Last Updated 25 May 2020

Administrative costs

Category Essay Examples
Essay type Process
Words 786 (3 pages)
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The end result of this is that stock outs have been reduced to a bare minimum (IBM, 2007). Additionally, the systems have also enhanced the quality of data, the benefit of which is that automobile manufacturers can now fully comply with legislative requirements that compel them to ensure the traceability of the parts and components used in the manufacturing process. Not only that, the implementation of the automated systems has enabled the automakers to more fully and effectively track warranties (IBM, 2007).

IBM (2007, p. 7) writes that “This superior, integrated approach also enables enterprise security across all ecosystem partners and many device types, including wireless. The global nature of business operations requires the deployment of solutions that are scalable, standards-based and easily replicated from plant to plant, around the world. The success of these projects mandates seamless execution across company and supply chain boundaries, and that requires teaming with the right solution partners.

” According to Frohlich and Westbrook (2002), paperless systems also help to integrate customers and suppliers, resulting in untold benefits for all partners across the supply chain. Thoneman (2001) has given the example of Wal-Mart and Proctor and Gamble (P&G), as some of the organizations that have benefited as a result of implementing integrated networks which link the organization with its suppliers and customers.

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According to Thoneman (2001), the two organizations have experienced significant reductions in administrative costs, with inventory falling by up to 70% and customer service levels rising by as much as 99%. By using integrated networks such as the Demand Chain Management (DCM), Frohlich and Westbrook (2002) state that organizations are able to balance their supply and demand, and to more effectively, reliably, and efficiently deliver their products to the market, while minimizing the delays of inbound materials.

This would also help improve to the market speed. Use of DCM also helps organizations eliminate the bullwhip effect and in the process raise their productivity. Where the integration is supported by internet technology, Frohlich and Westbrok (2002) write that the organization can engage in targeted marketing, and that such integration offers the organization the ability to implement Customer Relationship Management (CRM) systems that will eventually boost and ensure healthy long term relationships between the organization an its customers.

Anderson and Ottosson (2007) have given the example of Zara, the renowned clothes dealer from Spain, who experienced higher efficiency levels, a reduction in lead times from design to store, higher levels of flexibility, closer proximity t its market, and a sharp reduction of risks as a result of supply integration. Finally, another example is given of Plexco, which experienced huge declines in costs of warehousing and inventory and a huge rise in its efficiency levels after adopting a Vendor Management Inventory (VMI) program that consisted of warehouse management, order tacking and management and transport management systems.

The program had the effect of increasing the visibility of the supply chain, with huge cost savings, a more versatile product mix, higher product availability and faster delivery times being experienced (Case Study, 2002). Critical Success Factors that ensure successful supply chain management systems implementation Critical success factors have been defined by Bullen and Rockart (1986, p. 383) as ‘the limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department, or organization.

CSFs are the few key areas where ‘things must go right’ for the business to flourish and for the manager’s goals to be attained. ’ According to Jing and Qiu (2007), the introduction of new supply chain management systems will inevitably attract a lot of resistance from key organizational stakeholders such as employees. Many organizations fail in the implementation of their supply chain systems largely because of stiff resistance to the introduction of the new systems.

There are several critical success factors Ngai, Cheng and Ho identify five CSF’s that are important in the successful implantation of supply chain management systems. These include: communication, top management commitment, data security, training and education, and hardware and software reliability. As far as communication is concerned Ngai, Cheng and Ho (2004) state that the cooperation of employees is essential if the systems have to be successfully implemented and that for such cooperation to be successful there has to be extensive communication.

Current information must be provided and made accessible to al the employees (Ngai, Cheng and Ho, 2004). Apart from sharing of the information, it is essential that top management commitment is also available. Top management has to provide adequate financial support as well as resources to ensure that the implementation does not stall midway. Additionally, top management needs to lend their support for the implementation of the systems so that it can be allocated high priority and the adequate attention necessary for success (Ngai, Cheng and Ho, 2004).

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Administrative costs. (2018, Nov 12). Retrieved from

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