The impact of increase in lead times in supply chain activities on retail concerns - Research Paper Example

? The Impact of Increase in Lead Times in Supply Chain Activities on Retail Concerns The Impact of Increase in Lead Times in Supply Chain Activities on Retail Concerns The basis of every company’s success lies with the clients. The best thing that a company can wish to achieve is a satisfied customer who will remain loyal based on the services they received from the company. However, for this to happen to any supply chain, the management must enforce some of the basic rules that allow them to compress time to enhance their processes and ensure that the clients receive their orders in due time. Precision and accuracy always work positively as they ensure that the time that lapses between the placement of an order and the delivery of the same is as minimal as possible and at the right time (Chen, et al., 2000, p. 436). This does not imply a reduction in the quality just to satisfy demand. Each employer understands that the employees will always work best if motivated and inspired to keep the quality and time as congruent as possible. As such, working hand in hand with them is not only necessary but advantageous because the management will understand what is required to help them achieve the very best within the shortest time possible (Borzath, Warsing, Flynn and Flynn, 2009, p. 78). Pressurizing them may hinder their full potential and thus failure in the production system because they are not satisfied with what they are doing. However, a clever supply chain manager will always seek innovative means through which they can improve the demand chain performance. To achieve this, they may need to include some of the time-proven ideologies such as lead time reduction, forecasting or customer satisfaction matrix. The report herein will explore the impact of lead time reduction and how this affects the services within a supply chain. The report will also offer some recommendations based on the impacts discussed in relation to the Norwich Nordic and Pulp Company as well as the best means of maintaining this trend. Lead Time This is defined by several researchers as the amount of time that elapses between the start of a process and its completion (Chen, et al. 2000; Borzath, Warsing, Flynn and Flynn 2009; de Treville et al., 2004; Shah and Ward, 2007). Every company wants to encompass the whole system in the supply chain from the consumer demand to customer satisfaction this means that by all means they have to deal with the total cycle time (TCT) or the lead time. This has three major components that are imperative in meeting the customer demand, information flow and material flow. These attributes are necessities and if well intertwined, could offer the best strategy in meeting the demands of the supply chain management system. The consequent reduction of the lead time is very imperative in the creation of a direct leverage on the bottom-line (Shah and Ward, 2007, p. 786). This will help the chain achieve better competition and allow the management to deal with each of the factors from a more informed position compared to before. By allowing this component, the management will be offering a chance for each of the employees to play to the same music hence minimizing delays and maximizing on the time allocated for each activity. When talking about the lead time there are several components that ought to be considered. They include pre-processing, processing and post-processing. Pre-processing includes the determinations made when resources are required and the steps that allow each of them to be filled in order. It also looks at the final product and how it reflects the current order placed by the client (Ketchen and Hult 2006, p. 575). The processing bit looks at the actual manufacturing of the product and making it like the real product that has been ordered. Post-processing looks at the delivery of the order to the client after the order has been manufactured. Each of this is what the lead time has to be measured against based on the benchmarks set by the company. Reducing the process from one point in the process to the other means that each of the processes will be in accordance to the customer’s specification, increasing their competitive nature and allowing as many other clients to remain loyal to their products (de Treville et al., 2004, p. 613). Case study: Norwich Nordic and Pulp Inc. NNPC was experiencing some problems with its supply chain which was becoming a great impediment in achieving their goals. They need to improve their services or else their clients would become impatient and look for alternative suppliers. They needed to customize their products and improve on their shipment of products throughout Europe and the Americas. There were major disparities when dealing with the process-to-delivery time with 6 months being the shortest they could avail the products as ordered. From that simple explanation, one notices that there will be an inventory that will be six months old while still in the pipeline. This really angered their clients who felt that the products were taking a little bit longer, hence losing out on their clients. The company on the other hand was always on its toes as it sought to satisfy all its clients. The production rate was always the same with the batch time having an increased effect in the increasing lead time period. The company tried to create cycles that would allow them to reduce on the batching and reduce the lead times but the management was not very cooperative change is an ingredient that cannot be evaded in any process change. This is expected especially where supply chain management is expected to increasingly allow more people to meet their goals. These goals will always be distributed amongst the chains and their achievement will be pegged on how well each subsidiary can prioritize their role within the larger corporate picture in terms of driving towards the intended change. They needed a change in their distribution strategy so that the chains both at the top level and those at the bottom have a clear picture of what their roles are, how they can be autonomous but still achieve the goals set and how they are supposed to relate to their clients. The use of the Enterprise Resource Planning system is also crucial in ensuring that each subsidiary is able to have the right information and reduce any errors that may affect their relations with the clients. Improving the technological bit was also important due to the advancing technology that has made completion even more during this globalization period. How they Effected Lead Time Reduction An increasing global market has made the competition a very core attribute of the way things are run in every company in the world. The diversity has allowed as many people learn from their rivals and apply some of the techniques used by Forbes 500 companies. The essence of having a team that oversees the quality of the company is to create a chance for each of the clients to enjoy the products. With increased competition, clients have so many options and will always choose that which provides them with more value for their money and their time (Borzath, Warsing, Flynn and Flynn, 2009, p. 79). Companies that have recognized this have improved on their lead time and allowed as many others to benefit from their timely production. As such, lead time reduction places the company in a very focal position when compared to their rivals in the industry. If industries are dominated by poorly performing organizations, developing a more responsive order that fulfills the process in the shortest time possible will always gain the company an upper hand and more loyal clients as such. Employees will also be satisfied because their potential will be recognized and appreciated (Chen, et al., 2000, p. 438). This is what NNPC realized and set on meeting the goals that they have for a long time tried to achieve. They began with reduction in the lead time. When the client is directly involved, the processes must convincingly entice the client to come back later. This means that in cases where the product in question is a standard or a unique one, the best must be put to task as an allowance for the client to be happy with the changes made and the time-frame must be as requested or agreed upon by the two parties (Borzath, Warsing, Flynn and Flynn, 2009, p. 82). The client uses this as a perception towards company performance if the best is to be got from every interaction with the clients. The moment they get in touch with the company is the most important moment where they should be impressed by what they see (Chen, et al., 2000, p. 439). Their perception will always affect the way they market the company to others and this is one important type of marketing that the company cannot overlook. NNPC sought to improve on how they communicated with their clients and created an avenue that was important in ensuring effective handling of the complaints and suggestions. By reducing this knowledge gap, the company was able to deal with some of the issues and hence look for ways of further impressing and retaining these clients using quality and timely services and products (de Treville et al., 2004, p. 616). To achieve the maximum impact, there are three attributes that NNPC took into deeper consideration. The first one is the excessive queue time or the work-in-progress period. This was achieved by first reducing the input for a while when there was a market constraint (de Treville et al., 2004, p. 617). This in turn helped reduce the work in progress and decreased the lead time; hence stimulated demand. Though many may view it as counter-intuitive, the results were an increased demand and reduced waiting period. This can be illustrated in the diagram below (Borzath, Warsing, Flynn and Flynn, 2009, p. 83-4): The second attribute was the batching of the production (Chen, et al., 2000, p. 440). A reduction in the physical batch size generally reduced the amount of time spent on each of these products hence reducing the time spent waiting for the product to be received at the other end. In a normal make-to-order setting, there are two ways of reducing the batch size. First, this may be achieved through the subdivision of the batches to smaller sub-batches while in the process the second is by releasing only smaller discrete amounts of the batch more often (de Treville et al., 2004, p. 618). For NNPC, they chose the subdivision method because it was found to be more effective in reducing the lead time greatest. This was very impressing in reducing the wait time for the clients which reduced it to four months in the first quarter and to three months from the start of the third quarter. This led to an increase in their sales and thus more loyal and satisfied clients. The third attribute that helped in lead time reduction was batching in time (Chen, et al., 2000, p. 440). This is defined as the increase in the frequency of the schedule by which such orders take into consideration. This will reduce the time spent waiting for one order for a long time. By changing the batching time from let us say once a week to twice everyday may help improve their batching time and thus reduce the time elapsing between each order and its delivery (de Treville et al., 2004, p. 619). This means that if the company can in one way or the other increase its batch time, they are likely to increase their service delivery, hence stimulating demand for their products. NNPC chose to improve on their batching time by including at least three batches at least three days in a week. This way, they were able to reduce the number of people waiting, increase their service provision and increase their production every week. Eventually, they were able to meet their production requirements, meet their client’s demands and allow each of their clients to sell the products and even change their specifications and have them included in time compared to the previous times. They also tried as much as possible to change their equipments and those that are still old generation are on the way to being replaced. This replacement allowed more products and batches to be dealt with every day and thus improved on its efficiency (de Treville et al., 2004, p. 620). The new equipments have also allowed them to meet a higher demand and this has been effective in allowing more profits from each of their subsidiaries (Halldorsson, 2007, p. 288). The chain distributors have also recorded higher profit margins because of the more clients that have subscribed to their services and this has made them one of the biggest supply chains in the European and Americas shipping route. They have edged out some of the greatest names in the industry and ensured that they are the best at what they do. Their products have also improved in terms of quality and this has really pleased their clients and the end user has also benefited from handling products with higher longevity than before (Halldorsson, 2007, p. 289). They have gained more clients that have marketed them to others and this has made it easier for them to penetrate markets that were seen as unreachable before. Recommendations To help them maintain this trend, I recommend that they use a simulation model that will help them maintain and even improve on their lead time reduction and batching time. The system to be used is the automatic pipeline inventory order-based production control system (APIOBPCS). This model has been documented as one that helps in the area of performance enhancement for any wide range supply chain (Halldorsson, 2007, p. 290). This model deals with best design values that allow the company to utilize all skills that are inherent within the company that would be beneficial in improving on its production as well as offering innovative ideologies that help in improving efficiency. The supply chain management theorem dedicates the aspect of performance towards the management who should ensure that everything done within the company helps improve on its production. By using this model and allowing the supply chain management to take effect, there will be some changes that will be witnessed. The model will help in the prioritization of company methodologies and processes to help improve on its production rate. The SCM will help in performance; improve the distribution strategy; help in the coordination of all logistical activities; enhance the flow of information from one level to the next; and improve on the management inventory including the finished goods, the work-in-progress and the raw materials aspects (Halldorsson, 2007, p. 291). Another recommendation is that they should create a seamless supply chain. Currently, these are the trends that each company needs as the global competition has been made tougher by the inclusion of the internet as art of the system. There are no longer few players in the market. Customers have a wide array of suppliers from which they can choose from. If the company does not conform to these standards, they are likely to lose out in the market and even lose their clients for good. Everyone depends on the patronage of the end user. They will thus look for all means of achieving this and seamless suppliers have become a completion basis which NNPC needs to adapt as soon as possible to remain relevant. To achieve this, the ERP will be a good place to start with because they will ensure the flow of information to all their subsidiaries which will enable them improve their performance and make any radical improvements together instead of being alone (Halldorsson, 2007, p. 294). They may also seek more partners to improve on their market share and penetrate as many markets as possible. This way, they will have more clients to serve, more people to deliver their services and cheaper supplies because of the distributed costs over the supply chain. Conclusion Lead time reduction improves performance of the company and increases a company’s appeal to the end-product users. They are able to compete at a higher level compared to other companies. They achieve better results based on quality services that may be hard to implement for some if they do not have the right knowledge regarding the whole process. However, this alone is not enough for success. Using knowledge from the SCM theorem would be better as they will manage what they have produced from the process level to the delivery of the product at the end of the chain. References Borzath, C. c., Warsing, D. P., Flynn, B. B., & Flynn, J. E. (2009). “The impact of supply chain complexity on manufacturing plant performance”. Journal of Operations Management, 27, 78–93. Chen, F., Drezner, Z., Ryan, J. K., & Simchi-Levi, D. (2000). Quantifying the Bullwhip Effect in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information. Management Science, 46(3), 436-443. de Treville, S., Shapiro, R. D., & Hameri, A. (2004). “From supply chain to demand chain: the role of lead time reduction in improving demand chain performance”. Journal of Operations Management, 21, 613–627. Halldorsson, A., Kotzab, H., Mikkola, J. H., & Skjoett-Larsen, T. (2007). Complementary theories to supply chain management. Supply Chain Management: An International Journal, 12(4), 284-296. Ketchen Jr., G., & Hult, T. M. (2006). Bridging organization theory and supply chain management: The case of best value supply chains. Journal of Operations Management, 25(2), 573-580. Shah, R., & Ward, P. T. (2007). “Defining and developing measures of lean production”. Journal of Operations Management, 25(4), 785–805. Read More