P.Ethics

What is Ethics?

           Ethics is the branch of study dealing with what is the proper course of action for man. It answers the question, "What do I do?" It is the study of right and wrong in human endeavors. At a more fundamental level, it is the method by which we categorize our values and pursue them. Do we pursue our own happiness, or do we sacrifice ourselves to a greater cause? Is that foundation of ethics based on the Bible, or on the very nature of man himself, or neither?

Why is Ethics important?

          Ethics is a requirement for human life. It is our means of deciding a course of action. Without it, our actions would be random and aimless. There would be no way to work towards a goal because there would be no way to pick between a limitless number of goals. Even with an ethical standard, we may be unable to pursue our goals with the possibility of success. To the degree which a rational ethical standard is taken, we are able to correctly organize our goals and actions to accomplish our most important values. Any flaw in our ethics will reduce our ability to be successful in our endeavors.

What are the key elements of a proper Ethics?

              A proper foundation of ethics requires a standard of value to which all goals and actions can be compared to. This standard is our own lives, and the happiness which makes them livable. This is our ultimate standard of value, the goal in which an ethical man must always aim. It is arrived at by an examination of man's nature, and recognizing his peculiar needs. A system of ethics must further consist of not only emergency situations, but the day to day choices we make constantly. It must include our relations to others, and recognize their importance not only to our physical survival, but to our well-being and happiness. It must recognize that our lives are an end in themselves, and that sacrifice is not only not necessary, but destructive.

Stakeholder Analysis

         Stakeholder management is critical to the success of every project in every organization I have ever worked with. By engaging the right people in the right way in your project, you can make a big difference to its success... and to your career."
– Rachel Thompson, Experienced Project Manager
               Stakeholder Management is an important discipline that successful people use to win support from others. It helps them ensure that their projects succeed where others fail.There are two major elements to Stakeholder Management: Stakeholder Analysis and Stakeholder Planning. Stakeholder Analysis is the technique used to identify the key people who have to be won over. You then use Stakeholder Planning to build the support that helps you succeed.

The benefits of using a stakeholder-based approach are that:
·         You can use the opinions of the most powerful stakeholders to shape your projects at an early stage. Not only does this make it more likely that they will support you, their input can also improve the quality of your project.
·         Gaining support from powerful stakeholders can help you to win more resources – this makes it more likely that your projects will be successful.
·         By communicating with stakeholders early and often, you can ensure that they know what you are doing and fully understand the benefits of your project – this means they can support you actively when necessary.
·         You can anticipate what people's reaction to your project may be, and build into your plan the actions that will win people's support.
The steps of Stakeholder Analysis are explained below:
1. Identifying Your Stakeholders:
       The first step in your stakeholder analysis is to brainstorm who your stakeholders are. As part of this, think of all the people who are affected by your work, who have influence or power over it, or have an interest in its successful or unsuccessful conclusion.
The table below shows some of the people who might be stakeholders in your job or in your projects:
Your boss
Shareholders
Government
Senior executives
Alliance partners
Trades associations
Your coworkers
Suppliers
The press
Your team
Lenders
Interest groups
Customers
Analysts
The public
Prospective customers
Future recruits
The community
Your family


Remember that although stakeholders may be both organizations and people, ultimately you can only communicate with individual people. Make sure that you identify the correct individual stakeholders within a stakeholder organization.
2. Prioritize Your Stakeholders:
You may now have a long list of people and organizations that are affected by your work. Some of these may have the power either to block or advance it. Some may be interested in what you are doing, others may not care.
Map out your stakeholders on a Power/Interest Grid on our free template as shown in figure 1, and classify them by their power over your work and by their interest in your work.
For example, your boss is likely to have high power and influence over your projects and high interest. Your family may have high interest, but are unlikely to have power over it.
Someone's position on the grid shows you the actions you have to take with them:
·         High power, interested people: these are the people you must fully engage with, and make the greatest efforts to satisfy.
·         High power, less interested people: put enough work in with these people to keep them satisfied, but not so much that they become bored with your message.
·         Low power, interested people: keep these people adequately informed, and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project.
·         Low power, less interested people: again, monitor these people, but do not bore them with excessive communication.
3. Understanding your key stakeholders:
You now need to know more about your key stakeholders. You need to know how they are likely to feel about and react to your project. You also need to know how best to engage them in your project and how best to communicate with them.
Key questions that can help you understand your stakeholders are:

·         What financial or emotional interest do they have in the outcome of your work? Is it positive or negative?
·         What motivates them most of all?
·         What information do they want from you?
·         How do they want to receive information from you? What is the best way of communicating your message to them?
·         What is their current opinion of your work? Is it based on good information?
·         Who influences their opinions generally, and who influences their opinion of you? Do some of these influencers therefore become important stakeholders in their own right?
·         If they are not likely to be positive, what will win them around to support your project?
·         If you don't think you will be able to win them around, how will you manage their opposition?
·         Who else might be influenced by their opinions? Do these people become stakeholders in their own right?
A very good way of answering these questions is to talk to your stakeholders directly – people are often quite open about their views, and asking people's opinions is often the first step in building a successful relationship with them.
You can summarize the understanding you have gained on the stakeholder map, so that you can easily see which stakeholders are expected to be blockers or critics, and which stakeholders are likely to be advocates and supporters or your project. A good way of doing this is by color coding: showing advocates and supporters in green, blockers and critics in red, and others who are neutral in orange.
Stakeholder Analysis Grid
Figure 2 shows an example of this - in this example, you can see that a lot of effort needs to be put into persuading Piers and Michael of the benefits of the project – Janet and Amanda also need to managed well as powerful supporters.

Four Functions of Management

All Managers Must Plan, Organize, Lead and Control

          Four Functions of Management: All Managers Must Plan, Organize, Lead and Control The key managerial functions of planning, organizing, leading and controlling are all crucial to the success of any manager. Managers exist in every business. In fact, managers do the same types of tasks in all businesses. Whether a person manages a hair salon or a factory, the manager’s job consists of similar tasks. Planning, organizing, leading and controlling all serve an important part in achieving management’s vision. Each component is important and one cannot function well without the others.

Planning

 The first component of managing is planning. A manager must determine what the organizations goals are and how to achieve those goals. Much of this information will come directly from the vision and mission statement for the company. Setting objectives for the goal and following up on the execution of the plan are two critical components of the planning function. For example, a manager of a new local restaurant will need to have a marketing plan, a hiring plan and a sales plan.

Organizing

 Managers are responsible for organization of the company and this includes organizing people and resources. Knowing how many employees are needed for particular shifts can be critical to the success of a company. If those employees do not have the necessary resources to complete their jobs, organization has not occurred. Without an organized workplace, employees will see a manager as unprepared and may lose respect for that particular manager’s supervisory techniques.

Leading

    Managing and leading are not the same activity. A manager manages employees; this person makes sure that tasks are completed on time and policies are followed. Employees typically follow managers because he or she is the supervisor and in-charge of employees. Employees see a leader as someone that motivates them and guides them to help meet the firm’s goals. In an ideal situation, the manager also serves as the leader. Managers who want to lead effectively need to discover what motivates their employees and inspire them to reach the company objectives.

Controlling

The controlling function involves monitoring the firm’s performance to make sure goals are being met. Managers need to pay attention to costs versus performance of the organization. For example, if the company has a goal of increasing sales by 5% over the next two months, the manager may check the progress toward the goal at the end of month one. An effective manager will share this information with his or her employees. This builds trust and a feeling of involvement for the employees.

The Five Functions of Management

Our Management Excel student:
  • A manager who happens to manage a farm or horticultural business.
  • A manager challenged to make efficient use of resources.
  • A manager challenged with getting things done through people.
  • A manager who has opportunity to use of all the tools of management that any other manager uses.
  • A manager who has a way of life like any other manager.
Management Excel is about changing people not about changing businesses. We change people by helping them improve their management skills. Our expectation is that with these tools, they are then likely to change their businesses.
Management
In Management Excel, we start with an assumption of the universality of management. Management is management. Management is generic. Management principles are general rather than specific to a type of firm or organization. However, management is universal only if the manager has become familiar with the specific situation in which it is applied. Production technology, customer characteristics and the culture of the industry are examples of specifics that managers need to learn to be effective in applying their generic management skills.
A definition:(1)
Management is creative problem solving. This creative problem solving is accomplished through four functions of management: planning, organizing, leading and controlling. The intended result is the use of an organization's resources in a way that accomplishes its mission and objectives. (Figure 1.1, From Higgins, page 7)
In Management Excel, this standard definition is modified to align more closely with our teaching objectives and to communicate more clearly the content of the organizing function. Organizing is divided into organizing and staffing so that the importance of staffing in small businesses receives emphasis along side organizing. In the management literature, directing and leading are used interchangeably. (Note figure of Management Excel wheel)
Planning is the ongoing process of developing the business' mission and objectives and determining how they will be accomplished. Planning includes both the broadest view of the organization, e.g., its mission, and the narrowest, e.g., a tactic for accomplishing a specific goal.
Organizing is establishing the internal organizational structure of the organization. The focus is on division, coordination, and control of tasks and the flow of information within the organization. It is in this function that managers distribute authority to job holders.
Staffing is filling and keeping filled with qualified people all positions in the business. Recruiting, hiring, training, evaluating and compensating are the specific activities included in the function. In the family business, staffing includes all paid and unpaid positions held by family members including the owner/operators.
Directing is influencing people's behavior through motivation, communication, group dynamics, leadership and discipline. The purpose of directing is to channel the behavior of all personnel to accomplish the organization's mission and objectives while simultaneously helping them accomplish their own career objectives.
Controlling is a four-step process of establishing performance standards based on the firm's objectives, measuring and reporting actual performance, comparing the two, and taking corrective or preventive action as necessary.
Each of these functions involves creative problem solving. (Figure 4.2 from Higgins, page 118) Creative problem solving is broader than problem finding, choice making or decision making. It extends from analysis of the environment within which the business is functioning to evaluation of the outcomes from the alternative implemented.
Supply Chain Management
A supply chain is a network of retailers, distributors, transporters, storage facilities, and suppliers that participate in the production, delivery, and sale of a product to the consumer. The supply chain is typically made up of multiple companies who coordinate activities to set themselves apart from the competition.
A supply chain has three key parts:
  • Supply focuses on the raw materials supplied to manufacturing, including how, when, and from what location.
  • Manufacturing focuses on converting these raw materials into finished products.
  • Distribution focuses on ensuring these products reach the consumers through an organized network of distributors, warehouses, and retailers.
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).
Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally."
More common and accepted definitions of Supply Chain Management are:
  • Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole (Mentzer et al, 2001).[1]
  • Global Supply Chain Forum - Supply Chain Management is the integration of key business processes across the supply chain for the purpose of adding value for customers and stakeholders (Lambert, 2008)[2].
A supply chain, as opposed to supply chain management, is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is 'supply chain management' (Mentzer et al., 2001).[3]
Supply chain management software includes tools or modules used to execute supply chain transactions, manage supplier relationships and control associated business processes.
Supply chain event management (abbreviated as SCEM) is a consideration of all possible events and factors that can disrupt a supply chain. With SCEM possible scenarios can be created and solutions devised.

Supply chain management problems

Supply chain management must address the following problems:
  • Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers.
  • Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal transport, including TOFC (trailer on flatcar) and COFC (container on flatcar); ocean freight; airfreight; replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or 3PL).
  • Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs, there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy.
  • Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc.
  • Inventory Management: Quantity and location of inventory, including raw materials, work-in-progress (WIP) and finished goods.
  • Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.
Supply chain execution means managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional.

 Activities/functions

Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement.
Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels . The CSCMP has adopted The American Productivity & Quality Center (APQC) Process Classification FrameworkSM a high-level, industry-neutral enterprise process model that allows organizations to see their business processes from a cross-industry viewpoint[4].

Strategic

  • Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities.
  • Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.
  • Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities.
  • Information technology infrastructure to support supply chain operations.
  • Where-to-make and what-to-make-or-buy decisions.
  • Aligning overall organizational strategy with supply strategy.

Tactical

  • Sourcing contracts and other purchasing decisions.
  • Production decisions, including contracting, scheduling, and planning process definition.
  • Inventory decisions, including quantity, location, and quality of inventory.
  • Transportation strategy, including frequency, routes, and contracting.
  • Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.
  • Milestone payments.
  • Focus on customer demand.

Operational

  • Daily production and distribution planning, including all nodes in the supply chain.
  • Production scheduling for each manufacturing facility in the supply chain (minute by minute).
  • Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.
  • Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.
  • Inbound operations, including transportation from suppliers and receiving inventory.
  • Production operations, including the consumption of materials and flow of finished goods.
  • Outbound operations, including all fulfillment activities, warehousing and transportation to customers.
  • Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

Developments in Supply Chain Management

Six major movements can be observed in the evolution of supply chain management studies: Creation, Integration, and Globalization (Lavassani et al., 2008a), Specialization Phases One and Two, and SCM 2.0.
1. Creation Era
The term supply chain management was first coined by a U.S. industry consultant in the early 1980s. However, the concept of a supply chain in management was of great importance long before, in the early 20th century, especially with the creation of the assembly line. The characteristics of this era of supply chain management include the need for large-scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management.
2. Integration Era
This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of supply chain evolution is characterized by both increasing value-adding and cost reductions through integration.
3. Globalization Era
The third movement of supply chain management development, the globalization era, can be characterized by the attention given to global systems of supplier relationships and the expansion of supply chains over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back several decades (e.g., in the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing their competitive advantage, value-adding, and reducing costs through global sourcing.
4. Specialization Era—Phase One: Outsourced Manufacturing and Distribution
In the 1990s industries began to focus on “core competencies” and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond company walls and distributing management across specialized supply chain partnerships.
This transition also re-focused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI).
The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands.
5. Specialization Era—Phase Two: Supply Chain Management as a Service
Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non-asset-based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management.
At any given moment, market forces could demand changes from suppliers, logistics providers, locations and customers, and from any number of these specialized participants as components of supply chain networks. This variability has significant effects on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to more complex requirements including the configuration of the processes and work flows that are essential to the management of the network itself.
Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of specific, best-in-class partners to contribute to the overall value chain itself, thereby increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain-specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity.
Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root primarily in transportation and collaboration categories. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model currently in focus today.
6. Supply Chain Management 2.0 (SCM 2.0)
Building on globalization and specialization, the term SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era".
Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 brings is to help navigate the vast amount of information available on the Web in order to find what is being sought. It is the notion of a usable pathway. SCM 2.0 follows this notion into supply chain operations. It is the pathway to SCM results, a combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization, near-/far- and off-shoring, and talent scarcity

Decisions on Three Levels

        Supply chain management decisions are often said to belong to one of three levels; the strategic, the tactical, or the operational level. Since there is no well defined and unified use of these terms, this Section describes the how they are used in this thesis. Figure gif shows the three level of decisions as a pyramid shaped hierarchy. The decisions on a higher level in the pyramid will set the conditions under which lower level decisions are made.
   figure137
Figure: Hierarchy of Supply Chain Decisions.
On the strategic level long term decisions are made. According to Ganeshan and Harrison [12], these are related to location, production, inventory, and transportation. Location decisions are concerned with the size, number, and geographic location of the supply chain entities, such as plants, inventories, or distribution centers. The production decisions are meant to determine which products to produce, where to produce them, which suppliers to use, from which plants to supply distribution centers, and so on. Inventory decisions are concerned with the way of managing inventories throughout the supply chain. Transport decisions are made on the modes of transport to use.
Decisions made on the strategic level are of course interrelated. For example decisions on mode of transport are influenced by decisions on geographical placement of plants and warehouses, and inventory policies are influenced by choice of suppliers and production locations. Modeling and simulation is frequently used for analyzing these interrelations, and the impact of making strategic level changes in the supply chain.
On the tactical level medium term decisions are made, such as weekly demand forecasts, distribution and transportation planning, production planning, and materials requirement planning. The operational level of supply chain management is concerned with the very short term decisions made from day to day. The border between the tactical and operational levels is vague. Often no distinction is made, as will be the case in this thesis.

Supply Chain Decisions

             We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain. There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas.

Location Decisions

The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. (See Arntzen, Brown, Harrison and Trafton [1995] for a thorough discussion of these aspects.) Although location decisions are primarily strategic, they also have implications on an operational level.

Production Decisions

The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility.

Inventory Decisions

These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semi-finished or finished goods. They can also be in-process between locations. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels.

Transportation Decisions

The mode choice aspect of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels, and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy.

Supply Chain Modeling Approaches

Clearly, each of the above two levels of decisions require a different perspective. The strategic decisions are, for the most part, global or "all encompassing" in that they try to integrate various aspects of the supply chain. Consequently, the models that describe these decisions are huge, and require a considerable amount of data. Often due to the enormity of data requirements, and the broad scope of decisions, these models provide approximate solutions to the decisions they describe. The operational decisions, meanwhile, address the day to day operation of the supply chain. Therefore the models that describe them are often very specific in nature. Due to their narrow perspective, these models often consider great detail and provide very good, if not optimal, solutions to the operational decisions.
To facilitate a concise review of the literature, and at the same time attempting to accommodate the above polarity in modeling, we divide the modeling approaches into three areas --- Network Design, ``Rough Cut" methods, and simulation based methods. The network design methods, for the most part, provide normative models for the more strategic decisions. These models typically cover the four major decision areas described earlier, and focus more on the design aspect of the supply chain; the establishment of the network and the associated flows on them. "Rough cut" methods, on the other hand, give guiding policies for the operational decisions. These models typically assume a "single site" (i.e., ignore the network) and add supply chain characteristics to it, such as explicitly considering the site's relation to the others in the network. Simulation methods is a method by which a comprehensive supply chain model can be analyzed, considering both strategic and operational elements. However, as with all simulation models, one can only evaluate the effectiveness of a pre-specified policy rather than develop new ones. It is the traditional question of "What If?" versus "What's Best?".

Network Design Methods

As the very name suggests, these methods determine the location of production, stocking, and sourcing facilities, and paths the product(s) take through them. Such methods tend to be large scale, and used generally at the inception of the supply chain. The earliest work in this area, although the term "supply chain" was not in vogue, was by Geoffrion and Graves [1974]. They introduce a multicommodity logistics network design model for optimizing annualized finished product flows from plants to the DC's to the final customers. Geoffrion and Powers [1993] later give a review of the evolution of distribution strategies over the past twenty years, describing how the descendants of the above model can accommodate more echelons and cross commodity detail.
Breitman and Lucas [1987] attempt to provide a framework for a comprehensive model of a production-distribution system, "PLANETS", that is used to decide what products to produce, where and how to produce it, which markets to pursue and what resources to use. Parts of this ambitious project were successfully implemented at General Motors.
Cohen and Lee [1985] develop a conceptual framework for manufacturing strategy analysis, where they describe a series of stochastic sub- models, that considers annualized product flows from raw material vendors via intermediate plants and distribution echelons to the final customers. They use heuristic methods to link and optimize these sub- models. They later give an integrated and readable exposition of their models and methods in Cohen and Lee [1988].
Cohen and Lee [1989] present a normative model for resource deployment in a global manufacturing and distribution network. Global after-tax profit (profit-local taxes) is maximized through the design of facility network and control of material flows within the network. The cost structure consists of variable and fixed costs for material procurement, production, distribution and transportation. They validate the model by applying it to analyze the global manufacturing strategies of a personal computer manufacturer.
Finally, Arntzen, Brown, Harrison, and Trafton [1995] provide the most comprehensive deterministic model for supply chain management. The objective function minimizes a combination of cost and time elements. Examples of cost elements include purchasing, manufacturing, pipeline inventory, transportation costs between various sites, duties, and taxes. Time elements include manufacturing lead times and transit times. Unique to this model was the explicit consideration of duty and their recovery as the product flowed through different countries. Implementation of this model at the Digital Equipment Corporation has produced spectacular results --- savings in the order of $100 million dollars.
Clearly, these network-design based methods add value to the firm in that they lay down the manufacturing and distribution strategies far into the future. It is imperative that firms at one time or another make such integrated decisions, encompassing production, location, inventory, and transportation, and such models are therefore indispensable. Although the above review shows considerable potential for these models as strategic determinants in the future, they are not without their shortcomings. Their very nature forces these problems to be of a very large scale. They are often difficult to solve to optimality. Furthermore, most of the models in this category are largely deterministic and static in nature. Additionally, those that consider stochastic elements are very restrictive in nature. In sum, there does not seem to yet be a comprehensive model that is representative of the true nature of material flows in the supply chain.

Rough Cut Methods

These models form the bulk of the supply chain literature, and typically deal with the more operational or tactical decisions. Most of the integrative research (from a supply chain context) in the literature seem to take on an inventory management perspective. In fact, the term "Supply Chain" first appears in the literature as an inventory management approach. The thrust of the rough cut models is the development of inventory control policies, considering several levels or echelons together. These models have come to be known as "multi-level" or "multi-echelon" inventory control models. For a review the reader is directed to Vollman et al. [1992].
Multi-echelon inventory theory has been very successfully used in industry. Cohen et al. [1990] describe "OPTIMIZER", one of the most complex models to date --- to manage IBM's spare parts inventory. They develop efficient algorithms and sophisticated data structures to achieve large scale systems integration.
Although current research in multi-echelon based supply chain inventory problems shows considerable promise in reducing inventories with increased customer service, the studies have several notable limitations. First, these studies largely ignore the production side of the supply chain. Their starting point in most cases is a finished goods stockpile, and policies are given to manage these effectively. Since production is a natural part of the supply chain, there seems to be a need with models that include the production component in them. Second, even on the distribution side, almost all published research assumes an arborescence structure, i. e. each site receives re-supply from only one higher level site but can distribute to several lower levels. Third, researchers have largely focused on the inventory system only. In logistics-system theory, transportation and inventory are primary components of the order fulfillment process in terms of cost and service levels. Therefore, companies must consider important interrelationships among transportation, inventory and customer service in determining their policies. Fourth, most of the models under the "inventory theoretic" paradigm are very restrictive in nature, i.e., mostly they restrict themselves to certain well known forms of demand or lead time or both, often quite contrary to what is observed.
The preceding sections are a selective overview of the key concepts in the supply chain literature. Following is a list of recommended reading for a quick introduction to the area.
The seven strategic issues we addressed were:
  • The effects of globalization
  • Issues of infrastructure  
  • Mergers, acquisition, and alliances
  • Safety and security
  • Leveraging human capital 
  • Responding to customers
  • Exploiting technology
3 ISSUES TO SUPPLY CHAIN MANAGEMENT SUCCESS-PROCESS, PEOPLE, TECHNOLOGY
           Supply chain success just doesn't happen. It takes focus and effort across the entire company organization and with outside suppliers and service providers. Logistics touches every part of a company. So supply chain management must be multidimensional in its approach and scope. And this takes process, people and technology. This is true whether you are a wholesaler, retailer or manufacturer. And it is true if you are lean and need to be agile, flexible and collaborative.
Supply chains can be long and complex, stretching between different countries. A firm may have many customers, each with different order and shipment requirements and destinations. There can be many suppliers, sourced from different cities and many countries. Each supplier may require instructions and planning as to lead times. All this work is done have product available when customers order.
There are internal needs too. These include where warehouses should be located, both in the U.S. and internationally; how inventory is forecast and allocated to each warehouse; how orders are handled and shipments prepared and how production is assigned among plants and suppliers.

PROCESS. Process means a practice, a series of actions, done for a specific purpose, such as satisfying customers. Customers demand and expect more from their suppliers; that is a fact regardless your size or industry. And supply chain management is critical to that customer satisfaction.
Supply chain process is a flow of activities with the goal of meeting the requirements of a customer. It includes all internal functions, logistics, distribution, sourcing, customer service, sales, manufacturing and accounting. It includes external companies. The series flows backward--from delivering each customer order each order as demanded back through the performance of suppliers to provide needed finished products, components, parts and assemblies.
Process has structure. This compares what some companies call "process" which may be a series of repetitive, standalone transactions. Process has standardization with its understanding of what must be done. With that in place, it also has flexibility to handle exceptions and changes that are a reality of doing business.

PEOPLE. People make organizations and are important to supply chain success. They need to have functional expertise and skills. They need to know how to manage and operate warehouses, inventory, transportation, purchasing. They need both a tactical view for everyday business and a strategic vision of where and how their function fits in the supply chain and how to make it better.
People success is a function also of the corporate culture, how the company sees itself, defines itself and operates, both internally and externally. The culture can be a facilitator of processes or an inhibitor. If the company has myopia, then it negatively impacts its ability to respond in all areas required.
Similarly, organizations, with their hierarchical design, create barriers to supply chain process, which is horizontal. Organization silos can short circuit the supply chain process. Each silo can have its internal goals that can work cross-functionally to the process. Even though the focus of the supply chain process is the customer, merchandising, logistics, finance and others may work to optimize their role, but which may suboptimize the process.

TECHNOLOGY. Supply chain management is sometimes define, or incorrectly defined, in terms of technology. Process can be defined as technology, with an overemphasis on hardware and software, and not on the purpose of the process.
Software may be "sold" as the answer, the means, to supply chain nirvana. That can lead to an overexpectation by the user, which in turn can lead to disillusion with what is required to set up and operate the system and with the results actually achieved.

Concepts of Leadership

Leadership is a process by which a person influences others to accomplish an objective and directs the organization in a way that makes it more cohesive and coherent. Leaders carry out this process by applying their leadership attributes, such as beliefs, values, ethics, character, knowledge, and skills. Although your position as a manager, supervisor, lead, etc. gives you the authority to accomplish certain tasks and objectives in the organization, this power does not make you a leader, it simply makes you the boss. Leadership differs in that it makes the followers want to achieve high goals, rather than simply bossing people around.

Three basic ways to explain how people become leaders

o    Some personality traits may lead people naturally into leadership roles. This is the Trait Theory.
o    A crisis or important event may cause a person to rise to the occasion, which brings out extraordinary leadership qualities in an ordinary person. This is the Great Events Theory.
o    People can choose to become leaders. People can learn leadership skills. This is the Transformational Leadership Theory. It is the most widely accepted theory today and the premise on which this guide is based.
The Two Most Important Keys to Effective Leadership

o    Trust and confidence in top leadership was the single most reliable predictor of employee satisfaction in an organization.
o    Effective communication by leadership in three critical areas was the key to winning organizational trust and confidence:
1.     Helping employees understand the company's overall business strategy.
2.     Helping employees understand how they contribute to achieving key business objectives.
3.     Sharing information with employees on both how the company is doing and how an employee's own division is doing - relative to strategic business objectives.
Eleven Principles of Leadership
1.    Know yourself and seek self-improvement - In order to know yourself, you have to understand your be, know, and do, attributes. Seeking self-improvement means continually strengthening your attributes. This can be accomplished through self-study, formal classes, reflection, and interacting with others.
2.    Be technically proficient - As a leader, you must know your job and have a solid familiarity with your employees' tasks.
3.    Seek responsibility and take responsibility for your actions - Search for ways to guide your organization to new heights. And when things go wrong, they always do sooner or later -- do not blame others. Analyze the situation, take corrective action, and move on to the next challenge.
4.    Make sound and timely decisions - Use good problem solving, decision making, and planning tools.
5.    Set the example - Be a good role model for your employees. They must not only hear what they are expected to do, but also see. We must become the change we want to see - Mahatma Gandhi
6.    Know your people and look out for their well-being - Know human nature and the importance of sincerely caring for your workers.
7.    Keep your workers informed - Know how to communicate with not only them, but also seniors and other key people.
8.    Develop a sense of responsibility in your workers - Help to develop good character traits that will help them carry out their professional responsibilities.
9.    Ensure that tasks are understood, supervised, and accomplished - Communication is the key to this responsibility.
10.  Train as a team - Although many so called leaders call their organization, department, section, etc. a team; they are not really teams...they are just a group of people doing their jobs.
11.  Use the full capabilities of your organization - By developing a team spirit, you will be able to employ your organization, department, section, etc. to its fullest capabilities.

Factors of leadership

There are four major factors in leadership:
Follower
Different people require different styles of leadership. For example, a new hire requires more supervision than an experienced employee. A person who lacks motivation requires a different approach than one with a high degree of motivation. You must know your people! The fundamental starting point is having a good understanding of human nature, such as needs, emotions, and motivation. You must come to know your employees' be, know, and do attributes.
Leader
You must have an honest understanding of who you are, what you know, and what you can do. Also, note that it is the followers, not the leader who determines if a leader is successful. If they do not trust or lack confidence in their leader, then they will be uninspired. To be successful you have to convince your followers, not yourself or your superiors, that you are worthy of being followed.
Communication
You lead through two-way communication. Much of it is nonverbal. For instance, when you "set the example," that communicates to your people that you would not ask them to perform anything that you would not be willing to do. What and how you communicate either builds or harms the relationship between you and your employees.
Situation
All are different. What you do in one situation will not always work in another. You must use your judgment to decide the best course of action and the leadership style needed for each situation. For example, you may need to confront an employee for inappropriate behavior, but if the confrontation is too late or too early, too harsh or too weak, then the results may prove ineffective.

Attributes

If you are a leader who can be trusted, then those around you will grow to respect you. To be such a leader, there is a Leadership Framework to guide you:

BE KNOW DO

BE a professional. Examples: Be loyal to the organization, perform selfless service, take personal responsibility.
BE a professional who possess good character traits. Examples: Honesty, competence, candor, commitment, integrity, courage, straightforwardness, imagination.
KNOW the four factors of leadership - follower, leader, communication, situation.
KNOW yourself. Examples: strengths and weakness of your character, knowledge, and skills.
KNOW human nature. Examples: Human needs, emotions, and how people respond to stress.
KNOW your job. Examples: be proficient and be able to train others in their tasks.
KNOW your organization. Examples: where to go for help, its climate and culture, who the unofficial leaders are.
DO provide direction. Examples: goal setting, problem solving, decision making, planning.
DO implement. Examples: communicating, coordinating, supervising, evaluating.
DO motivate. Examples: develop morale and esprit de corps in the organization, train, coach, counsel.

Environment

Every organization has a particular work environment, which dictates to a considerable degree how its leaders respond to problems and opportunities. This is brought about by its heritage of past leaders and its present leaders.

Goals, Values, and Concepts

Leaders exert influence on the environment via three types of actions:
1.    The goals and performance standards they establish.
2.    The values they establish for the organization.
3.    The business and people concepts they establish.
Successful organizations have leaders who set high standards and goals across the entire spectrum, such as strategies, market leadership, plans, meetings and presentations, productivity, quality, and reliability.
Values reflect the concern the organization has for its employees, customers, investors, vendors, and surrounding community. These values define the manner in how business will be conducted.
Concepts define what products or services the organization will offer and the methods and processes for conducting business.
These goals, values, and concepts make up the organization's "personality" or how the organization is observed by both outsiders and insiders. This personality defines the roles, relationships, rewards, and rites that take place.

Roles and Relationships

Roles are the positions that are defined by a set of expectations about behavior of any job incumbent. Each role has a set of tasks and responsibilities that may or may not be spelled out. Roles have a powerful effect on behavior for several reasons, to include money being paid for the performance of the role, there is prestige attached to a role, and a sense of accomplishment or challenge.
Relationships are determined by a role's tasks. While some tasks are performed alone, most are carried out in relationship with others. The tasks will determine who the role-holder is required to interact with, how often, and towards what end. Also, normally the greater the interaction, the greater the liking. This in turn leads to more frequent interaction. In human behavior, its hard to like someone whom we have no contact with, and we tend to seek out those we like. People tend to do what they are rewarded for, and friendship is a powerful reward. Many tasks and behaviors that are associated with a role are brought about by these relationships. That is, new task and behaviors are expected of the present role-holder because a strong relationship was developed in the past, either by that role-holder or a prior role-holder.

Leadership Models

Leadership models help us to understand what makes leaders act the way they do. The ideal is not to lock yourself in to a type of behavior discussed in the model, but to realize that every situation calls for a different approach or behavior to be taken. Two models will be discussed, the Four Framework Approach and the Managerial Grid.

Four Framework Approach

In the Four Framework Approach, Bolman and Deal (1991) suggest that leaders display leadership behaviors in one of four types of frameworks: Structural, Human Resource, Political, or Symbolic. The style can either be effective or ineffective, depending upon the chosen behavior in certain situations.
Structural Framework
In an effective leadership situation, the leader is a social architect whose leadership style is analysis and design. While in an ineffective leadership situation, the leader is a petty tyrant whose leadership style is details. Structural Leaders focus on structure, strategy, environment, implementation, experimentation, and adaptation.
Human Resource Framework
In an effective leadership situation, the leader is a catalyst and servant whose leadership style is support, advocation, and empowerment. while in an ineffective leadership situation, the leader is a pushover, whose leadership style is abdication and fraud. Human Resource Leaders believe in people and communicate that belief; they are visible and accessible; they empower, increase participation, support, share information, and move decision making down into the organization.
Political Framework
In an effective leadership situation, the leader is an advocate, whose leadership style is coalition and building. While in an ineffective leadership situation, the leader is a hustler, whose leadership style is manipulation. Political leaders clarify what they want and what they can get; they assess the distribution of power and interests; they build linkages to other stakeholders, use persuasion first, then use negotiation and coercion only if necessary.
Symbolic Framework
In an effective leadership situation, the leader is a prophet, whose leadership style is inspiration. While in an ineffective leadership situation, the leader is a fanatic or fool, whose leadership style is smoke and mirrors. Symbolic leaders view organizations as a stage or theater to play certain roles and give impressions; these leaders use symbols to capture attention; they try to frame experience by providing plausible interpretations of experiences; they discover and communicate a vision.

Stockholder or Stakeholder
There are two theories about corporate and social responsibility, each with their own valid arguments and shortcomings. Although they are not significantly unlike each other, they outline a very different business model and guide for ethical and social responsibility within the and outside of the organization. These are Milton Friedman’s Stockholder theory of corporate responsibility and Edward Freeman’s Stakeholder theory of corporate responsibility.
In 1962, Friedman said “There is one and only one social responsibility of business: to use its resources to engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.” This is true, to an extent. Stockholder theory, as we discussed in class, is similar to taxation without representation. True, this is a loaded phrase,and it is hard to think about this is taxation. If you examine, however, the stockholder theory in detail it would seem to make a valid argument.There are investors, or stockholders, that put their money into the organization and expect a return on that money.This is, of course, considering the industry is an in-out flow model, where goods are purchased, produced into something of greater economic value (EVA) or transformed into a service, which is then sold, creating wealth for the company, and in turn, the stockholders.Any additional expenses that the organization incurs can thus be considered a tax on the return money to the stockholders. For example; if the industry in question has the choice to dump their semi-toxic waste in a stream or reservoir, incurring
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a fine, or paying high recycling and disposal costs but being “socially responsible”, it would be considered taxing their profits by taking the more expensive, socially responsible, route of recycling that waste. Even if there was a 2 million dollar fine incurred for dumping into that reservoir, it could save 10 million dollars in recycling and disposal costs. You could thus consider it an 8 million dollar tax to choose the socially responsible route.
With their sole responsibility falling to their investors, executives have hard decisions to make. Though this can benefit the organization financially, it could hurt them in the long run as far as their image and long term sustainability are concerned. They may also lose business if they are not “socially responsible” with their waste and recycling practices. The company Method, for example, produces all of their products at a slightly higher cost using only “green energy”.
With this being a new trend and highly sought after by a niche in the consumer market, it could be argued by Executives at Method that they are following stockholder theory. Even though they are taxing their returns by using a method with higher cost, it is actually essential that they create their product in that fashion, otherwise they would lose their niche, and their core business. Method without “green energy manufacturing” is, after all, just really expensive soap.
In 1984, Edward Freeman proposed the stakeholder theory, which follows the same logic as the stockholder theory, but focuses more on “who and what really counts” as opposed to just the stockholders.
In stockholder theory, the
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organization deals with four parties: the investors, employees, suppliers and customers. The organization is therefore responsible only to these parties to show economic gains or some return on their capital investment and labors. Stakeholder theory suggests that, although stockholder theory has a basis for validity, the organization needs to include more parties than those it is in direct business dealings with.Other parties may include government, political action committees / groups, various trade associations and unions, the community in which it does business, both production and sales, “associated corporations”, perspective employees and customers, and community public in general. You can even argue that competitors could be counted as stakeholders in the corporation because they are directly connected to your product or service, pricing, the way you market and deliver your product; basically at every level from start to finish. Stakeholder theory would seem to be the ideal ‘compromise’ on stockholder theory and the real world. Although logical, stockholder theory has drawbacks that stakeholder theory better addresses. Identifying other groups that the organization needs to be responsible for will help them monitor competition, keep up on current manufacturing and design technologies, environmentally friendly production and operation methods; all of which is being increasingly scrutinized by customers. The cheapest product, as Method has shown us, isn’t always the best selling. When selling the exact same product they are able to ask a price more than double that of other manufacturers, and people are willing to pay it. Granted, this is a niche market, but is an interesting
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example of how social responsibility can benefit the organization. Other ways of being socially responsible can be shown by the company Starbucks, who chooses not only the “best” coffee from around the world, but invests in those communities, looking after the best interest of the people that are growing and producing the coffee beans. This is a three fold benefit: it is great publicity for Starbucks and people opt to pay a slightly higher premium for coffee beans knowing that they are supporting the respective communities, Starbucks is
garuneteed exclusive contracts on whatever coffee they chose to purchase because they are known around the world for taking an interest in the community and investing in it, and the communities themselves are benefiting, not only from Starbucks’ donations and investments there, but by their solid annual contracts that encourage plantations to work together to produce high quality, high yield products.
Another way that stakeholder theory differs significantly from stockholder theory is that it includes government bodies as investors in the organization. Although they nay not be direct investors by means of capital, they do lay out the rules for importing, exporting, pollution guidelines, minimum wage and labor standards, etc. Without considering the government a part of the process, the organization would be blind to huge changes in the market place and could miss out on great opportunities. For example; around the United States, corporations are given tax breaks or “advantages” differing from state to state to encourage industry to move to that state. California has a city called “City of Industry”, for
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example, which caters to corporations and gives them breaks for moving and staying there. Many financial centers have their headquarters in Minnesota and Wisconsin for the same reason. Basing your headquarters in Appleton, Wisconsin as opposed to Seattle, Washington could save your corporation 1-2% in taxes.
Considering that some business, like the Boeing Company, do hundred million dollar deals, 1% can mean a lot of money and make it a good business decision to move to Illinois, in their case, and pay their taxes according to those laws in that state.
Within stakeholder theory, there are other ideas or sub theories that define the modern view of it. The most modern view of stakeholder theory includes a “resource-based” view as well as a “market-based” view and “adding a socio-political level”. Also considered is the normative theory of stakeholder identification. All things considered, whether you are looking at the stakeholder theory itself or the newly incorporated version of it, with all the latest philosophy and market data, it would seem to lay out a better business model to follow than its predecessor.

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