The Business Strategy and Supply Chain Strategy for Organization - Coursework Example

Introduction British Aerospace Engineering Public Limited Company (abbreviated: BAE Plc is a British defence company. BAE’s headquarter is situated in London, United Kingdom with five key markets in the world i.e., United States, United Kingdom, India, Saudi Arabia and Australia. Total number of employees is reported as 21,200 globally (Annual Report 2102). The core businesses of the company are elucidated as following: Consultancy Services Cyber and Intelligence Electronics and System Integration Management Information Technology and Information System Handling Military and Technical Services Land and Armaments Support Solutions Defence Security BAE systems came into being in 1999 when two leading company were merged. The predecessor companies of BAE systems are British Aerospace and The Marconi Company. Currently BAE Company is involved in major defence and engineering projects in US and UK such as F-35 Lightning II, the Euro fighter Typhoon and the Astute-class submarine etc. The major production of the company is defence oriented. According to the annual report of 2012, it is stated that 95% of the sales was defence oriented (BAE Annual Report 2012). Company’s Strategic Objectives The strategic goals of the company are enormous and customer focused. The mammoth of overwhelming strategic business vision is exploited to align the overall line of action. It is described as to create a lucid vision of expected goals of future prospect. They are more concerned towards developing valuable business outcomes which might remain more important to increase and optimize customer satisfaction as well as shareholders’ wealth. Out of two basic business objectives (profit maximization vs. wealth maximization), BAE systems tend to inclined towards wealth maximization which ultimately is a avenue towards value maximization. The overall interated business outcomes plan is as follows which describes the interlinked activities in order to achieve business excellence from raw material to customer satisfaction. Adopted from: Annual Report of BAE Systems (2012) Business Strategy Business strategy of BAE systems provides a long term plan of actions in order to achieve the goals of the organization. The strategy definition covers the entire scope of business including global strategic alliances and local business environment. Following is a list of strategic decision ingredients: Prioritization of scarce resources to meet the challenges in order to achieve strategic tradeoff between supply and demand Finding the accurate ways to implement the strategy by setting off the adaption of environmental agile A continual improvement process Focusing the customer needs and feedback to safeguard their interests Team orientation held by strong leadership to get a speedy drive to meet the demand Improving the financial conditions of the company improve shareholder’s wealth and value Delivering total performance through focusing customer, execution of integrated programs, improving the financial performance and outcomes and behaving responsible Supporting the core business processes through maintaining long term and profitable relationships with customers and suppliers (official web page of BAE systems). Supply Chain Strategy Supply chain or logistics strategy guides about standards procedures that allow an organization to add value at each and every step when a product is produced and supplied to the end customers. However there are several stages which are involved in making a product available. These steps are strategically integrated to overall business objectives for the sake of achievement of desired and anticipated goals. A standard supply chain begins with procurement and moves through intermediary channels and ends up with the stage when the product is available with final customer. Supply chain strategy of BAE systems is long term and technology oriented because of nature. They claim that their supply chain is potentially flexible and is enough reliable to meet up with uncertainty in environment and demand or supply fluctuations efficiently. The core focus is to provide high customer satisfaction and value by responsive supply chain strategy. The key characteristics of supply chain of BAE systems are as follows Adapted from: Official Web Page of BAE Systems The integrated supply chain of BAE systems allows the company to attain the best of the suppliers around the world. According to the official web page of BAE systems, they explicate that the annual expenditure for procurement is over 10 billion pounds with 25,000 suppliers (Kraynak 2012). Strategic Recommendations Opportunities to Improve Supply Chain and Logistics Activities Improving Information Systems: Improvement in information systems which are updated and customized is a taller opportunity in the way of improvement supply chain activities. Outdated information systems must be obsolete in order to improve demand and supply tradeoff with respect to efficiency and responsiveness across the supply chain within the organization Tailored System: The supply chain system must be flexible to meet the demand and supply uncertainties by the time declaration. Customized system of supply chain and logistics management is more appreciable than the rigid systems. The flexible, customized and industry oriented supply chain system is palpable for an organization. Operations, Sales and Finance Integration: Standard Operations and Procedures (SOPs) are required to be in a queue that is substantial. An overt system that describes about which, how, when and where the facilities would be expected to handle indeed. Innovative Culture: If an innovative and decentralized system will be tailored then it will open the avenues towards greater company value. Supply chain integration in an organization like BAE systems is very important because products are crucial in nature. The more the innovation in the organization, the more the customization will be observed (Chopra and Meindl 2012). Improving the movement Facility Location: The facility location must be surrounded by the production location. In this way, a supply chain may yield actively and responsively. An analysis of cost and economic benefit must be conducted in order to implement this strategy. The location decisions are very crucial in a sense that it performs over macro standards. Choosing Warehouse Strategy: Warehousing strategy must be chosen according to the requirement. However three possibilities are there which may be exploited as stock keeping unit, job lot storage and third is cross docking. The most commonly used is stock keeping unit where every product is launched altogether and taken out of the inventory as per needs. Job lot storage provides a little bit of customization because the good with same technical and common characteristics are stored at one place. Whereas the most dynamic and efficient use is cross docking which allows the supply chain to meet with agile demands with lesser holding costs (Chopra and Meindl 2012). Interaction Challenges While interacting with suppliers, an organization especially logistics management may face a number of enormous confronts. First of all, the main issue is supplier selection. It is the core duty of procurement manager while it may differ according to the nature of organization. Once the supplier is selected, the real challenge begins now. Following is the list when a company faces different sort of challenges regarding supply chain strategic fit achievement - Decreasing product life cycles - Globalization - Increasing product quality - High standard requirements - Support and disqualified product confronts Increasing Customer Value For all type of organizations, customer value carries vital importance in order to generate customer equity while sustaining long term profitable relationships with them. There are three types of generalized strategies which may affect customer value in a supply chain: Per Customer Sale: It is more appreciable to sell the products to current customers first. It will enhance customer relationship with the organization. Gaining Loyalty: To gain loyalty, it is considerable to offer short term schemes to existing customers. It can also be specified as to offer collective loyalty schemes like loyalty cards etc but this scheme is more substantial for retail businesses like FMCGs and retail store chains. Lowering the serve cost: the cost to serve new customer should be lower than the existing ones. It is to create longer term relationships with customer and to create positive word of mouth by the customers. It is more appreciable for the customers of organizations like BAE systems whose nature of products is customized, dynamic and tailored. For mass production organizations, it is harder to adopt and carry on (Genroe 2012). Impact of SCM on Organizational Functions Supply chain management affects substantially over the organizational functions. It because SCM is directly associated with each step of organizational functions. Every procedure including procurement to make the product reached to the final customer. Its position is specified as the blood stream for the organization. For BAE, it is vital in various manners. They are working with more than 25000 suppliers and it is more important to integrate them altogether worldwide. BAE systems integrate their suppliers in such an effective way that it employs substantial flexibility level to meet the supply and demand. SCM affects the BAE’s functions in following manners: Demand Forecasting Supplier Relationships Customer Value Efficiency and Responsiveness Customer Equity Faster Delivery Time Movement of Products Throughout the Channel of Physical Distribution Corporate Social Responsibility: Giving back to the society (Culp 2011) Financial Implications in Supply Chain Improvement The importance of financial measures cannot be denied while employing a supply chain across the organization. The sales and revenue impact is measured through supply chain performance. Generally it is considered that meeting the forecasted level of profits and sales posit the effective performance of supply chain. The performance of a supply chain is considered as deficient when the forecasted strategic financial objectives are not met. In specific terms of context of BAE systems, it is important to remain in time frame and allocated budget with sustained quality. Financial implications on SC of BAE systems may be described as follows: Shareholders’ return and dividend payout Net Return on Operating Assets Channel Structure (In house sourcing vs. outsourcing or third party logistics through economic cost and benefit analysis) Order Management- to increase sales and to reduce uncertainty of demand fluctuations Transit time (Frazelle 2012). Supportive Practices To congregate with the above given recommendations, following are the best available practices of logistics and supply chain management: Demand Forecast: Having an updated and efficient information system that manages demand for each location and is automated to align the supply of stock. Inventory Management: To manage the inventory, the best practice is to set inventory parameters that are enough competent with historical inventory level. The factors affecting over inventory optimization are demand planning, replenishment lead time, estimation of demand plan error, estimation of dependent demand over distribution, level of service policy and cost of carrying cyclical inventories. Supply Chain Financing: Steps in best practice of supply chain financing include (i) Original invoices from suppliers, (ii) Approved payable files to financial institutions, (iii) payment of discounts by invoices to suppliers, (iv) cash payment against matured invoices and (v) settlement of negotiable payment and duration issues. Optimization of Supply Chain Design: It is more appreciable to use economical and mathematical models in order to reach towards strategic objective. Operational Planning and Selling Objective Settlement: Running the business according to set standards of sales planning and demand forecasting through each unit sold. Spare Parts Management for Capital Intensive Industries (Like BAE systems): Intensive records are needed to keep containing related data and information linked to business operations and required equipment management. Estimated life of equipments and depreciable life estimation are vital to manage spare parts and repairing services (Business Strategy BAE System). References Business Strategy. (n.d.). BAE System- Official Web Page. Retrieved May 3, 2013, from www.baesystems.com/our-company-rzz/corporate-responsibility/working-responsibly/investing-in-our-people/diversity-and-inclusion/our-approach--strategy Kraynak, J. (Director) (2012, November 18). Customer Keynote. Accelerating Supply Chain Performance. Lecture conducted from BAE Systems Inc. Helping the US Department of Defense solve strategic challenges | PA Consulting Group . (n.d.). Management consulting, IT consulting, technology and innovation | PA Consulting Group . Retrieved May 6, 2013, from http://www.paconsulting.com/industries/defence/us-defense/ Chopra, S., & Meindl, P. (2012). Supply chain management (5. ed., global ed.). Boston [u.a.: Pearson. Culp, C. L. (2011). The risk management process business strategy and tactics. New York: J. Wiley. Frazelle, E. (2012). Supply chain strategy the logistics of supply chain management. New York: McGraw-Hill. The Only 3 Strategies that Increase Customer Value | Genroe. (n.d.).Customer experience management consultants & specialists. Retrieved May 6, 2013, from http://www.genroe.com/blog/the-only-3-strategies-that-increase-customer-value/1787 Read More