The importance of supply chain alignment is a widely discussed topic in the production management literature. Wong et al. (2012) identify six primary supply chain enablers: organizational structure, internal relational behavior, customer relational behavior, top management support, information sharing and business performance measurement systems. Through these identified six enablers, enterprises can maintain and develop their sustainable competitive advantage (Wong et al. 2012).
Ville Hallavo (2015) discusses how supply chain suitability affects a company's performance. Supply chain suitability in this context refers to a perspective that combines practical knowledge and the performance of the company, comprising a number of dimensions – leanness, agility, flexibility and efficiency – into one stream of research. According to Hallavo (2015), the direct mutual relationship between customer uncertainty and supply chain responsiveness has great importance for supply chain optimization. The research results show that a company's performance can be improved through better coordination between company uncertainties and functional ability. Further evidence suggests that efficiency is the precursor of operational responsiveness.
A company can achieve superior performance by optimizing its supply chain. In an environment of low uncertainty, this means focusing on operational efficiency and a lean manufacturing approach. In an environment of high uncertainty, it means focusing on operational responsiveness, agility and a flexible manufacturing approach. (Hallavo 2015)
Supply chain management (SCM) has a significant role to play in the development of corporate business. Companies have a strong vision of reform processes related to the supply chain providing significant profits. Yet publications in the field of industrial engineering and management, on the one hand, and industry experts, on the other, have differences of opinion regarding company business development.
Examples of business success stories can be found, yet examples can also be found of sluggish business development. Walmart stands out as one example of a company that has been able to develop its business by optimizing SCM.
Few companies have succeeded in optimizing SCM in this way, and therefore a significant developed action can be identified – in particular, cooperation between companies in the field of SCM. The differences between the winners and losers are significant: if a company belongs to the group of winners, success is predicted, yet if the company falls among the losers, it may mean business failure.
The results of supply chain optimization for successful companies are convincing. Continuous improvement practices combined with ambitious development projects directed towards the entire supply chain is the key to success. These measures, by improving the company’s competitiveness, offer the possibility of satisfying customers and thereby improving profitability. Supply chain optimization is not easy to implement. Concerning the transition from in-house to networked development, the difficulty level increases. In order to successfully develop the network environment, cooperation efforts are required on the part of all companies operating in the network. As a result, an optimized value creation supply chain is achieved, which in turn satisfies customers’ expectations.
Genuine network value chain operations, which have so far been established by companies such as Dell, Cisco, Walmart and Tesco, contain certain common features. The first feature is the underlying controlling role of one of the "core businesses". The core company’s size is such that it is able to make decisions that affect the whole network and sufficiently commit to successfully controlling the entire network. Another important feature is common technology. The companies operating in the network must apply compatible technologies (EDI,
ERP), which allow information to be exchanged between companies operating in the network. (Poirier 2003)
Competitive priorities, such as quality, delivery, flexibility and cost, are commonly accepted approaches to considering operations strategy and SCM capability. Contingency theory applies to business management so as to identify the causal mechanisms underlying the measures taken in pursuit of results. According to contingency theory, the company must adapt its structure and processes in accordance with environmental requirements in order to optimize its performance. In developing the PDM and SCM activities, the clockspeed of industry sector products must be considered. Industry clockspeed indicates how rapidly given products are renewable in the relevant industrial sector. According to Fine (1998), the clockspeed concept can also be applied to indicate the change rate of processes and organizational structures. To be successful in the face of ever-increasing, fierce competition, companies must adapt their SCM capabilities and operational processes to operate at least at the same clockspeed as the relevant industrial sector. Changes in products represent the rate of release of new products, while changes in processes and production processes refer to changes in production technology. Finally, mergers and acquisitions indicate changes in organizational structures (Fine 1998, Chavez et al. 2012).
The chronological evolution of the competitive elements of SCM can be identified through a classified development path, starting in the 1980s with the "flow of material" action, proceeding to the "integrative philosophy" approach and further to the "assistance among members" and "mutuality and holistic" approaches, and finally arriving at today's approach which "links together partners". An alternative way of mapping this evolution is to consider the development path through the supply network approach, whereby SCM has developed through three distinct development phase: dyadic linkages, a chain of suppliers and a supply network.
The networked approach plays a key role in the company’s strategy for developing supply chain performance. Companies operate as partners with their suppliers and cooperate closely. In this mode, information management has great importance due to technical complexity and increased worldwide competition. Companies must manage new digital IT tools necessary for the international business network. Knowledge dispersion and technological resources are forcing companies to operate in an increasingly networked environment. Companies thus strive to increase cooperation with external partners. This opens up opportunities to strengthen their own core competencies, but on the other hand,
under this approach companies are dependent on their partners’ resources and capabilities. (Svahn et al. 2007, Braziotis et al. 2013)
Reichhart et al. (2007) consider supply chain responsiveness in term of product, volume, mix and delivery. In pursuit of a critical competitive advantage in relation to competitors, companies must take into account the increasing market range of products, their customization and precise OTD. Companies design and implement strategic measures in order to improve their competitiveness and take advantage of achievable competitive advantages. Flexibility and responsiveness are important and differentiating competitive factors, particularly in an uncertain and dynamic market environment. Order management can be considered as one of the critical business processes. The precise and exact, but if necessary flexible, OTD process will bring certainty and predictability to the order delivery process, thereby meeting the expectations of the customer (Park et al. 2010, Reichhart et al. 2007).
Companies must pay attention to the alignment of competitive priorities. Innovative companies must align to the strategic priorities of new products with a flexible approach to operations, while customer-oriented companies must align to the strategic focus areas of sourcing, production and delivery flexibility. According to the military supply chain flexibility measures, the ability to adapt operations in terms of the level of moved materials and lead times is an important dimension of SCM performance (Fantazy et al. 2009, Sokri 2014). The competitive environment has shifted in the direction of networks competing with one another. The company's practice of continuous improvement in this new competitive environment is at least as important as in the traditional environment of competition between enterprises. Development measures must be considered at the entire network level. In other words, development must not be confined to each company’s own business delivery network. Development activities maintain a strategic dimension and this is essential for companies to operate successfully in the worldwide competitive market.
The worldwide competitive and dynamic market is characterized by customers requiring short lead-time, low-cost, high-quality, diversified products. Products are increasingly fragmented, and companies are adapting their operations by utilizing a networked approach in order to achieve competitive advantage. Communication channels and connections between services are an important development area, as companies seek to manage geographically dispersed supply networks seamlessly and in a timely and cost-effective manner. (Chang et al. 2011)
Maintaining product support services has become important in at least two important respects. First, maintenance operations are significant business opportunities that companies should take advantage of. There are several companies on the market whose sales are over 50% maintenance activities. Second, the customer is concerned about product life cycle costs in terms of reliability and failure frequency, downtime duration during service operation and the total costs of maintenance and repair activities (Kotler 2003).