E-Logistics and International Supply Chain Management - Research Paper Example

E-Logistics and International Supply Chain Management Table of Contents 2. Factors that Drive Rolls‐Royce to Choose Singapore as its Manufacturing Location for Making Sophisticated Engines and Parts 4 2.1 Sympathetic and Transparent Political System 5 2.3 Geographical Location and Connectivity 7 2.4 Skilled and Competent Human Resource 7 2.5 Cultural Openness 8 3. Potential Challenges/Risks to be Considered by Rolls‐Royce to Increase Its International Supply Chain Performance 9 3.2 Growing Demand of the Global Aerospace Manufacturers 10 3.3 Recent Collaboration with Tier II Manufacturers 11 3.4 Economic Uncertainties 11 3.5 Geopolitical Issues 12 4. Proposed Recommendations for Rolls‐Royce to Effectively Deal with Potential Challenges/Risks in Its International Supply Chain Functions 13 4.1 Selection of an Effective Supply Chain Management (SCM) Tool (Lean SCM Model) 13 4.2 Improving Synchronisation and Coordination among the Supply Chain Player 14 5. Conclusion 15 References 18 1. Introduction Making an effective decision regarding the choice of manufacturing plant’s location has long been witnessed as a competitive factor for the international marketers to achieve competitive advantage. Especially, the organisations from the aerospace parts or equipment manufacturing industry are likely to take adequate strategic measures while selecting their plant locations in any part of the world (Porter, 2008; Doole & Lowe, 2008). With regard to the recent trends during the last few years, Singapore can be considered as one of the widely accepted locations for the global aerospace parts and equipment manufacturers as the country involves a set of beneficial aspects that enables the global marketers not only to avoid different types of uncertainties, but to lower their production and supply chain management cost as well. The current business environment of Singapore enables the foreign aerospace equipment manufacturers to gain various other advantages due to the lower rate of corporate tax i.e. 17% at a basic along with the stable and more transparent political and regulatory systems of the country (Grant, 2014). Since the year 2006, the formation of Seletar airport into Seletar Aerospace Park with an area of 320 hectare in Singapore has been widely accepted to attain a large attention of the global aerospace parts manufacturing organisations. The emerging development in manufacturing of aerospace related products has been witnessed to name Singapore as the global hub for the international companies. In relation to the subsequent investment made by the companies from both the United States and United Kingdom, the aerospace equipment manufacturing hub of Singapore has been observed to achieve more than USD810 million (Grant, 2014). With the aim of producing aerospace parts and different equipment in the global airline manufacturing business industry, Rolls-Royce, an UK listed company has established its production facility in this particular area (Grant, 2014). Therefore, in keeping with the role of supply chain in the current aerospace product manufacturing industry of Singapore, the primary purpose of this research report is to critically assess the key factors that motivate Rolls-Royce to select Singapore as the suitable place for manufacturing sophisticated engines and parts. Moreover, the discussion of this report also explores the potential risks or challenges to be considered by the company to improve its international supply chain performance. Additionally, the report also recommends a set of effective measures to avert potential risks and improve its current supply chain performance. 2. Factors that Drive Rolls‐Royce to Choose Singapore as its Manufacturing Location for Making Sophisticated Engines and Parts According to the present day context, the aerospace industry of Singapore incorporates a major set of factors that are subjected to attain the interest and attention of the global marketers to expand their manufacturing plants (Low, 2001). In relation to an in-depth understanding of the case, it has been critically recognised that the external environmental factors along with adequate resources and capabilities associated with the Seletar Aerospace Park in Singapore are highly effective for the international manufacturers to produce a wide range of quality based aerospace parts with a feasible or lower amount of cost. With regard to the major motivational reasons for Rolls-Royce’s decision, a few major factors can be widely accepted behind the selection of Singapore as the production plant location for the company (Singapore Economic Development Board, 2014; Grant, 2014). The major motivational factors of the company have been briefly described in the following section. 2.1 Sympathetic and Transparent Political System According to the observation of the article, it has been identified that the political factor is one of the key driving factors for Rolls-Royce to select Singapore as its plant location for manufacturing titanium fan blades (Grant, 2014). The adequate stability along with transparent political system and practices of Singapore is more sophisticated as compared to the other developing nations that can enable the organisation to independently perform its manufacturing operations with a minimum or less number of constraints. Additionally, the governmental system of the nation also involves flexibility, which can enable Rolls-Royce to make effective decision related to its range of supply chain activities including procurement to shipment of final products. Moreover, the government of Singapore also provides an effective set of deregulatory policies that enables the country to grasp the attention of the global companies or investors (Singapore Economic Development Board, 2014). Considerably lower level of corporate tax rate, which is attributed to be 17% as well as wider and modest trading policies of the country also attract the foreign marketers to establish their manufacturing plant within different sectors of Singapore (Grant, 2014). In this regard, the ease of political mechanism and practices along with sophisticated governing policies in Singapore are a few of the primary driving factors for Rolls-Royce to establish its aerospace parts manufacturing plant. Additionally, an effective set of apparent trading policies and deregulatory framework in the legal system for the foreign entrepreneur can also be considered as a major factor for Rolls-Royce towards selecting the respective location for producing different aerospace equipment (Low, 2001). 2.2 Cost Advantage With regard to an understanding of the article, production or different supply chain activity costs can also be considered as one of the effective motivating factors for Rolls-Royce to invest in Singapore. In relation to the present business scenario, Singapore is one of the cost-effective nations for the manufacturing firms to produce a large volume of products in a low cost (Heracleous & et. al., n.d.). According to the present day context, the country offers an extensive number of valuable resources that are likely to improve the different supply chain operations encompassing procurement, inventory management, manufacturing along with warehousing and shipment of final goods processes. Correspondingly, the lower wage structure of the workforce along with easily manageable compensation policies can also be regarded as few major cost advantageous factors for Rolls-Royce behind its selection of Singapore as a manufacturing plant location (Cengage Learning Higher Education, n.d.). 2.3 Geographical Location and Connectivity The geographical location of Singapore is also a major driving factor for Rolls-Royce. With regard to the geographical area of Singapore, the nation generally involves a well-developed connectivity that can enable manufacturing firms to easily perform a range of supply chain activities. The sufficient availability of airlines along with cargo ports is also an effective factor through which the company can easily accomplish business operations with various countries from South-East Asia and most of the European regions. Therefore, the location of the country is also a major driving factor for Rolls-Royce to successfully accomplish its range of supply chain activities through the Singaporean manufacturing location (International Air Transport Association, 2011). 2.4 Skilled and Competent Human Resource A collection of well-trained and highly skilled workforce is one of the most critical and essential parts of the aerospace equipment manufacturing industry. The adequate accessibility of skilled and experienced workforce plays a crucial role for the aerospace parts manufacturing organisations to determine adequate control and performance of the overall value chain. With regard to this aspect, it can be firmly stated that the ease of availability of competent workforce is also a major beneficial constituent of Singapore towards gaining attention of the organisations from different geographical locations. In relation to the aerospace industry of Singapore, it is observed that the nation currently employs almost 19,900 of highly skilled, experienced and well-trained workforce in the aerospace equipment manufacturing sector (Singapore Economic Development Board, 2014). Therefore, the accessibility of skilled and well-trained personnel is also a major driving factor for Rolls-Royce to establish its production plant in Singapore. 2.5 Cultural Openness Socio-cultural factor including the cognitive skill along with adequate understanding relating to behavioural characteristics of the communities in Singapore can also be regarded as a major factor that significantly attracts the foreign entrepreneurs. Adequate openness in culture of the country is also a driving factor for Rolls Royce to establish its manufacturing plant and produce cutting-edge aerospace equipment and parts. Moreover, the aerospace hub of the country tends to involve an extensive number of domestic as well as international suppliers that encourage manufacturers to build a strong relationship with the suppliers from other countries. Therefore, the cultural factor is also a major driving factor for Rolls-Royce to select Singapore as its aerospace parts manufacturing location. The socio-cultural environment in Singapore also helps the company to build a robust working culture and also facilitates to increase the productivity capability of the workforce within the plant (Singapore Economic Development Board, 2004). 3. Potential Challenges/Risks to be Considered by Rolls‐Royce to Increase Its International Supply Chain Performance The aerospace industry of Singapore has been observed to emerge rapidly due to the increasing number of competition among the market leaders in global airline manufacturing and service business sector. In relation to the present competitive scenario in the aerospace parts manufacturing organisations, it is widely accepted that the organisations are likely to face a number of challenges along with threats due to the increasing frequency of changes in the aerospace industry (SPRING Singapore, n.d.). With regard to the business operations of Rolls-Royce, the company has been identified to act as one of the key suppliers to the global airline manufacturing companies including Airbus and Boeing. The strong and more efficient strategic measures and practices of its international supply chain have long been witnessed to improve the business performance of Rolls-Royce in the respective aerospace manufacturing industry (Rolls-Royce plc, 2014). However, the company may also face a significant number of potential challenges or risks due to the increasing competition in the global aerospace industry. A few of the major challenges or risks to be faced by Rolls-Royce have been briefly described as follows: 3.1 Rising Cost of Producing Aerospace Parts Being the first company in assembling engine along with establishing test plant in Asia, Rolls-Royce might face a significant challenge in terms of saving manufacturing cost of its production unit located at Seletar Aerospace Park (SAP) in Singapore. In relation to the recent statistics, it can be recognised that the operating cost of Rolls-Royce production unit faces hurdle in terms of saving costs associated with manufacturing aerospace parts. The increasing cost in raw material procurement and emerging inventory management cost to produce aerospace engine and other parts may substantially cause the company to face financial penalties. Additionally, the emerging bargaining power of the raw material suppliers across the different regions can also be a major risk for Rolls-Royce to improve its international supply chain activities (Vértesy, 2011). 3.2 Growing Demand of the Global Aerospace Manufacturers In relation to the present day purview, the aerospace manufacturing organisations have been witnessed to increase their business operations through making quick delivery of the freights to the airline service marketers. Due to the increasing competitive pace of the aerospace manufacturers, the organisations dealing with producing aerospace engines and other body parts are likely to face increasing demand (Tiwari, 2005). In the context of Rolls-Royce, addressing increasing demand of quality based aerospace engines and other body parts by the two major airline manufacturers such as Airbus and Boeing can be observed to create major challenge for the company. Therefore, the inefficiency in meeting growing demands of the airline manufacturers can be a major challenge for the company’s international supply chain functions and to achieve competitive advantage over the existing rivals in the similar business industry (Jefferys, 2011). 3.3 Recent Collaboration with Tier II Manufacturers Rolls-Royce is generally known as one of the leading Tier 1 manufacturers in the global aerospace industry. Recent collaboration with Tier II manufacturers may also lead to impose different risks for the company to efficiently perform its range of supply chain management functions. The collaboration with Tier II types of manufacturers may lead to slower the supply chain activities and it can also reduce the organisation’s capability to deliver finished goods to the airline companies in a scheduled time and cost. Nevertheless, Rolls-Royce often outsources its range of equipment manufacturing operations to the Tier II manufacturer without justifying their technical skills or competency level, which may further convey major risk for the company to sustain its leading position in the global aerospace industry (George, 2008). In addition, to ascertain the potential risk to be faced by the company, there are certain other conventional factors that can also bring major challenges for Rolls-Royce to modernise its supply chain management performance. Correspondingly, the conventional risk factors such as economic uncertainties and various types of geopolitical issues may create a significant challenge into the international supply chain functions of an organisation (Hessami & Savoji, 2011). 3.4 Economic Uncertainties With regard to the business functions of Rolls-Royce, it has been widely witnessed that the company is highly inclined towards offering integrated process of delivering quality based aerospace equipment from its different production units located across the diverse regions (Rolls-Royce Holdings plc, 2012). Subsequently, the uncertainties associated with economic condition of the overseas market may also impose greater risk or challenge for the company. The nature of sudden changes associated with market demands may be a key risk factor for Rolls-Royce. More significantly, the increasing volatility of global economy can also create a major constraint for the company to achieve its long-term sustainability in the respective business market (Hessami & Savoji, 2011) 3.5 Geopolitical Issues Although Rolls-Royce has been observed to highly comply with the legal and regulatory systems, the potential changes in the trade regulatory codes may also bring a significant challenge for the company. In this regard, any types of future trade restrictions in different overseas nations along with arbitrary polarisation of different legal policies of government would also be a major constraint for Rolls-Royce to efficiently uphold its competitive position. This concern may also have a major impact on the supply chain management operations of the company to achieve its desired outcomes (Hessami & Savoji, 2011) Consequently, it can be stated that the supply chain management functions of Rolls-Royce may include a number of factors that are generally driven by the competitive market environment along with uncertain economic and geopolitical conditions. In order to effectively deal with these types of issues, the following section would provide an effective set of strategic measures and practices that can enable Rolls-Royce to avert various types of future challenges and risks. 4. Proposed Recommendations for Rolls‐Royce to Effectively Deal with Potential Challenges/Risks in Its International Supply Chain Functions According to the recent observation of the international supply chain management strategies of Rolls-Royce, it has been identified that the company is highly focused on developing its robust structure of its own supply chain model. The global supply chain operations of the company are considered as an integrated part of its operations and are the key aspect to enable the organisation towards accomplishing its long-term business objectives. However, the aforesaid risks and challenging factors relating to the supply chain management operations of the company can severely impact Rolls-Royce to sustain its long-term position in the aerospace industry. In order to effectively deal with those potential challenges, a few of the key strategic measures and practices have been recommended that can enable Rolls-Royce to maintain the efficiency of its global supply chain management operations. 4.1 Selection of an Effective Supply Chain Management (SCM) Tool (Lean SCM Model) In order to sustain the leading position in the aerospace industry, it is highly essential for Rolls-Royce to adopt an effective model of SCM process. Correspondingly, a lean model of SCM can provide a number of advantages to improve the overall SCM functions of the company. The lean model in the company’s SCM system would enable Rolls-Royce to minimise the potential risks by the organisation due to the changing supply chain trends in the global business environment. Moreover, the supply chain model also ascertains specific objectives including low operational cost, quick response along with minimum and deployed stock related practices that are highly effective for the modern organisations to address various types of potential risks within the market (Ventana Research, 2007). Considerably lower amount of cost associated with the company’s SCM process can be regarded as the primary objective of lean supply chain. In relation to the objective of cost minimisation, the lean supply chain improves productivity and quality through minimising cost and waste associated with each aspect of an operational process ranging from procurement of raw materials to the delivery of finished goods to the final clients (Wright, 2010; Ventana Research, 2007). In this context, the implementation of lean SCM model would enable Rolls-Royce to effectively address the risks associated with increasing cost and delivery time of aerospace equipment to its major clients. Additionally, the model also emphasises high utilisation of the organisational resources that enables to minimise lead time required to produce and deliver finished goods to the consumers. Moreover, the lean model would facilitate Rolls-Royce to avert various types of potential hazards within its international SCM functions (Konecka, 2010). 4.2 Improving Synchronisation and Coordination among the Supply Chain Player It has been affirmed that the collaboration with the Tier II manufacturers significantly imposes greater risks. Thus, the SCM strategy of Rolls-Royce should highly focus on ensuring continuous improvement. In order to reduce potential risks from the Tier II manufacturers, it is highly essential for Rolls-Royce to maintain an apparent communication and transaction system relating to the supply chain practices along with addressing the predetermined goals and business objectives of the company. The strategy of making contractual agreement with the supply chain players along with the other Tier II manufacturers would also enable the company to reduce potential risks that might be faced by Rolls-Royce in its global supply chain functions. In addition to the risks associated with conventional factors including geopolitical issues and economic uncertainties, the strategy of building strong relationship with the governmental institutions can be a major and effective process for Rolls-Royce. Moreover, ensuring adequate compliance with the regulatory policies including trade regulation, taxation policies along with different other legal codes would also help Rolls-Royce to efficiently manage the risks associated with geopolitical issues or any types of economic uncertainties. 5. Conclusion With reference to the overall discussion of this research report, it has been observed that the primary reason related to Rolls-Royce’s decision to establish its manufacturing plant in Seletar Aerospace Park was to produce weight saving titanium fan blades up to three-times lesser than the conventional types of fan blades. With regard to the recent observation, it has been recognised that the aerospace parts manufacturing industry of the nation plays a crucial role as it enables Pratt & Whitney along with Rolls Royce to produce fuel efficient engines. In relation to the workforce, Singapore also tends to provide a large number of skilled workers for the global manufacturers to produce range of cost-effective aerospace products. The strategy of selecting Singapore as the manufacturing plant for Rolls-Royce is an effective and more competitive decision, which can improve the business performance of the company to sustain its leading position. The process of building production plant at Seletar Aerospace Park in Singapore would enable the company to gain more advantages for improving its range of supply chain activities. The abundant resource along with sympathetic and more transparent political system of the country has been identified to provide adequate support to the company’s overall supply chain performance. However, there are a number of potential factors can also be identified to impose various types of risks and/or challenges to Rolls-Royce. In accordance with the changing trend of commercialisation processes, the company can face different risks/challenges associated with rising costs and increasing bargaining power of the raw material suppliers along with fiercely increasing demand of the major global clients. Moreover, the organisation can also face a major distinctive risk associated with its collaboration process with the Tier II manufacturers. Correspondingly, the conventional risk factors including geopolitical issues and economic uncertainties of the global destinations can also be considered to impose risk and challenges for Rolls-Royce. In this regard, the discussion provided strategic measures and practices relating to the global supply chain processes for Rolls-Royce. The adequate execution and practices of the recommended strategic measures would enable the company to effectively deal with these types of potential risk factors. Moreover, the suggested strategic measures and practices such as improving synchronisation and coordination among the supply chain player and lean SCM model would further facilitate Rolls-Royce to improve its global supply chain management functions and maintain its leading position in the aerospace industry. References Cengage Learning Higher Education, No Date. The External Environment. Chapter 4, pp. 52-72. Doole, I. & Lowe, R., 2008. 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