Critical Factors Affecting Supply Chain Management

SCM performance is defined as the operational excellence to deliver leading customer experience. Beamon mentions some features present in effective performance measurement systems and these include the following: inclusiveness (measurement of all pertinent aspects), universality (allows for comparison under various operating conditions), measurability (data required are measurable), and consistency (measures consistent with organization goals). Also, the strategic goals include key elements such as the measurement of resources (generally cost), output (generally customer responsiveness) and flexibility. Stevens states that to build up an integrated supply chain requires the management of material flow from three perspectives: strategic, tactical, and operational. From these perspectives, the use of systems, facilities, and people must be seen as a whole and work in a coordinated manner. He also mentions that a company can measure the supply chain performance by inventory level, service level, throughput efficiency, supplier performance, and cost. Lear-Olimpi also stated that logistics play an important role in pursuing supply chain excellence which will lead to improved business performance. Another critical sub-factor of successful supply chain management is the analysis of the supplier market. An important point according to Canbolat, Gupta, Matera and Chelst is outsourcing, which is significant in the supply chain management for the opportunities and risks that it offers. Then, this factor comprises four sub-factors logistics, supplier markets, supplier performance, and materials sourcing.

Logistics

Logistics is defined by Bowersox, Closs, and Cooper as "the responsibility to design and administer systems to control movement and geographical positioning of raw materials, work-in-process, and finished inventories at the lowest total cost". The research of Autry, Zacharia and Lamb establishes that logistics must be focused on the coordination and collaboration of activities, logistics social responsibility, strategic distribution planning, and technology and information systems.

Supplier markets

According to Yushan and Cavusgil, changes in the market create sensible companies regarding firm-supplier relationship. For manufacturers it is more important to build supplier's trust and to rely on suppliers, focusing on customer orientation, competitor orientation, and inter-functional coordination. The current competitive environment makes manufacturers aware of the need to reduce costs and to develop new products quickly. This is when supplier's expertise plays an important role. Superior supply chain management requires significant information with respect to supplier markets. Implementation of strategies in the supply chain will make the precious firm-supplier relationship difficult to copy by competition.

Supplier performance

When looking for successful supplier performance, it is important to emphasize relationship quality. Researchers such as Walter, Kaufman, and Palmatier, propose relationship quality as a "multi-dimensional construct consisting of trust, satisfaction, and commitment". Steward, Wu, and Hartley (2010) consider factors such as product quality; responsiveness to requests for change; sales, service and/or technical support; total value received; and overall cost performance as a measurement of supply chain performance. They also found that "supplier performance is higher when the supply manager perceives trust and satisfaction on the part of the supplier's account executive".

Material sourcing

Companies in any manufacturing sector are always looking for low-cost raw material, domestic or imported. With the objective of improving their competitive advantage, some of them see importing as an appealing option. As there are some advantages when importing resources, such as lower labor cost and lower cost of resources, there are also some disadvantages that companies have to take into account when evaluating whether or not to work with offshore companies. Importing raw materials, components or products increases the dependence on suppliers, and some risks are identified such as culture, language, foreign exchange rate, regulations, quality, political and economic stability, and transportation delays.