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Supply Chain Management

Introduction

“The global credit and economic crunch has put more pressure on strategic supply chain management Blanchard” (2007 p.48) and (Rousel, & Cohen, 2005 p.123). In this regards, Supply chain managers and practitioners should ensure all suppliers come out of the downturn and are able to help them capitalize on a recovery. This calls for a paradigm shift in the management of strategic chain supply in organizations. In running of an efficient supply chain management, strategic decision plays a central role decision. According to Harland & Knight (2005 p.43),

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While optimizing supply chain management is critical to business success, these days it is simply not enough. For many companies, a large portion of revenue and expenses are related to their supply chain, effectively linking supply chain management to major strategic decisions and overall effectiveness

Supply Chain Management Definition

According to Hurbner, (2007. p. 57)

Supply Chain Management is about managing the flow of information, materials, services and money across any activity, in a way which maximizes the effectiveness of the process.

Case study: Office Products Company

Office product is a medium size office equipment manufacturing firm. Available literature points out that, the company has over 1000 employee and serves a British market as well as overseas market. For the past two decades, the firm has been rapidly diminishing in size. This decrease in size precipitated by lack of effective manufacturing capability led the company to not only transform to merchant manufacturing distributor but also reduce the number of employees. OP Company currently has got thirty five staff members. The company produce product such as stapler and punches. In which it has developed a great name in the market. The company’s purchasing department is headed by Sally Hughes. Currently the company is picking up its former market share although the growth is gradual.

Sally procurement principles which might be harmful to OP in future

  • Sally: “Procurement is a critical factor in the success or failure of any organization. A penny saved in negotiation is a penny profit. I need to be tough with our suppliers. If they can’t give me what I want, when I want it, then I will go elsewhere.”

Analysis of the above statement

The above comment mean that sally prefer buying from many suppliers with no specific long term relationship or partnership. This kind of relationship is bad for future development of the company. This is because with partnership or long term good relationship wit suppliers, the company can even buy on credit. But with this I don’t care mentality of Sally it becomes difficult to buy on credit.

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  • Sally: “There is plenty of competition between suppliers in our market. I will make full use of this competition by seeking bids from a large number of suppliers whenever I wish to place a large contract. It doesn’t take long to sort out the more attractive vendors, and competition keeps everybody on their toes.”

Analysis of the above statement

Based on the above argument, Sally thinks that long term relation ship is bad as she points out that that completion keeps everyone one on toes. However, for the success of strategic chain supply partnership is inevitable.

  • Sally: “The present volatility in the currency market means that I have to watch those products that are sourced overseas very carefully. It doesn’t take much of a shift in the exchange rate to make formerly attractive foreign suppliers no longer viable. I am keen to take advantage of overseas opportunities but I avoid long-term commitment as this takes away flexibility.” Sally Hughes

Analysis of the above statement

In this case Sally is an opportunistic and lacks vision. This is because she is not ready to commit to long term relationship with suppliers. “This principle with lack of vision is detrimental to development and growth of a company” (New, 2008 p.13).

  • Sally: “Clear specifications are important. I seek suppliers who will manufacture exactly to our designs and specifications. Sometimes suppliers will suggest ‘improvements’ to our designs or, worse still, complain about the difficulty of manufacturing exactly what we want. I am not sympathetic. In my view suppliers want to change specifications for one reason, to make the product easier to manufacture so they can make more profit.”

Analysis of the above statement

Sally comments that she is not sympathetic which means she is never concern with the suppliers’ plights. This is a very bad strategy to use in managing suppliers and to carry out efficient procurements. This mentality therefore, is detrimental to the growth and development of OP.

  • Sally: “Of course, finding the cheapest supplier who can meet our needs is not the end of the story. Suppliers are not usually to be trusted. We have to expedite, to make sure that they meet their contractual obligations and, of course, we inspect all incoming goods carefully to ensure that they are not passing defective goods to us. We do find that the quality of some o our suppliers both domestic and overseas, requires careful watching.”

Analysis of the above statement

Trust is quite necessary for good company – suppliers’ relationship and when Sally comments that suppliers should not be trusted, the she misses the point on the best way to create along term partnership with suppliers which h is the key to efficient chain supply management.

  • Sally: “Business is essentially simple. Design products that you think will sell well (if you can make them at low cost), if not, contract with a supplier. Manage suppliers carefully, ensuring that they always meet their obligations under the contract.”

Analysis of the above statement

“Business entails a lot of things which is not just designing what can sell. Business entails several aspects such as good management, good marketing, and good customer relation just to mention a few” (Caniëls, & Gelderman, 2005).It is therefore wrong see business in the perspective of self development but rather the development of all. This mutual development strategy makes a company to reap the benefit of good relations in the market. But what Sally suggests is bad for the development of OP Company.

“Most companies have well designed business strategies but fail to have a well organized supply chain strategy” (Kotabe, 2008 p.31). These in most cases pose a great challenge to the effective operation of the companies. It therefore calls for an organized and effective chain supply which not only set good working relations with the supply chain partners but also sets the company way above the rest. This will ensure that OP Company is fairly competitive; thus, enjoy the economies of scale. This report takes a critical analysis of Strategic Supply Chain Management, its importance and challenges. To briefly and comprehensively explain the concept of strategic supply chain management, the paper analyzes OP office equipment manufacturing company limited as a case study.

Importance of Supplier Development Program

“Suppliers are quite important to the company and therefore their effective management can never be discerned” (Barney, 1991p.66). In this regard, the company is adopting a strategic chain supply program which not only aim at enhancing the effective relationship between the company and the suppliers but also enhance effective running of the company so as to promptly the customers demand.

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Benefits chain supply management

According to (Kotabe, 2008 p.125),

As supply chains have moved from a cost focus to a customer focus and now currently to a strategic focus, the need to think strategically about the supply chain has never been more important. The success of a strategy is only as good as the company’s ability to fully and properly execute it.

“Effective Supply chain management has got benefits to all,” Barney, (1991). The suppliers will expect a lot of improvement in payments, good relation and effective business communication. This will go a long way in improving time management. The employees will reap the benefits of effective management with will include salary increase and a number of motivational program in our company. In this endeavor, “the client and customers are very important and this strategic chain supply program will enhance service delivery” (Bragg, 2006 p.41) and (Hugo, 2006 p.67)

Supply Chain improvement project for OP Company

The need for efficient and effective supply chain management has made the company not only to strategically position itself in the market but also form a very vibrant supply chain management. This chain management project has generated positive benefits in the company.

Outsourcing Advantages and Risks

“Increasingly, with rapid wealth growth of emerging global economies, the basis of Competitive advantage is changing from internal capacities to network capabilities” (Gottfredson & Puryear, 2005, p.17).Harland & Knight, (2005, p. 43) and Bragg, (2006, 43), further support this argument by illustrating that,

The rate at which a major company’s tasks are being outsourced to business outsourcing companies is gaining astronomical attention each day, companies are outsourcing anything from payroll to IT and even the whole management of a company is being outsourced. The reason for this outsourcing craze is simply to minimize cost because the jobs are being done by highly skilled workers in the less developed countries for less than the real cost of the job at home.

Strategic Outsourcing Matrix

Profit Impact Out sourcing risks
Low High
High Low Leverage items :
Increase market penetration and
expansion of market with high level outsourcing to increase economies of scale.
Strategic items:
In sourcing for competitiveness
Seek strategic partnership for long-term
market position of OP Company
Low Non-critical items :
Ensure efficient cost reduction strategy
for economies of scale
Bottleneck Items :
Close partnership for assuring supply of raw materials
Sourcing alternate partners

Duplication which may arise between OP Company and the other company which has been bought is that the when procurement is done differently this will be costly and results in duplication of roles. “Outsourcing for chain supply increases efficiency in a company and above all it reduces the cost of procurement” (Gattorna 1998 p.54) and (Mentzer, 2001p.51).

Recommendation

The success of running an excellent strategic supply chain is peg on several factors such as adoption of new and modern strategies which will not only facilitate rapid growth and development in the company but also create a reputable name in the market. “Strategic supply chain management is an important in issue in any company” (Hoecht, and Trott, 2006 p.91). Towards this, company should adopt new technological approaches to outsourcing. This should include the use of e-commerce so as to gain more economies to scale. In addition, there is need to venture in to strong partnership with other steel industries in other parts of the world like Asia and Africa.

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Most companies in this world of capitalism always want more. They want more profit, more shareholder value, and more market share, among others. The realizations of these objectives have been attained through the successful initiation, development and management of brands in most instances. Indeed, the effective development and management of brands has become a major priority for all organizations of all sizes in the different industries and markets.

The reasons for this are certainly clear; strong brands are positively correlated with customer loyalty and profits. However, the efficient management of brands can present challenges, especially in the case where managers are unable to accurately evaluate and assess their brands particular strengths and weaknesses objectively. One major limitation that has been presented in both academic and empirical literature is on how to deal with the multifaceted issue of products development and multi-channel branding, especially where there is the need for reliance on professional retail distributors engaged in the sale and distribution of competing products.

Conclusion

Strategic chain supply management is central to the success of a company. Towards this, OP Company has the obligation to cope up with new strategies and ideas on the improvement and excellent in running chain supply management. This is because a close comparison of India and China scenario as compared to UK, it is clear that outsourcing is efficient and relatively cheap to outsource from India and China. This will make OP Company enjoy the economies of scale associated with outsourcing in these countries.

References

Barney, J 1991, Firm Resources and Sustained Competitive Advantage. Journal of Management 17(1): 99.

Bragg, S., M, 2006, Outsourcing: a guide to– selecting the correct business unit– negotiating the contract– maintaining control of the process. New York: John Wiley and Sons.

Caniëls, M. C. J. & Gelderman, C, J, 2005, Purchasing strategies in the Kraljic matrix? A power and dependence perspective. Journal of Purchasing and Supply Management 11(2-3): 141-155.

Gattorna J, 1998, Strategic supply chain alignment: best practice in supply chain management. London: Gower Publishing, Ltd.

Gottfredson, M., R. Puryear, 2005, Strategic sourcing: from periphery to the core. Harvard Business Review 83(2): 132-9.

Harland, C.,& Knight, L, 2005. Outsourcing: assessing the risks and benefits for organizations, sectors and nations. International Journal of Operations & Production Management 25(9): 831-50.

Hoecht, A. and Trott, P, 2006, Innovation risks of strategic outsourcing. Technovation 26(5-6): 672-681.

Hurbner, R, 2007, Strategic supply chain management in process industries: an application to specially chemicals production network design. New York: Springer.

Kotabe, M, 2008, Outsourcing, performance, and the role of e-commerce: A dynamic perspective. Industrial Marketing Management. 37(1): 37-45.

Kraljic, P, 1983, Purchasing must become supply management. Harvard Business Review. 61(5): 109-117.

Rousel, J & Cohen, S, 2005, Strategic supply chain management: the five disciplines for top performance. New York: McGraw-Hill Professional.

Mentzer, J.T, 2001, Supply chain management. Supply Chain Management New York: SAGE.

Hugo, M.H, 2006, Essentials of supply chain management. Essentials series. New York: John Wiley and Sons.

Blanchard, D, 2007, Supply chain management: best practices. Wiley best practices. New York: John Wiley and Sons.

New, S, 2008, Supply Chain Management. Critical Perspectives on Business and Management Series. New York: Taylor and Francis.

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