Viverra Motors Supply Chain Management - Case Study Example

Analytical Report (Name of Student) (Name of University) Confidential- Proprietary Material: I particularly request that the recipients of this report treat it in uttermost confidential manner and no copies of this report be made, other than the ones proposed for the internal use. Thanking you for obeying these conditions. Table of Contents………………………………………………………………...page Confidentiality…………………………………………………………………….2 Executive summary………………………………………………………………4 Introduction……………………………………………………………………..4 Responsive supply channel and effective supply channel………………………..6 The organization life cycle and clock speed of parts and products………………7 The collaborative planning, replenishment and forecasting……………………..8 The major activities of this Collaborative Program………………………………10 The challenges of supply chain management……………………………………12 Conclusion……………………………………………………………………….14 References……………………………………………………………………….15 Executive Summary: This report is about how supply chain management of Viverra Motors can help reduce space and investments requirements while maintain sufficient service levels. The discussion reflects on how the supply chain operations can offer a sound foundation for market competitiveness and a sustainable growth for Viverra auto Supermarket. Once it is comprehensible regarding the subject of supply chain operations, the talk is extended on how to establish a supply network from the new acquisition and develop new strategic partners, how to offer the right product to the desired customer at an appropriate time and at the desired place. The supply chain operation is concerned with merely moving of from the manufacturer to the stores and eventually to the end user. The objective of the supply chain operations should be to develop value for the for all the investment partners with much emphasizes on the consumers. The structure to achieve value added functions in the supply and purchase chain should be collaborative planning, replenishment and forecasting among the all the players (Kwok, 2000). Introduction: The supply channel management is a package of synchronized activities and decisions applied to effectively integrate manufactures, suppliers, warehouses, retailers, transporters and customers so that the appropriate service or product is delivered at the right time, to the right destination and at the right quantity, so as to reduce system-wide expenses while fulfilling customer services requirements. The aim of the Viverra Motor’s supply channel management should be to attain sustainable competitive edge. Viverra Motor’s supply channel in an e-Biz environment appears to be sophisticated. This is because the company has various supplies and customers for its products. The organizational supply chain comprises the internal supply channel functions, an upstream purchasing network and a downstream supply network. Therefore the logistics function enables the physical flow of materials from the manufacturer to the stores and finally, the consumer. The organizational chain of supply is fundamental to Viverra Motors; it should ensure that the sourcing, distribution and production is efficient. Purchasing or sourcing department should be responsible for identifying suppliers, formulating the purchasing process, negotiating contracts and processing the orders. The supply should be responsible for the overseeing the effective flow of parts and other materials inventory from the manufacturer to the auto supermarket (Doukas, 2006). The company should implement Enterprise Resource Planning programs (ERP), this will ensure that the company integrates the entire information systems, data store and processes, across the business units, functional areas, and service lines to help all the managers make investment decisions. Being an IT structure, ERP will create impact on the way in which Viverra Motors will run its day to day operations and improves the flow of information within all the purchasing processes. Responsive supply channel and effective supply channel. The major cause of purchasing chain failure is lack of understanding of the demand nature. The existence of lack of understanding will automatically result into mismatched supply chain processes. So that Viverra motors take care of this, the company needs to establish some two characteristic approaches, which are a responsive supply chain and an efficient supply chain. The objective of a responsive supply channel is to react effectively to the market demand. This kind of supply chain is best fitting our situation since the demand predictability is quite low, the product life is relatively short, there is constant new product introduction and the error in forecasting is quite high and lastly the product variety is massive. The company should ensure that the supply channel program matches the competitive precedence focusing on rapid reaction time, quick delivery times, development speed, volume flexibility and customization. The organization needs to emphasize on intermediate or flexible flows, low inventory levels, high capacity cushions and short cycle time as the main features of the responsive purchasing or supply chains (Boalow, 2004). The function of a competent supply chain should be to coordinate the flow of parts and services to reduce the inventories and increase the efficiency of services providers and manufacturers along the chain. The reasons as to why this model is not appropriate for Viverra Motors is because it ideal for a business environment which the demand is greatly predictable, the product life cycle is long, the variety of the product is less, the new production introduction is rare, the forecasting error is minimal and order fulfillment source time is minimal. Efficient supply channel Responsive supply channel Demand Based on projection, constant Based on the orders of customers , Fluctuate Life cycle of the product Long Short Variety of the product Low High Contribution margin Low High Fulfillment of order lead time acceptable longer lead time fulfillment Based on quoted date, and is short Supplier Should be long term Depends on the product life Production Make to stock Make to stock Assembly to order Build to order Capacity cushion Low High Inventory Finished goods inventory Parts, subassembly, components Supply selection Consistent quality, low cost, timely delivery Fast delivery, flexibility, Table 1: effective supply channel and responsive supply channel. The organization life cycle and clock speed of parts and products In respect to clock-speed of the product, automobile industry falls somewhere in the middle. The products do not change as quickly as the information and entertainment industry, and at same time it is not as slow as aero industry. The passenger vehicles for instance, have a product life of about 3 to 5 years. When it comes to its process clock speed, every time the organization develops a new model, we should expect that a lot of that investment to be outmoded in 4 to 5 years. Therefore, our supply chain should mirror the nature of the product clock speed, comprehending what would make it more likely for us to have an efficient supply channel and vise versa (Lecraw, 1997). Assessing the clock speed of the parts, materials, organization and process shall enable us to see with accuracy greaterity the future needs of our customers. Fast clock speed Medium clock speed Slow clock speed Organization 2 to 10 years 2 to 25 years 20 and above years Process 2 to 10 years 2 to 25 years 5 years and longer Product Less than 6 mon- 2 years 3 to 15 years 10 years and higher Table 2: clock speeds. The collaborative planning, replenishment and forecasting: The aim of the contemporary supply chain progress is the collaboration across the chain of supply. When there is no collaboration within the supply chain, these results into redundant inventory stock, inefficient production and inflated costs. Let take these two examples to illustrate the mentioned points. One, it normally takes a pack of cornflakes more than 3 months so that it’s eventually delivered to a supermarket shelf from the factory warehouse this is purely because of the ineffective supply strategy. Two, it often takes a vehicle an average of fifteen days to move from the plant to the showroom of a dealer, which needs four to five days to travel. A lot of retailers and suppliers have studied the trend of demand fluctuation in the upstream of the distribution chain. The manner in which most retailers place their orders at the factory can easily fluctuate easily than the retail sales. This concept of developing demand variability in a supply chain is known as the bullwhip effect. The bullwhip impact is basically the synthetic distortion of consumer demand statistics as they are conveyed back from the retailers to the suppliers. One way Viverra Motors can address the effects of bullwhip generated by order batching is to forecast car demand, collaboratively plan production and replenish the inventory. This will result into small order volumes, smoothened production capacity and more often order replenishment to take care of the small store that Supermarket branch. The organization will therefore have a smooth flow of small orders that the retailers and distributors would be capable of managing more effectively. The company also needs to engage in collaborative contracts with the supply chain associates to develop forecasting, ongoing planning and the replenishment process. Such a collaborative initiative should ensure that the supply chain investment partners shall jointly plan fundamental supply channel functions starting from the production and delivery of the materials to the final product and lastly the end consumer (Boalow, 2004). The aim of this initiative will be to maximize the purchasing chain through designed demand forecast, with the right parts, lubricants and cars delivered at the planned time to the Supermarket showroom, with minimal inventory, evading stock outs and enhanced customer service. The value of this program will focus in the wide exchange of projection information to enhance the accuracy of forecasting when Viverra Motors collaborate via joint knowledge of promotion, sales and relevant demand and supply information. The major activities of this Collaborative Program: The three main activities of this initiative should include, forecasting, planning and replenishment. Each activity has a couple of steps that are involved. Planning: Planning begins with an agreement which outlines the responsibilities of the organizations that Viverra Motors should collaborate with in delivering right products to the consumers. The agreement terms and conditions should be negotiated first. Thereafter, a joint investment plan concerning sales promotion, demand management, timing, inventory level, production quality, will be established. Forecasting: First and foremost, the consumer demand should be predicted by all the parties participating. Then, any discrepancies in demand within the participating organizations should be acknowledged and resolved. Lastly, a feasible sales projection for every participating firm should be structured. Certain modifications should be carried out occasionally to mirror the changes in the market demand (Lecraw, 1997). Replenishment: foremost, we need to know the orders for all our competitors. We also need to develop a delivery schedule, so that our orders can be fulfilled. When we develop a collaborative supply chain, the organization will establish a significant competitive advantage over our competitors. Prominent firms are already starting to spear head the way. Corporations for instance Dell Inc, Wal-Mart among others share point of sale information with all the firms that fall within their respective chains of supply. The organizations in these chains of supply are also beginning to share inventory information with one another. Sharing this type of date generates a basis for every organization to make decisions regarding their individual activities that deliver better efficiencies and greater profits and for the entire supply chain. Collaboration in forecasting, replenishment and production brings various benefits. The first one being the diminishment of the bullwhip effect since all the firms within the supply framework will access real time sales information and forecast of sales share. This will help every partner in the supply chain to establish ideal inventory levels, better production schedule, and a pragmatic delivery plans. The other advantage is that all the parties in the supply channel shares decline and rise in the demand of the customers. This will make the adjustments to the formerly planned levels of production made appropriately. This will assist our retailers not to loss sales as a result of getting out of inventory or loss revenue as a result of surplus of parts and lubricants. One thing that we should remember is that this initiative is not easy to implement and we should be realize that it could take same time to be fully embraced by everyone. The challenges of supply chain management: One concept that is missing in Viverra Motors is the integration of the supply chain. Though it has great benefits, it has some challenges which the company needs to take into consideration. To begin with, the supply chain is an incorporated system that needs coherent decision to maximize the system value and profit. In daily running of the business such as in Viverre Motors, various facilities within the supply chain seem to have inconsistent objectives. Secondly, the organization has a dynamic system of supply chains, which continually evolve and have their own life cycles. For instance, the demand by the customers and the capabilities of the supplies change with time and this also affects the supply chain relations. According to Errunza & Senbet, (2004), with the new network acquisition such dynamic systems can be avoided since they will have to deal with a various suppliers and different customers. Customers will therefore be able to find a collection of various parts and materials under one room. The new acquisition will also enhance the market reputation and boost confidence in our products. The company will now be dealing with various supplier and in case they is a weakening relation with one of the suppliers, we will still be able to sustain the steady supply of the other two models as we forge head to establish another supplier. The major weaknesses of the present purchasing and inventory management at the firm include; 1. the in- process inventories are very high, 2. the scheduling and routing pose perennial challenges, 3. the parts handling is costly and inefficient, 4. the complexities of the job is narrowing the management span, 5. the special attention is yielding a higher per unit expense and finally the accounting, inventory and purchasing management functions are complex. With the new network acquisition these weakness can be affected by: 1. capital costs will be spread over various units 2. enables broad span of supervision 3. the showroom will be amenable to greater through put 4. scheduling and routing will be automatic 5. Purchasing, inventory and accounting will be fairly routine Conclusion: A couple of significant challenges exist not only for the CEO but also to the purchasing manager. Since the top management of the Company is worried about the finances and the space to stock up the purchased materials. Through brain storming on various avenues through which the supply chain, inventory and purchasing departments can help provide solution, certain key elements were suggested. The first one was that the supply chain should be positioned to coordinate the flow or materials and parts to reduce the inventories, as this take care for the space concerns. Viverra Motors should embrace ERP, this will improve the integration of the entire information systems, processes and data store, across all the investment units and service lines and this will greatly guide managers in making decisions and formulating policies. Based on the IT platform, the ERP will create effect on the manner through which the company will manage its daily business operations and enhance the flow of information in all purchasing needs. Finally, the Company needs to develop a responsive supply chain to avoid mismatch of the customer demand nature. References: Boalow, J. (2004).Transformation of Economy Real. Houston Chronicle, July 16, 2000. Hall, K. (1997). Information distortion in a Supply Chain. The Bullwhip Effect. Management Science, 23, 4. Steermann, P. (2008) A practical look at CPFR: the Sears – Michelin experience.”Supply Chain Management Review, May / June 2008, pp. 16-33. Mitchell, K. (2001). The Call, Sinking Fund, and Term-to-Maturity Features of Corporate Bonds: an Empirical Investigation. Journal of Financial and Quantitative Analysis, 16(5), p20-22. Lecraw, K. (1997). Direct Investment by Firms from Less Developed Countries. Oxford Economic Papers, 19(6), 142-157. Kwok, Y.(2000). Internationalization and Firm Risk: An Upstream-Downstream Hypothesis. Journal of International Business Studies, 21(4). Eiteman, D. and Moffett, M. (2005). Multinational Business Finance, 9th edition, Addison-Wesley, USA. Errunza, V., and Senbet, L. (2004). International corporate diversification, market valuation and size-adjusted evidence. Journal of Finance, 14, p227-245. Doukas, A. (2006). Geographic diversification and agency costs of debt of multinational firms. Journal of Corporate Finance, 10, p19-72. Read More