Supply Chain Management By Devangini Mahapatra Chauhan - Dissertation Example

Supply Chain Management By Devangini Mahapatra Chauhan Supply chain management is that genre of management that deals with the activities ranging from procurement to allocation, distribution and final utilisation of the resources so as to find any deviations that may have resulted in faulty use and correct the same to promote optimum utilisation of resources. This will facilitate better organisation in the operational sphere of the organisation as well as a more systematic progression towards the process of achievement of goals. (Jesperson, 2005)1 Chapter 1: Literature Review This paper will seek to examine through various textbooks and journal articles, the nuances of the supply chain management system followed at a company called Texan, and the benefits of the same. Some of the books will be Supply Chain Management: In theory and Practice, by Birgit Dam Jespersen and Tage Skjtt-Larsen, as well as another book called Supply Chain Management: Concepts and Cases, by Rahul V Altekar. While the first book discusses the basics that form the conception of supply chain management, the second book discusses various cases that help demonstrate the elements of this concept in a better way. Further, the journal articles will focus on the work produced by the Supply Chain Management Professionals, so as to gain an insight into this area of operational significance in the organisation. These journal articles will include Coordinated Supply Chain Management by D. J Thomas and P. M Griffin, for the European Journal of Operational Research. Apart from such articles, there will be a strong focus on Internet sources like www.bettermanagement.com which describes various strategies as well as business policies that support systems like supply chain management and knowledge management. Chapter 1.1: The Case Study - Texan The information gained from these literary works will be analysed and correlated to the concept of supply chain management as it has been adapted within Texan. Texan Foods is a company founded and based in Texas, near Amarillo. Born in the year 1941, this company has grown from strength to strength to consolidate its standing as one of the best gourmet chain which specialises in grocery products. Their line of products includes croissants, English muffins as well as exotic sandwich breads, buns and other baked goods like tortillas. Besides being a household name by the mid 90s with ample support from a former oil businessman, R.L (Buddy) Howlett, who was its founder and a successful entrepreneur, this company had come to employ a major supplier who went by name of Valley. (Autry, 2005)2 As a big manufacturing company, it has been demonstrated that Texan has a very poor system of supply chain management as far as its model of collaboration, planning, forecasting and replenishment (CPFR), is concerned. To start with, let us describe the exact nuances of supply chain management, in context of the CPFR model. Supply chain management (SCM) may be defined as that sphere of activities that takes place in context of planning, implementing, and controlling the operations. These operations or activities, in turn, are connected with the management of the supply chain so as to effectively cater to the requirements of the customer and gain complete satisfaction of the same through a focus on optimum ulisation of resources. (Atlekar, 2005)3 In this regard, supply chain management deals with all activities pertaining to the mobilisation, storage as well as an account of the semi finished and finished products that are of value to the end user. (Hugos, 2005)4 In this context, various scholars have also refered to this form and area of management as logistics as it connects the quantitative areas of assessment with the qualitative goal achievement progress of the organisation. These areas have been assessed in Texan, through inputs from two officials who are connected with the operational realities of the supply chain management system followed at Texan. Chapter 1.2: Problem Areas In this regard, Texan has been described as a company that has a background of failed CPRF programs with a paticular supplier known as Valley, making various demands that was taking away from Texan's efforts towards customer relationship building. Further, this had been asserted by the Category Director, Angela Preston, and the Vice President for Supply Chain Operations at Texan Foods. They had noticed growing dissatisfaction among employees and customers alike through the initiation of the new pilot program called CPRF, which was dealing with Valley, one of their primary suppliers. (Autry, 2005) As a supplier, Valley had always been like an insecure and demanding child who believed that Texan had kept a lot of secrets in terms of knowledge sharing and management. It seemed to the two officials of Texan, that the supplier was in constant need of motivation and more information, in the form of examples like a demand for increased collaboration. This had led to a fair amount of interference and thus added confusion in the supply chain that exsited in Texan. (Autry, 2005) The trial phase of the CPRF program had shown various gaps in the sales forecast and the actual sales figures, leading to deep concern regarding the efficiency of the supply chain management strategy followed by Texan. In this context, through this paper I will try to lay down the options that the company has in terms of tackling its weaknesses, before going on to analyse these options and then laying down the conclusions and recommendations about the future course of action as far as the supply chain management model is concerned. (Atlekar, 2005) Chapter 2: Options for Supply Chain Management in Texan Before laying down a diagram of the work flow pattern that must be adopted for suitable supply chain management within Texan, it is imperative to lay down certain assumptions on the basis of which the options will be laid down through the diagram. These assumptions are as follows: Chapter 2.1: Assumptions: Texan foods operates in areas where there is a requirement for a more sophisticated touch in various activities. Therefore, their purview of supply adheres to areas like high end hobbies like cookery classes, a sizable wine selection to choose from, and music like alternative or rock that plays within its stores - live. (Autry, 2005) Texan offers a host of services under one roof, like an in house kitchen in many of its stores apart from other facilities like catering and online shopping options for its regular clientele. This shows that the company has the potential to show diversity even in a field as specific as that of gourmet grocery products. (Autry, 2005) Texan has a sizable customer holding who have been their patrons for many years and rely on the company for their most mundane gourmet needs. This shows that Texan is under high pressure for delivering a good performance every single day as far as commitment and customer holding are concerned. This requires Texan to fulfil the role of a qualitiative and effective organisation. (Autry, 2005) Texan needs to have a large supplier base that is reliable and efficient as far as collabortaive and planning strategies for meeting actual forecasts are concerned. This shows that Texan needs to pay special attention to various details regarding its suppliers in order to show regular profitability in operations. (Autry, 2005) Chapter 2.2: Options Based on these assumptions, we will discuss the options that Texan is confronted with, in order to formulate an effective supply chain management model. This model is an integration of the weaknesses of the CPRF model followed by Texan and how these can be confronted and tackled through a focus on its potential as charted in the assumptions presented above. (Atlekar, 2005) This has been done with the view of tacking the primary problem of all the resources being diverted towards Valley as the foremost supplier whom Texan is most dependent on. Further, this model is only a proposal of the options that are facing Texan as it seeks to operate in terms of having maximum competitive advantage. (Thomas et al, 2006)5 This has to do with Texan's reputation as well as future forecasts. Fig 1: Options for a More Effective Supply Chain Management Model for Texan (Anderson et al, 2003)6 This model has been presented in the form of a flow chart with the aim of collaborating and organising the knowledge and information within the organisation to zero in on a strategy that makes the best possible use of the feature of the CPRF program in every step through a firm focus on back up plans. (Hugos, 2005) There is a need to diversify and divert resources for the sake of reliability and security of the same, besides finding ways to reach the ultimate goal of complete customer satisfaction through a steady and natural flow of collaboration, planning, forecasting and finally, replenishing, without the need to depend on one single party for all these needs. The best option facing Texan in context of the above diagram or flow chart is to test its supply management strategy on various suppliers instead of Valley alone, in order to find the strengths and weaknesses of each of the suppliers. This will facilitate easy distribution of resources and efficiency in operations. (Copacino, 1997)7 Chapter 3: Analysis of Options This chapter will provide an insight into how the above mentioned options and the basic premise regarding diversification of suppliers that has been gathered from the same. It will look at the model through an investigative mode. (Anderson et al, 2003) This investigation will be based on elements like collaboration, planning, forecasts and replenishment as well the resulting CPFR program. (Copacino, 1997) Chapter 3.1: Criteria of selecting options Before moving forward, it is imperative to study the criterion that has been utilised in order to reach the above mentioned options and the role play of various factors. (Anderson et al, 2003) This will help decide the influence of each element of the options during the subsequent analysis in terms of these factors. These factors that form the basic criterion are as follows: Reliability: the collaboration methodology needs to be one that promotes reliability of both parties on one another. For example, Valley as a supplier does not feel that Texan is providing it with all the relevant information. This can become a strong factor for dissent and mistrust in the future and it also shows no stability in the relationship between the two companies. (Jesperson, 2005) Competitive Advantage: As a serious supplier, Valley needs to support the competitive advantage and the market share that Texan enjoys on this account. Without the support of a reliable supplier, there will be almost no competitive advantage for Texan as will lack the basic elements from its external environment to support the cause of sustainable growth. (Copacino, 1997) Knowledge Management: the supply chain management system needs to integrate the tools of knowledge management within it so as to create a certain amount of awareness in terms of the transmission and development of communication and information, which in turn will put the end users at ease. (Thomas et al, 2006) Inter firm cooperation: Texan must remember in its supply chain management system that collaboration with external parties like suppliers and vendors will lead to cooperation. This is a significant pre requisite for building a strong base for furthering the relevance of forecasts and the achievement of goals through competitive advantage which is a necessary outcome of this collaboration. (Hanna, 2007)8 Diversity: there must be a keen focus on diversity in all areas of operational relationships, like the level of customer - company interface as well as supplier - company interface, so as to promote the development of an understanding of the diverse product and complementary service range that Texan has plunged into. (Autry, 2005) Chapter 3.2: Analysis of Options To begin with, it is imperative to note that Texan Foods is a company with diverse interests as far as markets go. This has been fuelled by its product and service range. This kind of diversity can be explained by its gradual foray into gourmet food with studies in areas of needs of high end markets. In this regard, Texan Foods has been known to adhere to emerging and prevalent trends by making sure that it caters to needs like environmentally friendly food that does not deplete the ecological balance or resources in any way, apart from the use of plastic containers to serve pre prepared meals. (Autry, 2005) Also, there has been a gradual diversification as far as cultural elements go, through a focus on serving food that caters to various ethnicities and the tastes that have been developed and derived thereof. Therefore, to manage this kind of diversity, there is a need to strike a balance between knowledge management and personal interaction. While personal interaction with the clients and end users happens over events like personal surveys and interviews, as well as wine and cheese parties or cookery classes, the personal interaction with suppliers is another issue. This issue deals with the integration and utilisation of knowledge management within the framework of the supply chain management. Considering the fact that Texan operates within a structure of over 3,000 suppliers, there is a need to break out of the usual means of interactions which revolve around emails and automated phone calls. (Autry, 2005) There needs to be a more personalised form of interface through a focus on the development and sharing of certain forms of knowledge regarding the policies and products as well as niche customer groups. This can be promoted through the option of the creation of new events where the strengths and weaknesses of these suppliers can be assessed through the laying down of a standardised format for knowledge management and sharing of information. (Jesperson, 2005) This in turn will support the option of distribution of resources along judicious lines depending on the potential demonstrated by each of these suppliers as well as the customer groups they can cater to specifically. This will also put the customers at ease once the company lets them know that choosing the right supplier for collaboration on certain strategic points is their way of catering to the specific whims of the high end crowd that demands exclusivity. (Thomas et al, 2006) Further, with diversification of products and services, the company also makes sure that it makes optimum utilisation in terms of innovation and creativity, by diverting the suppliers to specific areas. This will also ensure complete conversion of work in progress by not depending on a certain supplier for various areas. This kind of collaboration will help spread the multitude of tasks, which in turn will help divide the pressure of performance. Also, this will be an added motivation for the suppliers to perform better. In this regard, Texan will show a stronger focus on creating backup plans by spreading the risk and tasks evenly among its suppliers and making sure that there is standardisation and categorisation of these activities through the length and breadth of the organisation. This in turn will work in Texan's favour as there will be a better approach towards achieving the forecasts, as well as an exponential increase in the profitability through positive contribution to the supply chain management from all directions. (Jesperson, 2005) Chapter 4: Recommendations: Based on the above analysis of the options, I would recommend the following areas of operation where Texan needs to place certain amount of strategic importance. These recommendations are based on considerations like feasibility, sustainability as well as acceptability of the proposed model for collaboration. Chapter 4.1: Realistic Payback Terms At Texan, Gordon and Angela had come to the conclusion that an effective collaboration model would have to integrate features like realistic payback terms. This is due to the fact that in the case of fast moving goods like food items, there is a need for complete conversion of the food along secure and reliable lines before payment is made to the suppliers. (Autry, 2005) This was primarily due to the fact that the officials at Texan felt that Valley was reporting nominal profit figures so as to demand more out of Texan in terms of payback. In this regard, Texan asserted that it would be imperative to first make sure that the sales forecasts are met in the pilot project period, before taking a step in this direction. This requires Texan to use the option of more backup suppliers to boost its conversion frequency rates which will help it adhere to its forecasts. Thus, in case of payback terms, there needs to be stronger focus on the tools like tactics in the procurement of the relevant resources at the best possible prices. (Hanna, 2007) This also includes decision making in terms of the locations, as well as transportation strategies that will cut costs. Chapter 4.2: Front End Agreements The pricing factor was another area where Texan felt that the front end agreements had been dishonoured by Valley. Price ceilings had been a major issue in the collaborative efforts where there had earlier been an approach towards sharing the cost in an equal ration. But as discussed above, with the disclosure of nominal profitability figures, Valley had found an excuse to pay less than its required share. With only small improvements to the tune of 0.65%, Valley had experienced a 2.7% decrease in its distribution costs. (Autry, 2005) This calls for Texas to use the option of finding more sources of replenishment so as to achieve better control when dealing with the management of suppliers and customers along the same supply chain for increased sustainability in development and growth. There needs to be ample discussions where there will be enough references to the aims and goals of both companies so as to formulate a strategy that will help promote an integration of these individual goals, to form one that will help derive a mutually beneficial relationship. (Hanna, 2007) Chapter 4.3: Cost of Technological Support With the increasing use of software as well as hardware, there had been a large increase in the cost of the project. This was an added disadvantage to this pilot project which had so far failed to perform up to the mark as far as reaching forecasts was concerned. (Autry, 2005) In this regard, the maintenance costs of information technology used for monitoring and communicating had reached a peak. These costs need to be controlled through a larger focus on the option of collaborating with more suppliers. This will help secure optimum utilisation of the IT systems used as there will be more communication along the same lines with suppliers who fit into the same applicability zone in terms of knowledge management. This will also be more acceptable to the framework of the existing supply chain management program where there is a greater emphasis on collaboration. Technological support always costs more unless it has been developed internally. (Copacino, 1997)Therefore, for a company as huge as Texan, they must either tie up with various independent software and hardware vendors for more profitability, or develop the skills within their own organisation to develop enough intellectual capital on which future innovations can depend. (Thomas et al, 2006) Chapter 4.4: Conversion Rate of Inventory With a fall in the inventory conversion rate to 1.2% with the fall in orders by 5%, there has been a strong need within Texan to mobilise the physical inventory. This will support the use of the option of diversity in operations through which there will be better and more widespread use of the inventory. Also, this will involve more interaction at a personalised level, between Texan and its suppliers like Valley for the analysis of the needs and requirements of specific orders and the use and distribution of inventory to forecast the sales and achieve the same. This will lend feasibility to the collaborative aspect of the project. This will include plans and decision making processes for inventory and a step by step approach to the plan in terms of procurement and positioning within the organisation and among the suppliers, so as to promote complete competitive advantage for the company. (Hanna, 2007) Such measures will also enhance the tactical positioning of the company on the whole where mobilisation of its various resources and diversion of the same will be concerned. Also, it will help suit the applicability of an inter firm cooperation model. Conclusion Apart from a need to communicate more strongly with each other regarding the progress of the project, Texan and Valley need to finalise a model according to which resources will be more equitably distributed. (Anderson et al, 2003) The elements of this model will depend on the options discussed in this paper, with a strong focus on the weaknesses of the project. There also needs to an assessment of the level of contribution of both companies towards the achievement of customer satisfaction, which is the ultimate aim of the mobilisation and utilisation of resources along a specific model of supply chain management. As discusses by Taoist philosopher Sun Tzu, there needs to be stronger approach within all institutionalised efforts towards the achievement of goals and subsequent profitability, to adhere to the use of tactics and strategies that will promote greater efficiency in sourcing and production decisions. (Hugos, 2005) This will lead to the achievement of a wider network where there is more critical thinking involved in taking various decisions. This will not only lend credibility to such decisions, but also involve the optimum utilisation of resources for doing the same. In this regard, the options proposed in this paper must form the research background upon which the relationships between the company, suppliers and end users must be clearly defined for more definite and decisive knowledge management as well as equitable distribution of feasibility in operations and sustainability in growth. References: 1. Jesperson, B D; Larsen, T S (2005) Supply Chain Management: In theory and Practice. Copenhagen Business School Press. 2. Autry, Chad W. (2005) Launching CPFR at Texan Foods: Improving Inventory Replenishment with Collaborative Activities and Technology. The Council of Supply Chain Management Professionals. 3. Atlekar, Rahul V (2005) Supply Chain Management: Concepts and Cases. New Delhi: Prentice Hall of India. 4. Hugos, Mike. (2005) The Tao of Supply Chains. CIO Magazine 5. Thomas D. J; Griffin P. M (2006) Coordinated Supply Chain Management. The European Journal of Operational Research. 6. Anderson, S; Chapman, M; Goodner, M; Makinaw, P; Rekasuis, R (Dec, 2003) Supply Chain Management - Use Case Model. Web Services Interoperability Organisation (WSI) 7. Copacino, Willam C. (1997) Supply Chain Management: The Basics and Beyond. CRC Press 8. Hanna, Victoria (Feb, 2007) Exploiting Complementary Competencies Via Inter Firm Cooperation. 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