SCM AND ORDER PENETRATION

Supply Chain Management And Order Penetration

Question 4

Supply management (SM) has undergone a significant transformation from a function responsible for placing purchase orders to a strategic process focusing on the management of goods and services. The role of SM in Nordic phones is to create the maximum strategic advantage for the firm. This includes areas such as the management of technology and innovation, streamlining processes, in sourcing and outsourcing, and managing complex relationships. Before the days of data ware housing and integrated information technology (IT), much of purchasing's activity involved dealing with myriad transactions, embroiled in minutiae. Because of the overwhelming level of activity involved in keeping track of orders and paperwork, it was extremely difficult for those in purchasing to rise above the day-to-day fray and make a significant, value-added contribution to the organization. The focus of SM was first on getting the lowest price, without regard to production, process, and design inefficiencies in suppliers or their own systems.

Relationship with Suppliers of Nordic phones

The vendor management function is becoming more centralized, whereas the profit-and-loss responsibility of firms is becoming less centralized. In this context, heads of business units are examining the purchasing function, and more opportunities to partner with suppliers are available as firms attempt to capture critical supply resources. Taking advantage of these opportunities is increasingly important for several reasons:

Shift in emphasis. Vertically integrated companies those that have complete internal capabilities and are self-sufficient are becoming less prevalent as firms are outsourcing areas of non-expertise. Therefore, products and services that were internally created are being outsourced. The supply function becomes more critical when companies outsource manufacturing to contract manufacturers and outsource warehousing to third-party logistics and warehousing.

Sourcing. With liberalization of markets and the emergence of the World Trade Organization (WTO), sourcing is becoming global. Free trade and investment among countries is becoming increasingly prevalent. Physical and temporal distances increase uncertainty, and supplier relationships are required to reduce these uncertainties.

Global customers. Customers are becoming global and, therefore, suppliers are asked to serve them on a global basis. This is particularly true for large global retailers such as Carrefour and Wal-Mart, as well as for global service industries such as banking, financial services, airlines, travel, and tourism. Global sourcing requires relationships at a global level.

Cross-functional and cross-cultural emphasis. Cross-functional and cross-cultural issues are becoming more important in global logistics and supply chain management. These issues are amplified in the context of integrated decision making across functions such as design, manufacturing, and marketing, along with finance, legal, and information technology. To manage these cross-functional and cross-cultural issues, firms need to develop relationships with supplier firms at these levels.

Declining market prices. Expectations of declining prices because of low inflation, especially in advanced countries, surplus manufacturing capacity, and low interest rates because of global savings rates exert greater pressure on firm margins. Thus, firms would like to obtain lower-cost products and services by working with suppliers.

Rising competitive intensity. Competitive intensity is increasing because of the restructuring of the world economy, as ...