Improving the Supply Chain Performance - Coursework Example

Department Topic Globalisation has increased opportunities for business in many companies and at the same time broughtabout new business challenges. With globalisation for instance, the entire world is a global village hence it is has become particularly easier to do business anywhere in the world. Many businesses have gone international and many others are still expanding their international operations as opportunities come about. This means MNCs have to set up business operations in different parts of the world notwithstanding the geographical and cultural differences. Culture is particularly important in international business; national cultures are different and the significantly impact the way business is done. Marketing, packaging and distribution of products in particular countries must be done in a manner that conforms to local cultures. Companies must thus carry out a very through market research in the overseas territories before launching their operations. Supply chain management has therefore been recognised by businesses as key driver of competitive advantage especially when a company has vast operations in different parts of the world. In this paper I will be examining how improving supply chain management can beneficially influence business and will use OMV as case study. It has been identified that supply chains are increasing playing the very critical role in assisting businesses attain their growth objectives. With the modern market where competition is continuously growing, organisations are increasingly turning to the multiple dimensions of supply chain management to achieve growth and profitability. Many organisations have challenged their supply chains on multidimensional fronts such as flexibility, customer service quality, cost cutting and predictable risk management. The goal is to leverage the multidimensional approach to supply chain management and derive competitive edge and realize business goals both in the short and long-term. Implementation an effective supply chain can deliver competitive advantage to an organisation in different ways and actually differentiate it from others in the same industry. With flexibility and focus on delivering quality customer service for instance, an organisation could balance its product supply with the demand for the same and deliver just what customers want in the right quality & quantity (Hult, Closs and Frayer, 2014). Through strategic supply chain management a company is able to effectively plan and manage its sales & operations. For effective sales and operations planning there is need for higher order cross-functional and business firms therefore have to focus their attention on organisations issues just the same way they do with demand and supply chain management. A finely honed supply chain is therefore able to point out to the organisation just which areas need to be improved on and which technologies are necessary to maintain a strong market presence. Having barriers in the supply chain can therefore be more costly to organisation as compared to tariffs. It is thus very important for organisations to align their supply chains with business goals and strategies as such a more will not only help them deliver on business objectives but also growth that is sustainable and profitable. Whereas decisions on supply chain design must be driven by business strategy, it is extremely crucial that all the tactical elements of the supply chain are executed in a very smart fashion. Supply chain management is at the heart of exceptional performance in the modern world of business. Strategic execution of supply decisions on the different dimensions can deliver not just a competitive edge but also enhance satisfaction of customer expectations. At the same time there is a significant room for operational improvement in the supply chain. It is very critical therefore that the gap between supply chain strategy and design is effectively bridged. Organisations should also ensure that their supply chain decisions are successfully implemented through a strong operational expertise and in alignment with the overall business strategy. This will ensure that the results of implementing a supply chain strategy are visible and permanent. Organisations must therefore ask two important questions when it comes to supply chain design and strategy. The questions are, what our overall business strategy is and what must be delivered by our supply chain so as to best support business strategy. Organisations must also understand just how to ensure the supply chain design is able to deliver on their strategic business priorities, which specific supply chain capability require improvement and how to get the right enabling conditions in place (George and Hult, 2012). The OMV Value Chain in Perspective. Austria based OMV is an integrated oil & gas group of companies and an industry market leader in the Central and Eastern Europe. OMV has high credit ratings given by Moody’s, Fitch and other accrediting agencies for having a very clear business strategy with a special focus on growth particularly in the refining and marketing divisions. OMV R & M is currently leading in the Danube region which is comprised of 13 countries with over one hundred million people. The company’s acquisition of Petrom Oil Company of Romania enabled it attain its objective of controlling 20% market share by the year 2008 in the R & M business segment. OMV has 2540 filling stations and servers over eight hundred thousand persons on a daily basis. OMV has three business segments namely, Exploration & Production or E & P, Gas & Power or G & P and Refining & Marketing or R&M. E&P is responsible for exploration work, G&P advances pipeline projects while R&M manages the expansive network of filling stations across the business regions. The company’s extensive network of petrol stations supported by sales agencies ensured the desired quality in the cross-border sales activities. It owns refineries in strategic countries like Germany, Romania and back home in Austria as well as shares in Germany’s Bayernoil. This guarantees OMVs legacy as the biggest oil refining group in the vast Danube area. It is also the major supplier of aviation fuel for the Vienna-Schwechat and Munich international airports. At the its Burghausen and Schwechat inland refining plants OMV is also producing petrochemical commodities for its partner company Borealis apart from its traditional business of producing superior quality mineral oil products. This is a very huge business portfolio with tremendous from consumers, corporate customers such as the airports as well as business partners such as Borealis which depend on OMVs petrochemical commodities for its plastic manufacturing business (Bartlett, Julien and Bain, 2007). It should also be noted that the oil refining sector has some of the most extremely complex supply chains that starts right from the point of drilling and extracting the natural resource and continues through to the point when the consumer gets the final product. OMV group has implemented a supply chain that perfectly reflects and responds to the complex needs of not only its various business segments but also the entire oil industry logistics. At every state of the OMV supply chain, the management requires and depends on current information so as to make necessary adjustments in terms of supply, processing, logistical & marketing plans to the constantly evolving situations in the market place. It for this reason that OMV has implemented a centralised system for reporting that helps decision makers especially in the R&M business segment. This has been recognised as a key supply chain requirement if the company has to successfully implement the company’s operational and strategic business goals. Customer Service from a Logistics Perspective. A very huge potential for efficiency in OMVs operations management lies in its Arplan based supply chain management and reporting system. The application permits analysis of historical and current data in terms of supply, demand, logistics, processing and sales figures due to its integration ability. It makes it possible for a consistent and continuous informational exchange between the various OMV’s sub-processes and business units even with the fact that every sub-process is run from a different system. The arcplan has moved the company’s supply chain management function from past where each department maintained just very limited information on excel which was used internally to the current situation. Management in the past had to go through extremely tedious manual processes in order to map movement of goods and products between the different points of the entire supply chain considering its various locations and vast market. Arplan has assisted the company get rid of these manual processes and introduced urgency, professionalism and efficiency in the management of the supply chain with benefits such growth in profitability and customer satisfaction. Continuous improvement in the supply chain management will therefore mean the company continues to cement its market position, increase its market share, grow further and make more profits. Considering the complex value and supply chains in the oil & gas industry, logistics is another extremely important area of focus for OMV. The company’s logistics strategy is informed to a large extend by the quest to meet the both industry and customer expectations. Both corporate and retail customers are important to the OMV filling station business. The company has an own logistics team and has also partnered with HAVI logistics for technical support with the aim of exceeding customer expectations. The company understands what is going on in the market has it extensively invests in market research. OMV knows in order to meet and expect customer demands in terms of supply and order processing, a seamless supply of products is essential. With the technical support of HAVI Logistics, OMV has embarked on a journey of investing in maintenance lean logistical operations. The company aims at achieving cost savings with the theme of lean logistics by investing in the appropriate technologies and processes. It has also managed to save a lot of time by engaging only with those systems that are efficient. With the integration of HAVI Logistics in the entire OMV supply chain for instance, the number of product deliveries to the filling stations will be cut down from the over thirty to just between one and three every week. The benefit of this is that OMV is in a position of making significant time savings while at the same time ensuring constant availability of goods for the market. The concept has been introduced under the auspices of HAVI Logistics and is known as the one stop-shopping-concept. One area of customer service that I think is missing in the OMV strategy from the perspective of logistics is segmentation. The company has very well understood its market, values them and even hosts them in seminars to the chat the way forward in business as was the case in the year 2011 when it held a fully sponsored summit meeting with its customers. However, in order to further customise the management of its customers, I think the company should segment its customers and classify them based on value addition and spend. First class customers who are considered strategically important are given first class attention with a dedicated relationship management. The same should continue with those considered second class and third class while at the same time maintaining a constant flow of goods in the filling stations for the daily retail customers. Apart from segmentation the company should also increase its meetings with customers and explain its logistics and supply strategy. It can also give them targets which must be met in terms of value creation and addition to the strategic partnership. This is particularly necessary with suppliers and large scale retailers who source their products from the company. So as to ensure success of this strategy OMV only needs to go a step further by enabling its customers and suppliers through technical support and making sure the necessary systems are in place to guarantee seamless business flow. Ultimately, by ensuring continuous supply of products in quantities and qualities that meet the demand levels the company will ensure its customers are satisfied and hence attain a competitive advantage for not just customer leadership but also intimacy and operational efficiency. Driving Value and Cost Savings through the purchasing Function and Procurement. OMV is market leader in the production of liquid hydrocarbons; in New Zealand it responsible for about 40% of the national requirement for natural gas. It leads the oil and gas industry in Central Europe and has a global presence. The company also has interests in many other exploration projects as well as production licences. Globally, OMV supplies the energy requirements of millions of persons as well as other day-to-day goods and essential services. The industry itself requires the deployment of equipments that is extremely specialised and often expensive. At the same time many of the equipment have to come from foreign countries and orders may take as long as over a year. The company therefore has to carefully, monitor its machinery and other equipment, keep the inventory at a bare minimum and plan in advance for new purchases if any. OMV therefore witnesses a lot of inter-dependence between the functions of purchasing & procurement, inventory management and asset management. How information flows between these areas is therefore critical. The company has respondent to this situation by implementing an integrated solution for managing the three areas with the main goal being to streamline work processes, save the resources of time & money, increase efficiency and ultimately derive value not just for the company but also its partners such as suppliers. Following the integration and streamlining of business process in the areas, the company benefited enormously through increase efficiency, smooth flow of communications between the Austria based head office and international subsidiaries. The integrated solution has benefitted the company especially the New Zealand arm in a number of areas. Access to information is no longer a problem; management of records has greatly improved as well as reporting standardization. Communication is flawless and reporting is synchronised across the entire business. A great deal of time saving has been attained with requisition processes going down by more than 60%. The solution has also increased accountability; qualities of reports & procurement options have gone up and the system accommodates the regulatory environment of the different countries. An area of improvement in the OMV procurement is to integrate strategic sourcing and tactical purchasing. According to (KPMG, 2012) organisations can derive value from the purchasing function through focusing on strategic sourcing and maintaining closer relations with their suppliers. OMV can therefore improve its procurement by having a dedicated team of employees closely monitor and manage supplier relationships. The procurement department can further be organised into different areas of expertise such as direct sourcing, research and new markets. The company can then have teams of employees in its different locations executing the purchase function tactically and managing the suppliers. In conclusion therefore supply chain management is increasingly becoming a major source of competitive advantage for businesses today. Globalisation means firms have to go for opportunities in international territories and as such some companies such as OMV are managing very vast supply chains as well as business portfolio. This makes almost a requirement for companies to align their supply chain management with the overall strategic business goals. With good management of the supply chain, OMV for instance has been able to deploy an integrated reporting system that enables real-time supply of information to the management and other decision makers. Monitoring of processes as well as exchange of information across the entire supply chain is thus a reality for OMV and this has benefitted the company in a number of ways. Supply chain management can also increase operational efficiency, enhance monitoring of supply & demand and ultimately help a company attain growth and profitability that is sustainable. Bibliography 1. Arcplan Inc. (2009) OMV Refining & Marketing GmbH Manages Supply Chain with help of Arcplan Enterprise. Retrieved from: www.viewpointpartners.com/fileadmin/.../arcplan_case_study_OMV.pdf 2. Jian Cai, xiangdong Liu, Zhihi Xiao and Jin Liu. (2009) Improving Supply Chain Performance Management: A Systematic Approach to Analyzing Iterative KPI Accomplishment. Elsevier: Volume 46, Issue 2, Pages 512–521. 3. KPMG. (2012). Supplier Category Management: Driving Value through the Procurement Organization. Available at: http://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/supplier-category-management.pdf 4. Paul A. Bartlett, Denyse M. Julien and Tim S. Baines. (2007) Improving Supply Chain Performance through Improved Visibility. The international Journal of Logistics Management. 18:2, 294-313. 5. Tomas Hult, David Closs, and David Frayer. (2014) How Global Should Your Supplly Chains Be: Global Edge Business Review: Vol. 8, No 2. Retrieved from www.viewpointpartners.com/fileadmin/.../arcplan_case_study_OMV.pdf 6. Yip, George S. and G. Tomas M. Hult (2012), Total Global Strategy. Upper Saddle River, NJ: Pearson Read More