The Supply Chain Relation between Success Inc and ABC GmbH Company - Case Study Example

Executive MBA Program EMBA 657 Supply Chain Management Supply Chain Management Small Supplier, Big Volume Submitted Date: 24th Feb 2012 Prepared to Dr. Emerson Prepared by Mohammed Al Otaibi – ID: 950002783 Contents Small Supplier, Big Volume 1 Contents 2 1.0 Time context 3 2.0 Viewpoint 3 3.0 Central Problem 5 4.0 Statement of Objectives 6 4.1 Must Objectives 6 4.2 Want Objectives 6 5.0 Areas of Consideration 7 5.1 External Environment 7 5.1.1 Threats 7 5.1.2 Opportunities 7 5.2 Internal Environment 7 5.2.1 Strengths 7 5.2.2Weaknesses 7 6.0 Alternative Course of Action 8 7.0 Final Decision 9 8.0 Detailed Action Plan 10 1.0 Time context The realization of the inability of ABC GmbH Company to supply the required contents by Success Inc was highlighted at personal level by concerned dedicated employees. One of them is Jill Turner a business analyst o suppliers. The next person is Jack Smith from sourcing section. The concern was explicitly analyzed by the two during their 7 P.M phone chat. In this event, Jack Smith noted that ABC GmbH Company could do the investment on its own to supply the required contents as stipulated in the agreement. This is as result of ABC Company being involved in a management buyout without any venture capitalists. Hence, meaning that financing has to be very tight. Thus, this meant that Success Inc entrusted a Small Supplier with big volume of work. 2.0 Viewpoint The supply chain relation between Success Inc. and ABC GmbH Company is not in the line with the theoretical and practical expectations of integration and cooperation. In one instance, ABC GmbH Company is not able to meet its contractual obligation and thus, operations of Success Inc. are nearly grinding to halt. However, this was as a result of Success Inc procurement department not being able to see the financial abyss that the contracted company was. Moreover, even from the outlook and present ability of the ABC GmbH Company employees and premises, it showed a total failure. In addition, the same company was small in capacity yet it was entrenched with the duty of supplying voluminous contents. From the above instance, it seems most of the managers at Success Inc. pegged their decision based on the old approach of unilateral domination and completion in supply chain. To curb this, there is an agent need for Success Inc. to shift their focus into another supply with higher capacity and ability to finance the process. Moreover the company should try and invest in a mutual relationship with its suppliers since they are integral part of their lifeline, success and market leadership. Supply chain management philosophy is pegged on the system view approach rather than a set of fragmented parts. This translates to the fact that supply chain management extends the concept of partnership into a multiform effort to manage the total flow of goods from the supplier to the ultimate customer. Thus, each firm in the supply chain directly and indirectly affects the performance of all other supply chain members, as well as ultimate, overall channel performance (Mentzer, 2001, p. 9). Hence a firm should not keep any supplier that is not functioning as agreed. In relation to the current situation between Success Inc. as the contracting firm and ABC GmbH Company as the contracted company, there has been the lack of fulfillment of contractual obligation. Due to this kind of scenario, Success Inc operations are nearly grinding to halt as result of lack of raw materials. There has been some let down since the contracted company has not been able to fulfill its obligation as result of the Company being involved in a management buyout without any venture capitalists. Hence, meaning that financing has to be very tight. Thus, this meant that Success Inc entrusted a Small Supplier with big volume of work. But for future survival and with the situation on the ground, to avoid further losses Success Inc. should discard this inefficient supplier. One way in which a firm can increase their profitability and market leadership is by reduction of operating cost through cost cutting measures. One key area of cost cutting measures is by concentrating on core functions of the firm. This can only be achieved by efficiently integrating suppliers, manufacturers, warehouses, and stores so that merchandise is produced and distributed at the right quantities to the right location and at the right time (Simchi-Levi, Kaminsky and Simchi-Levi, 2004, p. 2). However, this kind of arrangements normally faces numerous challenges which are dynamic and complex (Simchi-Levi, Kaminsky and Simchi-Levi, 2004, 4, 5 & 6). According to Simchi-Levi, Kaminsky and Simchi-Levi (2004, p. 7), in the 1980, companies discovered new manufacturing technologies and strategies that allowed them to reduce costs and better compete in different market segments. However, in the recent there has been a paradigm shift towards supply chain management so as to increase profit and market share. Thus, Success Inc. should only engage another company apart from ABC GmbH Company which is able to meet their expectations in terms of quality, efficiency, cost cutting and market leadership. 3.0 Central Problem Success Inc. contracted ABC GmbH Company to supply it with raw materials for its operations even though ABC GmbH Company could not meet their obligation due to their small capacity in terms of capital outlay. This is contrary to the concept of supply chain management which is tied on the premise of improving performance across the entire industrial logistics network. The motivation is on the notion that companies that have already streamlined their internal business process should optimize their external relationship with their business partners (Hieber, 2002, p. 1). In a simple overview, supply chain relates to a network of facilities and distribution option. These networks perform the functions of procurement of materials, value addition, and distribution of these finished products to clients. A key to improved supply chain management lies in the new trend of integration and coordination rather than competition (Cousins, Lawson and Squire, 2006, p. 757). In addition, much of the theory in supply management is based on idealized schemes of optimal routes and quantities for demand fulfillment when considered from a whole-network or chain perspective (Cousins, Lawson and Squire, 2006, p. 760). However, the above ideal situation is not the case between Success Inc. and ABC GmbH Company. Thus, this kind of arrangement should be terminated. 4.0 Statement of Objectives In order to mitigate over this concern, this paper proposes numerous objectives and yard sticks that should be attained by Success Inc. Company through integration and cooperation so as to ensure smooth operation and path towards market leadership. 4.1 Must Objectives To advice the company to entrench integration and collaboration concept in supply chain management with any supplier so as to optimize their external relationship with their business partners. To propose to the company that they should critically analyze contracted companies financial position, honesty and capability instead of picking the lowest bidder. To propose to the company to adopt system view approach in managing their supply chains. 4.2 Want Objectives To advice the company to seek new supplier for their input materials. To advice managers not to allow company employees bring personal vendetta against would competent and qualified suppliers. To advice the company to make it mandatory for bidding firms to submit alongside other requirements their financial statements and previous completed projects. To advice the company to adopt holistic approach while seeking for suitable suppliers by involving all departments and quality assurance team. 5.0 Areas of Consideration 5.1 External Environment 5.1.1 Threats A company can not operate without timely delivery of key inputs required for its operation. The significant threat that is accosting Success Inc Company relates to its inability to build an integrated and cooperative network with its suppliers. This is threatening to ground their operations into halt. 5.1.2 Opportunities The firm should take the advantage that there are other numerous supplier who are capable and are willing to partner with them so as to build a strong supply network. 5.2 Internal Environment 5.2.1 Strengths The company has at her disposal employees with diverse background and qualifications which if well tapped can lead to appointment of well qualified partners. In addition, the top level management enjoys close working relationship with numerous suppliers and this should work to their advantage 5.2.2Weaknesses The internal organization of the company is wanting. This is evident since even with different qualifications in their ranks they could not settle for a credible supplier. In addition the concern of eminent failure is only handled by two employees and at not board or departmental level. This shows lack of seriousness towards external links. 6.0 Alternative Course of Action The approach that will be taken is based on the ACAs approach. The ACAS Code advocates that any issue of discipline/grievance must be handled promptly without any unreasonable delay, including the initial investigation, meetings and confirmation of any decisions made; that contracting company must act consistently; and that it must establish the facts of the case, give the contracted company the opportunity to state their case, allow them to be accompanied to any meetings held and give the them the right to appeal against any decision made. The procedure entails ascertaining whether there is indeed a disciplinary issue, and for this case it is true since ABC GmbH Company is not able to meet its contractual obligation to Success Inc. Secondly, notify the contracted company of the disciplinary issue in writing, and in this case the procurement office should forward their concern to ABC GmbH Company due to their inability to meet the agreement. Thirdly, conduct the disciplinary meeting without unreasonable delay. Subsequently, give both parties the opportunity at the meeting to present their case, including allowing time for any witnesses called to be cross examined. Then once the meeting has finished the employer must go away and make a decision based on the evidence that was presented at the meeting, and this is where Success Inc will decide whether to drop the company or opt for other remedies. Finally, if need be, any appeal hearing should be held (if possible) by someone other than the person who conducted the disciplinary meeting (in order to maintain impartiality). The first course of action would be retaining ABC GmbH Company who was the initial identified supplier. However, since ABC GmbH could do the investment on its own was involved in a management buyout just three months ago without any venture capitalists since; it will force Success Inc to invest in the company through financing the investment. The advantage of this approach is that raw material supply will not be cut short as their will be continuity. In addition, the contracting company will not be forced to go back to drawing board while searching for new supplier. However, on the other hand the disadvantage would be that the contracting company will be spending a lot of resources in their non core areas which otherwise would have been used for core function expansion. The second option would be to discard ABC GmbH Company and opt for a new supplier like Elite Ltd. This would lead to time lags due to vetting process and might lead to short to mid term discontinuation in the operations. On the other hand the advantage would be that the company would be able to source for a new credible supplier with the capacity to abide with contractual agreement. The third last option which might prove to be expensive, but a safety net in terms of continuation would be to co-opt another firm alongside the initial contracted company. This would ensure continuity and at the same time co-option of credible supplier while at the same time taking to re-evaluate their relationship with their initial supplier. Thus, to me, the best course of action would be to terminate the contract of initial supplier then shop for another one. 7.0 Final Decision Firms normally have what is called forward and backward linkages. A firm operates like a system whereby it can not operate single handedly without input from other sources. In realization of this reality, firms are usually compelled to source or contract certain product/services. This kind of approach then allows then to concentrate on their core functions rather than try to be a jack of every trade. Thus, in order for a company to improve their long-term performance and stay afloat, there is need to analyze the probable supplier in terms of their capability, capacity, efficiency and financing among others. In addition, the firms need to create a good rapport with its suppliers (Mentzer, 2001, p. 5). Thus, for this scenario, Success Inc. has no option but to terminate contractual agreement with ABC GmbH Company due to their inability to meet contractual obligation. 8.0 Detailed Action Plan The Implementation Matrix summarizes the planning issues identified, objectives, strategies to be applied, actions to be undertaken, actors and the period within which the action should be undertaken. Issues Objectives Strategy/ action Actors Time frame Termination of contractual agreement with ABC GmbH Company The company should terminate agreement due to inability of the contractor. Secondly, the company should adopt new approaches to supplies management The company should strengthen supply chain management by improving performance across the entire industrial logistics network. Supplies management/ procurement office Quality assurance department Human resource officer Should start immediate if projected that the initial supplier is totally incapable Immediate contracting of another supplier To immediately find capable and efficient supplier so that the company operations do not stop The company should embrace tough conditions for its suppliers by requiring financial statements and completed projects Chief financial officer Supplies management/ procurement office Quality assurance department Should start when proved that the services of the initial contractor is unwanted Co-opting of another supplier To ensure stability by co-opting another credible supplier If approved, the Success Inc. should co-opt new supplier who is credible Supplies management/ procurement office Quality assurance department Should start when proved that the services of the initial contractor is wanting Read More