Maximizing Supply Chain Efficiency: An Overview of Global SCM Networks - Essay Sample

Introduction

Supply chain management (SCM) is a business concept that integrates and manages the provision, flow, and control of goods and services through a system with multiple functions and suppliers (Fayezi & Zomorrodi, 2016). Global networks of SCM involves interactions of a group of companies to deliver a product to the end consumer. Therefore, SCM incorporates many disciplines that include strategic management, relationships, logistics, and marketing (Fayezi & Zomorrodi, 2016). Throughout history, researchers have developed theories to explain the complex organizational behaviors of SCM. The concepts elaborate on the complexities and decision-making processes in SCM environments.

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Concepts and Theories

A shift in business research initiated the interest of applying multiple theories to understand the complex dynamics of SCM. Fayezi and Zomorrodi (2016) suggested that the traditional supply chain focused on limited outcome factors while the best value supply chain integrated specific priorities. Moreover, changes in the internal and external organizational behaviors influence a company's competitive advantage; thus, urging the application of multiple supply chain quality concepts and theories.

Transaction Cost Economics (TCE)

According to Fayezi and Zomorrodi (2016), the TCE quality concept argues that "during any economic exchange, the cost of the product or service should include all hidden costs." The main objective of TCE is to reduce the cost of economic transactions by incorporating all organizational expenses. Consequently, the theory assumes and accounts for the formation and development of relationships providing forms of leverage (Fayezi & Zomorrodi, 2016). TCE considers two aspects of transaction cost; contractual obligation and locus of control in the supply chain (Fayezi & Zomorrodi, 2016). Specifically, the frequent influence of minor players in exploiting leverage by structural manipulation. For example, second-tier agents available in the supply chain that manipulate the quality of products and services.

Agency Theory (AT)

The establishment of agency relationships involves one team (the principal) entrusting an assignment to another (the agent) to improve their expertise (Fayezi & Zomorrodi, 2016). The agent acts as the principal's representative and performs for the benefit of their company. In this theory, the teams' self-interest and profit maximization persist; thus, the objective is to identify an efficient contract regulating the principal-agent relationship (Fayezi & Zomorrodi, 2016). Typically, the principal pursues reduction of agency expenses, while the agent aims to increase their bonuses. The AT provides a framework that analyzes the impact of principal-agent relationships in the supply chain quality.

Resource-Based View (RBV)

Fayezi and Zomorrodi (2016) claimed that the RBV quality concept describes the development of a unique combination of capabilities, such as tangible and intangible resources that might help corporations attain a competitive advantage. According to the theory, the products' value, rarity, and substitutability are essential characteristics of resources that advance a competitive advantage (Fayezi & Zomorrodi, 2016). Traditional RBV assumed the sole domain of companies relies on ownership and control of resources. However, it contradicts the outsourcing aspect of SCM that utilizes partnerships to improve organizations’ abilities. Therefore, traditional RBV hinders collaborative arrangements, but its reformed edition considers the network resource approach, which explains its power in the supply chain environments (Fayezi & Zomorrodi, 2016).

Resource-Dependence Theory (RDT)

The RDT concentrates on a group of power relationships between companies based on the exchange of essential resources (Fayezi & Zomorrodi, 2016). Most organizations do not have access to all the material and expertise needed in the value creation; thus, they depend on one another. The arrangement raises concerns in the maintenance of a power-dependence relationship between companies ensuring accomplishment of their functional and operational demands. Therefore, according to Fayezi and Zomorrodi (2016), most organizations form collaborative partnerships to increase their power and quality of their products while aiding other corporations to be dependent on themselves. The RDT is applicable through resource manipulation and control exertion that regulates uncertainty and dependence in economic transactions. Moreover, quality supply chains utilize dependency as a factor of establishing trust and commitment to fulfill contractual obligations.

Relational Exchange Theory (RET)

The RET incorporates the idea of embeddedness in SCM, which implies that collaborative organizations perform based on specific norms rather than contractual obligations (Fayezi & Zomorrodi, 2016). According to the concept, trust-based relationships are less prone to exploitation by partners' self-interests (Fayezi & Zomorrodi, 2016). Moreover, the developed connections focus on dedicating resources to advance their partnership instead of managing transactions in supply chains. The RET emphasizes on relational rents, such as knowledge-sharing techniques, complementary resources and expertise, and effective management in collaborative projects. Therefore, making RET a vital component of SCM, monitoring the influence of relationships, and facilitating resource exchange in quality supply chains between organizations.

Network Theory (NT)

According to Fayezi and Zomorrodi (2016), the NT provides a broad perspective of inter-organizational interactions in a business network environment. The NT evaluates the dynamics of network environments and acknowledges the influence of partnerships relations in the company's operations. The NT states that "a network resource view assists managers in developing a more realistic assessment of individual node resources and their implications for business" (Fayezi & Zomorrodi, 2016). Organizations can use the network approach to design quality supply chains that benefit from responsive, reliable, and flexible partnership ties. Furthermore, the NT provides a wide range of knowledge-sharing mechanisms in SCM.

Process-Driven and Customer-Driven Quality

Process-driven quality involves businesses that develop a product or service using the most efficient and cost-effective procedure and then search for a market (Luenendonk, 2019). The organizations assume the development of a great product with less cost ensures the attraction of customers and high-profit returns. Currently, Apple company is one of the leading technology organizations in the world that exhibits process-driven quality (Luenendonk, 2019). The product designers and executives are the decision-makers on which products hit the market. Therefore, focus on the manufacturing process efficiency to release quality products, such as the iPhone and iPad.

In customer-driven quality, the organization researches its consumer demands and develops a product or service based on the findings (Luenendonk, 2019). The sole focus of the business is customer satisfaction. For example, Samsung is well-known for its extensive marketing research to produce a wide range of smartphones for targeted middle-class markets in the Middle East and Africa (Luenendonk, 2019).

Impacts of Quality Concepts

The clothing industry has experienced significant changes in the production locations of big brands due to the availability of cheap labor, access to raw material, and removal of trade barriers in Asia (MacCarthy et al., 2016). For instance, Nike and Adidas have utilized the AT and NT to set up their manufacturing units in Bangladesh, while they market their products in the United States (US) and Europe (MacCarthy et al., 2016). The Cost-effectiveness of the manufacturing process initiated the move, which increased their annual revenues.

In the electronic industry, creative and innovative experts are in high demand due to rapid technological advancement. According to MacCarthy et al. (2016), designers are emerging as key players in the emergence of products, and their expertise advances a company's competitive advantage. Apple's company implementing the RBV concept to produce unique and quality products have established it as the leading smartphone manufacturer (Luenendonk, 2019).

Many healthcare providers offer consultation services to their customers intending to ensure good health, but also generating an income. The relationship poses a challenge to the provision of the best quality care at a friendly cost thus integrating health insurance companies as agents. Therefore, health organizations focus on service delivery without the worry of insufficient payments.

Conclusion

The supply chain sector is changing over time because of the alternating consumer demands. Business researchers developed the quality concepts and theories to elaborate on how organizations can improve their competitive advantage in the current markets. Consequently, global brands like Apple, Samsung, Nike, and Adidas have managed to advance their businesses using the theories.

References

Fayezi, S., & Zomorrodi, M. (2016). Supply chain management: Developments, theories, and models. In Handbook of research on global supply chain management (pp. 313-340). IGI Global.

Luenendonk, M. (2019, September 23). Product-driven vs. Customer-driven Businesses. Cleverism. https://www.cleverism.com/product-driven-vs-customer-driven-businesses/.

MacCarthy, B. L., Blome, C., Olhager, J., Srai, J. S., & Zhao, X. (2016). Supply chain evolution–theory, concepts, and science. International Journal of Operations & Production Management, 16(3), 1-28. https://doi.org/10.1108/IJOPM-02-2016-0080.