In the context of business world, it contains more than one crucial element to be able to make sure that every party included in a particular process is eligible to operate and perform well to avoid malfunction which could lead to negative consequences. Nowadays, due to the competitiveness of business environment, every marketer or practitioner has to be competent enough to be able to survive or thrive in an industry. So, it is extremely important for every business leader to have an in-depth knowledge or understanding of Supply Chains and Logistics. It is imperative as it is the key to improving an organizations in profitability and could help to attain competitive advantage over competitors who have the same market share within an industry. In order for an organization to be competent its competitors within the same industry, a business leader should not focus only on what he offers or supplies, but also the bigger picture in the business given that customer’s choices or demands could vary from time to time due to globalisation.
Definition of Supply Chain Management and Logistics Management
Supply Chain Management is defined as an important element which plays the role as a network which helps to linking a business or organization with its customers (Kranz, 1996). It is an integration of different processes or approaches which includes providing additional values for consumers other than products itself, such as relevant services and information which involves different parties in the process, for instance, from suppliers or service providers to end users which is consumers (Larson ; Rogers, 2015). Supply Chain Management is a strategic approach which can help to attain operational efficiencies and it includes almost everything we can think of which is relevant in a business, for instance, from logistics, inventory management, acquisition of raw materials or procurement, to warehouse management and more (LeMay, Helm, Kimball ; McMahon, 2017). According to a recent study, majority of organizations which practice SCM, are able to achieve greater profit growth compared to average organizations which do not (Deloitte, 2014).
Being one of the elements which forms a complete supply chain network, logistics is one of the most essential and irreplaceable part in business environment. Logistics management, as defined by Council of Supply Chain Management Professionals (CSCMP), is a component within SCM which is crucial in planning, implementing, managing the overall flow and storage of raw materials or products as well as additional services and relevant information from manufacturer to customers in order to meet what is required by customers (CSCMP, n.d.).
The importance of SCM and LM
According to a recent study, majority of organizations which practice SCM, are able to achieve greater profit growth compared to average organizations which do not (Deloitte, 2014). SCM is crucial in business environment and logistics is considered the heart and soul of supply chain. First, it enables an organization to acquire cost effectiveness by reducing unnecessary costs in operation, such as purchasing and production cost (Zhang ; Wu, 2013). For instance, through practicing SCM and LM, it helps to distribute goods or services to consumers or retailers in a more rapid and effective way, such as costly products to avoid additional charges imposed. Besides, as we all know, any single delay in production can cost manufacturers a fortune to offset the deficit. The implement of SCM might help to avoid such costly delays as manufacturers highly depend on reliably raw materials delivery for plants assemble to be on time (CSCMP, n.d.). A well implemented SCM can be resulted in the Just In Time strategy, which is one of the most effective and prolific policies in the business context nowadays. Furthermore, SCM and LM can help to attain customer satisfaction which further leads to customer loyalty in an organization. Customer satisfaction is a measurement which indicates that whether products or services provided by an organization are able to meet customer’s expectations (Ellinger et.al, 2012). An organization’s market share within an industry or market is closely affected by customer satisfaction, thus to attain customer satisfaction has become one of the main strategies by organizations nowadays as it is crucial in contributing in an organization’s growth (Omoruyi, 2017). Customers always expect to get the best service, and when they purchase a product or service, they tend to expect more than product itself. Through practising SCM and LM, an organization is able to create additional value for customers, for instance related information and services such as post-purchase services. Moreover, customers always expect products they have purchased to be delivered on time, customer satisfaction is likely to diminish if there is any delay in delivery. Customer satisfaction is the key to an organization’s sustainability within an industry, if an organization has the ability to generate higher level of customer satisfaction, it is more likely for it to stay competent (Ellinger et.al, 2012).
Factors affecting the implementation of Supply Chain Management
Supply Chain Management is closely affected by its surrounding or environment and it could vary from time to time. For instance , there are a few external factors which could have influenced the implementation of Supply Chain Management.
As we are all aware of the 14th General Election which took place in Malaysia a few weeks ago, has resulted in a brand new government and Malaysia as the former opposition party has taken over the authority to govern our country (TheStraitsTime, 2018). The newly formed government, as promised before the election, has announced the abolishment of Goods and Services Tax (GST), which is effective from 1st June 2018 onwards. It is followed by the abolishment of toll plazas across Malaysia, which is going to be implemented soon and this indicates that there will be no more toll charges which has a deep influence on how logistics works. These two policies by the government could cause a great impact to the whole economic activities taken place in Malaysia, which undoubtedly including SCM (TheEdgeMarkets, 2018).
Every country has its unique regulatory authority which must not be challenged. When business transactions have taken place between countries, they have to form a sense of mutual respect regarding the law and also culture of that specific countries, in order to avoid violation of law. For instance, when a specific SCM system of a country is to be implemented in another country, due to factor such as franchising, they must make amendment to avoid violating the law of the particular country.
As aforementioned, due to the abolishment of GST, taxes and charges imposed on goods and services will be lowered down to 0%. This will directly affect Malaysian’s decision making regarding buying activities and also stimulate the demand of good and services. With the existence of GST, the more level of supply chain involved, the higher the taxes imposed will be, hence, the final price of a product will be relatively higher compared to its actual cost. For instance, due to the abolishment of GST, prices for high involvement goods such as cars are expected to be lowered. Marketers are definitely aware of this situation, as demand for cars will skyrocket, therefore the supply are expected to be much higher. In order to cope with such situation, manufacturers or marketers have to make sure that their SCM are working more fluently than usual, and any error should be discouraged as they have to bear the losses if there is any halt in production (TheMalaysianInsight, 2018).
In recent years, there is an awareness that supply chain nowadays is defective of flawed. This results in the pollution and wastage created in the process of business activities which have caused damages to the environment. This has also been the problem for the business environment in Malaysia. Sustainable supply chain management is a concept which put three important elements, which are people (social), profit (economic) and planet (environment) into consideration. SSCM insists that while an organization’s main purpose is to generate profit, it should also focus on societal welfare and environmental issues, as all these three are complementary to each other. It emphasizes both sustainable development and also supply chain management. Every organization should try to balance all three elements and should not overlook the social responsibility which it is entitled to. Customers nowadays have become increasingly conscious of environmental issues, and this is a CSR involvement every organization should engage. For instance, marketer could go through a few process in the SCM in order to avoid or decrease the amount of wastage which could result in the pollution to environment. For example, buying environmental friendly raw materials, have collaboration with parties connected to involve in environmental issues, decrease the consumption of hazardous substances in the process (Tengku Aziz ; Jaafar ; Tajuddin, 2016). This are all approaches marketers can try to involve in respective SCM in order to create a better living environment while generating profits.
In conclusion, Supply Chain Management and Logistics Management are the backbone of the business environment and also an organization as they have been justified to be able to vastly improve or strengthen the structure of an organization. Furthermore, without the existence of SCM and LM, many problems will arise: goods are not able to be delivered on time, a delay in raw materials acquired will cause a halt in production thus will lead to customer dissatisfaction or not being able to meet the supply of the market on time. Without these two elements, business activities conducted would not be as fluent and they have played an important role in ensuring all activities are to be gone through under a systematic approach. Every organization in any industry should try to embrace the implementation of SCM, it surely will do more good than harm.