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SUPPLY CHAIN MANAGEMENT: THE DYNAMIC STRATEGIES FOR OPERATION

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SUPPLY CHAIN MANAGEMENT: THE DYNAMIC
STRATEGIES FOR OPERATION

Johnson O. Okeniyi1
1
School of Built and Natural Environment, Northumbria University, Wynne Jones Building, Ellison
Place, Newcastle upon Tyne, NE1 8ST, UK

Managing a procurement system is becoming increasingly difficult; this is resulting

from a wide range of procurement practises around the globe. In order to manage the
daily operations of a procurement system, one must consider and build on the possible
strategies that exist within an organisations supply chain. This research is a simple
analysis of the strategic elements that exist within a supply chain. It aims at creating
an analytical supply chain strategy template, by representing each strategy under a
scope or another within a procurement system. The research accesses the difference
between the organisational levels and the applicable strategies. Although there are so
many views that exist that are relating to supply chain management strategies, the
research distinguishes the strategy by negotiating the difference between
organisational structures and segmented internal scopes. Strategies for successful
implementation within a logistics operation were gathered based on stated documents
from a number of recent and past scholars. It also uses words like procurement,
logistics, and supply chain interchangeably. However, this study conclusively sets a
balance between strategies for successful operations and factors that may affect them.
This research establishes that in order for organisations to achieve success in their
procurement/logistics system, they must generate strategies that are in alignment to
their scope of operation.

Keywords: Cost management, externalities, human resource management, risk

management, strategic procurement management, time management, and value
management.

INTRODUCTION
Leenders (2006, p.2) described that Supply chain management is essential to
organisations across nation and ample evidence shows that suppliers are the primary
intermediary between the producers and customers. This study intends proving that
there is the need for a diversified strategy in every supply chain system within the
organisation. Logistics is an alternative phrase that is used to describe supply chain
management (Cousins 2008, p.11). He further explained that transportation of goods
within and without a company won’t have been possible if not for the process of
logistics management.
Cousins (2008, p.12) explained the logistics management process with a simple
model. According to his model, logistics plays a key role in the daily management of a
firm. The roles played are not just passive but active; it runs together with the day to
day administration of a firm. Internal logistics convey inputs for manufacturing
activities. The model puts internal logistics in place in order to avert disruption in
1
johnson.okeniyi @northumbria.ac.uk
Johnson O. Okeniyi

manufacturing activities. The external logistics sets in after full administrative duties
have been performed. His simple model shows that the issue of supply chain
management entails lots of complexities.
Supply chain is the science of industrial movements within and without a company’s
production chain (Rushton & Walker 2007, p.5). However in their book they gave a
profound definition for the concept of supply chain management “…may be defined
as the integrated management of all parts of the supply chain from the originating
supplier to the final customer.” Supply chain management is a combined tactical
process that brings together all forms of logistic chains in order to make things work
aright within and without the organisations scope of work.
Leenders (2006, p.4) in his work suggested that “Terms such as purchasing,
procurement, materiel, materials management, logistics, sourcing, supply
management, and supply chain management are used almost interchangeably”. This
research will make use of the variety of the words like procurement, sourcing etc
interchangeably, all submitting to the same meaning as supply chain management.
STRATEGY LEVELS WITHIN A SUCCESSFUL SUPPLY CHAIN
MANAGEMENT
Over the years a number of scholars have carefully outlined and explained strategies
for the successful integration and implementation of a supply chain management
system. An organisations strategy gives a visible pathway for the correct
implementation, movement and management of a body over a period of time (Grant
2006, p.385). He suggested that it is essential for logistic managers to familiarise
themselves with their company strategy to be able to make a successfully merged
procurement decision that will not contradict the company’s overall strategy. In other
words just as there is a corporate strategy for every organisation; there is also a
corporate strategy for every procurement chain or cycle. It is important for every
manager within and without a procurement system to have a clear knowledge of both
strategies in other to generate ex-ante procurement policies.
In order to understand the strategies under the subject of logistics management and
how they work, it is good to have a little knowledge about the three division of
strategy allocation. According to Bozarth, Handfield & Weiss (2008, pp.401-402)
strategic plans in relation to procurement management can be categorised into three
different parts namely,
 Strategic Plan
 Tactical Plan
 Detailed plan and control.
Strategic Plan
This type of planning takes the future of the firm or an organisation into critical
consideration whiles formulating its overall plan. The overall plan is the mother of all
other plans as it affects the other two categories by bringing them under unavoidable
subjection. It is the result of the consultation between the corporate vision and mission
of a firm, (Grant 2006, p.385) and (Bozarth, Handfield, & Weiss 2008, pp. 401-402).
 The Dynamic Strategies for Operation

Tactical Plan
Tactical plan is a question of specification; it focuses more on the present than driving
deep into the future. It is the breakdown and gradual fulfilment of the strategic plan
(Grant 2006, pp.385-386).
Detailed Plan and Control
This particular level of strategic planning lacks the power to make strong immediate
influence, it is described a fellow up level. In other words, this level of strategic
planning ushers the firm into the achievement of the earlier stated corporate or
strategic plan (Bozarth, Handfield, & Weiss 2008, p.401).
However Grant (2006, p.387) suggests that this level can also be called operating plan
“The most detailed level of plan is called the operating plan or the annual plan”. This
level is seen as a prescription for the daily movement within an organisation; however
there is a link between this level and the previous levels.
STRATEGIES FOR IMPLEMENTING PROCUREMENT MANAGEMENT
UNDER THE SCOPE OF TIME MANAGEMENT
Just-in-time System (JIT)
JIT is one of the integration strategies of supply chain management system, according
to Rushton, Croucher & Baker (2006, p.27) the JIT system of procurement is a system
that minimizes the cost of production through the avoidance of valueless processes.
The just-in-time system is a production system that alters the unnecessary activities
within the production and delivery chain.
JIT system surpasses just the delivery of goods but also insists that goods should be
delivered at the time when they are needed according to Lysons and Farrington (2006,
p.341). In their work they stated that there is a global perception that JIT was
developed about 15 years after the Second World War by an expert Japanese
company. However the just-in-time procurement system can also refer to as cross-
docking, and to further facilitate this system of distribution advanced settlements are
normally arranged for even before the suppliers receives order from the customer
(Ghiani, Laporte & Musmanno 2004, p.8). JIT is always activated and in process by a
final consumer, that is the end user is a core component to the whole process of JIT, in
the absence of the end user then the JIT system may be considered less effective
(Harrison and Hoek 2011, p.223).
Since storing of goods in a ware house could indirectly tie down capitals, JIT system
removes element of inactive capital and likewise suggest instant active and yielding
capital system. JIT is a system that tends to lead to customer satisfaction, and it is a
useful system for firms that make their customers their main focus (Hutchins 1999,
pp. 44-45). JIT is a preferable strategy in this study as it will lead to profitability on
the side of the producer. One main focus of companies these days is to manage time in
the procurement system (Joseph 2002).
UNDER THE SCOPE OF COST AND FINANCE MANAGEMENT
Insourcing
Insourcing is a measure taken by firms to reduce the cost of running a procurement
system. It spells out how organisations decide to limit their work inputs by
maximizing the use of their internal resources. The procurement manager makes a
brief analysis of cost fairness by weighing the sourcing of the firm’s activities.
Johnson O. Okeniyi

However on the long run it is an industries core competencies that are likely to be
insourced. This is advantageous in the sense that when external bankruptcy or
scarcity situations arise, the firm will be less concerned and neither will it be affected
as it has insourced her core competencies. Insourcing in a way may influence the
procurement system by enhancing cost management (Bozarth, Handfield, & Weiss
2008, p.319).
Outsourcing
Outsourcing on the other hand can also be a measure of minimizing cost intensive
industrial spending. Whiles insourcing can sometimes hinder the dynamism of a firm,
outsourcing can be a last resort for the firm. According to Bozarth, Handfield, &
Weiss (2008, pp.320-321) organisations will normally aspire to outsource activities of
which they lack skills and technics, and also activities that lie outside the scope of its
core competencies. It is amazing to wonder why a firm should outsource activities that
are outside her core competencies. It was observed in their work that outsourcing less
core competencies will give the firm a competitive advantage. In other words it will
allow the firm to concentrate on the positivity of the outcome of its core competencies
rather than being interrupted by the non cores.
Lysons and Farrington (2006, p.392) defined outsourcing as“…a management strategy
by which major non-core functions are transferred to specialist, efficient, external
providers”. It is observed that outsourcing of less core competencies can also be cost
less, in that it will give the firm opportunity to contract external firms that probably
have better expertise in the outsourced area and also have less cost contractual
quotations.
E-Sourcing
The e-sourcing is an enhanced system that removes the element of stress from
procurement, it is like a modern time machine that has been transmitted into logistics
system (Lysons and Farrington 2006, pp.372-373). The E-sourcing is simply another
way of implementing strategic cost management in the procurement system through
the use of the internet transaction websites. According to Harrison and Hoek (2011,
pp.260-261) there are certain sites like Ariba “…http://www.ariba.net…” that are
available on the internet for e-procurements. Web sites like these normally foster e-
sourcing, and the interesting thing about it is that it is an easier method of procurement
and also costless. For instance customer can now go to the internet café and transact
business with popular china websites like Alibaba (Tania 2010).
UNDER THE SCOPE OF RISK MANAGEMENT
Warehousing System
There has been a number of criticisms against the warehousing system, especially as
read earlier in this study under the scope of time management. Hutchins (1999, pp.44-
45) criticized the system by suggesting that it is a system that ties down capital which
in reality is not good for a firm. However under the scope of risk management it is an
important strategic procurement system. It was described as a system that is quite
broader in nature compared to the JIT system.
For instance, if a natural disaster occurs that is outside the control of a firm the JIT
system will lead the firm to instant bankruptcy whiles the warehousing system will
trigger solutions even under this cryptic situation. The bottom-line is that uncertainties
are bound to occur and in this period, only an ex-ante procurement system will bring
 The Dynamic Strategies for Operation

reasonable solutions (Bozarth, Handfield, & Weiss 2008, p.369). The JIT system can
be beneficial in the area of time management but the warehousing system surpasses it
and it is also suggested to be a more responsive system in the area of uncertainties.
Quality Management system
Sometimes when some firms get deeply involved in the business of reducing the cost
of procurement and production, they unconsciously begin to drive the curve of quality
in produce into the slope of diminishing return. Quality management is an essential
key in a logistic system because failure to maintain a correct and constant balance in
the product quality, will lead to total fall in purchases (Grant 2006, pp.406-407).
Re-engineering
The subject of reengineering may be described as it sounds. Due to the ever increasing
competition in the business environment, it is important to note that if a firm fails to
rebrand its productions; there will be a massive fall in the procurement of such
productions as other competitive brands will rapidly take over (Grant 2006, p.407). In
order to avert massive diminishing in the area of sales, there should a timely
rebranding policy as a safety precaution against uncertainties.
UNDER THE SCOPE OF VALUE AND BENEFIT MANAGEMENT
Collaboration
Organisations gain value by collaborating with suppliers and consumers; both parties
are able to exchange beneficial information. If companies are able to collaborate with
consumers, it will lead the company to better understanding the unexpressed needs of
the consumers (Lou 2006). This will in turn provoke innovative thinking that will
usher the organisation into new profit driven paths. When collaboration becomes part
of an organisations core priorities, such organisations will realise high percentage
increase in profitability. They will also be able to focus on quality improvement and
creative migrations in their production. The collaboration strategy has a segmented
system that governs the whole process under procurement activities (Mohsen and
Sharmin 2007).
Bidding
Although bidding strategy may be requiring, it is a necessity in order to create value
and benefit management. It has a way of assuring that the organisation buys at the
least price. Bidding within a supply chain suggests a form of shortlisting before
engagement (Dave 2008). The internet has made it possible for both insiders and
outsiders to be able to bid within a reasonable period of time. Bidding online has made
it a simple and easier way to procure with industries; however the internet itself may
possess future treats, (Anonymous 2005).
UNDER THE SCOPE OF HUMAN RESOURCE MANAGEMENT
People
In recent times, customers have become one of the key players in the procurement
system. Most suppliers now perceive that delivering efficient performance that leads
to customer satisfaction may determines the continuity of their relationship with such
customers. However in a case where the organisation renders inefficient services to
customers, there is a risk of losing such customers, (Joseph 2002). Considerably
companies need to balance the difference between customer satisfaction and their
other core competencies.
Johnson O. Okeniyi

FIGURE 1
EXTERNALITIES
Occasionally some external factors that are beyond the control of a firm may
negatively affect the internal procurement system. Cousins (2008, pp.15-17)
illustrated that certain factors may affect the smooth administration of a good
procurement system. The model is categorised into four different sections namely;
political, economic, social and technological. It can be acronym to as PEST analysis
(Rushton, Croucher & Baker 2006, p.107).
Political
The political aspect suggests the element of external litigations or legalities. Every
country has laws under which it operates. For instance in certain countries the
governments ruling on a logistics firm is that it should be run as a monopoly market.
In this kind of market only one body is in charge of the procurement or logistic
management system. In some other places the government places high weight of tax
on the procurement system such that firms will be frustrated to migrate out of the
locality. In some places, the government could issue unfavourable employment laws
and trade regulations that are at times unfavourable to the firm. Sometime the
government of a country can make stability laws when it has foreseen that things
would get out of hand. However in some places especially third world nations, it is
assumed that government makes laws that will encourage the further development of
 The Dynamic Strategies for Operation

the country as a whole, thereby making favourable laws that magnetize industries to
want to invest in such places (Rushton, Croucher & Baker 2006, p.107).
Economic
A firm could be at a loss when there is high rate of inflation from the outside.
Depending on whether there is a good business cycle in the firm’s location, there is a
great tendency that the firm will do well in the area of redistributing its goods to
within the business cycle that was already made available. Inflation is an external
factor that is beyond the control of the firm. If there are changes in interest rates, this
could be of advantage to the firm especially if it is one with a global insight but
depending on whether it is an increased change or a decreased change in interest rate.
When there is high rate of unemployment in the system, the firm can take advantage
of this and use its employability but at a reduced cost, that desperate skilled labourer
would go for. Where the industry is located in a locality where there is available
energy at subsidized cost, it will be favourable to the firm (Rushton, Croucher &
Baker 2006, p.107).
Social
The level of population of a society in which a firm is located or its goods are directed
will have a massive effect on the success or failure of the firm’s distribution
management system. As you must have read in the early parts of this study, a logistics
system is more concerned with the end users who are the main subject of production.
Therefore one may suggest that the higher the level of population, the higher the
distribution and sales of goods. The number of people who are interested in the firm’s
product that are situated there will lead to a blossom in the procurement schedules.
The attitude of the employees towards work may determine the frequency of a firm’s
production. The level of literacy also plays a very important part in the procurement
management system. For instance in a situation where the firm decides to outsource
some of its responsibility by introducing the e-sourcing procurement system, it is the
level of literacy that will determine the success of this implementation. The level of
literacy will spell out the number of people who will be able to go and browse the
internet to do procurement transactions (Rushton, Croucher & Baker 2006, p.107).
Technical
A firm can be global but decide to localise itself in other locations, the issue is that the
firm may not be able to procure well in the localised communities. This because the
community may not be up to the standard of the globalised firms location, and to be
able to share equal transactions the firm will have to wait for the community to
revolutionize to the global state. For instance it is pointless introducing e-sourcing to
community that is not yet exposed to the internet. Until the government of a location
where a firm is located begins to spend on research’s that will boost the system, the
firm will remain static in areas of advanced procurement system. This may in turn
lead to high rate of obsolescence (Rushton, Croucher & Baker 2006, p.107).
Environmental
According to Christopher (1992, p.64) the immediate and external environment of a
supply chain management poses threats towards effective administration of a logistics
system. The environment varies as it could be economic environment or the social
environment. The business environment is an important contributor to the success of a
firm and where the humidity of competition is high, ex-ante strategies should be put in
Johnson O. Okeniyi

place. However, in the likely hood of bad business humidity, industries should migrate
towards the environment that is user friendly to her operations.

CONCLUSIONS
Just like managing other aspects of an industry, managing a supply chain entails a lot
of challenges. In order to avert these challenges a number of strategies that can be
applied have been outlined. The implementation of these strategies may vary on the
setting and geography of the operation. The application of the strategies in
procurement may not yield in success, unless it is done in the order of hierarchy
within the organisation. However, effective implementation of supply chain strategies
would follow the flow hierarchy of planning in the industry. The most successful
strategies that are implemented in a supply chain system are generated based upon the
industry’s core operational frameworks. Whiles implementing operationally generated
strategies, organisation should be careful to avoid narrowing down their style of
operation to one edge. Diversification of strategies should be encouraged even in
occasions where they appear outside the non-core frame works of the organisation.

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 The Dynamic Strategies for Operation

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