Weltz lives and goes to school in southern California but the handbag she really wants is made in and distributed from China. This is not a problem because thanks to the internet, she has access to numerous supplies at various prices. Being a college student, low price is important to her but since she has a school dinner to attend to next week, so is delivery; on time delivery that is.
The process of making, assembling, inventorying, distributing and transporting commodities such as the handbag Weltz really wants is called supply chain management. Supply chain is an essential behind the scene operations part of any business function that is frequently overlooked. Big companies like apple and Walmart wouldn’t have attained a global reputation or made it to the fortune 500 companies list without a stable and efficient supply chain. It is thus safe to say a significant percentage of a company’s success depends on an effective supply chain. Companies are beginning to measure how well they are doing by comparing the effectiveness of their competitors’ supply chain to that of their own. (Transition)
It is human nature to compete, being it in a society where we strive to achieve the highest social status we can or in academia where we do our best to be remembered for our good grades or good work. Sometimes humans compete against themselves in the hopes of becoming the best there is. According to science direct, humans compete for three reasons. On their blog, they wrote, “We hypothesized that people who are motivated by competition are motivated for at least three reasons: competition allows them to satisfy the need to win, competition provides the opportunity or reason for improving their performance, and competition motivates them to put forth greater effort that can result in high levels of performance.” Because a corporation is made up of a group of individuals, the competition dynamics outlined above also apply to organizations and corporations with some very minor alterations. As outlined in his journal, Gary A. Smith describes the framework of corporation competitions, calling competition “…the soul of capitalism” and went on to suggest that without competition, growth and improvement are impossible.
Perhaps this concept is not clearer anywhere as it is in supply chain management. Businesses compete economically and competition among businesses is good for both customers and competing businesses alike. Gary Smith, in his journal, elaborated on five reasons he thinks competition is good for a business. He suggests that competition is a form of validation. Having a competitive market indicates people or organizations see value in your commodity or idea. There is no such thing as a unique product. A product or organization with no competition dies out and eventually goes out of business. Competition, therefor is a way for a business to access how valid their ideas and products are in a business market.
Gary Smith’s second reason for identifying competition as a key to supply chain success is that competition spurs innovation. In organizations’ attempts to one up one another, new and better commodities and ideas are inspired. A good example is how the automobile industry has changed over the course of a few years. In automobile manufacturers’ attempt to be the one to provide consumers with the best vehicle there is, we now have innovative inventions such as self – driving cars and some of the safest cars since the invention of the automobile now roam our streets. All these are as a result of companies competing against each other.
Companies exercising a monopoly in a market often get complacent with their idea or product and make little to no effort to improve such commodity. This is one trait, in Gary Smith’s opinion, that competition helps eliminate. A case study on how blockbuster eventually went out of business is a good example as to why competition is needed to keep companies on their toes. In the early 2000s, Netflix CEO and co-founder Reed Hastings proposed a deal for his company to be bought and absorbed by Blockbuster for $50 million. Blockbuster’s Chief executive, John Antioco refused to buy out a company which is now worth $19.7 Billion because he lacked the vision to see how the home entertainment industry was changing just under his feet. His complacency rooted from the fact that at the time, blockbuster was a leading name in the home entertainment industry with no competition in sight. This led him to believe no improvements or changes are necessary, much to the company’s demise. This has come to be known as the worst business decisions in history.
In his journal, the dynamics of competitive intensity (quotation marks?), W.P Garnett wrote, “Competition triggers organizational learning, from internal functions to external customers.” This quote exemplifies Gary A Smith’s last argument on the importance of competition in supply chain and business as a whole. Competition educates. Businesses have a spontaneous desire to compare themselves with other homogeneous organizations as a means of obtaining a competitive edge. Such a play is beneficial to a business because it helps identify and sometimes correct areas where they might fall short. In a commonly used business practice known as benchmarking, companies can compare themselves to other organizations to, according to business dictionary, “…determine what and where improvements are called for, (2) to analyze how other organizations achieve their high performance levels, and (3) to use this information to improve performance.” This process of continuous education puts an organization in a mindset of continuous improvement.
While Gary A. Smith expands on the importance of competition to a supply chain in an industry, Zhi Cao (and co-authors?) (Insert tittle here?) analyses the influence of competition on supply chain integrity in today’s global market. He (they?) argues that, “As companies compete on a global scale, having a supply chain that spans the globe increases an organization’s competitive advantage.” For years, the question supply chain professionals have been asking is just how much influence has globalization on supply chain? (Transition)
Most business executives today know they can purchase competitive quality commodities from china for a third of the American price. This has led to companies not just competing on a domestic scale but are challenged by international competition in both domestic and international markets. To borrow the words of Zhi Cao, “With the expansion of globalization, firms in most countries have to compete against both domestic and foreign competitors, challenging their design, product, and service capabilities.” Global competition therefore can threaten a company’s survival. This has led various companies to seek and implement new and innovative management philosophies and practices to survive a competitive environment. Further clarification can be found in the rapid changes in customer expectations.
Customer satisfaction is a primary goal of most organizations. An excellent supply chain plays a very important role in customer satisfaction. The 28th APICS dictionary gives some criteria businesses use to measure their customer satisfaction, “…to meet customer satisfaction. This is done through order fulfilment. A good order fulfilment is “An order in which the ‘seven Rs’ are satisfied: the right product, the right quantity, the right condition, the right place, the right time, the right customer, the right cost.” In order to compete, companies are now going beyond low prices and fast deliveries because the low cost and fast delivery strategy has become relatively ineffective in recent years as a result of globalization. In a B2B (Business to business) market, businesses don’t just require low prices and faster deliveries. In fact some companies in the B2B market regard a faster than expected delivery as a bad business practice due to inventory costs of commodities not yet needed for use. As a result, companies looking to stay relevant in today’s global market and shift the competition paradigm in their favor are adding an extra layer of customer satisfaction. The implementation of concepts such as just in time delivery (Explain?), extended warrantee, Poka Yoke, value adding, the introduction and implementation of lean and six sigma concepts are all examples of such efforts.
As cited in Zhi’s journal, “One of the most investigated dimensions of competition is “competitive intensity,” which refers to the degree of competition a firm faces within a particular market.” However, most research done on competition focus solely on intensity dimension, ignoring the fact that when a firm’s target market expands or changes, its competitive intensity changes as well. Firms may have different perceptions of competitive intensity if their focal market changes. This is further made clear as Zhi writes, “When a firm’s target market expands from the local to the international market, it may perceive the competition as more intensive because it faces more aggressive competitors and more volatile demands.” There are many ways a company can perceive competitive intensity in a new market. A firm might experience a variance in laws and regulations governing foreign economies as compared to local markets which will lead it to behave differently in the two markets. Secondly, a company’s competitive intensity can be measured by its levels of technology and methods of information sharing. Some Chinese companies use informal information sharing to gain competitive advantage in a domestic market but switches to formal information sharing to compete in foreign markets. Differences in language, culture, distance, and institutions are all ways a company’s competitive intensity can be perceived by a company venturing into a new market. It is therefore a major requirement for a company’s competitive behavior to be aware of the competitive intensity in a market it wishes to pursue.