Logistics Processes of Fresh Mart and Seal Honey - Vulnerability Dimensions, Status - Essay Example

?Topic: Logistics processes of Fresh Mart and Seal Honey – a comparison of vulnerability dimensions, status and SCM resilience Introduction Companiescannot perform supply chain functions independently; they depend on their suppliers and customers. There has been a trend in logistics to either pay attention to the supplier side or to the customer side for optimization of the supply chain although both aspects of supply chain management are critical to manage as both are open to competition in the marketplace. Companies find it hard to manage the vulnerabilities of earning reasonable margins by applying cost-efficient supply chain processes so that they register their presence in the market for a long term through lean inbound, internal and outbound supply chains. Vulnerability of organisational logistics process and SCM resilience Analysis Vulnerability in organisational logistics processes needs to be tackled to make business functions lean, flexible and responsive. Companies are immensely dependent on each other and are vulnerable in increasingly integrated supply chains. The time and relationship dependencies are significant to manage vulnerabilities (Svensson, 2002). The time and relationship dependencies between two companies in the supply chain network can be described through the interactional model of Hakansson. Dependence of companies cannot be easily constructed until their functioning is performed to check their assumed time and relationship dependencies towards their suppliers and customers. The functionality process of the dependence construct has turned a bit with the research performed by Hammarkvist et al. (1982)) and Mattsson (2000)). There have been five dependency dimensions identified by Hammarkvist et al. (1982)), which are: 1. Technical Dependence. It happens when two companies sell compatible products and adjust their business functions with each other in technical way. In this regard, Fresh Mart is depending on technical knowhow comprehensively than Seal Honey. 2. Time Dependence. It happens when two companies are bound because of time element needs of their shared business functions. This dependency dimension applies greatly to Fresh Mart as it has a robust order management system, fast delivery time, efficient ERP, robust GUI and highly cost-effective supply chain. 3. Knowledge Dependence. It is related to the communication process between two organisations, gaining from the strengths and weaknesses of each other. This interaction helps in finding ways of resolving issues. With regard to this dimension, we can say that Seal Honey used this dependency appreciatively by engaging supermarkets as point-of-sales and realised increased sales. 4. Social Dependence. It is related to increased communication between two companies because of individual level contacts. It means that social environment and increased compatibility level between the executives of two companies create an impact on their business functions. Again, Seal Honey was able to use its contacts to sell its products through superstores and leverage from this dependency. Economical/Judicial Dependence. This is related greatly to the formal written format of depending, entered into by the companies themselves to strengthen their dependence of business functions in the economical and judicious way. Case studies on both the companies do not indicate that they have entered into any such formal contract with their suppliers to comment on this dependency of the Seal Honey and Fresh Mart (Svensson, 2002). Mattsson has added two extra dimensions to the list of Hammarkvist et al.’s, namely: 1. Market Dependence. It is related to a company’s reputation and ranking that might have a positive impact on the other company’s reputation and ranking. It can also enhance the brand value of the other company in the market. Of course, both the companies are leading players in grocery market and dependent on market forces to a great extent as dealing in perishable goods. 2. IT Dependence. When the two companies follow the same IT parameters by investing in ditto IT functionalities such as EDI (Electronic Data Exchange) to make their communication compatible by installing similar hardware and software, it makes them IT dependent. Fresh Mart is ahead of Seal Honey as its ERP processes are comparatively comprehensive. All The above dependency dimensions are right as they stress on time and relationship dependencies between company business functions. There is severe competition between companies at various levels. They manage their business functions amidst time and relationships based situations and remain in the business by working on these crucial business philosophies and earn reasonably in a cost-effective way. These time and relationship dimensions are looked after while dealing with suppliers and customers (Svensson, 2002). Vulnerability status of organisational logistics process of Seal Honey and Fresh Mart Seal Honey and Fresh Mart are competitive companies selling same grocery products with almost same pricing. Both the companies are distributors and suppliers of their own products through a chain of shops. Comparatively speaking, the market of Fresh Mart is vast as it has established a point of sale in some of the supermarkets also. On the other hand, Seal Honey’s product range is quite vast with a lot of new-to-the-market fruits and vegetables. From the perspective of product range, we can say that Seal Honey has a strong position to attract a more customers than Fresh Mart but at the same time, Fresh Mart is also on a robust platform by making its product range available at supermarkets but in this context with more product variation, Seal Honey is in a better position to appease the customers by offering such vegetables and fruits that are not commonly available elsewhere. Order management system of Fresh Mart is comparatively better than that of Seal Honey, as all inquiries and quotes are processed to gather and punch-in each order to be allotted a distinct number, which is carried forward on the invoices for matching to receive payments and related notes. Any order ca be traced by its quantity, location, first name, last name and contact number of the customer. On the other hand order management system of Seal Honey is quite complex as it does not enable the user to trace order through a number of search options Another difference between both the companies is that Fresh Mart maintains a ‘freshness’ chart to timely deliver the product before it becomes stale. Thus, their delivery remains efficient by making prompt servicing of products with the shortest freshness period. No delivery is delayed beyond 2 days irrespective of the freshness period to avoid customer loss to Seal Honey. The difference between both the companies is that Fresh Mart delivers fast perishable vegetable like tomato within ? day time while Seal Honey follows no such chart. Invoicing system used by Seal Honey is comprehensive enough to include sales, purchase, supply and inventory in its compass. It generates a sales order when order is placed, which in turn creates a purchase order for the supplier. As the product is supplied, it gets entered in the stock system. Supplier is paid via the supplier’s invoice. When a product is shipped, it carries along a delivery note and receipt if payment has been made in advance or invoice if payment is yet to be made. Information technology processes of Fresh Mart are better than that of Seal Honey although both have in place an electronic record processing (ERP) system. Fresh Mart better manages customers and suppliers through its Fresh Deliveries System. It helps the company to plan order as per demand needs and select cost-effective logistic medium to reduce the transportation cost. Deliveries are arranged by consolidating orders, which saves transportation cost. Fresh Mart remains efficiently functional by taking prompt decisions through Fresh Deliveries. Comparatively speaking, the graphic user interface of Fresh Mart is user-friendly, permitting flexibility in locating and sorting things than that of Seal Honey. Level of organisational resilience A company’s resilience is an activity of its competitive ranking and its reaction over the supply chain. In a competitive business environment, fast reaction taking companies get wider customer base in comparison to other companies that are not as fast in as these companies. Such companies become leading brands by strengthening their positions vis-a-vis slow-reacting companies. Maintaining the resilience power pays a company in the long run as it can reap huge margins due to the leading position it attains afterwards while other companies lagging behind in resilience can face regulatory action. Overall, companies can boost their resilience either by strengthening in redundancy or in taking a flexible approach (Sheffi & Rice, 2005). Company Position and Responsiveness Two crucial variables can decide the resilience level of a company, its competitive position and responsiveness of the supply chain. A company can react at once to market pressures and save its position by keeping the market share with it given the low switching cost in a competitive scenario. As an outcome of company responsiveness, a company can possibly get the market share in severe competition or strengthen its leading ranking in the fields it has already taken a lead from the rival companies. Some companies follow the strategic inventory policy of “sell one, stock one”; it is done by keeping additional stock of goods, supplied only with special permission, as in the US, the strategic oil reserves are managed this way (Sheffi & Rice, 2005). Implications An analysis of both the companies finds certain issues with their supply chain management. Seal Honey is not managing its inventory system optimally. It is causing loss of value as products are perishable. Easy perishable vegetables and fruits such as tomatoes and oranges are found to be stinking. It is happening because the company does not have a robust inventory system to manage both ends of the supply chain, the suppliers and customers. Conclusion At Fresh Mart, empty shelves need to be stocked with fresh products to attract more direct customers who do not order for home deliveries. Overall, both the companies are reaping the benefits of efficient logistics system. They are leveraging from consolidation of orders and strategizing of delivery routes efficiently and earning hugely on these two factors. References Sheffi, Yossi & Rice Jr., James B., 2005. A supply chain view of resilience enterprise. MIT Sloan Management Review, vol. 47, no. 1. Available from: http://web.mit.edu/scresponse/repository/Sheffi_Rice_SC_View_of_the_Resilient_Enterprise_Fall_2005.pdf [Accessed 1 November 2011]. Svensson, Goran., 2002. A typology of vulnerability scenarios towards suppliers and customers in supply chains based upon perceived time and relationship dependencies. International Journal of Physical Distribution and Logistics Management, vol. 32, no.3. Available from: www.emeraldinsight.com [Accessed 1 November 2011]. Read More