Strategic Supply Chain and Logistics Management - Essay Example

Strategic Supply Chain and Logistics Management Consider Dell and HP. In terms of Michael Porter’s 5 forces model, how do they compete? Michael Porter’s Five Forces model is based on industrial organization (IO) economics. This model states that all firms in a particular industry face forces within their industry that significantly affect profitability. The five forces are buyers, suppliers, new entrants, substitutes, and rivalry and are analyzed from the perspective of how they are able to limit industry profits. If all five forces are weak, then it is likely that the industry will be an attractive one with firms that are quite profitable. (Ahlstrom and Bruton 2010, 131) Michael Dell, founder of Dell Computer, used a basic modeling by selling PCs to the final customer and built them to users’ specifications. This is a flexible method because Dell sells through retail outlets. Dell also kept track of customer’s inventory, allowing them to order PCs directly rather than going through the hassles of purchasing. (Kraemer, Dedrick, and Yamashiro 2000) The advantage in Dell’s strategy is that it minimizes inventory. Dell’s method is direct selling, and selling through the Internet. At Dell Computer, speed and balance are the secret weapons to creating value. (CNET Networks Inc. 2007) Hewlett-Packard (HP) does not rely on outsourcing of supplies. Rather than relying on a network of partners, the company builds its PCs in-house. HP computers are of highest quality. Management believes that every part and component should be designed and produced in house. Since the beginning, HP had been making its own screws. HP people focused on developing new technology internally, resisting collaboration with outside partners to leverage existing technology. (Mendelson and Siegler 1999, 134) 2. What value is added by the following? Rate in terms of “high”, “low” or “none”, and explain: Executive Management defines company strategy and allocates resources to achieve it. (High) Executive management is right on the top, which means this is the top echelon of the company or business. Important decisions and company strategies have to come from this part of the organization because they affect the operation, to include the future and success of the organization. Supply management coordinates the upstream supply base, finding the right suppliers and building the right relationships with them. (High) Supply management is equally important as in other strategic decisions processes in the organization. Supply management sustains the lie of organization. Without an effective supply chain, business cannot thrive or be successful in the long run. Operation transforms the inputs acquired from suppliers into more highly valued products. (High) Operation is the process by which goods and services are created. We find productive processes in all kinds of organized activities such as factories, offices, supermarkets, and hospitals. Production and operations management deals with decision making related to productive processes to ensure that the resulting goods or services are produced according to specifications. (Shim and Siegel 1999, 2) Logistics moves and stores materials so they are available when and where they are needed. (Low) Although Logistics is an important section or department of the organization or business, it has little functional effect. Supply chain management can handle this function of the organization. This part of operations management is composed of a trusted and well-trained manager and personnel. Marketing manages the downstream relationships with customers, identifying their needs and communicating to them how they company can meet those needs. (High) Marketing field offers a variety of interesting and challenging career opportunities such as personal selling, advertising, packaging, transport, storage, marketing research, product development, wholesaling, retailing, strategic planning and consultancy. A business organization must sell products to survive and to grow. (Jobber and Lancaster 2003, 11) Human Resources designs the systems used to hire, train, and develop the company’s employees. (High) Human resource management is the strategic and coherent approach to the management of an organization’s most valued asset – the people. HRM functions include recruitment, selection, appraisal, performance standards, training and development, and HR planning. These functions have to be consistent with the organization’s strategy. (Storey 2007, 60) Accounting maintains business records that provide information needed to control operations. (High) Accounting is also an important function of an organization. This should be managed and manned by effective and well-trained professionals, highly schooled in the art of accounting. The team who should handle this department must be well-versed in accounting principles. Finance acquires and controls the capital required to operate the business. (High) One of the most important functions of the organization is finance: this is supposed to be the lifeblood of the company or business. Without finance, all the other functions and operational requirements are paralyzed, and the business should close shop. The finance function is necessary in every undertaking or activity. Information Technology builds and maintains the systems needed to capture and communicate information among decision makers. (High) Another very important aspect of management is Information Technology. This is a necessity now in almost all organizations and businesses. Information Technology can mean many things to the organization: it provides the software for operation and control of industries or departments; it enhances effective communication among the different departments and functions; it monitors, operates, and provides feedback. Research and Development (R&D) is responsible for new product design. (High) Research and Development can provide improvement and even success for business. R&D is very important in the operations because it can provide studies and surveys for the current product. An organization’s product cannot be improved without the support of R&D, or it will remain a ‘stagnant’ product. 3. Consider General Motors. Its production function was the dominant one in the business. In early 2003, General Motors was the dominant car manufacturer in the automotive industry. For 2003 alone, the company produced 85 million vehicles and had a world market share of around 15 percent. Toyota was only tailing behind GM, and Ford was behind Toyota. Now Toyota is in the forefront. Project Saturn was conceived during the 1980s by Roger Smith – to save GM. Why should GM need to be saved? GM had just survived the recession at that time, but was threatened by US and Japanese competitors, like Ford, Honda and Toyota which were making a mark and doing really good in the US auto industry. Saturn was to be a plant to produce a brand new car because GM had not been introducing a brand new car for some time then. The name Saturn bears the name of the rocket ship the astronauts used to go to the moon. The metaphor is that Saturn was used to connote the future, now Saturn is used to make a bright future for GM. Saturn was to combine innovative technique in labor relations and innovative manufacturing technique. (Ingrassia 2009) After careful planning, with intervention from governors of different states to have the plant built in their jurisdictions, Smith proceeded with the project in Spring Hill, Tennessee. More than two decades later, a new brand of recession hits the world. GM has a pending application for a bailout by the White House. GM management did everything to save the company from collapse. This included areas in marketing and innovations, relationships with the GM workforce, and so forth. Did management succeed? What happens with the government bailout? Innovative technique in labor relations was introduced. But the technology that Smith envisioned did not materialize. Smith and the UAW agreed on a Memorandum of Agreement to implement plans for innovative technique in labor relations. This kind of effort proved effective and beneficial for the plant employees. They were now part of the management of the plant and even in hiring new employees. They felt they were part-owners of Saturn. But it produced resentment inside GM. Other GM brands viewed Saturn as unfair to them. The first Saturn cars went on sale in the fall of 1990 to great fanfare. When the Japanese auto makers bought one Saturn car and opened it up, they all laughed to what they discovered: “the dashboard had overlapping plastic panels that made it look cheap, and a harsh-sounding engine that stemmed from inferior motor mounts.” (Ingrassia 2009) There was no quality in the new Saturn car. Toyota people could attest to this that the new Saturn car was ridiculous and that it was not made to provide the user the desired driving pleasure that drivers were looking for at that time. However, even if the technology was not that perfect, public relations were not good. The ads showed that Saturn was really building “a different kind of car”. Everyone thought the car was selling or it was a good product. When a customer would complain of a defect in the car, Saturn would replace the entire car. It was a good promotional campaign which earned customer enthusiasm. People were rushing in to GM outlets to get their own car. But it was not good for the company, which was losing. There was high cost spending and too much manufacturing capacity. Saturn lost a then-record $4.45 billion. President Obama commented after his attendance with the G20 Summit that his administration was giving GM 60 days to submit a new plan and also thought of splitting GM into two, or selling off Saturn. Saturn can be one of those trigger mechanisms because it is a part of the economy. Billions of dollars were lost that were never recovered. We all know that the car industry is a labor intensive industry, and that if a company closes shop, it would greatly bounce back on the economy. President Obama and his advisers would like to be sure that whatever the decision would be with regards to the GM bailout, it would be for the good of the GM workforce, because this would affect the economy. In July 2009, Dan Akerson was appointed to the GM Board by the U.S. Treasury after a declared bankruptcy, leaving the government with a nearly 61 percent stake. Akerson is on the lead and wants GM to make the attack, with more quality cars and new direction in sales, and not the slow pace that GM has been. Akerson updates the Obama administration every few weeks. (Reuters 2010) 4. Look at a fictional computer hardware manufacturer located in Taiwan. Describe the strategic approaches to supply chain management that they could take to remain competitive. Taiwan is a progressive country with many plants and factories in the city, most of which provide linkages to the supply chain, not only within the country but to other parts of the world. A computer hardware manufacturer, for instance, has some co-partners producing the product. This is because most of these businesses manufacture parts and components for almost the same product. They become partners but are independent from each other. Supply chain is a network of facilities and distribution options that performs the function of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers (Blake, and Gini 2002). The supply chain can be very complicated. It can involve hundreds of companies in the chain. It is a set of linkages among suppliers of materials and services that links up the transformations of raw materials into final products and services and delivers them to a firm’s customers. A company in Taiwan can have other linkages in the supply chain to other countries or to organizations around the world. Most companies are global organizations operating in many areas. They don’t have much problem with supply chain because of the support and collaboration from other companies and from the government. A company can utilize other plants or manufacturers through a certain form of partnership in the supply chain. This strategy being employed by the government and private businesses in Taiwan has enabled them to move freely and effectively. 5. Consider Amazon. Initially when the company was established the orders were taken by Amazon online and were filled by Ingram Book and shipped to consumers. After several years around six DCs were established in the USA. What are the benefits in terms of inventory and Amazon use of DCs? Why did they do this? How could they use the ABC inventory approach? When Amazon.com started as a virtual business organization in July 16, 1995, it was just a simple online bookseller. Amazon however revolutionized the way people purchase books; people learned to purchase books in a new way. Amazon.com is a web application, not just an ordinary website. Each “page” is generated right when you push the button, or as you request it. It can also track which products you’ve viewed and display a list of similar or related products. (Bausch 2003, 1) At Amazon, you can sell and also become a Pro Merchant. Amazon’s virtual marketplace is now huge. It has sites for the United Kingdom, the United States, and other major cities. Amazon is also the number one seller of used books, ebooks, and also new ones. Amazon has also applied third-party sellers. Third-party sellers represent everyone selling on Amazon except Amazon itself. These sellers now represent 30 percent of everything sold through the site. In third-party selling, the customer is the first party. (Schepp and Schepp 2009, 15) As to inventory, the seller doesn’t have to worry about it. This is because once you sell an ebook, for instance, this can only be sold virtually. Using this privilege, the seller or Pro-Merchant only waits for orders coming from the millions of customers worldwide. ABC inventory can only be made use when there are inventories, but Amazon doesn’t need surplus inventory because there is no surplus. Books are published once orders are being made. 6. Consider the supply chain for breakfast cereal. There are farmers, who grow and make the raw materials. There is a manufacture that has an operations division for manufacturing the cereal, a marketing division and a logistics division. There is a distribution arm of the grocery chain that works with the distribution from a DC. There is an individual grocery store that sells the cereal. Discuss the competing and conflicting objectives of these parties. Breakfast cereal is one of the fast-selling products in the market, be it from huge retailers or the ordinary supermarkets and grocery stores. This is because breakfast cereal is a health product that customers want to take early in the morning. It concerns the health of everyone in the family. At the turn of the century, the cereal industry has been in a turnaround because of new products constantly introduced in the market. Many developed countries have been choosy when it comes to cereal. Kellogg, Kraft, and General Mills have all introduced healthier or organic versions of their traditional varieties, selling for almost 15 percent more than the older brands. Kellogg is again in the forefront, taking the first place ahead of General Mills. (Allen and Albala 2007, 64) In recent years, sales for the cereal industry fluctuated, due probably to some reasons. In 2006, 95 percent of Americans consumed breakfast cereal, purchasing a total of 2.7 billion boxes a year. Some companies start not as cereal-selling companies but as tomato cannery, one is that from the United States, the Bush Brothers & Company which produces approximately 80 percent of canned baked beans, a big portion of which is exported to the UK. Other companies also diversify due the need to earn more profits. Many of the companies in the UK started immediately World War II, and have diversified to other related products. In the UK, people would like to take food helpful to their health and well-being. Strategies of these companies producing breakfast cereal have thought of the health-related issues. 7. Explain how simulation help solve difficult logistics network problems. Why should a company review the logistics network periodically? How do the requirements of the network design change over time? Technological advancement and continuous innovations have motivated organizations and businesses to react to changes in the global competition. Organizations have to reorganize, re-evaluate and reprogram outdated functional programs and activities, and realign them to the present trends for improvement and competition. Supply chain management has to be further realigned to respond to changes. Globalization has triggered a fierce competition in global markets. The introduction of new products with shorter life cycles, and heightened customer expectations have forced organizations to invest much in supply chains. Technological innovations and faster transportation technologies, such as mobile communication, Internet, and overnight delivery, have motivated the continuous evolution of the supply chain and the techniques to manage it. Traditionally, in the supply chain are raw materials which are procured and processed at one or more factories, and these are shipped to warehouses for intermediate storage, and further to retailers and end users or customers. To reduce cost and improve supply chain, effective ways are employed with simulation, which is applied with Information Technology. The supply chain is also known as the logistics network, which consists of suppliers, manufacturing centers, warehouses, distribution centers, and retail outlets. Added to the supply chain are raw materials, work-in-process inventory, and finished products that flow between the facilities. A successful supply chain can utilize efficiently the members or segments thereof, and the product is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize systemwide costs while satisfying service level requirements. (Simchi-Levi, Kaminsky and Smichi-Levi 2003, 1) 8. Explain how the principle of postponement can be used effectively in clothing supply chains and the impact that this has on the supply chain network. Principle of postponement in marketing is a philosophy of management which states that ‘an organization should postpone changes in the form and identity of its products to the latest point in the marketing flow and postpone changes of the location of its inventories to the latest possible points in time prior to their sale, primarily to reduce the risks associated with having the wrong product at the wrong place at the wrong time and in the wrong form’. (Heskett, Jaimes L., Marketing. 197, Macmillan Publishing Co. Inc., N.Y.) Postponement can be in the areas of commitment, passage of title, branding, consumer packaging, final assembly, and mixture or blending. This principle aim for the right timing. It is not always good to be in a hurry. A product that is sold in the market with the proper and accurate research and development may not last long, and will always fail. This can produce unnecessary costs for the company and eventually an unexpected collapse will ensue. It happened in many products, and even to the best and successful companies. That is why companies introduce this principle of postponement. Take for example the clothing supply chains. A mismanaged clothing supply chain can cause disaster if the product will lack quality and cannot suit to the taste of the end user or customer. A typical product moves through four channels: manufacturer to distributor to retailer to customer. From the time it leaves one stage or part to the other, the company spends money and resources through storage, transportation, and manpower. (Ackerman 1997, 174) References Ackerman, Kenneth. 1997. Practical handbook of warehousing: materials management/logistics series (fourth edition). The Netherlands: Kluwer Academic Publishers Group. Ahlstrom, David and Garry Bruton. 2010. International management: strategy and culture in the emerging world. United States of America: Cengage Learning. Allen, Gary and Ken Albala. 2007. 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