Learning Outcomes

The purpose of this chapter is to develop your knowledge and understanding of the key business issues relating to supply chain profitability, quality management and world-class organizations. In particular after studying this chapter you should be able to:

• recognize the importance of supply chain profitability and how it is achieved;

• know and understand the importance of quality management and its impact upon profitability;

• be aware of the different management approaches to quality including the use of statistical process control charts and the development of international standards.

Supply Chain Management and Profitability

Managing the supply chain is a core competence that the organization must possess to deliver profit and return on investment (ROI). It has a major impact on organizational objectives and effectiveness in achieving those objectives. According to Dyer (2000, p. 27) maximizing supply network effectiveness is the key to individual and supply chain profitability. Virtual integration is achieved by firms collaborating in partnership (alliance), which is also referred to in the literature as the extended enterprise, strategic network or virtual corporation. Figure 10.1 illustrates how supply chain strategies can impact upon sales revenues and costs and how total profit is affected as a consequence.

Figure 10.1: How supply chain management can improve 'bottom line' performance

The principle of 'world-class management' is focused upon maximizing profitability by driving revenue up and lowering cost or eliminating completely non-value-added costs. Schonberger (1986) introduced the notion of world-class manufacturing and principles to achieving world-class performance. The next section explains in more...