Global Supply Chain Management - DHL - Case Study Example

GLOBAL SUPPLY CHAIN MANAGEMENT By Name Course Instructor Institution City/State Date Table of Contents Global Supply Chain Management – DHL Executive Summary Managing logistics processes in the supply chain need the company’s managers to understand the drivers (managerial variables) which have to be addressed, given that they demonstrate how the processes of business could be successfully managed and designed across the supply chain. More importantly, the managers should understand way through which key supply chain management mechanisms (specifically, integration and coordination) are interacting with the managerial variables; as a result, contributing to the finding of the drivers’ concrete impact on supply chain’s logistics processes. This Report focuses on DHL, whereby the significance of tracing as well as tracking of shipments is deemed somehow high based on the customer service and crucial for efficient management of logistics networks. As a global company, At DHL, Research & Development (R&D) is utilised to facilitate the discovery of new knowledge regarding the new and existing services and processes. Importantly, R&D investment is crucially important not only for the firm’s growth but also its success and survival. At DHL, R&D is a crucial determinant of the firm’s long-run welfare’ and productivity. Advanced technology such as 3D printing can largely decrease complexity in logistics and allows the company to leverage on-demand logistical concepts. The objective of this report is to determine how DHL manages to create close coordination across the globe, how the company’s distinctive R&D investments have lead to increased revenues, the supply chain risks as well as the existing mitigation strategies, and how the company uses advanced technology means/tools to maintain the competitive advantage. Introduction International trade development is steered by international management and logistics as well as the global supply chain provision. The global SCM crucial objective is linking the distribution network, marketplace, manufacturing process and also procurement activity in a manner that allows the customers to be serviced satisfactorily, yet at reduced cost. Generally, this has resulted into a novel management breed within the computer-enabled literate environment that operates in the global infrastructure. Currently, the world is facing global competition; therefore, it has become imperative for companies to economically focus on the rapid response to the needs of the customers, together with rapid technology deployment and market access. The new telecommunication and information technologies development together with economical, fast and efficient systems of global transportation leads to new possibilities. This allows the companies to reach beyond their own geographical as well as organisational boundaries for operations coordination as well as management by the means of whole supply chain, devoid of investment and direct ownership problems. The supply chain involves every activity and organisation related to the transformation and flow of goods and the related monetary and information flows. The supply chain can be defined as a set of three or more firms linked directly by some downstream and upstream flows of information, services, products, and finances from a source towards the customers. DHL Overview DHL was established in 1969 by Larry Hillblom, Adrian Dalsey, as well as Robert Lynn, and the first global delivery service was initiated (DHL, 2016). The three partners started by delivering shipping documents through the air, in order to get at customs offices earlier than the freight, and allowed goods to navigate customs with less holdup. Currently, DHL is the largest logistics company in the world that offers express mail, international courier, and parcel services. The company operates across the globe, especially through air and sea. The company normally transports urgent goods and documents in a reliable manner and punctually from door-to-door in over 220 countries as well as territories. DHL’s global express network is considered as the most comprehensive worldwide. The company has a fleet of 250 aircraft; thus, making it one of the world’s largest air carrier. The company has nearly 285,000 employees who enable the company to provide solutions for all the customers’ logistics needs (Top Employers Institute, 2016). How DHL Manages To Establish Close Coordination across the Globe As mentioned by Roman (2003), co-ordination is a communication and decision-making pattern amongst numerous actors performing tasks with the aim of achieving goals. The author mentions that coordination mechanism involves the informational structure that defines who gets what information, ways of processing the information and its distribution amongst various members taking part in the mechanism itself. For logistics companies, co-ordination normally denotes information as well as material flows. Planning and coordinating the information and material flows extending from the market, through the company as well as its operations is one of the principles underlies the integrated logistics concept. According to EIU (2006), when DHL decided to position its biggest global information technology support centre in Prague, central Europe was actually placed on the off-shoring map. Before the company decided to offshore to Prague, DHL had a shared IT support centre in Malaysia and was outsourcing already to India. The objective of the Prague decision was to move IT services from costly areas such as Dan Francisco, London and Hong Kong into locations that had a lower-cost infrastructure, high-quality labour, as well as improved accessibility to external commodity-like and non-core operations’ outsourcing providers. DHL chose Prague because of its improved infrastructure, adequate IT skills, stable political environment, business-friendly government, and high-quality air links across the region. As pointed out by DHL (2017), offshore sourcing is the company’s main strategy for meeting the growing demand for the offered services. Still, it is imperative to track and trace the company’s shipments considering that many companies face huge coordination problems. DHL normally ensures that it keeps track of all products from the source up to the destination, which has resulted in customer satisfaction. According to Shamsuzzoha and Helo (2011), tracking system enables the companies to identify the shipment position and inform the customers in advance. Devoid of the tracking system, it becomes nearly impossible to locate the shipped items; thus, leading to business losses. DHL uses a number of tracking systems such as Global Trade Item Number (GTIN), Global Positioning System (GPS), Radio-frequency identification (RFID), Barcode and many others. Branch (2009) asserts that the logistics’ role is developing systems as well as supporting processes of coordination in order to make sure that the aspirations of the customers are met. According to Hsuan et al. (2015), supply chain management involves business processes integration from end user all the way through the main suppliers providing information, services, and products which add value to all the stakeholders. Integration connotes coordinating across legal corporate boundaries as well as functional lines. This coordination could be organisational (such as interfaces and inter-organisational teams at different levels of management), system related (like communications systems, integrated information, as well as Internet connections), or planning related (like exchanges of inventory status, order data, production plans, sales forecasts, and so forth). Before outsourcing, DHL normally looks for countries with strong language and technical skills, and where R&D centres could be set up. According to EIU (2006), everywhere is nearshore for DHL since the company has operations in scores of countries across the globe. DHL is optimising their global footprint; that is to say, the company is developing a support structure for its global business operations, by capitalising on the global labour pool. How Distinctive R&D Investments Has Helped DHL to Increase Its Revenues DHL has invested heavily in R&D as demonstrated by its Hands-On-Lab, which act as a platform where the partners and customers discuss with the company regarding the trends as well as new technologies and how they affect the industry. The company normally showcase the prototypes that the DHL’s Solutions & Innovation department has researched and developed. As mentioned by LaMattina (2015), DHL’s has a new innovative lab that is utilised to research and develop ways of making logistics-related innovations more tangible. The current R&D topics at DHL include DHL’s Logistics Trend Radar as well as 3D-printing. The Logistics Trend Radar provides the trends’ snapshot at a particular point in time. The Trend Radar, according to LaMattina (2015), has enabled DHL to stimulate interactive discussion all through the business networks and departments, leading to more innovative ideas. R&D investment, as mentioned by Başgoze and Sayin (2013), normally lead to the firm’s growth in the long-term. For that reason, the firm’s market capitalisation demonstrates the intangible assets’ value, to the same extent as the tangible assets. Investing in R&D successfully leads to a new service or product that makes it possible for the firm to become distinctive from others. A number of studies as cited by Başgoze and Sayin (2013), established that there was a positive correlation between stock price returns and R&D investments. Lantz and Sahut (2005) posit that R&D investment does not only influence the firm’s market value, but also the firm’s performance, in terms of returns and income. A study by Sougiannis (1994), as cited by Lantz and Sahut (2005), established that a dollar invested in R&D results in an average rise in net income by 2 dollars after seven years. This demonstrates there is a connection between the R&D investment and increase in profit. At DHL, R&D Investment is deemed as investing in intangible assets which result in the long-term firm growth in terms of profit and productivity. Beld (2014) asserts that investing successfully in R&D lead to innovative services and product that allow the firms to improve their intangible assets; hence, distinguishing itself from other companies. Companies that have invested in R&D normally improve their innovations probability and improve the underlying process of profitability (Warusawitharana, 2015). As pointed out by VanderPal (2015), there is a positive connection between R&D and profitability, future market growth, as well as market value. R&D has led to improved DHL performance; thus, making it possible for the company to command premium prices in the market. Evidently, competitiveness can be improved and maintained through significant R&D investments (Hsu et al., 2013). The Supply Chain Risks and the Associated Mitigation Strategy According to Christopher and Peck (2004), supply chain risks can be categorised into five groups: control risk, process risk, supply risk, demand risk, as well as environmental risk. Even though all organisations are vulnerable to supply chain risks, Tang and Tomlin (2008) posits that the operation environment for organisations in the global supply chains is exceedingly uncertain and more complex; thus, leading to increased risk profile. These companies increasingly experience high risk because of breakdowns, bankruptcies, disruptions, political and macroeconomic changes (Christopher et al., 2011). Supply risks are amplified by a number of factors, such as the, buyer demographics, firm’s location, raw materials availability, supply conditions, and the supply chain complexity. In addition, supply risk is related to the challenges of getting a reliable supplier in a new market. According to Tang and Tomlin (2008), demand risks are attributed to the unknown nature of consumer demand and it is associated with distinctions in the products and information flow between the market and the company. This risk often happens when the company relocate its services or production into a foreign market (Liu & Nagurney, 2011). Another type of risk is the process risks which are attributed to the internal operations or manufacturing process of the company. Intellectual property is another factor that contributes to failure or success of the company. Because DHL has outsourced some of its business operations, the supply chain has resulted in the development of intellectual property risks. Limiting the flow of intellectual property to nations with inadequate legal protection and registration of patents can help reduce intellectual–related risks (Kim et al., 2009). According to Gultie (2013), supply chain disruptions ma take place because of transport-related problems theft, delays, and engine breakdown. To mitigate this risk, Christopher and Peck (2004) suggest that companies should adopt flexible logistics strategy such as using the multimodal transportation. Transportation risks can be reduced through multi-carrier transportation as well as utilisation of multiple routes (Tang, 2006). IT risks are common considering that cybercrime has become prevalent. Therefore, DHL mitigates these risks by developing information security system. Unpredictable events like floods, poor weather, political risks, terrorism, and labour disputes, and natural disasters can also lead to supply chain disruptions. To overcome these risks, Siba and Omwenga (2015) indicate that companies should launch supply chain risk management so as to be able to identify, measure, and prioritise the supply chain risks. Dittmann (2014) posits that the repercussions attributed to supply chain disruptions towards the company’s financial health could be devastating and far-reaching. For this reason, DHL Resilience360, a new risk management solution was launched by DHL with the aim of improving the supply chains resilience. The DHL Resilience360 has enabled the company to eliminate or prevent risks so as to reduce the negative impact to the business (Postal and Parcel Technology International, 2017). DHL (2016) posits that all companies that depend on complex supply chains must improve their risk management by developing smarter strategies. How Advanced Technology Means Have Help Maintain the Competitive Advantage As mentioned earlier, DHL has been reaching and developing advanced technologies, such as 3D Printing with the aim of improving its performance and also to achieve competitive advantage in the global market. As pointed out by Bhasin and Bodla (2014), 3D Printing adoption is offering companies a novel way for manufacturing on-demand products in small quantities in an area close to the end-customer. Besides that, 3D Printing enables the company to customise products. Without a doubt, this has complexly changed the supply chain equation. For DHL, 3D Printing would improve the supply chain efficiency and the development of customised services and products could lead to the realisation of competitive advantage. As mentioned by DHL (2016), 3D printing is widely adopted because it results in more localised manufacturing as well as delivery, less waste, and greater customisation. DHL (2016) further established that 3D printing is inclined to complement instead of completely substituting the conventional manufacturing and delivery techniques. The company is working with the partners and customers to jointly find new solutions for unlocking the 3D printing potential in the future supply chain. D’Aveni (2015) maintain that 3D printing leads to high efficiencies that could allow companies to build out systems for proprietary coordination with the aim of securing competitive advantage. Recently, DHL launched an all-touch and pocket-sized computers that take advantage of the latest technology to make sure that the customers gain from improved visibility and a completely enhanced experience. These TC55 scanners are Android-enabled and are integrated with GPS navigation and location services capabilities (Supply Chain Digital, 2015). Big Data has enabled a number of Internet powerhouses like Facebook, eBay, and many others to achieve increased competitive advantage. Aside from capital, labour, and resources, information has also become a crucial factor of competitive differentiation. As mentioned by DHL (2013), the connected devices have been deployed massively; thus, they offer an increased number of autonomous data sources. A number of devices like Smartphones are generating data streams continuously devoid of human intervention; thus, increasing the data aggregation as well as processing speed. DHL is currently managing a massive flow of products and simultaneously creating a vast set of data. The company makes millions of shipments every years, weight, size, origin and destination, location and content are all tracked through the global supply chain. Therefore, the search for competitive advantage normally starts through strong Big Data use identification. Big Data analytics is utilised by DHL to improve the operations’ efficiency in as well as accelerating business processes. DHL has equipped all its vehicles with new devices (with mobile connectivity, sensor, camera, as well as miniaturisation that is facilitated by the Internet of Things) for gathering rich data sets. Conclusion In conclusion, this report has determined how DHL manages to create close coordination across the globe, how the company’s distinctive R&D investments have lead to increased revenues, the supply chain risks as well as the existing mitigation strategies, and how the company uses advanced technology means/tools to maintain the competitive advantage. The tracking system has enabled DHL to identify the shipment position and inform the customers in advance. The company has invested in R&D investment with the aim of adding value to its processes and improve competitive advantage through the creation of capabilities. The modern-day businesses are facing a number of challenges, especially the decline of unpredictable costs of global supply that result in supply chain risk. Supply chain risks bring forth major issues considering that companies that fail to manage them are inclined to suffer based on performance. 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