Logistics Management. Supplier Evaluation at EADS Company - Case Study Example

Logistics Management YourFirst YourLast Supplier Evaluation at EADS Company Overview EADS (European Aeronautic Defenseand Space) was a major global player in the aerospace sector. Having just a handful of other companies offering similar products, EADS Company’s market was structured in an oligopolistic manner. The company recorded a sales volume of approximately €30 billion, a figure only dwarfed by its biggest competitor in the aerospace market, which recorded approximately €40 billion worth of sales. Other competitors followed closely with sales averaging between €10 billion to €20 billion. Most of the company’s sales came from Europe and North America and therefore the company intended on making adjustments to improve sales in the Asian and South American regions. The company’s main clientele comprised of major airlines around the globe. These airlines employed the business strategy of increasing purchases in order to get price reductions based on traded volumes. The nature of the aerospace industry was such that value addition on merchandise was capped at between 25%-35%. Therefore, the organizations that were tasked with supplying these products formed an integral part in developing competitive advantages for EADS and other companies in the industry. They additionally became a potential advantage for reducing expenses and risk besides enhancing revenues. Suppliers in the Aerospace Industry The nature of the aerospace industry demanded that suppliers provide goods and merchandise of the highest quality. The goods needed to be durable, and had to meet some specific quality requirements. The suppliers through companies such as EADS were required to meet the certification needs and requirements under the watchful eye of regulatory institutions such as FAA (Federal Aviation Administration). Special relationships between the suppliers and companies such as EADS had to be formed to ensure specific product customization requirements were met. Therefore, due to such associations, the company was confined to purchasing products from one supplier. The suppliers formed an integral part of EADS supply chain that consisted of the [Suppliers – EADS group – Clients]. EADS Supply Vision and Strategy EADS supply vision aimed at achieving competitive advantage by attracting, retaining, incorporating and developing the global best suppliers. The strategy therefore entailed developing the best methods in procurement marketing and the management of risk and opportunities. Procurement marketing had to adopt best practices for the company because sales department needed to be supported because of customization needs in different regions. Because of the close business cooperation that existed between the suppliers and EADS, risk and opportunity management strategies were required in ensuring that the risks were shared appropriately. EADS Company Business Structure Due to the nature of the aerospace market, the company faced an outstanding product complexity. The company’s makes the most sales in North America and in Europe. Sales share in Asia and South America are almost negligible The company is faced with structures of uneven distribution of sales in the world market. Problems and Weaknesses Identified Weaknesses EADS Company has a very weak sales position in Asia and the Southern American region The Company additionally seems to be very rigid since it fails to consider some other dimensions in the supplier evaluation system Problems Due to the nature of the industry, the organization faces complexities especially in the nature of the merchandise they deal in. The Aerospace industry is additionally not capable of handling the stringent requirements set forth by some of their clients including the FAA EADS Company is unable to optimally exploit and effectively employ their resources and supplier availability. They have constricted themselves to only one supplier, therefore limiting their capabilities of sourcing for supplies elsewhere. The company is experiencing skewed sales distribution, as North America and Europe completely overshadow other parts of the world. There is an uneven distribution of sales. Priority Steps Step One: I would Find a mechanism and formulate strategies that would assist in improving sales in Asia and in South America. Some of these strategies include: Market surveys Supplier screening Company visits to suppliers manufacturing bases and their headquarters Asian countries’ screening and evaluation Applying competitive intelligence techniques Step Two: I would develop new supplier assessment methods for present and potential suppliers. I would execute this strategy through: Examining the present framework and evaluate based on current performance I would make comparisons between the previously executed work and evaluate with similar models I would establish fresh criteria for organizational ethics I would consult the base country’s policies on quotas. Step Three: I would strive to focus on efficiency while stressing on local focal points through strategies such as E-Procurement, horizontal organizational integration and enhancement of supplier relationships. Supply Chain Design Techno Overview Techno is an organization that deals with high technology electronic goods. The company supplies its merchandise to OEMs (Original Equipment manufacturers) and later these goods are delivered to end users through different markets. Techno engineers operated in close collaboration with OEM clients in designing their products. The NPI (New Product Introduction) department stationed within the operations department was engaged in small-scale production of the products, to give the go ahead for large-scale production to be initiated. The product design was therefore mandated on the engineering department and the team that launched the product. The small-scale production for assessing quality and product specifications was differently handled by NPI within the operations department. Within the Operations department, there had been an AMO (Advanced Manufacturing Operations) section, which received the prototype from NPI for mass production. The unit was able to manufacture approximately 50 units on a daily basis, but production was soon moved to a larger production centre that was capable of producing approximately 100 units on a daily basis. Fundamental Issues According to MacCormack, Verganti & Iansiti (1999), the worth of design for front-end merchandise creation has been noted as a fundamental and integral component of product innovation. Businesses that employ the use of product design principles realize positive business results and performance. Scholars such as Khan, Christopher & Creazza (2012) have singled out important functions for engaging in product design: Design as a Merchandise innovative process leader; design as an incorporated multifaceted team; and design as a functioning specialty. Borja de Mozota (2003) additionally highlights the capability of product designing actions in assisting companies execute strategic and tactical product differentiation, integration and transformation. Nonetheless, for product design to function at its optimum, it is important that organizations integrate product design with supply chain processes (Khan, Christopher & Creazza, 2012). The considerations within supply chain that need to be integrated with product design include client responsiveness, logistics, inventory management, efficiencies in transportation, flexibility and duties and customs. Unfortunately, for many companies, involvement of the design team after the products have been launched becomes minimal and therefore, unable to assess the activities of the supply chain of the product. Fundamental Issues There was a big disconnect between the design team and the operations team (NPI) tasked with initial and mass production of the products The NPI team was unable to get the right information from the engineering department, sometimes the necessary paperwork lagging behind the products design Major inconsistencies existed in the different systems used by the two departments within the same organization. The engineering team used “Agile” recording system while the Operations team used ERP (Oracle Enterprise Resource Planning). Short-Term and Long-Term Solutions The immediate solution to Techno Company would be to streamline the two departments and ensure that systems are fully integrated so that work flows freely from the engineering department to the operations teams tasked with production. That would assist normalize production currently, and ensure production is not stopped because of the separated functionalities. To ensure continued production and sustainability in the long term, the product design as well as the Supply Chain Management functions should work together, hand in hand to ensure that all areas are covered. The tasks of the supply chain management and the design teams are separate but interlinked within a merchandise-focused production context (Xiu & Chen, 2012). The design managers are tasked with constructing a good that consumers use to derive value from, a product that is easily differentiated and one that employs optimal use of the organizations assets. Conversely, Supply chain managers are offered the designed good or products intended for marketing by the company and additionally given information that enables them carry out market forecasts while at the same time identifying production networks. Their function is primarily coordination along the supply chain, in the attainment of a distribution and production target that meets the terms of the market. In light of this, I would align both managers and their departments for the long-term benefit of the organization. The combination of incorporating Supply Chain activities with product designs assists in identifying inefficiencies that may hamper consumer satisfaction, and replacing those inefficiencies with designs that respond well to customer’s expectations. References Borja de Mozota, B. (2003). Design management. New York, NY: Allworth Press. Gordon, S. (2008). Supplier evaluation and performance excellence. Ft. Lauderdale, FL: J. Ross Pub. Jung, H., Chen, F., & Jeong, B. (2007). Trends in supply chain design and management. London: Springer. Khan, O., Christopher, M., & Creazza, A. (2012). Aligning product design with the supply chain: a case study. Supply Chain Management: An International Journal, 17(3), 323-336. doi:10.1108/13598541211227144 MacCormack, A., Verganti, R., & Iansiti, M. (1999). Developing products on "Internet time". [Boston]: Division of Research, Harvard Business School. Xiu, G., & Chen, X. (2012). The Third Party Logistics Supplier Selection and Evaluation. Journal Of Software, 7(8). doi:10.4304/jsw.7.8.1783-1790 Read More