Today’s complex business environment has shifted the key feature of organisations from a ‘business & business’ form to the supply chain competition, which is navigated by firms to increase their competitive advantage in the market (Li et al., 2006; Tan et al., 2002). The responsibility of a supply chain management strategy is to strengthen relationships with customers (Hines, 2004; Melnyk et al., 2010), because the success or failure of managing supply chain is decided, ultimately, by the final customers (Christopher, 1992). However, some firms noted in the research have indicated that they do not do their own responsibility well in the supply chain versus chain paradigm (Table 1). This idea guides the present work to discover how businesses’ supply chain can generate the best value for money through internal procurement management.
Supply chain Problem
New order management and distribution system were useless, and the cost targets set in contracts were unattainable.
Huge sales losses; the firm was bought by McKesson.
Toys R Us.com
Could not fulfil orders that had been promised for delivery by Christmas
“We are sorry” email sent two days after orders were placed. Ultimately
outsourced achievement to Amazon.com.
Order management and warehouse implementation caused Hershey to miss Halloween orders’ commodities.
At least a $150 million loss, profits dropped by 19%, stock went from $57 to $38.
Under a conservative supply chain strategy, Apple could not meet the demand for Power Macs.
Apple lost PC market share, from which it has not recovered.
CEO Robert Smith invested billions in broken robot technology.
CEO was fired and the low-tech firm Toyota gained a strong competitive advantage through its Lean manufacturing approach.
With the above in mind, the objectives of this essay are threefold:
– To describe the three main schools of thought regarding of the management of supply networks.
– To answer the questions of whether better cross-functional internal management leads to a better value for money with improvements.
– To determine how trust affects supplier management with the ‘trust measurement tool’ this essay generates.
The Debates over Managing Supply Chains
The Lean and Agile Schools
“Toyota helped us dramatically improve our production system. We started by making one component, and Toyota rewarded us with orders for more components” (Senior executive- supplier to Ford, Chrysler and Toyota, 2001, pp.35). The most famous feature of the Toyota Production System, which is responding to every situation that appears in the company, is its ‘just-in-time’ production system. Kiichiro Toyota established the just-in-time system in 1937; it has allowed Toyota to become the leader among the global automotive manufacturers and facilitated the sharing of information and close collaboration with its suppliers.
Based on Toyota’s success, the Lean supply school concluded that supply chain management should be based on building good relationships with suppliers and trust in these close collaborations (Womack and Jones, 1990). Studies such as those by Lamming (1993), Hines (1994) and Carlisle and Parker (1989) supported to the Lean approach by proving that a lack of trust in cooperation will lead to sub-optimal outcomes. The principle of the Agile supply school is similar to the Lean school’s approach which states the importance of trust relationship between buyers and suppliers. Still, both encourage buyers and suppliers to work closely together to build trust.
The IMP Supply School
In contrast to the perspectives of the Lean and Agile supply schools, the Industrial Marketing and Purchase Group (IMP) school argues for an idealised scenario in which executives can control and manage the long-term relationships with suppliers. A long-term transparent strategy for supply management will fail, because companies need to change the behaviours of