Strategic management essay on: Digitization of business – Wal-Mart & Toyota

Introduction

In an era of digitalization, emphasis of business was shifting more towards integration of various attributes of business so as to achieve the ultimate objective of cost, quality and efficiency. This change is not limited to enterprises only but has extended to influence the functioning of supply chain, which is considered to play a critical role in determining an organizational success. The new age business communities like Wal-Mart and Toyota, are using various aspects of supply chain in a strategic manner for gaining competitive advantage (Ketchen, et.al, 2008). However, as the competition is stiffening with every passing day, the focus of management is deviating towards modern models of supply chain which aims to yield the best value (Ketchen and Hult, 2007). The modern chains are thereby of flexible nature and are based upon multiple metrics that coordinates and collaborates with one another to deliver a greater degree of performance.

It has become evident that twentieth century has significantly impacted the manner in which business was managed. Interestingly what exists at the core of modern supply chain was the dual notion of collaboration and integration (Done, 2011). This was because the actual benefits from 3Cs were derived only when the concept of integration takes certain steps past the conventional attributes of data levels, exchange of knowledge, expertise etc. It is one such approach which necessitates the strategies of collaboration, cooperation as well as coordination in successfully establishing a relationship in the context of modern supply chain.

Aim

Aim of the report is to analyze the strategic relevance of 3Cs (coordination, collaboration and cooperation) in managing the modern supply chain successfully.

Objective

The objective of the report is to assess the advantages derived from maintaining a strategic approach for managing the supply chain while evaluating the challenges confronted in the process.

Plan of Report

The report is an attempt to develop an understanding of the innovation which has happened in the modern supply chain and then attempt an assessment of the benefits and challenges faced by the business community while implementing this change. The structure of the report is carefully divided into sections which assess the stage wise change in the business environment which ultimately impacted the inherent supply chain. An attempt has been made to weigh the benefits and drawbacks of modern supply chain approaches within the established scope of the paper. However, there are certain aspects which stand beyond scope. It is on the basis of these limitations that the direction for future research is provided after concluding the report.

Analysis and Discussion

Historically, the concept and practice of supply chain was introduced as the issues associated with logistics and physical distribution, focusing upon the aspect of cost (Giannakis and Croon, 2004). It was with the growth of technology and impact of globalization that revolutionized not just the manner in which businesses were managed but also the dimension involved in supply chain. It was with the turn of the century that the complexity and relevance of supply chain in success of an enterprise was appreciated. At the same time it is also interesting to note that the Japanese motor industry was proficient enough in identifying the importance of ‘coordination’ in making their supply chain successful (Womack et.al, 1990). The modern supply chain thus considers cooperation as an importance element while utilizing expertise from the chain and addressing the impact upon the entire chain. Thereby from the modern perspective, both customers and suppliers are considered a part of the same chain/ boat, which demand strategic consideration.

Strategic Supply Chain Management

It has become evident that inherent challenges in the business economy along with the growing complexity of competition, has compelled major changes in the operational strategies of business. The focus has shifted more towards augmenting the value provided to the end-consumer, which was seemingly possible through integration of supply chain (Bowersox et.al, 2000). From the perspective of a manufacturing industry, integration of upstream and downstream with the customers and suppliers was seen as a critical strategy for organizational success. So much so the elements of business performance, which was conventionally considered a part of strategic management, have now majorly drifted towards supply chain. For determining commercial success for an enterprise it is essential that collective capabilities are taken into consideration rather than their individual abilities (Slone, 2004). This aspect is made possible when every inherent enterprise unit is involved in cooperating with each other such that at every stage there is value addition which results in enhancing the final performance/ output of the firm.

In the modern context however, the concept of collaboration is a step further away from ‘integration’. Emphasis is laid more upon sharing of knowledge and expertise as processes tends to become more and more ‘human-centric’ (Frohlich and Westbrook, 2001). Interestingly some critics have remarked that the concept of supply chain collaboration is the eventual objective inherent in the process of integration (Fawcett and Magnan, 2002). Furthermore as the present day industry is becoming more knowledge based in nature, it is the strategic relevance of supply chain which is increasing continuously and is gradually embracing the avenues of not just collaboration but also coordination and cooperation with those who claim proficiency in a specific segment.

Additionally, from the historical perspective the focus of strategic management was primarily upon enhancing the competitive advantage of a firm. However, supply chain was one such domain which was seen more like a means of procuring goods for functioning of the firm. The fact, that strategically managing the supply chain has immense potential of improving not just productivity but also the competitive edge of the firm, is something which has been realized in the modern business environment of cut-throat competition (Ketchen, and Slater, 2004). Further if the ability of strategically managing the supply chain strengthened the competitive positioning of an enterprise, inability of management in the strategic fashion leads to serious impacts. The loss of $2.25 billion by Cisco in 2001 was one such instance when the company failed to manage it supply chain. Another prominent instance was in 2003 when Motorola was incapable of grabbing the initial market with their camera phones as its supply chain was not managed strategically to meet the business objective of supplying enough lenses for camera phones (Lee, 2004). Such evidence from history, wherein profitability of a firm is impacted by supply chain laxity clearly indicates erosion of market value of firm when a flaw in supply chain is discovered (Hendricks and Singhal, 2003). These lessons from history have been instrumental in heightening the importance of cycle time in determining strategic success of a business firm, which in turn has brought back the importance of concepts like cooperation, coordination and collaboration in establishing successful relationship in modern supply chain.

Value of 3Cs in Strategic Supply Chain

Three Cs in supply chain are categorized as cooperation, coordination and collaboration. The term cooperation as the name suggests directs towards the concept and practice of working together so as to achieve a specific goal. From the perspective of supply chain, cooperation is considered a step closer towards tolerance while working with others. Thus it includes maintaining positive approach which enables organization to easily align with one another.

Coordination on the other hand refers to active involvement and cooperation for accomplishing the business goal. It is through coordination of various elements of supply chain that a harmony is achieved while maintaining effective business relationship. Contrasting with cooperation, the concept of coordination deals primarily with the process of decision making which happens in joint manner. The prevalent type of coordination in a supply chain is further classified as horizontal and vertical type of coordination. Horizontal type refers to interaction which happens within the tier of chain, whereas the vertical relates to interaction across the chain, like the case of supplier and customer. The process of coordination enables in effective sharing of information which is considered critical in anticipating trends in the future market.

Finally the element of Collaboration is defined as the practice of working together with different entities. The difference between coordination and collaboration is that, the former directs to driving the appropriate indication for sharing of information. The latter is of more intensive in nature and from the perspective of supply chain; it aims in achieving optimization at a global level. For effective management of business strategy, collaboration is further segregated into three more types’ viz. exchange of information in a simple manner, sharing of information in a formulated manner and modeled type. It is interesting to note that the element of coordination is considered as one of the critical factor which determines the rate of success for any manufacturing plant.

In the contemporary business world, business enterprises tend to develop the collaborative strategy for management of its supply chain which is considered effective in accomplishing the long term goal. Also as the post globalized market has become significantly stringent, application of the collaborative strategy enables the companies in achieve economies of scale while sustaining the additional pressure exerted through rising prices. The strategy of 3Cs is accomplished by means of trust and is achieved when the primary objectives are aligned as per the strategies of business goal.

Despite been one of the major drivers for revolutionizing the contemporary business market, globalization is labeled as a challenge when the practice of supply chain integration comes into play. This was because the competition was intensified to such an extent that it became difficult for the managers in focusing their attention upon a single approach of supply chain to sustain the pressures of competition. There exists a constant pressure upon business leaders in integrating the strategies of supply chain with business operations in such a manner that they are capable of adapting every transition.

Advantages Derived from Integration of 3Cs

In the globalized environment of business, which is increasingly dynamic in nature the ability to sustain and maintain a consistent level of service has been an areas of serious concern. As rightly identified by the industry leaders, globalization is like a double edged sword. If on one hand it has opened the flood gates of opportunities on the other hand it has exerted additional pressure upon the business enterprises that they need to devise innovative means of combating challenge and sustaining business growth. One of the primary advantages that integration of the components identified as 3Cs leads is the management of cost. Cooperation enables business enterprise to improve the economies of scale in a strategic manner such that different companies establishing the trade relationship can complement one another. Also globalization hasi expanded boundaries for doing business in a manner that cooperation became indispensable in scaling the global market (Hammer, 2006). The process of integration of supply chain is one such aspect, which enables firms to cut down upon the additional costs of production by leveraging from the expertise of one another and complementing each other’s success.

Also integration of supply chain participants helps a business in accomplishing the competitive advantage, which in the modern day business world is considered quintessential for survival. As businesses are becoming more human centric in their approach it is pertinent in establishing a business network in such a manner that skills, knowledge, opinions are traded such that the management is capable of anticipating a specific trend of market movement. It is essential to develop the capability of anticipation for it aids the process of strengthening the supply chain in a strategic manner such that it integrates seamlessly with the core strategy of business operations.

The 3Cs of supply chain are seen as relevant as it helps in establishing a mutual relationship through collaboration which is considered a critical element in alignment the chain with the core objective of business. Also as the emphasis of the competitive market has shifted towards unique attribute attached with managing their respective supply chain in a strategic manner, an enterprise can generate desirable growth once it is capable of identifying the appropriate participants for collaboration. The ability to effectively cooperative, collaborate and coordinate with every participants of the chain can strengthen the competitive positioning of the business.

Also in the age when efficiency is rated as one of the critical requirement in management of business, integration of 3Cs of supply chain enables firms in achieving that efficiency. It is interesting to note that unlike the conventional approach of emphasizing cost minimization, the focus of the contemporary business tactics and supply chain management has significantly drifted towards enhancing the efficiencies as well as the economies of scale, which is very well achieved through integration of supply chain 3Cs.

Importance of Relationship Management in Managing the Supply Chain

It is an established fact that in order to ensure success of a specific supply chain, the participants involved in the process are integrated in the most effective fashion. The facets of cooperation, coordination and collaboration which were so repeatedly referred in the report come into action when a business manager considers the dimension of relationship management in supply chain. The aspect of cooperation which is based primarily upon relationships developed on contractual terms like outsourcing is one element which demands extensive conciliation owing to its complex nature (Miles, Miles, and Snow, 2005). Cooperation is also essential for effective alignment of business goals. Complementing this aspect, another element of collaboration is based upon the foundation of trust and communal objective. Under the purview of collaboration every participating element is seen as an extension of the other which demands quality time and energy owing to its essential nature of sophistication.

It is interesting to note here that despite emphasis upon establishment of collaboration and partnership in managing the supply chain effectively, business managers do not see collaboration as one of the best means of addressing the business relationships. Management is of the opinion that whenever it is possible to attain business synergy through implementation of other factors, it is wise to avoid the aspect of collaboration (Narayanan and Raman, 2004). They are of the belief that the relationship between the business and the partners is developed and strengthened on the basis of the value delivered by each participating body. What evolves as a critical need is the ability of coordinating between every participative element involved in the process. As it has become evident that involvement of various parties in the process adds to the complexity of the process, ability to effectively coordinate with every element for extracting the required benefit is considered indispensable for business success.

Notwithstanding the benefits derived by maintaining the approaches of cooperation and collaboration, the process is not devoid of serious challenges. Considering the complex nature of supply chain and the role of various participants involved in the end-to-end process, it becomes very much difficult for the business manager in accurately determining the participants that can be instrumental in establishing an effective relationship based upon collaboration of traits and expertise. So much so the aspect of relationship management in supply chain to deliver the best value has been contested time and again for establishing its relevance in any contemporary business context. It is interesting to note that as the present day business environment has become noticeably agile, the adage of “time is money” has becoming true not just in day –to-day life of an individual but also in meeting the business needs. For utilizing time in the most effective manner it becomes necessary for the business manager to adopt the approach of 3Cs wherein every participant can complement the other for achieving the ultimate objective of their respective business.

Challenges Confronted while Integrating 3Cs

The model of supply chain management which was essentially followed till the turn of the century was challenged by the changing dynamics of contemporary environment of business. For instance events like proliferation of business due to globalization and advancement of technology together magnified the importance of integrating the existing network of supply chain, which emerged as a new challenge which the marketers need to face for successful management of their business. At the same time when assessed from the viewpoint of business operations, the concept of switching and administration of knowledge across organization is difficult to comprehend, which becomes even more difficult with the growing complexity of enterprise dynamics which is changing its gear more towards supply chain.

As the industry focus is directing more towards integration of strategies of supply chain with the overall strategies of business the nature and type of challenge is increasingly becoming singular in character, such that it has become one of the top priorities for the CEOs of a company. Notwithstanding the fact that the concept of integration was introduced with the objective of extracting the differential advantage from various markets by means of a multi-national company; the increasing intensity of competition has made the business environment so complex and dynamic that it has become difficult to maintain a proper coordination (Awad and Nassar, 2010). Some of the major challenges as faced in management of supply chain post integration of 3 Cs can be stated as: Cost involved in transaction, Management of customer order, Established standards of trade and business, Process of procurement, Management of logistics, Integration of the enterprise, Integration of application, Challenges related to adaptation, Requirement of specified competency in suppliers, Integration of business processes, Integration of data and other specific information, Cultural change.

Disadvantages of 3Cs Integration

The 3Cs approach of managing the supply chain is not devoid of downsides. Some of the major disadvantage of the same are as discussed. For instance in case of coordination which helps in ensuring smooth flow of information gets disrupted when the piece of information which moves within the chain is of distorted nature. This distortion leads to increase the variability of orders within the chain that impacts the overall productivity. Further information alteration hinders the process of forecasting the future trend of demand in the business market. Like a chain reaction one form of trouble triggers others, coordination issues leads to obstacles related to behavioral aspects which further complicates the supply chain.

One of the prime disadvantages of 3Cs is that as every element are interrelated; disruption of information in one of them affects the entire chain which impairs the process of decision making in business. Lack of coordination also makes the strategies incompatible with the larger objective of business. Adopting the 3Cs approach of managing business supply chain also leads towards dependence upon the other. Contradicting the fact that objective of implementing 3Cs was to ensure that one business complements the other, in reality it impacted the business due to increasing dependency amongst the partners (Hammer, 2006). Also when a company is required to work closely with the other there is an increasing risk that such relationship leads to sharing of certain confidential or sensitivity information, which can significantly impact the competitive positioning of respective enterprises.

Furthermore prime and most debatable disadvantage is that implementation of 3Cs in strategic management of supply chain pushes the companies more towards standardization of processes. If on one hand standardization acts like an opportunity of scaling the global market at a faster pace, on the other hand it standardization is also leading towards competitive disadvantage in the broad market which endangers the sustainability of business firm.

Conclusion

One of the pertinent trends which have become apparent in the contemporary business world is that the focus of competition is shifting from firms towards the supply chain followed by them. The management of supply chain has thereby gained strategic relevance in successful management of business for it is seen more as a weapon of competitive advantage. Unlike the traditional approach of business management, wherein the focus of supply chain was limited to procurement and delivery of goods and service; the contemporary approaches of strategic supply chain takes a step beyond procurement. The essence of strategic supply chain lies in effective management of various participant of business process such that the focus of business is not just upon management of cost but also upon enhancing the economies of scale.

This aspect is possible when a business is capable of successfully integrating the participating elements of supply chain as identified as 3Cs which is critical in strengthening the overall chain and helps in maintaining the competitive edge in the closely competitive market. Despite the advantages attached with the modern approaches of supply chain, the process is not devoid of downside. For if on one hand the change has been effective in enhancing the efficiency of managing the business supply chain, on the other hand the challenge has increased manifold for the business houses in effectively integrating the networks of supply chain.

Furthermore the process of integration and collaboration is also associated with managing the differences of culture, general fears, infrastructure to name a few. It becomes a critically challenging task for the management to draw a meticulous plan such that the approach delivers desired results. It was also interesting to note that the concept of integration was contested; however it has been found that journeying through the integration process leads to complete collaboration as defined in the approach of modern supply chain management.

Direction for Future Research

From the study it also became apparent that there still lays immense scope to effectively gauge the challenge during the entire process of transition and integration of modern supply chain in a strategic manner. Any such study carried in future can focus upon the process which ensures effective collaboration for in the current context, business manager tend to avoid it if the synergy is achieved even without it. As business is becoming more and more human centric, the focus will shift more towards management of relationship in the near future which would demand a comprehensive approach of managing supply chain through collaboration.

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