Supply Chain Management - Essay Example

? Strategic Supply Management Q-So!-21: Strategic Assessment and Future Direction Number: Word Count: 2,180 words, excluding diagrams, tables and references Table of Contents Table of Contents 2 Introduction 3 Environmental Analysis 3 Figure 1: Macro Environmental Analysis 4 Figure 2: Q-So!-21 SWOT Analysis 5 Supply Chain Analysis 6 Figure 3: Q-So!-21 Supply Chain Analysis, Based On Case Study Information 6 Supply Network Design 7 Supply Chain Management 7 Key Challenges 8 Table 1: Environment Best Suited For Responsive Supply chains 9 Table 2: Design Features For Responsive Supply chains 9 Conclusion 10 Recommendations 10 References 11 Introduction This report assesses the current situation of Q-So!-21 Security Limited with a view to recommending changes to supply chain strategies to resolve current problems. It will begin with an evaluation of the environment and the potential impact of this on the business, then present an analysis of the current supply chain, identifying problems requiring resolution in both the immediate and longer term. The problems will then be assessed against the key challenges facing the business to determine what direction the business needs to take to avoid future problems as well as resolve existing ones. Following a brief conclusion, a series of recommendations will be made relating to the supply chain that will reduce and/or remove the current problems and put the business in a better position to deal with the future. Environmental Analysis Worthington and Britton (2009, p.6) define the macro environment as “those ... factors ...which affect a wide variety of businesses and which can emanate not only from local and national sources but also from international and supranational developments”. Johnson et al (2011, p.50) identify the PESTEL framework as a means of analysing the environment. Following corporate scandals and the global 2007-2008 economic crisis, several commentators have added ethics to the analytical list. This approach will be used to analyse the macro-environment of Q-So!-21. The STEEPLE framework considers the Socio-cultural, Technological, Economic, Environmental, Political, Legal and Ethical factors that affect business and over which business has no control. Figure 1: Macro Environmental Analysis This brief analysis provides an indication of some key factors that will affect Q-So!-21. Many of them stem from the current UK (and world) economic situation. With the focus on austerity, the most recent figures indicate the UK either did not grow or contracted last quarter (Wintour 2011). As the government have stated their intention to continue with current economic policies, there is the real possibility of another UK recession, with very little available for industry and individuals to cut, as most cuts were made following the 2007-2008 global economic crisis. As such, many businesses may find a second recession occurring so soon after the last one, with a higher tax burden this time (increases in VAT and both income tax and national insurance) results in their ceasing trading, exacerbating the effects of the cuts being made and intensifying the impact of the recession. Even without recession, the higher tax burden and public sector cuts being made are likely to cause many businesses to cease trading, either voluntarily or through insolvency. The market for all goods and services will become increasingly tight, with both business and personal consumers keeping purchases to the absolute essentials as everyone focuses on keeping their heads above water. The Bank of England may be forced to raise interest rates, which have been at an historically low 0.5% for some time, allowing both businesses and individuals to mitigate to a certain extent, the lack of price/wage rises (although the Consumer Price Index (CPI) is well above the 2% target set by the government). The impact of any rise will depend on the amount of the rise. If rates rise to, say, 1.5%, then it is likely most people will be able to adjust their outgoings to compensate. But more than this and the pressures on industry and individuals will intensify the impact of tax increases and cuts in benefits, resulting in hardship for many. In these increasingly volatile times Q-So!-21 will need to maximise the advantages it has and resolve weaknesses as quickly as possible to remain in business and at the top of its game. The following SWOT analysis highlights the issues within the company with the opportunities and threats they face. Figure 2: Q-So!-21 SWOT Analysis Supply Chain Analysis Figure 3: Q-So!-21 Supply Chain Analysis, Based On Case Study Information Supply Network Design Supply network design “involves configuring the shape and capabilities of one’s own and other operations with which the business interacts ... includ[ing] all suppliers and their suppliers and all customers and their customers” (Slack et al 2009, p.68). The process through which Maeve intends going is supply network design, a precursor to supply chain management. Figure three provides an overview of the current situation for Q-So!-21, although it does not reflect the problems with quality or the number of issues relating to purchasing that require resolution. It does show the company is currently responsible for everything from the production of the electronic locks and associated components to their installation. Had the whole operation been run efficiently from the outset, it is likely that major changes would not be needed, but the current situation is not working for the company and Maeve has no alternative but to go back to basics and potentially reconfigure the whole supply network. This total overhaul of the supply network is an approach recommended by Lee (2010) who reports the approach and outcome of the reinvention of the supply chain of a premium cotton shirts producer in Hong Kong, to take account of the increasing demand for a more sustainable final product. Maeve will, however, need to be very careful when reconfiguring the supply chain of the company, as it cannot afford to lose customers because the transition from the existing to the new arrangement is too radical. One of the key issues evident in the current network design is the excessive number of suppliers for some components, compared with scarcity in others. Slack et al (2009, p.72) state that “reducing the number of suppliers can reduce transaction costs and enrich supplier relationships” which might go some way to restoring the profitability of the company. Supply Chain Management Supply chain management is “the synchronisation of a firm’s processes with those of its suppliers and customers to match the flow of materials, services and information with demand” (Krajewski et al, 2010 p.344). Regardless of any action taken to change the network design, Maeve needs to manage the current supply chain, as it is that causing problems for the company now. Based on the case study, there is an attempt to match the flow of materials and services (components, finished goods and installation services) with customer demand. The information feedback from customers is that product quality is not good enough. This indicates issues with either the supplies being used, or the processes used to manufacture the electronic lock components. There is no indication that the manufacturing processes have changed, so there might be an issue with staff not doing their jobs properly through lack of training. Quality has not been a problem before, indicating that staff training is usually adequate, so the issue must be with the quality of components from particular suppliers. This would appear to be the priority issue for Maeve. Key Challenges Maeve’s key challenges will depend on her priorities. She has indicated she wishes to consider expanding overseas with potential outsourcing to China. However, there may not be a need to reconfigure the supply chain to that extent. Equally, the company is not supplying goods to customers that meet their quality standards. There is little point in considering expanding if there are problems with the product. These need to be resolved. Having identified the issue is likely to be with the quality of supplied components, Maeve needs to consider which of the company suppliers is supplying inferior quality components and stop using them, then assess the remaining suppliers to determine which should be targeted as supply partners rather than simply casual suppliers. Once the product being supplied to customers is of a suitable quality, Maeve can turn her attention to the supply network design to determine whether changes are still needed and if so, what changes need to be made. Resolving the supplier issue and reducing the number of suppliers may resolve the issue of high production costs and increase profits, at which point overseas expansion can be considered, together with the possible outsourcing of production to global locations including China. Maeve’s biggest challenge is likely to be convincing the family that producing their products overseas is a good idea. They are unlikely to have issues with expansion beyond the EU, but may insist on exporting goods produced using the current facilities rather than setting up production facilities overseas. Her supply network design will need to take account of several issues, including how much of any extended supply network should be owned by the company and where those facilities should be located, what capacity levels should exist at each part of the extended company-owned network at any given point in time, and the associated issues of outsourcing and/or off-shoring (Slack, et al, 2009, p.71). The information system that supports this network will need to incorporate the ability to report the network status at any point in time, as well as the ability to accurately forecast future demand and determine whether that demand can be met from existing facilities and stock levels. The objectives of the network should include maximising economies of scale and scope, determining the optimum timing of capacity changes and the impact of any changes on stocks held. At the same time, Maeve can incorporate sustainability principles throughout the new network design, providing a new selling point that customers are likely to appreciate. The information needs of the extended network point to an ERP system underpinning a responsive supply chain. Krajewski et al (2010, p.362) identify the following factors associated with a responsive supply chain: Factor Responsive Supply Chain Demand Unpredictable, high forecast errors Competitive priorities Development speed, fast delivery times, customisation, volume flexibility, variety, top quality New service/product introduction Frequent Contribution margins High Product variety High Table 1: Environment Best Suited For Responsive Supply chains (Source: Krajewski et al, 2010, p.362) These priorities seem most appropriate for the company, given the speed of technological change in the industry. As a consequence, Maeve will need to consider the following when she designs any new supply network: Factor Responsive Supply Chain Operation strategy Assemble-to-order, made-to-order or customised services or products, emphasise variety Capacity cushion High Inventory investment As needed to enable fast delivery time Lead time Shorten aggressively Supplier selection Emphasise fast delivery time, customisation, variety, volume flexibility, top quality Table 2: Design Features For Responsive Supply chains (Source: Krajewski et al, 2010, p.363) Maeve can use the criteria for supplier selection for the assessment to reduce the number of company suppliers. Conclusion Maeve has an immediate issue to resolve where the supplier number and component quality are concerned. Once this has been resolved and the products produced by the company return to a satisfactory quality, she can consider the more expansionary ideas that she has and present them to the board for consideration. Recommendations The first priority is to deal with the quality of the product being produced at present. Assuming it is a supplier issue, Maeve should investigate to determine who is supplying substandard components and immediately cease dealings with them, ensuring all outstanding invoices are paid and all records closed. It may be more than one supplier and it may also be one of the suppliers who provides the key lock barrel component. Care will need to be taken to ensure the company still has sufficient quality supplies to continue manufacture in the event new suppliers need to be located to replace those supplying sub-standard goods. If new suppliers are required then, managed properly, Maeve can establish partnership-style relationships with them, to allow closer linking of supply and production schedules. Once the company is producing quality products again, Maeve should turn her attention to the number of suppliers being used, determine how many suppliers should be used, making sure that the company is never put in a position when it cannot obtain necessary supplies and then undertake a supplier audit to assess whether or not each supplier can meet the company’s requirements for a responsive supply chain, based on the ideas of Krajewski et al (2010, above). Having determined the suppliers’ abilities to meet these, a final decision should be made as to preferred suppliers and back-up suppliers. Any dealings with other suppliers should be brought to a managed conclusion, in case they should be needed in an emergency in the future. Maeve then needs to develop partnership-style relationships with the preferred and support suppliers to align supply and production schedules for mutual advantage. Having remedied the key issues affecting current production, Maeve can turn her attention to supply network design to determine the look of the ideal supply chain for a global operation, identifying how such a strategy should be implemented to avoid problems with quality and timing when the strategy is rolled out. She will need to build a solid case to support her argument as the family may not be happy their products will be made overseas, especially if China is the chosen location, as China has a reputation for being “cheap” (although they are taking action to resolve this issue by charging more for their products) and the company’s products have always been high quality (until recently) and produced under the supervision of the product designer. She will need to determine whether the company itself will expand overseas or whether manufacturing and sales partners will be needed; if the latter, she will need to determine how to assess their suitability and how contact will be maintained to identify and resolve any problems quickly. This last recommendation will be Maeve’s biggest challenge. She will therefore need to take sufficient time to build her case and assess all possible options before presenting them to the board for consideration. References Johnson, G., Whittington, R. and Scholes, K. (2011) Exploring Strategy (9th edn.) FT Prentice Hall, Harlow Krajewski, L. J., Ritzman, L. P. and Malhotra, M. K. (2010) Operations Management: Processes and Supply Chains (Global Edition) (9th edn.) Pearson Education, Upper Saddle River New Jersey Lee, H. L. (2010) ‘Don’t Tweak Your Supply Chain – Rethink it End to End’ Harvard Business Review October pp.62-69 Slack, N., Chambers, S., Johnston, R. and Betts, A. (2009) Operations and Process Management: Principles and Practice for Strategic Impact (2nd edn.) FT Prentice Hall, Harlow Wintour, P. (2011) ‘Coalition refuses to change course as economy shrinks by 0.5%’ The Guardian 25 January available online at http://www.guardian.co.uk/business/2011/jan/25/coalition-defends-policies-as-economy-shrinks [accessed 26th January 2011] Worthington, I. and Britton, C. (2009) The Business Environment (6th edn.) FT Prentice Hall, Harlow Read More