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Introduction
Contemporary supply chain management is concerned with building a system that aligns both with organizational needs and customer expectations. Organizations like Cisco, which operates in the tech market, have become more aware of customers demands and upcoming trends, thus investing in agility, sustainability, and high levels of digitalization. The company operates in the spheres of Networking, Cloud Technologies, and Cybersecurity, with the headquarters at San Jose, California. The future success of an organization now depends on whether its supply chains are practical and efficient enough to keep pace with the ever-changing business environment in which new trends emerge on a continuous basis.
Context and Principles of Supply Chain Management
Supply chain management (SCM) refers to the process in which suppliers are engaged to develop and embed supply chains that are as economical and efficient as possible. Supply chains cover all steps that occur, ranging from the initial product development to production, as well as any information systems necessary for directing the undertakings. As a rule, SCM attempts to centrally control or connect the production, shipment, and product distribution. By managing a supply chain, organizations that produce something can reduce the excess expenses and deliver products to their consumers within much quicker timeframes. SCM is implemented to have a tighter grasp of internal inventories, the manufacturing process, distribution and sales, as well as company vendors inventories. SCM is grounded on the idea that almost every product that appears in the market results from the efforts that different organizations implement to participate in the supply chain. While supply chains have existed for a long time, many organizations have only recently started paying attention to them as a way to add value to their operations.
In terms of adding value to customers, strategic supply chain management enables to define the segment of target consumers served by the organization in question. Understanding the needs and expectations of the target population is imperative for formulating an appropriate positioning strategy and enabling closer engagement with them. Notably, Cisco predominantly serves three target markets: enterprises, services providers, and small or medium businesses. The enterprise customer segment includes governments, corporations, educational institutions, and utilities. The service provider category covers organizations that offer information services, such as Internet providers and cable companies, telecommunication carriers, as well as other tech service providers. In the small and medium business segment, Cisco caters to companies that require data networks for themselves, including Internet connections and networks, to stay in contact with business partners. To cater to the expectations of the three customer segments, Ciscos supply chain strategy entails a flexible approach that focuses on technology over other alternatives. The supply chain managers at the company are expected to listen to the needs of customers, monitor all other options, and provide clients with a range of options.
The context within which SCM is implemented is characterized by the ever-changing and dynamic business environment. Supply chain managers are challenged by minimizing shortages in product stocks and keeping costs at a lower level. In order to stay competitive against rivals, organizations should ensure that the supply chain management networks their managers create meet the customer demands and meet the expected costs. For instance, the supply chain at Cisco is highly diverse, extensive, and international. Since the company has more than three hundred product families, it is challenged by the need to have a wide range of target customers with different expectations and fulfillment requirements. Thus, the majority of Cisco products allow employing configure-to-order (CTO) production. As a result, the company can avoid having excessive product inventories at warehouses, saving significant costs.
The principles of supply chain management have a two-decade history since being formulated by Anderson, Britt, and Favre in their Supply Chain Management Review article titled The Seven Principles of Supply Chain Management. Before the article was published, SCM was not well-understood, and the authors were effective at providing a cohesive breakdown of the critical SCM principles. The first principle is to adapt to the supply chain to the needs of customers (Anderson, Britt and Favre, 2007). In order for companies to better understand their customers, they are divided into different groups or segments, with the simplest way to differentiate between them is to divide them based on sales volumes or profitability they bring to the company. Anderson et al. (2007, p. 42) suggested that customers are divided based on their service needs, such as order fulfillment needs and sales and merchandising needs. Notably, in the current context, it is not enough just to divide customers into segments but to also anticipate their needs and act accordingly.
The second principle is customizing the logistics network because by doing so, it becomes possible to adjust them to serve different customer segments. The customization of logistic networks is necessary because there is no unified approach to reaching superior asset utilization. Cisco has been tailoring distribution assets to meet the individual logistic requirements. This principle has allowed to an improved differentiation source for the companys manufacturers, which have been mainly undifferentiated (Gore, 2015). The third principle is to align demand planning across the entire supply chain that an organization operates, which is expected to ensure consistency in forecasting and optimal resource allocation. It is notable that independent and self-centered forecasting does not often align with effective SCM. Therefore, companies that implement the principle has worked recognize the needs and objectives of every functional group within the supply chain and ground their operational decisions on overall profit potential (Anderson et al., 2007). The principle has shown to allow for coordinating the decisions on inventory deployment the scheduling of production.
The fourth principle is to differentiate products close to customers. Many companies have usually relied their goals of production on projections of the completed goods demand, thus stockpiling inventory to avoid forecasting errors. Cisco has noted this principle and has been engaging in less traditional strategies to meet the individual needs of its customers efficiently. The principle is beneficial for companies that follow market trends and want to challenge the conventional idea that lead times are fixed and cannot be adjusted. Within sourcing projects targeted toward capital acquisition, product differentiation done closer to end clients allows defining a specific procurement strategy that will generate the best return-on-investment.
The fifth principle is to outsource strategically, which means never outsourcing core competencies. Specifically, Cisco has searched for the areas of outsourcing that will enable to cut costs within its supply chain to lower the prices in the marketplace and enhance margins (Gore, 2015). The principle calls for the implementation of gain-sharing arrangements that will reward the largest profitability contributors within the supply chain. The sixth principle is to develop Information Technologies (IT) that can effectively support multi-level decision-making. By using IT, organizations are expected to have a closer grasp of the flow of products, services, and information within their supply chains (Tadepallu, 2014). It is anticipated that systems that companies implement must handle everyday transactions and e-commerce activities within the supply chain, thus helping to match the supply and demand through sharing information on daily scheduling and orders. Therefore, the expansion of the electronic capabilities of a company creates opportunities for positive change to facilitate an improvement in supply chains. The final SCM is adopting both service and financial metrics to measure the outcomes of collective success to reach end-users. The importance of the principle at companies such as Cisco is that it allows determining its services actual profitability as the organization can define real expenses and revenues of their key activities. For instance, Cisco has been getting the maximum benefit from activity-based costing in its SCM (Cisco, 2022a). Therefore, because the company maintains its supply chain data in discrete units, warehouses offer quick and easy access to relevant service and financial metrics.
Strategic Supply Chain Management
Integrated Supply Chain Features
Integrated supply chains represent processes in which raw materials procurement, production, packaging, quality control, distribution, supply, and final delivery are inseparable. Essentially, integrated supply chain management represents organizational resource planning that entails establishing close relationships with suppliers and distributors through a centralized system within the organization. The core benefits of an integrated supply chain process are cost efficiency and concentrated professional expertise.
The successful implementation of integrated supply chains entails engaging in ongoing communication, collaboration, cooperation (Early Supplier Involvement (ESI)), as well as establishing the focus on customers (Early Buyer Involvement, (EBI)). First, communication within the integrated supply chain is essential because all stakeholders involved need to stay up-to-date so that they can rapidly adjust their operations to meet the demands. For example, for organizations such as Cisco, which follow the configure-to-order (CTO) model of production, it is essential that the communication is on a high level within the supply chain because products are built based on confirmed customer orders (Cisco, 2022a). Second, collaboration is crucial as it requires good relationships among all members of the supply chain, which is illustrated by the company building strong connections with its partners and suppliers. Every participant in the supply chain is expected to be engaged in the supply chains development, including training for improving product knowledge and understanding of the markets being served.
Cooperation is essential as it entails the sharing of supply and demand information, which is critical to success. For Cisco, the growth of which stems through acquisitions, the cooperation between the members of the supply chain is necessary so that everyone is on the same page when it comes to responding to customer needs. Finally, within integrated supply chains, an organization is expected to have a focus on customers needs and what they value and for which they are willing to pay. In the case of Cisco, the build-to-stock production model allows the manufacturing of products to satisfy the demand for them as orders come in. Because customers provide specifications based on which Cisco issues products, it is expected for the organization to have a good relationship with its clients. Everyone involved in the supply chain is expected to be aware of the final customers needs and how their role in the chain influence the ability to meet them.
Challenges Presented to Supply Chain Managers
Organizations that have survived the volatility of modern markets, especially those overcoming 2020, have likely done so by reaching lean supply chains, selling through their inventory, and emphasizing their working capital. Due to market volatility, it is expected that supply chain management challenges will persist, with managers having to make sure that their companies can acclimate to changes by addressing inefficiencies and working smarter. Among the first challenges that supply chain managers have encountered in the recent two years is material scarcity due to suppliers struggling to meet the demand due to the unavailability of many materials and parts. The second problem is increasing freight prices due to the increasing demand for container shipping during the pandemic. Despite the demand, the shipping capacity has been insufficient, causing a considerable shortage of available empty containers and an understandable price increase. This presents a significant challenge for companies such as Cisco that relies on some parts made outside the US; the freight issues are problematic because they cause the company to possibly increase prices and experience delays in production.
Another challenge that supply chain managers encounter is the difficulty of demand forecasting to facilitate short-term change. Since the COVID-19 pandemic, a new layer of complexity for many supply chain managers was added because of the lack of understanding of how much inventory is needed and whether it can be provided by the expected date. For Cisco, understanding the potential demand is crucial because of the need to ensure that all systems are in place to meet customers demands based on the configure-to-order model of production. Therefore, Ciscos supply chain managers tend to look into optimizing their supply chain to boost business scale and agility (Cisco, 2022b). The combination of the configure-to-order and build-to-stock models and non-standardized processes made scalability almost impossible, which causes halts in productivity and customer experience.
Impact of Globalization on Local and National Supply Chains
Globalization has offered organizations operating on a broader scale to reach new customers in unexplored markets, which dramatically limits the ways in which manufacturers need to operate to be successful. While exposure to new markets results in exposure to greater competition and risks, it also results in greater rewards. Besides the opportunity to reach new markets and customers around the world, among the positive outcomes of globalization is the capability of local and national suppliers to grow and expand the scope of their business. Globalization makes communication more accessible, which makes it less challenging for markets to extend their capabilities, diversify processes, and thus have more opportunities for business owners to capitalize.
For local supply chains that understand the context created by globalization, it is possible to implement reliable strategies that involve the sourcing of products both in local and international arenas to achieve agility. Therefore, it is crucial that local businesses do not choose globalization or localization but instead use the advantages derived from both approaches. To ensure that globalization does not play a significant role in the supply chain when challenges arise, it is necessary to reduce the dependence on one type of supplier or region. Importantly, in the past, manufacturers have mainly emphasized globalization enhancement in the supply chain. Today, the trend is shifting toward increasing localization even though some suppliers remain overseas. With the emerging interest in localization, companies are expected to implement a different approach to SCM. Specifically, new suppliers are more likely to be vetted very carefully, with companies having to ensure that they are capable of doing business with them.
Ways to Deliver Added Value
The strategic supply chain processes cover the breadth of the supply chain and usually cover the development of products, customers, manufacturing, vendors, and logistics. Through strategic SCM, it is possible to provide a defined strategic direction in terms of considering the products that a company should produce to provide to clients (Murray, 2019). For Cisco, which is continuously challenged by establishing standardizing processes and standard practices and customizing them when necessary, product development is concerned with always meeting business requirements and capabilities needed to support them. At different stages of the product cycle, Ciscos managers will make strategic decisions about developing and introducing new versions of existing products, rationalizing their current product offering, or creating an entirely new range of products or services. Added value is created when all of these steps integrate with one another to create a cohesive supply chain strategy.
A supply chain manager should position themselves as a specialist leveraging the latest trends in SCM. Specifically, value is added through the implementation of latest solutions that allow for the more accurate analysis of data to become more customer-focused. Managers can reach better supply chains flexibility by combining supply chain management and Big Data analytics. Due to the focus on supply chain digitalization, IoT growth, and broader customer data availability, there is an increased abundance of customer data. Big Data analytics is a trend that involves generating varied business intelligence that ranges from analyzing past performance to forecasting trends for which companies should prepare. The technology makes it easier to determine the preferences of customers alongside with latest market trends to redefine supply chains to meet the demand (Tadepallu, 2014). Besides, the increased access to Big Data analytics, highly advanced organizations have begun using AI and machine learning as a further step toward procedures automation.
As found by Gartner (2019), the number of organizations using AI grew 270% in recent years. Across different industries, companies are now using different AI applications to strengthen their competitive advantage in all areas of business. For instance, predictive analytics and machine learning are employed for improving scheduling and systems of decision support, allocating the patterns of purchasing, as well as automating long but mundane procedures linked to inventory management. AI has additionally been used to substitute for humans when it comes to completing repetitive tasks and carrying out complicated supply chain calculations.
Role of Technology in Supply Chains
Software and Systems Supporting Supply Chain Management
The use of Information Technologies (IT) in supply chain managers offers improved visibility and accountability. To bring efficiency to the entire process of production, it is imperative for manufacturers to have a clear idea of the current stages of implementation, and foresee any upcoming issues and delays to align the schedules of production accordingly (Tadepalli, 2014). Today, there is an abundance of systems and software available for supporting supply chain management processes. They include blockchain technologies, Artificial Intelligence (AI) solutions, CRM systems, HCM systems, and other tools.
There are several examples of different solutions that organizations have used to integrate the technological aspect into their supply chain management. For example, Oracle NetSuite is a popular supply chain and ERP system for small and mid-sized companies, particularly for those which do not have complicated business requirements (Enfroy, 2022). Plex Systems is preferable for more mature organizations with complex supply chains, especially those operating in the automotive and aerospace markets. IFS is even more advanced compared to Plex as it allows to handle supply chains that have dispersed geographically effectively. Other examples are Infor CloudSuite and Nexus, which provide enterprise-wide services for companies that look for comprehensive solutions to cover manufacturing, distribution, and back-office processes (Enfroy, 2022). For organizations that require effective warehouse management, Blue Yonder has been the software that they use the most. It allows for predicting and planning demand, the necessary funds, products, and all other aspects in between for better control and visibility.
Overall, more advanced and comprehensive solutions for supply chain management make multi-party collaboration easier, including innovative functionality in the control center, predictive analytics, and working capital management. The multiple examples of software and systems available for supply chain management show that they are flexible enough to address the needs of their clients. Depending on the size of an organization, the complexity of its supply chain, as well as the location and number of suppliers, it is possible to find software that will fit the needs and expectations of each company.
Value of Integrating Advanced Manufacturing into Supply Chains
There is no clear definition of advanced manufacturing because it encompasses an array of processes and technologies ranging from robotics to big data applications. Such technologies have been conducive to issuing differentiated and Internet Protocol-rich products. An essential characteristic of advanced manufacturing technologies is that they are flexible, which means that they can be deployed in any context (Stasiuk, 2022). Their innovativeness offers optionality with respect to productions location, the automation of manufacturing that provides cost benefits, as well as offshoring if necessary.
Even though advanced manufacturing can be applied in different markets and their supply chains, it is the most valuable in sensitive industries such as government contractors or defense industries. In the case of Cisco, the company and its partners have managed to create a secure networking foundation for smart factory operations within the integrated supply chain. The manufacturing solutions that Cisco now has allows connecting the industrial control systems and the available OT devices to reach an industrial network that is highly manageable, flexible, and automated. Besides, at Cisco, advanced manufacturing goes hand-in-hand with industrial cybersecurity, which enables the enhancement of visibility for building more secure networks, protecting factory assets, and maintaining production uptimes (Cisco, 2022b). Through the implementation of such solutions as industrial Internet of Things (IoT) sensors, it is possible to enhance the agility of operations and agility by means of monitoring industrial assets and facilities. IoT allows to work closely with blockchains, with the data being sent to blockchain networks, creating records of relevant transactions.
Among the most interesting options that advanced manufacturing offers is the ability to make flexible and fine-tuned decisions when it comes to product development, which is referred to as rapid prototyping. In supply chain management, this method relates to the processes that allow fabricating product models and parts in shorter timeframes. This has great benefits for hardware-focused manufacturers. Rapid prototyping has also been shown to improve both functional and aesthetic characteristics of consumer products, including smaller electronic components.
Beyond rapid prototyping, advanced manufacturing has enabled localizing the process of production. While this can be less challenging for large contract manufacturers, smaller-sized companies tend to struggle with the need to expand output capabilities before getting their large customers. Thus, advanced manufacturing can be valuable for solving the problem of lower financial barriers to entry in domestic production. An example of the solution is the establishment of microfactory-as-a-service to boost automation capabilities in place without having to invest in traditional equipment, which is a bonus for streamlined supply chains. It has been a trend for the distribution of output across global networks in contrast to shipping products from one major production locus to a global set of customers. Consequently, companies can be more effective at catering to the needs of their customers within individual locales.
The final aspect of the value that advanced manufacturing brings to supply chains is concerned with the possibility of being better informed and thus making more accurate forecasts. While it is not expected that every company integrates advanced manufacturing into their supply chains, the option of being able to do so is what is needed to be flexible and in tune with the changing trends (Stasiuk, 2022). Comparative advantage will remain being relevant, and it is important for companies to retain their leadership in the manufacturing of certain products and give more options based on the forecasted demands and expectations. Besides, consumers are as cost-conscious as ever, which means that any technological advancements that are made can drive down the costs of manufacturing.
Value of Digital Supply Chains
Digital supply chains represent a set of processes that entail the use of advanced technologies and improved insights into the role of each stakeholder within the chain. It allows the supply chain participants to make better decisions about the materials they need, understand the actual demand for their products, and be effective at managing relationships between one another. The first step toward the effective integration of the digital supply chain is the combination of demand planning, asset management, warehouse management, as well as logistics and transportation management (Bowen, 2020). However, the true digitalization of a supply chain is concerned with data mining from processes that enable the production of the needed data. Digital supply chains are achieved through the instrumentation with the help of sensors and monitors, the combination of which represents the IoT, which is usually employed for monitoring logistics and manufacturing processes. By using gateways, the acquired data can be disseminated across stakeholders included in the supply chain and later aggregated and used for assessing whether the needed products or parts.
The most significant advantage of digital supply chains is their ability to provide people and processes with the required information and data necessary for proper visibility of what is happening in the business to make faster and more efficient decisions. This is applicable not only to business per se but also to companies supplies, customers, and the businesses that serve suppliers. The end-to-end visibility within the supply chain that is achieved through digitalization is expected to help organizations provide improved products and services, a better return for their stakeholders, as well as more sustainable success for everyone involved in the supply chain.
A successful digital transformation of supply chains enables improved collaboration and insights. As a result, it becomes less complex to reach a competitive advantage through enhanced operating models and overall operations targeted at margins improvement, sales acceleration, as well as the overall betterment of business results on both a short- and long-term basis. Digital supply chains also tend to provide deeper insights for improved decision-making (Murray, 2019). Because the digital transformation depends on the analysis of data and information, it allows to determine hidden opportunities for improving business results and cutting costs without much of human involvement.
The improvement of customer experience is another advantage brought by digital supply chains because of the possibility to involve highly visible tactics ranging from knowledgeable and skilled staff or a responsible customer service strategy. The digitalization of supply chains will improve customer experience in different ways, such as reshaping the approach to shipping to reduce delivery times and reevaluating the warehousing and inventory processes to enhance product availability. Besides, digital supply chains enable using intelligence and data for finding opportunities to help improve customer experience.
Supply Chain of the Future
Importance of Sustainable Supply Chains
Supply chain sustainability represents the extent to which organizations are considerate of the environmental impact associated with their products journey over the supply chain, beginning from raw materials sourcing to the final product reaching end customers. To achieve the high standards and effectiveness of supply chains, many companies now aim to create a framework of sustainable practices that smoothly flow throughout the supply network (Villena and Gioia, 2020). Cisco consider sustainability as an essential factor of their operations that will reduce the adverse environmental impact from energy usage, the consumption of water, or waste production. At the same time, it is necessary to increase the positive influence on individuals and communities influenced by the operations of organizations. The triple bottom line (people, planet, profit) entails combining the corporate social responsibility, which also include sustainable supply chains, and transparency of business operations.
Sustainable supply chains are essential because they enable organizations that have previously overlooked their impact on the environment to consider the outcomes of their operations on a broader scale. In their essence, supply chains tend to incorporate production that is highly dependent on energy use, while the transportation of goods both locally and internationally also has its impact. Therefore, companies can make a significant difference by modifying their supply chains rather than other business operations to become environmentally conscious.
Cisco has been working on establishing sustainable operations within its supply chains to adhere to the highest standards of Corporate Social Responsibility (CSR). The companys manufacturing and sourcing operations are now entirely outsourced to a global framework that includes suppliers and partners that are highly interconnected. Now, the impact of WTO and trade blocs on supply chain sustainability are not clearly defined, but Cisco has established its own standards and expectations to ensure the ongoing improvement of processes and driving impactful change for society overall. For example, Cisco is among the founding members of the Responsible Business Alliance, which means that it adheres to the Alliances code of conduct. The sustainability initiative always needs improvement in the area of suppliers attitude to the triple bottom line (Cisco, 2022a). Ciscos suppliers have to make sure that the standards of sustainability are embedded into the supply chain networks. Notably, Cisco views its suppliers as partners, which means that collaboration has been an essential part of building supply chains through a mutual effort.
Cisco has reported establishing a responsible minerals policy because the company uses a range of materials, including costly materials such as tantalum, tungsten, tin, gold, and others. The supply chain managers at the company are dedicated to ensuring that the materials are sourced from companies that share their values in terms of preserving human rights and environmental sustainability. Through the Responsible Minerals Initiative, Cisco has driven ethical sourcing throughout the country.
The importance of the sustainable supply chains has been illustrated in Ciscos circular economy approach (see Figure 1), which entails moving away from the linear economy in which products are used once and then disposed. Instead, the company is dedicated to making better use of the limited natural resources, which should not be taken for granted. A circular economy matters and should be considered within supply chain management because it looks beyond the current take-make-waste approach intended to redefine growth by emphasizing benefits for society as a whole.
Emerging Trends in Supply Chain Management
Besides the increased attention given to the sustainability of supply chain management and chains digitalization, there are other latest trends that can influence the future of supply chains. Among essential trends are the supply c
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