Key Challenges and Opportunities in Managing Global Supply Chain - Assignment Example

< Key Challenges And Opportunities In Managing Global Supply Chain> by Abstract The paper answers questions related to logistics management, predominantly managing of global supply chains. Furthermore, the strategies used by supply chains managers to respond to globalisation and fashionable products are discussed in the paper. A. Demand-Driven and Hybrid Supply Chains Demand-Driven Supply Chain The business model wherein all the activities of the supply chain are focused and built on the demand of the consumer is known as “demand-driven supply chain”. This model enhances the ability of companies to effectively react and deal with the changing demands of the consumer along with a more effective model to manage the inventory (Stalk, George; Harvard Business Review, 1988). The different challenges faced in the global supply chain within this model are: To ensure the right forecasts and demand plans on the basis of demand factors such as sales, innovative products, marketing, etc.; and thus minimizing the cost of inventory or out of stock situations. Thus, the supply chain models tend to be more of forecast driven due to several levels of inventory rather than being demand driven (Womack, James, Daniel Jones, and Daniel Roos, 1990). The demand chain’s processes often lack organization in comparison to the supply side due to lack of a common framework for the analysis of these processes (fisher, Marshall, 1997). There are different opportunities in the demand-driven supply chain which the company uses. Capgemini uses this model and has benefited in following ways: Capgemini has provided its manufacturers and different retailers their supply chain solutions saving approximately revenues to the tune of $150 billion. A common accessible data to all the retailers providing transparency in the system. One of the luxury retailer’s supply chains was transformed to the demand-driven model which consequently helped in reduction of the planning cycle along with analytical ability and transparency enhanced by 30%. Hybrid Supply Chain The businesses often face situations where any of the models of lean or agile supply chain strategy can be appropriate for the business. In such scenarios it is always best to go for a combination of models, and thus hybrid supply chain (Fisher, Marshall, 1997). This supply chain model helps that in the combined portfolio of markets and products, there will be situations where the demand can increase, decrease, o remain stable; which becomes predictable for the organization. Thus, it is more important that the supply chain model should recognize the demand rather than focusing on being lean or agile and can adopt a hybrid model (Christopher Martin, 1998). B. Managing Supply Chain Risks In The Age Of Volatility The ever changing business scenario and the ensuing effect of the internal and external factors on the businesses such as global economy, fluctuations in the currency, environmental factors, commodity instability, legal and political changes; create volatility on a continuous and permanent basis. Thus, this kind of volatility directly affects the global supply chains since the latter needs visibility at real-time basis and flexibility to adapt to the market volatility and changes in order to achieve high performance, profitability, and continuity in the business (Hines and Peter, 1994). Thus, a dynamic supply chain model is needed by the organizations to fuel the finances, provide resilience, and manage operation during volatile business scenarios. In order to create a dynamic supply chain, the businesses require changing the fundamental thinking process and integrating the physical and product supply and value chain (Lewis and Jordan, 1995). There are five major factors which help in achieving a dynamic supply chain model: The business needs to adopt a cost structure which is variable in nature and an adaptive and flexible operating model in order to ensure strategic alignment. The investment of large chunk of money in the infrastructural cost of the supply chain can be risky for the business and it is critical for the organizations to maintain the right balance between the fixed and variable costs. The supply chain should be linked to the different values such as product, geography, etc. When the businesses link their different channels of sales, marketing, and production; they are able to quickly analyze the changing demands and market situations and react and act accordingly minimizing costs and increasing profitability. Systems and processes should be established to anticipate risk and mitigate them. It provides the businesses with required lead time to execute changes of both short-term and long-term for the different channels of product mix, production, operations, distribution, and technology. The businesses need to increase the visibility and allocate the resources profitably in order to maximize the collaboration across enterprises and adapt quickly to external and internal business changes and consequently establishing dynamic supply chain. Businesses need to support and cultivate an organizational culture of change. One of the leading airline companies of UK, flew a single type of aircraft in order to reduce the complexity and cost of supply chain and remain competitive. C. Implications of transportation and global logistics Supply chain management can be divided in three stages: purchase of raw materials, manufacturing of end products, and transportation of finished goods (Thomas et al., 1996). The supply chain process consists of two basic activities: physical (transportation) and non-physical (strategic such as design, vendor selection, etc.). Transportation is one of the most critical parts of the economic activity of the supply chain system for a business. Approximately, one-third of the total logistics cost is spent on the transportation system. There are various different cost areas which the transportation system consists of such as different means of transportation used, pallets, labor, corridors, time taken, terminals, and containers (Supply Chain Digest, 2008). Thus, transportation acquires a larger part of the supply chain and logistics activities. Businesses can generate positive effects by improving the operational cost of various items. This requires the managers to comprehend, understand, and apply the operational strategies of transportation system in a detailed manner. The businesses who try to expand their operations at a global level, also add distance and time to their supply chain processes which consequently lead to additional cost, complexity of the process, and risk (Supply Chain Digest, 2008). The supply chain and logistics leaders need to effectively and dynamically combine various routes, carriers, and freight vendors in order to attain the constraints of delivery in an effective and consistent manner. To illustrate this, if the western coastal parts face labor strife on a continuous basis, the ability of supply chain leaders sitting in European countries to quickly react and select alternative routes will reduce or maintain the cost. The priority of most of the supply chain leaders of different businesses in the current volatile market scenario and businesses operating at global scale is to establish dynamic routing capabilities for the movement of freight and products across globe at an optimum cost and risk. Previously there was no dedicated technology in the area of maintaining effective transportation in logistics. Thus, the supply chain leaders face a huge challenge of developing appropriate technological and software solutions in this area which can help in modeling a complete, multi-modal and international routes of transportation (Supply Chain Digest, 2008). Till few years back, the demand for such technology was limited; but with the businesses going global such software solutions have started coming in the market for the cost optimization of the supply chain process at global scale. The lifecycle of fashionable products is increasingly becoming shorter but at the same time, due to globalization, product lead times are longer. Analyze the strategies supply chain managers can adopt to overcome this dilemma. The fashion retail industry experiences demand patterns which are unpredictable and thus businesses need to react and respond quickly to the changing demand and market scenario. It is important and critical for the business in fashion retail industry to determine and mitigate the risks in the supply chain model along with operational activities associated with it (Zsidisin et al., 2000). In this global economic scenario, the fashion retail industry of UK is facing tough competition in terms of low cost imports and cheap labor from developing countries. This is making the retail companies like Marks and Spencer (M&S) to maintain profitability and quality of their brand. This forced M&S to cancel various agreements with few of their vendors, both based in UK and other overseas countries. But this resulted in further problems for the company such as: operating the different systems such as production and supply became difficult; the quality of the end products degraded; the products visibility was incoherent as the designing and manufacturing process involved lots of suppliers. This consequently resulted in low profits and a point of crisis in next three years (Slack and Lewis, 2002). Thus M&S launched a series of strategic improvements in order to sustain the business and stay competitive in the market. The first step in this direction was to consolidate all their suppliers on the board and directed them to focus on developing quality relationship with their key vendors. The company also shifted 75% of their sourcing to the vendors based in overseas countries and interacted with them directly. The company also put investment in the designing of the core competencies in order to manage and mitigate supply chain and operational risks (Slack and Lewis, 2002). The fashion industry is facing a dynamic, competitive, and creative market which is also volatile in nature and there is a constant shift in demand. The business need to respond quickly with flexible and innovative approach in order to attain profitability and business continuity (Hines and Bruce, 2001). The fashion style and statements are short lived due to changing color and design patterns along with changing seasonal dressing style. This requires the fashion industry to constantly be on its toes and conduct market research, marketing, supply chain, and product planning. The supply chain risks are in the area of outsourcing, proactive purchasing, and relationship management at global scale. Most of the fashion retailers are expanding their base of supply chain and at the same time cutting on the cost of production. Thus fashion retailers need a strong supply chain with smooth communication flow in order to get the pulse of market and respond on time. The outsourcing of supply chain has provided competitive advantage to retailers (Zsidisin et al., 2000). The strategies of retailers to reduce risks have mostly focused on the selection of suppliers, maintaining corporate relationship with suppliers which can increase the level of communication between the supplier and retailer (Smeltzer and Siefered, 1998; Krause, 1999). As described above, M&S undergo strategic changes in supply chain model in order to reduce their losses and attain business continuity. Thus the risk involved in purchasing new designs and risk management becomes an integral part of producing creative and innovative product line. M&S first of all energized its resources in identifying their core competence and invested in the management of the designing and product development process (Interview Report, 2002). The brand building was done by focusing on designing more in-house rather than outsourcing it to vendors (Interview Report, 2002). This proved to be beneficial for M&S in the long run as was clearly indicated by the success of its brands, Autograph and Blue Harbour, with increased sales and popularity of the brands. The core competence was identified as the “production of successful products for high street” which was attributed by the right control of designing and innovative processes which helped in managing the supply chain risks. The strategies undertaken by M&S were as follows: M&S executed and implemented a central design team, design studios, market trend forecasting team, colorists, and designers which were in-house. The implementation of central technology and design helped the company in forecasting fashion trends up to five years ahead and these forecasts were made realty by the strong and committed team of designers, developers, and colorists within the clothing division. Thus, this enabled M&S to capitalize on the opportunities identified in the forecasts and creative new product lines in quick and efficient manner. Creating a central in-house designing team and studio has also reduced the risk of outsourcing for the company as most of the times outsourced products were incoherent and did not go with other range of products. According to the company spokesperson, “there was no single type of design and in the end, they had a jumbled up product portfolio that was least appealing (Interview Report, 2002).” Thus, the company created an in-house design team to create a range of products which complemented each other by using similar fabric so that the customer can mix and match different brands and color schemes (Interview Report, 2002). This enabled the fashion retailer to control the risks associated with design and operational strategy linked to supply chain such as procurement and storage of products in the stores on time. M&S executed and implemented a procurement team M&S consolidated its supply base and maintained strategic partnership with its suppliers and was also involved in direct sourcing The fashion retail company, M&S also investment financially in huge design studios and technological advancements such as CAD systems which leveraged quick communication and design presentation. The technology is being used to develop new fabrics and new ways of developing fabrics such as suits which can be machine washable and fresh feet socks. Some of the examples of the different brand launched by M&S, which are considered as revolutionary are as follows: Bodysensor Opaque Tights: the fabric of this brand helps the body to keep warm in winters and cold in summers. This product was awarded “Millennium Product Awards” by the Design Council. Woolen knitwear which was machine washable Non-iron shirts Secret Support range: This product was especially made for women to provide discrete support and gave the freedom to women to go bra-less when wearing strap tops, swimwear, lingerie, and halter necks. This product received the award of “Queen’s Award for Enterprise Innovation” in 2001. Conclusion The, the global business scenario is changing and becoming more dynamic every day. The businesses need to function in an environment of constant changing demands, competition, and new technological advancements. As the businesses are going global, the supply chain model needs to be more dynamic and flexible in nature in order to adapt and react to the changes in internal and external business environment. Thus, the organizations should make their supply chain model more lean and customer-demand-driven in order to attain profitability, reduce cost, and continuity in business. 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