International Journal of Computer Trends and Technology- March to April Issue 2011

SUPPLY CHAIN MANAGEMENT AN APPROACH FOR MEDIUM SCALE ENTERPRISES

VARANASI NARASIMHAM #1, V.V.S. Kesava Rao #2, P.S.Avadhani *3
#

Dept. of Mechanical Engineering,*Dept. of Computer Science and Systems engg. Andhra University, Visakhapatnam, India
narasimham_v@yahoo.com 3 psavadhani@yahoo.com

Abstract The Supply Chain Management has attracted much attention from both the Business managers and consultants, which has changed the traditional procurement and inventory planning. The developments in information technology, also have enabled major advances in information management and electronic commerce. The supply chain management is implemented in various business functions. However, most of the users of the supply chain are primarily the large organizations. The objectives of supply chain implementation are the cost reduction to yield higher profits, good relations among the partners etc. The large organizations have more negotiation power than their small supplier whereas the case is opposite with the small or medium scale enterprises. This paper deals with the characteristics of the medium scale enterprises, their negotiation power, customer business function, strong initiatives etc. The objective is to achieve the ultimate benefits for both the supplier and the operations enterprises. Keywords Supply chain Management, Negotiability, Inter Chain , Consortium.

Medium scale enterprise, the characteristics are small work force, limited fixed assets, small paid up capital and limited resources. When the supply chain activities are implemented by their customer, the supplier will also implement to their supplier in the other way round. The large company supplier will get less impact than the medium companies because they have more negotiating power in terms of volumes, capital security and possible future opportunities for further business. It is quite often not the same with the smaller firms since they have lesser bargaining power. In such cases, it appears that the cost reduction in the larger firms just gets transferred to the smaller firms and the process is not that of total cost reduction in the whole chain. The supply chain performance on the whole is not effective.

SUPPLIER

I. INTRODUCTION T The popularity of supply chain management is picking up day by day and more and more industries are showing inclination. Many companies world wide, have studied the adaptability and trying to implement in their organization[1]. The partner companies are also amenable to its adoption because of its distinct advantage over the traditional form of production planning and inventory control. With the increased usage, more complex environments are confronted in the supply chain implementation which need an intense and specific study for each application [4]. Many companies are exercising the supply chain management as an important mechanism of success. The major advantages of this supply chain mechanism are the reduced costs because of the better inventory control, improved delivery schedules, the JIT inventory management, shifting of our inventory to Vendors management, supplier management etc..[5] In supply chain, the impact of implementation lies in the bargaining power of the partner. A majority of the companies who implement the supply chain are large companies, which may be an indispensable customer. The supplier is another partner for the chain, when coming to deal with the customer and is expected to work for the mutual success of the complete chain [6]. In case of a medium scale enterprise, the perception is different. Many studies and papers indicate that the small industries treat their suppliers as a restriction on their schedules and cause production shortage, unlike the perception of the large firm as a partner. When it comes to the

Accept proposal Refuse Proposal

MSE
COMPETITOR

SCM Implement

SCM Implement

MSE
COMPETITOR

MEDIUM SCALE

ENTERPR
SCM Implement Accept Proposal
s s

SCM Implement

CUSTOMER

Figure 1: Supply Chain Reaction In Medium Scale Firms A typical supply chain reactions in medium scale enterprises is shown in Figure 1. When the customer is a large company or a customer with a strong base with a heavy bargaining power, the supply chain activities such as cost reduction, JIT inventory management are implemented to the medium scale industries. Consequentially, such firms also get little cooperation from their suppliers. Hence, the cost is not truly minimized in the total chain but absorbed by the medium sector enterprises. In due course of time, such small firms can not survive themselves in the chain.

ISSN:2231-2803

-1-

IJCTT

International Journal of Computer Trends and Technology- March to April Issue 2011
II. METHODOLOGY An In this study, the data from quite a few medium scale enterprises in the automotive retail sector had been studied about their problems in supply chain implementation. The firms have provided necessary information about their current practices and the obstacles in supply chain dealing. Their competitors also face the same problem in the same chain. In this study, the competitors have been put on a separate axis. This paper studies the supply chain applications in medium scale enterprises. The standard supply chain practices and problem descriptions have been listed out. The detailed survey had been conducted with a good number of units and the results are analysed. The feed back was taken in a simpler format so that any shortage of the managerial and technical competence of he operators does not become a deterrent in obtaining the correct and realistic results [2]. Most usable data was obtained from those who implemented supply chain in their organizations. The marketing and purchase departments were actively involved. The total focus was completely on the medium scale enterprises. The limitations on the part of the Medium entrepreneurs are listed below in the order of the intensity of the obstacle. 1. 2. 3. 4. 5. 6. 7. Lack of ability to manage the supplier High competition in the supply chain Lack of cooperation in the supply chain Lack of ability to manage the customer Proximity to the customer and the accessibility Accessibility to the supplier Information systems among the partners III. Inter Chain Management In this, we propose to establish an interaction between the competitor firms in order to reduce the top three obstacles listed above. The inter chain management can be established among those medium scale firms which have the same suppliers and similar customer base. It is proposed to maximize the mutual benefit in handling business under supply chain coordination [7]. The inter chain management is the function of coordination of the medium scale firms in the same business.

40-

CUSTOMER 38%

SUPPLIER

MANAGEMENT 16%

20-

COST REDUCTION 9% INVENTORY MANAGEMENT 8% OTHERS 5% MEDIUM SCALE FIRM

CONSORTIUM OF MEDIUM SCALE FIRMS

MEDIUM SCALE FIRM

Figure 2: The Supply Chain Driving Forces The participants were also asked about the necessity felt by them that would drive them to opt for supply chain implementation. The figure 2 gives the results of a typical survey. It is clear from the bar chart that the highest driving force for supply chain implementation is the customer demands. This is also an indication about the customer driven market. The managements policy and vision for future is also an important driving force of supply chain implementation. The other important aspects which drive the firm towards supply chain management are the cost reduction and Inventory control. The firms are in the automotive retail trade, including consumables like fuels, lubricants etc and common automobile spare parts. It is found that in trading business, the major customer implemented the supply chain to the firms. From the feedback, it was also observed that the medium scale firms find the obstacles to be their limited ability to manage their supplier and the high competition in the supply chain[3].
SCM Implement

SCM Implement

MEDIUM SCALE FIRM

Accept Proposal SCM Implement

CUSTOMER
Figure 3: Inter Chain Management Model The objective is to have the bargaining power over the supplier and to be the world class supply chain supplier under limited costing. The medium scale firms if act in combination as a single community can adapt the inter chain management strategy to set the major type of the material, decide the major suppliers of the group, monitor the supplier performance

ISSN:2231-2803

-2-

IJCTT

International Journal of Computer Trends and Technology- March to April Issue 2011
periodically and maintain the relation to improve mutual performance. The inter chain activities must be a continuous cycle. The following figure 3 shows interaction flow chart among the inter chain management partners.

firms. Phase II is establishing a strategic relation with the supplier as a single entity for the materials. Phase III is the managing the Inter chain by The inter chain management is the monitoring the supplier performance and cooperation among the competitors over their conducting negotiations on competitive basis. Phase suppliers. Though initially it is difficult to establish IV is maintaining the chain for continued such a cooperation among the partners, once improvement. stabilized, the chain will have a positive impact on V. Further Study all its partners. The inter chain management can be From the information available, it is noted established in four phases in continuous cycle. . In the beginning phase, the medium scale that the medium sector has the higher proportion in firms community shall increase the higher volume the market share upto60% and has a significant in bargaining to suppliers. The concentration in this impact on the business and economy. Besides, the phase is that the community shall have a neutral medium scale firms have the advantage of easy management and maintain the confidentiality. The manoeuvrability in navigating the management second phase involves setting up of strategic decisions. However, their weakness is the low suppliers and materials that the medium scale firms negotiation power with the supplier and the need to manage and negotiate for batter business customer due to limited size and capital. The supply dealings. The third phase is managing the suppliers chain management is helpful in managing and performance. The community as a group should control the changes in terms of inventory monitor the suppliers performance and give management, supplier management, cost control etc. necessary feed back and share the information for better control. The last and fourth phase is REFERENCES maintaining the continuity of supplier performance [1] Baozhu Li, "Supply Chain Management Performance Evaluation Based on Fuzzy Analytical Network Process", Journal of Supply Chain for long term benefits. Management, 2009 The overall objective of this model is to [2] Ge guo Lian, Li Hu., "The Research on Knowledge Management based of minimize the obstacles in managing the supplier of [3] on Supply Chain", The Journal Lu supply" chain management,2008 Ma Feicheng, Zhan Guoliang, Tao, A New Approach of Modern Supply Chain Management, Electronic Supply Management Based on the medium scale firms. This inter chain Information Lifecycle Management", International journal of supply management model emphasizes on the inter chain management, 2009 cooperation among the medium scale firms with [4] Handfield R.B. and Nichols,"Introduction of Supply Chain similar functions, instead of competing among [5] Management ", 2005 Managing a supply chain partnership, Logistics Saraj Ahuja, et.al., " information management journal", 1998 themselves in the normal course, to please the [6] Michael Tracey et.al., "The import of supplier selection criteria and customers. supplier involvement on manufacturing performance", The journal of IV. Conclusion The inter chain management is a strategic tool for material and information management to the suppliers. The concept is to combine the volume and competitiveness among the same business operators in order to negotiate for a better deal. The model is suggested to minimize the limitations and weakness of the medium scale firms when dealing with a large companies The inter chain management can be implemented in four phases. The phase I is the formation of the single community among the
[7] supply chain management, 1999 Laura Horvath, "Insight from industry: collaboration", "The key to value creation in supply chain management", an international journal ion supply chain management, 2001

ISSN:2231-2803

-3-

IJCTT