quantities. Different or new models could assist retailers in re-engineering and strategic planning of the supply chain.
Various supply chain models have been developed by researchers over the past decade. The renewed interest in integrated supply chain management is ensuring that research continues. The ideal or perfect model has not yet been developed but groundbreaking work has been done. Different models will be named but only four will be discussed in detail.
Researchers have realised that models must be developed to assist organisations in their search for supply chain optimisation. Stalk, Evans & Shulman(1992:23) write that at a time when cost pressures are pushing many companies to out-source more and more activities, capabilities – based competitors are integrating vertically to ensure that they, not a supplier or distributor, control the performance of key business processes.
Garvin (1995:201) warns that before setting out to redesign a critical process, a manager first should ask whether the chief problem is quality, cost, or speed of the process or, rather, the fundamental inability of the process to support the strategy.
To assist organisations in ensuring that the components of the logistics system are correctly aligned, figure 2.3 indicates the relationships between different strategic dimensions in an organisation. The functional and lastly the implementation phase follows. The supply chain models all follow this structure to a greater or a lesser degree. However certain authors have a tendency towards one of the main functions, either strategy or operations.

The Growth Model

This model developed by Poirier (1998) consist of four different levels through which an organisation must progress to obtain supply chain excellence. These levels are, sourcing and logistics, internal excellence, network construction and industry leadership.
The sourcing and logistics stage is the first level of supply chain progression, and the emphasis is on reducing sourcing and logistics costs. The organisation selects a driver to lead the effort. These
drivers are conscripted by a more senior leader intent on driving down the cost of purchased goods. The driver generally displays a reluctance to be proactive.
Normally a special project or two is thrown in to redesign some part of the supply chain relationship. The tools used at this stage revolve around team building and development techniques, as team members use their functional experience and expertise to uncover savings that had eluded the organisation. Some companies conduct idea exchanges with a controlled number of key suppliers. Usually, these deliver good results. Novel suggestions on how relationships could be improved lead to real savings for both parties. An offshoot of this effort finds problem – solving teams being formed to discover root causes of poor performance or to look for new ways to perform old jobs.
There is no real model guiding the efforts on the first level. Typically, the teams are simply looking for quick hit savings as a means of justifying their programs and activities. Some preliminary alliances may be formed with a few trusted suppliers that are given larger positions as a reward for major cost concessions. Any training that does take place relies on team techniques.
The biggest concern at this level is to make certain the improvements are real and not just a temporary exchange of costs from buyer to seller that are transferred back to the buyer at a later date.
The second level, the internal excellence stage, utilises the chief information officer as a driver and introduces a new dimension to information technology’s role in the supply chain. The power of this vital function is brought to bear in designing leading edge systems and processes that lead to both internal excellence and more satisfied customers. The expected benefits come from a prioritized list of improvement opportunities that become the means to introduce elements of continuous improvement to the effort.
Companies at this level design tool kits with useful benchmarks showing the gap between their current performance and best practice. The demonstrated best practices are documented and studied to guide the teams in their quest for excellence. Plant and site visits to the acknowledged leaders become part of that effort. Business process reengineering becomes a rallying cry, as business process re-engineering techniques are applied to root out the non-value adding features of supply chain activities. Activity-based costing is usually employed to show just how wide the gaps really are while pinpointing opportunities for real improvement.
Despite the tentative attempts to reach outside of the organization, the level two focus remains largely internal. Accordingly, the teams are exhorted to deliver savings to the company. As the constant hammering for improvement continues, some suppliers begin to lose interest in the initiatives, particularly if they don’t see anything in it for themselves. This fact is lost on some companies, as the drive for internal improvement takes precedence over the more beneficial approach of shared savings.


1.1 Introduction
1.2 Market Analysis
1.3 Scope of Study
1.4 Research Methodology
1.5 Summary of Chapters
1.6 Conclusion
2.1 Introduction
2.2 The Literature study
2.3 Supply chain management – The new paradigm
2.4 The importance of re-engineering the supply chain
2.5 Supply chain models
2.6 Key factors for supply chain success
2.7 Information technology
2.8 Measurement of supply chain success
2.9 Conclusion
3.1 Introduction
3.2 Research Methodology
3.3 Conclusion
4.1 Introduction
4.2 ConclusionS
4.3 Recommendations
4.4 Conclusion


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