Example Of Essay On Strategic Supply Chain Management
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Background of the Company
Putzmeister South East Asia Pte Ltd is a subsidiary Company of Putzmeister Group that was founded in Germany and has its headquarters in Aichtal. Putzmeister South East Asia Ct Pte Ltd was established in 1996 with the aim of promoting the sale of Putzmeister products in the larger South East Asia. The company is a well-established company that has over 3000 employees and a large market share of over 680 million euros. The main company’s focus is on parts supply, equipment, service and maintenance of concrete pumping equipment (Backaler, 2014). Putzmeister South Asia is a service and marketing company that aims at serving customers in South East Asia. The company operates a logistics center that serves the whole of Pacific Asia.
According to Khan & Zsidisin (2011), supply chain is a system that helps in moving a product or even a service from the supplier to the consumer. The system includes variables such as organization, activities, people, resources and information. In the supply chain that Putzmeister uses to distributes its products, the Putzmeister South Asia acts as the distributor such that it links the customer with Putzmeister Group. The Putzmeister Group manufactures the various products, and they are transported to the distributor. The transport logistics is mainly in the hands of outsourced companies that provide these services. The function of the outsourced companies is to deliver goods to the distributor. The distributor distributes the products to the customers who ordered them. Feedback is also through the same supply chain.
Issue 1: Supplier Management Issue
Definitions of supply chain management
Researchers have interpreted supply chain management differently. According to Shah (2009), supply chain management is the practice of managing the various variables available in the supply chain. These variables are the partners in the supply chain and they determine if the customer will be able to receive the products ordered in time and the stipulated quality. Horch (2009) state that supply chain management is the strategic and systematic coordination of functions and tactics in business with the adopted supply chain. The coordination helps improving the performance of the company and the supply chain as well.
According to Garg (2012), supply chain management aims at designing, monitoring, controlling, and evaluating the supply chain used by a company. For this reason, supply chain management creates net value; synchronize supply with demand and measures the performance of the company globally. Ivanoc (2010) argues that supply chain management aims at integrating the business processes with the established supply chain to create value for the stakeholders and the customer. For any company to operate globally, it is determine that the best supply management strategy can be helpful in achieving competitive advantage over other firms that operate in the industry.
Literature, theory and practices of supply chain management
Literatures and much research have been done over a long period but still the issue of supply chain management is under debate. The various practices and theories in supply chain management are still under consideration for further improvement. A lean supply chain has been given by Shah (2009), and it is a supply chain that aims at underpinning a lean production. Stadtler (2015) explored the issue from an industrial perspective where various supply chain is introduced in ensuring timely delivery. The supply chain to be adopted come with different forms and may take various shapes so as to reduce on time and efficiency. The world today requires that companies broaden their area of operations to include supply chain. Supply chains contain three important flows that are information, materials, and finance. The effective management of these flows is essential for the profitability and offering quality service to the customers. The integration and coordination of these flows ensure that the company can achieve all the necessary goals it has set. Scheduling, forecasting, production planning, customer service and order processing are considered as the part of the procedure which represents the monitoring of information systems regarding activities. Stadtler (2015) declares that Supply chain management enhanced economic value and customer to associate information through synchronized management of physical goods from sourcing to consumption.
According to Khan (2011), sharing of information within the supply chain is basic to effective coordination of any supply chain. Various studies have proven that sharing of information within the supply chain is essential so as to reduce the effect of bullwhip. The analysis of market fluctuations associated with high level of complexity with unknown chances and challenges that dispersed globally in production processes. It can be said that if the market fluctuations quickly threaten many downstream industries it will counteract demand fluctuation through production plans adjustments. Companies use the efficient resources to employ the use of cost benefit while responding to the market fluctuations. Lee (2012) states that the analysis of the market fluctuations can be helpful in adopting an effective supply chain. Putzmeister Company improves its variability management and synchronization with worldwide supply chains. Information share enables companies to make an informed decision about the supply chain hence ensuring that resources are utilized, and the supply chain operation cost is minimized. When information is managed effectively, companies will be more responsive to the demands of the customers hence protecting their reputation. Advancement in the information technology sector helps in the effective sharing of information between various partners in the supply chain.
It is identified that information systems and real time data have low cost methods whereas the dock management systems from data given by delivery automation and pickup can anticipate requirements. According to Garg (2012), the data about customers always operate for consolidation and become more effective when carriers inspire shippers to make scannable lading bills. The understanding regarding the customer can be accomplished by construction of an information structure and market research. It is identified that supply chain management allow organizations to share planning data with customers and suppliers on a basis of real time.
Ivanoc (2010), states that a supply chain structure is an arrangement of various companies and their functions so as to achieve a common goal. The type of information to be shared depends on the supply chain integration that is adopted. Garg (2012) analyzes the number of partners to be used for sharing information from a retailer perspective. Horch (2009) observe that the benefits of information sharing increase with the increase in the number of retailers. He also states that the number of partners to share information with depend on the product characteristics. For the case of Putzmeister, the only partners who are eligible to get access to the information about the products are the distributor and the manufacturer. The decision support system ensures that each customer specific needs and requirements can be met by manufacturers of intermediary goods that used to produce products for customers. In supply chain management, the product is easily modified with the unique configuration in order to fulfill the needs of the customers. In accordance of Parez (2013), customers do not only appreciate supplier’s response but also appreciate their ability to adapt solutions to satisfy their needs. It can be said that company include decision support system with few functions as MIT supply chain which focuses on the customers and their needs. Suppliers of Putzmeister Company provide the access in real time data to manufacturers in order to track customers’ needs and respond them as soon as they can. The successful supply chain is focused on customer need and requirements somewhat than products. Putzmeister Company suppliers use the internet so that they can easily gain their customers’ needs and develop an effective and efficient consumer response. Therefore, Putzmeister Company needs to design and manage its management with the intention to eliminate such uncertainty risks that were remain in the company for last three years. Decision support system also require to manage the outsource design procedure so that it can be easy for the company to develop the effective strategic supply chain management.
Putzmeister Company is experiencing some difficulties in the supply chain that lead to the customers not been able to receive the same quantity of goods ordered. The supply chain encounters this challenge due to poor communication from the headquarters in Europe. When Putzmeister South East Company sends a purchase order to the Putzmeister, the company sometimes lacks the specific products or parts that a customer requires. Communication is not done to inform the distributor, who is Putzmeister South East Company, of this issue (Parez, 2013). The distributor supplies the goods to the customer, not knowing some spare parts are missing. Upon the customer receiving the goods, he inspects them, and before the communication is received back at the headquarters, much time is lost. Most global companies, who deal with supply of products, establish a feedback channel where every query is raised to determine the adequate solution in the shortest time possible. Creating an efficient supply chain requires a company to consider the various supply chain principles.
Supply Chain Principles
According to Stadtler (2015), the best supply chain that any global operating company can emulate is a supply chain that allows the inspection of goods before they reach the intended customer. This is done to avoid the issue of mistrust between the customers and the company. Shah (2009) stipulates out important supply chain management principles which are: knowing the customer, adopting lean philosophies, creating a supply chain information structure, integrating supply chain with business processes and uniting the decision support systems (Shah, 2009).
Knowing the customer is important in supply chain management can assist in the distribution of products to the customers (Lyons, 2009). Adopting lean philosophies is the adoption of supply chains that can be changed with time to meet the fluctuating market demands. According to Garg (2012) lean philosophies do not only depend on the internal operation processes of the company but also the external factors.
Creation of an information structure is the coming up with a structure can capture the data from the customer. This ensures that customer's information is shared among the supply chain partners effectively and efficiently. When information is shared among various individuals or people in an organization, the information may end up been distorted before reaching the intended person (Lyons, 2009). Integrating business processes is essential to ensure the smooth flow of products from one partner in the supply chain to the other. Business processes to be integrated are both intra and inter-organizational processes that will support the objectives of the supply chain. Understanding the processes that need to be integrated with inter-organizational processes is important to enhance and leverage the capabilities of the supply chain partners.
Uniting decision support systems is the coming up with software that will help the organization in achieving a supply chain that will suit all the partners in the supply chain. The support system to be adopted depends on how the organizations in the supply chain forecast demand, how decisions are made and the driving factor in production.
Lee (2012) argues that supply chains will be more effective if the various partners in the supply chain have established centers for inspection of products. The centers are stations where goods are inspected with the purchase order from the customer to make sure that the purchase order and goods to be delivered are the same. The centers have the mandate to request the manufacturer to provide products that are not available in packages that are delivered to the customer (Lee, 2012). It is important for companies to maintain a considerable level of inventory. In these centers, a continuous communication is established between the company and the customer. According to customer relationship management theory, customers who can communicate with the company any time become loyal customers to the company. Creation of a customer relationship management will help the company to establish a relationship with the customer.
Issue 2: Forecasting Issue
Forecast is an issue that has not attracted many researchers yet it is a very important aspect in the business world. Hyndman (2014) define forecasting as the ability to estimate the occurrence of an event before it is actually observed. Prediction is a term that can also describe forecasting, but this is quite general. According to Hyndman (2014), forecast in the business world is the ability of a department or organization to predict the demand change in consideration to change in certain factors. The factors may be political, social or economic in nature.
According to Anderson (2009),the techniques that are used in the forecast can be categorized broadly into two categories: qualitative and quantitative. Qualitative is a subjective method that involves the use models like executive opinion, customer expectations, and sales force composite. Quantitative technique of forecasting involves the use of mathematical models like regression, straight-line projection, trend-line analysis, moving average, box-Jenkins, neutral network and simulation. This qualitative and quantitative models can be categorized into time-series, judgmental and casual. Time-series classification model uses the past data to estimate the future expectations. Judgmental model are also known as subjective since they only rely on the intuition, probability and opinions to make decisions.
Forecasting continues to consider important challenges that may enhance the risk of inventory. Companies enable forecasting issues in supply chain performance in order to get effective in microeconomic inventory forecast. Hyndman (2014) declares that forecasting role in supply chain is to show the right and accurate direction rather than being right every time. Putzmeister Company exploit to apply forecasting methods in supply chain management to present issues with 50% accuracy. Putzmeister Company suppliers has applied the methodologies in order to change the company financial exposure. The actual preferences of customers are replaced with analytical insight concerning the demand-driven forecasting. The company suppliers forecast burdens supply tiers in order to meet timetables. Putzmeister Company used forecasting techniques to measure and control risks. A strategic approach in the company can adversely impact place and costs constraints on capacity.
The ability of a business to forecast efficiently is determined by the experience of the forecasting department or how efficient market research has been done. Jacoby, (2009) argues that when a company can forecast efficiently, the inventory cost is eliminated to the advantage of the enterprise. This is because costs that were incurred in managing inventory are channeled to other areas of the firm. Forecasting entails taking a risk, and it is uncertain that the forecast done is accurate. Forecasting in the today's business world is a risk considering how the market has become dynamic therefore it is important to state the level of uncertainty in any forecast so as to set the necessary ‘what if ‘strategies (Anderson, 2009).
Forecasting can lead to increased profit if the forecast is accurate. Inaccurate forecast result in increased inventory costs, goods been obsolete, insufficient cash flows, quality of products may be compromised due to prolonged storage, and excess stock hence low turnover (Blanchard, 2010). According to Blanchard (2010), the availability of forecast helps the marketing department in developing marketing strategies that will match with the expected change in demand or market behavior. The type of business operated will determine the type of forecast method that will be used. Forecasting is done depending on a number of assumptions, which are:
Past events and occurrences tend to repeat themselves. This means that whatever happened will repeat itself with time
Forecast will be more accurate if the horizon is shortened. For example forecast for next week will be more accurate than forecast for next month
The forecast for individual products is less accurate than forecast on the entire demand of a class goods. For example, the forecast for demand of Spirit will be hard than the forecast for entire soft drinks produced by Coca-Cola Company
Forecast is never and can never be hundred percent accurate and, for this reason, cannot be relied upon in totality.
William Stevenson stipulated the following characteristics that describe a good forecast:
Accuracy- a good forecast can be done to reflect a certain desired degree of accuracy so as to compare with other alternative sets of forecasts
Time- a forecast allows a certain period so as to allow the necessary changes to be made when need arises.
Reliability- A forecast can reflect some degree of confidence in the forecast
Cost effective- forecast does not use all the resources of the company
A good forecast can be easy to understand and use. The departments to which the forecast relate can be in a position to understand it and use it efficiently.
Jacoby (2009) states that forecasting can lead to competitive advantage or losses and for this reason, the organization to take into account the factors that may result in inaccurate forecast. The decision to replenish or not to replenish products offered by a company depends on the forecast that the company has done (Malakooti, 2013). Inventory control is the practice that helps to determine the quantity of goods left in the warehouse. Adapting good inventory management practices mostly entails having control systems that are of high quality. The systems help in maintaining the desired quantity level of products and determine when replenishing can be done (Pankratz, 2012).
According to Lawarence, (2009) forecast can be effective by establishing the right people in the company, improving the forecast process and the use of information technology is an important milestone in forecasting. Major companies like Coca-Cola have been able to forecast successfully due to the adoption of these three factors. The decision to replenish is determined by the customers’ opinion on a product. Forecast is based on the client's objective opinion (Ellis, 2010). Customers help in the improvement of the products offered by a company through feedback to the company on the issue concerning a product.
Forecasting cannot be eliminated in the management of any company. Forecasting helps in making sure those products that the customers require are available (Montgomentry, 2011). This ensures that the company maintains its customers as well as attracting other customers. In forecasting, the involvement of the marketing department is essential since the Department is in close contact with the customers. This is because the marketing department is closer to the customer (Ellis, 2010. The marketing department determines the sales turnover of a product. The information that the marketing department help in making objective decisions (Montgomentry, 2011). Hyndman (2014) states that departments in any organization are to be grouped depending on how their functions relate to each to ensure that come up with forecasts that are reliable and realistic.
According to Montgomentry (2011) forecasting can be seen as a very technical process, but it is an important aspect of any business today. Organization success depends on the ability of the organization to foresee the future happenings so that the necessary strategies can be set. Management sets aside resources to undertake forecasts (Lawarence, 2009). The practice of involving customers in making decision is an idea described by Wu (2009) as an important strategy to ensure that adequate forecast decisions are arrived at. Forecast research is expected to take the shortest period, and the elements that constitute a good forecast are taken into consideration (Wu, 2009).
Putzmeister Company is a company that has a vast market share when it comes to customer base. The company supply chain and inventory management is important to the growth of the company. An efficient supply chain will ensure the success of the company through increased customers. Every customer would like the products he consumes be able to reach him in time and at the same quality and quantity as ordered. When this is not the case, the customer will not trust the company, and this will lead to losses. Adopting an integrated supply chain that accommodates all the supply chain partners, will be efficient for companies to grow. A common practice in the global Companies like DHL is the introduction of supply centers where goods can be inspected, and quality assurance can be done. This can be done before the delivery of the products to the customers. All departments like Marketing, procurement, production and others are important when it comes to forecasting. Coordination and corporation between these departments will ensure that the best forecast is arrived at. When two or more departments work together in forecasting, there is an increased probability of the forecast been accurate. Management’s responsibility is to ensure that the forecast to be adopted is reliable and reflects the current situation of the market. The management can make sure that each time a new forecast is done due to the dynamic nature of business all over the world. The business world changes each and every minute and, for this reason, forecast strategy can change with time.
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