Grand Master Business Report

Nirmal Rathod, Sapan Shah Balaji Dubey, SCM 940 July 28, 2016 Words: 3031

1

EXECUTIVE SUMMARY

An efficient supply chain implies to the network of supply chain which would be feasible from all

the 4 perspectives i.e. Cost, Responsiveness, Quality as well as Productivity. All these factors are

basically dependent on the overall external and internal environment, competitive advantage as

well as Company ethics.

The following report is an approach to design a similar Improvised supply chain model, so as to

thrive in the current business environment.

In our case, the product differentiation is the first and foremost competitive advantage. There is no

product in the market which supports S4 Hana SAP application. By this, the end users of this

product would be able to access SAP platform in their e-pads. The compatibility of the consumer

experience is as simple as having a coffee in one hand and making a Purchase order in the other

hand, while travelling.

There were mainly 3 consequences which were taken into account for the designing of the supply

chain model. Firstly, the UK exit from the EU leading to a dilemma pertaining to the business

environment; secondly, the UN Conference on Green Business promotion in Paris leading to new

sustainability considerations and thirdly, the Mexican corruption issues, putting the company into

the threat of violation of its socio-cultural ethical considerations.

Apart from that, certain Distribution strategies are recommended, including the Push-pull

marketing hybrid model. Concisely, there would be a single Mega distribution centre which would

source the assembled e-pads from China and further distribute it to the other 4 distribution centres,

spread throughout the North American market. Moreover, one of it is situated at the major port

area so as to facilitate the distribution to other parts of the world.

Also a forecast system is suggested taking into account all the key considerations including

Consumer behaviour, market profile etc.

Conclusively, an eco-friendly model was estimated with certain recommendations which would

surely help the company from financial as well as branding perspectives.

Finally, an analytical competitive grid was designed to evaluate the newly designed improvised

Supply model against the current model. It showed a significant hype, supporting all our

assumptions to be worth it.

2

TABLE OF CONTENTS

Executive Summary

1) Introduction 3

2) Background 3

3) Discussion 4

PESTLE Analysis of the Business Environment 4

Distribution Network Re-structuring 5

CFPR Approach 9

Environmental lifecycle analysis 11

Analytical Competitive Grid 12

4) Conclusion 13

5) References 13

6) Appendices 14

Appendix 1: Analytical Competitive Grid Table 14

Appendix 2: CPFR Model diagram 15

Appendix 3: Distribution Network Maps 16

3

INTRODUCTION

The organization is involved in the selling of electronic items and the major product is E Pad. E

Pad is the competitive product of I Pad which has almost same features and functions. This

organization has several manufacturing plants in different countries plus it has separate design

engineering unit too in UK, head quarter in UK and total 8 distribution centers in North America.

But there are some issues regarding cost effectiveness and responsiveness etc. the company

decided to relocate the supply chain network and the strategy as well. So according to the recent

news in the global market the supply chain associates and the leader has some responsibility to do

the research on relocate the distribution network system and come to a final decision.

BACKGROUND

Global situation is the key, inevitably ought to be taken into consideration for the development of

an efficient Global supply chain model.

There are three main aspects which forces the change in the current supply chain model.

1) Brexit 2016

“Brexit” is the exit of the United Kingdom from the European Union. A referendum was passed

in June 2016, whereby 52% of the citizens voted for exit.

This decision would surely affect the global marketplace, because UK contributed to a major

economy of the European Union. On the other hand, its reliability on EU can also not be

neglected.

Future predictions and consequences of this Brexit are highly controversial and vague so far;

but one thing is crystal clear that this is going to affect the Global Supply chain, in one or the

other way. Also, our company being headquartered in UK; it would be highly recommended

that certain amendments should be made within the current supply chain design, so that the

overall future could be secured and hedged against any big risks.

2) United Nations Climate Change Conference in Paris (Nov. ’15)

The conference was organised in Paris, with the intention to reduce the “greenhouse gas

emissions” in the environment.

It was concluded with a prediction of a significant hype in the Oil prices almost doubled up to

$250 a barrel. Moreover strict Carbon surcharges would be levied on the companies if the

pollution is not reduced to a certain level. On the other hand, government would appreciate

clean & green attempts and provide subsidies for the business (in order to promote green

business)

3) Mexican Border Corruption Concerns

4

Certain issues were found near the Mexican border regarding Corruption and other

racketeering scandals. Our company is known for its honesty and socio-culturally active

attributes. Thus, it has to be taken into account that our company doesn’t get affected by any

of such issues or even get involved in those activities. It is strongly recommended to change

move the operations away from those corrupted areas.

DISCUSSION

PESTLE Analysis of the Business Environment

Following is the PESTLE analysis of the Business environment wherein our company is/would

possibly be mapped. All these 6 six factors plays a vital role in aptly deciding our future

standpoints.

Political Scotland would be least likely to leave the EU after the Brexit results

and reactions. This would lead Scotland to make decisions in favor of

EU and not UK. Thereby, UK (being almost dependent on Scotland

for oil so far) would have to pay fat prices for the Oil. City of London

would get wacked. (4) (5)

Another biggest controversial Political factor is Sir Donald Trump.

If he wins the upcoming elections, he would make sure that he creates

problems with the trading agreements amongst Chinese countries as

well as TPP. Since our company is carrying out most of the

manufacturing from China, therefor this point is bit of a concern for

us. (13)

Economical It is strongly believed that this Brexit decision is going to badly affect

the economic standpoint of UK economy as well as US economy. UK

is already struggling with huge debts and budget problems.

On one hand, it seems like UK took this decision by its own (thus, they

would obviously have some strong grounds to take care of their

financial stability concerns) but on the other hand, the figures are not

in favor of them. Investors less likely would want to invest in new

products (like ours), especially when the overall economic standpoint

of the country is so unpredictable and disintegrate

(2)

Agriculture in UK would be adversely affected. Technically they

would be out of the Common Agricultural Policy (CAP), which makes

it inevitable for the government of UK to release new subsidies for

farmers. This would affect economy of the UK too. (3)

Immediate reaction to finance would be low. A great many things

would change as the negotiations proceed with EU. (10)

5

Social After the Brexit, the terms with EU countries is highly unpredictable.

It might be possible that the member countries does not support UK in

order to stay peacefully with EU. (12) Moreover, all the trade

agreements shared with EU as well as trade agreements with non-EU

countries too, would have to be amended.

Technological Merger with Blackberry:

This would be a big technological advancement for the company. We

would be able to set up a more security based efficient system. We are

providing SAP in our e-pad which would help companies access their

database with their e-pad. Thus, security concern has due significance

over here.

Moreover, Blackberry would be helpful in R&D funding and also in

the process of design engineering.

Legal The legal framework is currently based upon the EU legislations

design. These legislations legally loses its force as soon as the Britain

signs out from EU. Thereby, a strong legislation constitution is ought

to be set up in the UK which doesn’t leave behind any loopholes. Thus

technically UK Legal framework is practically unstable. (1)

Moreover, UK technically had trade deals with many countries as a

member of the EU. There are 22 trade agreements between EU and

individual countries and 5 agreements with other countries. After

Brexit, UK has to renegotiate with all these countries freshly and there

is no certainty whether or not these countries would want to remain

connected with UK with same type of agreements. (1)

Environmental The Paris conference was held in Nov. 2015 by United Nations. Its

results strongly supported the eco-friendly approaches and Green-

technologies which would help in making the world a better place with

least Greenhouse exposure.

Apart from that, it was predicted that due to the Surcharges levied upon

the pollution (Carbon foot prints); the prices of Oil would have

escalated almost up to $250 per barrel.

Furthermore, government subsidies would be provided to the

Companies and firms, stepping towards the promotion of this Carbon-

free world maintenance.

Distribution Network Re-structuring

Distribution Network is the system of distributing the products from one place to another and it

can be in any terms i.e. product, information or services, etc. This distribution network is used for

6

the movement of the goods from manufacturer to customers via several distribution channels.

Those cannels could be wholesaler, distributor and retailer.

Taking into consideration the aforementioned external business environmental factors, it is

inevitable to make certain changes in the structuring (positioning) of the overall business network.

Following are the certain changes that are made in order to cope up with the current global

marketplace:

Corporate headquarter, London

Design engineering, Waterloo, Ontario (Canada)

Chip Manufacturing, Taiwan

Plastic components manufacture, China

Controls and screen module manufacture, Taiwan

Final assembly, China

Distributions Centres: New York, Washington, Minnesota, Kansa and Toronto.

We would recommend to relocate design engineering and some manufacturing locations too. So,

earlier the design & engineering was in UK that now we plan to move to Waterloo, Ontario, then

Head Quarter (UK)

Design engineering (Waterloo,

Ontario)

Chip Manufacturing

(Taiwan)

Plastic Components

(China)

Final Assembly (China)

Washington (US) New York (US) Minnesota (US)

Kansa (US) (Master

Distribution Center)

Toronto (Canada)

Controls & Screen manufacture

(Taiwan)

7

chip manufacturing will be as it is in Taiwan, plastic components manufacturing in China and

controls & screen manufacturing would be moved to Taiwan. Final assembly will have the same

location i.e. China. The only reason we found that cost effective because we use the concept of

economies of scale.

For E Pad, we would like to relocate the distribution centers that covers US and Canada. The

distribution centers would be Washington, New York, Minnesota, and Kansa in US and Toronto

in Canada. The main reason behind choosing all these distribution centers in US is to cover the

whole nations including the New York because there is a port in New York so an international

trade which contributes 20% of whole sales can be covered.

As a redesign of the project we would like to introduce Kansas as a Master Distribution Center in

the USA. This is the distribution point where is located in at the central part of the nation and we

would have a plan to have a warehouse at this point so that all the final products will be delivered

at this point and then, according to the order or the demand the products will be sent to the different

distribution centers. So that we can focus on some activities such as Full Container Load (FCL)

with the cost effectiveness. In addition, we decided to import all the final products from China to

Kansa, USA. Because 80% of the final revenue comes from North America (80% from USA and

20% from Canada). So if the master distribution center will be there in the middle of the US then

we can cover the whole nation. For that we would like to use Warehouse Management System

(WMS) to control and maintain the inventory hence, the transportation activities too. A warehouse

management system is a software application that supports day – to – day operations in a

warehouse. WMS programs enable centralized management of tasks such as tracking inventory

levels and stock locations.

Following are the reasons for making certain key changes to the current Supply chain models:

Suspend Operations in Houston and Los Angeles

Houston and LA shares a substantial area with the Mexican borders. In fact, Texas (Houston)

has the longest stretch of border with Mexico. (6)

As mentioned earlier, the Mexican corruptions and scandals are currently at its pinnacle.

Moreover our company is branded to be a Socio-culturally responsible firm. Henceforth, it is

recommended to suspend the distribution centres from those locations, which proximate

towards Mexico.

Relocate Design Engineering from UK to Canada (7) (8)

Currently our Design engineering is conducted in UK. But after Brexit, the conditions doesn’t

seem prevailing for UK. Till date UK was the 3rd largest receiver of the funding from European

Union; for Research and Development. But now, EU would obviously think upon blocking

those funds to UK. They would preferably divert those funds towards the R&D affairs of other

EU member nations.

Furthermore, after leaving EU, the government of UK would also have burdens of

responsibility for issues such as competition policy and international trade negotiations. Thus,

8

it would basically prioritise their funds towards these affairs rather than R&D improvement in

the country.

Thus we need to move our Design engineering to somewhere else. So, it is recommended to

be relocated in Canada.

Why Canada?

We are planning to merge with Blackberry. So there is no way we are moving R$D to Silicon-

valley or China or any place like those. We need a place where the security infringement issues

could be properly taken care of.

Blackberry is well known to spend a lot of money in the R&D especially in the Canada

(Waterloo, Ontario). (9) This could be helpful for the company in a financial sense. (We could

have grounds to invest more on design engineering of our product). Moreover, our

technological advancements could be synchronised with that of Blackberry’s; which would

ultimately aid in the upbringing of our product.

Furthermore, Canada is a comfortable place for Blackberry too. They would not be

comfortable to do business with us, if we move our design engineering stuffs to the cheaper

markets like China, Vietnam etc. (9)

Relocating the Control and screen module manufacture from Korea to Taiwan

The manufacturing of screen modules are ought to be moved from Korea to Taiwan. Even

though Korea has a good reputation with the manufacturing of semiconductors; but in our case

Taiwan would be comparatively more feasible. The main reasons behind this prioritization are:

(a) The inflation of exchange rates in Korea is substantially dependent on the

International trade of neighbouring countries (Japan and China). Thus, it could

be stated that it is highly likely to be unstable. (11)

(b) Also moving the manufacturing to Korea would give us an opportunity to cut

down transportation expenses; because, now & then, manufacturing of Chip as

well as screen modules would be done at the same place (Taiwan)

Distributions Centres: New York, Washington, Minnesota, Kansa and Toronto

Instead of 8 distribution centres, only 5 distribution centres were designed in such a way

that it covers the entire 80% of the area of the North American market. (Appendix 3)

This would reduce costs and also make it easier to complete the supply chain loop.

One distribution centre is also set up to be the Master warehouse from where the goods

would be distributed to the other DC’s. All the assembled e-pads would be transported to

that single DC in pre decided full loads.

Push – Pull Strategy

As a distribution strategy, we decided to have Push – Pull strategy. Push based supply chain would

be better for this system in certain stages for example for cost and productivity of E Pack. Because

E Pack is the product in which we are manufacturing it based on the long term forecast and

therefore it will be make – to – stock strategy. Moreover, the manufacturer bases demand forecasts

on orders received from the retailer’s warehouses. It therefor takes much longer for a push – based

9

supply chain to react to the changing marketplace. Whereas, the Pull strategy would be helpful in

quality and responsiveness of the product. The only reason for having pull strategy is we are using

SAP S4 Hana which is the fastest version of SAP and we can get the maximum advantage of this

technology.

As it is mentioned earlier that for the initial stage like cost and productivity, the push based strategy

will be helpful but after that, the remaining stages require the pull based strategy and that is why

this interface between the push and pull based stages known as push-pull boundary.

Raw Materials End Customers

Supply Chain time line

Collaborative Planning, Forecasting and Replenishment (CPFR):

This is a module or a business plan that induces or makes the trading partners to work cohesively

in providing customer demand. This is usually done by:

Linking practices of sales and marketing to supply chain planning and executing the same.

The main objective here is to provide more to the customer while decreasing the inventory,

transportation and logistics cost.

There are 3 stages of CPFR:

Basic CPFR: Less number of business processes whereby less number of supply chain is

integrated.

Developed CPFR: Here huge number of data exchange takes place between to partners.

Advanced CPFR: Here synchronization of forecasting information system and

coordinating planning and replenishment process.

Push Strategy Pull Strategy

Push –

Pull

Boundary

10

So from above, based upon the company history, it is clear we will be using the Basic CPFR model.

CPFR is usually used by value chain suppliers to co-ordinate plans that help to reduce the variance

between supply and demand.

The opportunities that CPFR creates are as follows:

Trading partners share their plans for future events, and then use an exception-based

process to deal with changes or deviations from plans

By working on issues before they occur, both partners have time to react

A supplier can build inventory well in advance of receiving a promotional order and carry

less safety stock at other times

A retailer can alter the product mix to reduce the impact of supply problems.

There are tasks which are performed under CPFR, they are:

Collaborative activities: Collaboration tasks:

Strategy and Planning 1. Collaboration Arrangement

2. Joint Business Plan

Demand and Supply Management 3. Sales Forecasting

4. Order Planning/Forecasting

Execution 5. Order Generation

6. Order Fulfillment

Analysis 7. Exception Management

8. Performance Assessment

Now let’s analyze how this part will be handled. In collaboration arrangement the company and

the retailer will set the scope of framework, define common goals and responsibilities. After this

both the parties will form a joint business plan, here those events which affects supply and demand

are identified. Next part will be to forecast consumer demand which will be executed under sales

Forecasting task this will help in building Order Planning/Forecasting schedule, where the

inventory lead times, current inventories, logistic restrictions and other factors affecting the

planning will be mapped. In the execution phase, Order Generation will be used to transform

forecast into firm demand after which Order Fulfillment process will follow where producing,

shipping and stocking the goods will be done. Finally, in the Analysis phase, Exception

Management and Performance Assessment will be used to constantly monitor any sudden changes

in quality, provide key metrics to evaluate the success of the business goals and monitor the trends

in the industry that can help change the strategy more quickly if necessary.

The following can be done to ensure this system works, the retailers will have POS system in place

to provide the sales of the day information, this information will help the retailer to place order to

11

the distribution center, now to help enable the CPFR works properly the system (the entire supply

chain) must have SAP in place to help procure and distribute the product. This will provide

information of the product, manufacturer and price and this will be stored in the centralized data

warehouse.

This information will help in analyzing daily, weekly, monthly sales data to determine which

products were sold and in which quantities. This helps in placing purchase order which helps in

providing products at right time and have it at right place. The SAP system, through its

information, will help the distribution center receive goods and dispatch them to stores in less than

a day.

Historical sales data will be stored through SAP system, this would allow the retailer to make a

demand forecast. This information will also help the distribution center to study competitor’s

product demand. Retailers will share past data, customer data, demographic data, and stock

positions. Both retailer and distribution center will forecast demand individually and then co-

operate by sharing such information’s. This will help to reduce inventory cost, and ensure product

availability across supply chain.

The outcome will be that lead time will come down. On-hand inventory will be reduced. Sales will

grow over a period of time.

Environmental Life Cycle Analysis

Apart from the efficient supply chain design, the company is recommended to implement certain

"Green business technologies" in order to add on value to the corporate structure. This would not

only build a strong positive reputation of the company but also aid the company in reducing the

carbon foot prints.

Thereby the company could develop strong grounds to become eligible for the various government

subsidies allocated for the promotion of the same.

Following are the key recommendations:

(a) The sourcing as well as manufacturing would be carried out in eco-friendly manner. Steps

could be taken to reduce the pollution as much as possible.

(b) A green business R&D department could be allocated as a part of the design engineering team

in Waterloo, Ontario. They would be involved in development of innovatory approaches towards

the sustainability in the overall business. Every approach would be surely appreciated and

financially aided by the government.

(c) As we are using SAP as the Database Management System of the company; it could be

cautiously implemented in such a way that the use of "papers" would be as less as possible.

(d) The company is advised to contribute to the various projects and awareness programs

pertaining to the sustainability and eco-friendly activities.

(e) The distribution network would be maintained properly so that the maximum efficiency could

be obtained out of it.

12

E.g. The orders could be forecasted as precisely as possible and thereby reducing carbon emissions

via transportation.

Furthermore, due care would be taken at each and every unit operation to make sure that we leave-

behind minimum carbon footprints.

Analytical Competitive Grid (Appendix 1)

Steps of Competitive Grid

Step 1: There are 4 main factors which are set as benchmarks for analysis of the 2 supply chain

models (i.e. Current Vs Improvised (New)). These are Cost, Productivity, Quality and

Responsiveness.

Step 2: Each aspect was then given a weightage factor depending upon its probable predicted

impact on the company’s integrity. It basically represents the degree of influence of the factor on

the company’s Supply chain stability.

E.g. Quality - 9, Productivity - 8 etc.

Step 3: Then the scores of each attribute are multiplied by its weighing factor.

Step 4: The resultant figures are then plotted on the Y axis with the corresponding attribute factors

on the X axis.

Following result was deduced from the grid: (Graph 1)

Graph 1: Competitive grid – Current Vs Improvised Supply chain models

01020304050

Analytical Competitive grid

13

CONCLUSION

Conclusively, the aforementioned Improvised supply chain model is analytically found to be more

efficient in comparison with the current model.

The Distribution network could be set as per the model discussed above. This would lead to

minimized lead times and a highly responsive supply model.

Furthermore, the CFPR model would aid in meeting up the supply-demand chain more aptly and

precisely.

Lastly, the Green Business initiatives would give a distinct branding image to the company as well

as it would help the company to reduce the overall carbon foot prints, ultimately making it eligible

for the various funding and appreciations from the government.

Finally, it could be strongly concluded that if the UK economy doesn’t tumble to the depth of the

well (which is in fact least likely to happen); the Improvised supply design would bear most of the

market resistance and yield high value to the company.

REFERENCES

1) "Five Models for Post-Brexit UK Trade." EU Referendrum. N.p., 27 June 2016. Web. 29

July 2016.

2) "Brexit Continues to Shock Global Markets." Yahoo Finance, 27 June 2016. Web. 29 July

2016.

3) Philippidis, G. and L. J. Hubbard (2001) ‘The Economic Cost of the CAP Revisited’,

Agricultural Economics, 25, 375-385

4) "Brexit Continues to Shock Global Markets." Yahoo Finance, 27 June 2016. Web. 29 July

2016.

5) Massie, Alex. "Why Brexit Means Scottish Independence Is Off The Table—For Now."

Time, 1 July 2016. Web. 29 July 2016.

6) "Mexico United States Border." N.p., n.d. Web. 29 July 2016.

7) Dhingara, Swati. Life after BREXIT: What Are the UK’s Options outside the European

Union? London School of Economics and Political Science, n.d. Web. 29 July 2016.

8) Ugwumadu, J. (2013) ‘Poland Takes Lion’s Share of EU Funds’, Public Finance

International, 28 November 2013. Retrieved from:

http://www.publicfinanceinternational.org/news/2013/11/poland-takes-

lion%E2%80%99sshare-eu-funds

9) "TECH R&D SPENDING IS DOWN IN CANADA; BLACKBERRY IS STILL NUMBER

ONE." Canadian Start up News and Tech Innovation. Betakit, 2 Mar. 2015. Web. 29 July

2016.

10) "Brexit's Impact on the Global Economy." N.p., 25 June 2015. Web. 29 July 2016.

11) "4 Economic Challenges South Korea Faces in 2016." Investopedia, 15 Jan. 2016. Web. 29

July 2016.

12) Gibbs, Phil. "Brexit: Do You Know the Impact on Your Supply Chain?" LLamasoft, n.d.

Web. 25 May 2016.

14

13) Banker, Steve. "Will Brexit Affect Global Supply Chains?" Logistics and Transportation.

Forbes Magazine, 2 July 2016. Web. 29 July 2016.

APPENDIX

Appendix 1: Analytical Competitive grid table

FACTORS

Weightage factor

Score (Out of 5)

Weighed Total

(Score* Weightage

factor)

Current

Supply chain Model

Cost 9 3 27

Productivity 8 3.5 28

Quality 9 4 36

Responsiveness 8 2 16

Improvised

Supply chain Model

Cost 9 4.5 40.5

Productivity 8 5 40

Quality 9 4.5 40.5

Responsiveness 8 5 40

15

Appendix 2: CPFR Model Diagram

16

Appendix 3: Distribution Network Maps