Supply Chain Management of Famous Companies - Case Study Example

DELL Dell follows a business model that seems to be very simple from outside, but has many complexities and issues when it comes to implementation and execution (Kraemer & Dedrick, n.d.). To follow the JIT inventory mechanism that Dell practices, there is an extremely narrow margin of error for its Supply Chain Management. Dell follows a build to order approach (Sunil & Meindl, 2004). This means that Dell needs to have sufficient amount of components and parts in its inventory, to be able to assemble the final product on a very short notice, based on the configurations given to them by the customers. Moreover, it is essential for Dell to have its manufacturing and logistics functions closely integrated with the rest of the supply chain so that efficient flow of information is experienced and all channel members work towards the same goals. This was vital for Dell’s commitment to on-time deliveries of the configured PCs and laptop computers. Working in collaboration with its partners is crucial for Dell. Dell outsources most of its production and non-strategic activities. For instance, Taiwanese manufactures, Quanta and Compal, are responsible for the Notebook PC manufacturing. However, unlike the rest of the PC companies, Dell does not outsource the final assembly of its products. (Kraemer & Dedrick, n.d.) Subassemblies of components, like motherboards, are outsourced but the final assembly of all sub-assembled components is done by Dell itself (Kraemer & Dedrick, n.d.). In certain cases, shipments are directly sent to the final consumers. However, Dell usually gets the base unit shipped to its facilities where they can do final assembly of the products based on the consumers’ personal configurations. Lean Dell Lean manufacturing focuses on delivering greatest value to the customer. This is done through the removal of waste and undesirable bits from the organization’s process, keeping the needs of the customers in perspective. Basically, the aim is to maximize customer value through optimizing the performance of the company’s supply chain. Even though the focus is on waste reduction, it is important to note that waste could be increased at point of the supply chain in order to have a bigger reduction somewhere else. (Altarum et. al, 2003) This can be clearly seen in the Dell’s lean processes throughout the supply chain. Even though the company aims to work close to JIT inventory mechanisms, which over stocking of parts is avoided (Crystal, 2003), it prefers to maintain some level of inventory to counter the random fluctuations in demand, or simply to make its flow of products more efficient. For instance, in some cases, truck loads are kept in reserve by Dell and are pulled off when needed. Even though inventory costs will rise by keeping higher levels of inventory, this results in better supply chain performance as a whole, and ends up delivering high value to the final consumers. A similar situation can be seen in the sourcing department. Even though Dell sources most of its supplies from Asia, some procurement is done locally, from Nokia and Phippips, as well. This negates the low cost advantage that is gained through sourcing from Asia. However, the added cost helps in streamlining the processes of the supply chain through backup supplies and ensures on-time deliveries to the consumers even when the demand fluctuates. Because of these strong networks and partnerships that Dell manages throughout the world, it is very easy for them to conveniently improve their processes on a regular basis and be flexible enough to make changes in their business model if need be. JAPANESE CAR PRODUCTION IN UK Japanese car production in UK follows a very lean supply chain model. Its efficient supply chain management practices and continuously evolving processes give the Japanese car production a competitive edge over its competitors. The Japanese companies mainly utilize local raw material available in the UK for production. However, some parts also imported from Europe. They aim to maintain optimal level of inventory through efficient communication practices with their supply chain partners. Moreover, the parts are automatically delivered to the point of fit on the production line by suppliers and external logistics. This enables configuration of individual cars as per the requirements of the customers and also integrates the upstream supply chain directly with its processes to ensure collaboration. (Ting et. al, 2008) This communication with the suppliers and third party logistics is done using electronic solutions that provide the companies with a common platform to streamline processes of the entire supply chain and enables the manufacturers to implement JIT delivery and JIT production at the plants (Ting et. al, 2008). The suppliers and third party logistics are automatically updated with the production plan and the delivery plan by the manufacturer, and the suppliers and third party logistics work together to deliver the required components every two hours to complement the JIT manufacturing. JIT methodology ensures that the inventory holding costs and inventory carrying costs are kept to a minimum. (Broyles, 2005) All these factors enable the Japanese car manufacturers in UK to maintain a lean supply chain and continuously improve their processes. There are numerous benefits of the lean supply chain that are experienced by the Japanese car manufacturers, including accurate demand forecasts. (Pilkington, 1996) As the entire supply chain is collaborated via technological solutions, the manufacturers are able to accurately forecast the demands through using information obtained by every channel member (Collaboration, n.d.). The accumulated orders at the end of every day are and, based on the information, weekly and monthly forecasts are done and production plan is made. In addition to accurate demand forecasting, the Japanese car firms are also capable of managing any changes in the future, as well, because of their flexible processes. Future Potential of Japanese Car Manufacturers in UK A very prominent advantage of the supply chain model of Japanese car manufacturers in UK is that their processes are kept very simple (Ting et. al, 2008). There are no complications in the processes, such as maintaining inventory, managing bull whip effect throughout the supply chain, managing separate communication channels with different supply chain partners and so on. This enables the manufacturers to be extremely flexible and responsive to the changing environment and changing consumer demands. They can easily shift from production of one type of car to another without having to worry about the excess inventory in stock, or the long lead times that might occur due to changing supply chain processes. They can simply notify the partners of the new requirements of components and parts, shifts from production of one type of car to another because of the changing customer needs or as a response to the competitor’s strategies, increments or decrements in the production plan as per fluctuations in demand, and so on, through the technological solution implemented. These factors make the Japanese car production processes in UK very lean and capable of continuous improvements in the future as well. WAL MART Wal mart is one of the largest retail stores in the world, with stores in Canada, Mexio and United States the company strives hard to make sure that they remain ahead of their competitors and offer their clients an unparalleled shopping experience (Walmartstores.com, 2008) Wal Mart has always emphasized on the need to reduce purchasing costs and to give its customers the best prices for the goods it sells. For this reason the company procured goods directly from the manufacturers thus eliminating all intermediaries. Wal Mart because of its huge volumes is a tough negotiator and hence would only finalize deals if it was sure that the items will not be available anywhere else for a lesser price. As a result, the only performance goal that Wal Mart focuses on is low price procurement strategy. CURRENT STATE OF SUPPLY CHAIN Procurement and Distribution As mentioned earlier Wal Mart focused on the least cost procurement strategy, thus they made it simple. They told vendors that they did not want any promotional, advertising or delivery program (James, 1991). The only thing they were concerned about is price and so they made it clear that their own vehicles will pick the goods from the suppliers’ warehouse, instead of the supplier delivering them. For distribution Wal Mart has over 40 distribution centres located in different states across the US (Wal-martwatch.com, 2002). The distribution centres ensured a constant supply of goods to support the supply function. Logistics and Management The most important feature of their supply chain was their fast and efficient transport system. The company had over 3500 trucks which were responsible for delivering goods to the distribution centres’ and them from the centres’ to the stores (Daudelin, 2001). The truck drivers considered each store as a customer and had to service specific stores from one distribution centre. To streamline the process there was strict vigilance by the management. Inventory Management Wal Mart used IT and communication systems to effectively track and monitor sales, inventory levels and distribution patterns across different regions (Lisa, 1999). Thus they were able to reduce the unproductive inventory levels and stimulate levels of inventory with products that were most desired by the customers. SUGGESTIONS FOR THE FUTURE Since, Wal Mart has already invested a lot in IT and communications infrastructure they can improve their supply chain further by ensuring that modern IT systems are implemented in their warehouse and distribution centres’. One such initiative was tagging the products with RF id chips to easily track inventory. Another improvement could be in their internal audit process. The internal audit process needs to be extremely stringent so that employees know that their progress is monitored and negligence will affect their jobs. Similarly, the internal audit process needs to see if the current progress is in line with the long term goals of the company. Similarly, Wal Mart should encourage Six Sigma projects within its domain. These project ideas can come from employees’, customers, top management etc (Burton, 2006). Once a viable idea is surfaced the process should be streamlined using the Six Sigma approach. CONCLUSION As discussed, lean supply chain management is one of the main factors of success in companies. Famous companies such as Dell, Wal-Mart and Japanese car manufacturers that have several members in their supply chain should make sure that none of the members work in isolation. Every channel member must ensure that it is aligned and integrated with its upstream as well as downstream channel members to ensure efficient flow of information and material. Business must aim to follow the lean supply chain management. They must closely and continuously examine every process in the chain and identify any possible bottlenecks, or ways that can be used to further better the process. Also, they must realize that being lean is a continuous process so they must adopt these practices in their supply chain on permanent basis so that they can evolve with time and always remain on top of the leader board REFERENCES Kraemer, K. & Dedrick, J.(n.d.) Dell Computer: Organization of a Global Production Network. Center for Research on Information Technology and Organizations. University of California, Irvine. Altarum, P., Boeing, H. & Messier-Dowty, S.(2003). Developing Lean Supply Chains: A Guide Book. Ting, W., Building, M., Hall, W. & Keynes, M. (2008). 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