Case Study on Adidas Supply Chain

Adidas Adidas | |[pic] | |Type |Public (AG, FWB: ADS) | |Founded |1924 (registered in 1949)[1] | |Founder(s) |Adolf Dassler | |Headquarters |Herzogenaurach, Germany | |Key people |Herbert Hainer (CEO), Erich Stamminger (CEO, Adidas | | |Brand), Igor Landau (Chairman of supervisory board) | | |(2009-) | |Industry |Designing and Manufacturing | |Products |Footwear, Sportswear | | |, Sports equipment | | |Toiletries | |Revenue |â‚ ¬10. 799 billion ($15. 6 billion) (2008)[2] | |Operating income |^ â‚ ¬1. 070 billion ($1. billion) (2008)[2] | |Profit |^ â‚ ¬642 million ($933 million) (2008)[2] | |Employees |38,980 (2008)[2] | |Website |www. adidas-group. com | Adidas AG (pronounced / di? d? s/ in US English, FWB: ADS) is a German-based sports apparel manufacturer and part of the Adidas Group, which consists of Reebok sportswear company, TaylorMade-adidas golf company, and Rockport. Besides sports footwear, the company also produces other products such as bags, shirts, watches, eyewear and other sports and clothing related goods. The company is the largest sportswear manufacturer in Europe and the second biggest sportswear manufacturer in the world, after its U. S. rival Nike. 3] The company's clothing and shoe designs typically feature three parallel bars, and the same motif is incorporated into Adidas's current official logo. The â€Å"Three Stripes† were bought from the Finnish sport company Karhu Sports in the 1950s. [4][5] The company revenue for 2008 was listed at â‚ ¬10. 799 billion and the 2007 figure was listed at â‚ ¬10. 299 billion, or about US$15. 6 billion. | | [pic][edit] History [edit] Gebruder Dassler Schuhfabrik Adolf (â€Å"Adi†) Dassler started to produce his own sports shoes in his mother's wash kitchen in Herzogenaurach, Bavaria, after his return from World War I. In 1924, his brother Rudolf (Rudi) Dassler joined the business which became Gebruder Dassler Schuhfabrik (Dassler Brothers Shoe Factory) and prospered. The pair started their venture in their mother's laundry, but at the time, electricity supplies in the town were unreliable, and the brothers sometimes had to use pedal power from a stationary bicycle to run their equipment. [6] By the 1936 Summer Olympics, Adi Dassler drove from Bavaria on one of the world's first motorways to the Olympic village with a suitcase full of spikes and persuaded United States sprinter Jesse Owens to use them, the first sponsorship for an African-American. After Owens won four gold medals, his success cemented the good reputation of Dassler shoes among the world's most famous sportsmen. Letters from around the world landed on the brothers' desks, and the trainers of other national teams were all interested in their shoes. Business boomed and the Dasslers were selling 200,000 pairs of shoes each year before World War II. [7] Late in World War II, the shoe factory shifted to production of the Panzerschreck anti-tank weapon. [8] [edit] Company split Both brothers joined the Nazi Party, but Rudolf was slightly closer to the party. During the war, a growing rift between the pair reached a breaking point after an Allied bomb attack in 1943 when Adi and his wife climbed into a bomb shelter that Rudolf and his family were already in: â€Å"The dirty bastards are back again,† Adi said, apparently referring to the Allied war planes, but Rudolf was convinced his brother meant him and his family. 9] After Rudolf was later picked up by American soldiers and accused of being a member of the Waffen SS, he was convinced that his brother had turned him in. [6] The brothers split up in 1947,[10] with †¢ Rudi forming a new firm that he called Ruda – from Rudolf Dassler, later rebranded Puma, †¢ a nd Adi forming a company formally registered as adidas AG (with lower case lettering) on 18 August 1949. The acronym All Day I Dream About Soccer, although sometimes considered the origin of the adidas name, was applied retroactively. The name is actually a portmanteau word formed from â€Å"Adi† (a nickname for Adolf) and â€Å"Das† (from â€Å"Dassler†). [1] [edit] The Tapie affair After a period of trouble following the death of Adolf Dassler's son Horst Dassler in 1987, the company was bought in 1989 by French industrialist Bernard Tapie, for 1. 6 billion French francs (now â‚ ¬243. 918 million), which Tapie borrowed. Tapie was at the time a famous specialist of rescuing bankrupt companies, an expertise on which he built his fortune. Tapie decided to move production offshore to Asia. He also hired Madonna for promotion. He sent, from Christchurch, New Zealand, a shoe sales representative, to Germany and met Adolf Dassler's descendants (Amelia Randall Dassler and Bella Beck Dassler) and was sent back with a few items to promote the company there. [pic] [pic] A pair of Adidas â€Å"Samba† football trainers. In 1992, Tapie was unable to pay the interest from his loan. He mandated the Credit Lyonnais bank to sell Adidas, and the bank subsequently converted the outstanding debt owed into equity of the enterprise, which was unusual as per the prevalent French banking practice. Apparently, the state-owned bank had tried to get Tapie out of dire financial straits as a personal favour to Tapie, reportedly because Tapie was Minister of Urban Affairs (ministre de la Ville) in the French government at the time. In February 1993, Credit Lyonnais sold Adidas to Robert Louis-Dreyfus, a friend of Bernard Tapie for a much higher amount of money than what Tapie owed, 4. 485 billion (â‚ ¬683. 514 million) francs rather than 2. 85 billion (â‚ ¬434. 479 million). Tapie later sued the bank, because he felt â€Å"spoiled† by the indirect sale. Robert Louis-Dreyfus became the new CEO of the company. He was also the president of Olympique de Marseille, a team Tapie had owned until 1993. Tapie filed for personal bankruptcy in 1994. He was the object of several lawsuits, notably related to match fixing at the soccer club. During 1997, he served 6 months of an 18 month prison sentence in La Sante prison in Paris. In 2005, French courts awarded Tapie a â‚ ¬135 million compensation (about 886 million francs). [edit] Post-Tapie era In 1994, combined with FIFA Youth Group, SOS Children's Villages became the main beneficiary. In 1997, Adidas AG acquired the Salomon Group who specialized in ski wear, and its official corporate name was changed to Adidas-Salomon AG because with this acquisition Adidas also acquired the Taylormade Golf company and Maxfli which allowed them to compete with Nike Golf. In 1998, Adidas sued the NCAA over their rules limiting the size and number of commercial logos on team uniforms and apparel. Adidas withdrew the suit, and the two groups established guidelines as to what three-stripe designs would be considered uses of the Adidas trademark. In 2003, Adidas filed a lawsuit in a British court challenging Fitness World Trading's use of a two-stripe motif similar to Adidas's three stripes. The court ruled that despite the simplicity of the mark, Fitness World ‘s use was infringing because the public could establish a link between that use and Adidas's mark. 11] In September 2004, top English fashion designer Stella McCartney launched a joint-venture line with Adidas, establish ing a long-term partnership with the corporation. This line is a sports performance collection for women called â€Å"Adidas by Stella McCartney†,[12] and it has been critically acclaimed. [13] Also in 2005, on 3 May, Adidas told the public that they sold their partner company Salomon Group for â‚ ¬485m to Amer Sports of Finland. In August 2005, Adidas declared its intention to buy British rival Reebok for $3. 8 billion (US). This takeover was completed with partnership in January 2006[1] and meant that the company will have business sales closer to those of Nike in North America. The acquisition of Reebok will also allow Adidas to compete with Nike worldwide as the number two athletic shoemaker in the world. [14] Adidas has corporate headquarters in Germany, and many other business locations around the world such as Hong Kong, Toronto, Taiwan, England, Japan, Australia and Spain. Mainly sold in the U. S. , Adidas makes lots of assets from these countries and is expanding to more oversea countries. In 2005, Adidas introduced the Adidas 1, the first ever production shoe to utilize a microprocessor. Dubbed by the company â€Å"The World's First Intelligent Shoe†, it features a microprocessor capable of performing 5 million calculations per second that automatically adjusts the shoe's level of cushioning to suit its environment. The shoe requires a small, user-replaceable battery that lasts for approximately 100 hours of running. On 25 November 2005, Adidas released a new version of the Adidas 1 with an increased range of cushioning, allowing the shoe to become softer or firmer, and a new motor with 153 percent more torque. [citation needed] On 11 April 2006, Adidas announced an 11-year deal to become the official NBA apparel provider. They will make NBA, NBDL, and WNBA jerseys and products as well as team-coloured versions of the â€Å"Superstar† basketball shoe. This deal (worth over $400 million) takes the place of the previous 10-year Reebok deal that was put in place in 2001. [edit] Products [edit] Running Adidas currently manufactures several running shoes, including the adiStar Control 5, the adiStar Ride (the replacement for the adiStar Cushion 6), the Supernova Sequence (the replacement for the Supernova Control 10), and the Supernova Cushion 7 (which will soon be replaced by the Supernova Glide), among others. In addition, their performance apparel is widely used by runners. Adidas also uses kangaroo leather to make their more expensive shoes. [15][16] [edit] Association football One of the main focuses of Adidas is football kit and associated equipment. Adidas also provides apparel and equipment for all teams in Major League Soccer. Adidas remain a major company in the supply of team kits for international football teams. Current examples include Russia, France, Germany, Greece, Romania, Argentina, Spain, Mexico, South Africa, Japan and Nigeria. Adidas also makes referee kits that are used in international competition and by many countries and leagues in the world. In the United States, referees wear the Adidas kits in MLS matches even though the primary referee supplier is Official Sports. The company has been an innovator in the area of footwear for the sport with notable examples including development of the Copa Mondial moulded boot used for matches on firm dry pitches for almost forty years. The studded equivalent was named World Cup follow in celebration of the 1978 tournament won by Argentina, one of the nations it supplied at the time. A few of the famous club football teams of hich are currently sponsored by Adidas are Real Madrid, Chelsea, River Plate, Liverpool, Marseille, Universidad de Chile, Bayern Munich, Schalke 04, Benfica, Milan, Wolfsburg,Galatasaray,Panathinaikos, and Palmeiras, among others. Adidas became renowned for advancing the Predator boot design developed by ex-Liverpool and Australian internation al player Craig Johnston. This design featured a ribbed rubber structure for the upper leather of the shoe, used to accent the movement of the ball when struck; highly skilled players claimed they were able to curve the flight of the ball more easily when wearing this new contoured design. [citation needed]The Predator also features the Craig Johnston-invented Traxion sole. FIFA, the world governing body of football, commissioned specially designed footballs for use in its own World Cup tournaments to favour more attacking play. The balls supplied for the 2006 World Cup were particular noteworthy for their ability to travel further than previous types when struck, leading to longer range goal strikes that were intended to increase the number of goals scored. Goalkeepers were believed to be less comfortable with the design, claiming it would move significantly and unpredictably in flight. [edit] Tennis Adidas has sponsored tennis players and recently introduced a new line of tennis racquets. While the Feather is made for the â€Å"regular player†, and the Response for the â€Å"club player†, Adidas targets the â€Å"tournament player† with the 12. 2 oz Barricade tour model. 17] Adidas sponsors the following professional players: Jo-Wilfried Tsonga, Dinara Safina, Ana Ivanovic, Daniela Hantuchova, Andy Murray, Fernando Verdasco, Gille s Simon, Marcos Baghdatis, Fernando Gonzalez, Marat Safin, and upcoming players like Melanie Oudin, Sorana Cirstea and Grigor Dimitrov. Adidas tennis apparel contains the ClimaCool technology found in other athletic jerseys and shoes. [18] In Cincinnati, at the ATP Tennis Tournament in Mason, they have also sponsored the ball-boy and ball-girl uniforms. [edit] Golf In 1997, Adidas purchased TaylorMade. The image and focus of TaylorMade was redirected shortly after the acquisition to take over the driver market. The company succeeded in achieving this goal in late 2004 when it officially became the No. 1 driver in golf. On 14 October 2008, Adidas, through its subsidiary TaylorMade, acquired Ashworth for $72 million, assuming $46. 3 million in debt. [19] [edit] Cricket In the 1990s, Adidas signed the world No. 1 batsman Sachin Tendulkar and made shoes for him. [1] He is still wearing Adidas shoes when he plays matches. Adidas even made action figures after Sachin Tendulkar. In 2008, Adidas made their move into English cricket market by sponsoring English batting star Kevin Pietersen after the cancellation of his lifetime deal with Woodworm, when they ran into financial difficulties. [20] The following year they signed up fellow England player Ian Bell and Indian Player Ravindra Jadeja. Having made cricket footware for many years, the company finally entered the field of bat manufacture in 2008 and their products are available in the Incurza, Pellara and Libro ranges Adidas also manufactures the uniforms worn by both the England cricket team and the Australian cricket team. In 2008 and 2009 in both the seasons of the Indian Premier League (IPL), it took up the sponsorship of the Mumbai Indians and the Delhi Daredevils. In 2009, Adidas signed Sachin Tendulkar and started sponsoring his bat. It created a new bat ‘Adidas ST' for him and ‘Adidas KP' for Kevin Pietersen, the same year. Now both of them use their personalized bats in cricket. [edit] Basketball Adidas has been a longtime basketball shoe manufacturer and is one of the leading basketball brands in the world. They are most famous for their iconic Superstar and Pro Model shoes, affectionately known as â€Å"shelltoes† for their stylized hard rubber toe box. These were made very popular in the 1980s hip hop streetwear scene alongside Adidas' stripe-sided polyester suits. Adidas is also the current outfitter of all 30 franchises in the National Basketball Association (replacing the Reebok brand after the merger) and sponsors numerous players past and present like Kareem Abdul-Jabbar and Tracy McGrady, as well as Dwight Howard, Chauncey Billups, Derrick Rose, Kevin Garnett, Michael Beasley, Josh Smith, Tim Duncan, and Candace Parker. [edit] Lacrosse In 2007, Adidas announced the future production of lacrosse equipment, and will sponsor the Adidas National Lacrosse Classic in July 2008 for the top 600 high school underclassmen lacrosse players in the United States. 21] [edit] Rugby Adidas make rugby balls and other rugby gear. They are the current kit and ball supplier to the New Zealand All Blacks, Irish Munster Rugby, and the Argentinian Pumas, among others. [edit] Gymnastics Since 2000, adidas has provided men's and women's gymnastics we ar for Team USA, through USA Gymnastics. In 2006, adidas gymnastics leatards for women and adidas mens comp shirts, gymnastics pants and gymnastics shorts have been available in the USA, with seasonal leotards offered for Spring, Summer, Fall and Holidays. Starting in 2009, adidas gymnastics wear has been available worldwide through GK Elite Sportswear. [22] [edit] Skateboarding Adidas SB (Skateboarding) are shoes made specifically for skateboarding. Many of the shoes Adidas previously made were redesigned for skateboarding. [edit] Accessories Adidas also designs and makes watches, eyewear, bags, baseball caps, and socks. [pic] [pic] Adidas Fresh Impact – Limited Edition As well, Adidas has a branded range of male and female deodorants, perfumes, aftershave and lotions. [edit] Marketing Adidas, like other sports brands is believed to engender high consumer brand loyalty. Brand loyalty towards Adidas, Nike and several other sportswear brands was examined in a recent study. [23] The study found consumers did not exhibit unduly high loyalty towards such brands. During the mid to late 1990s, Adidas divided the brand into three main groups with each a separate focus: Adidas Performance was designed to maintain their devotion to the athlete; Adidas Originals was designed to focus on fashion and life-style; and Style Essentials, with the main group within this one being Y-3. â€Å"Impossible is Nothing† is the current mainstream marketing slogan for Adidas. This campaign was developed by 180/TBWA based in Amsterdam but also with significant work being done by TBWA/Chiat/Day in San Francisco – particularly for its basketball campaign â€Å"Believe In Five†. TBWAChiatDay commissioned Zane Peach[24] to produce images for 2007 international ad campaign. [edit] Sponsorship Main article: List of Adidas sponsorships Adidas are the main sponsor and kit supplier of the highly successful New Zealand national rugby team, the All Blacks. Adidas also are the kit supplier to the Argentina Pumas, to the French Stade Francais, and the Irish Munster Rugby team and the United States Eagles. Adidas are the main sponsors and kit sponsors of the successful Australian Cricket Team and the England Cricket Team. They are also the main sponsors of the Indian cricketers Sachin Tendulkar and Virender Sehwag and English cricketers Kevin Pietersen and Ian Bell. Adidas are the main sponsors of Australian Domestic Cricket Competitions – Pura Cup, KFC Twenty20 Big Bash, Ford Ranger One Day Cup. They are sponsors of the Indian Premier League teams Delhi Daredevils and Mumbai Indians. Adidas also sponsors and produces apparel for the Gold Coast Titans rugby league clubs in the Australian National Rugby League (NRL) competition. Adidas is the longstanding kit provider to the Germany national football team, a sponsorship that began in 1954 and is contracted to continue until at least 2018. Sponsoring also the Mexican, French and Spanish National Football Teams and from 2010 will sponsor the Scotland national football team. [25] Adidas are very active at sponsoring top football clubs such as Real Madrid, Liverpool, AC Milan, Palmeiras, Bayern Munich, Chelsea, Marseille, AFC Ajax, Schalke 04, Galatasaray, Benfica, Newcastle, River Plate, Besiktas, Fenerbahce, UANL Tigres, Panathinaikos, Litex Lovech, Slavia Sofia, AIK, Djurgardens IF, Brondby IF, IFK Goteborg, Al-Ahly, Al-Hilal, Ahli Jeddah, Universidad de Chile, and the Colombian football teams Los Millonarios, Deportivo Cali, and Atletico Nacional. Adidas and Major League Soccer (MLS) announced a 10-year sponsorship agreement in November 2004 to make Adidas the official athletic sponsor and licensed product supplier for the league, and to work together to create a developmental league for MLS. [26] Adidas also sponsors events such as the London Marathon. For the 2008 Summer Olympics in Beijing, China, Adidas spent â‚ ¬70 million sponsoring the event, amid criticisms. [27] Adidas has also been marketing in NASCAR, sponsoring big name drivers such as Dale Earnhardt, Jr. and Tony Stewart. [edit] Corporate information [edit] Current executive board †¢ CEO Adidas-group: Herbert Hainer †¢ Finance Adidas-group: Robin J. Stalker †¢ CEO Adidas brand: Erich Stamminger Global Operations Adidas-group: Glenn S. Bennett [edit] Former management †¢ CEO (1993-2002): Robert Louis-Dreyfus. [edit] Financial information |Financial data in millions of euros[28] | |Year | [pic][edit] Idea More common and accepted definitions o f Supply Chain Management are: †¢ Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al, 2001). 1] †¢ Global Supply Chain Forum – Supply Chain Management is the integration of key business processes across the supply chain for the purpose of adding value for customers and stakeholders (Lambert, 2008)[2]. †¢ According to the Council of Supply Chain Management Professionals (CSCMP), Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediarie s, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperate to provide product and service offerings has been called the Extended Enterprise. A supply chain, as opposed to supply chain management, is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is ‘supply chain management' (Mentzer et al. , 2001). [3] Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships and control associated business processes. Supply chain event management (abbreviated as SCEM) is a consideration of all possible events and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and solutions devised. [edit] Supply chain management problems Supply chain management must address the following problems: †¢ Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. †¢ Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e. g. , direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e. g. motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e. g. , pull, push or hybrid); and transportation control (e. g. , owner-operated, private carrier, common carrier, contract carrier, or 3PL). †¢ Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy. †¢ Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc. †¢ Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods. †¢ Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain. Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional. [edit] Activities/functions Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels . The CSCMP has adopted The American Productivity & Quality Center (APQC) Process Classification FrameworkSM a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint[4]. [edit] Strategic †¢ Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities. †¢ Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics. Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities. †¢ [[Information technoloy chain operations. †¢ Where-to-make and what-to-make-or-buy decisions. †¢ Alig ning overall organizational strategy with supply strategy. †¢ It is for long term and needs resource comittement. [edit] Tactical †¢ Sourcing contracts and other purchasing decisions. †¢ Production decisions, including contracting, scheduling, and planning process definition. †¢ Inventory decisions, including quantity, location, and quality of inventory. †¢ Transportation strategy, including frequency, routes, and contracting. †¢ Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. Milestone payments. †¢ Focus on customer demand. [edit] Operational †¢ Daily production and distribution planning, including all nodes in the supply chain. †¢ Production scheduling for each manufacturing facility in the supply chain (minute by minute). †¢ Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. †¢ Sourci ng planning, including current inventory and forecast demand, in collaboration with all suppliers. †¢ Inbound operations, including transportation from suppliers and receiving inventory. †¢ Production operations, including the consumption of materials and flow of finished goods. Outbound operations, including all fulfillment activities, warehousing and transportation to customers. †¢ Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers. [edit] Supply chain management Organizations increasingly find that they must rely on effective supply chains, or networks, to successfully compete in the global market and networked economy. [5] In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies. During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither â€Å"market† nor â€Å"hierarchy† categories (Powell, 1990). It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms (Zhang and Dilts, 2004). Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance (Mintzberg, 1979). In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, significant success factors were identified, complementing the earlier â€Å"Just-In-Time†, â€Å"Lean Manufacturing† and â€Å"Agile Manufacturing† practices. 6] Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain net work (Coase, 1998). Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as â€Å"Keiretsu†, â€Å"Extended Enterprise†, â€Å"Virtual Corporation†, â€Å"Global Production Network†, and â€Å"Next Generation Manufacturing System†. [7] In general, such a structure can be defined as â€Å"a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration† (Akkermans, 2001). The security management system for supply chains is described in ISO/IEC 28000 and ISO/IEC 28001 and related standards published jointly by ISO and IEC. [edit] Developments in Supply Chain Management Six major movements can be observed in the evolution of supply chain management studies: Creation, Integration, and Globalization (Lavassani et al. , 2008a), Specialization Phases One and Two, and SCM 2. 0. 1. Creation Era The term supply chain management was first coined by a U. S. industry consultant in the early 1980s. However, the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line. The characteristics of this era of supply chain management include the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management. 2. Integration Era This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of supply chain evolution is characterized by both increasing value-adding and cost reductions through integration. 3. Globalization Era The third movement of supply chain management development, the globalization era, can be characterized by the attention given to global systems of supplier relationships and the expansion of supply chains over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back several decades (e. g. , in the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing their competitive advantage, value-adding, and reducing costs through global sourcing. 4. Specialization Era—Phase One: Outsourced Manufacturing and Distribution In the 1990s industries began to focus on â€Å"core competencies† and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond company walls and distributing management across specialized supply chain partnerships. This transition also re-focused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI). The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands. 5. Specialization Era—Phase Two: Supply Chain Management as a Service Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non-asset-based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management. At any given moment, market forces could demand changes from suppliers, logistics providers, locations and customers, and from any number of these specialized participants as components of supply chain networks. This variability has significant effects on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to more complex requirements including the configuration of the processes and work flows that are essential to the management of the network itself. Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of specific, best-in-class partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain-specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity. Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root primarily in transportation and collaboration categories. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model currently in focus today. 6. Supply Chain Management 2. 0 (SCM 2. 0) Building on globalization and specialization, the term SCM 2. 0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new â€Å"era†. Web 2. 0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2. 0 brings is to help navigate the vast amount of information available on the Web in order to find what is being sought. It is the notion of a usable pathway. SCM 2. 0 follows this notion into supply chain operations. It is the pathway to SCM results, a combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization, near-/far- and off-shoring, and talent scarcity. [pic] |This article appears to contain a large number of buzzwords. Specific concerns can be found on the Talk page. Please improve this | | |article if you can. (February 2010) | SCM 2. 0 leverages proven solutions designed to rapidly deliver results with the agility to quickly manage future change for continuous flexibility, value an d success. This is delivered through competency networks composed of best-of-breed supply chain domain expertise to understand which elements, both operationally and organizationally, are the critical few that deliver the results as well as through intimate understanding of how to manage these elements to achieve desired results. Finally, the solutions are delivered in a variety of options, such as no-touch via business process outsourcing, mid-touch via managed services and software as a service (SaaS), or high touch in the traditional software deployment model. [edit] Supply chain business process integration Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become known. The marketing department, responding to customer demand, communicates with several distributors and retailers as it attempts to determine ways to satisfy this demand. Information shared between supply chain partners can only be fully leveraged through process integration. Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000), operating an integrated supply chain requires a continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) [8] are: †¢ Customer relationship management †¢ Customer service management †¢ Demand management †¢ Order fulfillment †¢ Manufacturing flow management †¢ Supplier relationship management †¢ Product development and commercialization †¢ Returns management Much has been written about demand management. Best-in-Class companies have similar characteristics, which include the following: a) Internal and external collaboration b) Lead time reduction initiatives c) Tighter feedback from customer and market demand d) Customer level forecasting One could suggest other key critical supply business processes which combine these processes stated by Lambert such as: a. Customer service management b. Procurement c. Product development and commercialization d. Manufacturing flow management/support e. Physical distribution f. Outsourcing/partnerships g. Performance measurement a) Customer service management process Customer Relationship Management concerns the relationship between the organization and its customers. Customer service is the source of customer information. It also provides the customer with real-time information on scheduling and product availability through interfaces with the company's production and distribution operations. Successful organizations use the following steps to build customer relationships: †¢ determine mutually satisfying goals for organization and customers †¢ establish and maintain customer rapport †¢ produce positive feelings in the organization and the customers b) Procurement process Strategic plans are drawn up with suppliers to support the manufacturing flow management process and the development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship where both parties benefit, and a reduction in time required for the design cycle and product development. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkage to convey possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers involve resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and research into new sources or programs. c) Product development and commercialization Here, customers and suppliers must be integrated into the product development process in order to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched with ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must: 1. coordinate with customer relationship management to identify customer-articulated needs; 2. select materials and suppliers in conjunction with procurement, and 3. develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination. d) Manufacturing flow management process The manufacturing process produces and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency in meeting customer demand. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations. e) Physical distribution This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e. g. , links manufacturers, wholesalers, retailers). f) Outsourcing/partnerships This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage, and outsource everything else. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, managing and controlling this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally, with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level. g) Performance measurement Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. Taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can both be correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A. T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts, internal measures are generally collected and analyzed by the firm including 1. Cost 2. Customer Service 3. Productivity measures 4. Asset measurement, and 5. Quality. External performance measurement is examined through customer perception measures and â€Å"best practice† benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking. Components of Supply Chain Management are 1. Standardization 2. Postponement 3. Customization [edit] Theories of supply chain management Currently there is a gap in the literature available on supply chain management studies: there is no theoretical support for explaining the existence and the boundaries of supply chain management. A few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. 2008b) have tried to provide theoretical foundations for different areas related to supply chain by employing organizational theories. These theories include: †¢ Resource-Based View (RBV) †¢ Transaction Cost Analysis (TCA) †¢ Knowledge-Based View (KBV) †¢ Strategic Choice Theory (SCT) †¢ Agency Theory (AT) †¢ Institutional theory (InT) †¢ Systems Theory (ST) †¢ Network Perspective (NP) [edit] Supply chain sustainability Supply chain sustainability is a business issue affecting an organisation’s supply chain or logistics network and is frequently quantified by comparison with SECH ratings. SECH ratings are defined as social, ethical, cultural and health footprints. Consumers have become more aware of the environmental impact of their purchases and companies’ SECH ratings and, along with non-governmental organisations ([NGO]s), are setting the agenda for transitions to organically-grown foods, anti-sweatshop labour codes and locally-produced goods that support independent and small businesses. Because supply chains frequently account for over 75% of a company’s carbon footprint[9] many organisations are exploring how they can reduce this and thus improve their SECH rating. [edit] Components of supply chain management integration The management components of SCM The SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The literature on business process re-engineering,[10] buyer-supplier relationships,[11] and SCM[12] suggests various possible components that must receive managerial attention when managing supply relationships. Lambert and Cooper (2000) identified the following components: †¢ Planning and control †¢ Work structure †¢ Organization structure †¢ Product flow facility structure Information flow facility structure †¢ Management methods †¢ Power and leadership structure †¢ Risk and reward structure †¢ Culture and attitude However, a more careful examination of the existing literature[13] le ads to a more comprehensive understanding of what should be the key critical supply chain components, the â€Å"branches† of the previous identified supply chain business processes, that is, what kind of relationship the components may have that are related to suppliers and customers. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement (Bowersox and Closs, 1996). A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects of financial risk, thus including primary level components (Bowersox and Closs, 1996). A secondary level participant (specialized) is a business that participates in channel relationships by performing essential services for primary participants, including secondary level components, which support primary participants. Third level channel participants and components that support the primary level channel participants and are the fundamental branches of the secondary level components may also be included. Consequently, Lambert and Cooper's framework of supply chain components does not lead to any conclusion about what are the primary or secondary (specialized) level supply chain components (see Bowersox and Closs, 1996, p. 93). That is, what supply chain components should be viewed as primary or secondary, how should these components be structured in order to have a more comprehensive supply chain structure, and how to examine the supply chain as an integrative one (See above sections 2. 1 and 3. 1). Reverse Supply Chain Reverse logistics is the process of managing the return of goods. Reverse logistics is also referred to as â€Å"Aftermarket Customer Services†. In other words, any time money is taken from a company's warranty reserve or service logistics budget one can speak of a reverse logistics operation. [edit] Global supply chain management Global supply chains pose challenges regarding both quantity and value: Supply and Value Chain Trends †¢ Globalization †¢ Increased cross border sourcing Collaboration for parts of value chain with low-cost providers †¢ Shared service centers for logistical and administrative functions †¢ Increasingly global operations, which require inc reasingly global coordination and planning to achieve global optimums †¢ Complex problems involve also midsized companies to an increasing degree, These trends have many benefits for manufacturers because they make possible larger lot sizes, lower taxes, and better environments (culture, infrastructure, special tax zones, sophisticated OEM) for their products. Meanwhile, on top of the problems recognized in supply chain management, there will be many more challenges when the scope of supply chains is global. This is because with a supply chain of a larger scope, the lead time is much longer. Furthermore, there are more issues involved such as multi-currencies, different policies and different laws. The consequent problems include:1. different currencies and valuations in different countries; 2. different tax laws (Tax Efficient Supply Chain Management); 3.