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Supply chain planning and management has evolved into an essential instrument for gaining a competitive advantage in business. Companies are applying strategic supply SCPC methods to improve overall performance in the stages of product manufacturing, storage, distribution, and disposal. This is because rivalry is no longer limited to businesses selling similar items, but also throughout supply chains (Li et.al, 2006, pg.1). The challenges of getting items to the right location, at the right time, and at the lowest feasible cost necessitate that those firms not only aim to enhance internal efficiency but also seek steps to make the supply chain competitive. According to Wei and Xiang (2013 pg.1), SCPC refers to the supply chain systems used to coordinate, operate and optimize different activities and processes, and with the goal of correcting goods and service needed by customers in the right amount and the right state. This way, the need to understand the practice effective supply chain management has become a prerequisite for remaining competitive. This paper uses existing literature to examine the role of supply chain planning and control in ensuring a competitive business environment.
Role SCPC in securing a competitive advantage
Strategic supply chain management and control is a prerequisite for a global competitive advantage. The strategy of a company determines the set of customer expectations it seeks to fulfil. This strategy chosen defines the nature of the procurement of raw goods, transportation and disposal of materials from one company to the other. According to Shailendrakumar (2007 pg. 2), the ultimate goal of supply chain management is to find a balance between a business competitive strategies and its supply chain planning and control. This balance can be attained by understanding the need of customers, which helps the firm define costs and the requirements for goods and services. Additionally, the balance is beneficial in the design and management of supply chain in accordance to the expectations of customers. The company can then change the structure of SCPC where there exists a mismatch between the customer needs and what the supply chain is able to deliver.
There is an immense growth capability in the developing markets, which has seen an increased foreign competition in local markets. This has forced small and medium sized business to update their operations and consider international expansion. Mentzer (2007) suggest two methods that companies can implement to achieve a competitive edge through supply chain planning and control. The first is the principal of sticking to what the company does best. To do this, companies are encouraged to think of supply chain partners and create a list of things that both the company and the supplier do best and another list for the things they both do poorly. This will help the organization identify its core competencies that it should not let any other person do, and the core competencies of suppliers that it should not do. The second method is to coordinate all these functions across supply chain. These functions involve what the firm can do best for the supply partner, which will tie them more closely to the firm as supplier or customer. These functions can be delivered with higher quality and at a lesser cost, becoming a source of competitive advantage.
Given that a firm's value chain is the management of linkage between interrelated activities, a competitive advantage can be achieved using differentiation strategy. According to Wahyuni (2010), competitive advantage is solely dependent on how a firm manages its linkages. To better manage these linkages, there are two beneficial ways that firms can pursue: optimization and coordination. Optimization is important for linkages that reflect the trade-offs among activities and functions to get the same results. For example, inspection in the financial process of production, before making deliveries, can greatly minimize costs associated with after sales service. Coordination on the other hand will result to low cost and improved differentiation. Therefore, joint optimization of linkages and proper coordination of activities will improve competitive advantage (Porter, 1985).
Implementation of supply chain planning and control is an efficient way of reducing costs. Through SCPC, companies can substantially save costs that result from situations where products are purchased, and the cost of getting it can be lowered with practical plans for procurement, production, storage and transportation (Pozo and Tachizaw, 2013). Product order, control, and execution tracking can further lead to improved performance, high quality and low costs of production. This can be enhanced by better coordination with business stakeholders to help increase profit margins. An example of cost reduction includes paying less, eliminating the use of a product, and use of substitute good or service that cost less or reducing the part of the acquisition such as transportation or inventory cost. According to Kreipl and Pined, (2004 pg.4), SCPC can also be implemented to reduce cost through avoidance where cost saving employs measures such as the purchase of items of lower price and change to lower packaging details to lessen the cost of transportation.
Reduced costs will have a direct impact on the profitability of an organization. Firms, through collaborative supply chain management and control, find it easier to maintain and increase revenue (Khurana, 2017). This can be achieved by using portfolio management software and supply chain management solutions that allow businesses to produce goods and services at faster rates. Although the concept of supply chain planning and control is a clear one, it is easier said than done. This presents the need to work with successfully integrated supply chain partners than to make the difference when integrating supply chain activities.
Supply chain planning and control benefits business to achieve a competitive edge in numerous ways. Understanding the concept of supply management has allowed companies to retain their market share and compete favorably in a global platform through proper linkages of activities in the supply chain. Organizations seek efficient supply planning and control measures to ease the burden of getting the right products to customers at the right time. These actions not only lead to competitive advantage but also ensure the business reaps maximum profit while reducing operational costs. Since competition is no longer limited to organizations but also among different suppliers, SCPC plays an additional role in improving performance. International market demand has escalated, which has necessitated the development of competitive global markets. When markets are global, planning and control of supply chain become difficult. It is only those companies that pursue strategic SCM measures that can penetrate world markets and remain competitive as new trends and practices emerge
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Mentzer, John. (2007). Achieving Competitive Advantage Through Supply Chain Management. Stick to your core competencies. The University of Tennessee. Available at: http://www.industryweek.com/companies-amp-executives/achieving-competitive-advantage-through-supply-chain-management-0
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Zhang, W. and Wu, X., 2013. The importance of supply chain management. International Journal of Business and Social Science, 4(16).
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