| Supply Chain Management (SCM) as defined by Tom | | | | The strategy works and now Toyota Motor |
| McGuffog is "Maximising added value and reducing | | | | Corporation, a Japanese company, is considered to |
| total cost across the entire trading process through | | | | be the number one auto car maker in the world |
| focusing on speed and certainty of response to the | | | | beating Ford and General Motors of the United |
| market." Due to globalization and ICT, SCM has | | | | States. |
| become a tool for companies to compete effectively | | | | Value Advantage |
| either at a local level or at a global scale. SCM has | | | | SCM has allowed business nowadays to not just |
| become a necessity especially for manufacturing | | | | have productivity advantage alone but also on value |
| industry when it comes to deliver products at a | | | | advantage. As Martin Christopher in his book, |
| competitive cost and at a higher quality than their | | | | Logistics and Supply Chain Management: Strategies |
| competitors. Here are some of the reason SCM has | | | | for Reducing Cost and Improving Service' states, |
| become important to today's manufacturing industry:- | | | | 'Productivity advantage gives a lower cost profile and |
| Competitive Edge through Core Competencies | | | | the value advantage gives the product or offering a |
| Today's business climate has rapidly changed and has | | | | differential 'plus' over competitive offerings.' Through |
| become more competitive as ever in nature. | | | | maximizing added value and also reduce the cost in |
| Businesses now not only need to operate at a lower | | | | the same time, more innovation can be added to the |
| cost to compete, it must also develop its own core | | | | product and process. Mass manufacturing offers |
| competencies to distinguish itself from competitors | | | | productivity advantage but through effective supply |
| and stand out in the market. In creating the | | | | chain management, mass customization can be |
| competitive edge, companies need to divert its | | | | achieved. With mass customization, customers are |
| resources to focus on what they do best and | | | | given the value advantage through flexible |
| outsource the process and task that is not important | | | | manufacturing and customized adaptation. Product life |
| to the overall objective of the company. SCM has | | | | cycles also can be improved through effective use of |
| allowed company to rethink their entire operation and | | | | SCM. Value advantage also changes the norm of |
| restructure it so that they can focus on its core | | | | traditional offerings that is 'one-size-fits-all.' Through |
| competencies and outsource processes that are not | | | | SCM, the more accepted offerings by the industry to |
| within the core competencies of the company. Due | | | | the consumers would be a variety of products |
| to the current competitive market, it is the only way | | | | catered to different market segments and |
| for a company to survive. The strategy on applying | | | | customers preferences. |
| SCM will not only impact their market positioning but | | | | As an example, the Toyota Production System |
| also strategic decision on choosing the right partners, | | | | practiced in Toyota, evaluates its supply chain and |
| resources and manpower. By focusing on core | | | | determines what is value added activities and what is |
| competencies also will allow the company to create | | | | not value added activities. Non added value activities |
| niches and specialization of core areas. As stated in | | | | are considered to be 'Muda' or waste and therefore |
| the Blue Ocean Strategy outlined by Chan Kim, in | | | | must be eliminated. Such non added value activities |
| order to create a niche for competitive advantage, | | | | are overproduction, waiting, unnecessary transport, |
| companies must look at the big picture of the whole | | | | over processing, excess inventory, unnecessary |
| process, and figuring out which process can be | | | | movement, defects and unused employee creativity. |
| reduce, eliminate, raise and create. | | | | The steps taken to eliminate waste are through |
| As an example stated by Chan Kim, the Japanese | | | | Kaizen, Kanban, Just-in-time and also push-pull |
| automotive industries capitalise on its resources to | | | | production to meet actual customer's demands. The |
| build small and efficient cars. The Japanese | | | | Toyota Production System revolutionise the Supply |
| automotive industries gain competitive edge by | | | | Chain Management towards becoming a leaner supply |
| utilising their supply chain to maximise their core | | | | chain system that is more agile and flexible towards |
| competencies and position itself in a niche market. | | | | meeting the end users demands. |