Supply Chain Performance Evaluation of BH Company - Assignment Example

Executive Summary To manage supply chain strategically can prove to be a competitive edge for any company. This needs to balance the expectation and accountabilities of all the relevant stakeholders. In the given case of Bruce’s Hardware (BH) also the company needs to do that. Moreover it has to resort to Information Technology for finding a web based supply chain solution. This will channelize free and real time flow of information across the stakeholders. In this competitive business world, it is the supply chains which compete with other and not the individual firms as such and in this information is the most powerful war fare. As a matter of act the collaborative optimization of resources need to be the epitome of any supply chain else local and concentrated optimization only replaces the bottle neck from one point to other. This is what this assignment is endeavoring to suggest to the management of BH. It will analyze the present affairs of the company from the standpoint f its supply chain. Then it will put forward some recommendations in order to optimize it considering the requirements of customers and employees, keeping in view the value generation for the company. Key Words: Supply Chain Integration; Supply Chain Performance Evaluation; Sustainability. Table of Content S. No. Topic Page 1. Introduction 3 2. Analysis 3 2.1. Enterprise System: Level of Supply Chain Integration 4 2.2. Supply Chain Processes 5 2.3. Implementation Issues 6 2.4. Successful Implementation: Wal-Mart Inc. 7 2.5. Implementation Failure: HP Technologies Inc. 8 2.6. Benefits Associated 8 2.7. Recommendations 9 3. Conclusions 9 4. References 10 1. Introduction BH is a multi store hardware chain. It has adopted centralized management system for its supply chain and follows a matrix organizational structure. The firm has adopted information technology based information system but it needs to be improved keeping in mind the expectations of the customers and requirements of the employees. The company maintains data base at store point through a server based system and all the servers have been centrally connected to the main server at the head quarter. The central server is updated on real time basis. But the system lack that there is no way the employees and customer can track the orders or take and give orders online respectively. Also the supplier horizon for gauging the orders is very short and they have to take resort to forecasting in absence of real time stock information. The customers are not able to order online. They have to either do it themselves going to any of the stores or they seek help of mobile sales staff to book orders. Better Order management is also one of the aims that BH needs to achieve by implementing enterprise system. Employees also have still to use telephones to track records and elicit information. Had they able to track stocks and orders online, they would have been in better position to promise orders from nearest store from customer. Moreover though delayed, the order tracking is very much appreciated and is a factor for customer delight. If one takes a bird eye view of the legacy system existing at BH, it is clear that the real problem is that the associated stakeholders are subjected to interrupted and delayed information sharing. The system needs to be enabled with peripheral intranet and extranet in order to solve the problem faced by customers, employees and suppliers. It is not just a matter of technological improvement. Rather it is an attempt to optimize the complete supply chain system of the company. BH like any other firm cannot sustain competitively without collaborative partnership of the entire stakeholder in the supply chain. It need to mobilize the information flow throughout the system and web based solution will prove to be a tool for that. Right now with decentralized system in place, the staff requirement for managing the system is quite on higher side. There is one system administer at every store and 2 at headquarter. With new system in place, the staff requirement will also come down. Some stores can be clubbed together and can be assigned to one system administer. Though there will be more staff requirement at the headquarter, but the overall requirement will drastically come down. Also, the same staff can be used with slight re-training on new system. This will give store stock information through electronic data interchange (EDI) and thus BH can enjoy the advantages of vendor managed inventory (VMI). At the same time employees can give their full attention on customers and their order fulfillment. This will bring more customer satisfaction and hence value to the company. The recommendations given at the end of the assignment when implemented can fetch fortunes for the companies as it will address the problems of the customers, the employees and the suppliers. 2. Analysis Every firm passes and represents certain stages to integrative supply chain. This is symbolized by the level of integration among different stakeholders of the supply chain. Recent developments in supply chain management information systems have greatly increased the ability of firms to integrate processes, systems, and information with their supply chain partners. It is generally accepted that successful manufacturing firms no longer compete head-to-head with other firms, but instead, they compete supply chain-to- supply chain. This means that firms rely on the complementation between their own internal competencies and those of their supply chain partners to achieve competitive advantage. To achieve complementary competencies among independently owned firms, a relatively new form of organizational governance, called Supply Chain Integration (SCI), is preferred over more traditional forms such as hierarchies or markets. Various studies show that SCI capabilities result in cost reductions, improvements in inventory, customer service, new product development, information and material flows, and financial performance for the focal firm The four prominent stages are discussed below which will help us to first ascertain the stage to which BH belongs. 2.1. Enterprise System: Level of Supply Chain Integration 2.1.1. Stage 1: Multiple dysfunction At this stage the central firm lacks clear internal definitions and goals and has no external links other than transactional ones. Figure 1: Integration Stages (Adapted from Brennan and McNichols, 2004) 2.1.2. Stage 2: Semi functional enterprise The (potential) nucleus firm takes initiatives to improve effectiveness, efficiency, and quality within functional areas. There is little or no overlap in decision making from one department to another. Figure 2: Integration Stages (Adapted from Brennan and McNichols, 2004) 2.1.3. Stage 3: Integrated enterprise The firm begins to focus on business processes rather than compartmentalized functions. Though conceptually it is independent of technology, practically IT plays an important role. Figure 3: Integration Stages (Adapted from Brennan and McNichols, 2004) 2.1.4. Stage 4: Extended enterprise The firm decides to extend at least one business process beyond the boundary of the individual corporation. This ‘exploratory collaboration’ can extend further into fully networked relationships. IT has a crucial role to play. Figure 4: Integration Stages (Adapted from Brennan and McNichols, 2004) It can be inferred from the circumstantial evidences given in the case that BH is at stage 2 and endeavors to move to stage 3 and successively to stage 4. 2.2. Supply Chain Processes One of the most inclusive definitions of supply chain management has been put forward by David Ross in a 1997 in his book titled, ‘Competing through Supply Chain Management’. According to him supply chain is defined as “A continuously evolving management philosophy that seeks to unify the collective productive competencies and resources of the business functions found both within the enterprise and outside the firm's allied business partners located along intersecting supply channels into a highly competitive, customer-enriching supply system focused on developing innovative solutions and synchronizing the flow of marketplace products, services, and information to create unique, individualized sources of customer value.” There are five major supply chain activities which need to be undertaken from supplier to customer end. These are as follows. Figure 5: Visual representation of the network systems to be implemented 2.2.1. Purchasing: This involves the supplier and he manufacturer and is a part of back end supply chain. 2.2.2. Logistics It relates to the physical movement of the material, money and information along the supply chain. 2.2.3. Production Control This refers to production planning and control part of manufacturing or service provision. 2.2.4. Marketing Sales This is the bread earner of the complete supply chain. This is the front end of the supply chain. This takes the products and services to the customer. 2.2.5. Distribution This involves the middle partners and the allied roles like warehousing, retailing etc. 2.3. Implementation Issues The implementation of the new system will inherently have various issues which need to be considered in advance. There are always some risks associated with such implementations but the prior knowledge and prioritization will help to mitigate the risks associated. Followings represent various issues involved. 2.3.1. People Issue a) Resistance to change or change management b) Staff Adequacy c) Training d) Employee Relocation and re training e) Turnover f) Top Management Support g) Discipline 2.3.2. Process Issues a) Program Management b) Business process reengineering c) Stage transition d) Benefit realization 2.3.3. Technological risk a) Software functionality b) Technological obsolescence c) Enhancements and Upgrades 2.3.4. Implementation Issues a) Implementation time b) High Initial investment c) Unreasonable deadlines d) Insufficient Funding e) Interface f) Organizational Politics g) Scope Creep h) Configuration Difficulties 2.4. Successful Implementation: Wal-Mart Inc. The basic principle of enterprise system helps to create an accurate forecast of demand and actually execute replenishment and supply chain optimization opportunities. Wal-Mart used this accurate demand forecasting to take costs out of the entire value chain. Moreover at the same time it passed this growth in revenue to lure customers which in turn increased the revenue. While implementing the enterprise system they made sure that every stakeholder must have access and visibility to a single forecast number. This resulted in the fact that all links in the value chain contributed their knowledge of causal factors which collaborated and updated the forecast to be more accurate. In other words, they imitated the best of retail-managed, vendor managed transportation and supplier management knowledge, and through the enterprise system they put it into the same demand forecast to come up with one number that flows into whole system from supplier to retailer and hence served the customer in best manner possible. They made right choice of software system. They assed and prioritised the risks involved in advance. They did the implementation in a phased wise manner. They planned for manpower and allied issues in advance. This is why Wal-Mart is considered to be an industry standards body to adopt guideline for implementation of enterprise systems. 2.5. Implementation Failure: HP Technologies Inc. In July 2004, HP endeavored to make transition from decentralized to centralized enterprise system. The motto behind it was to increase the revenue. But the company failed severely in this attempt. When investigated it came apparent that the project failed because it left many issues unaddressed. Firstly they absolutely lacked contingency planning for system implementation. Secondly there were problems related to the interface of older and the legacy system as they went ahead for one shot implementation. This failure was in fact more embarrassing because HP itself takes up projects to implement enterprise systems for other firms. It led to a big blow in its credibility apart from the severe financial impact 2.6. Benefits Associated There are several tangible benefits to the supplier, the firm itself, the employees and the customers. These are segregated as below. 2.6.1. Tangible benefits a) Inventory Reduction hence reduction in carrying costs b) Reduction in lead times c) Personnel reduction d) Improved productivity e) Better cash Management f) Better resource utilization g) Reduction in logistics cost h) On time delivery 2.6.2. Intangible benefits a. Information Visibility b. Improved Business Process c. Customer satisfaction d. Better analysis and planning capability e. Improvement in decision making f. Standardisation of business processes g. Increased flexibility 2.7. Recommendations As the assignment has already highlighted various issues, benefits and examples associated with the implementation of enterprise system, BH can be advised to implement the enterprise system in a following manner. a) The system should be centrally governed. b) There should be intranet for free flow of information inside the company and for all stores and employees. c) There should be extranet for suppliers, vendors which need to be provided with real time store stock information for better supply management. d) The customer should be given access over internet to track and place orders online. e) The software compatibility with legacy system should be dealt with great care. f) BH should adopt vendor managed inventory system (VMI). g) There should be proper contingency plan in place. h) The interface between legacy system and new system should be taken care off. i) The implementation should be in phased manner. j) Cost benefit analysis should be done before making investment in new system. k) Training of the staff specially the retraining should be through. l) Change Management should be dealt with favourable incentives. m) There should be full support of top management. n) BH should adopt functional structure in spite of matrix one in order to reduce complexities. o) The staff should not be retrenched, in order to avoid opposition. They must be relocated and staff requirement should be controlled through freezing fresh recruitments. 3. Conclusions The enterprise system is not just mere technical tool but it is a philosophy in itself. Good software will not itself assure good results. Rather it is the managerial skill of the implementation that will bring success. A collaborative supply chain backed by integrative enterprise system can fetch fortunes for BH. It will reduce overall cost of the value chain and hence will benefit all the stakeholders. 4. References 1. ALBER, Karen L. and William T. WALKER. "Supply Chain Management: A Practitioner's Approach." Practitioner Notes -- APICS Education and Research Foundation (Falls Church, Virginia) Oct. 1997: 68. 2. BLACKSTONE, John H., Jr. and James F. COX III. "APICS Dictionary." APICS - the American Production and Inventory Control Society. Falls Church, VA.9th ed. 1998. 3. COX James F., III. "APICS Dictionary." APICS - the American Production and Inventory Control Society. Falls Church, VA.8th ed. 1995. 4. National Association of Purchasing Management - Terminology. Tempe, Arizona. 1996. 5. ROSS, David Frederick. Competing Through Supply Chain Management. New York: Chapman & Hall, 1997. 365. 6. WISE, Richard and Peter BAUMGARTNER, "Go Downstream: The New Profit Imperative in Manufacturing." Harvard Business Review. September-October 2008. 133-152 7. Brennan, L. and McNichols, T., (2004): Evaluating eCollaboration: Toward a Positioning Map for Supply Chain Integration, in "Proceedings of the 17th Bled eCommerce Conference", June 21-23, Bled, Slovenia. 8. Chopra, S. and Meindl, P., (2001): "Supply Chain Management: Strategy, Planning, and Operation", Prentice-Hall, Inc, Upper Saddle River, NJ. 9. Poirier, C. C. and Bauer, M. J., (2001): "E-Supply Chain: Using the Internet to Revolutionize Your Business", Berrett-Koehler Publishers, San Francisco, CA. 10. Reddy, R. and Reddy, S., (2001): "Supply Chains to Virtual Integration", McGraw-Hill, New York, NY. 11. Riggins, F. J. and Mukhopadhyay, T., (1994): Interdependent Benefits from Interorganizational Systems: Opportunities for Business Partner Reengineering, Journal of Management Information Systems, Vol. 11, No. 2, pp. 37-57. Read More