Managing Towards Supply Chain Maturity

Supply chains have been widely discussed in the academic literature and have been the subject of numerous monographs. We can therefore safely conclude that the topic of supply chain management has been examined thoroughly and in detail. This does not mean, however, that all of the avenues of analysis have been explored, or that no areas of enquiry remain to be uncovered that may considerably expand our knowledge of supply chains. There will be latitude for additional exploration for as long as supply chains, which are living economic structures, continue to evolve and change. Logistics service providers and those responsible for supply chains at manufacturing and trading companies are continuously acting to make their operations more efficient, to reduce costs or to improve customer service. This is clearly visible in the case of world-class market leaders and their supply chains. Operating in the markets they do, where competition is ever sharper and customers more and more demanding, they are required to strive for refinements and improvements in this way.

In the face of the growing rate of globalisation processes, stronger competition and increased flexibility of business lines, companies have ceased to focus exclusively on what is happening within their own organisation. They have abandoned an egocentric approach, which was based on purely market-related, transactional relationships with their environment. One may conclude that thinking in categories of a network of dependence and relationships has unquestionably become one of modern management’s key paradigms — justified in the context of the global economy. As K. Obtöj states (2002, p. 64), the time of the ‘lone gunslinger’ is drawing to an end, the future is not in aligning with single companies as much as with networks of companies that collectively influence the standards of market operations. Therefore, the supply chain should be understood as a network¹ of entities delivering the product (or service) to the market, end-customer or consumer. A variety of entities are involved in delivering the product to the market; they, either individually or in cooperation, carry out diverse processes; many flows are recorded within the supply chain structure itself. A detailed description of the supply chain requires application of the following approaches (Witkowski 2010, p. 13):

Integration is the single most important and the most common concept associated with supply chain management. The idea of integration includes such notions as synchronisation and coordination of actions in order to speed up flows in a supply chain. The primacy of attempts at integration, without which other actions in the supply chain could not be carried out effectively and efficiently, needs to be stressed. At the same time, following Mangan, Lalwani and Bücher (2008, p. 250), it should be noted that supply chain integration is not identical with partner collaboration in the supply chain. Indeed, though an integration initiative may be accompanied by relation-based collaboration, something that will surely facilitate its implementation, partnership is not an absolute condition for process integration in a supply chain.

In recent years, the question of how to ensure process continuity in relationships between supplier and customer has been getting more attention in academic discussion and commercial practice. This is due to a significant increase in levels of risk, in particular in international supply chains. The main reasons for this increase are the following: • globalisation, outsourcing and offshoring strategies, which translate into increasingly complex supply chains due to the diversification of links involved in the process of the flow of information and goods and, consequently, heightened uncertainty in relationships between supplier and purchaser;

Outsourcing involves the sourcing of goods and services, previously produced by the sourcing organisation, from external suppliers (Mclvor 2006, p. 7). The term outsourcing is an abbreviation of ‘outside-resource- using’, which means the use of external resources to perform tasks that were traditionally performed in-house. Outsourcing is a concept of organisation management consisting in entrusting tasks to outside companies, which take on the obligation to perform them. The execution of this concept leads to resignation from the independent performance of selected tasks and the entrusting of this to specialised third parties. The theoretical boundaries of outsourcing range from 0% to 100% and the upper limit (100%) means the company outsources all operational activities to third parties and is itself a virtual entity (Rymarczyk 2008, p. 70). If a company does not outsource anything at all (the lower limit of 0%), then its operation is fully based on in-house resources (insourcing). A good example of insourcing is provided by the Ford Motor Company. When Henry Ford realised how much glass was needed to build his automobiles, he decided to acquire a glass factory (Tompkins et al. 2005, p. 4). The traditional business based on own resources allows full control over processes. Generally, insourcing is perceived as an approach that gives higher security.

Supply chain risk management (SCRM) is based on the same methodology as enterprise risk management (ERM). It presents risk management as a process composed of a number of stages (AIRMIC/ALARM/ IRM: 2002; COSO 2004; HM Treasury 2004; ISO 31000:2009; Fraser and Simkins 2010, p. 103):

Apart from material flow, other flows also occur in supply chains, including data, information and knowledge flows. The flow most frequently described in the literature is information flow (Coyle, Bardi, and Langley 1992, p. 71; Ballou 2004, pp. 7–8; Bowersox and Closs 1996, pp. 28 and 33–34); one such flow is thus distinguished. This approach displays (suggests) a uniform manner of communicatin between links in the supply chain and a uniform set of tools involved. However, it does not reveal the communication content structure. To build such a structureit is necessary first to define what is being considered as data, information and knowledge.¹ ‘Data’ include facts, images, characters and figures taken out of context, considered separately and as yet unanalysed. The term ‘information’ is defined as data systematically presented within a certain context and assuming some act of communication. Data can be transformed into information. This transformation is performed within the information system (including the computer system) of an organisation or a supply chain, and means adding value to data. The value of information, however, depends on the recipient and the context in which the information is being presented. Information may have major significance for one recipient but be of no value to another. Data and information are complemented by knowledge.

Most, if not all, publications pertaining to supply chains stress the growing importance of the nature of the contacts between supply chain links; these contacts largely determine the durability, effectiveness and efficiency of operation. Usually, it is suggested that collaboration between the supply chain links be based on partnership, as opposed to transactional or confrontational relationships (Ferguson 2000, p. 65). These should be long-term relationships, closely binding the parties, and based on mutual trust, openness and the sharing of risk and profits (Dudzik 2000, p. 179). Building such relationships within a supply network is a challenge. It requires the time, willingness and commitment of all parties.

Today, companies want to improve the operation of their supply chains because they have learned that supply chains are the source of market power. Many companies outsource and offshore selected business processes. The scope and scale of outsourcing and offshoring are constantly growing. The results of the conducted research helped expand knowledge of modern supply chains in terms of the risk, information and social capital management methods employed by companies (supply chain links) in the outsourcing and offshoring decisions they make. The results help assess the differences in approaching these issues and differences in the applicacion of risk, information and social capital management methods on different supply chain maturity levels within the context of Ch.C. Poirier’s model. They also present an overview of what effects these methods have.