Countries all over the world have competed to develop their economics through different ways. One of these ways is enhancing the Logistics and Supply Chain Management or LSCM. Governments and firms are starting to be aware of the integration strategy of concepts like systems, technologies, and frameworks with LSCM. These concepts are used to enhance the efficiency of LSCM. Also, the difficulty of the competition in the world market enforces government and companies to think more dynamically. Firms build strong relationship with suppliers, customers and even with competitors, by sharing information and knowledge. Governments improve their relationships with their citizens and other countries. Also, by using technology infrastructure, they are increasing the level of sharing important information with other parties. According to integration strategies, firms create a collaborative effective supply chain that is capable of competing in strong ways. Kahn and Mentzer believed that, the integration is “a process of interdepartmental interaction and interdepartmental collaboration that brings departments together into a cohesive organization (Mentze, 1996).” In the literature review chapter there will be more details about LSCM and technology. Also, it will be shown how integration is important between the management and technology.
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Managing a supply chain strategy consists of managing activities like material resourcing, production planning, and the necessary information that is used in physical distribution system. There are a lot of techniques, which are used to manage and improve the LSCM’s activities, like Material Requirements Planning, Manufacturing Resource Planning, Enterprise Resource Planning, Supplier Relationships Management, and Customer Relationships Management. These days, the most powerful technique in management is technology. Technologies are used to enhance the LSCM strengths.
One of the most powerful technologies is wireless technology. This technique is used in two ways: the first one is Radio Frequency Identification or RFID. This technology was adopted by Wal-Mart in the United States and by the US Department of Defense or DoD. The RFID technology is supposed to be able to eliminate many of the problems with supply chain efficiency. The second technology is Global Positioning Satellites or GPS. Technologies such as these helped companies to improve tracking processes, processing information and customer relationships (Parvatiyar, 2001). The RFID technology is an example that represents the developed situation of the LSCM in one of the most developed countries like the United States. This country placed the appropriate technology infrastructure in its place.
The Jordanian government is one of the governments that found out that if it needs to improve the Jordanian economy it has to improve the supply chain management or SCM in almost every aspect of life. Also, the Jordanian government found that economic improvement will not be achieved without technology improvements. In addition, it found the importance of the combination between technology and LSCM. Applying technology in the Jordanian economy has a lot of support starting with King Abdullah and ending with the economist themselves. HM King Abdullah II says:
“It is time to widen the scope of our participation in the knowledge economy from being mere isolated islands on the periphery of progress, to becoming an oasis of technology that can offer the prospect of economies of scale for those who venture to invest in our young available talent” (Government, 2006).
A lot of efforts are spent by the Jordanian government to develop technology sector and the supply chain management programs. The efforts, that spent to develop technology sector, can be seen through the big improvement in technology between the Jordanian situation in 2005 and the Jordanian situation in 2008, according to a United Nations or UN survey (United Nations Survey, 2005) (United Nations Survey, 2008). Also, regarding The Global Information Technology Report 2009-2010 which was conducted by the CIA, Jordan ranked in the 44 (WorldEconomicForum, 2010). That meant Jordan started to compete with developed countries. The literature review chapter will show the Jordanian government efforts in improving the LSCM. The Jordanian government objectives of enhancing technology tools are to improve the government transformation, to attain the critical national goals and improve the Jordanian economy. By providing a strong technology infrastructure, the government will gain a lot of advantages which will attract investors from all over the world to invest. The geographical location for the Middle East, in general, and Jordan, in specific, plays an important role to attract the international firms and that affects the response time of developing an effective LSCM program. International firms believe Jordan’s geographical location to be the perfect connection point, which connects them with the world, in their commercial supply chains. Some investors believe that the Jordan location gives them a bigger chance to enhance their business to become widespread (Transportation, 2008). Also, all those reasons and more effect the development of the LSCM program in Jordan.
General Statement of the Problem:
In order to investigate the current status and future vision of the use of information systems for LSCM in Jordan, and to review the current and future enterprises’ policies for LSCM, a survey must be conducted. The results of the survey will be a conclusion about the Jordanian situation. From that conclusion, it will come with the answers for three questions. The first question: What are the major challenges and developments on the use of information systems for LSCM? The second question: What is the actual level of satisfaction of current Jordanian enterprises’ policies on LSCM? Finally, what is the actual need of enterprises in Jordan on effective use of information systems for LSCM? By answering these questions, it will be easy to extract a conclusion about the Jordanian situation.
Statement of the Hypothesis:
The hypothesis of the study is that the Jordanian sectors, government and business, are ready to implement the most effective solutions for LSCM. There are three reasons for this hypothesis. The first, the Jordanian government, according to a recommendation from King Abdullah, spent a lot of effort in developing the economy in many different ways. The most effective effort is to enhance the technology sector and the technology infrastructure. That, for sure, will positively affect on the LSCM area in Jordan. Second, as mentioned above, the Jordan geographical position can be attractive to the world investors. Third, according to the United Nation survey, there was a big enhancement between the Jordanian situation in technology between 2005 and 2008. Finally, in 2010, the CIA factbook classified the Jordanian economy as an emerging market with a free market economy (WorldEconomicForum, 2010).
There are three limitations for this study. First, manufacturing enterprises will be the target sample for this study, because they tend to adopt such information systems (Ketikidis,2008).
The second limitation of this study is that it is difficult to spread the survey to all cities in Jordan. The survey will be sent to the companies which are located in Amman. Amman is the capital of Jordan where most of the Jordanian investments are located. The last limitation is that there is a shortage of academic research that is conducted for LSCM in Jordan. This will affect the literature review and may hinder the clear picture of the Jordanian LSCM situation that will be created.
The only delimitation found is that the enterprises that are located outside the Jordanian capital, Amman, will not be covered by the study. One reason for this is most of the enterprises and manufacturing companies are located in Amman. The other reason, money and time needed to spread the survey to every city in Jordan.
The Definitions of Terms:
Management is the act of organizing people to achieve certain goals. Also, it can be defined according to the Merriam-Webster dictionary as “the conducting or supervising of something as a business” (2010). Henri Fayol, who developed the theory of Management Science, believes that the most important activities of management are forecasting, planning, organizing, commanding, coordinating and controlling (Fayol, 1917).
The International Network for Small and Medium Sized Enterprises or INSME defined technology as “a human innovation in action that involves the generation of knowledge and processes to develop systems that solve problems and extend human capabilities” (2003). In other words, technology is any process that can improve the human knowledge and be used to solve problems by making life easier. Finally, Merriam Webster defined technology as “a manner of accomplishing a task especially using technical processes, methods, or knowledge” (2010).
Information Systems or IS:
Information System simply can be defined as computerized tools that are used to organize data and information in easy form to extract decisions that help in managing organizations.
Merriam Webster defined integrate as “to incorporate into a larger unit” (2010). From the definition it can be understood that integration is anything that can work with another to come out with an output or result. The research purpose of defining this concept is to inform the reader that the integration between management and technology came out with concepts like the automotive SCM. Also, the supply chain management used a lot of technologies to enhance its improvement. The new supply chain management is named automated supply chain management. The literature review chapter will include more explanation about the integration between management and technology.
Information Technology or IT:
Simply, Information Technology is using technology resources to facilitate the use of information. Also, it can be defined as “the technology involving the development, maintenance, and use of computer systems, software, and networks for the processing and distribution of data” (Merriam-Webster, 2010).
Supply Chain Management or SCM:
SCM is managing the activities that are used to deliver a product from manufacturers to target users. Also, it can be defined as the “management of all the activities along the supply chain from suppliers to internal logistics within a company and to distribution to customers.” (ETSU, 2010). The new form of SCM is the automated SCM which is using technologies to improve the efficiency of SCM. Detail definitions for SCM will be in specific section.
Logistic is managing the process of moving products or resources from one point to another in order to meet customers’ needs. The Council of Supply Chain Management Professionals defined logistics management as:
“that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements” (2000)
Logistics and Supply Chain functions can overlap, but from the researcher concept the only difference is that Supply Chain tends to focus on purchasing and procurement and the logistics is focusing more on the physical flows of the products and resources.
Hashemite Kingdom of Jordan:
Jordan is a country in the Middle East and the capital city is Amman. Jordan is classified as an emerging market with a free market economy by the CIA World Factbook in 2010 (WorldEconomicForum, 2010).
This study is built on two important assumptions. The first assumption was that there is a need for this study to know the current and future situation for SCM of Jordanian enterprises. The second assumption is the target population of this study is the manufacturing enterprises placed in Amman.
Chapter 2: A REVIEW OF THE RELATED LITERARTURE
The Jordanian government has a lot of basics, like technology tools and professional skills, which can build strong LSCM programs. A lot of efforts are spent to enhance the LSCM area. This effort can be summarized in two sectors, health care and transportation. This section will give the reader an overview of past research. First, it will discuss the integration between the management and technology. Then, it will discuss the supply chain management topic. Finally, it will focus on the Jordanian effort in enhancing the LSCM area.
The technology , management, and effective integration:
Henry Mintzberg defines a manager in his research as “that person in charge of the organization or one of its subunits” (1975). According to Mintzberg’s research, he found that the traditional duties for managers are to write and execute the plans after evaluating and collecting information to help in managing the organization. Also, he found some facts in his research, which are that managers work at an unrelenting pace, that their activities are characterized by brevity, variety, and discontinuity, and that they are strongly oriented to action and dislike reflective activities. Wickham Skinner defined technology, in chapter nine of his book Manufacturing, the Formidable Competitive Weapon, as “the set of physical processes, methods, techniques, tools, and equipment by which product are made or service rendered” (1985). From Skinner’s definition, it can be understood that technology can serve any production system, and it can be effective. In addition, from the definition of Skinner, it can be found that technology can be applied to companies’ management to improve it. Skinner believes that “an intelligent manager can learn to understand and to deal effectively with technology” (1985). The Information Era has generated new technologies able to improve almost every aspect of business, and one of these aspects that are affected by technology is SCM. By making a combination between management and technology concepts, it will find a new output named information technology, or IT. As motioned above, IT is a system used to control and manage. IT now has become the backbone of every business. IT made a revolution in the business world. “Information technology is no longer a business resource; it is the business environment” is that what John Browning indicated as a result of his survey that he made in 1990 (Choure, 2004 ). As mentioned above, SCM is one of the business activities that were affected by technology, which became a more effective system by applying technology. Technology enables firms to improve their business operations. All organizations now are aware of the effects, benefits and implications of technology in SCM and also its ability in creating its own competitive advantages. A creative SCM can also add value to a firm by reducing cost or increasing revenue. The creativity in SCM can be formed by using effective technologies.
Supply Chain and Supply Chain Management:
Forrester, through his management research, was able to define and build the basics of the SCM idea that “Management is on the verge of a major breakthrough in understanding how industrial company’s success depends on the interactions between the flows of information, materials, money, manpower, and capital equipment” (1958). Also, he was aware of the technology impact he believes that “The way these five flow systems interlock to amplify one another and to cause change and fluctuation will form the basis for anticipating the effects of decisions, policies, organizational forms, and investment choices” (1958). Even though Forrester’s article is more than 50 years old, but he forecasted the new shape of SCM and how the technology systems will play an important role in managing SCM.
The concept of SCM has risen and become popular during the last 10 years (Martha, 1997). There are two important reasons for the popularity of this concept. The first one is global sourcing, “this globalization of supply has forced companies to look for more effective ways to coordinate the flow of materials into and out of the company.” The second reason is the rapid changing in technology and economics. These reasons force enterprises to implement a more effective and flexible supply chain system (Mentzer, 2001).
Opinions about Supply Chain:
La Londe and Masters believe that a supply chain is a set of firms that pass materials forward (Londe, 1994). Christopher believes the Supply Chain is “the network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services delivered to the ultimate consumer” (1992). In simple words, supply chain consists of manufacturing, distribution, and target customers.
Supply Chain types:
There is confusion in the supply chain classification. Hicks, Earl and McGovern T, in their research, divided supply chain in two types. The first type is the external supply chain which involves companies’ relationships with customers and with suppliers. Also, it may include external firms as a third party. The second type is the internal supply chain. The internal type involves the relationship between different units within an organization. The figure below shows the two types (Hicks, 1999) (Dobler, 1996).
File:A company’s supply chain (en).png
Another research (Mentzer, 2001), is concerned with defining supply chain in depth, divided it into three degrees of complexity. These three degrees are a direct supply chain, an extended supply chain, and an ultimate supply chain. A direct supply chain is when the flow processes of products, services, and information is divided between three parties, the firm itself, a supplier, and a customer. The figure below shows the simple level of SC.
Direct Supply Chain (Mentzer, 2001)
The extended supply chain is when the flow process of products, services and information divided between “suppliers of the immediate supplier and customers of the immediate customer (Mentzer, 2001).” The following chart shows this level.
Extended Supply Chain (Mentzer, 2001)
The ultimate supply chain is when all the organizations shared in managing the flow processes of products, services, and information “from the ultimate supplier to the ultimate customer (Mentzer, 2001).” The figure below can summarize this level of SC.
Ultimate Supply Chain (Mentzer, 2001)
Opinions about Supply Chain Management:
The Council of Supply Chain Management Professionals considers Supply chain management as:
“The planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers” (2000).
Even there are a lot of opinions for SCM, but it can be summarized by three opinions. The first opinion is from Monczka, Trent, and Handfield. They believe SCM is a concept “whose primary objective is to integrate and manage the sourcing, flow, and control of materials using a total systems perspective across multiple functions and multiple tiers of suppliers” (1984). The researchers’ opinions simply cab be summarized the most important activities for SCM and how enterprises can organize these activities. Other researchers, La Londe and Masters, classified it according the strong relationship between two parties “the development of trust and commitment to the relationship” between two or more firms (1994). Finally, Stevens believes SCM is “the objective of managing the supply chain is to synchronize the requirements of the customer with the flow of materials from suppliers in order to affect a balance between what are often seen as conflicting goals of high customer service, low inventory management, and low unit cost (1989).” In Stevens’s opinion there is a sign for the importance of customers’ relationships with a firm and how it is important for a firm to improve this relationship to be stronger. From these three opinions, it can be said SCM is a way to manage three things: the material flow process, customers’ relationships, and others firms’ relationships. From that, the SCM can be considers as a technique that firms use to make a balance between material processing, customers satisfaction, and partner firms’ relationships. The enterprises have to keep low inventory to manage their inventory perfectly and high quality with lower prices to keep customers satisfied. Finally, the firms have to find other firms to be partners who can help them to stay strong in the market. It can be concluded that the enterprises that possess stronger SCM systems are the enterprises that can easily compete in the market, and they will stay longer.
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Supply chain management goal:
The researchers’ opinions about SCM can lead to goals that must be achieved though implementing SCM systems. There are a lot of goals and advantages of SCM, but the most important goal from a firm’s perspective is reduction of costs. The A.T. Kearney Management Consulting Company conducted a study about SCM. The main finding of the study was “supply chain costs can represent more than eighty percent of the cost structure in a typical manufacturing company.” Most of the costs came because there were losses in sales regarding insufficient customer service or sold out products. “For every dollar of inventory in a system, there are one to two dollars of hidden supply chain costs: working capital costs, asset costs, delivery costs, write downs and so on”. The study also found the importance of a SCM system, “companies leading in supply chain performance achieve savings equal to three to seven percent of revenues compared with their median performing peers” (ATKearny, 2008). Another study, about efficient consumer response, was sponsored by the Food Marketing Institute. The study “estimated that forty two days could be removed from the typical grocery supply chain, freeing up $30 billion in current costs, and reducing inventories by forty-one percent” (Mentzer, Fundamentals, 2004). Hence, it can be concluded, from the A.T. Kearney and Food Marketing Institute studies, that the most attractive goal in the SCM topic is cost reduction, which will lead to quality improvement and stronger relationships with customers.
C. Logistics and Supply Chain Management in Jordan:
There is a lot of effort spent to enhance SCM in Jordan. The Jordanian government was the leader in developing the supply chain management area in Jordan and that does not mean there is nothing going on in the private sector. The business sector did a lot of things regarding SCM, but it was too difficult to find research studies about that. Regarding previous researches, SCM development in Jordan is in two government areas, the health care and the transportation, and one private company which is LG Electronics.
SCM in the Jordanian health area:
Effective supply chains help in success or failure of any public health program. Starting from that point, the Jordanian Ministry of Health or MOH asked for a contraceptive logistics system estimation for new SCM system to be used in MOH. This estimation had to be accomplished by the end of 1996. That decision was taken because the MOH was afraid of the weakness of contraceptive supply. This weakness of the supply system would affect its family planning programs. Therefore, it identified the importance of needing to improve the logistics system as a high priority (Chandani, 2004). The estimation results can be summarized by the following points:
The logistics system is weak and fails to identify an individual responsible for managing the contraceptive distribution system (Chandani, 2004).
All reports were missing important logistics data elements, which will affect the future forecasting and other important logistics management efforts (Chandani, 2004).
The logistics system was informal and lacked guidance (Shawkey, 2003).
There is confusion about the ordering process for contraceptive supplies (Shawkey, 2003).
From the previous points, it can be found how the MOH situation was worse that time. United States Agency for International Development or USAID helped the government to develop and enhance the MOH logistics and supply chain. USAID provided a combination of short and long term solutions to Jordan. These optimal solutions can be summarized by transferring the necessary skills and technology to the Jordanian health care sector.
Building a Jordanian Logistics System:
The logistics procedures were designed by Jordanian nationals (Shawkey, 2003). By the end of the first quarter of 1997, a complete situation analysis for all parts of the system was conducted. After the analysis process was completed, the design process was started by gathering the recommendation from all health providers at all levels (Chandani, 2004). After that, the MOH policy makers gave their approval to the new inventory control system. The next step was building the training strategies. One important step in building the system was a skill test for quality control. The system was simple, and some of the reports were done manually. Then, it was developed by collecting feedback from health employees. In the first quarter of 1999, a computerized Central Information System or CIS was developed. The new system helps in improving the efficiency of MOH (Chandani, 2004) (Shawkey, 2003).
The reports from the new system were helpful in finding logistics problems, such as stock imbalances or an unusual number of losses or adjustments. Any problem faced by the health providers was resolved by the system developer through collecting the feedback (Chandani, 2004).
All the effort that was spent in developing the system was with help from USAID, but by the end of 1999 the government was able to manage the system without any help. “Training on the new system could have started earlier, but it was more important that the MOH first approve it as the official system” (Chandani, 2004). The MOH recognized that the system will be helpful in its family planning program. Also, politicians support the logistics system in a stronger way than before after they found the advantages and the results of building a system such as the new logistics system. The new system was able to improve the family planning program functions which was proved by continuous contraceptive availability (Chandani, 2004) (Shawkey, 2003).
By implementing the logistics and supply chain system the Jordanian government gained a lot of advantages. The advantages can be summarized by the following important points:
Improving the relationship between the citizens and the MOH. By implementing the system, it was easy for the MOH to satisfy the citizens’ needs. They are feeling more confident about the family planning program (Shawkey, 2003).
Improving quality of care. The new effective logistics system improves quality of care, not only in the family planning program, but throughout the health care system (Shawkey, 2003).
Improving cost effectiveness. The new system reduced the cost in different ways, such as reducing losses due to overstock or damage (Shawkey, 2003).
Improving the reporting techniques which help in meeting the health centers’ requirements. “The system in Jordan was designed to enhance timeliness of reporting” (Chandani, 2004). Also, that helps in cutting the costs (Shawkey, 2003).
Using the system enable the MOH to prepare national forecasts (Chandani, 2004).
The following chart shows a comparison between the stock outs situation of the health centers before and after implementing the system. Also, the chart summarizes the important results of the logistics and supply chain management system.
Contraceptive Stockouts at Health Centers in Jordan in the years of 1997 and 1999 (Chandani, 2004)
SCM in the Jordanian transportation and trading across borders:
Logistics and supply chain management affects almost every aspect of life. One important area that was affected by LSCM was the transportation area. Also, this aspect was affected by technology. Technology and LSCM improvements created a new economy in the world. The new economy was characterized by producing a large flow of goods with few differences (Shwawreh, 2006). Also, the technology infrastructures helped in enhancing the quality level of products transportation processes, especially with using the electronic data interchange techniques. One example of the new transportation way that appeared because of the technology development is the way that it is used in electronic commerce or E-commerce. Jordan is one of the countries where E-commerce is still rough. The reasons for this weakness can be summarized by the weakness of the Jordanian logistics and supply chain management, and the weakness of the technology infrastructure (Shwawreh, 2006). Even though there are a lot of efforts to develop the LSCM in Jordan but it is still a weak area. The next section will show the government effort in this area.
The government efforts in developing LSCM in the transportation area:
The government realized that to improve its ability to trade across borders it has to develop the logistics and supply chain management system which was used in Jordanian Customs Department or JCD (BizCLIR, 2006). To achieve this goal the government developed the system through two programs with help from USAID.
The first program is The Golden List Program. This program “was designed to make JCD a global leader in trade and customs efficiency”. Basically, it enhanced the supply chain security measures. Also, it enabled the JCD to be more prepared to meet the international standards which were mandated by institutions like the U.S. Container Security Initiative or CSI. In addition, it helped in reducing risk for both JCD and the private sector business through increasing the transparency of the process. The Golden List Program did not affect the government procedures to approve the necessary operations for import or export, but it motivated other countries “to enact reciprocal agreements for accepting the low-risk shipments of Jordanian Golden List members” (BizCLIR, 2006). That affects the procedures over all by reducing delays in those countries.
The second program is the Customs Integrated Tariff System or CITS. The goal of the CITS was to build a professional integrated system that helps the government sector and the private sector. This system could be used to find a full listing of all government rules related to imports, exports, and transfer goods in Jordan. One advantage of this program is reducing the costs and bribery related to exports and imports (BizCLIR, 2006). To achieve the goal of this program a Web based program was built and it was accessible to both the private and public sectors.
It can be concluded that the effect of these programs was significant. CITS helped the Jordanian government stay away from these economic obstacles by providing Website including a database for all customs and government policies. The Golden List Program minimized the obstacles that businesses face in exporting or importing goods, which made the process of the trade across borders in Jordan easier. These programs were beneficial to the Jordanian
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