Using the Internet to Create Efficient Supply Chains

San Diego Bay Dock -M.Abel

Products move across the globe at a speed unseen at any time in history. Much of this movement is directly derived from improved manufacturing methods mixed with telecommunications technologies that coordinate supply chain mechanisms to create more efficient processes. Fatorachian, et. al. (2013) studied 67 companies to determine what impact the integration of Internet technology and its computational power has on the supply chain. The study helps companies push for greater technological development using the data processing methods of the Internet.

 

The supply chain is a necessary component of moving products and equipment to various locations where they are put to use keeping the economic engine running. Sometimes this may be within a city, a country, or across the globe but many of the processes have similarities. According to Gereffi (1999), the supply chain integration can be a main source of providing competitive advantages based upon networked relationships. 

 

The supply chain ensures that each of the components are connected together to reduce waste, improve speed, and meet timeframes. The supply chain can be quit complex and take into consideration large and small shipments. It is therefore important to have the right kind of information that integrates all of these components into a more integrated network. Generally, the more integrated the network the more cost effective it can be and this impacts the profits of a company in a big way. 

 

Enhancing the supply chain requires better collaboration, cooperation and understanding of different partners within the network (Kandemir, et. al, 2006). This integration often requires higher levels of software, information, and connecting systems that encourage the components to work well together. When a product is tracked and the systematic efficiencies are improved across multiple companies there is a natural reduction in cost and an increase in service. 

 

Most of us are familiar with tracking at UPS and Amazon. We experience supply chain technology when products are scanned in as they move from one point to the next. Each time the product is scanned the system can tell at what leg and juncture of the trip it is at. Customers may find this a benefit but companies also get the benefit of monitoring many shipments to reduce costs and lower the level of resources expended on logistical management. 

 

Those companies that can integrate their supply chain have much higher payoffs than those who don’t (Cagliano, et. al., 2005).  This is not an easy process and often requires a systematic redesigning of the process to integrate high technology information with ground based systems. The development of high data and fast information transference systems that can manipulate the functioning of physical systems takes time. 

 

According to the authors when a company can do this well they are able to generate significant benefits.  The authors found through their analysis that the use of Internet technology improved upon supply chain integration, logistics and returns processes, order processes, procurement, planning synchronization, inventory control, overall production, and customer relationship management. This means that the implementation of technology systems furthered significant strategic goals within companies. Business leaders should consider the improvement of their systems and updating of technology when possible. 

 

Cagliano, R., et.al. (2005) E‐business strategy: how companies are shaping their supply chain through the internet. International Journal of Operations & Production Management, 25 (12), pp 1309‐27.

 

Fatorachian, H., et. al. (2013). Role of Internet in supply chain integration: empirical evidence from manufacturing SME’s within the UK. Proceedings of the European Conference on Management, Leadership & Governance 

Gereffi, G. (1999) International trade and industrial upgrading in the apparel commodity chain. Journal of International Economics, 48 (1). 

 

Kandemir, D., Yaprak, A. and Cavusgil, S.T. (2006) Alliance orientation: conceptualization, measurement, and impact on market performance. Journal of the Academy of Marketing Science, 34 (3).

Managing the Complex Web of Global Subsidiaries

Global firms often work with a number or partners in order to move their products into multiple markets. Global firms use subsidiaries to help them promote and distribute their products. Research by Homburg, et. al. (2012) seeks to categorize the varying types of firms available on the market to help multinational organizations do a better job at managing across countries, cultures, and markets.  Their research finds five different types of firms that have their own benefits and detractors.

Global firms attempt to maintain competitiveness by using subsidiaries to create effective international reach. These firms are more aligned with regional and local differences in market characteristics. Problems result when global marketing loses a level of efficiency and effectiveness in the development of methods of managing these multiple distribution fingers. 

Drawing from configuration theory of organizations it is possible to use subsidiary archetypes to understand the varying nature of firms.  The majority of marketing researchers have advocated for additional customization but this can create difficulties in global management and in turn impact sales.  Global marketing requires a different way of viewing subsidiary management. 

It is possible that moving beyond subsidiary characteristics to find value-added functions helps to create efficient archetypes. These archetypes enhance the effectiveness of decision-makers to make strategic considerations due to their ability to conceptualize complex information. Knowing how each type of firm can help in the branding and distribution of products is helpful in developing efficiencies.

The research used three steps to categorize firms:

-Conceptual Domains: Value-added scope, influence, and competence are common.

-Core Domain Constructions: Structure, subsidiary size, value-added scope, strategy, strategic influence, strategic competence, strategic importance, etc…

-Cluster Descriptive Variables: Performance, environment, communication, coordination, etc…

In this study they used surveys and random samples of multinational companies across various service sectors. They were able to categorize a variety of different market clusters to help define each type of company. Knowing cluster characteristics should encourage managers to think more strategically about which types of firms they are using and why they are using them for global and regional marketing. They are as follows:

Saturated Administrators:  These are the larger firms that have done well in the beginning of the globalization process. They are moderately effective but maintain name brand and strong purchasing power. They have difficulty effectively making their way into local markets and are relied on by a majority of companies seeking a global presence. 

Universal Champs: These are high performing firms that focus on certain industries in which they can maximize profits. They are seen as effective and seem to do well with high value added products/services.  Due to the nature of the customers they seek wealthier nations where the economic system is stable and maintain purchasing power. 

Important Dependents:  They are strategically important but small. They exist in a number of Asian countries and are relatively passive but have high value-added services. They provide local access to markets other firms may have a hard time reaching. 

Promising Aspirants:  These are small firms that are self-sufficient and work out of an entrepreneurial approach. They are beneficial in terms of their ability to work in fast growing markets that require cognitive flexibility. They offer generally low value-added services but work well in risky markets.

Flexible Implementers:  Small and young clusters. Very few value added activities with low influence and low competence. They move products and services along to local markets with high standardization.

Homburg, C., et.al. (2012) Ensuring international competitiveness: a configurative approach to foreign marketing subsidiaries. Journal of the Academy of Marketing Science, 40 (2).