Global Cases in Logistics and Supply Chain Management - Essay Example

Global Cases in Logistics and Supply Chain Management - Clorox As the Vice President at Clorox has found out the growth of the company and its volumes have come at a price that can be described as too dear for a global giant. The product portfolio of Clorox has grown with adding more and more underperforming products, a paradox that defies supply chain logic and the behavior of material logistics. Secondly the company’s stock keeping units (SKU) count increased by almost 50% during the three-year period between 1998 and 2001. This was against the backdrop of a fall in its net profit margins by 1.7% between 2000 and 2008. Sales team was more concerned of adding newer products to the existing portfolio so that diversity of products and wider choice would appeal to customers who are constantly on the lookout for newer and better products. Thus bonuses and targets were their prime concern. On the other hand the supply chain team was highly worried about out-of-stock inventory mix. When 30% of SKUs are registering below sales targets in volumes and profits, there is something really to worry about. The supply chain team was also worried about the service related challenges in order to fulfill customer demand (Scholz-Reiter, Frazzon & Makuschewitz). Against this backdrop a more comprehensive SKU rationalization strategy would be pertinent though it’s equally imperative to know how best to avoid supply chain bottlenecks and associated costs by way of reducing inventory of no-go-products. In other words a rationalization strategy would require a number of tasks to be performed before putting into effect any program of action. In managing supply chain related activity in procurement of materials the purchasing manager or the specialist has to perform a series of tasks according to some predefined criteria. In the same way the purchasing manager or the supply chain team has to take it to consideration the number of factors that directly and indirectly impact on their performance. In the first instance skills of the supply chain team would be enhanced by the vertically integrated organizational and management structure which essentially support the design planning and implementation of supply chain strategies, especially those directly related to the purchase of raw material and components for primary operations. Clorox was just faced with this problem (Hugos, 2006). The purchasing specialist has to focus on his tasks associated with procurement and management in order to achieve a degree of functional conformance to established standards such as the core business activity related efficiencies. This means that the ever increasing practice of modern business organizations’ preference for outsourcing certain tasks that lie out of the core business functions of the organization is dictated by competitive pressures. For instance the logistics team would be able to hone their skills depending on the level of concentration on core business operations by the company. Business organizations’ increasing level of dependency on resources procured from outside enables teams to develop a special set of skills for effective practice as a supply chain team (Bagchi & Larsen, 2003). Globalization has not only shrunk international borders between countries but also shortened product life cycles on numerous occasions as at Clorox. The purchasing specialist’s functional environment requires such special skills as an understanding of the variables that impact on product lifecycles of both locally produced and imported goods. Further the initiation of skills training programs and their relevance and impact on innovation and leadership culture would definitely create a framework of reference for the purchasing specialist’s project procurement and contract management requirements. This is more so in respect of change management programs at the organizational level. Customer relations and strategic focus on facilitating the control over internal and external relations are much more important than the activity of selling. As such the logistics team’s functional skills are augmented by both complexity and diversity of the facilitator’s role rather than putting the purchasing manager or specialist into an old fashioned functionary’s mould. Clorox has been more concerned about selling the total output rather than minimizing associated costs of maintaining stocks (Vidal, & Goetschalckx, 1997). The logistics team would have to place emphasis on the supplier’s credentials rather than the price itself. In the first instance a competitive tendering processes involve not only specification and evaluation criteria but also the painful task of selecting the best team for the task in hand. This requires not only a knowledge of tendering skills but also particularly strong evaluation techniques (Wagner & Bode, 2008). This is due to the fact that value parameters attached to the determination process of suitability criteria are fundamentally based on the logistics team’s dynamic role. The entire process of procurement of supplies has to be specified in conformance with the cost involved in the prolonged lifecycle of the product. The logistics team has to plan for the appropriate evaluation criteria, that would otherwise be ignored and delivery schedules dragged without much consideration of the critical path (CPA). This might affect both the functional parameters and the technical specifications, thus hindering the aesthetic and qualitative outcomes of the process. Finally the supply chain team needs to focus attention on the objective of controlling the entire supply chain evaluation process in a manner that non price factors receive a fair share of attention throughout the supply process, thus leaving little room for any marked variance or divergence away from the predefined criteria. Similarly the team’s success or failure is determined by how best they are able to reconcile those divergent parameters of the process. Hence there is the need for some debriefing procedural applications to be adopted. Kraljic’s supply chain portfolio matrix & required strategies to improve products & services (modified by the writer) According to the above diagram which is patterned on Karljic’s purchasing/selling portfolio matrix the strategic partnership with the supplier has a telling impact on profits of the company. The logistics team’s task is to identify what Karljic says those disadvantages or bottlenecks and make them less negative in impact or / and altogether remove such suppliers and replace them with more efficient ones. Next in Karljic’s matrix the standardization of items and baskets thereof is essential to maximize the logistics team’s buying power. This exercise according to Karljic’s matrix enables the logistics team to leverage the most appropriate quadrant. (Gunasekaran & Ngai, 2005). According to Karljic strategic partnerships in supply chain management/logistics empower managers and teams to target highly desirable positive outcomes such as market share and success in critical success factors. However Kraljic has noted that it is possible that strategic partnerships might become complacent in the long run thus leading to a situation where competition becomes intense. It is also possible that strategic partnerships acquire a higher power dimension in the long run. As a result the purchasing manager might be forced to adopt a counter strategy to reduce the level of dependence on existing partnerships. 3. Additional factors for the consideration at Clorox The purchasing manager maybe called upon to order goods from abroad. In this instance it is essential that he must be aware of how different legal systems impact on the contractual obligations it is also essential that he pay attention to exchange rate volatilities and their impact on contracts. The supply chain team’s knowledge about procedures in international commerce also matters. For example he must be able to understand how letters of credit and other instruments of international commerce can be utilized to execute a certain line of actions. The World Trade Organization (WTO) has a set of rules, regulations and restrictions in place to be followed by member governments, countries, firms and individual citizens when they engage in international trade. Similarly the contracting clauses on carriage of goods across international borders and insurance formalities must be well-known to the supply chain team. Finally the team must be aware of how the international chamber of commerce defines those cross border trade related activities carried out by different agents. 4. Ethical & environmental considerations on logistics The purchasing specialist’s must also be aware of both ethical and environmental impacts. For instance as much as there is ever increasing pressure on the purchasing specialist’s to act in compliance with environmental regulation and ethical practices, there is also the need to understand that customers are increasingly aware of environmental and ethical issues. Further the purchasing team’s freedom is curtailed to a greater extent by the fact that the company needs to maintain its reputation among customers and the workforce. The supply chain team must also focus on cost reduction techniques by independently engineering specifications on value parameters associated with maximum durability, reparation, reusability, the cost of recycling and upgrading (Meixell & Gargeya, 2005).What is so important about alternatives is that the ability of the purchasing specialists to reduce the degree of negative impact on environmentally significant operations. The success in reducing SKUs depends upon the company’s efficient supply chain and logistics function. The key factors include the strong third logistics company partnerships, the creation of a strategic vision for the supply chain team, a database of critical information and logistics/supply chain centric technical capacity development. Horizontal integration of successive supply chain tasks under a unified command structure and hierarchy so that supply chain related positive synergies in implementing strategic initiatives to achieve performance based ratios can be adequately obtained. 5. Transfer of risk in supply chain management process at Clorox As much as the supply chain team ought to know how risk must be managed and mitigated, they also must know how to transfer risk away from what is being executed. Towards this end they must be able to recognize the fact that by relying on a fixed price they are unable to transfer risk to the final customer. Their task will be facilitated by closely acting with the sales team. Because both teams at Clorox together might be able to identify risk factors and then either mitigate or transfer them on a broad spectrum of activities. As much as the suppliers must be diversified there can be a non adversarial approach to risk transfer. In the process the supplier would be assured of constant profit margins. While the client would inevitably sustain the risk to a great extent, there is much less left for the decision maker to correct through specification of risk elements. As such it is essential that risk management and transfer process in supply procurement is handled by a team of specialists who might adopt an integrated approach in identifying the most suitable solutions to an otherwise intractable set of problems. For instance in the process of Clorox’s supply chain related activity teams can act in concurrence with each other in mitigating and transferring risks associated with extensive supply chain activity (Melo, Nickel & Saldanha-da-Gama, 2009). The proactive approach adopted by these teams in managing risk might reduce litigation costs with diverse supply networks spanning across the globe. Purchasing managers and supply chain teams working on more costly supply chain contracts are influenced by the modern motivation techniques such as monetary and non-monetary rewards given out to the contractors for reducing cost and reaching targets on schedule. Finally the supply chain team at Clorox can successfully combine management skills with strategic business acumen to obviate unnecessary costs and associated costs with suppliers (Harvey & Richey, 2001). Successful delivery is not only based on efficiency but also on the quality of the final product delivered to the end-user. Assuming a degree of independence enjoyed by the quality planner there is much more to be desired in respect of such concepts like Kanban and Kaizen as they occur in an exclusively procurement and contract management contexts. The concept of Kanban has been proposed by recent researchers for its impact on Just-In-Time (JIT) supplies procurement. However only a few researchers place emphasis on Kanban as an inclusive concept because in JIT stock movements can be well monitored to achieve cost efficiencies through effective stock control measures while it is not relevant for procurement managers due to the fact that the latter utilize materials only for a particular line of production of which the life cycle can be very short. However critics point out that Kanban is equally relevant in supply procurement and management because it helps to minimize expenses on maintaining stocks of material. Clorox just needs to focus its attention on this aspect. But nevertheless there is an equally strong argument against these novel concepts in supplies procurement. The current literature suggests that sales teams and supply chain teams are usually better advised to act in coordination when the company sales are subject to a negative trend through SKUs (Emmett, 2008). On the other hand Kaizen refers to the standard Japanese manufacturer’s practice of continuous improvement of the product. This practice is related to quality circles. Japanese manufacturers have a habit of forming quality circles as informal units within the organization. The main task of a quality circle is to identify quality related constraints and suggest ways and means to overcome them. However in procurement exercise the supply chain team cannot afford to ignore quality concepts because sales teams are after targets while quality suffers a setback. Similarly some scholars on the subject of procurement and supply chain management have suggested a conceptual framework for policy convergence in adopting change management participles in task related procurement processes as in the case of hotel chains. Despite their enthusiasm for these concepts some modern researchers have expressed doubt about the efficacy of many supply chain management models as outlined above in the absence of a proper system of metrics to measure the real impact of variances and co-variances. This is true of Clorox as well. In varied supply chain management settings where stakeholders happen to have a sizeable interest in the outcomes as in the case of health food there can be quite a lot of legal and environmental hassle. Similarly some specialists argue that theoretical and conceptual model building has much greater relevance in ensuring constant monitoring of the outcomes such as costs and quality. This particularly refers to logistics teams’ tasks as well. This writer believes that contingency models on supply chain management including that of Kraljic’s wouldn’t solve some of the problems associated with critical success factors including those of corporate governance and corporate social responsibility (CSR). At Clorox there has been a substantial amount of waste on enlarging the product portfolio whose unyielding diversity has just led to cumulative costs (Blanchard, 2010). However recent research findings suggest that empirical evidence is more centered on highly probable settings such as managers of procurement management processes have a tendency not to be transparent. This behavioral tendency is in conformance with many research outcomes related to logistics teams’ transparency and continuous engagement with other stakeholders (Whiteing, 1999). As per the supply chain management strategies at Clorox the supply chain team is constantly nagged by a significant shift in policy variables on the subject of procurement of supplies and contract management. These instances are characterized by a desire on the part of the team to be more efficient against rivals who are increasingly becoming more knowledgeable about growing markets and changing customer attitudes. On the other hand in procurement and supply management such rivalry is not so much emphasized. What is emphasized is the reduction of costs, satisfaction of the customer and improvement of the quality. These three objectives are regarded as end purposes that are conclusive and not relative. In other words it is the delivery process that matters in the management process involving supply chain activity. Conclusion Clorox has been constantly affected by a downward trend in its sales while SKU has been falling to such lower depths. The company needs to restructure its supply chain management activity in conformance with sales trends. In other words Sinclair needs to adopt a strategic shift away from its current level of portfolio bloating product diversification to a product dimension enhancing process. Such a process would inevitably lead to some good improvements in supply chain activity at Clorox. Clorox has suffered a drop in its sales because customers have been less aware of what the company has been doing to increase customer satisfaction. On other words the company has been growing in every direction without a proper strategic orientation. Thus it’s pertinent to understand that sales team’s current demand for more new products isn’t going to help the company. Growth must come at some well designed and executed marketing strategies and business policies. The supply chain team on the other hand is influenced by a desire to reduce out-of-stock product mixes. Customers of the company demand constant service support which inevitably increases overheads. Thus it’s imperative that the cost function must be regulated to achieve positive synergies associated with quality and quantity, both. REFERENCES 1. Whiteing, AE 1999, ‘Global Cases in Logistics and Supply Chain Management’  International Journal of Logistics Research and Applications, vol. 2, no. 2, pp. 213 – 214. 2. Vidal, CJ & Goetschalckx, M 1997, ‘Strategic production-distribution models: A critical review with emphasis on global supply chain models’, European Journal of Operational Research, vol. 98, no. 1, pp. 1-18 3. Scholz-Reiter, B, Frazzon, M & Makuschewitz, T 2010, ‘Integrating manufacturing and logistic systems along global supply chains’, CIRP Journal of Manufacturing Science and Technology, vol. 2, no. 3, 2010, pp. 216-223. 4. 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