Factors That Affect Variation in Supply Chain Networks

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Factors That Affect Variation in Supply Chain Networks

Table of Contents

Infrastructure
Economic environments
Relationships in the supply chain
References

The world today is very dependent on a value adding, effective and reliable supply chain. In order to gain a competitive advantage in the supply chain, a country needs to match the aspect which add value to the supply chain with a unique advantage offered by its infrastructure and ease of movement. To do this, a country must be able to identify and control the factors that influence the supply chain operations. The Federal Highway Administration of the United States admits this and is trying to ensure that the country has transport system. Due to rapidly advancing technology such as internet connections, products and services connectivity has become much easier. Technologies such as warehouse management system and global location numbers makes it possible for easy tracing and monitoring of products.

Supply chain networks are made of manufacturing plants, storage warehouses, physical locations, vehicles, roads, distribution centers, ports and even the people. Transportation modes operating within different supply chain networks include trains, container ships, road trucks and cargo planes. There are many systems which can be utilized today to increase efficiency of supply chain networks. They include transportation management systems, order management systems, strategic logistics modeling, supply chain visibility and optimization tools among others. These systems make it possible to automate the networks giving them a real time efficiency. They also make it easy to move goods from one point to the other and monitor the process all the way. For example, today it is possible for a business person to trace how far their package is from arriving to the desired destination. Factors affecting variation in supply chain networks include;

Infrastructure

Supply chain networks are very dependent on the different modes of transportation. It is not possible to develop a familiarity with supply chain networks without doing so with transportation. Transportation designs, control and efficiency in different regions will determine the efficiency of supply chain networks in those regions. Transportation to a large extent determines how hard logistic problems are in different places. Supply chain operations may not be possible in places which are not reachable by any mode of transport. Transportation is therefore a key component of supply chain networks and forms a big part of its engineering.

Forecasts which make a big part of supply chain are very dependent on accessibility of points of collection and points of delivery. Assuming every other factor was held constant, the time required to deliver inventories can be easily approximated by knowing the distance and speed of the mode of transportation. The mathematical modeling of supply chain networks is based on distance to be covered and time. Coordination mechanisms in supply chain are also dependent on infrastructure among other factors.

Freight transportation modes include sea cargo, freight, air cargo and the railroad. When a county lacks one or more of these modes, the available modes usually will have increased efficiency to make up for those which are lacking. The most important component of infrastructure in supply chain is road networks. Even countries which have well developed air and sea transport still need roads for small distance transportation and for distribution into the smaller units of different businesses. Transportation and pipeline inventory costs impact supply management decisions and costs. Transportation costs and rates also affect the choice of mode of transport as well as flow modes for traffic consolidation and routing (Transit Cooperative Research Program, 2002 pg. I-9).

Economic environments

The economic environment of different regions causes a variation in supply chain networks in different regions. The cost of products in different places will dictate which direction those products take (Fernie & Leigh, 2009, pg. 45). Economic environments dictate several other factors which affect supply chain networks. These include cost of doing business and amount of returns, both which play a critical role in the supply business. When a country has a favorable economic environment, businesses enjoy reduced costs of operation, predictable production rates, and a frequency of orders for businesses. Business becomes more predictable allowing efficient planning by suppliers.

A country which is healthy economically easily motivates the business environment and attracts activity in their market. They are able to help suppliers do business and are able to fund systems which keep the supply chain moving such as storage facilities. Since supply chain networks have a huge global aspect to it, a healthy economy is able to protect itself from negative global economic effects. Labor and the desired professionalism which is critical in supply chain networks is easily available in countries with good economic environments. There is also assured sustainability in such environments.

Economic environments affect fuel prices and availability to a large extent. This in return has an effect on supply chain networks. Fuel prices and availability determines the mode of transport for deliveries as well as costs. If for example it is becomes too costly to use road transport, the supply chain may be slowed down if water becomes the preferred mode of transport. It may no longer be possible to meet demands for goods which cannot be transported for long such as perishables especially when transport through air is too costly to be considered an option.

Relationships in the supply chain

Supply chain networks are very dependent on different relationships between people at different levels of business. The main purpose of supply chain networks is to connect the manufacturers to the final consumer through different stop points. These channels involve other people such as the distributors, retailers and people offering different storage facilities. If there is a breakdown in any of the relationships, the chain breaks or becomes disrupted. Efficient customer response and a quick response to their demands by the manufacturer is what keeps the chain connected. If the manufacturer seizes to exist, the whole chain is affected and may not even exist anymore.

Relationships among different players in the supply chain creates trust and commitment to the process. This in turn guarantees stability and how responses to different demands are met. Effective communication between a distributor and a manufacturer will determine how easily and timely products are availed to the distributor. Supply chain networks are no longer effective or even relevant if they cannot deliver goods to customers when they need them. Production will also not be possible if one raw material is lacking in the equation. Relationships between suppliers, manufacturers and consumer is therefore an important aspect of the chain.

Finally relationships which involve management decisions and those of major decision makers in the industry are important. Transporters, manufacturers, governments and different stakeholders have to be in agreement of what they want to achieve and how to do it. The government needs to ensure proper infrastructure, the manufacturer needs to ensure the goods are available and the consumer needs to consume. All these are people who make decisions at different levels and who affect variation in supply chain networks.

References

Fernie, J., & Leigh, S. (2009). Logistics & retail management: Emerging issues and new challenges in the retail supply chain. London; Philadelphia: Kogan Page Ltd.

Transit Cooperative Research Program. (2002). Estimating the benefits and cost of public transport projects: A guidebook for practitioners. Washington, D.C.: National Academy Press.

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