Supply Chain Management & Innovation

A supply chain can range from “basic commodities to selling the final product to the end-consumer, to recycling the use product” (Harrison, A. and Hoek, R.V 2011:6). Managing supply chains is an essential element of all organisations for producing and marketing goods and services, have a vital influence on the economy. Although managing such business systems can pose many challenges, innovation can significantly improve effectiveness and efficiency such as reducing CO2 emissions. They are critical to environmental change, enabling sustainability and heavily impact daily lives.

According to Hughes (2010:318), the aim of supply chain management is to “effectively reduce the inventory of an organisation”. Managing such processes can enable greater integration and result in improved profitability, productivity and achieving competitive advantage. Thorough and effective implementation is critical to its success; otherwise inventory related problems are likely to occur and although supply chain management is not as apparent as other organisational changes, it is still significant (Hughes 2010:319). Technological advances permit organisations to create more sophisticated supply management systems in a more effective and efficient way.

Supply chain management at Coca Cola involves “planning and controlling all of the processes from raw material production to purchase by the end-user to recycling of the used cans” (Harrison, A. and Hoek, R.V 2011:7). Planning needs to be co-ordinated to guarantee that customer needs are adequately met.

Supply chain management at Toyota

The car manufacturer, Toyota, is well known for its Toyota Production System (TPS) which formed the basis of its significant global success. Toyota developed this system to improve quality and productivity by eliminating waste and respecting people. It generated the idea of lean manufacturing and supply chain practices and concepts are now used throughout many business areas. Toyota has become a benchmark for many companies as an effective eliminator of waste through its well adapted systems such as TPS.

Steven Spears and H. Kent Bowen, two researchers, have devised four rules that have formed the foundation of Toyota’s thinking (Financial Times [online], 2011):

1. Structure every activity
2. Clearly connect every customer /supplier
3. Specify and simplify every flow
4. Improve through experimentation at the lowest level possible towards the ideal state

Over several generations, Toyota has invented and led the development and implementation of many innovative supply chain processes. Their first idea was ‘Jikoda’ in 1902; “allowing one worker to support 12 machines instead of just one dramatically dropping the cost of weaving” (Financial Times [online], 2011). The company’s success has been due to the successful applications of processes such as just-in-time, kanban and quality circles amongst many others.

Lean management; an innovative process

Lean management is a highly effective supply chain method to manage a business at all levels and presents employees with “the skills and a shared way of thinking to systematically drive out waste through designing and improving work of activities, connections, and flows” (Financial Times [online], 2011). Many organisations have succeeded using such systems through “minimal inventories of raw materials, work-in-process, and finished goods” incorporating aspects of just-in-time delivery (Jacobs, F.R et al 2009:404). To be a success, lean production systems require “high levels of quality at each stage of the process, strong vendor relations, and a fairly predictable demand for the end product” (Jacobs, F.R et al 2009:404).

References

Financial Times (2011) [online] Lean management like Toyota Production System spells inclusive growth, The Economic Times (Online), October 24, Available from Abi-Inform at http://proquest.umi.com/pqdweb?index=5&did=2492509751&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1323621126&clientId=57096, [Accessed 11^th December 2011]

Harrison, A. and Hoek, R.V (2011) Logistics Management and Strategy; Competing Through the Supply Chain, 4^th Edition, Essex: Pearson Education Limited

Hughes, M. (2010) Managing Change; A Critical Perspective, 2^nd Edition, London: Chartered Institute of Personnel and Development

Jacobs, F.R, Chase, R.B and Aquilano, N.J (2009) Operations and Supply Management, 12^th Edition, New York: McGraw Hill/Irwin