Supply Chain Design - Essay Example

Sur Supervisor Supply Chain Design Currently, supply chain design has become an integral part of most businesses. In the wake of globalization, no business can survive without having an efficient supply chain in its fold. Customers have become highly demanding in the sense that in many areas of personal consumption, they ask for customized products and services to be delivered to them quickly and that too without adding any extra cost. It is precisely this pressing need of customers that has forced companies to invent newer and newer means and ways of designing their supply chain to not only satisfy customer needs but also gain a competitive advantage in the market place. The paper attempts to explore three important themes namely deployment of internet and IT technology, modular design concept, and accurate forecasting of demand and supply parameters. All of these themes can be of paramount importance to augmenting supply chain design for most businesses in today’s competitive environment. Internet and IT Technology – a Boon for Supply Chain Design Internet and IT Technology has expanded world over enormously and it goes without doubt that its use is must for designing an effective supply chain in numerous products and services. For example, Solectron uses ‘Agile software’ to access numerous suppliers online for pricing and availability of supplies. This resulted into reduction of cycle time while introducing new product to its customers (Lee). Companies such as Dell, Adaptec, Cisco, Zara (Global Stretch), and numerous others have used the internet to make their supply chain management most effective. Cisco has created an e-Hub that links multiple suppliers via the internet to meet needs of the market and make supply chain more efficient (Lee). The companies expand their sourcing opportunities and reduce their inventory holding between supply chain partners. In fact, the internet has replaced the traditional model of supply chain management with more efficient and effective supply chain design making the use of IT technologies (Lee). Southwest Airlines has been able to manage its profitability during difficult times of post 2008 recession through i2 technologies deployed for supply chain management. The company has been able to increase its service levels to 95 percent and excess inventory of $30 million has been identified using i2 tools (SupplyChainBrain). Modular Design Concept Augments Supply Chain Design Currently, companies are facing an increasingly difficult situation to provide customized products and services without any lapse of time and in this process, they have to see that there is no significant cost increase in their offerings. This is the theme on which companies have to design their supply chain to gain the competitive advantage. It is indeed a challenging task for companies! In usual sense, customization will add up to the cost of product; however, certain companies have solved customization issue through their modular design offerings. Modular design means breaking end product into several components and subassemblies in which many of the components are common to all product options. In modular designs, some of the standard components can be used in all variances of the product and some of them can be used to customize the products. Bayer, one of the largest chemical manufacturers, employs modular production methods to augment supply chain design. That is how the company thwarts competition in its field of business. Modular chemical production is a completely revolutionary idea in supply chain design. It helps produce customer specific products in small batches. Modular production concept thus, helps achieve network optimization (Mogk). Having known the importance of mass-customization skills, Hewlett and Packard (HP) began offering its products meeting specific needs of the customers such as DeskJet printers for the Asian and European markets. The company customized the product at its distribution center instead of manufacturing locations so that the needs of each market could be fulfilled quickly. Due to this, shipping and inventory costs were dropped by 25 percent (Lee and Feitzinger). IKEA too uses modular concept in its furniture offerings across the world. This prevents keeping large inventories of variety of products and helps improve supply chain design. Accurate Forecasting of Demand and Supply Facilitates Supply Chain Design Customers are not only extremely choosy in their demands but also unpredictable too for manufacturers to ascertain their demands in advance with accuracy and plan out accordingly. Inaccurate forecasts mean either huge inventory accumulation of unwanted products or not making available the products that are in demand. This issue poses a biggest challenge to manufacturers and marketers to forecast the demand of their products and the supply of raw material components accurately in developing effective supply chain design. The moot question is whether it is possible to forecast demand and supply parameters accurately so that supply chain design can be developed in the line of forecasts. Fisher et al. argue that it is certainly possible to forecast accurately to a certain extent. Usually, the companies try to load the cost of errors in their product pricing but that approach does not help them to win customers. Sport Obermeyer being in the business of fashion skiwear illustrates how the issue of forecasting can be resolved successfully. Demand of the company’s products depends on number of factors such as fashion trends, weather, and macroeconomic situation with in the country. It is important to note that their selling season is just two months long. Obermeyer previously used to rely on an internal buying committee to forecast the demand of various products; however, the committee forecasts were not accurate. The company was advised to have individual member forecast for each product. Where the variance in the individual forecasts was minimal, it was obvious to believe that those forecasts would be more accurate. Sales data early in the season and retailers order also helped to eliminate forecasting errors (Fisher et al.). Similar to demand uncertainties, supplier uncertainties are also equally important to be resolved by the companies to strengthen supply chain designs. For example, companies such as Apple created a supplier hub to streamline their supply chain in which suppliers are constantly fed with the information about Apples needs and in transit inventories so that Apple manufacturing centers continue to get component supply all the time. Such hubs are also used by Cisco, Compaq, Dell, HP and host of other companies to strengthen their supply chain design (Lee). Significance of the above discussed supply chain design themes is immense because majority of the companies encounter them in their businesses to a certain extent depending upon the nature of their business. Internet and IT technology is the strongest tool in the hands of supply chain designers to make their supply chain effective. Modular design concept helps achieve mass customization solving supply chain issues successfully. Uncertainties involved in the market demand of products and the supply side of components make supply chain design more cumbersome leading to drain of resource. That means businesses must evolve means and ways to forecast their product demand and supply constraints accurately, especially when they are in a seasonal business. Accurate forecasting reduces strain on supply chain design and makes them efficient and effective to serve business goals of the firms. Works-Cited Feitzinger, Edward.; Lee, Hau. Mass Customization. Harvard Business Review. 1997. Fisher, Marshall; Hammond, Janice; Obermeyer, Walter and Raman, Ananth. Making Supply Meet Demand in Uncertain World. Harvard Business Review. 1994 Global Stretch. When Will Zara hit its limits? The economist. Web. 29 January 2014. Lee, Hau. Aligning Supply Chain Strategies with Product Uncertainties. California Management Review. 44. 3. 2002. SupplyChainBrain. Southwest Airlines Maintains Its Profitability with i2 Technologies. Web. 28 January 2014. Mogk, George. Benefits of Modular production in supply chain design. Web. 29 January 2014. http://ntlm.arcweb.com/events/process-management-academy/pma2013presentations/Benefits%20of%20Modular%20Production%20in%20Supply%20Chain%20Design.pdf Read More