Analyzing a Supply Network - Research Paper Example

?Introduction: Since the advent of information age the business landscape has changed dramatically. Globalization which is the main reason behind this change has shifted the paradigm in which businesses used to work (Skinner, Bryant, and Richey, 2008). The new paradigm requires businesses to build strong relationship with their channel partner and customers, have operating procedure which allow businesses to be responsive to their business environment, the internal and external processes of the business should be so nimble that they rapidly adapt or adjust to the changes in the environmental variables (Stadtler, 2005). All these requirements have been imbued upon the companies so as to ensure their continuity. In light of the above discussion, for companies it has become imperative that they streamline their operations to match the dynamics of their business environment. The degree of coordination required between different functions of the business has never been higher (Simchi-Levi, Kaminsky, and Simchi-levi, 2007). Not only is coordination required between different functions of the business but also it is required between different channel partners. This coordination between departments and channel partners should result in the sharing of accurate and timely information (Halldorsson, Kotzab, Mikkola, and Skjoett-Larsen, 2007). This information should enable a channel partner to adjust its operations to fit the requirements created by the new change. In this current globalised environment a holistic view a business entails a supplier, manufacturer, distributors and customer. This makes up the supply chain of a business. The extended supply chain of a business would be supplier suppliers and customer customers. Thus, in this highly complex and vast supply chain it becomes imperative for supply chain partners to share information between each other so that they could serve their customers effectively. The current business environment has brought previously local companies in contact with international customers and suppliers. These local businesses which previously were confined to their national borders have now transcended across these borders to advantageous of the opportunities present in the international market. But since these businesses are unaware of these landscapes they need to collaborate with local businesses that have a much more cultural familiarity of these landscapes. In order to facilitate communication and information sharing between trans-national channel partners it is important for these channel partners to have supply chain management system in place to link them up (Gundlach, Bolumole, Eltantawy, and Frankel, 2006). Organizations are facing several supply chain issues and challenges. The preferences of customers are changing at the rapid rate at the same time there are additional cost pressures on the organizations. This in turn has created dilemma for the organizations that either they should go for increasing the responsiveness and adaptability of the supply chain or should incorporate cost effective strategies. The organizations are looking for an optimal place in the middle of both important variables. In this paper an attempt has been made to understand the overall process of supply chain management and associated issues. For this purpose, the analysis of the supply chain management of Beri has been presented in this paper. In this way it will become easier to comprehend the important concepts. Supply Chain Management and Drivers of Supply Chain Management: It is important for the organizations to manage the overall supply chain in effective and efficient manager. Different key players are involved in the whole supply chain and in order to make sure that the supply chain is appropriately managed all players should be integrated to each other. While devising the supply chain strategy there is always a tradeoff between the cost effectiveness and high responsiveness. The elements of supply chain can be either designed in such a way that the overall supply chain is cost effective or is highly responsive. The managers are striving to achieve a balance between both factors in order to make sure that the supply chain strategy is consistent with the marketing, competitive, and business strategy (Fugate, Sahin, and Mentzer, 2006). The utility of supply chain management stem from the need to share information across channel partners in a timely and accurate manner, wherever they may be situated. The six main drivers of supply chain are (Chopra, Meindl, and Kalra, 2008): 1. Facilities 2. Inventory 3. Transportation 4. Information 5. Sourcing 6. Pricing (Chopra, Meindl, and Kalra, 2008) Other drivers of supply chain management are (Cooper, Lambert, and Pagh, 1997): Global market and suppliers: Previously before globalization, channel partners were located close to each other; they were constrained by the geographical boundaries. But now the world is undergoing economic integration as a result of which geographical boundaries between countries have blurred. As a result of this a company has added new customers and suppliers in their value web. Close coordination and information sharing between these new partners and the business have given rise to the utility of supply chain management (Charvet, Cooper, and Gardner, 2008). Customer Demand: With globalization has come the age of information technology. Customers as a result of information technology have been able to receive more product related information. They have been allowed by the internet to find the best provider of a product or service at a price with which the customers are comfortable with. Thus, in this age of information technology customers have become very demanding, they are asking for customized and individualized products and services. As a result of this change, previous model of business which focused on mass production and mass selling has become obsolete. And a new business model making using of the pull strategy of supply has become the new reality (Bosona and Gebresenbet, 2011). Business Complexity: As mentioned earlier, companies in this new business environment are doing business in countries, about which they have no information. These companies are completely alien to the culture, language and the manner of doing business in these countries. Thus they need help, which comes from local businesses who become the strategic partners of these international alien companies (Charvet, Cooper, and Gardner, 2008). Supply Chain Visibility: Since this new business environment has added new channel partners in to the business partners’ portfolio of the business, it has become imperative and simultaneously difficult for the business to maintain a healthy and productive relationship between all its channel partners. As a result of this volatile business environment, a business has to share its vital/sensitive internal information with its channel partners. So that which ever partner is getting effected by that piece of information, he might be able to develop appropriate provisions to see off the implications arising as a result of that piece of information (Charvet, Cooper, and Gardner, 2008). Enhanced Communication: With the addition of international channel partners in the list of existing channel partners, it has become imperative that information be shared with them on a timely basis. This information should be accurate and meet all the criteria’ of the channel partner (Charvet, Cooper, and Gardner, 2008). Analysis of Supply Chain Performance: In this highly competitive and hostile business environment it is of utmost importance that a business keeps a vigilant eye on the performance measurement tools of its supply chain. Some relevant tools are: value of excess inventory, cycle time, ratio of defect free goods to total goods, and accuracy of demand forecasting (Cooper, Lambert, and Pagh, 1997). In the coming section of the report an analysis of the supply chain of an Australian Juice Manufacturer “Berri Juice” will be done. This analysis would discuss the problems encountered by the manufacturer in managing its supply chain and what measures did the manufacturer take to resolve these problems. Company Profile of Berri Juice: The company has been operating in the non-alcoholic segment of the beverages industry since 1943. It is owned by Lion Nathan. The juices produced by Berri have been branded as “Australia’s favorite Juices”. The juices offered by the company have strong market penetration. They are distributed to hotels, restraints, hyper marts, super marts, and minimarts of Australia. In addition to local sales the company also exports to 20 other countries. The company has manufacturing plants in five states of Australia, while the company headquarters is located in Melbourne. The company has an annual sales turnover of $500 million (Dyson and Koruth, 2004). Following are the juices category of Berri (Berri): Berri Juice and Drinks Berri Australian Grown Berri Multi V Berri Plus Berri Prima Berri Super Juice Berri Squeeze Berri Cans Berri Quelch Analysis of the Supply Chain of Berri Juice: Before the company had implemented its supply chain management system, it was working on the principles of decentralization. All its manufacturing plants used to work on a state-by-state basis, which led to an incoherent business model. The company had enormous amount of strategic planning issues. Looking at the company holistically was way too difficult because it had many manufacturing sites supported by a national office. Whereas the warehousing and distribution functions of the business were outsourced to third party contracts. The entire business model was in utter disarray. The company had an in-house developed legacy system, a manufacturing system and JD Edwards’s financial software. Independent systems for individual departments along with a shattered business model prevented the managers from undertaking data extraction from different departments and use it to analyze and identify important trends. These liabilities constrained the company from responding quickly to the demands of its customers. Communication across the supply chain relied on traditional methods and invoicing was done manually, which lead to delays and workload. The company also became inflexible and insensitive to the changing environment (Dyson and Koruth, 2004). Project One Berri: Having encountering so many troubles with its current operations and sitting on the verge of globalization, Berri had two options either to be eaten up by the tide of globalization or bring the required changes to remain competitive and survive this tide. Berri opted for the second option and thus initiated the “Project One Berri”. Under this project Beri would adopt the supply chain management system along with e-supply chain and other required technology. The fundamental objective behind this initiative was to position the company in a way that would make it efficient and effective to face the tide of globalization. It wanted to enhance its capabilities so that it can become more responsive to its customers demands. Under this program the company started building a centralized repository of corporate data along with centralization of entire company’s operations. The company decided to kick of this change process fro its distribution function which as mention earlier was outsourced. This function was handled by independent contractors who offered no resistance to this change. The change brought electronic invoicing and prevented duplication of data and errors in entry of data. Thus the company was able to reduce considerably its clerical overheads (Dyson and Koruth, 2004). This similar performance was replicated with other channel partners. Surprising, the channel partners were very enthusiastic in adopting this new change. The main reason behind this was that this system not only benefited Berri but also the channel partners as well. For instance inventory management module of this system linked manufacturing and demand much more closely. By communicating timely and accurate demand estimates to the manufacturing this module reduced cost for both the concerned parties (Dyson and Koruth, 2004). One most obvious change that came after the implementation of this system was the increased ability of the managers to undertake analytical processes. This increased their ability to forecast demand more accurately and initiate more effective plans. Beri was able to trace its product batches and undertake quality checking procedures, thus allowing it to offer consistent quality products. To meet high demand for its products, Beri had to source raw material from multiple sources, this system allowed it to efficiently manage global suppliers and build long lasting relationship with them (Dyson and Koruth, 2004). Thus it can be concluded that the company has managed to raise its level of performance by undertaking a one time capital expenditure. The results of this analysis also support the notion that any investment made by the company to enhance its capabilities is always useful. The expenditure incurred or the problems encountered while its implementation takes a back seat when the system becomes operational. This is because the system will very quickly start providing the organization with the promised benefits. Possible Solution: Apart from emphasizing on the information technology and other related elements, the company should also modify and improve the other drivers of the supply chain. For this purpose, the company should come up with more comprehensive facilities, inventory, transportation, sourcing, and pricing strategy. The organization will have to make sure that the warehouses and distribution centers are located nearby in order to increase the responsiveness of the supply chain and at the same time should outsource the activities to the low cost providers in order to manage the cost effectiveness of the overall supply chain. Conclusion In the global competitive environment, supply chain has become one of the major points of differentiation. Business analysts no longer consider it to be a battle between to business entities; they now consider it to be a battle between supply chain of one entity versus the supply chain of another entity. In this regard which ever entity is willing to upgrade its supply chain network by installing a supply chain management system shall win the battleground. Up gradation of its existing systems has become essential for each and every company, operating in this highly globalised business environment. This new environment has no room for slow movers; a company needs to have organic systems in place to sensitize itself to the evolving dynamics of its environment. References Berri. Berri Juice and Drinks. Retrieved April 22, 2012, from Bosona, T., and Gebresenbet, G. (2011). ‘Cluster building and logistics network integration of local food supply chain.’ Biosystems Engineering, 108(4): 293-302. Charvet, F., Cooper, M., and Gardner, J. (2008). ‘The Intellectual Structure Of Supply Chain Management: A Bibliometric Approach.’ Journal of Business Logistics, 29: 47–73. Chopra, S., Meindl, P., and Kalra, D. (2008). Supply Chain Management: Strategy, Planning and Operation. London: Dorling Kindersley. Cooper, M., Lambert, D., and Pagh, J. (1997). ‘Supply Chain Management: More Than a New Name for Logistics.’ The International Journal of Logistics Management, 8(1): 1–14. Dyson, L., and Koruth, S. (2004). ‘Improving Business Performance through Supply Chain Intelligence: an Australian perspective.’ In Soliman, K.(ed) Information Technology and Organizations in 21st Century: Challenges and Solutions. Proceedings of The 2004 International Business Information Management Conference, July 4-6. Amman, Jordan: International Business Information Management Association (IBIMA), 342-348. Retrieved April 23, 2012, from Fugate, B., Sahin, F., and Mentzer, J. (2006). ‘Supply Chain Management Coordination Mechanisms.’ Journal of Business Logistics, 27: 129–161. Gundlach, G., Bolumole, Y., Eltantawy, R., and Frankel, R. (2006). ‘The changing landscape of supply chain management, marketing channels of distribution, logistics and purchasing.’ Journal of Business and Industrial Marketing, 21(7): 428– 438. Halldorsson, A., Kotzab, H., Mikkola, J., and Skjoett-Larsen, T. (2007). ‘Complementary theories to supply chain management.’ Supply Chain Management: An International Journal, 12(4): 284-296. 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