THE ESSENTIAL COMPETENCIES OF THE SUPPLY CHAIN
Reinaldo Toso Júnior[1]
Summary
This article addresses the core competencies in a supply chain. This work is justified because supply chains have become a source of competitive advantage in the markets through its correct management. Today the global competition is no longer in isolated products, because now the chains are the ones that compete for a market share. The problem with the research had as a guiding question: “what are the essential competencies of a supply chain?” and the hypothesis was that by analyzing the primary and secondary activities of the logistics and supply chain and the core competencies that the supply managers must possess it was possible to identify the essential competencies of supply chains. The methodology was the exploratory research in books and articles, both physical and available in the global network of computers. Through the research it was possible to understand the essential competencies of a supply chain and list them in order to identify them in their basic elements and that in the future it will possible to identify the means of measuring the efficiency and effectiveness of the supply chain through its essential competencies.
Keywords: Essential competence, supply chain, logistics.
1 INTRODUCTION
The objective of the article is to understand which are the essential competencies of the supplies chain on a preliminary mode.
This work is justified because supply chains have become a source of competitive advantage in the markets through its correct management. Today the global competition is no longer in isolated products, because now the chains are the ones that compete for a market share
Part of the competitive advantages are directly connected to the management of these chains and their operations need determinate essential competencies, such that if they are not well executed or successful they will not promote competitive advantages.
These essential competencies are intimately connected to the value chain, being that the supplies chain is what keep the value flow to the client and in a wide manner to the markets.
The hypothesis is that by analyzing the primary and secondary activities of logistics and the supplies chain and the essential competencies that the supplies managers must possess, if it is possible to identify the essential competencies of the supplies chains themselves.
The problem that arises is: “what are the essential competencies of a supplies chain? ”
For this, the methodology adopted is qualitative exploratory research in books and articles and other materials using the global computer network as a search and availability tool.
It is hoped that this work will help to understand the essential competencies of a supplies chain and identify its elements so that in the future it will be possible to identify ways to measure chain efficiency and effectiveness through its essential competencies.
The limitation of this work is that the specificities of the various supplies chains are not considered, so that a possible application of the critical success factors in a future work will be given only to the basic essential competencies of a supply chain. This does not prevent a more detailed study of specific chains in later studies.
Another limitation is the identification of supplies chains based on a reduced number of authors.
However, this limitation does not harms the concept of essential competence applied to a supplies chain.
2 DEFINITIONS OF A SUPPLY CHAIN
2.1 The logistics
Logistics as art was born from the art of war. It was the work of Marshal Jomini (1862) that included logistics in the studies of war. According to Colins (1996), in the late 17th and early 18th centuries efforts were made in France to coordinate, control and administer materials involving the war and the French navy, and to anticipate issues involving the conception and study of logistics after the twentieth century.
According to Toso Jr. (2008):
“It was after the fifties of the twentieth century that business logistics developed to the current format that we know, involving the evolution of the media, transportation and installed infrastructure (equipment, warehouses, ports, airports, depots, etc.) . ”
With the Industrial Revolution, the complexity of the materials gradually increased and this required that in each phase of the production, more services were aggregated and these services, among them transport as the largest participant, caused prices (costs) to be influenced by new factors, and manufacturing better was not enough anymore. It was necessary to transport, store and coordinate stocks of all kinds and products.
In the post-industrial or post-modern era in the 21st century, the scarcity of resources or the exhausting of sustainable conditions in various regions of the planet causes that even the most basic and therefore less complex materials require the same rigor in the management of their stocks as the most expensive items of the latest technology.
“In production activities, for example, Jiménez and Lorende (2001) recommend that the environmental performance may be considered as a new performance objective, which in a way many companies have already incorporated in their main activities such as: clean production, green marketing, logistics reverse and ecodesign. However, in addition to these activities, companies already need to consider environmental sustainability issues in their main activities, in order to reduce the consumption of natural resources and reduce pollution of air, soil, water and sound in the industrial units projected.”
NEUMANN and SCALICE, 2014, chap. 13, 13.1, item “b”.
To understand how this is relevant to DHL (2016), a global provider of logistics solutions, the company highlights its environmental program with the intention to reduce its customers’ “environmental steps” (and their own practices) through a series of optimizations that aim the reduction of the emission of carbon dioxide, in addition to other sustainable practices. Without a doubt, logistics has become a source of competitive advantage, adding value to global markets, whether it reduces costs, deadlines or reducing unnecessary consumption.
In a very synthetic way, it is possible to define logistics as a process of coordinating, planning and implementing a flow of material and information between the supplier and the end consumer in an efficient and effective manner, according to the client’s requirements and specifications. 1-2), the definition as “flow management” is also found in ALMEIDA and SCHLÜTER (2012, p. 72), which also states DORNIER et. Al. (2000, p.39).
The Logistics Professionals Council (2008: 01 apud TOSO Jr., 2008) defined business logistics as an activity that encompasses the receiving, shipping, transport management, handling and storage of materials and that for such activity it is necessary to promote an organization that is integrated, “inventory management, third party management, planning of the demands, like purchases, production and shipment, control of freight, warehousing, insurance and other typical expenses of these operations.”
Without integration, there is no logistics. In the absence of integration there is only a disorderly meeting of operations and therefore the flow of materials and information should allow the management of operations in an integrated manner. We can find support to this statement in Gomes (2004 p.2): “In this way, logistics is understood as the integration of inventory management and its physical distribution”.
Ballou (1993) presents the primary activities of logistics and these are:
Transport: this represents two thirds of logistics costs, and is responsible for the movement between the elements of the logistics chain and its value added to the product is in the place (MARQUES, 2016).
For stock maintenance, product availability is critical and accuracy is the primary measure of the inventories at any given time. Its importance is to act as a buffer between the time of availability and the time of demand, or “a lung” (BALLOU, 2009 p.33). Their way of adding value to the product is in the time (MARQUES, 2016).
Order processing (capacity and communication) is, in terms of time and information, an important element in the value chain. It aggregates as information in the product (MAGALHÃES, 2015).
The secondary activities of the logistics are: (ALMEIDA and SCHLÜTER, 2009 and also in BALLOU) storage, product handling, protection packaging, supplies (not purchasing but procurement – scheduling of supplies and management of shipments), products scheduling and information maintenance.
Storage: it involves activities of the proper handling of products and protective packaging. Storage decisions include product specifications for storage condition and packaging level, physical arrangement, physical space management, location, management and sizing of areas.
The acquisition (supplies – procurement) involves the process of selecting sources of supplies, quantities, scheduling of shipping of these materials, and shipping method. It also involves correct shipment management, freight optimization, consolidation, scheduled postponement and synchronization with the moments of need in addition to shipping points processes and forecasting.
“It is very difficult, in practical terms, to separate business logistics management from supplies chain management. In a large number of aspects, the two have the same mission: to put the products or services in the right place, at the right time, and in the desired conditions, while giving the best possible contribution to the company.”
BALLOU, 2009 p. 28
Because of that the differentiation takes place in the approach given in obtaining and supplying resources to the companies of materials or services.
The information maintenance needs to give place and time to the materials throughout the chain, traceability, costs, performance metrics, dates and places control, feeding facts, events and incidents that can change costs, time, the place, therefore, the product information along the chain. Ballou (2009 page 32) mentions information as “Information flow and order processing” at three levels:
Interconnection between orders, purchases and stocks; Information technology for data sending and “rules about orders”.
2.2 Value Chain and Logistics
The concept of value chain was introduced by Porter in 1985 and is a set of activities that a company performs for the delivery of goods or services to the market that involves a system composed of subsystems with inputs, processes and outputs. These activities involve the acquisition of material resources (materials, facilities, buildings, etc.), human resources and capital, as well as the management of these activities, since they are determinants of the cost and profits of the company. (Porter, 2013).
Among the various aspects of the value chain, it is understood that it must flow to satisfy customers and it is necessary to identify all value-generating activities, both in the main business process and in its subsystems. As exposed, as a chain there is a flow and the focus of this flow is the management that is done in the chain.
In observing the value chain defined by Porter, it is understood that cost is a very important component, but it is not the “at any price” cost . This cost is a consequence of the development of the competitive advantage through a model that aims to improve services and thus reduce costs. With this, it is possible to create value for the client and to understand and translate this generation of value through several sources, highlighting among them: (Based on the bibliographic analysis in BASU and WRIGHT, 2010 p.15; DELFMANN, 2007 p. IRELAND, HOSKISSON and HIT, 2008 P. 75)
The optimization of the productive process;
Purchasing strategy that allows cost reduction;
Innovation in process, product or service;
Product features and attributes that generate differentiation;
Improvement in quality;
Superior customer service and
Delivery time with improvement in logistics organization (PORTER, 2015).
As presented earlier for this integration, logistics is divided into two levels of activities: primary and secondary activities.
Primary logistics activities involve the following elements of the value chain:
Inbound – receiving, including purchases of raw materials, supplies, components, parts and pieces;
Operations – when dealing with product handling during production;
Outbound – Distribution – when dealing with finished products;
Marketing and sales – In channel selection, communication and after-sales; and
Customer services – at the service level, market selection and contract type.
The secondary or support activities involve the following elements of the value chain:
Procurement – Supplies;
Information Technology;
Human resource management – recruitment and development;
Facilities – Infrastructure;
Finances, Cost Control and auditing and
Research and Development
With these identified elements we can move to the definition of the supply chain.
2.3 Supplies Chain
According to SIMCHI-LEVI, KAMIINSKY and SIMCHI-LEVI (2009, p.33) a typical supply chain involves suppliers, manufacturers and customers, so that the raw materials, parts and pieces of the suppliers are transformed and assembled by the manufacturers and distributed to the target customers.
In the process of aggregating value in the transformation, raw materials, semi-finished and finished, there is a hierarchy of the value chain between land, capital and labor. At the beginning of the chain (downstream – upstream) there is more land, at the end of the chain (upward – downstream) there is more intellectual work, values increase and also the pressure to control these stocks.
With the increase of the value aggregation occurs the increase of the logistic relevance in the correct management of the supplies chain. However, in addition to this, new information, transport and manufacturing technologies (METZ, 1998) have increased the speed and possibilities of market integration, whether they are primary supplier’s markets, intermediaries or final markets in distribution. Focusing on the integration between the various factors of the chain has become an important element for value aggregation.
“Muda. It’s the only Japanese word you really should know. It sounds horrible when it rolls out by your tongue and this must be because change means waste, specifically any human activity that absorbs resources, but does not create values: errors that require rectification, production of items that no one wants to have stocks and goods accumulating. The transformation measures that are not really necessary, the movement of workers and the transport of goods from one place to another without any end, groups of people in downstream activity in waiting, since an upward activity was not delivered on time, and goods and services that do not meet customer needs.”[2]
WOMACK and JONES, 2010 p. 15
According to SIMCHI-LEVI, KAMIINSKY and SIMCHI-LEVI (2009), the supplies chain function is primarily the management of all facilities of suppliers, manufacturers, warehouses, distribution centers, retailers and commerce (in thedownstream involves all marketing channels), going to “suppliers of suppliers and customers of customers” in the words of the authors themselves (op cit.).
For these integration functions to be developed and practiced, focus is needed. With it there will be a correct strategic approach that will achieve the “state of the art” of operational efficiency, which involves several capabilities that need to be explored and developed. This is supported by Fleury and Fleury (2003), which classifies competitive strategies in operational excellence, product innovation and customer-oriented strategy.
2.4 Essential Competence
The essential competence defined by PRAHALAD and HAMEL (1990) is not new, according to MITSUISHI, UEDA and KIMURA (2008, p. 143). Selznick in 1957 and Penrose in 1959 defined distinctive competencies as unique capabilities that make a company stand out from other competitors. Barney in 1986 (apud Hines, 2004 p. 49) used the term strategic resource of the company as synonymous with competitive advantage. These competences, as explained above, reflect maximum efficiency as a “state of the art” and dependent on certain capabilities, ie skills.
It was Prahalad and Hamel (1990, p.4) who defined: “essential skills are a collective learning in the organization, especially in how to coordinate a diversified production of skills and integrate them into technology flows. ”
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For this the company must learn, coordinate and integrate this knowledge (ULRICH, 2001, p. 217), which are the concept of “architecture of essential competence” defined by Prahalad and Hamel.
For a better understanding of competence one must treat the term as ability, therefore, be able to. If logistics, by its own definition, is integrated its first competence is to be able to integrate, which fuses with the very definition of Prahalad and Hamel (1990) and besides learning from itself, must learn from the client.
The authors (Prahalad and Hamel, 1995) establish three levels to classify this capacity as essential; the first is the organization’s ability to expand into new markets. Expansion leads to development and new business opportunities; the second is the perception of value by the customer, the benefits must be real and measurable and for last it should be something difficult to imitate by the competition.
These competences generate more lasting competitive advantages. In Barney (1991) coherence with these levels when the author explains how a competitive advantage can be sustainable, this means more durable, in the author’s conception of value generation it’s necessary that the advantage be: valuable (enjoying the opportunities and mitigating threats), rare (distinguished from other competitors in the environment), difficult to imitate and irreplaceable.
In order to better understand competitive advantage as a distinctive advantage in a synthesis, it must be understood that it is something that your organization has, the competitor does not have and your customer gives value, otherwise you only have cost. To be an essential competency it cannot be something specific, like a single asset or ability (isolated event or skill or a few). As stated earlier it is an architecture, a collective learning to coordinate a very varied production of skills and knowledge and integrate them.
Ireland, Hoskisson, and Hit (2005: 83) explain that firms with few essential competencies can sustain competitive advantages for some time, but competitive advantage may last for a short time, since not every competitive advantage is an essential competency (RAMASWAMY and NAMAKUMARI, 2013 p 247). To be an essential competency one needs to have a knowledge architecture (defined by Prahalad and Hamel, 1995) and to achieve (pass) the three levels previously described, but if the competitive advantage (most of it) is anchored in essential competences in tends to be longer. But this does not mean that a competitive advantage lasts forever (BARNEY, 1991); we must always adapt to the market, which means that we return to the three levels of classification of an essential competence and of course always generate value to the customer or the chain breaks. The lesson we learn is the ability to learn and learn from the customer, which is a market orientation.
2.5 Supplies Chain and Essential Competency.
For the integration of the supply chain according to CROXTON et. Al. (2001) the essential competencies of a supplies chain are:
Management of the costumer relationship: provide the structure of how the customer relationship should be made, developed and maintained. What is in according with Fleury and Fleury (2003) – customer-oriented strategy.
Management of the costumer service: is the process of providing real-time information such as dates of shipment, ordering status, dates, quantities and other data to complete the services. This leads to several primary and secondary logistics activities in the customer value chain, but a very significant one is the order processing (Ballou, 1993). Bowersox (2001), which identifies three key dimensions: availability, operational performance and reliability.
Demand management: balancing customer demands with supply, synchronization between supplies, production and distribution. Once again, we can highlight the important aspect related to integration, since it involves supplies – procurement and several operations of primary logistics activities, among which we can highlight transport (transportation management) for distribution and support operations such as marketing (interaction with marketing) and real-time information systems (information technology).
Order fulfillment: meet customer specifications, which leads to the need for integration with marketing, production and logistics. Compliance with orders may be the main metric and quality element in logistics.
Supplier Relationship Management – Supplies: just as a company needs to develop a relationship with its customer, it needs to establish a strategic relationship with its suppliers. Today competitions occur not only in product but also in global chains.
Production flow management: Involves all processes for product management through the production process.
Product development and marketing: The time in which a product is taken to market is critical. It is up to the logistics to implement processes to integrate and accelerate the contact between suppliers and customers and thus shorten the time of launching a product or service.
Returns: They are a sensitive point because when dealing with returns it is possible to identify improvements in the process and to correct failures.
Global Business Leadership: Supplies chains are global. Every chain must be oriented and able to work in different markets and cultures.
Transformational capacity: coordinate transformational initiatives so that a dynamic environment can meet deadlines and costs.
Integrated Business Planning: Be able to coordinate supplies with the sales demands and the several operations that occur in the chain so that the planning flows from end to end.
Integrated value chain implementation: designing the end-to-end supply chain with the intention to exceed customer expectations, including its segments and the chains integrated with them.
Linking Supply Chain Performance to Organizational Success: Knowing how to link the flow of materials to the financial flow is crucial, in a way that the performance support is driven by metrics that lead to the lowest possible cost of execution.
Although DITTMAN (2013) directs his article to the essential competencies that supplies chain managers need to have, it is interesting to relate these, which are:
Global Business Leadership;
Transformation capacity;
Integrated Business Planning;
Integrated value chain implementation and
Link supplies chain performance to organizational success.
Similarly the APICS (Supply Chain Leadership Report: Many Styles Generate Success apud DONATI, 2015) also surveyed seven key competencies for a supply chain manager, which are:
Create and communicate business vision;
Promote and execute changes;
Building Partnerships;
Capture and act on relevant information;
Sizing and creating opportunity in time and space;
Modeling consistently and notoriously behaviors and best practices and
Serving the best interests of the organization without self-serving.
Although these essential competencies listed by Dittman (2013) and Donati (2015) are related to supply chain managers, it is possible to refer to these competencies and supplies chain competencies, which will be presented below.
3 FINAL CONSIDERATIONS
Based on this exposition, it is possible to establish the essential competences of a non-specific supply chain, limiting itself to the authors and concepts presented here.
The first competence is integration; every supplies chain must be able to integrate. For integration, a correct strategic business plan is necessary in line with the organization’s mission, vision and values, although strategic plan, mission, vision and values have not been discussed here. The interpretation of the capacity to create and communicate business vision (APICS, 2015) and global business leadership (DITTMAN, 2013) leads directly to these issues. More broadly, customer focus (clearly and consistently) is an essential skill.
This leads to the second competence: learning from clients, using learning and applying it. Clients have problems and promote and execute changes (APICS, 2015) and have transformation capacity (Dittman, 2013) are fundamental to generate customer value. The customer has a supply problem and it’s possible to apply a solution. Being able to do this in a supply chain is an essential competency which leads to the ability to research, develop and implement solutions.
Another competency is the ability to manage the relationship with the supplier – supplies (CROXTON, 2001), build partnerships (APICS, 2015) and with this an integrated business planning (DITTMAN, 2013), the latter being extended to the whole chain, which leads to the first competence presented here.
Capture and act on relevant information (APICS, 2015) that can lead to better demand management capacity (CROXTON, 2001) and thus understand customers, customer markets and their chains. Later, information management itself will be presented as a distinct competence.
The management of customer service and customer relationship management (CROXTON, 2001) to increase the level of service and value chain (DITTMAN, 2013) and performance in failures and recovery: contingencies and normalization, returns and thereby sizing and creating opportunities in time and space (APICS, 2015). Opportunities are lessons and situations that are explored to raise the level of service in the chain.
Designing supply chains, structuring the supplies channel and distribution, while consistently and consistently modeling behaviors and best practices (APICS, 2015). What can lead to another revision is that when designing the chains we should always serve the best interests of the organization without self-serving (APICS, 2015) and linking supplies chain performance to organizational success (DITTMAN, 2013).
When observing the issue of best behavioral practices, we have another competence which is the management of human resources, including recruitment and development (training, development plans, formation, retention and attracting talent), since logistics is intense in interaction and Human performance. Note that these aspects were not previously presented in order not to lengthen this preliminary study.
In this issue of chain design is the careful prescription of Facilities – Infrastructure and its management. Infrastructure management is also a competence with own and allocated assets and its conservation and full use must be very well managed.
Consistency, speed and accuracy in order fulfillment (CROXTON, 2001) are related to time and cost, and effort and quality measurements are based on precision and consistency, such as delivering a product under the same conditions at the time of collection. This can be understood as part of the consistency of the channel, specifically in transport, but is also broadly accurate. Those who have the least effort and greater precision (time and quality in handling / transport) have a competitive advantage and having competence in these areas makes the advantage more lasting. This is a key competency in the supply chain.
Production flow management (CROXTON, 2001), through support to manufacturing: PCP – production planning and control. Ballou (2009 p.32) reinforces this by listing aggregate quantity specification, sequencing in term and volume, and scheduling, being able to support production. Without being addressed here in this article this ability leads to others, such as lean production for example. Without the support of the logistics it is not possible to do it and without this capacity these techniques and many others (Just in Time) cannot be made.
Marketing support, with speed and flexibility, in the development and commercialization of products (CROXTON, 2001). As an example Ballou (2009) relates the evaluation of customer services, customer reaction to service and level of customer service as part of marketing support.
It was verified through this preliminary survey that the essential competences primarily related to the basic functions of logistics, such as transportation, do not appear in APICS (2015) and DITTMAN (2013) or even CROSTON (2011) notes because they are These skills, especially APICS and DITTMAN, are more related to managers and that these more basic functions are more related to the logistics operations themselves. However, without competence in these areas, it is not possible for a supplies chain to stand out in terms of speed, cost and consistency, since these are of the value chain, which were addressed in this article and are nested intrinsically within almost all the factors of the supplies chain, these being:
Information management in the feeding of information flowing through the network and that will serve as a medium for the exercise of other skills, such as relationship and customer service, for example. Competence in the flow of information and again here is repeated: with consistency and speed.
In transportation management it will also serve as means for other skills such as order fulfillment, distribution and supplies. Being 2/3 of the total logistical cost, transport management is the item with the greatest impact on logistical cost and the interface between one mode and another or between mode and facilities is also crucial. Optimization of freight, optimization of routes, proper use of mode, consistency, regularity, precision and many other critical factors indicate that in the design of the operation and the channel and its management one must be very competent due to the impact that this entails in time and effort (cost). When you do not trust the mode, there are more stocks due to the fear of the supplies chain being broken due to shortages due to errors, delays and failures.
This leads to another competence in inventory management, involving warehousing, material handling and packaging that provide consistency, speed and accuracy in order fulfillment through speed and availability, being a source of competitive advantage. In this way it can be listed that the “state of the art” should also be in:
Inbound – receiving;
Operations when dealing with products handling during production or at complex stages along the chain;
Outbound – Distribution and
Accuracy in storage in quantities, maintenance / conditions, location and control.
Another competence is that of sustainability along the supplies chain, involving not only reverse logistics but also the reduction of carbon dioxide emissions and consequently the reduction of the environmental steps, as well as other activities that reduce the use of natural resources and the exaggerated consumption of resources in activities that do not generate value.
Last but not in a importance scale, the supply chain must be able to manage the financial flow through the ability to obtain resources, manage these resources, control, elaborating audits and effective costs. The financial cycle of operations is as important as the physical cycle of the supplies chain itself.
Not all essential competencies may have been addressed here with weight or in a more consistent or more appropriate manner, but it is believed that this work has achieved its goal by identifying the essential competencies of a supplies chain. It is recommended for future studies a more precise and broader analysis, with other authors and works, in order to obtain in a more synthetic and precise way the essential competences without many redundancies.
At an opportune moment, global chains are expected to be measured by critical success factors anchored in key competencies broadly and narrowly within each factor in the chain.
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Indaiatuba, December 16, 2016
[1] Reinaldo Toso Júnior, professor on Fatec Indaiatuba “Dr. Archimedes Lammoglia”. Dom Pedro I Street, 65. Cidade Nova I. CEP 13334-100. Phone: (19)3885-1923. Contact: reitoso@yahoo.com.br.
[2] The word waste was preserved in this translation by the author of the article to be in agreement with how Womack and Jones evaluate the word muda in Japanese, translating it as waste and these authors, english speakers, report that this word is strange and sounds like “rolling through the tongue”. The more accurate term would be futile, something useless. (Muda is 駄 駄). Muda, useless / superfluous / worthless, mura, inconsistent / irregular and muri absurd / irrational / overload, the three types of wastage in the Toyota Production System, see Lean Institute Brazil, available at http://www.lean.org .br / concepts / 78 / muda, -mura, -muri — types-activities-that-generate-waste.aspx], access on Dec 07, 2016.
Blog do Laboratório de Logística da Fatec Indaiatuba - Dr. Archimedes Lammoglia 