Supply Chain Strategies

Introduction

This assignment will use a number of case studies to discuss how companies have developed their Logistics and Supply Chain Strategies, giving examples of savings realised.

Background

Logistics can be described as the planning function that tries to plan the flow of products and information through a company. A Supply Chain is an extension of this, in that companies try to co-ordinate all aspects of the production process from external suppliers through to the customer or end user. Without proper management or planning, neither of these will be successful. Therefore, if a company is to gain an advantage over competitors, it needs a strategy that takes account of all factors affecting its (and its suppliers) product and information supply.

As stated by Martin Christopher in 2005 “Whilst the phrase “Supply chain management” is now widely used, it could be argued that it should really be termed demand chain management to reflect the fact that the chain should be driven by the market, not the suppliers. Equally the word “chain” should be replaced by “network” since there will normally be multiple suppliers and, indeed, suppliers to suppliers as well as multiple customers and customers’ customers to be included in the total system.”

In order to ensure that the supply chain strategy used within a business is effective it is important to employ measurable standards or performance indicators. These standards should be either qualitative, quantitative, or both. Staff should be able to easily access the data collected and be able to ascertain whether the scheme is effective and, if necessary, spot areas of concern where improvement is required.

The traditional view of a buyer/supplier relationship was adversarial where each party attempted to cut costs or maximise profit from each other. One emerging trend is for companies to work together to improve profit for all parties. This requires an efficient means of communication in order to be successful. Communication is a vital part of any Logistics or Supply Chain strategy, without timely and accurate information flow, a company has little chance of planning or managing any of its processes.

The growth of the internet for business use has seen a number of companies giving their suppliers access to their company intranet sites, thereby giving the supplier real time information on which to act. This collaboration allows the supply chain to be managed as a whole, not a series of discrete processes or functions. If a sufficiently accurate and broad sharing of information is allowed, it is possible to enter into Vendor Managed Inventory practices (VMI). VMI takes the responsibility for the management and replenishment of the inventory from the customer and transfers it to the supplier. Both parties benefit from this system as the supplier requires less buffer stock and the customer through higher levels of reliability and availability.

In 2005, Martin Christopher summarized a number of principles that should guide a supply chain manager as the “4Rs’ of responsiveness, reliability, resilience and relationships. Responsiveness can also be described as agility or the ability to meet changing customer demands sooner. Reliability relates to the uncertainty inherent in many businesses, this can be improved by better visibility of the whole supply chain. Resilience is described as the ability to cope with unexpected disturbances. Relationships are becoming more important as businesses begin to work together more. Relationships can only be built on trust and co-operation.

Case Study 1 - Exide Technologies

(Source вЂ" William Atkinson, Purchasing magazine 17 July 2005)

One company that has developed a very robust strategy is Exide Technologies, the world’s largest producer of electrical storage solutions (Batteries) for industrial and transportation markets. The company was in serious financial trouble in 2002 due to debts from acquisitions it had made in the 1990’s and as a result of major customers demanding price reductions of about 5% per year. “The company had $2.5 billion in sales, but had more debt than sales and hadn’t made money in ten years,” pointed out Robert B. Weiner, executive vice president for quality, EXCELL, and global procurement. Exide was unable to meet commitments to employees and customers, and struggling to fulfil environmental requirements.

Rather than going under, in April 2001, the company launched EXCELL (Exide Customer-focused Excellence Lean Leadership), an initiative designed to eliminate waste and implement continuous flow throughout its supply chain. The goals were to double output utilising existing personnel and space and to improve the cost of quality twofold by 2005.

The creator of EXCELL was Robert B. Weiner who joined the company in 2001 having spent 16 years at General Electrics and 8 years at Pratt & Whitney where he helped to realise and manage a number of lean manufacturing initiatives.

Weiner faced the challenge of implementing a complex initiative in a very large organisation (approx 20000 employees in 72 plants around the world), compounded by the need to do it simultaneously and within a tight time frame. Weiner reflected, “When I came onboard, there was talk of rolling EXCELL out one plant at a time. However, I explained that if we didn’t begin in all of the plants right away, the company wouldn’t be around long enough to roll it out gradually.”

The EXCELL programme consisted of a number of practices including business process reengineering, just-in-time, kaizen, quality control process charting, six sigma and total productive maintenance. All of these practices had the common goal of eliminating waste from, and adding value to processes.

The company measures progress against a number of Key Performance Indicators (KPI’s) which it tracks through a centre of excellence staffed by eight “lean agents” who are responsible for between 6 and 10 plants each. These agents are coaches that provide training at the companies’ plants and also suppliers’ locations. Each plant has a “lean leader” who implements lean manufacturing within the plant and works with the plants supplier base. The lean leaders train lean champions (hourly paid workers) given responsibility for specific parts of the plant