Forecasting Blue Skies
Overview
Economies of scale are the tried and true methods for creating discounts. But in an industry where customization, competition, changing tastes and the pursuit of new and cool products are critical, large inventories can be cumbersome and forecasting can be impossible. Luckily, there is a company that satisfies all these needs while reinventing supply chain relationships. This company is PCH. PCH is an organization that aids companies in managing their chain of supplies. They do this by increasing information transparency along the supply chain through their many services.
Between a Rock and a Hard Place
For many years, companies were vertically integrated; they owned their entire supply chain. Necessary in industries heavily laden with proprietary information, this method of management was incorrectly applied to industries that had only a limited number of exclusive parts and shared the rest with other products. As companies learned their products and their competition’s products shared a significant number of parts, a new wave of manufacturing methods was developed. Electronic Manufacturing Services (EMS) was developed as a method to create asset-light companies. Necessary when changing tastes meant large inventories would be costly paperweights in a short time, this method created many unforeseen problems. The economies of scale necessary to lock in low rates were eliminated as companies ordered fewer products more frequently. Also as companies forfeited the control over their entire supply chain, issues with logistics, manufacturing, and procurement proved troublesome.
A Multi-Stage Solution
Companies were in a quandary. Manufacturers were still producing the same number o...
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... rewards. Besides Manufacturing, Postponement, and Fulfillment services, PCH also offers services in creative, engineering, logistics, and compliance management. With all these services, PCH has taken a sizable chunk of liability. If any aspect fails along the supply chain, it is PCH’s responsibility to fix it. At the forefront of PCH’s risk management strategy is knowledge. Furthermore, PCH has implemented an aggressive environmental policy and supply chain security policy as well as requires all of their suppliers to be ISO Certified. With these requirements to work with PCH as well as their relentless effort to gain knowledge with their suppliers and clients, PCH has been able to manage their risks and make them a minimum. Though forecasting in such a volatile industry is tough, with proper supply chain management, PCH has avoided being under the weather.
...ell. The key for them seems to be accurate systems, reliable data, and most importantly cross function communication. As the firm is distributing products with a short shelf life there is little room for error and they have created teams to help guide the supply chain through every step of the way. Communication is always first and rises above all other aspects of the supply chain management in this particular environment.
After each order is made the product is either picked from the store or ordered from one of the central hubs. If a product is ordered from a hub an employee needs to track down the part, count out the correct amount of pieces, and ship the product. Once the product is shipped to the store employees need to receive in the parts and then deliver them to the customer. Behind every part bought there is an extensive amount of labor time put into getting that product to the customer. Not only do the companies need to have labor to produce and distribute products they need high end technology to develop and distribute their
Outsourcing manufacturing services to a network of suppliers can provide organizations the ability to adjust the production capability upward or downward, at a lower cost, when trying to match the demand conditions. Outsourcing can also decrease the product design cycle time
Ewalt, D. M. & Hayes, M., (2002, Sep 30). Supply-chain management: Pinpoint control InformationWeek. Manhasset, 16-19
In the 1960s through the 1970s, companies realized strong engineering, design, and manufacturing functions were strong market strategy keys to create and capture customer loyalty. As the demand for new products rose in the 1980s, these market requirements were to increase their flexibility and responsiveness to adapt existing products and processes or to develop new ones in order to meet customer needs. As manufacturing improved in the 1990s, managers began noticing material and service inputs involving suppliers and their major impact on an organization’s ability to meet customer needs. As a result of these changes, organizations now find that it difficult to manage their own organizations. First, they must be involved in the management of their network of all upstream firms that provide directly or indirectly, as well as the network of downstream firms, which are responsible for delivery and market service of the product to the end customer. In order to succeed, managers have to realize that they cannot do it alone and they must work together on a daily basis with the whole organizations in their supply chains. Because supply chain management involves all functions within an organization, managers need to know what a supply chain is, why it is important, and the impact of supply chain management on the success and profitability of their organization. Today, Wal-Mart topped the list of the America’s biggest companies on the Fortune 500 list, “with sales of almost $345 billion — more than a quarter of a trillion dollars” (Forbs). Wal-Mart’s supply chain management is becoming recognized as a core competitive strategy.
Quickly becoming apparent after only a few rounds of play was in the absence of coordinating direction the individual supply chain links immediately focused upon acting in their own best interests much more so than the organization as a whole. Whether the end use customer was satisfied became secondary to avoiding stock outages for the next link in the chain, or their specific “upstream customer”. The real world application of this example is that focus on the end use customer must be consistent and maintained throughout the process up to and including delivery. Undoubtedly internal customers, such as retailers to wholesalers and distributors to production, must be serviced along the way for the transaction to ultimately occur. However, unless an end use customer is involved no profit can be realized by anyone.
The business environment is increasingly becoming competitive and challenging. In the recent past, manufacturers have found themselves facing the threat of dwindling profit margins due to unfortunate global events such as the 2007 global financial crisis and the on going Europe economic crisis. The need to improve operation efficiency so as to ensure current and future investment yield the highest rate of return has therefore become extremely important. Manufacturers are now actively engaged in, managing their costs, Research and Development, adopting best procurement strategies, among other Actions. While such actions might eventually lead to positive results, additional business value can be achieved through proper management of the supply chain (Waymer, Ivanaj & Mussa 2009; Krivda 2004).
The second way is to achieve low direct and indirect operating costs is gained by offering high volumes of standard products and offering basic no-frills products. Production costs are kept low by using less parts and using standard components. Limiting the number of models produced to ensure larger producti...
The furniture company Somerset needs to retain its customer service record and remedy any of its global supply chain issues before it has an adverse effect on the brand and start losing customers. With a frequent change in the product catalog, keeping an excessive inventory will cut its profit and some of the product may become obsolete even before the furniture hits the retail outlet stores. In order to achieve profit and success, business employee many strategies and the supply chain strategy are one of the operational management techniques that use analytical decision making process to achieve the company goals and provide tools to effectively compete in the market (Taylor and Russell, 2014).
Dell Computer have recently announced changes to their business strategy and supporting supply chain. They will no longer focus on a made to order direct sales model for their personal computers. Nor will they continue to refine their renowned supply chain model that supported their sales model. Instead, they will be looking to produce personal computers with fixed configurations at lower prices. This essay looks at why Dell have changed their strategy, and then considers the customer value proposition of the new strategy, as well as lessons that other organisations can learn from the Dell experience.
[8] Supply chain lessons for the new millenium: a case of Micromax informatics Integral Review –by Salma Ahmed, A Journal of Management-ISSN: 2278-6120, p-ISSN: 0974-8032, Volume 5, No. 2, Dec.-2012, pp 53-61) .
As Seattle based company Billings Equipment Inc. pushes on to produce a new product line, the organization is instructing supply management employees to reduce costs and cycle times of suppliers, to adhere to the Target Cost objectives. The hasty production timeline restraints led to early missed cost reduction opportunities, unethical reneging on supplier price contracts in order to reduce costs, and jeopardizing Billings Equipment’s historically impeccable reputation for ethical treatment of suppliers. This product line’s aggressive timeline to market; leading to early missed opportunities to reduce costs, followed by forceful demand to suppliers for a ten percent price reduction, and followed by an additional five percent price reduction
...e highest in the industry (Figure 3). The design team plus representatives of each of the other redesign teams were brought together to develop a systemic analysis of the bigger picture of the company. Figure 4 illustrates the systems map which revealed that the root cause of the company’s high supply chain costs was ongoing effort by the sales and marketing organizations to increase product mix to improve profitability. The increasing of the product mix led to many unplanned consequences that both increased supply chain costs and eventually reduced revenues as well. From this new acquired knowledge the management streamlined its product line and achieved both higher revenues and lower costs. (Stroth, 2012)
By adopting the value chain into a manufacturing company, it will gain efficiency, effectiveness, reduce the product cost and improve continuously. For example, Toyota has implemented Toyota Product System (TPS) integrated information system with the business process which allowed the company to be more efficiency, effectiveness and reduce inventory cost. (Toyota
All choices made by Seven-Eleven are structured to lower its transportation and receiving costs. For example, its area-dominance strategy of opening at least 50 to 60 stores in an area helps with marketing but also lowers the cost of replenishment. All manufacturing facilities are centralized to get the maximum benefit of capacity aggregation and also lower the inbound transportation cost from the manufacturer to the distribution center (DC). Seven-Eleven also requires all suppliers to deliver to the DC where products are sorted by temperature. This reduces the outbound transportation cost because of aggregation of deliveries across multiple suppliers. It also lowers the receiving cost. The information infrastructure is set up to allow store managers to place orders based on analysis of consumption data. The information infrastructure also facilitates the sorting of an order at the DC and receiving of the order at the store. The key point to emphasize here is that most decisions by Seven-Eleven are structured to aggregate transportation and receiving to make both cheaper.