Johnson & Johnson Ltd.: Supply Chain Management

Introduction

The past few decades has witnessed a complete revolution on the way business is conducted and the approach through which organizations relate to one another. This has been facilitated by globalization, advancements in information technology, outsourcing, and a networked economy. Organizations are increasingly finding it necessary to rely on other organizations to effectively compete for scarce resources and ever-dwindling clients.

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Smart companies are now relying heavily on effective supply chains to compete successfully in the global economy. They have realized that they must move away from their traditional business boundaries and cocoons and collaborate with other businesses to maximize on their profits. One of the areas they collaborate is on the supply networks, whereby each dedicated business associate focuses on only a few vital planned activities. This supply networks between organizations can be viewed as a new form of organization exhibiting complex connections between the players. This has given rise to the concept of supply chain management (Supply Chain Management 2008).

By definition, supply chain management is the integrated procedure involved in scheduling, controlling, and implementing the operations of the supply chain as proficiently as possible between organizations. It is a process that integrates major activities, from how the raw materials are sourced and stored, the work-in-process inventory, to how the finished products are distributed from the company to the consumers. It must also include collaboration and coordination with supply network partners, in most cases the suppliers of raw materials, third-party service providers, customers, and intermediaries (Supply Chain Management 2008).

Many modern companies are actively managing their supply chain activities in an attempt to achieve a sustainable competitive edge as well as maximize the value of their customers. Managers have realized that efficient and effective supply chains are vital tools for success (Supply Chain Management 2007). One such company is Johnson & Johnson, incorporated in the US, and has branches, networks, and subsidiaries all over the world. Below I attempt to describe the company, its products, and the supply chain in which it operates.

Johnson & Johnson Company

Johnson & Johnson, incorporated in the US, is a company that deals with a wide range of products, especially baby products. It has continued to grow steadily and to sustain itself in the ever competitive economy due to sound management policies. The company has enjoyed over a hundred years of continued growth and service to its most loyal customers. The company deals primarily with health and well-being products. Their wide range of products is used by at least a billion people worldwide everyday (Our management Approach 2008).

Johnson & Johnson credits their endurance and strength to their consistent business approach process and to the character of their customers. They have a guiding philosophy that put the needs and well-being of customers first. The management also takes responsibility towards their employees, the community, and the world in general (Our Management Approach 2008). The company has a wide range of baby products ranging from powders to medicated soaps.

Their baby powders helps to keep the skin soft, dry, and comfortable, while reducing friction that can be uncomfortable to the baby. Here, the company has developed Johnson’s baby powder, Johnson’s baby powder comforting Vanilla & Jasmine, and Johnson’s baby powder calming Lavender & Chamomile. To help treat baby skin irritation and diaper rash, the company has developed Johnson baby powder medicated with aloe & Vitamin E. For extra moisture absorption, the company has come up with Johnson baby powder pure Cornstarch with Aloe Vera & Vitamin E (Johnson’s – Baby Powders 2008).

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Johnson & Johnson has been at the forefront in developing children skin care products. They have the Johnson’s baby lotion which helps to keep the skin smooth and soft. Johnson’s soothing naturals nourishing lotion gives moisture to the skin for 24 hours and give relief to dry skin. Johnson’s bedtime lotion and Johnson’s bedtime bath are products designed to calm the baby before going to sleep (Johnson’s – Baby Skin care 2008). The company also designs specialty baby products such as Johnson’s baby cologne.

Meeting the needs of around one billion consumers every day is no easy task. That is why Johnson & Johnson have invested heavily in supply chain management. Johnson & Johnson has over 250 operating companies worldwide. The company management approach is decentralized, but has strong links in supply chain management to save on costs and be able to serve the huge number of consumers of its products efficiently (Our Management Approach 2008).

The company partners with many other individuals and companies to make its work easier and also make sure that they concentrate on the key areas of its business, leaving the rest to its partners. It collaborates with raw materials providers, research scientists, pharmaceutical companies, and business professionals attracted in searching inventive commercialization solutions for its products. It collaborates with independent scientists and pharmaceutical companies mainly in the product development phase (Partners – Johnson & Johnson 2008).

The company has put a lot of emphasis in building strong operational partnerships, especially with its supply chain networks to ensure that its core objectives of advancing the excellence of healthcare around the world, being profitable, respecting the environment, and supporting the local communities are attained. Johnson & Johnson also works with accredited transport companies and courier companies to ensure that its products are distributed efficiently across the globe (Partners, Johnson & Johnson 2008).

Johnson & Johnson has established an efficient, collaborative, and strong relationship with its suppliers. It sorely relies on the suppliers for the provision of raw materials, goods, and services needed to develop products. The company has continued to identify small and diverse suppliers who continue to add value and assist it to achieve its long-term expansion objectives (Suppliers – Johnson & Johnson 2008).

Importance of Supply chain management to Johnson & Johnson

First, embracing supply chain management has helped Johnson & Johnson to reduce its costs of doing business through narrowing in on certainty and speed of response to the market while maximizing on added value. The tool has helped it compete efficiently on the local arena as well as on the global scene. Johnson & Johnson continue to rely on business professionals abroad to market its baby products at very competitive prices (Sovereign 2008).

The business environment experienced today is more competitive than ever. Companies, including Johnson & Johnson must function at a lower cost to be competitive. Companies must also build their basic strong points to differentiate themselves from their competitors. This is what Johnson & Johnson has done. Supply chain management has enabled it to divert its resources and focus on developing baby products – a field it has performed optimally, while it continue to outsource tasks and processes that are less important to the objectives of the company. This has enabled Johnson & Johnson to survive while other companies are falling on the way (sovereign 2008).

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Supply chain management has also enabled Johnson & Johnson to choose the right partners, manpower, and resources. The company now boasts of very strong and stable selling agents from the US to China. This has enabled it to stay ahead of the pack. The company has also been able to specialize in core areas and create a strong market niche for its products, thanks to the efficient supply chain management. No company holds a larger market share in baby products than Johnson & Johnson (Sovereign 2008).

Supply chain management has also helped Johnson & Johnson to add value to its products. Value addition has given its products a competitive advantage over other generalized products. This has also enabled more innovations to be added on the company’s products to meet specific needs of different children. The company has developed a wide range of skin products to meet individual interests (Sovereign 2008).

Through operational flexibility, supply chain management has also enabled Johnson & Johnson to attain faster growth rate. Through contract manufacturing and outsourcing, Johnson & Johnson has been able to maintain its over one billion customers who use its products every day (Strategic Importance 2008).Overall, supply chain management has enabled Johnson & Johnson to comprehensively manage the transition of raw materials to finished goods. The procedure has made it possible for the company to offer high quality products to its customers (Supply Chain Management functions 2008).

Features that reflect common practice in Supply Chain Management

There are many features of the company operations that reflect common practice in supply chain management. According to Supply Chain Management (2008), some of the salient features exhibited by Johnson & Johnson include:

  • Development of a comprehensive strategic network optimization. Johnson & Johnson is tied to some 245 companies around the world and numerous distribution centres and facilities.
  • It has developed strategic partnerships with its distributors, suppliers, and customers. It has effective communication conduits that are used to pass vital information and improve on its operations.
  • It uses product design coordination to make sure that latest and existing products are always incorporated optimally into the supply string.
  • Johnson & Johnson has invested heavily in information and communication technology to maintain supply chain operations.
  • The company is involved in sourcing contracts, scheduling, and planning processes that make sure that it deals only in its key competencies of developing beauty and health products while leaving the rest to its partners and suppliers.
  • It has developed an efficient transport strategy which has taken care of the frequency of transporting its products, contracting, and the routes.
  • It plans on its daily production and distribution of its products, as well as taking care of all nodes in the supply string.

Interactions with supply chain partners to improve customer outcomes

Johnson & Johnson has a healthy symbiotic relationship with its suppliers, who supply it with raw materials, goods, and services. It carries its suppliers importantly for without them, the company cannot progress forward. Knowledge and expertise is applied to these raw materials brought by suppliers to create the value added products that Johnson & Johnson boasts of. These products are later sold to customers, after undergoing a lot of processes ((Partners, Johnson & Johnson 2008).

As already mentioned elsewhere, Johnson & Johnson has developed an efficient, strong, and mutual relationship with its suppliers. The company relies on them to provide raw materials, goods and services that are needed to develop products and service its customers at home and abroad. The company has continued to maintain a strong supply chain because they realize that the suppliers are the backbone of the company (Suppliers – Johnson & Johnson 2008). They are as important as the customers. Below I attempt to illustrate how the interaction works.

Successes and failures of Supply Chain Management

Though Johnson & Johnson experienced some difficulties in implementing supply chain management in its operations, the successes of the tool far outweigh the failures. First, the company has been able to reduce on costs by making sure that it involves itself only on its key competencies. The tool has enabled Johnson & Johnson to come up with innovative products that continue to change the lives of consumers worldwide. Supply chain management has also helped Johnson & Johnson to remain competitive and remain ahead of its competitors through the production of value added products (Bhattacharya et al. 1996, pp.39-48).

There were some teething problems that were experienced in configuring the distribution networks. The management was unsure of the number and locations of companies they wanted to network with. This has since been dealt with. Distribution strategy also presented some problems, with issues raised about whether to follow centralized, decentralized or shared operating control system. The company settled for the decentralized management system and it has worked wonders.

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Sharing of crucial company information with other companies also proved to be a draw back. Supply chain demand that valuable information must be shared in the course of collaboration. Some companies used the information to hold the Johnson & Johnson hostage. This has since been resolved and unfaithful companies have been shown the door. The company also experienced cash-flow troubles as it attempted to arrange the payment methods and conditions across different entities within the supply string (Supply Chain Management 2008).

All in all, it has helped Johnson & Johnson to revolutionalize its market share and offer products that continue to attract millions of consumers worldwide.

References

Bhattacharya, KA, Julian, LC, Gordon, B & Paul JK 1995, “The Structure Conundrum in Supply Chain Management”, The International Journal of logistics Management, vol 7, no. 1, pp. 39-48. Web.

Johnson’s – Baby Powders 2008, Johnson’s. Web.

Johnson’s – Baby Skin Care: A skin Care Routine as Easy as A, B, C 2008, Johnson’s. Web.

Our Management Approach 2008, Johnson & Johnson. Web.

Partners- Johnson & Johnson 2008, Johnson’s. Web.

Suppliers – Johnson & Johnson 2008, Johnson’s. Web.

Supply Chain Management 2007, Supply Chain Resource Cooperative. Web.

Supply Chain Management Functions 2008, Exforsys Inc. Web.

Strategic Importance of Supply Chain Increased 2008, Metso. Web.

Sovereign, R 2008, Importance of Supply Chain Management in Modern Business, Ezinearticles. Web.

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