The study focuses on the supply chain functions of a given company in a case study. The supply chain procurement options are to be evaluated through the report for the company. The company in focus wants to increase its demand functions effectively to significantly cater to the demands of the customer base. At the same time the company would also like to maintain the essential integrity of their supply chain. The company is involved in the manufacture of gaming consoles. The supply chain functions ultimately aim towards supplying gaming consoles to retail gaming store outlets across the globe. The supply chain of the company is systematically analyzed through the study. The functional aspects of supply chain need to be essentially discussed. Hence, the essential challenges have to be identified in regards to the supply chain functions and the subsequent procurement functions. The most important aspects related to the supply chain functions involving procurement and distribution need to be effectively analyzed.
Transport modality refers to the various modes of transport that can be used for safely procuring and distributing the sales items. Since, the gaming consoles are to be distributed at a global level, more than one mode of transport has to be utilized. Hence, deciding the means of transport becomes very difficult and important at the same time. The major challenge is deciding what form of transport will be fit for specific areas where the retail stores are located (De Araújo, Alencar and de Miranda Mota 2017). Inland surface transportation has to be the most used transport modality given the situation. However, at the same time since the supply and distribution areas are globally located it is also important to judiciously consider sea transport. The main challenges that can arise in case of surface transport are distance factors, quality of available roads, road safety, traffic aspects and other ground level issues that can affect the transport functions. It is important to consider that the management of the company wants to adhere to ethical principles during the implementation of the transport systems (Theodorakopoulos, Ram and Kakabadse 2015). Hence, it also becomes quite necessary that by no means unethical practices are utilized towards enhancing the procurement and distribution functions.
In regards to the onshore distribution of the gaming consoles, the transport that can be utilized can be smaller. As an example- large number of smaller vehicles can be used to distribute gaming consoles to the retail outlets. The procurement and distribution can be divided among zones. This will ensure that effective procurement and distribution happens in each specific zones. The zones can have specific zonal warehouses. The consoles can be distributed via larger transport vehicles to these specific warehouses. Smaller vehicles like small trucks can then procure the items from these warehouses located at specific zones and transport it to zonal stores subsequently (Brandenburg et al. 2014). In order to ship the consoles to international locations both air and sea routes can be utilized. Air routes will be for countries that are located far (Jacobs, Chase and Lummus 2014). However for neighboring countries sea routes can be utilized. Country specific transport mechanisms then need to be formed. It is better to locate warehouses only in the larger cities with better connectivity. Thus, the company can avoid risks of transport challenges in offshore locations.
The directors have to forecast the expenditures and sources of income that the logistics firm in the case study in order to form an appropriate transportation strategy to transport games consoles they manufacture. The case study remains silent on the global markets which the firm is aiming and does not reveal any detail about the suppliers. The forecast would hence be divided into two parts namely, upstream and downstream supply chains. The supply chain at the while forecasting its upstream supply would take into account the different procurement options. The procurement strategy would be broadly be divided into two portions, namely, the making the components in-house and procurement them from suppliers. The budget forecasting would also take into account the expenditure the transportation firm would bear for quality assurance, monitoring and control of the performances of the suppliers. The aim of the procurement would be meeting the global demands for goods, maintaining an integrated supply chain, retain leadership in the market and provide high levels of services to customers. It would also be assumed that the global demand would be 100 units. The case study mentions that the company is an existing company and thus, it can be assumed that the account department would allocate $1000000 in the first year and increase it by 10 percent in the coming two years. It would also be assumed that company would take a loan of $10000 from bank in the year 1, thereby increasing it by 10 percent each year. It would also be assumed that the firm would allocate $ 100000 from returns on investments each year towards the new transportation strategy. It also be assumed that total cost of production would increase by 10 percent. It has been assumed that the port of origin would be Sydney and the destination port is San Francisco, the US. It has also been assumed that the size of container would be 40 feet and according to the World Freight rates, the cost is coming to $ 3024.36 exclusive of all taxes and duties (Worldfreightrates.com. 2018).
The financial estimation shows that in-house manufacturing of goods would be cheaper compared to procurement of finished goods from third party firms. Thus, in response to this finding the management of the company should allocate funds to procure raw materials, technology and manpower required to produce gaming consuls. The in-house manufacturing facilities would also allow the firm keep the cost of production low compared to the procurement of finished goods from third party firms. The same has been found out by raising the expenditure by similar rate of 10 percent as the sources of funds.
The forecast conducted above suffers the several shortcomings in the light of the case study provided. First, the case study mentions global retail destinations but does not specify any destination names nor does it mention any domicile country of the firm. Thus, for estimation purpose, the destination and domicile countries have been taken as Australia and the US respectively. Secondly, the sources and expenditures of funds have been increased by 10 percent to keep parity. However, the budget and the amounts are just estimations and it is not to estimate exact value of currencies.
The supply chain strategy of the transportation company should consist of both upstream and downstream supply chain. The company should acquire materials to make all the essential components for its product, gaming consoles. The forecast emphasizes to a great extent on the upstream supply chain and gives very little attention to the downstream supply chain. Since it has already been proposed that the firm should opt for in-house manufacturing of gaming consuls, the following are the two pillars on which its supply chain should be based:
The upstream supply chain of the gaming consul manufacturing firm should include suppliers of raw materials which it would it use in manufacturing of gaming consuls. The supply chain should also include suppliers of manpower and technology. The firm should conduct a market analysis of different markets of raw materials as well as technology like Japan and the European Union. This would enable it to locate suppliers of high quality raw materials and technology which would enable it to procure raw materials as well as technology at economic rates. The firm should use inventory management software to ensure that it does not procure heavy bulk of raw materials, thus locking its funds. Similarly, the firm should also ensure procurement of manpower from regional or local market to the extent possible in order to keep the cost of expenditure low.
The downstream supply chain of the company should consist of distributors and retailers in each of global target markets. This would enable it to get more penetration into the markets. As a part of its downstream supply chain, should use ecommerce to sell its products in the global market. The firm should also aim to enter to agreements with selected retailers to sell its gaming consuls exclusively. This would allow it to keep its competitor companies away from its own customer base. The downstream supply chain should be strengthened with a strong promotion strategies consisting of discounts and offers. The firm in the long run can acquire some its important distributors and retailers, either partially or entirely to minimize competition. This would enable it to earn high profits and maintain its cost of distribution low, thus increasing its profit percentage.
The firm should strict evaluate the suppliers supplying it with components for its finished products. The evaluation of the suppliers should consist of both financial and non-financial strategies. The financial strategies should consist of measurement of quality of the components against the expenditure borne to acquire the raw materials. The firm should ensure that its suppliers do not indulge into illegal sourcing of components and offer the same at inflated rates. The firm should also ensure that the suppliers are able to supply the exact components according to its requirement.
The non-financial parameters which the firm in the case study should take into account to evaluate suppliers are legal and ethical compliance levels. The suppliers should not indulge into malpractices and illegal activities of any sort. They should not be involved with unethical practices like exploitation of workers and child labour directly or even indirectly.
Adding value becomes very much important as procurement and distributions are essential functional requirements in any industry. In this case the supplied items are gaming consoles. Thus, the entertainment factor becomes much important. In order to add value the transport systems can be enhanced to add promotional value to the consoles. The vehicles can be effectively designed in a way to promote the gaming consoles. However, the most important value to the customers will still be to get the gaming consoles on time. Gaming consoles share significant fan base. Customers often queue up in lines to get the consoles. Moreover, consoles are also pre-booked or pre-registered by many customers this means that time management will definitely add greater value for the customer than the other value adding techniques that might be implemented. This is also an important scope to uphold the ethical principles of the company. The company can project that the consoles are being provided to the customers in time without breaching any ethical limits.
The consoles also have to be effectively packaged. Packaging is bound to provide extra value to the customers. However, the actual significance of packaging functions is that it helps to reduce the chances for damage (Genovese et al. 2017). It’s a great responsibility of the entire supply-chain operation management to provide the consoles to the customers without any damage being caused (Christopher, 2016). The retail stores would also not like to have damaged products as this can negatively affect both sales and reputation of the company. Hence, packaging need to done in an effective way shock reducing packaging have to be used. For distribution to overseas areas or far off places the packaging can be further optimized considering the great amount of time and distance the packages would have to cover (Touboulic and Walker 2015). Adding value also means on time delivery, hence the packages need to be supplied to the retail outlets in the least possible timeframe. In order to enhance this the organization has to employ time management techniques and utilize times that are the safest for quick transportation of items. Providing an undamaged item on time to the customers will be the greatest value the company can add for the customers (Martínez-Jurado and Moyano-Fuentes 2014).
The following are the recommendations which can be made to the transportation company about quality assurance and monitoring performances of the suppliers:
The firm must form codes which the suppliers should comply with. The supply management codes should set parameters of performance which the suppliers have to satisfy. The parameters should be both quantitative and qualitative in nature. The quantitative parameters should be minimum amount of raw materials or components which each supplier has to accomplish while supply the same to the company. The qualitative measures should consist of ethical and legal parameters like avoiding indulging into illegal acts which the suppliers have to ensure during their business operations. The firm must ensure that its suppliers have high levels of ethical credentials and abstain from engaging into unethical activities.
The firm must conduct a supply chain audit half yearly and annually. This would ensure strict monitoring the business conduct of suppliers. The firm should ensure high performance of its suppliers based on the audit. It should revamp its supply chain by terminating relationship with low performing suppliers based on the audit report. Similarly, based on the recommendation of the auditors, it should acquire new suppliers. This would ensure strict monitoring on the performance of the suppliers.
The firm should adopt strategy to make its packaging stronger and durable to prevent or at least minimize damage. Similarly, all the packages should be kept in warehouses with facilities like barcoding and CCTV camera surveillance to minimize thefts.
Conclusion:
The systematic analysis of the procurement and distribution options available for the company and the various ways in which procurement can be made effective have pointed towards greater opportunities for production maximization. The production of the gaming consoles have been found to be good and it can be further optimized through the usage of materials that can be locally sourced and provide the same value. The demand of the consoles can be effectively realized if the procurement of goods and services can be done as far as possible from the local areas. It becomes important that the procurement and distribution essentially integrates in-house modes of production. The company can use its own factories to produce the items. This means that the scope for any production discrepancies can be effectively reduced. It is very important that all the services are effectively integrated and focused towards distributing high value end product to the customers.
References:
Brandenburg, M., Govindan, K., Sarkis, J. and Seuring, S., 2014. Quantitative models for sustainable supply chain management: Developments and directions. European journal of operational research, 233(2), pp.299-312.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
De Araújo, M.C.B., Alencar, L.H. and de Miranda Mota, C.M., 2017. Project procurement management: A structured literature review. International Journal of Project Management, 35(3), pp.353-377.
Genovese, A., Acquaye, A.A., Figueroa, A. and Koh, S.L., 2017. Sustainable supply chain management and the transition towards a circular economy: Evidence and some applications. Omega, 66, pp.344-357.
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Martínez-Jurado, P.J. and Moyano-Fuentes, J., 2014. Lean management, supply chain management and sustainability: a literature review. Journal of Cleaner Production, 85, pp.134-150.
Theodorakopoulos, N., Ram, M. and Kakabadse, N., 2015. Procedural justice in procurement management and inclusive interorganizational relations: An institutional perspective. British Journal of Management, 26(2), pp.237-254.
Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a structured literature review. International Journal of Physical Distribution & Logistics Management, 45(1/2), pp.16-42.
Worldfreightrates.com. 2018. Worldfreightrates.com. [online] Available at: https://www.worldfreightrates.com/freight [Accessed 13 Nov. 2018].
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