QUALIFI-UK

Operations, Quality and Supply Chain Management

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Table of Contents
Table of contents……………………………………………………………………...2

List of figures…………………………………………………………………….…...3

List of tables…………………………………….………….………………………....4

Introduction ………...…………………….………………………………….………5

1. Assess the contribution of operations management in organizations and how it

supports business objectives……………………………………………………..............9

1.1 Critically evaluate the business operations of a number of

organizations in different industry sectors……………………………….
……………………………………………...….9
.
1.2 Critically analyze how process and lean techniques and methods can contribute
to effective
operations………………………………………………………………………….…13

1.3 Explore the role of customer service in organizations and how this can impact
operations…………………………………………………………………….….…...14

2. Evaluate the role and contribution of quality models, systems and standards to
modern day business operations……………………………………………....……….15

2.1 Critically evaluate a range of quality models, systems and standards………..….15

2.2 Explore the use of quality models and systems in different

companies across a range of industry sectors………………………………………...20

2.3 Identify the pros and cons, and relevance of using quality models and systems in
modern day business operations……………………………………………………...

3. Evaluate the contribution of suppliers and supply chains on effective operations……

3.1 Critically evaluate supply chain theories and models and explore the use of supply
chain management in different companies across a range of industry sectors………....

3.2 Review how logistics impacts upon supply chain management…………………...

3.3 Identify the main requirements of supplier contracts, the risks

involved and mitigating strategies for organizations when securing
effective contracts……………………………………………………………………...

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List of Figures
Figure 1: Operation as a transformation………………………………………….5
Figure 2: Operation management technical core…….……………………...……7
Figure 3: Meaning of quality…………………………………………………...….15

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List of Tables:
Table 1: Different forms of operations…………………………….……….………6
Table 2: The fundamental functional domains of a business organization...…….8
Table 3: Dimensions of customer
service…………………………………..............14
Table 4: Pros and cons of using quality models and systems in modern day
business........................................................................................................................20
Table 5: Theories of supply chains…………………………………………………21

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Introduction:

operations management (OM) in both manufacturing and service organizations has

undergone significant changes due to the evolving market requirements. With the
market becoming increasingly global, enterprises have been compelled to keep up
with the changes in order to remain competitive. (Gunasekaran; & Ngai, 2012)

Operations is a field that involves many different aspects and create a comprehensive
view of how businesses work. That's why operations managers are highly sought after
by companies and government agencies.

Figure 1 illustrates how operations can be described as a transformation process,

whereby various inputs (such as material, machines, labor, management, and capital)
are converted into outputs, which are goods and services. Operation management
involves planning, organizing, coordinating, and controlling all the resources needed
to
produce a company’s goods and services, it involves managing people, equipment,
technology, information, and all the other resources needed in the production of goods
and services.

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Figure 1: Operation as a transformation

Effective business operations are a must for organizations. Achieving this requires a
thorough comprehension of the industry sector in which the organization operates,
coupled with a profound understanding of the organization's internal processes and
procedures.
To enhance the transformation process, businesses utilize customer feedback and
requirements to adjust various factors, which may subsequently impact the inputs.
The primary objective of operations is to ensure that the transformation process is
carried out effectively, resulting in an output that adds more value than the combined
inputs. Operations are fundamental to creating value by streamlining the
transformation process. This process can be thought of as a value chain, with the
supplier at the beginning and the customer at the finish. (Russell, 2011)

Table 1 illustrates that "operations" can manifest in various forms. Numerous

operating systems share the input-transformation-output (ITO) mechanism.
Figure 2 shows how operations often work as the technical center of an organization,
collaborating with other functional areas and suppliers to produce products and
provide services to clients.

Table.1 Different forms of operations

Operation Example
Physical, Manufacturing operations;
Locational, Transportation or warehouse operations
Exchange, Retail operations
Physiological, Health care
Psychological Entertainment
Informational Communication.

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Fig 2. Operation management technical core (Russell, 2011)

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The three primary functional areas of a firm are described in Table 2.
Table 2. The fundamental functional domains of a business organization (Wolniak,
2020)

Functional
Description
area

The finance department is accountable for obtaining financial

resources at advantageous rates and distributing them throughout
Finance the entity. In addition, finance department handles budgeting,
evaluating investments, and providing funds to support
operations.

The marketing department is accountable for evaluating

consumer demands and advertising the organization's products
and services. Their major goal is to sell and promote the
organization's products or services. Furthermore, marketing is in
charge of identifying client demands and expressing them to the
operations and design teams.
Marketing
Collaboration between marketing, design, and production is
crucial for Successful design adjustments and product
development. Marketing can also provide significant insights into
rival actions and consumer preferences, which can aid design in
creating products with the necessary features, and operations in
determining manufacturing capabilities.

Responsible for managing resources, producing goods or

Operations services, ensuring quality control, ultimately achieving firms’
objectives

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Source: (Knod & Schonberger, 2000)

1. Assess the contribution of operations management in organizations and how it

supports business objectives

1.1 Critically evaluate the business operations of a number of organizations in

different industry sectors.
In this section, I will critically assess the business operations of various organizations
in different sectors:

 Tesla:

Tesla Motors is a well-known US-based manufacturer and technology giant

that specializes in high-level electric vehicles. The company positions itself in
two ways: An energy company that sells solar panels, batteries, and other
related products, and an automobile manufacturer with an expanding product
line.
Tesla has taken advantage of the fact that expanding free trade agreements
between countries all over the world present opportunities for companies to
expand their operations internationally. Therefor Tesla has formed an equity
strategic alliance with Panasonic. This alliance has significantly enhanced its
technology innovation, profitability, and overall competitiveness, as evidenced
by the growing inputs and outputs of technology innovation, increasing return
on capital employed (ROCE), and better turnover ratios observed through
business and financial analyses. The combination of the vehicle factory and
the battery factory of Tesla and Panasonic has also resulted in cost savings in
terms of transporting costs, which enables them to lower costs and prices to
boost sales.
Tesla has been successful thus far, but its performance is not likely to be
sustained, and its share price may be overvalued. The company has yet to
achieve a profitable year, and its success is contingent upon future growth,
which necessitates substantial investments given their current losses. (chen,
2022)

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The fact that Tesla has witnessed rapid growth and gained significant
dominance over the EV market in recent years, has made many investors more
willing to invest despite the share price. However, another important fact to
consider is that Tesla is not alone and has many tough competitors in this
field. Numerous young and promising companies are entering the EV industry,
accompanied by strong development teams.
Behind the scenes, however, these great achievements are masking several
challenges that the company is actually facing, including, but not limited to:
 Late deliveries.
 Unpredictable technological issues.
 High share price regarding that Tesla is a public company.
 The company overstate its capabilities.
Tesla is confronted with numerous risks, such as the difficulty of reducing
production costs and meeting production objectives, as well as the resistance
of consumers to switch from their current car brand. Additionally, established
car manufacturers have been in the industry for a considerable period and are
also creating hybrid and electric vehicles.
Part of Tesla's business operations involves expansion and growing the
brand’s name, these plans have encountered hidden risks. for example, China
is a major player in the production domain, and Chinese manufacturers can
easily master the art and replicate Tesla’s technology, creating tough
competitor in the EV industry.
While Tesla may be relying on its top-selling figures as clear evidence of
success in the EV industry, this strategy may not be efficient or effective given
the increasing number of new companies entering the market. To distinguish
itself from its rivals, Tesla needs to develop a unique operational plan.

 Walmart:
Wal-Mart is the biggest employer worldwide and the top retailer in the US.
Operating with 6,500 outlets in over 27 countries and producing $62.7 billion
in 2006. Its main strength lies in cost leadership due to economies of scale, IT
investments, and a radial net store layout. The company tailors its products to
customers' purchase habits to target specific market segments. It has expanded

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into various industries, but its growth has decreased due to market saturation,
and economic downturns.
Wal-Mart faces challenges as consumers' purchasing power increases and
luxury goods become more popular. It needs a differentiation strategy to
improve its reputation and distance itself from competitors. Moreover,
changes in the U.S. market, such as market saturation, evolving demographics
(due to the growing numbers of young population and smaller family sizes),
and changes in the retail industry, have posed a threat to Wal-Mart's market
leader position, leading to a slowing of earning growth in the United States.
To counter this, Wal-Mart initiated international expansion as a strategic
priority for further growth. Nevertheless, Wal-Mart's international expansion
has shown mixed performance. the company has struggled to establish itself in
certain overseas such as German, and South Korean markets due to differences
in consumer preferences and the limited effectiveness of American marketing
strategies.

Another behavior characteristic of Wal-Mart is its great control over the

supply chain. Wal-Mart has its own transportation system which helps in
shipping merchandise from its own warehouses to the rest of stores
(Marcilla, 2014) The company keeps low prices by bulk buying to enjoy
quantity discounts, squeezing suppliers on price, instituting competitive
bidding for contracts, and working with vendors to keep inventories low using
methods such as Just-in-Time purchasing or Vendor-Managed Inventory. The
use of an Electronic Data Interchange (EDI) improves operations efficiency,
and test the potential of newly launched products.
Wal-Mart has several drawbacks, including a poor reputation, absence of
differentiation strategy, difficulty in expanding internationally, and strong
competition. To overcome these challenges, the company must invest in
charity, help local retailers, embrace green energies, be less aggressive with
suppliers, and consider opening new stores overseas. Wal-Mart limits
customization of service, offers high volumes of standardized products, and
minimizes production costs through reduced usage of regular components and
a limited number of manufactured models. The organization achieves cost

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efficiency by opting for low-wage labor and setting up facilities in low-rent
regions, while also outsourcing certain operations.
 Netflix

Netflix Inc. is a subscription-based streaming service, that offers a wide variety

of different types of Tv shows and other entertainment materials, and provides
its services through internet connected devices. With over 200 million
members worldwide, easy access to unlimited content including original
content, fixed monthly fee, Netflix has become one of the most famous,
leading premium streaming services.
It was founded in California, United States of America on Aug 29, 1997 by
Reed Hastings and Marc Randolph, they started the world's first DVD rental
service via mail. in 2007 Netflix shifted to video streaming via the internet,
spreading its services throughout the United States through video on demand
model
The company has changed the way users watch videos by adopting streaming
media technologies. Subscribers choose movies to rent through a web
interface. Netflix uses premium content and marketing efforts to generate more
subscriptions and fend off competitors. Netflix experienced a surge in
popularity and engagement rates during the pandemic, and its focus on
innovation continues to grow stronger.
Netflix original content is getting more and more popular bringing more
subscribers with every new show by making high quality of popular TV
shows, standup comedy, high ratings movies, and unique series. Also
Personalizing customer experience is extremely important for almost all types
of companies, especially in case of companies like Netflix, from the moment a
customer log in to the level of binge watching ...all that personalized model is
the final result to actual collected data, Al algorithms, and testable ideas. This
ensures that all the videos, recommendations, and other content is customized
as possible
One of the major weaknesses for Netflix is relying on debts to reach where it is
now, on the short term this debt seemed insignificant. But with debts growing
this would be a real negative factor. Starting in 2025, Netflix will confront an

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issue where almost $7 billion of its debt will be payable over a period of three
years.
Also depending on North American market: About 50 % of Netflix total profits
comes from north American market including USA and Canada, and this is a
major weakness for Netflix in terms of tough competition in the future, and
markets getting full needs

1.2 Critically analyze how process and lean techniques and methods can
contribute to effective operations

Product proliferation, shortened product lifecycles, shortened product development

times, changes in technology, more customized products, and segmented markets did
not Fit mass production assumptions. Using a concept known as lean production, a
system that prizes flexibility (rather than efficiency) and quality (rather than quantity).
this philosophy was originally developed by Ohno Taiichi, a Japanese industrial
engineer and entrepreneur, he is widely regarded as the pioneer of the Toyota
Production System (TPS), which served as a precursor to Lean Manufacturing in the
United States.

The definition of lean manufacturing can be described as the following: "a

comprehensive set of techniques that, when combined and matured, will allow entities
to reduce and then eliminate the seven wastes". (Wilson, 2010). From this perspective
wastes can be defined as anything that has no value added to the final product.
Ohno outlines the fundamental structure of TPS in his renowned book, "The Toyota
Production System: Beyond Large-Scale Production." The primary objective, is to
minimize costs. (pg. 8).

The ultimate goal of Lean Manufacturing is to reduce costs in business processes,

offer competitive prices in the market, and increase profits and ROI. This is achieved
by reducing costs from the bottom line at the operational level, which impacts all
product or service costs. other goals of lean manufacturing include reducing defects
and physical wastage, minimizing manufacturing lead times, reducing inventory
levels throughout the production stages, enhancing labor productivity, optimizing
equipment and manufacturing space utilization, and having the capability to produce a

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more diverse range of products with minimal changeover time and costs. Using lean
techniques, production workers would be motivated to address quality issues at an
early stage. This, in turn, guarantees that every process delivers fault-free components
to follow-up procedures. (Shah & Ward, 2007).
According to (Fullerton & McWatters, 2002), there is currently no consensus on the
specific aspects of operations performance that can be potentially attained through the
implementation of lean manufacturing, leading to ongoing debate on the topic.

1.3 Explore the role of customer service in organizations and how this can impact
operations.

Customer service involves a mixture of physical items and interactions with the
service organization. Customer requirements are diverse for different types of
products and range enormously from one market sector to another. organizations
should seek to define customer service as precisely as possible to implement
operational systems that deliver and control service quality which lead to
increasing customer satisfaction, loyalty, and retention, repeat business and
positive word-of-mouth referrals. A checklist of dimensions of customer service
(shown in table 3) can reflect the main factors that constitute customer service.
Operations managers must provide a quality of service that matches customer
expectations and needs by understanding the interactive nature of customer
service dimensions and instituting a corporate commitment to quality. A
framework for starting this process includes the use of checklists and an
operational audit for customer service. (Armistead, 1989)
Table 3. characteristics of customer service

Time frame  Service availability

 Availability of all components of the service package
 Waiting time
 Processing time

Fault freeness  Material objects

 Correctness of information

Flexibility  Customize services

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 Cope with mistakes

Style  Appropriate attitude

 Accessibility
 Ambience

Steering  Clarity
 Consistency
 Psychological timing

Safety  Trust
 Security
 Honesty

2. Evaluate the role and contribution of quality models, systems and standards to
modern day business operations

2.1 Critically evaluate a range of quality models, systems and standards.

Quality is a main priority of a production system. Employment of this practice is an

integral element of establishing both process and product quality. quality must be
ensured at the very beginning of each process. It is important to guarantee that only
good quality of product can be passed to subsequent workstation, no defect, no reject,
and conforms to the required specification.

The American Society for Quality (ASQ) defines quality as “a subjective term for
which each person has his or her own definition. In technical usage, quality can have
two meanings:
(1) The characteristics of a product or service that bear on its ability to satisfy stated
or implied needs
(2) A product or service free of deficiencies.” Obviously, quality can be defined in
many ways, depending on who is defining it and the product or service it refers to.

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Fig 3. Meaning of Quality

Quality Models:

• Total Quality Management

Total Quality Management (TQM) is a widely accepted concept in business

communities. While there is no universal consensus on the precise meaning of TQM,
several definitions have been suggested. According to Walsh et al., TQM is a culture
of ongoing client satisfaction attained by an integrated system of tools, techniques,
and training. (Anjard, 1998) sees TQM as a cultural revolution that inspires all
employees to take ownership of delivering superior services and goods. TQM is
described by (Gunasekaram, et al., 1998) as a management philosophy and a
collection of techniques and policies that prioritizes everyone's accountability for
quality.
In general, TQM can be defined as a management theory that focuses exclusively on
quality and involves employees in quality improvement processes to satisfy internal
and external customer needs and provide value to stakeholders. TQM-adopting
organizations use a complete framework of more than 100 management approaches,
models, and systems for developing employee competency. Directing management
activities towards customer satisfaction, continuous improvement, and nonconformity
prevention.

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• Six Sigma

Six Sigma is an approach that focuses on reducing variability in human activities to

eliminate defects. It is a data-driven, customer-centered methodology that derives its
name from the Greek letter sigma, which denotes variability. The goal of Six Sigma is
to reduce variability to the point where there are only 3.4 problems per million
opportunities, this is the same as the mean and the closest customer specification limit
being separated by six standard deviations.

• Lean Manufacturing:

lean manufacturing tools including cellular manufacturing and just in time have
widely used in manufacturing industries such as electronic and appliances, businesses
have been showing great interest in using these tools to benefit from these uprising
techniques.
Lean manufacturing tools:
1- The 5S System: (Sort, Straighten, Shine (clean), Standardize, and Sustain):
 Sort: removing scraps, and excluding unneeded items and old tools
 Straighten: arrangements of the right tools in the right place: by categorizing
tools and products in labeled boxes helps making resources detectible and easy
to use (Feld, 2000)
 Clean: waste management and adequate housekeeping
 Sustain: teaching and training working team to maintain high level of quality
achieved.

2- Kaisen (Continuous Improvement):

A systemic approach to orderly continues improvement in lean manufacturing.
in our case kaisen has served in reducing inventory and easy identifying
defective part in order to eliminate them.

3- Heijunka (Production Smoothing):

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the literal meaning in Japanese is (leveling) and here it refers to leveling of
production, to minimize the chance of overburdens in products and fill the
existed gap due different capacities

4- Total Productive Maintenance (TPM):

TPM (Total Productive Maintenance) is a holistic approach to equipment
maintenance, TPM serve as a preventive technique through anticipatory
maintenance, replacing random checkups with regular planned on all system
tools and detect any early errors and subsequently avoid corrective
maintenance.

5- Zero Defect:
it aims to ensure that all products are fault-free through continuous
improvement (Karlsson & Åhlström, 1996). Shingo developed the poka-yoke
system: an autonomous defect control system to detect deficit parts and
eventually prevent deficit products from appearing. it avoids from producing
defects. Consequently, each process supplies no defect unit to subsequent
processes (Shah & Ward, 2007)

Quality Standards:

Standards provide guidelines and best practices for business management, while
models consist of components that aid users and developers in understanding,
analyzing, improving, or replacing a process within a system. There are different
types of standards, including consensus, de jure, and de facto standards. Consensus
standards are more flexible and set by organizations agreeing on acceptable
standards. De jure standards are established by accredited organizations that set
standards for other companies, whereas de facto standards are set by dominant
industry players to gain a competitive edge. Standardization has a positive effect
on exports, quality assurance, and competitive pricing, and increases awareness of
product safety. Standards are adopted by organizations to ensure consumer
satisfaction and encourage pursuit of economically viable production methods.
ISO 9000, for instance is a range of standards for quality management systems
created by the International Organization for Standardization. These standards are

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intended to be applied to the processes involved in producing products or
providing services. ISO standards are applicable to any industry globally. To
obtain ISO certification, an organization must fulfill all the standards and
successfully undergo an extensive audit conducted by an ISO auditor. While ISO
certification is widely recognized, it may not be practical or cost-effective for
every industry.

Quality systems (QS):

A quality management system (QMS) is a collection of interconnected elements used

by organizations to direct and regulate the implementation of quality policies and
procedures in pursuit of quality objectives. The QMS includes organizational
structure, processes, procedures, and resources. Quality management is not solely the
responsibility of the Quality Management department; it is a philosophy embraced by
all members of an organization, spearheaded by executive management and steered by
the Quality Management Department. QMS has evolved from emphasizing
predictable outcomes using simple statistics and random sampling to focusing on
team cooperation, dynamic forces, and ongoing development.

Given both investor and customer happiness, as well as perceived quality, are now
more closely correlated with sustainability and transparency measures, QMS overlaps
with these objectives in the current day. The quality system design is a crucial
element of a quality system and involves developing standards and procedures to
ensure consistent quality. The design process involves various steps, including:

 Comprehending and charting out all the structures and procedures of the
business.

 Creating priorities for business performance improvement.

 Gaining insights into the existing performance measurement system.

 Creating performance metrics or indicators.

 Determining the approach to collecting necessary data.

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 Creating formats for reporting and presenting performance data.

 Testing and adjusting the performance measurement system.

This process should be carried out by a core team and involves input from all levels of
the organization, to ensure a relevant and accurate performance measurement system
is developed.

A quality system’s components include:

 Engaged Management
 Quality Infrastructure Development
 Clientele
 Procurement
 Learning And Development
 Data Analysis
 Inspection
 Innovation.

2.2 Explore the use of quality models and systems in different companies across a
range of industry sectors:

 Johnson & Johnson‘s:

Johnson & Johnson implements its Quality Management Framework
(QMF) to achieve end-to-end compliance with customer and regulatory
requirements for Quality Management Systems. The QMF includes
their commitment to quality outlined in their Credo, Quality &
Compliance organization, and system of policies, standards, and
procedures. The company's Quality Policies & Standards cover the
entire lifecycle of their products and create a common foundation for
quality expectations, ensuring a reliable supply of high-quality
products. Johnson & Johnson regularly assesses and improves its
internal quality policies and standards to keep up with changing
regulatory demands.

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 Toyota:
Toyota's Total Quality System, developed from the Toyota Production
System (TPS), prioritizes quality, customer satisfaction, and profit.
However, Toyota's rapid growth strategy caused a decline in quality
due to an overemphasis on sales targets and volume. This resulted in
issues with staff, suppliers, and the supply chain, affecting the BPTs
related to quality, standardization, and testing. The added complexity
of car designs, coupled with an aggressive growth strategy, also
affected the ability to identify quality issues, standardize tasks, and test
components and systems rigorously. Competitors can learn from
Toyota's negative experience by growing in line with the organization's
core principles, reducing their product range, having a crisis
management process, and protecting their brand reputation and
customer perception.
 Manchester airport airfield:
Manchester Airport's internal department, MA Airfield Safety &
Compliance, is committed to providing high-quality service by
ensuring compliance with regulations and internal processes and
procedures. The department aims to continually review and improve its
processes and procedures to maximize the efficiency of its Quality
Management System. The key elements of their Quality Policy include
developing and maintaining a Quality Management System, meeting
customer and legal requirements, establishing effective
communication, setting and reviewing objectives regularly, and
identifying opportunities for improvement. The policy is available to
interested parties upon request.

2.3 Identify the pros and cons, and relevance of using quality models and systems
in modern day business operations.

Table 4. pros and cons of using quality models and systems in modern day business
Pros Cons
Improved Quality Limited Scope:

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Increased Efficiency Resistance to Change
Competitive Advantage Implementation Costs
Standardization

Relevance:
Quality models and systems offer a framework for identifying and addressing quality
issues, which can improve customer satisfaction, increase efficiency, and provide a
competitive edge.

3. Evaluate how suppliers and supply chains affect successful operations.

3.1 Analyze the theories and models of the supply chain critically, and investigate
how supply chain management is used by various businesses in various
industries.
Supply chain management involves the coordination of information, products, and
services across a network of customers, enterprises, and suppliers. It is commonly
acknowledged that efficient SMC strategy is essential for businesses to acquire a
competitive edge.

Evaluating theories of supply chains:

The supply chain management theories listed in Table 5 have been helpful in
illuminating some of the difficulties in supply chain contexts.

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Table 5. Theories of supply chains:
Theory Description and characteristics
Transaction cost economics (TCE) Transaction Cost Economics (TCE) concentrates on
minimizing transaction risk by considering all
organizational expenses involved in economic
transactions, including hidden expenses. (Williamson,
2008)
Although TCE utilizes concepts like asset particularity
and unpredictability to convert trade-offs in make or buy
decisions into expenses, it ignores contractual
commitments and the center of power in supply chains.

While TCE has its limitations, it has shown promise in

addressing Supply Chain Management (SCM) concerns.
Second-tier agents have been observed to have
significant control over variables such as time, quality,
risk, and flexibility in "best value supply chains."

The resource-based view (RBV) Explain that companies can gain a lasting competitive
advantage by using a combination of tangible and
intangible resources in a unique way. This involves
identifying the value, rarity, imperfect imitability, and
imperfect substitutability of resources, which can create
barriers and enhance competitive advantage. (Priem &
Swink, 2012)

In the context of supply chains, the reformulated RBV

version employs the concept of a network resource to
leverage its explanatory capabilities.

RBV applications in supply chain management (SCM)

are mostly concerned with structural evaluation and
determining the causes of competitive advantage.
The resource-dependence theory Centers on the dynamics of power that result from the

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(RDT) transfer of resources., recognizing that organizations
may become dependent on each other for resources
required in the value-creation process.

RDT theory suggests that companies often create

partnerships to increase their power and make other
firms dependent on them. To manage uncertainty and
dependence in business transactions, RDT proposes
resource manipulation and control exertion as strategies.

Conventional supply chains usually exploit their power

and reliance along the chain. Conversely, the most
effective value supply chains leverage dependence to
foster trust and dedication in fulfilling the supply chain's
demands.
This highlights a shift in the resource-dependence
forecast, which is influenced by the needs for
collaboration in contemporary business practices.
(Ketchen Jr, et al., 2007)

The relational exchange theory Embeddedness means that when parties cooperate, they
(RET) follow certain norms instead of just sticking to
contracts. To promote trust and prevent opportunistic
behavior, soft control mechanisms are used instead of
strict rules. This approach predicts that relationships
built on trust are less likely to be affected by
opportunistic behavior from partners.

Establishing trust-based relationships enables the

allocation of resources towards fostering and nurturing
relationships, rather than dealing with transactional
conflicts or deviant behaviors within the supply chain.
(Dyer & Singh, 1998) highlighted the significance of

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relational rents that arise from relation-specific assets,
knowledge-sharing routines, complementary resources
and skills, and efficient leadership as characteristics of
cooperative partnerships.

Providing a framework for controlling how relationships

are formed, the Resource-based view (RET) plays a
critical role in (SCM) by enabling exchanging of
resources among organizations, both internally and
externally.

The network theory (NT) gives a more comprehensive perspective on how

different organizations engage with one another in a
networked environment, highlighting the complexity of
those settings and recognizing the impact of partner-
partner connections on how an organization operates.

A network resource view, according to NT, helps

managers make more accurate assessments of individual
node resources and their effects on the company.

The theory explains how sharing knowledge and

managing processes across a network can promote
innovation in the supply chain and build trust in bilateral
interactions. (Miles & Snow, 2007).
Agency Theory
Agency theory refers to the relationship between a
principal who delegates work to an agent to compensate
for a lack of expertise or to focus on core competencies.

Agency theory concentrates on identifying the most

effective agreement that governs the relationship
between the principal and agent to decrease agency

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expenses and address agency-related issues. There are
two branches of agency theory in the literature:
principal-agent investigation and empirical agency
theory.

Analyzing supply chains models:

 Strategic Models of Supply Chain Management:

For managing product diversity, demand ambiguity, or corporate strategy, supply
chain management strategic models offer strategic recommendations. Four strategic
models are suggested by Fisher and Lee's models: productive, risk-adjusted,
adaptable, and nimble.
Efficient strategies are for functional products with predictable demand patterns,
while novel and innovative products require a responsive supply chain strategy.
Resource pooling and sharing underpin the risk-hedging strategy.
Responsive supply chains incorporate flexibility and adaptability into their systems
and processes, whereas agile supply chains prioritize these qualities. Strategic models
in SCM are instrumental in developing contingency-based strategies for enhancing
SCM. (Brown & Bessant, 2003).
 Operational Models
Operational models are employed to tackle issues related to the theoretical foundation,
extent, and magnitude of SCM (supply chain management). While there is no single
theory that can describe and forecast SCM behaviours, operational models set the
boundaries of SCM and inform understanding and investigation. However, the
complexity and dynamism of supply chains make generalizations difficult, and issues
such as functional silos, inadequate operationalization, and lack of attention to context
have dominated the SCM literature. To address these concerns, researchers have
started incorporating contingency elements into their investigations, making their
findings accessible to diverse settings.

 Network Models

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The importance of network dynamics in supply chain management (SCM) has been
discussed in the literature, with some operating models emphasizing supply chain
structures and their implications for managing business operations. However, there is
a considerable body of literature specifically exploring network models of SCM,
which highlight the competitive positioning, components, and structures of a network.
(Harland, 1996) work identified and explained the internal, dyadic, chain, and
network uses of SCM, highlighting the key network dynamics that managers need to
be aware of when making supply chain decisions.
 Behavioural Models
Behavioral dynamics of inter-organizational interactions are a dominant theme in
supply chain management (SCM) literature, with models proposed to control and
manage practices, processes, and activities across the supply chain. Collaborative and
opportunistic behaviors are often suggested as two competing ends of a spectrum in
supply chain relationships. Various models have been proposed to guide partnership
development and maintenance, such as Lambert, Emmelhainz and Gardner's (1996)
partnership model, which emphasizes communication, risk and reward sharing, trust
and commitment, and contract style as key components for building and sustaining
collaborative relationships. Effective management of relationships with key suppliers
or customers is crucial for manufacturers.

The application of supply chain management in various companies spanning

multiple industry sectors.
 Apple:
Apple wields a big weapon when it comes to production: over $80 billion in
cash and investments. They intend to increase capital expenditures on their
supply chain to $7.1 billion, almost double the previous amount. Moreover,
Apple commits to prepaying essential suppliers an extra $2.4 billion to ensure
a steady supply and favorable pricing, which may restrict alternatives for other
firms. Apple requires suppliers to provide detailed accounting when asking for
a quote and supplier inventories to be within a mile of assembly plants. They
also sometimes delay payment up to 90 days. Apple's control reaches its
crescendo in the lead-up to product unveilings, with a tightly orchestrated

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process to track efficiency and ensure secrecy, even using tomato boxes and
electronic monitors to discourage leaks. (Satariano & Burrows, 2011).
 Tesla:
owns the entire supply chain, from manufacturing to distribution. This
strategy aims to lowering manufacturing and cost of goods sold, ensuring
long-term sustainability. Strategy of supply chain management is centered on
a long-term growth strategy that includes production, inventory management,
and distribution. By owning the entire supply chain, the company can control
costs, improve quality, and ensure timely delivery of products. (Bilbeisi &
Kesse, 2017) .
 Pfizer:
Pfizer, a pharmaceutical company, has a strong focus on health-related issues
Gives priority to the well-being of individuals, encompassing both employees
and the broader public. The company's Citizenship Report highlights its
concern for health-related issues and places a stronger emphasis on the supply
chain's social components while downplaying profits. To lower ingredient
costs while maintaining high safety and quality standards, Pfizer collaborates
with upstream supply chain members. Suppliers are required to comply with a
rigorous behavior code that entails unscheduled audits, and on-site
inspections. Pfizer also works with downstream supply chain members to
distribute AIDS medication donated to governments globally. They have
provided over 7 million free doses of Diflucan, a Pfizer drug, to those in need.
(Tate, et al., 2010)

3.2 Review how logistics impacts upon supply chain management.

Logistics is a vital component of supply chain management that strategizes, executes,
and oversees the movement and warehousing of products, services, and data to satisfy
customer demands. The recipient, which could be any receiving location, is the key
factor in determining logistical performance criteria. It is critical to comprehend
customer expectations and devise supportive approaches to formulate the logistics
strategy. This module delineates the essence of customer service and diverse
methodologies to cater to customer needs.

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Logistics is vital in supply chain management, assuring the smooth flow of
commodities, services, and information from the point of production to the point of
consumption to meet customer requirements. Effective logistics can reduce costs,
improve efficiency, enhance customer service, facilitate collaboration, reduce
environmental impact, and improve communication between supply chain partners.

3.3 Identify the main requirements of supplier contracts, the risks

involved and mitigating strategies for organizations when securing
effective contracts.
Companies need to identify and address potential weaknesses in their contract
management process, establish clear policies and procedures, and assign
responsibility for reviewing contracts
According to IACCM, an international organization for contract and commercial
management, inadequate contract management practices result in an average of 10%
annual revenue loss for companies. However, this loss can be reduced by adopting
effective contract management practices and software, along with improved risk
management. Companies can double their profit margins by halving this loss because
typical profit margins are around 10%.

Financial risks can lead to money loss regardless of how it impacts the top or bottom
line. Missing key contract dates, continuing contract terms due to automatic rollover
clauses, missed milestones, warranty problems, claims, or missed delivery dates can
all result in financial risk for companies
 Security risks associated with contract management can have severe and high-
profile consequences for a company. Storing contracts in insecure locations,
providing equal access to sensitive information for everyone and utilizing
email to transmit confidential data can both result in security breaches. that
result in additional legal, financial, and brand issues. Digital contract
management solutions eliminate the need for physical copies and increase
security by encrypting confidential contract data.
 Legal risks are another potential issue associated with contract management.
Breaches of contract can result in litigation or legal accountability, as well as
compliance, dispute, and regulatory issues. Missing contract obligations,

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failing to comply with OSHA, HIPAA, and HITECH, and intellectual property
infringement are all potential legal risks.
 Brand risk is the risk associated with negative consumer and public opinion,
and low employee morale. A company's reputation can be negatively impacted
by security, legal, and financial issues. Mitigating brand risk is more important
than ever before as bad news travels quickly in today's digital world. Negative
impacts on a company's brand reputation can lead to a negative impact on
financial performance, creating a cycle of further risk.

Mitigating Contract Risks: Encryption, Notifications, Role-Based Security, Clause

Libraries, and Version Control. To mitigate contract risks, companies can implement
various measures such as using encryption to protect contract data, eliminating missed
milestones and obligations through notifications and alerts, controlling access with
role-based security, using clause and template libraries to increase compliance, and
maintaining control over contract versions.

Encryption is essential to protect confidential contract data from unauthorized access.

Setting up notifications and alerts to avoid missing critical milestones or automatic
contract renewals can help avoid significant financial consequences. Controlling
access with role-based security ensures that only necessary employees can access
specific documents or contract types, while using clause and template libraries can
mitigate non-compliance risks.

To retain authority over contract versions, it is vital to trace modifications by user and
enable parallel assessment and revision of papers right within the contract
administration system. Furthermore, organizations can leverage electronic
notifications and nudges linked to the contract data archive to remain updated on any
contract modifications, appendices, and cancellations.

Page 30 of 34
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