International Supply Chain Design - Assignment Example

International Supply Chain Design Introduction Saudi Arabia is the largest country located in Western Asia. This country is officially known as the kingdom of Saudi Arabia. The estimations in 2012 reflect the population of this country to stand at a figure around 28.29 million with a gross domestic income of US$711.0 billion in the same year (World-Bank, 2014). The majority of the population is formed with Arabs and A small portion of the population being Afro-Arabs. Thus, the nation does not have so much ethnic diversity. The largest population being Muslims the country is run under Sharia Laws and the kingdom rule is implemented under the monarchy based on Islamic law (World-population-statistics, 2013). Economic Outlook This country is currently rated as a high income nation other vital statistics updated in 2012 including 97% of the rural population have access to water, life expectancy at birth stands at 75 years, and a national per-capita income of $24,310 (World-Bank, 2014). Saudi Arabia has among the largest oil reserves in the world and stands among the biggest suppliers of oil in the world. Before the transition of the economy to an oil-driven economy, Saudi Arabia had a slow growing economy which was run by subsistence Agriculture. Through the years, the drafting of the national budget has highly been influenced by the estimated national oil price for the expected year. With sometimes the unpredictable oil price change implicated the first budget deficit in Saudi Arabia in 2009 (Ramady, 2010, p. 44). Thus, it is evident that this industry is the economy is over dependent to the oil sector for the purpose of running its economy. To try to counter this, the government is advocating to support other foreign and domestic investors to invest away from the oil market for the purpose to de-monopolize the country's economic outlook. Oil supply chain in Saudi Arabia Saudi Arabia is the largest oil supply in the world. As a kingdom, this country played a vital role in its contribution to the world’s economy. Oil exploration in this country was started as early as 1933 and ever since the nation has maintained its relevance to the global economy by controlling an asset that directly contributes to the stabilization of the world’s economy (Amuzegar, 1983, p. 11). Strategically equipped some of the direct importers who is Saudi's main oil and petroleum related products main export market include; Unites States, Europe and Japan (USA-International-Business-Publications, 2013, p. 248). The supply and transportation of oil from oil reserves in Saudi is highly aided through the use the pipeline system. The two major pipelines that operate for this purpose include the East-West Crude Pipeline and the Trans Arabia pipeline (USA-International-Business-Publications, 2013, p. 249). These pipelines play a key role in the, in the distribution of crude oil to both refineries and also to major terminals where the oil is packages ready for direct export. Saudi Arabia not only exports crude oil but also has facilities than encourage the exportation of refined petroleum products such as kerosene, petrol and other related products. This country has had been working on projects to upgrade its refineries for the purpose on of increasing production activities and making the process more effective and efficient. However some economic drawbacks have been seen to stall these projects in the past. For example due to the fall in oil prices around the period 1998 -1999 the Rabigh project which was for the purpose of upgrading refineries budget was scaled down by 60% and was later canceled due to financial implications (USA-International-Business-Publications, 2013, p. 249) The main mechanism used by Saudi Arabia for the purpose of releasing its oil to the Global market is through use ports. For this purpose, it is important to ensure that the size of the ports doesn't present an obstacle to maximum exploitation of the global market. Expansion is important for every sector for the purpose of increasing its revenue. With the changing in market demands, the Saudi port capacity has been upgrading due to expansion procedures since the early 1970 where it stood at 2000 ton capacity and by 2008, it stood at 252,000 tons capacity (Ramady, 2010, p. 270). Due to rising in the competition with countries like Canada and Mexico also supplying oil to the US with oil, Saudi is slowly changing its target to the an Asian market (USA-International-Business-Publications, 2013, p. 248). It is further projected that the tables are likely to change in future terming Asia as the largest import of Oil and Europe coming second (Ramady, 2010, p. 270). System Approach in Re-engineering Saudi Arabia Oil Supply Chain The systems approach involves approaching changes to the supply chain through the point of view of the various sections that are involved in the supply. This will involve making each component efficient to maximize its delivery to ensure the process of getting the oil from the reserves and transportation to the refineries of to the clients is as efficient as possible. A supply chain methodology needs to be put in place for the purpose of ensuring optimization is generally effected on the system through the various sub-systems that ate present. The recent years have seen the supply of oil to US from Saudi reduce drastically due to the pricing factor as the US gets cheaper supply From Mexico and Canada (USA-International-Business-Publications, 2013, p. 248). This should not be thee necessary move for Saudi Arabia. By refining its supply chain, it can determine if it can remain relevant the market. Reconstructing its international supply chain through the systems approach may result in cost cutting, in the process of transportation and delivery. This is a positive factor as now the oil and petroleum related prices in the US market may be competitive and not necessarily higher. It is possible to re-engineer the supply chain since it is evident that the operational supply procedure of oil and petroleum related products uses the traditional approach. Supply Chain Re-Engineering Project in Sel Introduction Stanley Evans limited is an imaginary theoretical company that created assistance to students to gain in-depth understanding the concept of re-engineering a supply chain design. For the module the student is placed to be as a six month experienced consultant working under an imaginary company, Bull associates. One is then supposed to head the move of offering consultations through the initial stages of the supply chain re-engineering project to Stanley Evens limited company. Stanley Evans limited company has been formulated to be very practical and realistic. Working with the consultancy firm for this company will be able to equip the student with some experience of how the supply chain re-engineering project is supposed to run towards a successful implementation. This paper reports on the activities regarding the initial stage of the supply chain re-engineering project conducted in Stanley Evans limited with great focus on international opportunities and threats that are present. Background Information Stanley Evans limited company was founded as a family company in 1925 by the late Mr. Sternly Evans with its original location in Birmingham in the United Kingdom. The company majored on toy production but produced aircraft tank components during the world war two and later in 1945 went back to its original business of toy production. Since then, this company went through a series of events and changes that involved product differentiation, improvements, shifts to new sites and even purchase of existing companies. Stanley Evans Limited Shortened its name to SEL that the logo was stamped on all its products for easy identification in the product market as a prestigious brand. Stimulus for Supply Chain Re-Engineering Project Supply chain re-engineering is a procedure that involves the improvement or changing an existing supply chain to a more sufficient and cost-effective system of interaction between a firm and its clients (Handfield & Nichols, 2002). The cost effective perspective of supply chain improvements relates to cutting of costs and saving of money that can be channeled to other parts of the firm to elevate profit level. After an interaction with the chairperson of Lyles plc, an automobile company, Mr. Harry White, with the Chairman of SEL Mr. George Health, Mr. Health saw the possibility of improving SEL success through reforms in its supply chain. Lyles had recently undergone a re-engineering of its supply chain, which saw their system undergo significant operational improvements. After consultations with us, Bull associates, there was SEL saw it necessary to re-engineer their current supply chain for making this process more efficient cost effective and less complicated. Stanley Evans limited needs to emphasize more on the products that yield the company much revenues. There should a high level of engagement between the company and it retailers and vendors. In essence, Stanley Evans limited needs to focus much on understanding activities that strengthen delivery of its products to the market (Zoltners, 2004, pg24). In essence, they need to understand if the company is able to increase the processes and flexibility of the finished goods. The company has been successful and is attributed to their ability to provide the customers what they need their services. Lack of effectual inventory management can harm customer retention; reduce shareholder value in the company, and hold up the working capital. Stanley Evans limited is faced with long supply channels and strong service level demands. This has forced the company to be burdened with misconception on the inventory, oversimplification, corporate discomfort, and underinvestment (Handfield, pg15). There is a need for Stanley Evans limited to re-strategize and rethink the flow of the company inventory. The company needs to use postponement, risk pooling strategy and the method of leveraging inventory abilities. Conversely, influencing the company trading partners requires an effective technology support. Arguably, the Stanley Evans limited should develop Benchmarks that will enable them to assess their performance and ability to attain objectives. The required metrics considered in the developments of the benchmarks include the age of inventory, loss from liquidation and inventory turnover (Zoltners, 2004, pg56). This will form the basis for the company's ability to manage the supply chain. This is because the management of the supply chain sits in the precincts of the work in progress, associates inventory and the demand side of the economy. Companies that effectively use the supply chain management have the ability to generate more cash flow than their competitors do. Stanley Evans limited has been faced with improved virtualization that has resulted in a loss of visibility and advantage. Consultation Progress The consultancy process is initiated through the analysis of the processes and the status at which the games division stands. The supply chain re-engineering project is seen to be most suitable to be carried out as a pilot project initiated in the games division of the SEL Company. This was initiated through multiple stages and tasks that are discusses bellow Project Team Selection Before commencing with the project, I selected four individuals from a selection of six to help me in implementing the project. The selection was made strategically from the analysis of the candidates curriculum vitae thus determining who among them are likely to be of more help in the project. After the analysis of the possible contribution, the three members selected from SEL to work with us in the games division were Mr. Arthur Thompson, Mrs. Jane Evans, and Mr. Harold Bradley. This was mainly because of the possible contribution they can make in the company as they have experience in their respective posts and they have background knowledge of how other departments work due to their previous posts they held. From Bulls Association, I appointed Mr. Andrew Weeks to join my team. This was the composition of the four members that I would be working with in the project on permanent basis The corporate general corporate strategy to be adopted by SEL is directed toward the improving the efficiency of their supply chain. According the project guideline the project should achieve a reduction of inventory lead-time and indirect costs, which have the possibility to be achieved through supply re-engineering. The implementation team was not however limited to just this as other staff members would be called to assist in he project when need be Task 2 Financial Performance SEL is a very active company with its annual financial turnover for the last two years existing above 19 million pounds. On the comparison of the financial reports of the last two years, we can see that the profit after tax of this company is slightly elevated but is still significantly low compared to the company's turnover (Heinberg, 2004, pg63). The company stands at a commendable position due to the existence of the net current assets fewer liabilities in the games division at 2.17 million pounds. Through improved supply chain, the liabilities can be significantly cut down due to cut down in indirect cost and thus improving the asset liability ratio further. Task 3 The Market According the market survey results it has been predicted that his year (2009) the toy consumption is expected to rise due to the increasing birth rate. However, this is countered with decline in the use of toys due to children maturing at an earlier age. This can be projected from the fact that there is a significant change in toy use. Toys that were initially designed for use of children of age of 13 are now being limited to using by children of the age of 10 and bellow. With the rise in embracing of computer games, there is also a need to elevate innovation in this sector so as to keep the children entertained and interested in this toy on older age. However, the toy and games department is also concentrated in the manufacturing of games such as the Jigsaw that has the adult target market. Task 4 Game Division Overview The game division composes of two operational sites that used to exist as two separate companies in Wednesbary and Coventry. The sites operate under the same general manager and all the products have been branded with the logo of SEL, which is their new band. Although the production sites have distinctive products, some of the products like Jigsaw that are targeted to the adult market, are produced on both sites. For the purpose of increasing efficiency and speeding up the delivery of the goods from these sites, the production products of each site are supposed to be mutually exclusive. Recommendation Card packaging in the manufacturing site is done conducted on a manual basis. It can be recommended that a mechanism to package these cards be labor intensive by the involvement of machines in doing this. If the system that packages cards automatically does not exist then, innovation should be introduced in the process to make this possible. Holding of processed goods in the inventory results to additional indirect cost to the organization. The inventory level should thus be reduced for the purpose of cutting down on this cost. It is recommended that sales and supply mechanisms be refined (John, 2008, pg65). The sales will improve in creating market and supply will improve the rate at which products will be able to flow to and from the warehouse. Task 5 Integrated recommendation based on product range rationalization and product strategy Product Range Rationalization This mechanism is implemented for the purpose of profit elevation. This process of product rationalization involves the reduction or elimination of products that do not fit a volatile process and resource utilization target, which is placed at a maximum (John, 2008, pg50). Product rationalization involves the channeling of production resources towards the production of superior products. However, care should be taken to establish if the inferior product production should continue running or be faced out as these products might still be vital in the identification of the brand in the market (Doole & Lowe, 2007). Thus, facing them out from the market may influence negatively into the sales and revenue of a firm. A firm should determine when to implement rationalization by understanding why the process is necessary. Rationalization call may be when the product has reached the end of its life cycle, that is, the product is being faced out with time (Doole & Lowe, 2007). In this case if efforts to increase the sales of this product are futile, some production resources should be channeled to a product that is still at a growing potential. When there is a need to reduce inventory, product rationalization may prove to be a solution that will assist in the attainment of targets set on inventory reduction (Doole & Lowe, 2007). This means that a shift in the direction of production resources might be made to move away from the product that is experiencing low sales. Thus, this mechanism may prove to be helpful. When situations like limited budget, or calls by the international market to standardize products exists then it is deemed necessary for a firm to be involves in the necessary action (Doole &Lowe, 2007). When need be and a firm is targeting to increase its profit one way of achieving this in certain situations may be for the purpose of product rationalization. Some of the general benefits that can be achieved through product rationalization process include; reduce wastage of raw materials, achievement of maximum efficiency of labor by use of minimal effort, simplifying the distribution and supply of goods and services and finally avoid unnecessary cost such as transport and expensive warehouse time (Endres & Fleming, 2004). Thus, it can be concluded it can be concluded that product differentiation can be a suitable mechanism to cater for cost saving. Product Strategy A product strategy is generally the mechanisms that can be implemented in products to ensure that targets are set for a product are able to be achieved (Morse, 2002). For the formulation of a successful and appropriate product strategy of special plan the main items to be considered include; they type of product, market for the product, the supply mechanism to be implemented, the value your product will add to consumers and the retail market price of the product (Morse, 2002). Once the targets of the products are placed the process of developing a product strategy can be undertaken. From the product strategy, some of the strategic positions of the product can be determined. These include; what quality of the product is presented in the market? What is the position of the market in relation to the product? How efficient is the supply of the product and what is the speed and capacity required. On the determination of the answers to the above questions, product strategy can be determined. Product strategy may also involve further adjustments to the supply chain mechanism for the purpose of improving delivery efficiency and reduction of inventory (Morse, 2002). Studying the market to determine the competition products that are competing for consumption by consumers against your product is another factor that should be considered establishes a good product strategy (Heinberg, 2004, pg43). The nature position held by other product will determine the position of price setting you will establish. In addition, the quality improvement and innovation requirement in the product production may be highly determined by these. Conclusion Economic recession has forced many companies to investigate the need to their supply chain management. The effect of globalization is evident since it has caused the constant changes in the supply chain management. Many companies fail to understand some of the basic disciplines of the supply chain management hence the inability to prosper (Handfield, 2002, pg65). Some of the critical divisions in the supply chain management that needs to include the procurement, transport, manufacturing, and distribution channels. In addition, many companies lack experts in the management of the logistics and supply The company will need to use risk management in the supply chain, which is the tradeoff between achieving optimal supply chain effectiveness and management of supply chain. Many companies have been faced with supply chain malfunctions, which lead to ripples in production and distribution. There is a need for companies to review and redesigning the supply chain to respond to the market changes (Heinberg, 2004, pg45). The supply chain management needs to enhance credit availability, international sourcing, launching of products, and maintaining assets and shipment security. There is a need to develop strategies aimed at enhancing rules and regulations and monitoring the current trends in the supply chain management. Effective strategy will enable in coordinating customers, suppliers, vendors and other interested parties. Bibliography Amuzegar, J. (1983). Oil Exporters' Economic Development in an Interdependent World. Washington: International Monetary Fund. Doole, I., & Lowe, R. (2007). CIM Coursebook Strategic Marketing Decisions. Oxford: Elsevier Linacre House. Endres, A. M., & Fleming, G. A. (2004). International Organizations and the Analysis of Economic Policy, 1919-1950. New York: Cambridge University Press. Handfield, R. B., & Nichols, E. L. (2002). Supply Chain Redesign: Transforming Supply Chains Into Integrated Value Systems. New Jersey: Pearson Education inc. Heinberg, R. (2004). The End of Growth: Adapting to Our New Economic Reality. New York: New Society Publishers John J. Coyle, C. J. (2008). Supply Chain Management: A Logistics Perspective. Cengage Learning. John Mangan, C. L. (2008). Global Logistics and Supply Chain Management. John Wiley & Sons. Morse, S. (2002). Successful Product Management: A Guide to Strategy, Planning and Development. London: Kogan Page Limited. Ramady, M. A. (2010). The Saudi Arabian Economy: Policies, Achievements, and Challenges. New York: Springer Science + Business Media. USA-International-Business-Publications. (2013). Us Saudi Arabia Diplomatic and Political Cooperation Handbook. Washington: International Business Publishers. World-Bank. (2014). Saudi-Arabia. Retrieved 05 7, 2014, from The World Bank : http://data.worldbank.org/country/saudi-arabia World-population-statistics. (2013). Saudi Arabia Population. Retrieved 05 7, 2014, from World population statistics : http://www.worldpopulationstatistics.com/saudi-arabia-population-2013/ Zoltners, A. A., Sinha, D. P., & Lorimer, S. (2004). Sales Force Design for Strategic Advantage. New York: Palgrave McMillan. . Read More