Three enablers of supply chain performance are very important for managing the firm’s success. However, managing the supply chain is becoming increasingly complex. Having this, actually, firms have managed to reduce their logistics costs. Because of innovations of technology, it is possible to reduce logistics costs.
There are three major enablers. They have helped firms and nations in reducing supply chain costs. They are –
- Improvement in communication and IT
At present, computing power has become cheaper than the previous. However, communication costs also have come down. As a result, it helps firms in coordinating global supply chain in a cost-effective manner. Besides, firms are using enterprise resource planning systems. This system helps firms in automating several business functions. It can quickly share various information with different functions. However, this system changed the nature of information flow within the organization. It worked along with the internet technology that changed the flow of information in inter-firm transactions.
In the past, only can large firms can use EDI technology that helpful in integrating partner firms. But it was really expensive. Now, Small firms can communicate their chain partners using world wide web technology. Moreover, firms can replace physical inventory by information.
As a result, companies are no longer investing in IT sectors. They are going to re-engineering their supply chain and other processes. Besides, they are keeping their full capability to replace physical inventory into information.
For example, many Indian companies unfortunately invested more on the information systems. But alas, they don’t try to change in their supply chain systems and process. That causes the failure of those companies. Another example, a company may have multiple plants and it can work within them. It may keep a common safety stock of raw materials. Besides, it is not necessary for keeping safety stock for all. Similarly, it can offer better or customize service for order processing side.
Moreover, it should design a system that handles customized orders. Besides, their distribution systems also allow these products in the system. In the absence of an information system, this would not possible at all. Some companies have used IT that automates the existing supply chain. Those who are able to use IT can make a major changed in their supply chain, processes, functions, and strategies.
- The emergence of third-party logistics provider
Some firms have been managing their logistics activities internally. But lately, they are realized that they need to focus on managing core business functions. Thus, they are searching for third-party logistics service providers for handling their logistics functions. In developed countries, almost every firm have used outsourced logistics. The third-party logistics service providers manage them effectively.
In developed markets, global firms would like leading third-party providers. They would go beyond the traditional role and also play the role of a fourth party logistics company. The fourth party logistics company can integrate the capabilities, resources, and technology to provide effective supply chain solutions to its customers.
- Enhanced inter firms coordination capabilities
No firms can go beyond their capabilities. Successful coordination is needed to manage a global network of companies. International companies like Nike, Apple, and Toyota have successfully managed complex networks. They played the part of the strategic center and have emerged as role models of other companies. Each company is focused on core competencies. Consequently, supply chains become more effective and responsive. However, there are some failures because of lack of a partner’s interest along with firms. As a result, the network may not function effectively. But a better understanding and coordination issues would greatly in diffusing the third party supply chain revolution across all industries.