The relation between the supply chain network and Economies of scale & Economies of scope.

First let’s define what are the:

Economies of scale

Economies of scale refers to the accumulated volume in production and sales which occurs decreasing the cost price per unit, due to the experience curve and increased efficiency in a lot of factors such as production, marketing, and other factors. The global presence has a significant effect on extending the firm’s scale of operations through giving the firms a large capacity in its production as well as large asset base. From this point we can say that; through large scale, the firm could create a competitive advantage but in case if the firm convert the scale into economies of scale.

Economies of scope 

First let’s say the economies of scope happens, when the firm is serving in diverse marketplaces in the world, simply the global scope can’t take place in case the firm is serving a customers in just one country, customers should purchase a bunch of identical products and services across diverse countries and they can bring those products either from a horde of global suppliers or a single global supplier (international marketer) that are presents in all of the markets which the firm is already serving customers within. From this point we can conclude that compared with a horde of local suppliers and a single global supplier (marketer) can lead to increase the value for the global customer among the consistency in the product’s quality and features as well as in the services across countries, here we can conclude the importance of the integration between marketing and supply chain management within professional supply chain network across the countries. As well as the importance of local marketing talent.

. During the last decades the multinational firms could be succeeded by how they capture the economies of scale and & economies of scope, the supply chain network can help the companies to achieve this concept through:

1) Decreasing the operating cost per unit as well as spreading the fixed costs over larger volume due to experience curve effect.

2)Pooling global purchasing which support the firms and provide an opportunity to concentrate global purchasing power over suppliers, which lead to reducing the transaction cost & time.

. The challenging in capture the economies of scope within the global level lies on the quick response from the firm on the tension between tow factors: The need for central coordination of most elements on the marketing mix and the need for local autonomy in the actual delivery of products and services. The supply chain network guarantee poll of materials & info-flow and procedures, which ensure high quality and dynamic response and delivery.

The supply chain network is an effective linkage, which can:

 1)Extend organization learning to supply chain learning.

2)Extend market orientation to supply chain orientation (mediate the                      relationship between market orientation and financial issues that lead to marketing success.

    3) provide Intangible assets such as knowledge management, organization learning from accumulated experience gained also from economies of scale which lead to conduct economies of scope,  which enable the firms to enhance the market performance among different countries, so the supply chain network is helping the firms to increase all of those intangible assets to the internal and external customers.

4)  The best methods for capturing the voice of the customer in different firms embedded in different national and corporate cultures.

5) In the long term the supply chain network should provide service to the internal and external customers on what they already need by just mention their vision and mission only without mention their target market.

                                     Supply chain network

Abstract

•   The customer value within the supply chain management
•  Recognizing that everyone in the supply chain may value something different. As well as recognizing that many methods, both qualitative and quantitative, will be needed to capture those different value perceptions.
•    The important needs of global supply chain network as a trading platform, which integrate the suppliers and buyers in order to serve the end customer better

. In all stages in the value chain, there’s an opportunity for a positive contribution in the firm’s competitive strategy through performing some of the activities or process in the way, that bring a competitive advantage in comparison with other competitors and if the firm could attain such a competitive advantage that’s profitable, defensible, and valued among the market, so it could gain a high rates of returns.

 . In competitive terms value can be defined as, the amount that buyers are willing to pay for the products or services, which the firm provide to them, (Perceived value). So When the value of the products or services, which the firm provides to the customers exceeding the costs of doing them, the firm is becoming profitable, and this is the goal of any generic strategy.

The value chain displays the total value and it’s consisting of the value activities and margins.

. The value activities can be described as the physical and technological distinct activities, which the firm performs, as well as it’s the building blocks by which a firm creates a valuable product or service to the buyers Margin, which can be described as the difference between the total value (price) and the total costs of performing the value activities.

. Value chain activities can be defined as the key, which links the company resources and its strategic position within the global market. And on this point, one logic question emerges:

“ When the company resources considered to be valuable? ”

The answer is, the company resources could be valuable when they are transformed into activities that generate either lower cost or greater value than competitors.

So we can conclude that the value chain can be described as; it’s not a collection of independent activities but it’s a system of integrated and interdependent activities either within one organization or within various different organizations.

. The firm might be able to identify elements of the value chain, that aren’t worth the costs and this could be conducted outside the firm, which called outsourcing. Hence the role of the supply chain management emerges.

. Supply chain management: SCM described as the oversight of materials, information, finances, which moves in a process from suppliers to manufacturers, then to wholesalers, then retailers, to be delivered to consumers, so it could be described as a continuous movement of process to serve the end customer. SCM involves the coordinating and integrating all of those flows within and among various organizations. As we live on the Global economic system, so the collaboration between different organizations is becoming essential. As the advanced communication activities ease this Global trend, so the Supply chain network is the ideal solution to serve the global market, which reflect on the end customer to have better services.

. Supply chain network described as the flow of information and material’s movement, which came from the supply chain and marketing integration through linking various organizations together in one platform

Often the organizations focus only on their organizations which means what they provide to the customers rather than what customers perceive. Actually the Supply chain should be designed and operated from the customer backwards rather than factory outwards.

. In the early days the supply chain was referred to the functions of logistics, transportation, purchasing and supplies. The evolution of the supply chain has moved to focus on integration, visibility, cycle time reduction and streamlined channels. This integration has a variety of activities that include:

1.            Integrated Purchasing Strategy

2.            Supplier Integration

3.            Supply Base Management

4.            Supply Chain Management

. This requires create a unique linkage between companies to manage their supply chain management and act as a coordinator between buyers and suppliers of raw materials .as well as managing the information flow to provide global market awareness of raw materials and further more provide easy access to the raw materials needed for manufacturer through “dynamic online market” and providing valuable information which help the companies to be ahead of their industries within the rapid change of the global business environment.

Limitations and future blogs directions

The Further blogs have to investigate the relation between marketing and supply chain management and the importance of integration between both on the strategic level in order to managing professional supply chain network.

According to the marketing and the trends in the supply chain, there are 10 games which changing the trends in the Global Supply chain, which can be listed on the following:

1.    Customer service to customer relationship management

2.    Adversarial relationships to collaborative relationships

3.    Incremental change to a transformational agile strategy

4.    Functional focus to process integration

5.    Absolute value for the firm to relative value for customers

6.    Forecasting to end casting (demand management)

7.    Training to knowledge-based learning

8.    Vertical integration to virtual integration

9.    Information hoarding to information sharing and visibility

10.Managerial accounting to value-based management 

The Figure display the results from surveying more than 150 supply chain professionals in order to assess these trends and the figure will show us the changes of the results from 2000 to 2013

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