Supply Chain versus Supply Chain Competition

Supply Chain versus Supply Chain Competition

In the modern business environment, there is utilisation of aggressive outsourcing strategies. Businesses no longer compete against themselves. Rather, low-cost and high-quality sourcing environment create extreme competition among supply chains (Christopher, 2000 p. 39). As such, there is a shifting mindset on how supply chains and vendors affect daily sourcing challenges.

Part of the answer to such a phenomenon is the application of innovative information technology and shrinking product life cycles that have initiated a chain of reaction hence raising supply network performance expectations. Specifically, suppliers need to deliver additional value by employing new strategies and should be swift as per the market movements (Christopher, 2005). In addition, competitive suppliers should lower costs and be highly flexible when responding to changes in demand. To attain higher service levels, most firms turn opt for external suppliers for the provision of capabilities beyond organizational reach. As such, it necessitates deeper and higher levels of cooperation and coordination among the corporations.

Similarly, business entities chose to develop their supply chain network with the assistance of external suppliers in the creation of unique offering. An organisation can also create a unique value through integration of capabilities of other firms in their own supply chain networks. Maximization of that value occurs when a supply network exhibits union action as if it were a unitary organization in the marketplace. In light of these trends that focus on integration and outsourcing, it is clear that the nature of existing competition is based on supply chain (Boyaci, 2012, p. 14).

Limitations

As the global business entities embrace the supply chain competition, there are notable difficulties that plagues the trending business system. First, there are overlapping or common suppliers that limit the business’ ability to source for particular services or products. Conflict of interests arises for global suppliers especially during the provision of individualized value offerings to distinct customers. Moreover, use of common suppliers makes it hard for businesses to compete without compromising the participants of other supply networks. For example, if a supplier develops new capabilities for one customer, his other customers receive a signal on the business intelligence and secrets. Such a probability instils fear in corporate managers that intends to embrace global supplier competition (Qiang et al., 189). Instead, they prefer the traditional form of a company versus Company competition.

In supplier versus supplier business model, the actual competition that exists is between the customers and the suppliers. It demonstrates the level of difficulty when forging true international business collaborations between both parties. For example, Intel (computer chip maker) and Hewlett-Packard (manufacturer of computer hardware) can collaborate during the marketing process of their products, but at the same time, they are locked in a stiff competition to ensure customer loyalty during computer purchase as per value addition and branding.

Experts are yet to show the business benefits of supply network coordination. In fact, a sole-source relationship between suppliers and customers is the only advantage that can be demonstrated. Using data beyond one tier upstream and one tier downstream proves challenging in global supply chain competition as opposed to company competitions due to multiple reasons. First, global demand data has to be segmented, aggregated for numerous suppliers, and adjusted as per the latest material changes bill. At the moment, the existing international supply networks have complex and inflexible systems hence limiting customer procurement.

Furthermore, only a handful of globally recognized supply networks has a control point to coordinate competition with other logistics firms. The structure of a given industry contributes heavily to unfavourable conditions for supply chain competitions. Industries saturated with supply bases have a few suppliers possessing entrenched vested power (Cox et al., 2003). In this case, such suppliers can hardly coordinate with other suppliers or customers. Lastly large technological investment is needed for suppliers to meet global standards and to fulfil international trade requirements. In industries such as air transport and horticulture, customers are responsible for setting integration requirements, thus potentially raising sunken costs for supplies (Gereffi, 1995, pp. 100). Not only does this make supply chain difficult but also, it threatens the survival of start-up supply organizations.

Instances where Supply Chain Competition Dominate

            Supply chain-based competition is evident when the logistics firm is a vertically integrated business entity. The competition can be against other multinational supply networks or with a similar vertically integrated corporation. International trade rules allow for one company to own numerous supply chains. However, some firms exploit the vulnerabilities in such regulations by outsourcing particularised needs instead of meeting all the demands. A critical factor to consider in this case is the prohibition of sharing common suppliers with competitors.

Supply chain-based competition also dominates when a highly integrated firm with no or limited common suppliers forms a supply network. Corporations with sole-source relationships compete for customers in a supply network setting.  Lastly, supplier competition is prevalent when the industry is so fragmented that common strategic suppliers are non-existent (Cox, 1999, p. 169). Instead, several supply networks replace them while strategic suppliers focus on a single supply network.

No evidence exists at the moment to show that producers—integrated vertically--outperform non-integrated supply network. Mostly, it is dependent on the global market conditions and the ease of trade between different countries. For example, a vertically integrated company can have a unique competitive advantage if there are cost benefits of exhibiting integrated operations and when low cost is a vital factor in the market. On the other hand, there is a of non-integrated network of suppliers holding a competitive edge if the key international market drivers are fast cycle time and heightened level of product innovation.

Supply Network Capability Competition

Supplier competition such as this is based on the design of internal supply network of a single company. Service capabilities and cost of the firm’s internal supply network is another factor that can trigger supplier-based competition. Large multinationals are increasingly basing their competition on network capabilities. They utilise and integrate internal supply network capabilities of other network members. The capabilities include offering a compelling solution via a downstream customer or upstream supplier. It is possible to leverage such ability for competitive advantage.

Besides adjacent downstream or upstream supply network firms, modern multinationals integrate additional capabilities via joint product development programs, marketing strategy arrangements, and JIT (Just In Time) logistical service provision (Prajogo et al., 2012 p. 516). Other moves include collaborative replenishment, forecasting and planning. Integrated capabilities have compelling advantages that include quantifiable benefits if one-to-one international coordination, added value through one-to-one business relations, and useful and immediate data sharing techniques. Worth noting is that there is a more tangible, manageable and controllable relationship with adjacent downstream and upstream corporations in comparison to individual firms with distant supply network participants.

Channel Master Competitions

In this form of supplier-based competition, a dominant corporation in supply network determines the terms of global trade across the supply network. A Channel Master uses its influence in the international market to manage activities and processes among its customers and suppliers. A classical example is the global supply networks of Walmart. Channel Masters operate solely for their own advantage and benefit with disregard to negative rippling effects to other network participants (Peterson, 2012, p. 1332). There are cases where a competing global firm is actually a customer of or supplier to the channel master.

Companies are obliged to recognize the role of language when understanding the global market dynamics and during the description of a supply network. While supply chain against supply chain competition has already replaced company vs. company competition, it is imperative to note that international business strategies are developing new approaches to further permit coordination among the members of supply networks. Many questions still linger regarding global governance issues such as authority cost-sharing, benefits, and control of supply chain competitions.

In summary, not a single business entity can be powerful enough to launch a successful solitary competitive strategy in a global environment. Cooperation between firms with like mindset and outsourcing of services from specialized supply chain organizations narrows room for error. However, it is important for partnering organizations to focus on the results, collaborate and build trust with each other to ensure success and fair competition. As the technology advances, companies get an opportunity to fully synchronize and integrate their supply chain with those of partnering corporations to boost performance even as the future prospects of the global economy become uncertain (Henderson et al., 2002).

Bibliography

Boyaci, T. and Gallego, G., 2012. Supply Chain Coordination in a Market with Customer Service Competition. Production and Operations Management,13(1), pp.3-22.

Christopher, M. (2005). Logistics and Supply Chain Management: Creating Value-Added Networks. New York: Pearson education.

Christopher, M., 2000. The Agile Supply Chain: Competing in Volatile Markets. Industrial Marketing Management, 29(1), pp.37-44.

Cox, A., 1999. Power, Value, and Supply Chain Management. Supply Chain Management: An International Journal, 4(4), pp.167-175.

Cox, A., Ireland, P., Lonsdale, C., Sanderson, J. and Watson, G., 2003.Supply Chains, Markets And Power: Managing Buyer And Supplier Power Regimes (Vol. 18). SUNY Press.

Gereffi, G., 1995. Global Production Systems and Third World Development. Global Change, Regional Response: The New International Context of Development. pp. 100-126.

Henderson, J., Dicken, P., Hess, M., Coe, N. and Yeung, H.W.C., 2002. Global Production Networks and The Analysis Of Economic Development. Review of International Political Economy, 9(3), pp.436-464.

Peterson, H.C., 2002. The" Learning" Supply Chain: Pipeline Or Pipedream?.American Journal of Agricultural Economics, 84(5), pp.1329-1336.

Prajogo, D. and Olhager, J., 2012. Supply Chain Integration and Performance: The Effects of Long-Term Relationships, Information Technology and Sharing, and Logistics Integration. International Journal of Production Economics,135(1), pp.514-522.

Qiang, Q., Ke, K., Anderson, T. and Dong, J., 2013. The Closed-Loop Supply Chain Network with Competition, Distribution Channel Investment, and Uncertainties. Omega, 41(2), pp.186-194.