Strategic Operations Management at P&G and Cisco - Essay Example

Strategic Operations Management Introduction Bullwhip/whiplash effect is the condition experienced in the supply chain characterized by larger significant inconsistency of the orders sent to the producers and suppliers compared to sales to the consumers (Koch, 2008, p 119). This condition usually results to uneven flow of order from one point of the supply chain to the other because it either underestimates or overestimates the demand of the products hence inflated variations. P&G was established in 1837 and is located in Cincinnati, Ohio. The company deals with various products which they sell to their clients locate in over 180 countries through retailers. Those products are sold under different brand names across the globe. The supply chain managers at P&G discovered a prevalent bullwhip for its several brands especially pampers diapers. Causes of bullwhip at P& G Poor prediction of demand for the products across the supply chain resulted to players in the supply chain placing large orders than the actual demand. Approaches taken by P&G to eliminate bullwhip effect in the supply chain system Initiation of “vendor-managed inventory system” for the supply chain of diaper to ensure harmonization of the supply chain (Arai & Kimura, 2005, P.67). This approach resulted to in market share of P&G and a reduction of the Wall-Marts operating cost. P&G availed sales information to suppliers of its products through collective point-of-sale (POS) data, and this resulted to decline in the rate at which suppliers ran out of stock. Other measures Possible Measures P&G should utilize a policy of replenishing the stock of the suppliers more frequently by adopting “just-in-time” system in order to smooth flow of products and avoid building up excess stock at one point while risking running out of stock at other times (Koch, 2008. P.127). P&G should ensure the prices of the products are stable at all times irrespective of quantity demanded by suppliers in order to ensure that suppliers order the exact products they demand rather than order large quantities to enjoy huge discounts (Bettley, David, & Tarek, 2005, p.173). P&G should allocate products to the suppliers according to previous demands rather instead of basing relying on clients’ demands that could otherwise be based on speculation of price changes or shortage in supply. Question 2 Cisco is a manufacturer of electronic products. Initially, the company relied on Xilinx Company based at San Jose, California which supplied it with electronic components. However, Xilinx relied on intermediary distributors such as Avnet. At some points, this association resulted to significant variance involving the quantity of the electronic components demanded by Cisco company and the amount produced and distributed by Xilinx through it distributors. These variations forced Cisco make a bargain with Xilinx in order to streamline the supply chain system and harmonize the products demanded with the product supplied. This requirement resulted to change in strategies used by Xilinx and as a result they established a direct interaction with its client for better understanding of client’s demand. Likely Reasons that resulted in variations of demand and supply at Cisco There was poor communication between Cisco Company and Xilinx since the supplier relied on an intermediate distributor (Rangaraj, 2009. P.68). This is made it difficult for the supplier to comprehend the actual demand of Cisco and also prohibited Cisco from delivering the products on a timely manner. The variations of demand and supply of the product occurred at a period when the electronic market in the United States was recuperating from major downtown hence it was not possible for the demand Xilinx to produce electronic products based on existing demand because the existing data was insufficient. The supply chain managers at Xilinx had not taken keen adequate measures to streamline its supply chain which would otherwise help them come up with strategies to harmonize the demand with supply. New supply Chain arrangement Advantages of the new supply system The communication between Cisco and Xilinx is effective hence the supplier can easily monitor the variations in demand and adjust its supplies to match the demand of the client (Walters & Mark, 2007, p. 121). Also, the supplier and the producer do not incur high cost associated with storage of excess supply since production is demand driven. Disadvantages of the new supply system Since suppliers will react to consumer’s demand; sometimes they may not be able to react quickly to surging demand as a result of insufficient bumper stock (Olhager, & Fredrik, 2000, p. 243). Since the supplier manufacturers, products based on immediate demand the supplier (Xilinx) is not able to enjoy economies of scale because the units produced at a time is generally low hence increase production cost above the optimal level. Question 3 Order winner refers condition that wins the order. After the supply chain management of P&G discovering huge difference between demand and supply for some products such as pumper diapers they decided to adopt a criterion that led them into winning the order. This criterion involved linking the agents in the supply chain in order to improve communication between those agents (Martin, 2005, p. 234). This enabled P&G to forecast the demand of its products effectively in order to ensure continuous flow of products. P&G ensures faster delivery of products to the clients and maintains its stock by interacting effectively with their clients in order to identify their actual demand instead of basing their operations on perceived demand. This has enabled P&G to manufacture its products according to prevailing demand in order to maintain the cost of operations as low as possible. Xilinx were supplying electronic products to Cisco for production of electronic goods. However, the variation in demand and supply was caused poor interaction between the client and the supplier since they were using intermediary to supply those goods. Therefore, demand driven approach was the order-winner of Xilinx Company since it enabled this supplier to understand the market size of its supplies with precision and was able to meet the exact demand of the consumers (Jeffrey, 2004. P. 39). By reducing the chain of supply and ensuring direct interaction with client, Xilinx was able to manufacture products in accordance to specific needs of the clients and deliver orders in time. The company is able to structure the manufacturing process and maintain the quality of its products according to the needs of the clients. This assisted in creating customer loyalty because the customer’s views were incorporated in the production process (Martin, 2005, p. 231). In addition, the company was able to control the level of inventories in order to minimize inventory cost and ensure faster delivery of customer orders. Hp is a producer of electronic products and had a serious problem with matching clients’ orders with suppliers. Its order winners was decreasing the time it took to deliver customer orders and the level of stock inventory in order to lower the cost of operation (Sekhar, 2009. P. 110). In order for HP to streamline the supply chain system, they adopted parallel processing and late differentiation strategy in order to meet the needs of clients in time. The supply chain of HP involved converting the workforce into specialized group that  engaged in various specialized activities while they outsourced highly standardized activities. In addition, the process entails breaking down production process into different components for effective production and delivery of the clients’ orders (Wisner, 2011, p. 62). The other supply chain activities involved assessing demand, manufacturing, storage and distribution of products to the clients. The company engages high level of innovation and manufactures specialized products to ensure the maximum level of customer satisfaction. In addition, HP ensures its products are processed faster in the factory in order to reduce the period of time I which it serves customers and sometimes outsource the services to ensure quality goods for the customers as means of winning the orders against its competitors. Finally, HP has always ensured the level of inventories is maintained as low as possible in order to reduce operation expenses. List of References Walters D. & Mark, R. 2007. Strategic Operations Management: A Value Chain Approach. Palgrave Macmillan. Pp. 112-134 Bettley, A., David, M. & Tarek, T. (2005). Operations Management: A Strategic Approach. SAGE. Pp. 165-185 Wisner, J. D. 2011. Principles of Supply Chain Management. Cengage Learning. 42-89 Martin, C. 2005. Logistics and Supply Chain Management. Financial Times Prentice Hall. Pp. 213-242. Olhager, J. & Fredrik, P. 2000. Advances in Production Management Systems. Springer. pp. 234-264 Koch, T. 2008. Lean Business Systems and Beyond. Springer. Pp. 114-132. Arai, E. & Kimura, F. 2005. Knowledge and Skill Chains in Engineering and Manufacturing. Springer. Pp. 56-75. Jeffrey, P. W. 2004. Lean Supply Chain Management. Productivity Press. Pp. 31-46 Sekhar, G. V. S. 2009. Business Policy and Strategic Management. I. K. International Pvt Ltd. Pp. 97-127 Rangaraj, 2009. Supply Chain Management for Competitive Advantage. Tata McGraw-Hill Education. Pp. 67-79. Read More