Supply Chain Management of Hsuh Ta Enterprise Co - Term Paper Example

Supply Chain Management Executive summary The current business environment is characterized with intense market competition and frequent entry of new market players. In this context, it would be really difficult for businesses to survive the stiff market competition unless they maintain highest level supply chain efficiency, which is the key to overall organizational productivity and customer satisfaction. The Hsuh management pays particular attention to its supply chain management although the company has limited access to capital resources and the global logistics network. Introduction Today companies have recognized the role of supply chain management (SCM) in enhancing the organization’s operational efficiency. In addition to customer satisfaction and company success, supply chain management can also have a great influence on societal settings such as medical missions, disaster relief operations, and other emergencies and cultural revolution (University Alliance). Considering the crucial effect of supply chain management on organizational success, today even small business enterprises hire employees having abundant SCM skills and knowledge. Effective supply chain management will improve the bottom line of the business and enhance the cash flow by expediting the delivery of products. The most fascinating feature of SCM is that it plays inevitable role in meeting customer satisfaction making sure that right quantity of products is delivered to customers in a timely fashion. This paper will analyze the supply chain management of Hsuh Ta Enterprise Co., Ltd giving particular focus to the firm’s purchasing and material management and supply chain integration. A Brief Overview of the Organization Hsuh Ta Enterprise Co., Ltd is a Taiwanese plastic forming and molding company operating in the plastic industry. Although the company is in its initial phases of growth, it is known for its eco-friendly business model and a fast market growth rate. The sustainable business model assisted the company to survive the dreadful impacts of recent global recession successfully. The Hush management strongly believes that focusing particularly on the environmental notions of the society would benefit the organization to gain a set of competitive advantages over its market rivals. The company enjoys great governmental and public support on the strength of its sustainable business model. Supply Chain Management The concept of supply chain management has been well documented in the academic literature and is commonly regarded as the streamlining of a business’ supply chain activities for maximizing customer values and gaining competitive advantages in the marketplace. According to Mentzer, et al (2001), supply chain management (SCM) is “the systemic, strategic coordination of the traditional business functions, and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long term performance of the individual companies and the supply chain as a whole” (as cited in Bidgoli, 2010, p. 121). SCM covers all key business processes such as production, shipment, and distribution of a product. Proper and effective supply chain management can assist companies to cut down production costs notably and deliver products faster to end customers by keeping tight control over internal inventories, internal production, distribution, and sales. A well managed supply chain will certainly benefit organizations to achieve customer satisfaction and loyalty. Effective SCM is also necessary to identify various business needs on time to address existing threats in the supply chain, and to respond to emerging market opportunities on time. Purchasing and Material Management The Hush management strongly believes that effective purchasing and material management is essential to maintain optimum stock levels and to enhance effective utilization of physical space, working capital, and other resources. The increased emphasis on purchasing and material management helps the organization perform better in terms of inventory management. Slater (2010) defines inventory management as an activity “that ensures the availability of inventory items in order to be able to service internal and/or external customers” (p.5). The Hsuh is really concerned about the negative impacts of under-stock and over-stock scenarios, and hence the company management has developed potential mechanisms to ensure optimum stock level of inventory. Using the sales and operations planning tool, the organization tries to anticipate future demand for its goods and thereby effectively deal with inventory management. As the organization has not been established well yet, the management thinks that keeping a minimum stock level is better to run the business on minimum working capital. Although the organization currently performs well in terms of inventory management, the business is yet to computerize its inventory management practices completely. Although the company is currently able to deal with inventory management successfully without using computerized technologies, Hsuh management would fail to maintain this competency once the firm expands its market territories. In the absence of software based technologies, the organization may face the issue of information overload, resulting in numerous management complexities. Hence, it is advisable for the Hsuh to adopt software based inventory management so as to improve the overall efficiency of the supply chain. Experts suggest that well designed software can assist the supply chain to achieve greater optimization. An add-on software can better serve the interests of the company in the long run because additional features can be integrated into such a software later. By focusing on the effective management of its inventory, the Hsuh management strives to enhance the coordination of purchasing, manufacturing, and demand in order to ensure required availability. Interestingly, the company’s primary focus is on the elimination of stockouts because the organization would fail to meet customer satisfaction when running out of inventory. As a result of its increased emphasis on stockouts, the Hsuh often fails to identify overstocked situations. When goods are overstocked, there is no chance of a stockout, and hence this issue is less likely to be signaled. The problem of inventory overstock may result in unproductive use of capital resources and ineffective utilization of storage space. The chance of inventory overstock is high when the organization follows a traditional approach to inventory management. A major challenge the company faces in connection with inventory management is that there is insufficient number of skilled and experienced inventory management staff. As a result, the company often finds it difficult to check how the book inventory level matches the actual physical stock in warehouse. This favorable situation would assist storekeepers or other inventory staff to commit fraud. Fast varying market demand appears to be another issue challenging the smooth flow of Hsuh’s inventory management because this situation creates some confusion about the optimized stock level. Role of Supply Chain Management in Hsuh Supply chain management performs a wide range of roles in Hsuh ranging from material management to the delivery of finished goods. A deep evaluation of the key performance indicators (KPI) of the supply chain is really beneficial to analyze the firm’s supply chain performance efficiency. The supply chain KPIs include turnover, efficiency, stock inventory, out-of-stock performance, throughput, shrinkage rates, number of weeks of supply, and delivery lead time. While analyzing the turnover of Hsuh Ta Enterprise Co., Ltd, a plastic forming and molding company located in Taiwan, it seems that the company performs satisfactorily in terms of turnover. Even in the midst of the global financial crisis 2008-09, the company managed to maintain its turnover level on the strength of its innovative business model. The increased focus on environmental sustainability greatly assists the organization to gain greater public acceptance, which in turn leads to improved profitability and turnover. Similarly, enhanced efficiency is an important feature of the Hsuh’s supply chain. The company has a potential group of employees who have experience in various supply chain activities. This favorable workplace environment aids the organization to ensure smooth and uninterrupted flow of its different supply chain tasks (Hush Ta Enterprises). The computerized supply chain benefits the company to promote effective information sharing and to keep its various operations integrated and connected. In addition, the firm has great access to potential financial reserves, and therefore there would not be any delay in production or transfer of finished commodities to the delivery point due to lack of funds. Stock inventory, another KPI of supply chain, gives some crucial information about the operational efficiency of the company. The firm is keen to avoid issues associated with under-stock and over-stock of goods. Hence, the Hsuh management has developed improved mechanisms to ensure that there is optimum level of inventory in stock to meet the business needs properly. In addition, the organization is particularly watchful about the dreadful effects of the out-of-stock performance on the business. The management is certain that an out-of-stock situation would adversely impact on customer satisfaction and loyalty, and consequently the company may fail to regain consumer trust. Likewise, the company is committed to maintaining adequate levels of throughput, which indicates the actual rate of production. This is necessary to make sure that consumer needs are met adequately and to expand the business landscape in line with the changing market trends. It is interesting to see that the firm maintains a low shrinkage rate, which reflects that the business has only a small amount of inventory that gets lost or stolen. Keeping shrinkage rates low, the organization is able to cut down its overall costs and improve profitability. Finally, the company sticks to the stated delivery lead time. The Hsuh management strongly thinks that delivering customer orders on time is particularly crucial to achieve consumer confidence in the brand and to enhance customer loyalty. Hence, the company gives specific emphasis to customer relationships management so as to ensure that each consumer is satisfied with the market operations of the firm. In addition, this business concern greatly focuses on improving the number of weeks of supply with intent to gain wider market coverage quickly. Strategic Fit of Supply Chain Management It is identified that Hsuh’s supply chain management has effectively integrated with the organization’s mission, vision, and values despite some ignorable flaws. The company’s vision is to promote a sustainable business model that is capable of meeting the interests of end customers and enhancing the environmental goals of the community. In an effort to achieve this strategic long term goal, the organization adopts sales and operations planning (S&OP), which is an integrated management process that helps executives to accomplish continuous focus, alignment, and synchronization among all functions of the firm. According to Tudorie (2011), the use of this integrated management tool assists the company to develop an inventory plan, production plan, sales plan, backlog plan, new product development plan, and financial plan through an updated forecast. In addition, the S&OP process greatly benefits the organization to review customer demand and supply resources routinely. By using this management tool, the organization is capable of dealing with the re-planning process that pays attention to the deviations from the previously agreed sales and operations plan. Although S&OP is able to assist the Hsuh management to explore how the company achieved its current level of success, the organization mainly relies on this tool to focus on future actions and anticipated results. In short, the Hsuh uses the tool of S&OP to ensure that customer needs are met timely and adequately and customers remain loyal to the organization in the long term. Similarly, the organization’s supply chain management gives emphasis to creating values for its stakeholders by addressing their concerns over environmental sustainability. The Hush management strongly thinks that being a socially responsible corporate citizen is vital to enhance the company’s long terms goals of environmental sustainability and community welfare. As a result, the organization has taken improved measures to cut down the level of dangerous greenhouse gas emissions. In addition, the Hsuh management currently plans to implement some community-based educational and health care programs so as to express the firm’s commitment to social responsibility. However, a number of supply and demand issues including lack of knowledge about the true level of demand, high supply costs, declined demand for plastic products, and growing availability of alternatives pose some level of challenges to the strategic fit of the firm’s supply chain management. When it comes to supply-related issues, it seems that ‘knowing the true level of demand’ is a potential issue affecting the supply chain efficiency. According to Altekar (2005), it is inevitable for the company to identify the true level of demand for its products in order to deal with stock inventory and throughput effectively (p.16). Companies generally rely on paid market surveys and self-conducted telephone surveys or email surveys to obtain a clear and true view of the current level of demand. Since Hsuh is still in its initial stages of establishment, the organization cannot raise enough funds to conduct such expensive market surveys. As a result, it may be a bit difficult for the company to forecast future market trends or demand effectively. Recommendations Although the Hsuh currently performs better in terms of its supply chain management, the company cannot sustain this competitive advantage in the market place unless the company leverages its supply chain management operations appropriately. It seems that the Hsuh management still relies on slow and unreliable spreadsheets to plan its purchasing activities. As this practice would adversely affect the firm’s supply chain efficiency, it is recommendable for the Hsuh to move up to an affordable software-powered supply chain platform to deal with its purchasing. In addition, the supply chain managers must seek to understand their suppliers with most competitive capabilities so that the company can identify its innovation partners. The organization may segment its supply base to identify the right partners and to enable innovation. It is identified that most organizations segment their supply base in a single, traditional way but they must be able to do this in many different ways based on different criteria. It is advisable for the organization to research with systems that were designed for companies in the plastic molding sector so as to implement the most appropriate supply chain software, leading to great customization and integration with other systems. According to Joe Francis (cited in Schiff, 2011), executive director of Supply Chain Council, cascading supply chain metrics, enterprise-wide balanced scorecards, and management dashboard can provide supply chain managers with timely insights that would help them properly react to disruptions and opportunities in the current volatile market. It is advisable for the Hsuh management to avoid collecting irrelevant information and focusing only on meeting the criteria of an enterprise solution in order to improve supply chain efficiency. Finally, employee involvement is a major factor helping companies gain competitive advantages in the marketplace. Hence, the Hsuh management should foster its employees to be creative in the workplace and to involve in the decision making process. Conclusion From the above discussion, it is clear that the Hsuh management gives great focus to its supply chain management considering the importance of supply chain activities on customer satisfaction. A deep analysis of the key supply chain performance indicators such as turnover, efficiency, stock inventory, out-of-stock performance, throughput, shrinkage rates, number of weeks of supply, and delivery lead time clearly shows that the Hsuh performs the role of supply chain management effectively. The company extensively uses the sales and operations planning tool to develop and implement an inventory plan, production plan, sales plan, backlog plan, new product development plan, and financial plan through an updated forecast. In addition, the company emphasizes purchasing and material management in order to achieve optimum utilization of resources. The company may improve its supply chain management efficiency by implementing appropriate supply chain software that can accomplish great customization and integration with other systems. References Altekar, R. V. (2005). Supply Chain Management. US: PHI Learning Pvt Ltd. Bidgoli, H. (2010). The Handbook of Technology Management: Supply Chain Management, Marketing and Advertising, and Global Management. US: John Wiley & Sons. Hush Ta Enterprises Co. Ltd. Official Site. http://www.hsuhta.com/custom_4836.html Slater, P. (2010). Smart Inventory Solutions: Improving the Management of Engineering Materials and Spare Parts. US: Industrial Press Inc. Schiff, J. (October 21, 2011). 13 Ways to Improve Your Supply Chain Management. Enterprise APPS Today. Retrieved from http://www.enterpriseappstoday.com/supply-chain-management/ways-to-improve-supply-chain-management.html Tudorie, C. R. (2011). Production Planning Process in a Flexible Manufacturing Cell. Proceedings of 2011 International Conference on Optimization of the Robots and Manipulators. Sinaia, Romania. Retrieved from http://www.ipcsit.com/vol8/32-S8.3.pdf University alliance. What is the Importance of Supply Chain Management? University of San Francisco. 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