By Jonny Lupsha, Wondrium Staff Writer
Credit rating agency Moody Analytics predicted continued trouble for the global supply chain. More than three-quarters of ports are facing historic backlogs of shipments, causing product shortages worldwide. Normally, supply chain management is key.
Moody Analytics, also known as Moody’s, has looked at the global supply chain problem and predicts that the worst is yet to come. A shortage of truck drivers and the coronavirus pandemic, in general, have been blamed as major parts of the problem, and the worldwide shipping backlog seems to be exacerbated by the ongoing global economic recovery. The worst shipping backups seem to be in Los Angeles.
Under normal circumstances—and the last 18 months have been anything but normal—supply chain management (SCM) remedies the woes that come from getting a product from point A to point B. In the video series Critical Business Skills for Success, Dr. Thomas J. Goldsby, the Harry T. Mangurian Jr. Foundation Professor of Business and Professor of Logistics at The Ohio State University’s Fisher College of Business, said SCM is a relatively new field in business.
Basics of Supply Chains
According to Dr. Goldsby, a supply chain is any network of companies that works together to provide a good or service to an “end-use market.” The term “end-use market,” he added, is a generic term for the users of the product or service in question.
The supply chain of a cheeseburger at a fast food restaurant begins with farmers and ranchers and includes packaging manufacturers, shipping companies and their employees, the fast food corporation itself, the local restaurant employees, and finally the hungry customer, among others along the way. Supply chain management involves making sure all ends meet on this chain.
“The concept of SCM overlaps in various ways with topics […] such as supply management and logistics and distribution, but it’s developed as a distinct discipline with its own valuable concepts and strategies into a higher order of operations management,” Dr. Goldsby said. “In order for our organization to win in the long term, it’s essential that we work with really strong suppliers and customers, but we need to ensure that these outside parties are benefitting from the arrangements, too.
“In this sense, supply chain management should be considered a team sport.”
Pros and Cons of Large and Small Businesses
Dr. Goldsby said that getting all the functions of supply chain management coordinated within any company is known as “internal integration.” This includes making sure that all the departments of a company are performing in a way that streamlines the company’s readiness for their role in the supply chain.
On the other hand, “external integration” is when a business leverages relationships with select customers and suppliers, or figures out how to go to market together, so to speak.
“Small businesses have something of an advantage when it comes to internal integration,” Dr. Goldsby said. “They can usually align themselves better and faster than their larger, more complex competitors. Decision-making is usually more concentrated in smaller firms, and arguably employees in small firms demonstrate a greater concern for the success of the business.”
Larger companies get bogged down in bureaucracy, plus the departments within a large company may have conflicting interests and priorities with regard to integration within the company. At the same time, larger companies enjoy the benefits of easier external integration, due to their economic power and size, exerting influence through the customers’ and suppliers’ dependence on them.
While the current global supply chain issue can’t fairly be chalked up to a simple failure of supply chain management, SCM is a major part of any company’s operations.