Effective Supply Chain Management - Essay Example

?Systems and Operations Management: A case study of apex industrial chemicals Executive summary Supply chains are all the combined process and resources used by a manufacturing company to transform its raw materials into finished products, and the final delivery of these value added goods to the hands of the customers. Businesses in different areas of operation work towards developing competitive advantage over other market players. Effective supply chain management has been continuously shown to be a viable option for manufacturing industries to improve their competitive edge and increase their overall market share. Competition has progressed from one that is based on specific organisational practises to one that is highly influenced by the supply chains of an organization. Supply chain management has been conceptualized into five dimensions that posses the potential to determine the competitive advantage of a business especially in the manufacturing sector. Supply chain dimension are the determinant factors that influences the excellence of a specific supply chain model adopted by a company specifically in the chemical specialty sector. These dimensions include but are not limited to alignment of the overall business strategies and the supply chain strategy and the execution of such strategies. Strategic depth of every supply chain management plan also forms an important element of supply chain dimension that a company must consider. All the steps taken in enhancing the competitiveness of a business targets the customers who must register utmost satisfaction with the supply chain performance, an important dimension in strategic management of supply chains. Proper supply chain management also creates competitive advantage by providing the link between demand creation and demand fulfilment by improving the ability of a business to design its products based on the desires and tastes of the customers. The achievement of a perfect and higher level of integration that involves collaboration of the various internal processes of production (ie. SAP) is essential in implementing a proper supply chain management strategy (Al-Mashari, and Zairi, 2000). Within the speciality industry, firms produce different chemical and non-chemical products, which are needed by different sectors of the economy. Speciality chemicals include materials such as adhesives, agrichemicals, polymers, fragrances, food additives and surfactants. As products that are majorly used based on the basis of their performance and function, supply chain management plays a significant role in the development of proper products that can suit the demands of other industries and individuals. Speciality companies belong to different associations depending on their country of origin and the nature of products that they generally produce. In the United Kingdom, speciality industries belong to the British association of chemical specialties while American version is the society of chemical manufacturers and affiliates. Apex industrial chemicals is a British based company with its headquarters in Aberdeen and supplies companies and individual client’s different products for use in specific specialty industries. The products manufactured by the company include cleaners, degreasers, scale dissolvers, lubricants, corrosion preventives and hand care products. The products form Apex industrial chemicals targets players in other industries including the vehicle exterior cleaning and maintenance, electrical equipment maintenance and fabrication and engineering among others (Berning et al, 2002). Apex also manufactures products that targets offshore marine companies that are used in mining and offshore oil drilling. The widespread market presence of AIC across Europe and other parts of the world can be attributed to the sound supply management strategy that the company has employed. This has enabled the company to manufacture products that meets the demands and specifications of the clients found within different sectors of the economy. Example would be low cost products for low-end specifications or to meet competitive threats from Chinese sources. Introduction The growth of the specialty chemical industry has resulted from the increased number of industry players entering the market and this has increased the level of competition within the sector. There are a number of processes available for organisations in this sector to improve their competitive edge while still remaining profitable and efficient in their production processes. Operational excellence and the improvement of supply chain management have proved to be a viable step that can assist in enhancing the financial position of the companies. In the United Kingdom, Apex industrial chemicals are some of the major players in the specialty industry and the company has cut a niche as a major market player (Berning et al, 2002). In this report, the different supply chain management practises of the company will be evaluated to ascertain how these practises has enabled the company enjoy its current competitive edge over the rest. The operations and information systems and the contribution of these towards the improvement of the supply chain within the company will also be evaluated. This will ensure the provision of clear synthesis of the impacts of the different facets of information technology to the improvement of the supply chain within the company. The report will also evaluate the current established operational decisions within company and how such decisions impacts on the management of change internally. Finally AIC organisation’s system, information and business process perspectives will be evaluated to try identifying ways through which these processes affects the organisations competitiveness. Background information Speciality chemical industry Companies in different sectors of the world have developed different factors that enables customers to differentiate their products from different other market players. These factors include different product features, price variations, quality, availability and customer service. Competition in the market today has grown significantly thus companies must develop their products in a unique way which enables them to gain competitive advantage over other players. AIC, a specialty company has a number of competitors in the United Kingdom and in other parts of the world that produce the same or similar products. These include Airedale chemical company, Akzo Nobel surface chemistry, Abuttal analytical and Accepta limited all based in different parts of Britain. AIC also competes with other specialty chemical industries in the United States of America that produce functionally similar products and sell to different industries across the globe. The companies within the United States that belong to the society of chemical manufacturers and associates include the Huntsman, Ashland, Chemtura and Rockwood chemical industries. All these companies compete for international market with AIC and this has increased the market competition for the market players. AIC has however employed a number of supply chain management strategies that has enabled it to remain on top of other competitors despite the high competitions (Berning et al, 2002). Operations and information systems The development of a proper supply chain management strategy enables an organisation like AIC to achieve four major objectives in their desire to increase their competitive advantage. Such processes include compression, waste reduction in the production processes and unit cost reduction. Proper supply chain management strategies enable an organisation to reduce or minimize the waste within its production processes (ie Kaizen). This is done through the minimisation of duplication and processes that are unnecessarily repeated, and can be eliminated with minimal impact. Waste reduction thus reduces disparities in the final products and ensures uniformities of operations and systems among supply chain contributors. In the specialty chemical industry, customers make their orders based on their current demands, thus a system that can shorten the order-delivery time can be fulfilling to the customers by reducing their inventory or working capital. Sound supply chain management strategies helps in eliminating time wastage in production thus reducing the order delivery time intervals, a practise that can be used to attract more customers. In the specialty industry, competitive edge in the market is gained through making significant changes in the factors that affects price and product performance. Despite having manufacturing processes that are similar to other specialty chemical industries around the world, AIC has positioned itself as a major market player due to its sound supply chain management strategies. Integrating time compression policy into the supply chain management process of AIC has been made possible through an appropriate sourcing policy. As a result, most of its manufacturing products are supplied by trusted companies based in different parts of the world but known for quality products. With the large number of products that the company manufactures, AIC has adopted a clear time compression strategy that involves the building of a large supplier base that provides the company with low price raw materials. Other oil based raw materials used by the company to make adhesives and surfactants are however sourced from suppliers within the region thus reducing the overall cost of procurements. Despite the fact that the company outsource for its raw materials from other parts of the world, the products that reach the final customers are made by internal systems that are tested and under the control of the organisation (Gunasekaran and Ngai, 2004). To reach the widespread customers of its products across the globe, AIC has incorporated a clear distribution channel that enables it to reach its customers in all sectors of the economy and in different parts of the world within the best time possible. The company thus maintains a specified number of distribution centres in different parts of the world. The time taken for the final products to reach the distribution centres and thus the customers is also strictly maintained. Through this, the company has been able to reach its customers within the time frame indicated in the order documents signed. As a company committed to ensuring the manufacture and marketing of high quality products, AIC maintains close touch with its distribution centres and this enables them to access spot orders which are then acted upon based on the requirements of the customers. This has given the company competitive advantage in a market where other competitors take over a month to service an order from a client (Gunasekaran and Ngai, 2004). AIC also has a proper customer relations program under their supply chain management that enables the company to adequately handle the different complaints and concerns from the customers. This has empowered the company to build long-term relations with their customers and develop a traditional customer based. Customer relations’ management is an important component of supply chain management and gives an organisation a competitive edge over other market players. AIC customer relations management program has been developed into a personalised system that allows the customers to interact with the different sales team members of the company as their concerns and demands are met. From this, the company has been able to take into account any product issues in their production processes, thus improving quality and performance. Customers are an important member of the supply chain management process, and improving this kind of relationship with a company provides an opportunity for Apex to gain competitive advantage over the others (Li, Bhanu and Rao, 2004). The dynamics within the chemical industry also makes the elements of supply chain management quite different as compared to other companies. To enable a company like AIC develop and maximise its potential, it must redesign its strategic agenda for the supply chain performance. It is therefore imperative for such companies to strike a balance between the desire to reduce the cost of operation versus the service delivery and potential growth. As a corporation that has the potential to develop into a major market player around the globe, AIC must be able to forecast its process plans to support the rollout process within the company. This has enabled central reporting and data consistently, which has improved information needed within the organisation. The lack of outsourcing partners within the company to handle complex products from Apex’s portfolios of chemicals increases the need for improved supply chain management within the company (Gunasekaran and Ngai, 2004). Change management is an essential feature of any business system because it provides a better ground for the development of the company and the implementation of operation decisions within the organisation. Change management is thus a process that continually reviews organisations decisions, directions and internal customers. Management change is a continuous process in an organisation and is applied at both strategic and operational levels of administration. Material management is the development of an approach that involves organisational planning, organisition and having control over all the flow of materials within the organisation. Companies have different scopes of material management and this is also dependent on the nature of predicts made by the company. Material management encompasses processes that involve material planning, purchasing, inventory and in-plant and waste material movement within the company. A proper material management as part of an organisation’s supply chain management system provides basis upon which competitive advantage can be generated for the organisation (Gunasekaran and Ngai, 2004). Material management enables the company to improve the quality and quantity of its materials, the efficiency of the production process, the best and reliable source of raw materials and the production of goods that can be sold at a fairly competitive price. Apex industrial chemicals has development a sound material management program that has enabled the company to increase its production process and market their products at a competitive price despite the high competition currently present. The company has developed a supply chain structure that encourages the outsourcing of production services which enables them to diversify the products that are marketed using Apex’s trade name, thus increasing its market presence (Moberg, Cutler, Gross and Speh, 2002). The company currently works with over 500 other independent factories in Europe and Asia to manufacture their products which are then passed through the company’s quality assessment system before being released into the markets. The company’s supply chain is also multilayered with a large number of partners who work to ensure that the company products reach the highest number of customers across the world. The company currently have suppliers in major economies in Europe including Germany, France and Spain. The United States and Australia are also some of the target markets of AIC and the company thus maintains suppliers managed by outsourced companies in these countries (Berning et al, 2002). Apex industrial chemicals holds direct sourcing contracts with most of its business associates and suppliers who are however under the supervision of the central operation unit in Aberdeen. The central operation units are tasked with the management of the product development, the commercialisation process, distribution and the ultimate supervision of the manufacturing process to ensure that the products comply with the organisation’s quality control measures. As an approach aimed at improving the competitive advantage of the company, AIC also maintains indirect sourcing model. This provides an avenue for its products to be supplied by agents who are licensed to handle chemical products by the British chemical specialties association. Agents are therefore capable of placing orders with their preferred suppliers who are working under the control of the company’s central control unit. This has provided the company with important complementary outsourcing services which has enabled it to meet the requirements of the customers without the direct engagement of the central unit. The British market also poses a great market potential that has been exploited exhaustively by AIC thus increasing the presence of its products within the chemical industry. Other suppliers within the country who are also members of the specialty chemical association have also formed supply relationship with AIC, thus enabling the company to outsource their products and vice versa. The company’s main suppliers around the globe are categorised into four groups depending on their geographical location and the volume of goods they are allowed to handle. The main suppliers are groups spread all around the world who have contractual relationship with AIC to supply its products to the different markets across the world. These main suppliers target both the domestic and the international market thus increasing the market presence of the company and its competitive edge over other companies. The subcontractors are companies that AIC has made a binding contract with to enable it increase its overall products and thus the market serviced. The subcontractors thus assist the company to produce the chemical products that AIC may not be able to manufacture due to logistical or technological constraints. The third group of suppliers are the materials and other service providers who are not entitled to direct relationship with the company but are mandated to supply goods and services either directly to the company to the company’s main suppliers (Bain and company, 2003). Apex has also designed and developed new products to satisfy the wide range of customers across the globe. These products include vehicle valeting products which include gloss plus, Kleen glass, lift off and the multi-surface cleaners. The new lubrication products include never seize, food safe lube and TEF200, an oil based lubricant for sliding parts. The ability to develop new products that are quite distinct from those offered by the competitors can only the achieved through having a close relationship with the customer. As a result, the company is capable to getting information on the areas or the features of the products that can be changed or improved to make their products more distinct as compared to that provided by competitors. Supply chain management strategies should aim at increasing productivity and reducing the inventory and cycle time of a product as highlighted earlier. These measures are taken for the long-term objective of increasing market share and profits for the organisation. (Berning et al, 2002). Advances in levels of competition between companies has increased to a level where competition based on the product quality, price and design cannot be enough to generate competitive advantage over other market players. The customers’ demands are also punctuated with a lot of complications and this has necessitated the need for a high degree of coordination and information sharing between partners in a supply chain. The need to execute business processes in a more frequent and faster way has increased the need for the integration of technology into the supply chain management. Customers demands and tastes are continuously changing and the ability of a company to gain competitive advantage can only be based on its production performance and the response time towards the different demands of the customers (Berning et al, 2002). Apart from the rapid and advanced processes of production, companies must also have the ability to effectively receive feedback and respond to the evolving demands of the. Responses can no longer be based on month or year old reports on consumer behaviours, but mechanisms that provide instant response to the different issues raised by the customers. To react promptly to these demands, supply chain management strategies must involve different levels of application of information technologies. This should be done to enable a seamless information flow between all the players within the supply chain to help bridge the information gap present which may reduce the company’s ability to gain competitive advantage (Cigolini, Cozzi and Perona, 2004). A company must be able to make advanced planning and scheduling through applications that enables continuous production based on the transactional reports and reviews from the customers which the organisation gains from the application of the enterprise resource planning systems. AIC has developed a supply chain system that has integrated applications of information technology to make production easier. The advance planning and scheduling application enables the business to plan its production process in tandem with the enterprise resource planning system that provides real time updates on the consumer’s demands. Through the application of information technology, AIC has developed an online interactive platform that enables it to respond quickly to the desires and demands of the customers (Kane, 2008). This channel also provides the company with a chance to share information with the customers, most of which are industries dedicated towards making final products from the specialty chemicals form AIC. Such information is thus beneficial to the organisation as it enables it to improve on any areas of production that may enable it gain competitive advantage over others. The development of the electronic data interchange (EDI) has enabled companies to reduce uncertainties and enhance confidence in fulfilling the demands of the customers. Redesigning an internal organisation of production processes is fundamental in improving the production process, thus increasing the quality of goods produced by the supply chain adopted. This can only be achieved effectively through the proper integration of information technology. Both aspects have been shown to be essentially important in the process of information sharing because they have different results that can enable an organisation to improve its competitive edge. (Rudberg and Olhager, 2003). AIC has a wide range of customers with a large portion of them being manufacturers and other process companies. The company has thus devised both tactical and logistical levels of information sharing that enables the customers understand the dynamics of the products and application processes. Information sharing with other member of the supply chain has thus been used as a source of competitive advantage for AIC. The success of sharing information with the objective of gaining competitive market advantage is dependent upon the kind of information shared and the timing of information sharing (Hung, Samsatli and Shah, 2003). The success of different levels of supply chain management requires a number of decisions that relate to the flow of information, products and finances to help implement the different programs. The process of supply chain management can be classified into three different phases as applied by specialty chemical companies in this case the AIC. The supply chain strategy and design phase determines how the company is going to structure the supply chain as highlighted in its strategic plan. During the phase, the chain configuration, the resources used to implement the different programs and the processes to be included within the supply chain are determined. Following this reasoning, AIC Company decided to have its major production plant in Aberdeen, an area that is considered closer to the raw materials that the company uses in producing its products (Shah, 2005). This decision was made with in depth consideration of the impacts that it will have on the both the cost production and the costs incurred in reaching the general customers. Supply chain planning phase involves a time when critical decisions are made involving production and marketing of the products with an aim of improving the competitive advantage of the business. Planning involves making decisions based on the steps to follow in supplying the different markets served by the company, the decisions on subcontracting and inventory policies to be adopted and which ones to be dropped by the company. Planning thus provides basis upon which the supply chain of a company will function within a specified period of time (Stanley and Wisner, 2001). The process of supply chain management in various sectors of the economy has witnessed different emerging and new technological applications meant to improve the process of the flow of goods, services and information across the supply chain. These technologies have been applied in a number of ways in improving the manufacturing processes especially within the chemical and allied sectors. AIC has been at the forefront adopting new technologies to enable it improve the general flow of information, goods and services within the company. The radio frequency identification technology by the company has significantly changed the information moves within the organisation and this has transformed the supply chain of the company in a significant manner (Romano and Vinelli, 2001). This technology has also improved inventory management processes within the company making it cheaper for the company to operate and produce goods whose price can be significantly reduced due to decreased cost of production. Radio frequency identification technology (RFID) has also significantly increased the product competitiveness of the different chemical products manufactured by AIC as the quality of the final product has significantly increased. This new development has enabled the company to align its supply chain system with the global trends which has agitated for the complete overhaul of supply chain management systems especially in specialty chemical industries to RFID-based supply chain (Lin, Huang and Lin, 2002). The illustration below shows a depiction of the computerised system of nitrogen production within Apex industrial chemicals in line with their strategic chain management program. Courtesy of http://www.airproducts.ie/APEX/img/pict_nitrogen.jpg The power of the Internet has had significant changes in way different companies conduct business and this has had significant progress in the growth of business and different companies. Internet, as one of the emerging technologies, has also developed new ways of practising supply chain management especially in chemical specialty and allied industries. As a process to manage material flow and interaction with the different partners, AIC has extensively employed the use of the Internet which has impacted positively on the competitiveness of the company. The management of inventories, order placement and the flow of information between the different partners to a company have also been improved thanks to the new applications of the Internet and web 2.0 (Christiaanse and Kumar, 2000). The management of inventories are some of the sources of excessive expenditure that affects an organisations ability to maximise profits and charge reasonable prices on their products (ie working capital). AIC has adopted four emerging facets of e-business to improve its supply chain management and increase its competitive advantage over other companies in the same sector. These include the creation of virtual market places which are net market places in which different business transactions are conducted and executed. They have specific features that include the reliance on the internet to facilitate the interaction between buyers and sellers. It also eliminates the need for subsidiaries in the interactions that involve the buyers and sellers thus making it a faster and neutral way of sealing a deal and completing a transaction (Berning et al, 2002). Information technology has also enabled the synchronised planning of supply chain management activities within industries. This includes the ability of an organisation to make collaborative forecasting and restoration of a production system that is highly coordinated with proper inventory and capacity plans. Synchronised planning adopted by AIC involves the integration of information flow within the organisation and with the different stakeholders involved with the organisation. As part of the supply chain management, information technology has also resulted into a well-coordinated workflow and the development of a good business model that increases the competitive advantage of the business. Planning synchronization provides basis for the application of any information that is shared within the company (Blau et al, 2000). Operational excellence can be achieved through the adoption of proper supply chain management strategy and this has the potential of improving the competitive advantage of any manufacturing organisation. Operational excellence can be defined as an approach that systematically enables a company to attain a word class performance through enhanced productivity, quality and delivery of services. It enables companies to attain superior yield, lead-time and integrate processes that eliminate unnecessary wastage. Operational excellence at AIC is centred on three main facets and tenets that has enabled the organisation to progress despite the high competition available. The production-planning phase of the organisation has enabled the accurate planning and productions based on demand capture/forecasting capabilities (Romero, Badell, Bagajewicz, and Puigjaner, 2003). This production planning has factored into place the business objectives, manufacturing strengths and weaknesses. The production schedule that the company has also implemented has also been synchronised with the entire company’s supply chain plan, thus ensuring that the company optimally uses its assets to improve its competitive advantage over other players. The management of supplier quality is responsible for the deviations that may exist as a result of the variation in the forecast, and or the planned deliveries according to the suppliers’ shipping schedule. The manufacturing execution is the second phase of operational excellence and a practise that AIC has devised to improve its competitive edge as compared to other market players. The development of proper quality controls within the supply chain management enables a company to ensure that the final products that reach the customers are of high quality. This is essential for ensuring that the company enhances its market position and improves the competitive edge it enjoys over other members of the chemical specialty association (Shapiro, 2003). In a business that aims at increasing its market presence beyond its borders, the development of proper human resource management practises is essential. This is possible through the adoption of proper operational excellence practise, an aspect that AIC has appreciated and has significantly contributed to the growth of the company. The effectiveness of people, processes and assets within an organisation plays a critical position in the evaluation of the plant efficiencies and effectiveness. The company therefore monitors its overall equipment effectiveness of the assets especially at the plant levels to reduce any flaws that may compromise the quality of the final products (AIG, 2013). Conclusion The development of sound supply chain management strategies influences the ability of a business to progress and develop into a major market player and hence grow into a company with increasing market influence. AIC has endeavoured to increase its dominance in the European specialty chemical sector and to enter into new international markets by improving its supply chain management strategies. The company has also developed proper inventory improvement measures which have enabled it to increase the level of information sharing between it and other stakeholders and contractual partners. The necessary information is thus passed to the major contractors to enable them understand the product development policy and help develop the company’s quality production systems. Proper inventory adoption has also enabled the company to reduce the possible avenues of generating waste materials which reduces the company’s profitability and influence in the market. However, more needs to be done to improve the ability of the company to tap on the benefits available in using the Internet in managing supply chain. The Internet currently presents the greatest business potential to Apex Industrial Chemicals which must be exploited to improve its business and communication processes. References AIG, 2013, Chemical companies: minimizing the risks of supply chain disruptions, Advisen Insurance Intelligence. [Online] Available at: http://corner.advisen.com/pdf_files/2013_AIG_ChemicalIndustryReport.pdf [Accessed 19/09/2013] Al-Mashari, M., and Zairi, M., 2000, Supply chain re-engineering using enterprise resource planning (ERP) systems: An analysis of a SAP R/3 implementation case. International Journal of Physical Distribution & Logistics Management, 30 (3/4), 296–313. Bain and company, 2003, supply chain management in European chemical industries, Munich: Bain and company Berning, G., Brandenburg, M., Gursoy, K., Mehta, V., & Tolle, F.-J. ? (2002). 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