Leagile Method of Supply Chain Management - Essay Example

A 3000 PORTFOLIO ASSIGNMENT al Affiliation PART I Leagile Method of Supply Chain Management Our team chose to focus on leagile as the preferred model of supply chain management. Leagile is an integration or hybrid of the lean and agile systems or strategies of handling supply chains. Lean supply chain strategy focusses on the elimination of waste and is biased towards the pulling of goods through the whole system based on demand (Davis, 2014, p. 100). The agile system emphasizes on a response that is flexible and efficient based on particular customer demand (Fawcett, Ellram and Ogden, 2014, p. 150). The hybrid system of supply chain management or as it is now known popularly, the leagile system integrates the two systems and, therefore, can take one of a variety of strategies. For instance, leagile might involve the use of lean strategies for managing the supply of high volume products that are also in high demand and opting to use agile (make-to-order) for every other thing (Pagell and Shevchenko, 2014, p. 50). The leagile system can also opt to have a flexible production capacity with the purpose of meeting demand surges or unexpected needs/requirements. Alternatively, leagile might involve postponing whereby forecasting is done using “platform” or essential products, and then the final customer order would determine the final configuration and assembly of products (Selviaridis and Norrman, 2014, p. 160). CASE STUDY: TOYOTA COMPANY The case study for which we will use to analyse the leagile system of management is the Toyota Company particularly in the manufacture of its Scion line of cars. The Toyota Motor Corporation is an automobile manufacturer situated in Japan with its headquarters in the city of Toyota, Aichi.As of the last financial quarter of 2014, Toyota was the largest multinational company in the world in terms of revenue. As of 2012, in terms of production, Toyota leads companies such as General Motors and Volkswagen Group having produced its 200 millionth vehicle on the July of that year. The company’s origin dates back to 1937 when Kiichiro Toyoda founded it as a separate part of Toyota Industries owned by his father and its purpose was to manufacture automobiles (Sharma, Bhat and Routroy, 2014, p. 10). The multinational corporation produces its vehicles under five lines or brands. These are the Scion line, the Ran brand, Lexus and Hino brand. This study will focus on the Scion brand of vehicles in analysing the Leagile system of supply chain management. Toyota produces the Scion brand of vehicles for the North American market, and the production started in 2002 with the first Scion models going on sale in California in 2003.The scion expanded its market to Canada in 2010 (O’Rourke, 2014, p. 1125). The following is an image of the current headquarters of the company in Toyota, Japan. Toyota uses the Hybrid model (Leagile) in the production of its Scion brand of vehicles. The base model of Scion line of cars has its production happening in Japan. However, there is the addition of many other options for customers either at operation points in Los Angeles California in the Port of Long Beach or the dealer depending on a customer’s specific preference (Nettsträter, Geißen, Witthaut, Ebel and Schoneboom, 2015, p. 7). The lean methodology comes about where the production of the base model of the cars happens in Japan whereas the lean method is showcased by an additional inclusion of customer preferences. The following is a link to volume 27 of a 2006 issue of the Journal of Business Logistics which describes in detail (page 6) how Toyota Company uses the leagile method of supply chain management in its production http://web.wilkes.edu/jennifer.edmonds/MBA_513/leagile.pdf The article reveals how Toyota uses the leagile system. Toyota caters for the Scion segment of the market by focusing on market promotion strategies that avoid the mainstream media. Instead, the company chooses to sponsor charity events, concerts and other sports events and enthusiast clubs. Such a marketing strategy focus on individuality when one is selecting and owning a car. Toyota owns a website dedicated to giving customers an opportunity to indicate their own preferences (Panayides and Song, 2015, p. 68). The site involves a feature for customizing the vehicle basing on the vehicle’s colour, interior and exterior styling, and the colour of the vehicle, among others. The production of the base vehicles takes place in a lean manner in Japan and shipping to the United States then takes place. The customization of the cars (according to customer preferences) then happens at the dealer locations. More substantive customization takes place in the receiving US airports (Mylan, Geels, Gee, McMeekin and Foster, 2014, p. 24). Such customization includes the installation of stereos, the inclusion of performance elements such as sports mufflers or installation of side-way-impact airbags. Therefore, while base model production occurs in a lean manner, agile production is responsible for the accommodation of customer-tailored needs for the dealer or the port facility (Schaltegger and Burritt, 2014, p. 239). As a result of customization, the final form of the product i.e. the vehicle suffers delays and gets committed a location near the final customer. There is therefore time for cycle compression or quicker customer-specific demand accommodation (forward-positioned postponement) (Ramanathan and Gunasekaran, 2014, p. 250). Leagile approach is the best of the three in terms of supply chain management. The leagile system integrates the advantages of both systems of production (Fawcett, Ellram and Ogden, 2014, p. 120). It has a characteristic of adaptability where the organisation has the ability to adapt itself to demand by adjusting or modifying its structure. For decreased volume sales, a leagile manufacturing company shows marked improvement in profits contrary to the agile system that records higher fixed costs and thus no profits. Leagile system of supply chain management is consequently superior to both agile and lean methods due to its suitability in a volatile market (Mikurak, 2014, p. 2). The leagile method has characteristic agile advantages. For instance, agile strategies become the lowest total cost option as the carrying cost of inventory and the value of finished goods rise (Schoenherr, Griffith and Chandra, 2014, p. 130). PART TWO The bullwhip effect is an occurrence that happens in the supply chain where the orders sent to the manufacturer and supplier lead to the creation of a significant variance when compared to the sales to the end customer. The effect comes about in forecast-driven distribution channels and simply put, they allude to increasing variations in inventory due to changes in the demand of the customer. It usually occurs in firms that are at the tail end of the supply chain (Meyr, Wagner and Rohde, 2015, p. 100). The cornerstone of a lean supply chain is the efficiency in planning of the demand. Unpredicted spikes in demand cause the end of the supply chain to respond to variations in production. Consequently, the supply and production issues create an impact at the customer end of the supply chain a downward rippling effect i.e. the bullwhip effect (Turker and Altuntas, 2014, p. 843). Since the lean supply chain is a component of the leagile supply chain, the bullwhip effect is seen here too. The bullwhip effect impacted negatively on our team. For instance, the decrease in consumer demand resulted in excess inventory that forced us to lower supply on future inventory orders. This consequently led to stock-outs as a result of overcompensation on our part. As a result, we missed out on sales, and the situation threatened to damage our company relationships with customers. The stock out effect also resulted when the buyers overcompensated when they undersupplied the market demand (Beske and Seuring, 2014, p. 325). As a result, we ordered extra inventory to protect us against future occurrences of product shortages that only led to excess inventory since we ordered too much. The bullwhip effect also resulted in underutilization of the distribution channel. The effect came about as a result of the accruing inefficient production and excess inventory as each producer strived to fulfil the demands of the consumers in the supply chain. As a measure to stop the bull; whip effect we tried to change buying and ordering processes by batch ordering (infrequent purchase of large amounts of the product (Mitra and Datta, 2014, p. 2086).However, this just served to make the bullwhip effect worse. We ended up putting pressure on the suppliers ahead of the chain that caused tense supplier relationships. We asked our suppliers to produce high levels of inventory immediately which contributed significantly to the strained relationship. Also suppliers we became frustrated since because of the faulty demand forecasting there was constant shifting and urgent demands that we could not fully satisfy (Mangla, Madaan, Sarma and Gupta, 2014, p. 130). Findings by supply chain experts reveal that that the bullwhip effect occurs in forecast driven supply chains such as ours (Beske and Seuring, 2014, 2088). The only solution was the careful and keen management of the bullwhip effect. The goal was the extension of the visibility of customer demand to as far as possible. The first step we took in minimizing the bullwhip effect was to understand the drive and motivation behind inventory consumption and consumer demand planning. As key players in the supply chain, we addressed the lack of demand visibility by gaining access to point of sale (POS) data (Davis, 2014, p. 150). We then worked in collaboration with the customers for the improvement of the frequency and quality of communication and information throughout the chain of supply. We also opted to share information with customers through arrangements such as vendor managed inventories. We did away with practices likely to increase spikes in demand such as order batching (Selviaridis and Norrman, 2014, p. 160). We introduced Computer aided ordering and Electronic data imaging that lessened the impact of higher order costs that came with the numerous and smaller frequent orders associated with the bullwhip effect (Ellram and Cooper, 2014, p. 10). Our supply team also adopted new pricing strategies and policies to reduce the bullwhip effect. We got rid of incentives that caused customers to delay e.g. Volume transportation discounts and solved the problems that caused order cancellations by customers. Finally, we thoroughly evaluated our organizational policies, systems and practices to ensure an efficient supply chain was in place (Kabra and Ramesh, 2015, p. 1). The beer game is a role playing business simulation gamed designed to demonstrate core principles of the management of supply chains. The game takes a total of about one and half hours to play and requires at least a group, of four players. It depicts the real world supply chain in that it comprises various related stages (Selviaridis and Norrman, 2014, p. 160). The steps involve a retailer who has to fulfil the orders of the end consumer, the wholesaler who has to fulfil the orders of the retailer; the distributor who should meet the wholesaler’s orders and the factory. The factory’s task is to produce the beer to fulfil the order from the distributor (Ivanov, Sokolov and Dolgui, 2014, p. 2160). The game prohibits communication and collaboration consequently resulting in the creation of a ‘bullwhip effect’. The beer game symbolises the more complicated supply chain logistics where, even though, there might be a stable customer demand, small changes in demand at the retail end of the chain can dramatically cause a variation in upstream supply chains (Fawcett, Ellram and Ogden, 2014, p. 200). As a consequence, a range of inefficiencies occurs in the supply chain that showcases supply chain coordination problems. PART 3 DIAGRAM OF COCA COLA SUPPLY CHAIN MANAGEMENT AND CURRENT OPERATIONS ADMINISTRATION OF COCA COLA COMPANY Coca Cola Company is a major manufacturer and distributor of soft drinks in the world. A whooping 1.8 billion servings of coca cola products get sold throughout the world every day. The above statistic is according to the vice president of the supply chain development and the direct of the supply chain of Bottling Investment Group for the Coca Cola Company. The main priority of the coca cola supply chain is to get the right product to the customers at the right time, and in the right price range (Hartmann and Moeller, 2014, p. 290). STRENGTHS One of the main strengths of the Coca-Cola supply chains is its capability excellence. An important goal of the supply chain arm is to have every customer receive tailored services irrespective of his or her location. The food drinks giant has 16 million retail outlets, and each one has standard practices, capabilities and processes no matter where these retail stores are (Varsei, Soosay, Fahimnia and Sarkis, 2014, p. 250). The supply chain arm makes sure that it gets its products on the shelves in a consistent way in terms of quality and collaboration. The company strives to ensure that the customer does not travel far to get their products (Grimm, Hofstetter and Sarkis, 2014, p. 165). The company also relies on a type of supply chain management known as segmentation where the chain is based on the customers’ needs or the product attributes (Beske and Seuring, 2014, p. 327). Thus, the company has different types of supply chains basing on the above criteria. Segmentation allows the company to understand and implement best customer tailored practices. The company also emphasizes on local service by its supply chain staff. The company established the massive lean six Sigma supply chain several years ago that enables the products to be close to the consumers (Weele and Raaij, 2014, p. 68). Some of the local services include the individual opening of bottles by the supply agents (Govindan, Kaliyan, Kannan and Haq, 2014, p. 560). WEAKNESSES The increase in demand for Coca cola’s company is still a challenge. The supply chain does not reach some sections of the world especially in the developing regions of the world. One contributing factor or this problem is technology drawbacks. There are a lot of technology areas that are in need of some capacity that the company does not have or some technology areas that the company does not have knowledge of (Mitra and Datta, 2014, p. 2090). In addition, most of the supply chain systems of coca cola date back to a long time ago owing to its long existence. There is, therefore, a need for the replacement of dated systems with current platforms across every market for the purpose of creating a system of modern metrics and streamlined supply chain processes (Ellram and Cooper, 2014, p. 17). Technology is a crucial tool for the enhancement of the supply chain strategies of the coca cola company. As mentioned above, coca cola is a large company that has been around for a long time, and some of its supply chain systems are obsolete. There is the need for the replacement of these systems with modern ones that will ensure an efficient supply chain that will reach every corner of the globe (Stadtler, 2014, p. 15). Research on logistics indicates that social media will be a crucial technological tool in enhancing the efficiency of supply chains of Coca-Cola Company. Social media encompasses four types of technology. These are social blogs, social media networks, social bookmarking sites and forums (Giannoccaro, 2014, p. 1323). Social blogs entail the use of blogs where the company will post information regularly that will keep the customers updated on recent modifications on how to access the company’s products. The social media sites include the use of Facebook, Twitter, and Instagram for promotion that will ease the work of the supply chain (Subramanian, Rawlings & Maravelias, 2014, p. 79). These tools will improve the transparency of the distribution networks that will give the organisation extra control over the management of their freight strategies. Therefore, it will lead to an overall improvement of efficiency (Fleming et al. 2014, p. 45). Technology is an important tool for giving the coca cola company the ability to boost communication and the coordination of purchases. The centralization of inventories through a digital warehouse management system has the advantage of helping the organisation improve market analysis. It will also help it to adjust order fulfilment strategies and identify trends that will increase the quality of customer service (Tseng, Lin, Lin, Chen and Tan, 2014, p. 3255). The company can mobilize on the internet abilities by making it possible for consumers to order goods online that will do away with the use of some intermediaries thus saving costs (Wisner, Tan and Leong, 2015, p. 33). The use of reverse logistics can also be helpful in the management of supply chains. A good system of reverse logistics that utilises modern technology will result in improved retailer-vendor relations by providing for faster ways of vendor credit applications. In addition, the movement of merchandise from various stores to warehouses will be kept in balance reducing the risks of overloading some areas (De Meyer, Cattrysse, Rasinmäki and Van Orshoven, 2014, p. 661). Other technological tools that will ease the management of warehouses in the supply chain include the incorporation of network systems and state of the art technology that can predict demand and be able to track levels of supply inventories. Such technology will also facilitate the planning of efficient transport routes. Radio-based monitoring is also a useful tool for the monitoring of distribution and warehousing (Crandall, Crandall and Chen, 2014, p. 110). PART 4 The following is a grant chart detailing the systematic introduction of the new technology into the company.IMPLICATIONS OF THE CHANGES The incorporation of modern technology will take a span of two months as depicted in the grant chart above. The Company is in immediate need of an updated website as the current one is faulty. The survey will also assess the financial costs of these technological needs before it embarks on their incorporation and integration. In addition, the company will draw up an estimate of the budget and present this to the financial board pending its approval (Corbett, Blackburn and Van Wassenhove, 2012, p. 29). After the approval, the department of technology will set out on starting on the incorporation of the new technology. The above preparatory phase will take about one month (Chopra, 2014, p. 72). The incorporation of the new technology will require a vast amount of resources. The most crucial resources that the company needs are human labour and the financial resources (Bourlakis, Maglaras, Aktas, Gallear and Fotopoulos, 2014, p. 127). Budget estimates bring the total figure required to $20 million. The massiveness and the type of technology are partly the factors to blame for the large sum of money needed. Successful incorporation of the new technology will also eat into the valuable time of the company since this time and the money could have been used for doing other activities like say, production. There is also need to hire the necessary expertise that will be responsible for doing the changes that will use up a significant part of the money. However, since the company is a large multinational corporation, it is likely that the implicated costs will be absorbed by the high revenue sales that the company accrues annually. PART 5 PORTFOLIO AND ACADEMIC RIGOUR The main objective was to facilitate our understanding of supply chain management and strategies. We worked as a duo and started by researching and understanding the concept of supply chain strategies. The supply chain management strategies are three and these are lean, agile and leagile. After a detailed study, reflection and consideration we found out that the leagile strategy is the best approach to the management of supply chain with the primary reason that it incorporates the characteristics of the two other strategies. We teamed up with another duo to play the beer game in order to understand various concepts in the supply chain management. We played the game for over a week and came up with useful findings. We were able to understand the coordination problems of the supply chain. In addition, we fully understood the mechanism of the bullwhip effect, how it arises and how to manage it. We then did a case study of the coca cola company supply chain strategy. The primary aim was to find out how such a large company can handle its supply chain amicably. We found out that the main strength of the supply chain was the use of segmentation. There is a need for the company, however, to integrate modern systems of technology in its supply chain structure for increased efficiency. The incorporation of new technology into the supply chain of the company is likely to take an enormous toll on the financial resources of the company (Alexander, Walker and Naim, 2014, p. 515). For the project, we derived information from classroom material, literature sources from the online library whose link is http://search.ebscohost.com/Login.aspx?lp=login.asp&ref=https://www.google.com/&authtype=ip%2cuid . The first part of the assignment involved us drawing information from online sources and from a 2006 27th issue of Journal of Business Logistics for which we provided an accompanying link. As mentioned above, the second part of the project involved us teaming up with another team to play the beer distribution game. WE played the game for two weeks after which we analysed the valuable lessons as a group. References Alexander, A., Walker, H. and Naim, M., 2014. Decision theory in sustainable supply chain management: a literature review. Supply Chain Management: An International Journal, 19(5/6), 504-522. Beske, P., & Seuring, S. (2014). Putting sustainability into supply chain management. Supply Chain Management: An International Journal, 19(3), 322-331. 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C. and Leong, G., 2015. Principles of supply chain management: a balanced approach. Cengage Learning. Read More