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Part - XII

Increasingly Demanding customers

Companies can clearly see how customers’ demands have increased when considering delivery lead times, cost and product performance. Many companies used to have periodic, standard price increases - not due to a rise in demand or any other factor, but simply because raising price was the way business was done. Now one hears repeatedly about companies that cannot force through any price increase without losing market share. Today’s customers are demanding faster fulfillment, better quality, and better performing products for the same price they paid years ago. This tremendous growth in customer demands means that the supply chain must provide more just to maintain its business.

Fragmentation of Supply Chain Ownership

Over the past several decades, most firms have become less vertically integrated. As companies have shed non-core functions, they have been able to take advantage of supplier and customer competencies that they themselves did not have. However, this new ownership structure has also made managing the supply chain more difficult. With the chain broken into many owners, each with its own policies and interests, the chain is more difficult to coordinate. Potentially, this problem could cause each stage of a supply chain to work only toward its own objectives rather than the whole chain’s resulting in the reduction of overall supply chain profitability.

Globalization

This increase in globalization has had two main impacts on the supply chain. The first is that supply chains are now more likely than ever to be global. Having a global supply chain creates many benefits, such as the ability to source from a global base of suppliers. However, globalization also adds stress to the chain because facilities within the chain are farther apart, making coordination much more difficult.

The second impact of globalization is an increase in competition. This competitive situation makes supply chain performance a key to maintaining and growing sales while also putting more strain on supply chain thus forcing them to make their trade-offs even more precisely.

All of these obstacles are making it more difficult for companies to create the proper balance between responsiveness and efficiency in the supply chain and therefore to achieve strategic fit. These obstacles also represent a tremendous opportunity in terms of untapped improvement within the supply chain. The increasing impact of these obstacles has led to supply chain management's becoming a major factor in the success or failure of firms.

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* Contributed by -
Amit Mishra,
PGP 19188,
Indian Institute Of Management, Lucknow.