Global Supply Chain Management - Essay Example

Global Supply Chain Management With globalisation, paving way for companies to do business elsewhere without having to relocate there, supply chain management has become an important topic of the day. Through strategic partnerships, it is common to find overseas-based companies selling products in certain local areas. That is, however, not to say there are no challenges that befalls these firms. This paper has listed at least the three major obstacles that tend to impede the full realization of supply chains. Capacity constraints act as one of obstacles where firm’s operations costs may cause an imbalance. Secondly, a high demand of quality and safe products become a challenge to a majority of Supply chains. Normally, the first obstacle and a lack of understanding on how to reduce the costs cause this. Management of supplier relationship could prove imperative in overcoming this challenge. Additionally, outsourcing, regular maintenance of machines as well as forecasting and preparing for customer’s ever-dynamic needs could be helpful. Thirdly, inadequate knowledge on the need to have a supply chain resiliency plan has been identified as major hurdle for many. Three important relations in this third option include the supplier-customer, top management-supplier, and top management-customer relationships. This paper has extensively handled this topic, and hopefully, it will offer the much-needed solution. Introduction Supply chains play a critical role in ensuring that the services needed are delivered to their respective clients. On the other hand, the clients trust this industry to deliver products and services, which are reliable, safe, and ones that meet the precise need they have. However, the recent horsemeat scandal involving Tesco has cast a shadow of doubt on the supply chains. A debate has since risen on the need to change the way supply chains do business with some calling for transparency on this industry’s operations. While it is easy to criticize an industry whenever a scandal especially one that has to do with health concerns, this paper’s takes a different approach. With an aim to provide a solution to a vital industry whose services are needed, this paper seeks to highlight at least three obstacles the Supply chain has to overcome. To achieve this goal, this paper uses the UK automobile manufacturers, Jaguar as a case study Background Originally named ‘Swallow Sidecar Company’, Jaguar Land rover is UK multinational company headquartered in Whitley. The company produces various models of the Jaguar car make including Jaguar XF, XJ, and XKR-S to name but a few. Recently, the company’s vehicles have had a huge demand in the US, China, and the Asia Pacific (Brown, 2014). Like any other automobile player, Jaguar has faced numerous challenges and demands. For instance, there is a growing pressure for the automobile industry to be commitment to the environment. Consequently, this has forced companies to produce what has become popularly known as the green car. There are other challenges that Jaguar and others in this industry face, and the rest of the paper will undertake to highlight these challenges. 1. Capacity constraints For any business to produce any service or product, there are resources that are vitally important including labour, premises, raw materials, technology, inventory and equipment. Similarly, to have these products or services reach their intended markets, these resources are still needed in the facilitation. Capacity constraints becomes the very first obstacle that many supply chains are facing, not just Jaguar. As already noted, every process of these products require resources, and this is sometimes a challenge to many supply chains. Manufacturing constraints often starts this challenge especially when the products produced are in high demand. For instance, it has been predicted that Jaguar will encounter capacity constraints and this could have adverse effect on its market (Jung et al, 2008). The reason for this assertion is that the firm’s vehicles have had a surging demand in the aforementioned areas of Americas and Middle East. If there are more demands for the jaguar vehicles yet the firm cannot produce enough to supply to the markets, this could have reputational and financial implications. According to Xu (2006), whenever a firm’s capacity constraints are not well addressed, it poses a great threat to the brand. A case that perhaps convincingly confirms this assertion is Tesco’s, where despite having a highly-value brand, one scandal had devastating effects. Similarly, Jaguar’s capacity constraints need urgent measures to ensure that the demand for the cars is met lest the competitors capitalize on the perceived weakness. While this is a problem presented in this paper as Jaguar’s, it is worth noting that it remains an obstacle replicating itself in the entire supply chain. Whenever the demand for a product is high, it puts intense pressure on the company either hire more people or utilize the ones it already has. None of these options is without financial implications with the latter tending to compromise quality of the employees cannot handle the pressure. On the other hand, hiring more would mean a reduction on the profit margin besides the demand for other benefits the employees will be entitled to (Holmberg, 2008). Capacity constraints are normally caused by a surge in demand, and especially when the demand is occasional. It becomes hard for companies to always hire workers and end their contracts when the demand subsides. Additionally, many supply chains require varied expertise because of the process followed in finishing a product (Holmberg, 2008). For instance, in the case of automobile, there would be a need for producers whose work is to assemble the vehicle. In addition, distributors to ensure the vehicle reaches the suppliers, and purchasers are all needed. This would mean that every department needs workers, and their efficiency determines the overall sales outcome. This represents some of the most important department in a supply chain firm Figure 1.0 Source (Chen and Paulraj, 2004). Capacity constraints are made even more complex by many firms’ tendency to increase the cost of doing business through the layering of technologies and processes. For instance, instead of having separate units with own technological systems, companies ought to centralize the system such that all units can access it the same time, and this will reduce the cost (Jinjarak, 2014; Tomlin, 2003). In order to reduce the impact caused by the ‘red tape’ Pfohl and Gomm (2009) recommend that business have to be vigilant in identifying and stamping out the complexities where they are deemed to be unnecessary. Failure to adequately address capacity constraints not only affect a firm’s financial performance, but also impede the prospects. For instance, if a firm spends a considerable amount of resources in advertising about its new product, it has to consider how it will meet the demand if it arises. Similarly, it has to work on the modalities that the customers will use to access the product. That is to say, it has to be clear on whether it will use the direct sales or suppliers. A failure in this area is likely to see a firm’s otherwise highly innovative work end in oblivion (Maltz, 2012). 2. Safety and high quality demand of products As indicated earlier, the supply chains play a significant role in the lives of many populations, besides having an integral part in the global economy. However, each day the players face a stiff need for safe and high quality products. Whenever the opposite happens, these firms suffer insurmountable losses not to mention the reputational issues that are unavoidable. In the automobile manufacturing, this issue has not been exempted, and many companies have suffered significantly. When quality or safety issues hit the automobile industry, many companies are compelled to conduct a recall of all the vehicles with safety issues. For instance, since 2003 some Jaguar’s models have been recalled in Australia consecutively with the latest one being the XJ range that was recalled in November 2014 (ACCC, 2015). Besides being an expensive exercise, recall could be detrimental to the organisation’s long-term objectives because of the reputation. However, as Christopher (2013) implied, customers want their needs to be meet yet at a friendly price. When a firm is faced in a situation like this, it has to devise ways to ensure that clients’ needs are met without a compromise on the quality. Because of this pressure, the players in the chain supply tend to offer low-quality products, which, in some cases, could also be unsafe. The matters especially in the automobile industry are complicated by the fact that a vehicle has to assure significant safety. In addition, environmentalists demand that only green cars ought to be produced in a bid to conserve the environment. On the other hand, the manufacture of the same car would be a little more expensive which would mean a higher price. Ironically, the customers want a high quality product, but at a friendly price. The dilemma that often confronts the supply chains and one has to be overcome. Since customers’ needs have to be met, a firm’s commitment ought to be on logistics and supply chain management. Christopher (2013) stated that competitive advantage would be vital in meeting the customers’ needs, and that it can be achieved through effective logistics and chain management. Unfortunately, since not every player in the supply chain industry is committed to these recommendations, a compromise often occurs, thus complicating the situation. Clearly, this is one challenge that the supply chain industry faces, but one whose solution is available. Chopra and Mendl (2015) who asserted that supply chains ought to embrace it as a way of overcoming this challenge intense demand share the competitive advantage recommendation. When the competitive approach is embraced, a firm can quickly and effectively respond to negative occurrences. According to Mishra et al (2009), firms that tend to focus on the supply chains resilience in a cohesive manner normally respond to the inevitable adverse effects in a rather faster way than those whose sole interests is gaining market-share. For that reason, firms ought not to spend much trying to outdo other players; instead, the right approach would be to give a reason to clients to purchase their products through competitive advantage. Again, supply chain management can have a different approach to avoid sulking into the pressure that clients and authorities demand of their products. It is recommended that firms work on “providing competitive costs in getting the products to the market, and that total manufacturing and distribution cost and the reliability of the suppliers correspond to the competitors’ (Emmet and Crocker, 2006 p.7; Zhang and Zhao, 2009). These assertions are informed by the fact that sometimes supply chain has to have higher prices in order to meet the needed quality and safety. Unfortunately, the customers served are conscious of the price, and despite the high quality of the product, the price issue will determine their buying decision. For that reason, these firms ought to be conscious of all the costs to have the products sold at almost similar price to the competitors’. The above statements could greatly be used to describe the situation at Jaguar whereby in comparison to other players such as Toyota, the former still lags behind in terms of market-share. For instance, while the Japan’s Toyota reported a 2.3% increase of vehicle sales totalling to 10.2 million worldwide, Jaguar had 9% and 462,678 were sold in 2014 (CNBC, 2015; Ramsey, 2015). These statistics represent that scenario that the supply chain players often have to contend with. Nonetheless, as indicated these obstacles could be challenged, and eventually won if the logistics are well organised. Additionally, attitudes toward outsourcing ought to be rectified where firms need to view it as a partnership because outsourcing has been reported to be “central to sustaining focus on core competence and competitiveness, and can reduce complexity and mitigate uncertainty” (Emmett and Crocker, 2006 p.7). This obstacle of high demand of safe and quality products could also be overcome through the observation of key areas in the supply chain management (Geng and Malik, 2010). For instance, whenever a firm realises that making a product will be more costly while outsourcing comes in handy. Furthermore, supplier relationship is vital because they act as the major representative of the company before the customers. Moreover, quality maintenance is of great maintenance because the moment customers get used to it, any other compromise would see a firm pay a steep price (Crocker et al, 2010). 3. Inadequate knowledge of Supply chain resilience If every entity involved in the industry would understand the value of supply chain resilience, even the other two obstacles would be eliminated. Supply chain reliance is concerned with hedging the industry in such a way that risks are foreseen and well mitigated, customer-supplier relationship is closely monitored and logistics integration. In order to understand the essence of supply chain resilience, the diagram below the questions that the players in this industry ought to ask and have answers to. Figure 2.0 Source (KPMG, 2015) Resiliency is best achieved through collaborative advantage where the management ensures that not everything that happens throughout the chain portrays the firm in a negative way. The top management and the suppliers play the most crucial role in setting the trend a supply chain follow (Nikookar, 2014). Monitoring of the activities that the supplier is engaged in throughout the year is imperative in ensuring customer satisfaction. As the figure below will show, instead of working on a competitive advantage approach,“business world is composed of a network of interdependent relationships developed and fostered through strategic collaboration with the goal of deriving mutual benefits” (Chen and Paulraj, 2004 p.121). Figure 3.0 Source (Chen and Paulraj, 2004). Environmental uncertainty in supply chains is likely to emanate from lateness and unpredictable behaviour of the supplier, manufacturing uncertainty and machine breakdown. To ensure supply chain resiliency is intact, a firm- Jaguar included- has to be aware of these uncertainties and improve them accordingly. Customer focus calls for understanding that their needs tend to be very dynamic, thus ought to be assessed and adjusted regularly (Chen and Paulraj, 2004). Probably, one could argue that this is the reason for Jaguar’s stagnation, as it has not invested on more affordable cars. Top management’s role in the resiliency is supporting the suppliers who have a willingness to be partners through personnel, time and even financial resources. Supply strategy is normally unique in various firms, but ought to clearly set the resources, actors and the activities undertaken. Competitive priorities in the supply chain resiliency ought to be concerned more with quality, time, innovation, flexibility and dependability of a product than cost. Jaguar’s approach ought to change on this area to include these issues especially now that recall of their vehicles has been rampant (ACCC, 2015). A long-term relationship with effective suppliers could mean high profits especially when their handling of clients is satisfactory. Logistics integration is critical since its level determine the firm’s outlook. Chen and Paulraj (2004) noted that high-level integrations make it easy to communicate and coordinate, which leads to customers being satisfied especially when it is done strategically such that clients can receive products anytime they want. Conclusion Jaguar Land Lover, like any other supply chains firm, faces a myriad of challenges amidst opening opportunities. First, the company faces the capacity constraints, which a common limitation faced by all firms in the chains supply. As noted, jaguar faces this constrain since there has been a recent demand for its vehicles in the emerging markets of China and US. While these markets offer the company an opportunity to increase its profitability and market share, it also presents a challenge of fulfilling the customers’ needs. It was indicated that capacity constraints sometimes occur when the process of production is expensive, and cannot satisfy the demand. Because of these emerging markets, Jaguar will have more demands for the vehicles yet there is no evidence that the firm is focused on solving the issue of capacity. Secondly, the company has to overcome the issue that comes with the production of any goods or services. A demand for safe and high quality of products is one challenge that Jaguar has to overcome. It has been noted that there has been a push mainly by the EU for the automotive players to environment-friendly vehicles. Even though the demand is in line with the lives of all people, it comes at a higher price. In essence, there is always a demand for high quality product by clients whilst maintaining an affordable price. Nonetheless, Jaguar could overcome all the aforementioned challenges by attaining the necessary skills. 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