Strategic Supply Chain Management Business Essay

Strategic Supply Chain Management Business Essay Abstract In early stages supply chains were seen as just the supply process from a companys immediate supplier through to the immediate customer. They had their own goals, targets, deadlines, margins, and policies and also all these were depend on them based on how to cater the market demand. It is easy to perform especially in a monopoly market with very few outlets which is spread in a limited area. But when the business is growing they have to take solid decisions about expansion policies as well as the integration of supply chain operations to survive in the market and to gain the competitive advantage with the rapidly changing competitive climate. The manufacturing industry faces great challenges equally as any other industry, which is a result of economic crisis, especially when it comes to the diversified, large-scale companies with huge expansions and a customer base, as Singer Sri Lanka PLC. In particular to perform in the current competitive environment its not only the existing methods are important, but the latest logistics and supply chain management practices are matters a lot as well. Time has changed and out thinking about the way we manage our improvement activities also has to change. Good is not good enough Only our very best will attract the customers in todays competitive environment. Producing an excellent product is not cut the mustard today. Over the years Singer (Sri Lanka) structure has strengthen immensely to incorporate with the strategies formulated to face the changes in the environment. A critical study was carried out to understand the major competitive priorities in current supply chain of Singer Sri Lanka PLC; the supply chain management principles, strategies and techniques that are used in achieving these competitive priorities; other possible tools which could be used for improving the present performance of the organization and how the company can go beyond the excellence by using these practices as well. (Abstract is not included in the word count) 1.0 Scope of the Assignment To investigate Singer Sri Lanka PLCs supply chain with a view to, Understanding the supply chain systems and operations and to assess its impact on the chain. Identify the current supply chain strategies and the influence from various market conditions. Make recommendations in order to improve the current supply chain in the company and over come the identified critical issues and challenges by applying strategic supply chain management principles. Company Overview Singer Sri Lanka Started its operation in 1872 in Sri Lanka and is a Company that has grown over the years into a benchmark entity in Sri Lanka in terms of popularity, modernity and reach. Singer today is synonymous with quality, wide reach, and wide product range across diverse lines and wide appeal to consumers across the entire spectrum of buying power. Source -Singer (Sri Lanka) PLC Annual report Singer Sri Lanka PLC is a diversified, large-scale company, which was established and started its operations with few shops and now Singer has nearly 550 retail outlets spread all over the country with a group of more than thousand permanent employees. Furthermore Singer has widely spreaded distribution channels, such as Singer Plus, companys largest distribution channel, Singer Mega ,which optimises true modern trade retailing, promising a shopping experience on par with the best in the world, Singer Homes, the furniture store contributed to offer high quality and stylish furniture, Sisil World, promotes mainly Sisil brand products and it is the second slot in the distribution hierarchy, Singer Wholesale, Satellite shops and Duty Free etc are the other channels of distribution. Singers product portfolio is highly diversified and consists of products across a range of household, industrial and financial categories. Singer product portfolio: (Source: Singer (Sri Lanka) PLC Annual report 2009) Organization Structure Pyramid Singer Organization structure consists of three main management levels which include Junior, Middle and Senior. Senior and middle levels has two sub layers as illustrated below. A Foreign Component Suppliers B Local Component Suppliers Prodimix International Germany Arpico Haffle Fittings Italy Regional Sharpeners Dolken Company Germany St. Anthonys Company Hevea Company Malaysia Laminex Company Australia C Other Local Suppliers D Foreign Suppliers Soft Logic National/ Panasonic Epsi Computers Sony Craft Suppliers Samsung Nilkamal Hitachi TCL Whirlpool Wedge Unix E Retail Outlets F Corporate Customers Singer Mega Dilmah Singer Homes Nestle Singer plus John Keels Holdings Sisil World Media Services (Pvt) Ltd. The Supply Chain Competition Supply Chain is a network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users (Source: Christopher 2005, p.6) It is clear that current world companies cannot act individually and survive or gain a competitive advantage in the market for a long run. Therefore supply chain integration is a powerful concept for survival and growth in todays business environment. A product or a service should have key attributes to be competitive in the market place, which are known as the competitive priorities. The competitive priorities may change with the market segment. For example, when consider the Singer customers in a rural area may be interested primarily in the cost of product while the customers in urban areas are interested in quality of the same product. 3.1 Identifying the Competitive Priorities Cost Advantage: This is a strategy where the company seeks efficient facilities and uses tight cost controls to produce products more efficiently and effectively than competitors. Singer Sri Lanka had only around 10 brands in early 2000 and mainly concentrated on market penetration by providing affordable products to the mass market. In order to bring down the price, the company has moved to strategic sourcing of its major brands through an intermediary which purchases for the entire south Asian region which affects economies of scale. Eg: i. Discontinued the TV plant at Singer Industries Ltd., Ratmalana in 2001 and started sourcing form China. ii. Started the factory in Piliyandala for furniture water pumps to reduce imports as well as duties and offered innovative products at a competitive prices. At the same time manufacturing plants should plan their systems in such a way that all resources such as material, labour and machines are efficiently used to bring down the cost significantly. Also company should make sure to keep sufficient margin to cover all other overheads before going to reduce the selling price to get more volumes. This can be illustrated as follows; Value Advantage: Customers dont buy products, they buy benefits Adding value through differentiation is a powerful concept of achieving a defensible advantage in the market. Singer has moved to a differentiation and multi brand strategy to enter into a new era of retailing. In all categories, different brands positioned to appeal different customer segments. Singer trade name has changed to SINGER plus from SINGER on 1st of January 2007 and the slogan to MORE BRAND MORE CHOICE. It enables to increase the appeal to customers and the message of choice available in the stores and adds differential plus over competitive offerings. Singer adds value through service by providing unmatched service to their customers by giving not just a product but with a full package which includes super shopping environment, friendly customer care staff, product demonstration, discount schemes, easy payment schemes, free delivery to the door step, free installation, customer training, free services for selected items like A/Cs, extended warranty scheme, excellent after sales service, etc. When considering the product designs, certain designs may increase inventory holding or transportation costs with long manufacturing lead time. In Singer basically in furniture factories this issue can be seen. This will be a huge impact on the whole production of Singer factories if not properly address the problem. Multi Channel Strategy (Source: Singer (Sri Lanka) PLC Annual report 2007) Delivery Lead Time : Consumers in all markets, industrial or consumer are increasingly time sensitive and this is reflected in their purchasing behavior. This should be visible from the time of manufacturing to the delivery of the item. In all the Singer factories they use Computer Numerical Control (CNC Programmable machines) to make sure speedy, efficient and reliable manufacturing process. As a policy they also maintain average three months finished goods inventory in all the stock keeping units (SKUs) in general and 1.5 to 2 months finished goods inventory for identified fast moving items in the sub warehouse. Singer also has the island wide distribution network with more than 500 shops and goods are transporting everyday to all the locations from the central warehouse. Shops are also permit to keep sufficient inventory in their stores. But here the main issue is that the uncertainty of holding more inventories. Though they have reduced their lead-time, with the volatility of the markets some times they have resulted in excess inventory situations, where sometimes the loss can be very high. This is mainly for the items such as televisions, refrigerators and white goods (washing machines, home theatre systems) etc. since these can be out dated with the new technology enhancements. This should be addressed for an immediate solution, because it can have a huge impact on the whole supply chain in the long run. Quality: Quality should be there in every aspect including design quality, process quality, product quality, service quality, etc. While maintaining ISO 9001:2000 standards Singer Sri Lanka factories make sure that every item produced up to the required or expected level in terms of both quality of conformance and quality of design. In overall companys point of view it is also a crucial factor to maintain the balance approach between the price and quality of all the products. So to have a full range of products in each category company has decided to go with multi brand strategy, where the company doesnt want to compromise quality and damage the brand image due to get the price advantage. Analysis of key areas in Singer Supply Chain Analysis of the above competitive priorities has given a clear insight about the issues that can be impacted on the current supply chain and also here I would like to draw the attention on major key areas which should be considered to have an effective and efficient integrated network for the business organization. Areas to be reviewed; Supply chain competitive strategy Supply chain agility, flexibility and responsiveness How well the supply chain is synchronized 4.1 Supply Chain Competitive Strategy Competitive context of business continues to change basically because of four major reasons; i. The new rules of competition ii. Globalization of industry iii. Downward pressure on price iv. Customers take power to demand on goods/ services Analysis of Current Situation Currently Singer Sri Lanka has an internally integrated system which provides mainly an end to end planning framework and they highly depend on the hierarchy. So there is a high possibility of delaying the decisions due to lack of confidence and authority levels. Also the focus on reducing obsolescence properly is also a major issue. Possible Strategic Recommendations Singer Sri Lanka has to move ahead with external integration with their international suppliers this will lead to manage better up stream and down stream interaction in order to maintain an effective and efficient value chain and to get a better cost advantage. By having an effective ERP system they can handle all the transactions and information regarding the manufacturing, logistics, distribution, shipping, invoicing, accounting, human resources, shop sales, market campaigns, bargain or auction sales, promotion activities, etc. through this and also by applying internet, intranet and extranet facilities the company can avoid having excess inventories and maintain a proper inventory which is aligned with customer needs, especially when it comes to the multi brand multi channel concept. The other important fact is to identify the power position of Singer relative to their suppliers and customers with regard to the scale matters. Finally in this aspect they have to focus on managing 4Rs (responsiveness, reliability, resilience, relationships) thoroughly to strengthen the linkages between the customers and suppliers, where the competitor would find hard to break. Best fit in an organization can be illustrated as follows; 4.2 Supply Chain Agility, Flexibility and Responsiveness Demand in todays volatile markets causes most of the current pressure on supply chains to compete as networks and to use planned network configurations to drive flexibility, agility and responsiveness. Agile or Lean? Analysis of Current Situation In the current status of Singer Sri Lanka, they keep sufficient stocks of finished goods in ware houses of each channel and also raw materials at the main Singer factories, where some times it can cause huge losses because of excess of stocks. Though the overall lead time is reduced when under taking special orders such as providing customized items for corporate clients locally or internationally, there can be situations where timely response may be poor. Possible Strategic Recommendations By making the supply chain more agile it can make the operation of the company more smoother. For this applying the seven principles which is given in Table 1will be important. Efficient responsiveness should be improved by de-coupling the up stream and down stream processes and utilizing the principles of postponement wherever possible. As the company strongly believe that there should be a flexibility and variability in all categories. It can be improved by developing new products, by incorporating some product changes to fit the customer specifications and also quickly able to respond increasing and decreasing demand due to the seasonal sales pattern and also can position different brads to appeal the different customer segments in terms of quality and the price. Table 1: Basic Principles for the creation of agile supply chain Principle Application Synchronize activities through shared information Needs to enhance the companys new IT systems (ERP system, Electronic fund transfer, Internet, e-mail etc.) which enable effective on line purchasing other services Work Smarter not harder Reduce non value adding activities such as manual activities identify the parallel processes in the company (already this is done up to certain level of transactions) Partner suppliers to reduce inbound lead times Work more closer with suppliers and share information about different demand schedules to reduce time delays Seek to reduce complexity Enhance the advance capabilities of information systems increase the transparency of processes to reduce confusion delays Postpone the final configuration This is already being used for certain range of items Manage processes not just functions Needs to manage across its supply chain or the inter related cross functional processes to be more flexible agile in responding to demand Utilise appropriate performance metrics Singer already uses performance monitoring metrics, but can make out the other possibilities which fits the structure of the organization do necessary modifications design improvements Enhance the supply chain strategies through agility: 4.3 How well the Singer Sri Lanka Supply Chain is Synchronized? Synchronization implies that each stage in the supply chain is connected to the other and that they all march to the same drumbeat. The way in which entities in a supply chain become connected is through shared information. (Source: Christopher 2005, p.177) Key processes that needs to be linked, up stream and down stream to supply chain synchronization of Singer Sri Lanka: Key Processes Analysis of Current Situation Possible Strategic Recommendations Planning Scheduling This is done by sharing information between each tier, but the main focus is on the first tier customers suppliers. Properly linked information system should be implemented with an integrated ERP system in order to have a proper control over the lead time inventory. Design Since the poor communication with the tier 2 suppliers it has lead to a lack of market innovation and confidence about new design developments IT based systems (e-mails, internet etc.) can be used to optimize the connectivity among all the tiers New Product Introduction Though this is done through the differentiation strategies, still there are loop holes where the trends are not clearly identified and communicated When this comes to the bulk production it is essential to identify obsolete items and replace them with new product designs. to gain competitive advantage For this properly linked network channel is essential Product Content Management When a change is required it has implemented after going through a very long process where totally based on the hierarchy of management, which is very time consuming and complex Should have a proper alignment with the strategies and the critical processes in the supply chain to minimize the impact over the customers Order Management Most of the main suppliers have their own individual order tracking systems and basically the order processing is done by basic methods as communicating via telephones, where timeliness is a question To increase the agility with the highly volatile market demands Singer has to be inline with new technological advancements where they can reduce the order management time and optimize the efficiency of the whole supply chain Sourcing Procurement This is performed well in the current system, but this is limited due to high confidentiality As some of the suppliers work with competitors this should be remain but can be improve the visibility by having strategic partnerships Properly synchronized system would be as follows: 4.4 Other recommendations for further improvements in supply chain management: Mini Warehouse Concept: Since singer has more than 500 retail shops islandwide, keeping sufficient stock at each locations is involving considerable amount of money. So its better to locate mini warehouses in each district to maintain required inventories. Be Green Through Reverse Logistics: Company can reverting back all outdated and obsolete goods directly from the customers and try to send these to their suppliers at a nominal amount, which they are sometimes in a position to upgrade the products again. This reverse logistic concept can extend into having a more greeny environment as a responsible corporate citizen. Convert Major Suppliers Into Strategic Partners: Singer can try to discuss with its major international suppliers and convert them to strategic partners via joint venture or partnership agreements, which would enable to have a long lasting business relationship to both parties. Optimize Supply Chain: By nature consumer durable market is categorized as a seasonal market. Singer sales pattern has two main seasonal effects throughout the year (Apr/May and Nov/Dec). Its quite common to run out of the stock during seasonal times and having excess stock during off seasons. Both ways this is not good for the company since they are loosing customers during the season while considerable amount of money tied up in the inventory during the off season period. Structure Vs Strategy: Companys typical tall hierarchical structure in not infavour of the decision making system since each minor decisions should go above the line to the top hierarchy, which takes lots of time to get the final decision to the down the layers. If the company can adequately empowered its middle and first line managers company can be more proactive than the existing situation. Red to Blue Ocean Strategy: Singer has number of head to head competitors in the market who are engaging in the business in similar nature. So company can immediately identify its strengths and competitive priorities (which can be experienced management team, islandwide network, etc) to be edge over the others in the competitive environment. In other words they can enjoy lots of advantages by following the Blue ocean strategy. 5.0 Conclusion Supply Chain Management principles and techniques are not common to all the industries. Some times it can be a complex scenario in which it also change time to time due to internal industrial factors such as union actions, product line changes, design changes, etc. and due to external factors such as changes in economic condition, other company rules and regulations imposed by the government, new market competition, international market forces, etc. Singer Sri Lanka has strong formulated strategies and also as per the analysis carried out considering the strategic recommendations will be more effective in achieving sustainable competitive advantage in the industry by efficiently managing its supply chain. So it is vital to be more realistic when selecting the proper supply chain management principles and tools in a highly volatile and dynamic environment. This also can be result in reflecting the bottom line profitability of the organization.