Supply Chain Management: Key Concepts and Strategies

Work Standards as the Foundation of Capacity and Production Planning

Work standards are essential for capacity and production planning, as they serve many critical functions in defining production constraints, quality management levels, and service objectives in a manufacturing or service environment. The essential concepts within work standards enable variance analysis and the adoption of Six Sigma strategies for ensuring consistency of production levels and quality (Jacobs & Chase, 2010). In addition, work standards are essential for determining Economic Order Quantities (EOQ) from suppliers and are critical for the management of multi-stage, multi-layer supply chains (Nagar & Jain, 2008).

In industries with very high levels of inventory turns and the requirement of continual cost reduction alongside increasing product complexity, work standards are at the center of their business models. Examples of industries that fit this profile include high-tech and semiconductor manufacturing, where inventory turns, the pace of innovation, and cost reductions are the basis of competition (Ng, Sun, & Fowler, 2010). Work standards in these industries act as an accelerator, bringing greater clarity, predictability, and cost control to the entire production process. In more mature industries, work standards are equally critical for capacity and production planning, as fill rates for each production run must be defined and adhered to in order to ensure a high level of manufacturing performance (Sobel, 2004).

In conclusion, work standards are the basis on which companies evaluate the effectiveness of their processes, programs, and manufacturing workflows over time. They enable companies to find areas for improvement in supply chain performance as well. All of these factors contribute to work standards being instrumental in helping any company remain competitive over time.

Jacobs, R., & Chase, R. (2010). Operations and Supply Chain Management (13th ed.). McGraw-Hill Higher Education.

Nagar, L., & Jain, K. (2008). Supply chain planning using multi-stage stochastic programming. Supply Chain Management, 13(3), 251–256.

Ng, T., Sun, Y., & Fowler, J. (2010). Semiconductor lot allocation using robust optimization. European Journal of Operational Research, 205(3), 557.

Sobel, M. J. (2004). Fill rates of single-stage and multistage supply systems. Manufacturing & Service Operations Management, 6(1), 41–52.

The greatest competitive strength many organizations possess is their supply chain — a collection of processes, strategies, and systems that enables responsiveness to customers, cost reduction, and sustained competitiveness (Jacobs & Chase, 2010). Consider how critical the intersection of information technologies (IT) and Operations Supply Chain Management (OSCM) is in managing a multi-layer, global supply chain, and how the data, information, and knowledge generated affect every area of the organization. The OSCM of any organization — whether the final deliverable is a product or a service — affects every functional and process-related area.

OSCM as a Systematic Means of Observing Organizational Processes

The accuracy, speed of data delivery, and an organization's ability to integrate insights gained from an effective OSCM strategy have direct implications for total quality management, enterprise quality and compliance management, and the continual improvement of production operations (Kannan & Tan, 2005). From this perspective, OSCM is a catalyst of competitive strength, because it not only delivers insights into firm performance — it also provides the essential process infrastructure needed to serve and win customers through responsiveness and order accuracy (Zhang & Dhaliwal, 2009). Furthermore, the growing focus on sustainability and reverse logistics as part of many companies' efforts to reduce their carbon footprints and improve environmental performance makes OSCM a vital component of any company's ecosystem (Linton, Klassen, & Jayaraman, 2007). OSCM is therefore both a catalyst of competitive strength and a critical synchronization point throughout organizations globally.

Jacobs, R., & Chase, R. (2010). Operations and Supply Chain Management (13th ed.). McGraw-Hill Higher Education.

Kannan, V. R., & Tan, K. C. (2005). Just in time, total quality management, and supply chain management: Understanding their linkages and impact on business performance. Omega, 33(2), 153–162.

Linton, J. D., Klassen, R., & Jayaraman, V. (2007). Sustainable supply chains: An introduction. Journal of Operations Management, 25(6), 1075.

Zhang, C., & Dhaliwal, J. (2009). An investigation of resource-based and institutional theoretic factors in technology adoption for operations and supply chain management. International Journal of Production Economics, 120(1), 252.

The United States economy cannot support itself solely on its service industry. At the center of this nation's economy are highly advanced, effective, and profitable supply chains that fuel not only domestic growth but that of many global partners as well. The global economy of the twenty-first century is interdependent, integrated, and requires greater transaction accuracy and agility than ever before (Jacobs & Chase, 2010). The manufacturing base of North America has never been more critical for the continual growth and profitability of industries that determine the financial strength of entire nations. The myth of the service-only economy obscures the fact that manufacturing centers are so interrelated and financially reliant on each other that the global economy could not function without production centers in every major western nation, including those in North America (Jansson, 2009).

Rather than a service revolution in the U.S., what is occurring is a redefinition and realignment of entire value chains, of which manufacturing is an essential and vital economic element (Wirtz & Ehret, 2009). To claim that the U.S. economy is driven solely by services drastically understates the country's inherent global economic strength (Jansson, 2009). Paradoxically, the growth of the U.S. software industry has been continually influenced and strengthened by the combining of service and manufacturing value chains across industries (Riain, 2010). The U.S. manufacturing industry has never been more critical for keeping entire value chains — with global economic implications — synchronized over time.

The U.S. Economy, Manufacturing, and the Service Industry Debate

Chowdhury, S., & Miles, G. (2006). Customer-induced uncertainty in predicting organizational design: Empirical evidence challenging the service versus manufacturing dichotomy. Journal of Business Research, 59(1), 121–129.

Jacobs, R., & Chase, R. (2010). Operations and Supply Chain Management (13th ed.). McGraw-Hill Higher Education.

Jansson, J. (2009). The myth of the service economy — An update. Futures, 41(3), 182.

Riain, S. (2010). The missing customer and the ever-present market: Software developers and the service economy. Work and Occupations, 37(3), 320.

Wirtz, J., & Ehret, M. (2009). Creative reconstruction — How business services drive economic evolution. European Business Review, 21(4), 380–394.

Sustainability is defined, from an organizational standpoint, as the series of strategies, systems, and processes that seek to unify environmental, economic, and social factors in a concerted strategy to minimize environmental impact while attaining economic objectives (Hopkins, 2009). The focus on sustainability has grown exponentially over the last decade. Companies as diverse as Herman Miller — one of the world's leading producers of office furniture and systems — and Hewlett-Packard — the world's leading producer of computing systems and solutions — have set aggressive goals for their sustainability initiatives (Hopkins, 2009). Both companies are heavily reliant on their supply chains and reverse logistics processes to create greater levels of sustainability and environmental compliance over time.