2001, Volume 4, Paper 48
ISSN: 2209-6612
Supply Chain Management: Fad, Panacea or Opportunity
Anthony J. Dunne – Reader in Agribusiness, University of Queensland, School of Natural and Rural Systems Management
Introduction
Supply chain management has certainly been one of the hottest topics in agribusiness management circles over the past five years. But, what is supply chain management? What are its benefits? What, if anything, is its relevance to agribusiness and in particular to farmers?
The purpose of this paper is to bring together the disparate views on supply chain management so that agribusiness professionals and researchers will have a common framework within which the complex issues and problems confronting agribusiness firms can be analyzed, discussed and hopefully resolved.
As with any management concept, supply chain management (SCM) means different things to different people. To most, SCM is all about logistical efficiency – the efficient transport handling and storage of physical products through the various stages of production and distribution to the final consumer. This is not a bad place to start because it is essential to the whole marketing concept that the right product gets to the right place, at the right time, in the right condition, in the most efficient manner.
Establishing integrated supply chains that provide end customers and supply chain member organizations with the materials required, in the proper quantities, in the desired form, with the appropriate documentation, at the desired location, and at the lowest possible cost lies at the very heart of supply chain management.
But logistical efficiency is only one aspect of SCM when the term is used in a competitive strategy context. In this context, SCM combines the quest for logistical efficiency with the drive for creating customer value as a means of achieving sustainable competitive advantage for the firms involved.
We have entered a new era in understanding the dynamics of competitive advantage and the role played by procurement. We no longer talk about suppliers and customers as though they are managed in isolation, each treated as an independent identity. More and more, we are witnessing a transformation in which suppliers and customers are inextricably linked throughout the entire sequence of events that bring raw materials from their source of supply, through different value-adding activities to the ultimate consumer. Success is no longer measured by a single transaction; competition is, in many instances, evaluated as a network of co-operating companies competing with other firms along the entire supply chain.
In a strategic sense, the adoption of SCM requires managers of firms servicing a consumer market segment to re-evaluate their business relationships with input suppliers and buyers of their products. This re-evaluation usually involves a shift in their focus from an adversarial to a co-operative relationship. As a result, the competitive focus shifts from that between firms within one supply chain to that between different supply chains which service a common market segment.
What is driving the acceptance of SCM?
Australian agribusiness in the 1990’s has experienced a prolonged period of adjustment and there is no reason to expect that this will change. Rather than resist change, which in the long term is fruitless, a more productive course of action is to investigate ways of adapting to these forces so as to take advantage of the opportunities that change opens up.
Dunne (1999a) identifies three basic forces that drive change in the agribusiness sector:
- the globalisation of markets,
- the rapid advances in technology, and
- the greater involvement of people in what is produced and how it is produced.
Boehlje et al.(1995) claim that these changes have such a dramatic impact on the management of an agribusiness firm because they effect the competitive environment of the firm and influence the way in which the management of the firm will reorganize its internal resources to meet these challenges (Figure 1).
In the case of agribusiness firms the changes in the competitive environment are usually reflected in changes in:
- market access,
- competitive intensity, and
- relative market power.
Since change in any business is difficult to achieve in the absence of a crisis that would leave a firm in a vulnerable strategic position, it is worthwhile examining the scope of these changes and the ramifications of their potential impact.
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