Concurrent Product and Supply Chain - Research Paper Example

Concurrent Product and Supply Chain Name: Institution Executive summary Today, large companies are mainly focusing on becoming efficient and flexible in their manufacturing methods in order to handle uncertainty in the business environment. To do this, they need different strategies to manage the flow of goods from the point of production to the consumer. However, most firms have not been able to formulate the right strategies required to achieve this objective in Supply Chain Management (SCM), this calls for a strategic fit of an organization’s core competencies, strategy and core capability. The paper focuses on SCM best practices A company should also have in place a standardized manufacturing process. For the process to be more efficient it should be broken down into modules. Through the correct use and application of service inventory, companies are able to offer quality, faster response times and more competitive pricing. Firms that are seeking enhance their competitive advantage through the service inventory, should carefully consider and pay close focus to the four major service attributes of quality, speed, customization and price. In order to achieve optimal inventory investment, companies should re-strategize on how to place inventory through their channels, they also need to appropriately apply postponement and risk pooling strategies and how to leverage their inventory abilities with those of their partners in trade. TABLE OF CONTENTS Executive summary………………………………………………………………………………..2 1.0 Introduction……………………………………………………………………………………4 1.1 Background……………………………………………………………………………………4 1.2 Aim………………………………………………………………………………………........5 1.3 Purpose………………………………………………………………………………………...6 2.0 Discussion …………………………………………………………………………………….6 2.1 Question 1……………………………………………………………………………………. 6 2.2 Question 2……………………………………………………………………………………..8 2.3 Question 3……………………………………………………………………………………..9 2.4 Question 4……………………………………………………………………………………11 3.0 Recommendations……………………………………………………………………………12 4.0 Conclusion………………………………………………………………………………..….13 Reference List…………………………………………………………………………………...15 1.0 Introduction Supply chain management is the management of supply chain activities to increase customer value in addition to attaining a competitive advantage. According to Doran (2003), it entails a collective effort by the firms in the supply chain to develop and run the chain in the most effective and efficient manner. The activities in the supply chain cover every process starting with product development, sourcing, production and logistics. The firms in a supply chain are interlinked through physical flow of products and information flows. Physical flows include the transformation, transportation and storage of goods and raw materials. They are the visible part of the supply chain. On the other hand the information flows enhance coordination by the various supply chain partners in their long-term plans as well as coordinating the flow of goods and materials through the supply chain (Jones &Towill,1999). Supply chain management entails the management of networked businesses so as to avail goods and services as required by the end customer in the supply chain. It involves all movements and storage of the raw materials, and management of inventory and the end product from the manufacturing point to the consumption point with the objective of creation of net value, setting up a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and global measurement of performance (Rich &Peter, 1997). 1.1 Background Large companies today mainly focus on becoming efficient and flexible in their manufacturing methods in order to handle uncertainty in the business environment, they need different strategies to manage the flow of goods from the point of production to the end user. However, they have not been able to formulate the right strategies required to achieve this noble task in SCM. Hence a call for a strategic fit of an organization’s core competencies, strategy and core capability, which is an emerging paradigm in the study of strategic management and specifically in SCM Corporations have increasingly turned to global markets for their supplies. It is noted by Stanley and Gregory (2001) that the globalization of supply chains has forced companies to look for better and more inter-linked systems between SCM competencies, multiple SCM strategies and the implementation processes and SCM capabilities to coordinate the flow of materials into and out of the company as opposed to the fragmented systems, which have characterized many organizations. Companies and distribution channels today compete more on the basis of time and quality, having defect-free products to customers faster and more reliably than the competitor is no longer seen as a competitive advantage but simply as a market place requirement (Vergin & Barr, 1999). Customers consistently demand that products be delivered faster, on time, and with no damage. This can only be achieved with proper coordination of efforts by linking systems and processes to create synergy. Each of these necessitates better coordination with suppliers and distributors, and constitutes the linkage between SCM core competencies; strategy and SCM core capabilities, which are not easy to match. This combination creates a competitive edge within the system that cannot be copied by the competitor in the market place hence becomes core capability of the firm. 1.2 Aim This paper looks into the concurrent product and supply chain management the challenges involved in regard to supply and product development. It also looks into how design for logistic concepts could be applied to control logistics costs and on ways to make the supply chain more efficient. 1.3 Purpose The purpose of this paper is to bring out the various concepts of supply chain management theories tools and models used in the analysis and development of a supply chain. The global orientation and increased performance-based competition, combined with rapidly changing technology and economic conditions, all contribute to market place uncertainty. This uncertainty requires greater flexibility on the part of the individual companies and distribution channels, which in turn, demands for more flexibility in channel relationships (Pagh &Cooper, 1998). For this to be achieved, a firm must have a fit between SCM competencies, implementation of strategy and SCM capability with its suppliers and distributors as discussed in this paper. This will enhance competitive advantage of the business and improve corporate performance. 2.0 Discussion 2.1 Question 1. According to Dapiran (1992), in supply chains that are for global distribution, the logistics decisions of location of distribution centers, sourcing and the general distribution cycle are greatly influenced by many factors and challenges. These include; rampant competition, fluctuations in value of currency, international trade agreements, tariffs and laws and incentives on tax by governments. These factors are significant in deciding where to design, produce, assemble and market the products. For instance government policies in most countries require strict adherence to environmental rules and regulations. This is as indicated in the case study in regard to HP that the increased attention and care accorded to the environment has led manufacturers to put in place new techniques to design products and supply chains that are more economical and environmental friendly. Competition is another challenge that is quite evident among different organizations in different supply chains. Just like any other industry, competition is rife in the printer industry. It is noted in the case that the printer industry was highly competitive as traders of HP products were seeking to carry minimal inventory while still maintaining a high level of availability at the distribution centers for resellers. The exchange rates variation of foreign currency calls for careful focus, particularly in supply chains distributed across the world. This is because the overall allocation costs of production, inventory and transportation are vital instruments in the strategic decision making. They should therefore be calculated putting into consideration the currency exchange rates expected or forecasts. It is therefore of utmost importance for a company to consider and pay attention to the currency exchange rates trends where their markets, suppliers and manufacturers are located (Blackhurst & O’grady, 2005). With the ever growing customer needs and requirements it is always a challenge for a company to meet these demands while keeping costs low. For instance, HP found itself in a tricky situation whereby they had to have a high level of production and inventory levels so as to meet the varying consumer needs. For the company to operate efficiently it needed to minimize the level of inventory but at the same time meet the customer needs satisfactorily through availing their preferred products. This is as indicated in the case that there had been a reduction in some versions of the the product availed to customers at the European distribution center despite a considerable shipment to Europe in the previous month. This shows that irrespective of the high levels of inventory, the company’s products were not meeting the diverse customer requirements hence the reduction in some versions that customers preferred in place of others. 2.2 Question 2 Design for logistics refers to a span of concepts in the supply chain management which entails the approaches to products and design that would be useful to control logistics costs while at the same time increasing customer service levels (Dapiran, 1992). These concepts include economic packaging and transportation, concurrent and simultaneous processing as well as standardization. Economic packaging and transportation ensures that products are designed and efficiently packed and stored. Efficiency in the transport systems enable one’s access to benefits such as better accessibility to markets, employment and additional investments thereby reducing costs. Companies must therefore find ways to make movement of products in their supply chain more efficient and less expensive. In terms of controlling logistics costs, packaging and transportation can be improved to save costs. For instance, if products parts are ferried in bulk in place of shipping already assembled products, a company could make a lot of savings. Parallel and concurrent processing would be of importance when there is need to reduce the time taken to manufacture a product. It also enhances forecasting as many product components can be made at the same time ( Waller et al, 1999). When it comes to products that have components that need to be purchased and the supply is not known with certainity, a company should buy the said part in volume hence having a high inventory of that component alone instead of having high levels of inventory of the entire product as seen with HP where, after adopting a fast-high volume manufacturing process the company was still facing a big challenge. They had not been able to bring forth a successful high volume product. for instance according to the (HP case) it is noted that the early models had poor resolution and required special paper for printing hence leading to its unsuccessful market spell. This way a company will be able to maintain low inventory levels while meeting the specific and varying customer needs. According to Van hock (2001), a company should also have in place a standardized manufacturing process. For the process to be more efficient it should be broken down into modules. 2.3 Question 3 Over the past few years, many businesses have shifted from the idea of pushing product by developing inventory with expectations of demand. Many organizations and companies in the modern markets have adopted the pull environment whereby products are developed only in demand hence moving to the push-pull boundary ( Bucklin, 1965). By ensuring that the amount of work done before there is actual demand is minimized, companies find themselves in a position to avoid costly mismatches in supply and demand. For instance there is no idle inventory lying in the warehouses hence minimizing the holding cost. Inventory management can be looked at on two fronts. This also includes service inventory. Service inventory includes all processes that are completed before the customer arrives. Just as with physical inventories, service inventories enhance firms to be in a position to look into their resources from the variability of demand hence enjoying the benefits of economies of scale while at the same time responding faster to customers (Christopher & Towill, 2001). Through the correct use and application of service inventory, companies are able to offer quality, faster response times and more competitive pricing. In elaborating further on the inventory management of goods and services, it is evident that postponement strategies developed during manufacturing have a possibility of improving service performance. According to Zinn (1990), a focus on the postponement at the service push-pull boundary facilitates the performance of more activities in advance. The benefits of this include, cost reduction and shortening service delivery time. Postponement also tends to help service providers in relocating the line of visibility to develop a more effective service operation. Through push-pull boundaries firms tend to have a competitive edge over their competitors. Christopher et al (2004) notes that, this is because due to the existing competition, companies rarely operate individually. They therefore resolve to have strategic partners for the purpose of increasing synergy. This way they tend to focus more on their core competency and outsource the other part of the business process. The idea behind this strategy is to ensure that each party of the supply chain is more efficient and effective than competitors in other supply chains. Push-pull boundary distinguishes the part of the organization centered towards customer orders from the part of the organization based on planning. It also enhances the separation of customer order set of activities from those activities that are based on forecasting and planning (Christopher & Towill, 2001). Firms that are seeking to enhance their competitive advantage through the service inventory should carefully consider and pay close focus to the four major service attributes of quality, speed, customization and price. For instance, moving the push-pull boundary towards the market and adding to the service inventory levels is significant in increasing service quality. Moving the push-pull boundary towards the downstream players in the supply chain and the end user can facilitate considerable savings in cost which in turn enhance greater price flexibility by goods and service providers (Blackhurst & O’grady, 2005). These savings could be attributed to utilizing less expensive resources and developing self-service options. Zinn (1990) notes that paying more attention to the push-pull boundary avails a company a discrete way to tackle service management. In establishing where to set the boundary goods and service providers should focus more on the service inventory so as to provide structure and support to the service come across. It is important for the company to ask itself questions such as what do customers value? Do they prefer a fast, simple process or a single point of attachment that can deliver a variety of services? Focusing on the push-pull boundary also enhances a company to design their products or services processes. This way they are able to establish which processes or steps they should complete in advance so as to push the push-pull boundary closer to the market as well as boosting performance to higher levels. 2.4 Question 4 Despite inventory being one of the most valuable assets to a company, it is evident that most companies do not manage it in the most effective manner. Most manufacturers and distributors rely on outdated, simple and localized inventory policies. By this companies are not able to retain customers, and tend to tie up working capital (Stanley &Gregory, 2001). However for those companies that have managed to break free of this practice are able to reduce on hand inventories and drive improvements in time to market through supply chain inventory management initiatives. This has been achieved through changing how products are designed, how replacements are done and calculation of inventory policies hence improving drastically in their financial performance and customer satisfaction as well. According to Huang et al (2005), In order to achieve optimal inventory investment, companies should re-strategize on how to place inventory through their channels, they also need to appropriately apply postponement and risk pooling strategies and how to leverage their inventory abilities with those of their partners in trade. To put in place and implement a supply chain inventory program, technology plays a significant role. This is because through the appropriate technological support, companies are in a position to position their inventory at optimal levels around the globe through the supply chain instead of doing it locally. It also enhances mutual inventory processes with suppliers (Huang et al, 2005). In the modern world, companies can adopt a set of already proven supply chain inventory practices. This opportunity allows companies to reduce their inventory levels across their organization while simultaneously improving service levels and productivity. This way the companies are in a position to help their suppliers to reduce their inventory levels as well. By following the approach companies are also in a position be more responsible and reliable to customers (Christopher & Towill, 2001). 3.0 Recommendations Manufacturers need to have their focus on being more agile and responsive, planning, forecasting and reacting appropriately to the market changes through setting up a proper supply chain configuration while also paying attention to globalization aspects such as trends in the exchange rate variations as noted by Christopher et al (2004). It is important to a company to consider the critical aspects of a supply chain and product design so as to determine the optimal product structure and the global supply chain configuration in a suppliers, manufacturing facilities and distribution centers global supply chain system. It should put into consideration the procurement costs, production, inventory and transportation costs along with the impact of changes in the global market currency exchange rates. Different countries are very competitive in attracting and sustaining international investments and jobs in the countries. Some of the countries offer attractive packages of leverage contribution schemes, international trade agreements and tax incentives. Therefore decisions regarding the location of manufacturing facilities in international markets must consider all these considerations with respect to location, monetary value to be achieved in relation to the exchange rates in addition to making an effort to reduce the total cost of the global supply chain while maximizing profits. It is also important for a company to keep their inventory strategies up to date with real life conditions. With the ever changing market environment and global sourcing and contract manufacturing strategies that bring about more variability, it is important for companies to frequently update their strategies so as to be in line with the market conditions. 4.0 Conclusion With the level of competition in the global market today coupled with the ever increasing customer requirements with regard to quality products, companies are required to be more aggressive and agile in responding through the supply chain together with an optimized and globally interconnected configuration of the supply network. In the modern world for a company to be successful in the market place there needs to be a well balanced combination of strong brands, innovative technologies and an integrated supply chain that is flexible enough to respond to the market demand and the varying conditions. The performance of a company at the location of the push-pull boundary is one of the critical factors for the success of a supply chain. It is of essence to pool the risks of the supply chain at the push-pull boundary as it is a critical factor for the success of a supply chain. It is therefore notable that distributors have an important aspect in the supply chain. They can enhance the effectiveness and efficiency of the supply chain by moving the push-pull boundary away from the manufacturer and close to the end user. References Bucklin, L.,P. 1965. Postponement, speculation and the structure of distribution channels. Journal of Marketing Research, 2, 26-32 Blackhurst, J., & O’Grady, P. 2005. PCDM: a decision support modeling methodology for supply chain, product and process design decisions, Journal of Operational Management, 23, 325-43. Christopher, M., Lowson, R., & Peck, H. 2004. Creating agile supply chain in the printer industry. 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Developing heuristics to estimate the impact of postponement on safety stock. The International Journal of Logistics Management,1, 11-16. Read More