Section 1 – Introduction: concepts and demarcation
Learning unit 4
Organisation of the supply chain
Chapter 4: Organisation of the supply chain
Introduction
Main focus of Assessment criteria of learning Specific
concepts and
learning unit unit outcome 1
demarcation
Learning unit 4: Organisation of Compile a road map for supply Analyse the
Organisation of the supply chain complexities
chain integration.
the supply chain of the
Scrutinise the importance of building
managing relationships, power blocks of
and leadership in the supply supply chain
chain. management.
Study pages 61 to 79 of your prescribed book.
When you study chapter 4 of your prescribed book you should identify the following
five topics:
The bullwhip effect
Supply chain integration
Supply chain design
Virtual organisation
Relationship, power and leadership in the supply chain
The focus of this chapter is on the design of an entire supply chain – in other words,
the way in which all the organisations within the supply chain, often referred to as the
supply chain members, work together to organise and integrate the different flows
(product and services, finances and information) within the supply chain to maximise
supply chain surplus.
“SCM, when well executed, efficiently integrates suppliers, manufacturers,
warehouses and other intermediate value-adding partners so that production and
distribution is synchronised with customer demand, thereby reducing overall system
or pipeline cost and satisfying service-level requirements.” (Badenhorst-Weiss et al
2017:61)
4.1 The bullwhip effect
At honours level you should be familiar with the concept of the bullwhip effect and the
negative impact of the bullwhip effect on the entire supply chain. Your prescribed book
provides an excellent example of how a brewery's supply chain is negatively affected
by the bullwhip effect.
Activity 4.1: Refresher – the bullwhip effect
To refresh your undergraduate knowledge of the bullwhip effect, watch
this short YouTube video titled “What is the bullwhip effect?” by Investor
Trading Academy: https://www.youtube.com/watch?v=fNUmEw2EJPs.
4.2 Supply chain integration
This section starts by providing a comprehensive explanation of supply chain
integration. The authors conclude by stating that “supply chain integration incorporates
different groups, functions or organisations either formally or informally, physically or
by information technology, to work jointly and often concurrently on a common
business-related assignment or purpose.” (Badenhorst-Weiss et al 2017:63)
Section 4.2 is quite intensive – do not get overwhelmed when you go through the
section. Use table 4.1 below to make notes and to organise your thoughts as you work
through the section.
Table 4.1 – Sub-sections of section 4.2
Sub-sections of section 4.2 Keywords
Types of supply chain integration Internal supply chain integration
External supply chain integration
Stages of development in supply chain Stage 1: Baseline integration
integration Stage 2: Functional integration
Stage 3: Internal integration
Stage 4: External integration
Barriers to effective supply chain The multiple-variable problem
integration (and how to overcome these Complexity of the logistics network
Conflicting objectives
barriers) The dynamic, ever-changing nature of
the supply chain
The efficiency trap
Lack of trust and process ownership
Inventory management is not less
difficult
Cost and implications of integration Time-consuming
Business paradigm shift
Substantial investment, i.e. time and
effort
Opportunity costs
Associated risks
Key success factors for an integrated Clarification of roles, responsibilities
and processes
supply chain
Agility
Streamlined processes
Visibility of information
Trust and collaboration
Alignment of objectives
Activity 4.2: Bridging the gap
In the case study “How integrated is your supply chain?” on page 69 of the
prescribed book, a lack of information best practices and a lack of supply
chain collaboration are identified as the main contributors to the gap between South
African organisations' current ISCM status and the prescribed ISCM best practices.
With the knowledge that you have gained throughout this chapter, what advice can
you give these South African organisations to bridge this gap? Share your answers
with your fellow students on the discussion forum under the heading Activity 4.2.
4.3 Supply chain design
Take note of the following comment in your prescribed book relating to section 4.3:
“The discussion in this section will be focused on the design and implementation of an
integrated lean supply chain model such as the one presented below. It should be
noted that although this model is industry specific, the design concepts and principles
in it are not unique to any particular industry but are generic in nature” (Badenhorst-
Weiss et al 2017:70). Therefore, the same design concepts and principles are relevant
for a supply chain that, for example, is focused on responsiveness.
When designing a fully integrated supply chain, certain design constructs and activities
should be considered. These design constructs and activities are the focus of this
section. The section starts by differentiating between the different design constructs
of a supply chain and concludes with a discussion of the primary and secondary
activities of supply chain management.
4.4 The virtual organisation
“A virtual organisation is merely an informal electronic network that exists to perform
a certain task or provide a specific service. It is not necessarily an identifiable unit with
formal organisational structures.” (Badenhorst-Weiss et al 2017:76)
Take a minute and consider the impact of technology, such as the internet and e-mail,
on a supply chain.
4.5 Relationships, power and leadership in the supply chain
“… it should be clear that information sharing, collaboration, cross-organisational team
development and strategic partnering form the foundations on which supply chain
design and integration are achieved. It may not, however, be easy to collaborate and
develop relationships in supply chains that are characterised by power plays, non-
transparent process management, limited cross-organisational problem solving, etc.
Firms, together with their supply chain partners, have to re-engineer their processes
and inter-organisational linkages should they wish to survive in the competitive global
market place” (Badenhorst-Weiss et al 2017:76). The authors elaborate on this
statement by discussing relationships, power and leadership in terms of supply chain
management.
Did you include (or update) the following terms in your glossary?
bullwhip effect design constructs
internal supply chain primary supply chain
integration activities
external supply chain secondary supply chain
integration activities
supply chain integration virtual organisation
process
