Lenovos Retail Supply Chain - Essay Example

Introduction The computer hardware business is a multibillion-dollar industry whose players include Apple, Acer, HP and Dell among others (Chan, 2006, p. 176). A large number of the manufacturers develop computer hardware that varies from laptop and desktop computers to the low and high-end servers. Manufacturers face different challenges, including the delivery of their products to their customers in an economic manner at the desired date of delivery. In this regard, supply chain management involves managing how goods, cash and information flow both within and outside the company. On the other hand, sustainability involves making sure that a company has the least effect on the worldwide and immediate setup as well as the community and the society. Lenovo is an individual-technology firm that is worth approximately twenty one billion dollars and the second biggest dealer of personal computers (Ling, 2010, p. 265). The company’s head offices are in Beijing, China while a second head office is in Morrisville in the United States. Six Sigma is a collection of techniques as well as implements that assist in the improvement of elements which was established by Motorola and embraced as a business strategy for General Electric in 1995. Computer manufacturers have applied six-sigma for progressive quality enhancement as well as lean manufacturing with the aim of decreasing process wastage so that they can in the best way meet the needs of the customers (Tennant, 2001, p. 6). The focus of this comprehensive essay is to review Lenovo’s retail supply chain as well as logistics operations as well as the effect on costs and consumer experiences for the retail customers. Lenovo’s Supply chain operations Initially, Lenovo’s supply chain was not properly incorporated partially for the reason that it had been developed from a union between two firms that did not have the same characteristics (Sako, 2011, p. 24). The company had different distributors in various regions of the globe, with varying customer bases and operating under different models. The initial supply chain was also not created to deal with the volumes that the company started attaining and this made deliveries arrive at their destinations late. The company embraced Workout, which is a group based improvement approach that was initially developed by General Electrics, whereby, all the core decision makers on a difficult issue converge in a room and remain there until they find a solution. In some cases the productivity of the manufacturing line was able to be doubled as a result of this. Lenovo vertically integrates the obtaining of various components while continuing to depend on partners for other components like semiconductors and other systems (Valdani and Arbore, 2013, p. 74). The idea was to attain adequate scale that would make the prices of the company dip therefore creating a structural cost advantages when compared to the companies that are operating in the same industry. This philosophy was the main motivation for Lenovo when it started experimenting with the re-establishment of technology assemblies in the United States which was an activity that had ceased to happen a while back. Presently workers are assembling ThinkPads in the United States whose customers include the World Bank, the UN as well as the United States Air Force among others (Peng, 2010, p. 354). Employees in the US cost more than those in China but the gap is progressively narrowing and the number of US workers that are needed to complete the task is also decreasing (Yuann and Inch, 2008, p. 126). In the United States, only twenty two workers are needed for each line as opposed to sixty who are required if the production is done in China. One of the reasons is that people employed by Lenovo in the United States are cross-trained and can work in various areas when their Chinese counterparts have training on a single task. With the inclusion of transportation costs, the gap shrinks further and the costs progressively equal out. Sustainability issue at Lenovo Lenovo has a commitment to offer packaging that is friendly to the environment has been focusing on increasing the utilization of materials that are recycled and those that can be recycled in its packaging, a reduction in the size of its packaging as well as increasing the usage of bulk and packaging solutions that can be used again. From 2008, the company has made efforts to fully eliminate more than a thousand tons of packaging consumption through optimizing and refining designs in all the products shipments. Lenovo is increasingly making efforts towards increasing the usage of recycled contents in the packaging of products. Lenovo has identified packaging as a considerable environmental characteristic of its operations and made it an item of focus in regard to its environmental management structure. The main objective in terms of environmental managed associated with Lenovo is minimizing the consumption of materials used in packaging while pushing for the use of materials that are friendly to the environment. The targets that support this objective include increasing the usage of environment friendly material for packaging in most of its products within a stipulated time period as well as reducing the amount of packaging material that are used for a minimum of products. Need for sustainability Sustainability issue Lean/six sigma tool Effect Packaging ISO9001 Reduces the amount of waste and leads to non-hazardous waste Lenovo considers packaging the main cause of waste in the company and even though some might argue that this perception is ill advised, the increased visibility of packaging together with the propensity of its functions to be transitory means that in most cases, green credentials are ignored (Chauhan, 2008, p. 235). This therefore creates a dilemma to those fighting with optimization solutions for materials in regard to distributing and protecting products. The increasing tendency for light-weighting that is mainly synonymous with the plastic beverage container does not always appeal to the end of life stage as reprocessing may become difficult in its endeavour to recover adequate volumes of good recycling material from the already slimmed down materials. A developing revolution that is developing is the utilization of more nature-based, biologically waste-derived nutrients like straws along with barks. Most of the computer manufacturers have placed emphasis on materials that have the ability to be easily recycled or those that may be composted after they are used in an effort to develop packaging that will reduce wasted (Parsons and Oja, 2012, p. 107). Sustainability is at the core of Lenovo’s activities and plans while being important to its customers and the company’s sourcing function is integral in this regard (sustainablebrands.com, 2008). The standard purchase order contract of the company states that its suppliers must abide by specified environmental regulations, avoid using hazardous substances and the substances that increase the depletion of the ozone layer as well as provide liability insurance together with a guarantee that the imported and exported products will be safeguarded. As a part of its supplier performance assessment, Lenovo assesses the number of sustainable development programs that suppliers are taking part in. Consequently, it issues more than two hundred suppliers with respective audit reports every quarter so that they can evaluate their performance and to encourage the companies to match the growth seen at Lenovo. These suppliers are required to attain additional environmental thresholds. The company also measures and produces reports of its carbon emissions as well as utilization of water according to the guidelines that have been set by the Electronic Industry Citizenship Coalition while encouraging the suppliers to conform too. Lenovo acknowledges that climate change is a severe risk and believes that everyone should do their part to decrease harmful greenhouse gases. Lenovo seeks to reduce its carbon footprint through the development of a comprehensive strategy that will address all the elements of its business while developing aggressive goals and targets. The company is continually measuring its performance against every goal as well as target to makes sure that it remains on track. It also makes a commitment to absolute decrease in the emission of greenhouse gases from the operation of the company and to drive a, and assist similar reductions in the company’s supply chain and customer base through implementing an all-inclusive climate change strategy. Lenovo’s Lean Six Sigma for sustainable supply chain Bill Smith who was an engineer at Motorola is considered as the developer the Six Sigma and first to acknowledge the complementary factors associated with Lean and Six Sigma (Carreira and Trudell, 2006, p. 12). Jack Welsh, who was a business executive and former CEO of General Electric was the pioneer chief executive of a large corporation to adopt Lean Six Sigma (Burton, 2011, p. 13). According to General Electrics, Lean Six Sigma saved the company more than four billion dollars over a period of ten years. The Lean Six Sigma combines tools as with approaches from Lean and Sigma principles to develop actual results. It identifies process waste while reducing activities that do not add value and increasing the capacity and capability of the organization. The lean approach is intended to enhance the speed and efficiency of a firm through the elimination of waste while Six Sigma is a progressive improvement plan that is designed to decrease variability (Voehl, 2013, p. 7). Lenovo should adopt lean manufacturing and Six Sigma, which need a process focus while including customer drivers that will point out the needs that need improvement or will express the value. Nonetheless, Lenovo’s Six Sigma mainly emphasizes on the reduction of variations while Lean is focused on enhancing flow in the value stream and the elimination of waste. Lean is more focused on rapidity and cohesion, whereas Six Sigma is focused on superiority. Further, Lean has no capacity to make the process stable or statistically control it and the Six Sigma does not enhance the flow of information as well as materials through a process. As a management method that makes sure of the delivery of process, Lean Six Sigma entails the utilization of statistics in the assessment of process errors as well as the documentation of all the waste that takes place in a process (Breyfogle, 2003, p. 5). Lean Six Sigma ideologies are guided by sequential steps that aim for a decrease in costs and maximization of profits while identifying the opportunities that may assist in enhancing collaboration. As a result of the overly technical analysis components that exist in the Lean Six Sigma, Lenovo uses software that is intended to perform the needed arithmetic and statistical calculations. Lenovo uses the Lean Six Sigma to forecast the output of products so that it can improve its sales visibility, and this is achieved through a production control model that targets the returns inventory to assist in planning and anticipation of what will be accessible to the sales as well as outlet teams. This makes the company’s operations develop more flexibility to enable it deal with the products that Lenovo sells in North America without any limitations on the items that may be returned, refurbished or re-sold. Lean Six Sigma also assists in reducing the inventory value, which is attained through planning, and setting of priorities that will monitor the reduction of excess as well as obsolete inventory and this has already been seen as being successful. Similar to other successful businesses, Lenovo has influenced Lean Six Sigma and the tools that are associated with it to create modest enhancements in its reverse logistics operations. This has resulted in successes in areas that include the creation of proprietary shop floor control systems, operation flexibility that allows the company to handle brands and models as well as universal packaging that that supports various platforms and models. The personal computer market continues to the shift of numerous customers from desktop computers towards laptop computers and consequently, the company has implemented the Lean Six Sigma in its entire supply chain while making sure to closely collaborate with its suppliers in the delivery of improvements in regard to end-to-end costs. Recommended steps taken to promote sustainability Sustainability has developed to be a prerequisite for all the companies working in the IT field and Lenovo, which is a successful IT company, should not be an exception in regard to the adoption of sustainability policies. The first step by Lenovo towards achieving sustainability was acquiring the ISO 14001 certificate, which is a standard for sustainability that applies to companies in the entire globe. The elements of this standard include the reduction of costs in regard to waste management, developing more energy efficient and resource efficient means of production, reducing the costs associated with distribution and enhancing public relations. In regard to environmental issues, Lenovo has a corporate policy that is entailed in its sustainability report. This policy comprises of four programmes that are supposed to incorporate sustainability into the company including; compliance, preventing pollution in the environment, leadership in regard to product environment as well as continual improvements. As the leading computer maker in the world that serves customers in about one hundred and sixty nations globally, Lenovo has a commitment to ethical operations as well as promotion of corporate citizenship and sustainability in its business activities. As the company evolves its business to include mobile internet devices such as tablets and smartphones, it continues to show a commitment by operating in transparency while remaining responsible in regard to managing performance associated with the environment, the society as well as governance. With the increased threats in regard to rivalry in the computer industry, the business level strategies at Lenovo focus on innovation and design to come up with differentiation and superior products while reinvesting in research and development initiatives. It also focuses on the improvement of combinations and better association with the involved sectors in order to achieve cost advantage while decreasing prices in order to emerge victorious in the price war. The company should make sure it maintains its strengths through utilizing cost effective approaches that decrease costs and also share the benefits of costs with the consumer. Lenovo is associated with a strong alliance in regard to labor and material and it should exploit this cost leadership advantages through the double brand approach that will be focused on Lenovo and not IBM. The firm should focus on its gains so far as well as a continuous development and enhancement of products to ensure it maintains its competitive advantage. More focus should be directed to developing products in a manner that is more cost effective such as operating from other nations where the products will be relatively cheaper to produce while maintaining their superior quality. The growth strategy that is used by Lenovo that involves looking beyond laptops along with desktops continues to make the company successful as it makes preparations for the provision of total solutions for the customers through the increase of shares in mobile technology. In regard to the supply chain, the company has enhanced a business analytics point of excellence that backs its supply chain, trades and promotion as well as units associated with the business. Lenovo being the largest supplier in the globe of personal computers decided to engage in it largest acquisition in history through the purchase of Motorola which has been struggling in the market for a price of almost three billion dollars from Google. Therefore, the company has to develop a strategy that will reform its complicated manufacturing supply chain in regard to smartphones so that it can be more competitive in a market that is comprised of leaders such as Samsung and Apple. If the Motorola acquisition is to become successful subject to regulatory approval, Lenovo has to be able to reshape and rapidly incorporate the production supply chains that are associated with both companies. There is a lot of synergy that exists between Lenovo and Motorola which mainly preferred to outsource the manufacture process of its smartphones making an execution plan important in determining the manner in which the combined production supply chain would have to be redesigned. Lenovo should decrease the costs associated with its supply chain while maximizing on the gross profits that are realized from smartphone revenues as its customer base has increased to a global scale after the company acquired Motorola. In order to deal with the constant challenges that are associated with the use of recycled content in designing and manufacturing computer products, particularly notebooks, the engineers at Lenovo should cooperate with the suppliers to create and qualify newer grades of plastic resins that were not initially available in the IT industry. The use of PCC in IT products poses considerable challenges because of its unique structure, performance as well as cosmetic needs that are related to these applications. Various plastic materials that are used in the manufacture of Lenovo’s products contain varying levels of PCC, therefore, all these materials should pass environmental and performance quality checks before they can be approved to be used in product applications. Conclusion One of the main mistakes that international companies make is perceiving the global markets as being uniform or forcing uniformity on these markets through a one size fits all culture in their worldwide operations. Training employees to develop an engagement and appreciating numerous cultures represented within the company assists in developing an approach that will address the needs of the entire company. Lenovo has been able to make considerable progress in regard to supply chain efficiency and has been named among the customers that have a high degree of customer satisfaction particularly in the United States. The company is considered to have gone through tremendous transformation as a result of a continuous improvement process mainly because of improvements associated with customer satisfaction in the supply chain and relationship issues together with continued strength in hardware dependability. The success of the company is based on the innovation of products, a supply chain that is extremely global, a robust strategy implementation as well as its capacity for delivery in terms of its pledges to investors, workers, consumers as well as the society and the generations of the future. Bibliography Breyfogle, F. 2003, Implementing six sigma, Wiley, Hoboken, NJ. Burton, T. 2011, Accelerating lean six sigma results, J. Ross Pub, Ft. Lauderdale, Fla. Carreira, B. and Trudell, B. 2006, Lean Six Sigma that works, American Management Association, New York. Chan, M. 2006, The intrepid way, Ascend Beyond Pub, Columbus, GA. Chauhan, B. 2008, Environmental studies, University Science Press, New Delhi. Ling, Z. 2010, The Lenovo affair, Summaries.Com, [Hamilton, N.Z.]. Parsons, J. and Oja, D. 2012, New perspectives [on] computer concepts 2012, Course Technology, Boston, Mass. Peng, M. 2010, Global business, Cengage South Western, Mason, OH. Sako, M. 2011, Driving power in global supply chains, Commun. ACM, 54(7), p.23. Sustainablebrands.com, 2008. Lenovo Joins The Climate Group, Offers Reward for Recycled Computers | Sustainable Brands. [online] Available at: http://www.sustainablebrands.com/news_and_views/articles/lenovo-joins-climate- group-offers-reward-recycled-computers [Accessed 3 Nov. 2014]. Tennant, G. 2001, Six Sigma. Gower, Aldershot, England. Valdani, E. and Arbore, A. 2013, Competitive strategies, Palgrave Macmillan, New York. Voehl, F. 2013, The lean six sigma black belt handbook, Productivity, Boca Raton, Fla.. Yuann, J. and Inch, J. 2008, Supertrends of future China, World Scientific, Singapore. Read More