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
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