Integrated Supply Chain Management - Operational Barriers

Operational barriers to supply chain integration are understood as all obstacles related to the physical flow of products between companies, such as a lack of qualified human resources at the operational and executive levels (VAN HOEK et al., 2002), infrastructure and limited resources (AGAN, 2011; FAWCETT et al., 2008) and inadequate legislation (POWER, 2005).

Labor

VAN HOEK et al. (2002), in a survey of more than 300 European executives, concluded that the human factor is more important for supply chain management than factors such as operational and IT infrastructure. Supply chain managers need comprehensive knowledge and skills that go beyond the technical plane, such as the ability to work with flexible teams and communicate properly with diverse functional areas and other organizations (CARR and SMELTZER, 2000; VAN HOEK et al..

In addition, VAN HOEK et al. (2002) highlight the need for the supply chain manager to have the ability to think strategically, and not just operationally, to have deep knowledge about change management, the ability to influence others and to constantly learn, since operational innovations, Conceptual changes in product design, markets, suppliers and technology occur very quickly.

These skills depend not only on intellect, but also on emotional development (GOLEMAN, 1998; PATCHING and CHATHAM, 1998). Supply chain managers would need advanced social skills, that is, being at the top of GOLEMAN's (1998) emotional intelligence pyramid, which is not easy to find in executives from western societies (PRAJOGO and SOHAL, 2013; VAN HOEK et al..

In his survey of European executives, VAN HOEK et al. (2002) also identified that the lack of qualified professionals at operational levels is an important constraint in supply chain management, directly influencing the configuration of the chain. In Figure 1, it can be seen that the availability of qualified labor was the main factor considered in the decision to locate facilities when reconfigurating the supply chain.

Figure 1 - Location considerations for supply chain reconfiguration
Source: VAN HOEK et al. (2002)

Operational Resources and Infrastructure

Another operational barrier mentioned for the integration of the supply chain refers to the limitation of the available operational resources, not always the most adequate ones, to enable a broad integration of the physical flows along the commercial partners (FAWCETT et al., 2008). This limitation can be the result of incompatible operational structures, difficulties in sharing resources or even the lack of infrastructure and security.

The incompatibility of assets, the result of different strategies, cost structures and operational characteristics along the supply chain is another problem for operational integration, but which could be solved in the long term with a joint network analysis between the various partners (DONK and VAART, 2005). However, this restructuring of companies' asset base can bring unwanted financial results in the short term, which tends to be avoided by executives.

Another very relevant challenge for the sharing of operational resources between supply chain partners resides in the multiple existing interfaces (AJMERA and COOK, 2009), that is, unlike the linear structure with which it appears in the literature, a supply chain is usually multi-branched, making the customers and suppliers of a company also, most of the time, the same of competing companies (CHANDRA and KUMAR, 2000). Sharing resources and information, therefore, involves building trust relationships, which often initially require a dedicated operational structure, viable only in specific situations and with few, and more representative, customers and suppliers (DONK and VAART, 2005) .

With support from the World Bank and the consultancy Bain Company, the World Economic Forum produced a report on improving world trade (MOAVEZANDEH et al., 2013), in which he points out the existing barriers in global supply chains as the greatest obstacles to the development of international trade and economic growth of countries, highlighting among the operational obstacles:

• Unavailability and poor quality of transport infrastructure ð inadequate transport networks can be an important barrier for SCM, especially when there is a need to cover long distances to ports and airports, often forcing companies to fragment their loads, increasing complexity chain and limiting collaborative practices. The adequacy of the transport network can be measured by road conditions, availability of railways, ports and airports;
• Low quality of transport service is closely related to infrastructure issues, but also to the competitive aspects of the market. SCM initiatives generally require high operational performance to be able to respond quickly to the market, which depends on the existence of a qualified transport offer, which is not always available;
• Security Problems ð high crime rates, with a high incidence of cargo theft, force certain companies to create security mechanisms, such as escorts, convoys or cargo splitting, increasing operational costs and making it difficult to create collaborative relationships.

Although operational issues appear as important barriers to supply chain integration (BARRATT, 2004a; FAWCETT et al., 2008; MOAVENZADEH et al., 2013), there are few empirical studies that delve into this topic, mainly because chain integration is still largely analyzed from the perspective of internal integration or based on a specific relationship between two companies (NASLUND and HULTHEN, 2012).

Legislation

The legislation also deserves attention when analyzing the barriers to SCM. Conceived to mediate the relationships of independently managed companies, both the tax and civil structures can be impediments to the integration of material flows (POWER, 2005). However, most citations in the literature referring to barriers related to legislation are within the subtopics Green Supply Chain, dealing with environmental issues, and Global Supply Chain, focusing on international trade. More generally, regulatory issues can create limitations or add complexity to integrated supply chain management.

With regard to the limitations imposed by legislation, there is little literature available on potential problems concerning the integration of internal physical flows within the same country, which may be a sign that difficulties are more frequently found at the borders between countries, as highlighted by MOAVENZADEH et al. (2013) and POWER (2005). With regard to the limitations imposed by legislation for supply chain integration across supranational borders, the World Economic Forum report cites laws that create inefficiency in customs administration, inadequate import and export procedures, and lack of transparency in inspection processes, leading to increased time to release the goods, increased costs and corruption (MOAVENZADEH et al., 2013), which reduces the incentive for integration between international partners.

In terms of added complexity, legislation can be a major challenge for integration and collaboration between companies (KILGORE, 2000; MOAVENZADEH et al., 2013). Internally, that is, within the borders of a country, tax rules and overlapping laws can create legal weaknesses that hinder the exchange of information between partners and complex and unnecessary physical flows (MOAVENZADEH et al., 2013), shifting the attention and focus of companies. Externally, KILGORE (2000) says that the fragmentation and complexity of the rules, as well as the instability of import fees and taxes, create uncertainties for the flow of goods and bring complexity with the creation of intermediaries in the chain to carry out “ customs services”.

Table 1 - Summary table of operational barriers

Although it is often difficult to quantify the impact of undesired operational characteristics for supply chain integration, the literature presents several evidences that, while unresolved, operational problems prevent the adoption of SCM practices. Figure 2 shows the network of relationships identified in the extract from the literature used on operational barriers, which was summarized in Table 1.

Figure 2 – Network Design of operational barriers to supply chain integration
Source: AUTHOR using Atlas.TI tool.

References:

1 AGAN, Y. Impact of Operations, Marketing, and Information Technology Capabilities on Supply Chain. Integration. Journal of Economics and Social Research, v. 13, no. 1, p. 27-56, 2011.

2 AJMERA, A., COOK, J. A multi-phase framework for Supply Chain integration, SAM Advanced Management Journal, v. 74, no. 1, pages 37-47, 2009.

3 BARRATT, M. Understanding the meaning of collaboration in the Supply Chain. Supply Chain Management: An International Journal, v. 9, no. 1, p. 30–42, 2004.

4 CARR, AS, SMELTZER, LR An empirical study of the relationship among purchasing skills and strategic purchasing, financial performance, and supplier responsiveness. Journal of Supply Chain Management, v. 36, no. 3, pages 40-54, 2000.

5 CHANDRA, C.; KUMAR, S. Supply Chain Management in theory and practice : a passing fad or a fundamental change? Industrial Management and Data Systems, v. 100, no. 3, p. 100–113, 2000.

6 DONK, DP VAN; VAART, T. VAN DER. A case of shared resources, uncertainty and Supply Chain integration in the process industry. International Journal of Production Economics, v. 96, p. 97–108, 2005.

7 FAWCETT, SE; MAGNAN, GM; MCCARTER, MW Benefits, barriers, and bridges to effective Supply Chain Management. Supply Chain Management: An International Journal, v. 13, no. 1, p. 35-48, 2008.

8 GOLEMAN, D. Working with Emotional Intelligence. New York: Bantam, 400 pages, 1998.

9 KILGORE, SM Delivering the Global Goods. Cambridge: Forrester Research, 2000.

10 MOAVENZADEH, J.; DOHERTY, S.; PHILIP, R.; et al. Enabling Trade Valuing Growth Opportunities. Davos: World Economic Forum. Available in: , 3.

11 NÄSLUND, D.; HULTHEN, H. Supply Chain Management integration : a critical analysis. Benchmarking: an International Journal, v. 19, no. 4, p. 481–501, 2012.

12 PATCHING, K.; CHATHAM, R. Getting a life at work: developing people beyond role boundaries. Journal of Management Development, v. 17, no. 5, p. 316–337, 1998.

13POWER, D. Supply Chain Management integration and implementation: a literature review. Supply Chain Management: An International Journal, v. 10, no. 4, p. 252–263, 2005.

14 PRAJOGO, D.; SOHAL, A. Supply Chain professionals: A study of competencies, use of technologies, and future challenges. International Journal of Operations and Production Management, v. 33, no. 11, p. 1532–1554, 2013.

15 VAN HOEK, RI, CHATHAM, R., WILDING, R. Managers in Supply Chain Management, the critical dimension. Supply Chain Management: An International Journal, v. 7, no. 3, pages 119-125, 2002.