The food and beverage companies are dealing with products which are characterized as having limited shelf life and therefore, the purchasing and supply chain management approach of such companies is highly important for defining the performance and competitive position of companies. The historical context of supply chain management is significantly different for contemporary views stating that traditionally supply chain management was recognized as “three bids and a cloud of dust approach” with an aim of beating competitors in gaining low prices from suppliers. However, the changing face of businesses and drastically changing environment is suggesting new level of importance for supply chain management. Given this view, the current essay is hovering around discussing the role of purchasing and supply chain management in defining the level of competitive advantage of food and beverage companies. Along with this, the proactive approach of cost has also been discussed in context of supply chain management and competitive advantage.
Food and Beverage Supply chains and Competitiveness
The food and beverage industry is substantially competitive and their competitiveness is based on their quality service operations. It has been highlighted by the researchers that food and beverage industry is highly evolving and adjusting with requirements of industry is adding in competitiveness potential of organization (Ellram and Cooper, 2014). The supply chain management of food and beverage companies is responsible for procurement of beverages and food ingredients and ability to obtain ingredients on lower prices can add significantly in competitive potential of restaurants and bars. Currently, the food and beverage companies have significantly recognized the need to develop competitive purchasing and supply chains with an aim of surviving in long run. It has been highlighted by the researchers that around 49 percent of food and beverage companies in the world have adopted the approach of dedicating more than 5% of their workforce for management of supply chains (Beske and Seuring, 2014). According to the world class status, this extent of involvement in supply chain is considered as substantially important for competitive improvement of organization.
The effective management of purchasing and supply chain management is highly challenging for the food and beverage companies as they are transaction intensive companies. It is evident that food and beverage products have short shelf life, therefore, the purchasing and supply chain operations are both difficult and important to manage (Golicic and Smith, 2013). The change is highly inevitable within food and beverage companies and there is high level of variability in market demands, vendor offering, processing and regulations. Give this level of variability, the supply chains of food and beverage companies require higher level of flexibility with an aim of adjusting it with contingency variables. The success of supply chain is a dual concept which not only offer success to an individual organization but it can cause success of overall supply chain as well. The inclusion of customers and suppliers in supply chain can serve as the way of offering sustainable competitive advantage to organizations.
Purchasing and Supply chain management
The supply chain management is comprised of wide range of activities that are crucial for ensuring that business is running well. The supply chain management ranges from sourcing of raw material to the delivery of final products to the potential customer (Guthrie, Cuganesan and Ward, 2008). The goods are delivered in market mainly at the price which is acceptable in the market. Mainly, the supply chain management is carried out by ensuring higher level of integration with suppliers, external providers of services and customers. The focus of supply chain is maintained on development of new product, logistics and well integrated information system with an aim of coordinating these activities for effectiveness of organization (Li, Ragu-Nathan, Ragu-Nathan and Rao, 2006). The supply chain can help the food and beverage companies to deliver right product at the right time to the right customer.
There are number of activities associated with supply chain management including; forecasting, fulfilment, purchasing, customer services and storage and distribution (Tan, Kannan and Handfield, 1998). The forecasting is associated with analysing the supply demands and planning of sourcing material. The analysis of potential problems associated with performance and supply chains also comes under the category of forecasting. In addition to it, the fulfilment revolves around reception, storage and shipping of material which in case of food and beverage Companies is highly sensitive due to short shelf life of material and products (Stadtler, 2015). The purchasing process within supply chain management is associated with searching for right supplier, negotiating with them and then making contracts for making purchasing of material. The management of material is also the part of purchasing and in food and beverage companies the material management requires significant attention of purchasing and acquisition managers (Lin, 2013). Followed by this, the storage and distribution of material is highly important activity of supply chain management as some of the material needs to be stocked and short life time of raw material of food and beverage companies foster them to management inventory with huge effectiveness. In terms of inventory level management, the food and beverage companies need to make order as and when required for production with an aim of minimizing waste. Finally, the customer service management is also the part of diverse supply chain management (Beske, 2012). The delivery of high quality services to customers is ensured by accurately recording orders, effectively shipping final products and then delivering products in given time. The researchers have predicted that organizations who maintain effectiveness in all activities of supply chain management are able to maintain higher levels of performance and they have the potential to outperform their competitors in long run.
According to Folkerts and Koehorst, (1998) the improvement in supply chain management can be carried out by lowering the purchasing cost of material at the time of sourcing of material. The lowest purchasing price can be ensured by dealing directly with vendors and negotiating for the lowest possible prices. Purchasing the material directly from manufacturers without involvement of an intermediary is an important way of reducing cost of purchasing. The food and beverage companies can devise their strategies in the way which can help them in cutting down processes and to complete transaction with minimum possible cost. The food and beverage companies are available with the procurement software naming “Stratton Warren” with an aim of aim managing their purchasing process with greater ease. The Stratton Warren can be integrated with ware house management, production and financial system of the company in order to ensure that purchasing is made in time based on demand and usage of material.
It has been highlighted by the Golicic, Boerstler and Ellram (2010) that effective purchasing and better management pf supply chains can help in gaining sustainable competitive advantage. Moreover, it has been asserted by Guthrie, Cuganesan and Ward (2008) that there is diverse range of supply chains design and selection of right design and strategy of supply chain management is inevitable for success of supply chains. The companies who rely on strategic approach of supply chain management and shape their strategic initiatives on nature of their supply chains are more likely to gain competitive advantage in long run. The commitment of diverse set of individuals is necessary for shaping the success of supply chains and modification of purchasing strategy with external supplier’s entities and internal product design and production processes is necessary for defining the success of supply chain management. Likewise, it has been highlighted that adoption of effective information system and enterprise resource planning system is important to collaborate with suppliers and customers in the way market demands can be fulfilled and competitive advantage can be gained.
Methods of Gaining Competiveness Based on SCM
The effectiveness in supply chain management can be obtained by relying on number of factors including; automation of supply chain operations, proactive forecasting of future demands, proactive cost controlling approaches and implication of supply chain management software (Hamprecht, Corsten, Noll and Meier, 2005).
Automation of Operations and Supply Chain
It has been presented by professional and scholars that in the operations of food and beverage organizations, there are number of processes which are repeated over time and they can be automated with greater ease (Hawkes, 2009). The increased level of processes automation within supply chain of food and beverage companies allow the employees to spend less time on completion of processes and offer long term advantages to organization. In order to successfully automate processes, it is important to explore available technologies vigorously. The technology can vary from hand held bar code scanners to tablets and selection of appropriate technology can reduce human errors and can enhance accuracy of operations. Along with this, implication of effective enterprise resource planning system and linking it with operations and supply chain can help to check inventory levels and purchasing can be carried out in time by managing supply chains effectively. The Krause, Vachon and Klassen (2009) has suggested that IFS applications can be implemented for gathering operations and supply related information in timely manner. Therefore, the food and beverage companies can apply information gathering software and systems for automating the major components of their supply chains.
Proactive Forecasting of Future Demands
According to Lummus, Vokurka and Alber (1998) the food and beverage companies need to follow proactive approach of forecasting the demand of material for avoiding shortage of materials and excessive spending. The planning of future of purchasing supply chain requires to consider the aspect of market fluctuations, customer demand and cost of material into account. The market fluctuations are based on the notion that demand of market changes continuously and consideration for changing market conditions can enhance agility of supply chains. Along with this, the customer base of food and beverage companies is highly flexible and sales forecasting adds in ability of organization to serve customers through effective management of processes. Finally, the material availability and cost are also subject to change and by keeping in view the limited shelf life of food and beverage products, the purchasing of material sold be carried out based on demand and necessity. It has been asserted by the Maloni and Brown (2006) that supply chain forecasting of food and beverage companies can be carried out through adoption of enterprise resource planning system that helps in demand planning, procurement, inventory and production.
Proactive Cost Controlling
Most of the supply chains cost areas are difficult to control including; cost of material, labour and fuel rates. Therefore, the researchers have suggested that food and beverage companies can control material waste cost. The companies can use efficient and effective production processes for lowering the usage of material reduction of cost associated with lost finished goods (Matopoulos, Vlachopoulou Manthou and Manos, 2007). The food and beverage companies can hinder the approach of over stocking inventory with an aim of utilizing material within their shelf life. Along with this, the companies can maintain high quality with an aim of reducing defects in products, such that waste of finished products can be minimized and cost can be controlled. Likewise, the production sequences can be ensured for effectively detecting flaws in processes and taking corrective actions for minimization of issues. It has been offered by Rimmington, Carlton and Hawkins (2006) that well aligned system with operations of organization can help in proactively controlling of cost and it can allow the organizations to gain competitive advantage in long run.
Implication of Supply chain management software
The supply chain processes can be executed well and relationship with suppliers can be managed with the help of supply chain management software. There is huge variety of modules and tools available for management of supply chain including; fishbowl, Qstrat, Uroute, Snap Fulfil, Procurify, Jda, 3PL Central, Made4net and Ramp systems (Walker and Jones, 2012). The supply chain management software has the potential to efficiently manage the operations of company ranging from check-in of inventory in stores to shipment and distribution to material to final customers (Smith, 2008). The supply chain management software can help in automation of processes, which is an important way of minimizing lead times and it can help in improvement of performance. In this manner, the efficiency of organization can improve by relying on supply chain management system software.
Along with this, the supply chain management software can help in reduction of cost due to increasing efficiency of organizational processes and operations. Through reduction of lead times, the cost of labour can reduce and organizations can proactively minimize operational cost (Pullman, Maloni and Carter, 2009). The supply chain management software are designed with intelligent features which help in tracking areas of cost waste and helps in its reduction. The software can suggest the combination of modes in the way which can help in minimization of transportation cost. Along with this, the suggestions are also made about the areas where inventory storage cost be reduced. Following by this, the trend analysis and business intelligence programs can be implemented well by relying on supply chain management software. The forecasting of market trend can help in identifying the demands of customers and market and can assist in tracking the required level of material and investor (Pagell and Wu, 2009). Along with this, on the basis of data gathered through intelligence software effective decision making can be carried out. The food and beverage companies can gain higher performance level and sustainable competitive advantage by implementing supply chain management software.
Green Supply Chain Management
The mostly desired feature of supply chains is incorporating the concerns of community, society and customers into account. The green supply chain management are likely to gain higher level of compliance with ISO 14001 (Zhu and Cote, 2004). The food and beverage companies can develop sustainable supply chains by offering high quality products to their customers along with incorporating corporate social responsibility into account. They can rely on production of products that have positive health consequences on the customers. Along with this, the food and beverage companies can lay their hands in helping the community through charity and welfare programs which can enhance their positive image at public level and help them gain competitive advantage in long run (Wu and Pagell, 2011). Finally, the food and beverage companies can also motivate their suppliers to incorporate environmental management practices and to meet the concerns of their stakeholders regarding protection of environment. This can serve them to sustain competitive advantage in long run.
The food and beverage company can gain sustainable competitive advantage based on its effective purchasing and supply chain management system. The cost management ability of food and beverage companies can help them realize huge levels of profitability and proactive approach of cost reduction can help in gaining competitive advantage. The essay has presented that 49% of world’s food and beverage companies are relying on world class status of engaging in supply chain management are successfully competing with their significant counter parts. Additionally, the literature on purchasing and supply chain management has provided that how supply chain management can help the food and beverage companies in gaining competitive advantage in long run. Along with this, the different ways through which food and beverage companies can gain higher competitiveness based on purchasing and supply chain management are automation, forecasting of market demand and proactive management of cost.
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