W13 - Supply Chain BPR

The objective of supply chain management is to provide a high velocity flow of high quality, relevant information that enables suppliers to provide for the continuous and exactly timed flow of materials to customers. Supply chain excellence requires standardized business processes supported by a comprehensive data foundation, advanced information technology support and highly capable personnel. It needs to ensure that all supply chain practitioners actions are directed at extracting maximum value. The concept of supply chain management has received increasing attention from academicians, consultants, and business managers. Many organizations have begun to recognize that supply chain management is the key to building sustainable competitive advantage for their products and/or services in a gradually crowded marketplace. Supply chain management has been considered as a critical strategy for effectively competing in the 21 century. 

Successful companies recognizes that with effective supply chain management they are not only be able to reduce production cost by eliminating non-value added activities, but also to create a new set of market capabilities that are difficult to replicate. However, implementation of a successful supply chain may encounter resisting forces that include lack of supply chain management actor’s support, insufficient measurement and information systems, and organizational culture. Thus, successful supply chains can create value contingent on their ability to overcome resisting forces through various mechanisms, and BPR may be one of them.

Most organizations have a traditional supply chain strategy. In this strategy, each department has its own workspace, and interaction is usually present within department. It has been found that within a company whose strategy is of such a traditional form much of the work being executed is non-value-adding. By this, a significant number of the tasks which are carried out are performed more out of procedure than necessity and, had they have been removed, effective output and the general running of the company would not suffer. On the contrary, in fact, removing some tasks or processes may be beneficial to companies.

Over a decade ago, a few companies had been seen to be aware of this and consequently restructured their supply chain to address this matter. In the establishment of an effective supply chain management, the key factor is the need that focusing on building the relationship and creating values. After that, the enterprise can become more agile, responsive, and competitive. One of the most important things in understanding how to build effective supply chain management is to understand of the time dimension of the supply chain. In the supply chain, time-based resource management is being more and more recognized. Research indicates that it is not uncommon for the time spent actually “adding value” i.e. doing things that a customer is willing to pay for, to be as little as one tenth of 1%. Value-adding time is characterized using three criteria:

1. Whether the process is physically changing the nature of the consumable item (i.e. the customer’s product/service); 
2. Whether the change to the consumable item produces something that the customer values or cares about and may be willing to pay for; 
3. Whether the process is right first time, and will not have to be repeated in order to produce the desired result that is valued by the customer.

Non-value adding activity can be split into three categories: queuing time, rework time and time wasted due to management decisions. A time-based process map can be used to gain transparency of the value adding and non-value adding activities. This map also enables the user to gain transparency of the supply chain process.

The emphasis in BPR is put on changing how information transfers are achieved. A necessary, but no means sufficient condition for this is to implement new IT which enable efficient and cheap information transfer. Hence, IT support is not enough as deep structural and organizational changes are needed to fully realize the potential benefits of applying new IT.

Effective supply chain management is critical advance for supply chain competitiveness. Not surprisingly, IT sits at the heart of this advance. Specific technologies may vary from company to company, but the underlying principles remain the same: to create seamless pipeline where product is handled minimally but moves at maximum velocity. The results is a supply chain that can be managed according to approach where the customer order is a starting point, and works down the rest of the chain are such to eliminating waste and trimming processes that do not add value along on the way.

Source / Reference:

1) Bosilj-Vuksic V, Stemberger IM, Jaklic J, Kovacic A (2002). Assessment of E-Business transformation using simulation modelling. Simulation 78(12): 731-744

2) Cheung Y, Bal J (1998). Process analysis techniques and tools for business improvement. Bus. Proc. Manage. J. 4(4): 274-290


3) Migiro SO, Ambe IM (2008). Evaluation of the implementation of public sector supply chain management and challenges: A case study of the central district municipality, North west province, South Africa. Afr. J. Bus. Manage. 2(12): 230-242.