Supply the company value in order maintain
Supply Chain Management Supply change management (SCM) is active in many organizations today. The purpose of SCM is to maximize the company value in order maintain a competitive advantage in the market place. As an Operational Managers (OM) it is essential to oversee the supply chain within an organization.
The OM responsibility is to manage the supply chain flow, and to ensure the supply chain has a quality design in order to reduce cost and drive efficiency. Reid & Sanders, 2010) An organization supply chain includes activities such as product development, sourcing, productions, logistics, material, and other information systems needed to coordinate the movement of goods from suppliers to manufactures, and to final customers. (Handfield, 2011) The CEO of Durham International Manufacturing Company believes that the company can significantly increase its operating profit by implementing supply change management.An analysis will discuss DIMCO current supply chain, suggests the advantages of implementing a new supply chain system, recommend a strategy for external suppliers and distributors, and analyze the consequences of all recommendations by identifying who can be affected and how. Discuss the current supply chain system at DIMCO. Durham International Manufacturing Company (DIMCO), CEO Lucille Jenkins is looking to integrating the company external processes. The company currently has a traditional or basic supply chain structure which consists of three components; the company’s internal functions, external suppliers, and external distributors.
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The internal function includes 1350 different components and raw material in manufacturing its product line. The external suppliers are those components and raw material purchased from approximately 375 different suppliers around the world. The finished goods are then sent to external distributor which is in this case is a central warehouse. The central warehouse supplies 10 regional distribution centers (RDC); six are domestic and four are international, for a total of 10 RDC centers.
The 10 regional RDC supplies an average of 12 local distributors for a total of 120 local distributors. (10 x 12 = 120 local distributors) In addition, the 120 local distributors then supply an average of 35 retailers for a total of 4200 retailers. (120 x 35 = 4200 retailers). (Reid & Sanders, 2010) Discuss the advantages that DIMCO can gain by implementing supply chain management.
DIMCO may gain many advantages by implementing supply management chain. Implementing SCM can reduce problems within the company’s internal functions, external suppliers, and external distributors.Some advantages DIMCO can gain from implementing SCM are as follows; the supply chain would improve the quality of service to the end user; reduce channel cost; and create a competitive advantage. (Reid & Sanders, 2010) The implementations of SCM will strengthen DIMCO partnership with suppliers and distributors. Supply chain management can also prevent such challenges such as the bullwhip effect, caused by erratic replenishment of orders placed on different levels in the supply chain that have no apparent link to final product demand. Reid & Sanders, 2010) An effective and efficient SCM will allow partners to share information concerning health, safety, government regulations and environmental issues.
SCM will provide a common network for communications, suggestions, and feedback. This will assist DIMCO in meeting the need of customers quickly and in an efficient manner. Overall, SCM would assist in resolving the company’s internal and external challenges without delay which will drive efficiency and reduce cost. Recommend a strategy for DIMCO related to external suppliers.DIMCO currently has 375 external suppliers and provide approximately 1,350 various components and raw materials in manufacturing its products. A recommended strategy would be to integrate the suppliers. DIMCO should take steps to reduce the number of suppliers and encourage a partnership with key suppliers.
The recommended strategy can be accomplished through backward integration. In addition, DIMCO can reduce cost by sending out a larger portion of components and raw materials to a smaller number of suppliers. The recommended strategy will expedite supply chain velocity, increase efficiency, decrease inventory and cost of goods sold. Reid & Sanders, 2010) Another recommend strategy would be for DIMCO to research the possibility of establishing suppliers closer to its location, or consider making some components internally thus reducing time and shipping costs. It is possible that local suppliers would be more efficient and flexible than some of the foreign suppliers. As a result this strategy would improve quality of service, inventory management, and allow for a quicker response to the customer demand.
Overall, streamlining the number of suppliers will drive efficiency and reduce costs.Recommend a strategy for DIMCO related to external distributors. Currently DIMCO external distributors consist of 10 regional RDC which supplies an average of 12 local distributors that each supplies an average of 35 retailers. DIMCO should take steps to streamlining the supply chain form point of origin to point of sale. A recommended strategy would be for the company to consider cross docking which would streamline the external distributor’s processes. With cross docking, the products would get to the distributors and consequently to the customers in a timely manner.
Cross docking would assist DIMCO in reducing handling and operating costs as well as storage inventory. (Reid & Sanders, 2010) Another recommended strategy, would be for DIMCO to include a two-tier distribution alignment, this would allow for the regional distributors the possibility of delivering directly from the regional distributor’s location to the retailers without using the local distributors. The regional distributors should then perform a shipment transportation cost analysis to determine the possibility of the proposal.This would include using economic delivery transportation companies like FedEx, UPS and small local freight carriers. (Reid & Sanders, 2010) Overall, the two recommended strategies would decrease cost, increase profits and expedite delivery to the customer. Analyze the consequences of all your recommendations by identifying who is affected and how.
DIMCO should analyze the consequences and affects when streamlining the external suppliers and distributors processes through implementation of Supply Chain Management.Some suppliers and distributors may disapprove of streamlining the processes and perceive SCM as an attempt to exact DIMCO’s will on the suppliers and distributors. DIMCO will need to consider when implementing SCM, the responsibility of communicating honestly, regularly and thoroughly with the suppliers and distributors in order to prevent misconceptions, doubts and mistrust. DIMCO must encourage and support its suppliers and distributors to engage in activities that will allow them to receive sustaining benefits from SCM.
For example, the suppliers could develop a more efficient and economical transportation schedule of its raw materials and components resulting in higher profits and lower transportation costs. Random and regular inspections of shipments are necessary to ensure that the manufacturing process remains efficient and eliminates the bottleneck and bullwhip effects. (Reid & Sanders, 2010) This activity is essential in promoting the smooth operation of the entire supply chain and realization of mutual benefit to all concerned, especially the customer.
In addition, DIMCO must become and remain efficient and competitive as possible. One consequence DIMCO should consider that by decreasing the number of contracted suppliers, there is a possibility that some suppliers may feel betrayed and distrust may occur; however, through effective, straightforward and timely communication, DIMCO should share its vision of the future supply chain management process to its remaining suppliers and distributors. This will ensure that the plan is in the best interest of all parties involved.Furthermore, by eliminating some suppliers and distributors, affects those who are no longer in contracts with DIMCO, however, they would be free to explore other avenues of providing the same service to DIMCO’s competitors.
As a result the suppliers and distributors may have some of the same advantages and opportunities as DIMCO. Allowing FedEx, UPS and small local freight carriers to distribute goods ordinarily done by distributors may be a point of contention initially.Conversely, once the distributors conduct the shipment/transportation analysis, one may find that they have trucks available to provide service to other businesses in the local economy. This agreement produces a win-win situation where both businesses are more efficient and sustainable by decreasing and better utilization of capital, land, and labor. References Handfield, R. PH D.
(2011). What is Supply Chain Management? Retrieved from http://scm. ncsu. edu/scm-articles/article/what-is-supply-chain-management Reid, R. D. , & Sanders, N.
R. (2010). Operations Management: An Integrated Approach.
Hoboken, NJ: John Wiley & Sons, Inc.