gscm case studies
DESCRIPTION
Agile Supply chain strategy, Lean Supply chain strategy, Leagile Supply chain strategy, Honda Supply Chain , Air bus supply chain, Blackberry Supply chain, 3DCE, three directional concurrent engineering blackberry, Centroid Method for relocation, Simple linear regression method for forecastingTRANSCRIPT
Leeds Metropolitan University: GSCM
Global Supply Chain Management
Individual Assessment
Semester 2 2012/2013
Submitted to
Dr. Alfred Chinta
By
Kaustubh Lohiya (77125239)
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Leeds Metropolitan University: GSCM
Executive Summary
Supply chain management deals with all the issues relating to the development of logistic
operations, inventory control, procurement strategies, operation management, supplier
relationship and sustainability as well as contemporary issue that affect these areas. This
report deals with different supply chain management issues in various sectors of industries
ranging from supermarket, automobile, mobile handset to large aerospace organisations
which are as follows
The new product development have always had supply chain strategy based on demand
forecast however recent short product life cycle especially in mobile handset vendors have
forced vendors to rethink the impact it has on the scheduling of operations and supply chain
management. The reports analyzes mobile handset vendor Blackberry and how this scenario
impacts the scheduling of operations and how can blackberry ensure effective supply chain
management by means of 3-DCE model.
Further ahead the report discusses about supply chain managers who until recently has to face
a new strategic move by majority of the organisation throughout the world, who are now
going green. The green movement has forced manager to rethink and redesign the supply
chain activities so that it can be integrated with the company’s CSR policy. The report
analyze this impact with help of Morrison’s who environmental free strategy of “Great Taste,
Less Waste” has made impact on supply chain which also includes the alteration to
transportation requirement due to local sourcing in this sector of industry
On the other hand aerospace companies face a very different problem and situation with
respect to supply chain. The time consuming process which utilize 100’s of supplier coming
together to make a product has introduced delay’s to fulfilling the rising demand in aviation
sector. The aerospace manufacturer like Airbus, Boeing which dominate the sector and know
to have monopoly are continuously thriving to improve the efficiency of supply chain and to
reduce the cost. New supply chain theories like Supplier Integration and Collaboration
Model and Outsourcing Model can be considered a solution to this problem. This report
highlights these models and the role of association in keep the integrity and flow between the
100’s of supplier to optimize and integrate their supply chain.
Finally the report discuss on one of the key topics in supply chain which deals with supply
chain planning to forecast the demand and relocation. The report through an example
highlights on forecasting by means of simple linear regression which utilizes the previous
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sales data to forecast for future and also on the Centroid method which is used for relocation
to enhance the logistics in supply chain.
1AMobile Industry vendor in mid to late 1990’s experienced an unprecedented growth. The
expansion in the mobile phone vendors like blackberry forced the firm to develop supply
chain management system to optimize their operation. The system concentrated on internal
integrating however it relied on traditional mode of demand forecasting (S. David Wu et al,
2000). The operations were executed based on unit forecasting produced by customer
projections (S. David Wu et al, 2000). The mobile vendors more inclined toward fuelling
demand led to negligence towards the accuracy of the data for forecasting.
Innovation has led to a short product life cycle and thus a long production lead time can
hamper the vendor’s ability to respond to the change in forecast due to the volatile market
and heavy competition and slower decision making process. This adds to interchange cost
and buffers viz. intermediate storage buffers are used to re-sequence the jobs.
Ow et al. in his paper talks about distributed scheduling system to overcome the change in
demand forecast (n.d. in Agnetis et al, 2006). To have an optimal scheduling it is necessary to
put in place JIT supple chain strategy which helps to coordinate between different stages and
punctuality is one of the most important factors. Guruprasad Pundoor in his paper talks about
integrating productions with the distribution scheduling to achieve optimal flexibility for
fluctuating demands. The challenge lies in this is to achieve this without excessive inventory
(S. David Wu et al, 2000).
One other new model that is specifically addressed for short product life cycle is the BASS
model (XU Xianhao, n.d.). Improved BASS Model is suitable to forecast the demands of the
short life cycle products and has been shown to achieve better results (XU Xianhao, n.d.). To
predict the demands in products with short life cycle multiple models should be used which
utilizes both quantitative and qualitative data. Thus combining BASS Model for forecasting
along with distribution scheduling may help Blackberry to cope up with fluctuations in
demand.
1BResponsiveness and Agility are two attributes which are now considered as important factor
to add competitive advantage along with quality, variety and price (Eduardo Castellano et al,
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2010). Due to this many organisations started competing in the products, process and supply
chain domain. This maximizes the supply chain performance. Famuyiwa and Monplaisr
(2007) stated that, recent increase in competition at global level and the increasing demand
which has led to shorter product life cycle, has forced many of the manufacturing firms
including mobile vendors to move from tradition mass production strategy. The new theories
suggest mass customization which is achieved via agility and flexibility. Agility can be
achieved only by means of rapid product design adaptation and the development processes in
order to cater to the needs of the consumers. The main difficulty here lies in moving product
from initial design phase to arrival, it is a time consuming process as it needs lots of decisions
making. Fisher (1997) suggested innovative product which have unpredictable demand like
blackberry new products Z10 and hence should have responsive supply chain, which is to
respond quick to change in demand and minimize stock outs.
Figure 1: 3-Dimensional Concurrent Engineering (Ellram et al, 2006)
3-DCE (Eduardo Castellano et al, 2010) can help blackberry to achieve this by helping design
product and process simultaneously. By use of 3-DCE, the modularity or supply chain in
blackberry which includes blackberry organisational process, contracting procedures will be
utilized to accommodate the modular products (design boundaries such that feature and task
are independent at each module). Thus by integrating the product, process and supply chain
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blackberry can effectively manage its supply chain during launch of new innovative product
which has short life cycle and unprecedented demand.
2AAny organisation whether it is local shop, business or a multi brand conglomerate has some
kind on impact on the environment (Waste Watch, n.d.). The impact on the environment is
the result of the resources it consumes and the waste it generates. However significant
amount of this impact is also dependent on the transportation the organisations choose which
basically is a part of supply chain of an organisation. Recent consumers awareness and
support to reduce the impact on environment, have forced organisations top executives to
think about sustainability and their CSR policies. Morrison’s super market is no exception to
this. Morrison’s initiated green movement under the slogan “Great Taste Less Waste” (IGD,
n.d.). Morrison’s focused on many aspects to achieve green motive which even had an impact
on the supply chain of the super market chain.
A part of the supply chain is the distribution centre. Morrison’s green initiative led Morrison
to develop new distribution centre which were green in nature. The place was optimally
selected to reduce the transportation and cost. The centre’s location helped Morrison’s to
serve chilled foods and grocery for South Wales area (Morrison’s, 2012). The distribution
centre Willow Green at Bridgwater in itself was very much green (Morrison’s, 2012)
One of the suppliers to Morrison is Kerry Noon. They supply mostly Indian meals to the
Morrison (IGD, n.d.). By working together they reduced packaging of up to 20% on certain
products and reduced waste by 33% at the manufacturing point (IGD, n.d.). Not only this but
Morrison’s working along with Kerry Noon even increased the shelf life and the forecast
accuracy by 6% (IGD, n.d.), this helps Morrison’s to get the right food in right quantity at
right time which helps reduce waste.
Morrison’s uses vertically integrated supply chain model (Alex Lawson, 2013). This helps
Morrison’s reduce waste. Although the Initial investment for this model is high (Alex
Lawson, 2013) but it supports green movement by allowing Morrison’s to reduce time for
bringing in the products into store. Through this model Morrison’s is able to buy fresh food
directly from farmers. This provides freshest food and also helps reduce waste in supply
chain. It helps Aligning the production schedule with the order timing.
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2BIn order for the organization to serve in a better possible way to the customers the
organisation constantly move and flow the material and information. This flow which links
the organizations or units is known as supply chain or supply networks (Wikipedia, n.d.).
Networks as compares to chain are more complex structures which have two way exchanges
and cross links (Wikipedia, n.d.). A supply chain network is thus a collection of physical
location, transportation vehicles and the systems which support which help manage
(Wikipedia, n.d.). Transportation modes in network can vary from trucks, trains, cargo planes
or container ships.
Supply chain networks are undergoing transformation due to the advances in technology. As
compared to tradition way of managing supply chain the new automated technologies such as
RFID, GS1 and GLN (Global location number) are making the network more sophisticated
and efficient locally as well as globally.
Recent hikes in fuel prices and labour cost the cost of transportation seems to be rising and
more and more companies are shifting from Global Suppliers to Local Suppliers. The benefits
of local suppliers are more advantageous. The local suppliers but naturally offer cost benefits
(Liz Morrell, 2010), this is due to the fact that supply chains are shorter as compared to
global supplier. The shorter supply chain offers greater certainty and predictability with
respect to the delivery of the goods. Local sourcing in this sense can be better suited for
organisations having just-in-time strategy.
Reaction time in local sourcing is higher (Liz Morrell, 2010); basically this means that in
event of an unpredicted spike in the demand, local sourcing can prove it of faster approach as
the reaction time and lead time for international or global supplier will make it harder for
them to react. Also Risk management can be better integrated with local supplier because
natural disaster half way across globe can impact supply chain.
With the shift from Global to Local Suppliers organisations transport requirements will
change. The use of trucks and rails will be more dominating force as compared to Global
freights of air cargo and ships. Although the trucks and rails are more environments friendly,
dependable and reduce the carbon foot print but needs developed infrastructure. Road provide
additional benefit w.r.t. warehousing management, as goods are bought in smaller quantity,
so warehouse can be optimized to save cost.
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3ASupply chain management (SCM) is defined as a process of designing, planning, execution
and monitoring of the activities related to supply chain. To achieve the objective of SCM
planning becomes an essential process in supply chain management. The global supply chain
faces a very unique problem; the business is at risk from natural disaster (Admin, 2013). The
example of Japanese earthquake and tsunami can be best fit for this which caused disruptions
for many automobile manufacturing like Honda in USA (Admin, 2013).
Honda followed a lean strategy to manage its supply chain. Supply chain planning is
basically involved in future predictions to meet the demand of customer. Supply chain
planning is integrated with scheduling in order to efficiently manage supply chain.
The result of disaster could be seen because demand for the automobile was constant but
because Honda’s disruption the company felt auto parts shortage. The company’s lean
strategy did not create room for back up or alternates, as a result production slowed down in
the United States and elsewhere in the world. Supply chain planning need to take into account
risk as it is inevitable. When faced with such natural disaster it is better to have a proactive
plan. A risk assessment and proactive model integrated with supply chain planning would
have helped Honda to address the problem faster. Few of the models that aid doing this are
Multi stakeholder Opportunity model (Gabriela Alvarez, 1987), Unified multi-stage
stochastic model (Mark Goh et al, 2007).
Alternate to this would be to shift to the new hybrid Leagile strategy for supply chain
(Quirino Barbosa, 2007) in automobile industry, which takes into account innovative
production production plan and high demand. The event taught a great deal that Supply chain
planning should not take into account just one major supplier but more than one and
distributed across geographical area. This planning in supply chain can reduce the risk
associated with such disaster.
3BLean strategy, which was largely developed in the Toyota production system (Quirino
Barbosa, 2007), gained wide popularity in the automobile industries based on demand based
pulling of Good (Quirino Barbosa, 2007) and was adopted by Honda. However the lean
manufacturing is based on demand forecasting and not on the actual sales data, also lean
manufacturing strategy is at risk on its own in case of sudden unpredictable demands like
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natural disaster. Honda faced auto part shortage soon after the natural disaster in Japan due to
its lean manufacturing system.
The other manufacturing strategy is the Agile Strategy which uses wait and see approach.
The agile system is basically a make-to-order process (Quirino Barbosa, 2007) which can be
clearly understood from example of DELL. However this is fairly difficult to implement in
automobile industry due to time it consumes. Certain auto mobile industry like Rolls Royce
can have agile system because they work on make to order policy and offer complete
customized car. New trends in automakers like BMW, Audi who offer ready car as well as
certain customized cars are based on ready to order system. Thus we can combine agile
system into lean strategy and is called Leagile strategy (Quirino Barbosa, 2007).
The Leagile strategy can take the following approaches
1. It can make use of the lean strategy which is make-to-stock for products which have
stable demand and are high volume, it can use Agile strategy for everything else
(Martin Christopher, 2000).
2. It meets the surge in demand and to tackle the unexpected requirements it can have
flexible production capacity.
3. The hybrid strategy can make use of postponement strategy (Quirino Barbosa, 2007)
in which products are manufactured as per the forecast estimation however they are
not given final touch till the customer order is received. Thus this offer little
customization for the end consumers and for the manufacturer reduces time as it does
not have to start from the beginning.
This hybrid strategy is very useful for Honda as it offers customizations to implement make
to order while on other hand makes use of lean manufacturing to built the basic structure of
the car as pure make to order will take lot of time because car part suppliers are situated far
away geographical location
4AAccording to the reports by PwC consultant the cash strapped suppliers/manufactures to
aerospace companies, like Airbus, Boeing, Bombardier Inc, Lockheed Martin Group and
Gulfstream Aerospace corp., are the point of weakness for aircraft makers (David Pearson,
2012). Backlogs and delays have risen in aerospace industries which is impacting the overall
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cost of the new products. Many manufacturers are taking initiatives in order to protect its
supply chain (David Pearson, 2012), however in order to reduce the costs and for a more
sufficient supply chains some additional measures have to be taken. One such model is
Supplier Collaboration Model (Patrick Bachet, n.d.)
Supplier Integrations and Collaboration Model talks about integrating and collaborating the
suppliers into the business. Collaboration term is many times misused when business seem to
take using of collaboration by means of emails or 1 to 1 meetings. A true collaboration is
defined as sharing of information, skill, intelligence, competencies as well as the risks. The
benefits the aerospace company can achieve through this are mainly
1. Reduced investment from aerospace manufacturer
2. A variable cost model can be integrated rather than fixed cost
3. Risk is spread with everyone involved.
4. Aerospace manufacturer can focus more on their core capability
However many challenges are associated with this method, especially to involve all business
area and to put in as an end to end process. This model also needs the aerospace manufacturer
to introduce changes in culture, management, technology. Another model that can help
reduce cost and that can be implemented with suppliers is the
Integrated Outsourcing Model (Will Scott, 2009)
Integrated Outsourcing model is a pull system. The request for new part is triggered by the
actual usage thus if any part is used the supply chain itself becomes efficient enough to
replace the part. As the name suggest the model talks about outsourcing the activities
pertaining to local inventory management but the direct relationship with suppliers is
retained.
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Figure 2: Steps in Integrated Outsourcing Model (Will-Scott, 2009)
The advantages of this model are that
1. It maintains supplier relation for long term
2. The suppliers become accountable for their part of the supply chain
3. The right part arriving at right place and in right quantity adds to the cost saving and
also the following can be achieved
o Lower ‘owned inventory’ costs
o Fewer transaction fees
o Decreased shortages and stock outs
o Decreased management costs
4B
Aerospace industry is highly globalized, since majority of the manufactures manufacture
same product and look out for suppliers at global level to meet out the requirement. The
aerospace industry is structured in such a way that the aircraft manufacturer and engine
manufacturer are the major players (Wipro, n.d.). They play a broad role, however there are
numerous other small or medium manufacturers who also take part in this industry. Thus the
value chain is mainly characterised by aircraft and engine manufacturers who have contracts
with numerous other suppliers (Wipro, n.d.). As buyers aircraft and engine manufacturers can
influence a great deal of power for bargaining and concession from the small manufacturers.
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Aerospace associations (Patric Bachet, n.d.) help this wide and broad industry to function
efficiently. The association first and foremost offers a single point of contact for all the
suppliers and the airplane manufacturers (Patric Bachet, n.d.). The association said in creating
a value chain by means of cooperation and trust between small manufacturers. It help small
manufacturer to integrate their supply chain with that of the airline manufacturers and give
them a sense of power so that small manufacturer are not influenced by the bigger one.
Thus Associations like Aerospace Industries Association and Aerospace Suppliers
Association help in strategic future decisions and help coordinate maintain and integrate the
supply chain of small manufacturer to that of the dominating large aircraft and engine
manufacturer.
5A
Forecasting in general is the process of estimation and it is mostly in the unknown situations
(Doctor, 2007). In context for supply chain management it is the process of planning for the
customers demand. It is generally used by sales team as a business planning process (Doctor,
2007). The aim is to develop the estimation for future from previous sales data of demand
which can be then shared with other business department for planning of the inventory and
cash flows. (Doctor, 2007)
It is a challenge which can be overcome by means of statistical methodology like linear
regression method, Double exponential smoothing (Makridakis et al, 1989). Linear regression
is a simple statistical methodology which draws the best fit line i.e the linear relationship
between two variables. The error in this methodology is the difference in best fit line and the
actual sales value line. There are many other methods to predict the future based on time
series analysis or stochastic modelling (Mohammad Anwar Ashek Rahman, 2008) however
linear regression adds the following advantage (Wiki Answers, n.d.)
1. A single trend will generate using this method
2. The data fit is unbiased
3. It minimizes the sum of squared error (SSE)
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4. It is consistent as same dataset will always calculate the same trend (Wiki Answers,
n.d.)
Linear Regression method is not accurate but it is precise and because of the above
mentioned reason the method is suitable for this example.
Steps of Linear Regression
1. Calculate Slope
2. Calculate Intercept
3. Calculate Forecast i.e. Intercept + Slope * Quarter
Using it for the given example we obtain the following forecast data.
Quarter Sales Forecast
1 2 3 4 5 6 7 8 9 1011120
1000
2000
3000
4000
5000
6000
7000
SalesForecast
Figure 3: Graph of actual sales and Forecast
1 800 639
2 1450 1013
3 1350 1386
4 1270 1760
5 2000 2133
6 2600 2507
7 2500 2880
8 3100 3253
9 3750 3627
10 4250 4000
11 4500 4374
12 4750 4747
13 5121
14 5494
15 5867
16 6241
Table 1: Actual and Forecast Values
Interce
pt
266.06
06
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Slope
373.42
66
Table 2: Intercept and Slope Values
Thus by using linear regression we get the forecasted values for next four quarters as
5121,5494,5867,6241.
5BThe Centroid method (Brian Bass, n.d.) is used my many of the business around the globe for
the manufacturing unit or distribution unit. The main use of this method in production related
aspect of the business is to either reduce cost of shipping or lower the time of shipping but in
relation to the profits. It can be especially essential for business with multiple sites (Brian
Bass, n.d.).
The Centroid method uses the distances between facilities, and the volumes of goods to be
shipped between them to come up with new site which is best fit for all the sites. The
formulae used to achieve this are
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Figure 3: Centroid Formula (F Robert Jocob, 2009)
Applying this formula to the data given in the question we get the following results.
14
C = d V
V x
ix i
i
C = d V
V x
ix i
i
Where:Cx = X coordinate of centroidCy = X coordinate of centroiddix = X coordinate of the ith locationdiy = Y coordinate of the ith locationVi = volume of goods moved to or from ith location
C = d V
Vy
iy i
i
C = d V
Vy
iy i
i
S.No
.
Retail Outlet Co-
ordinates
X
coordinate
Y
coordinat
e
Sales
Volume (V)
1 Manchester 0,10 0 10 1200
2 Sheffield 30,40 30 40 800
3 Birmingham 20,80 20 80 1500
4 Cardiff 0,120 0 120 750
5 Derby 30,60 30 60 400
6 Loughborough 25,80 25 80 450
Centroid 15 62
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The original distribution channel is located at Leeds (0, 40). Using the centroid method the
suggested new place for distribution channel comes to (15, 62) plot of which is given below.
0 5 10 15 20 25 30 350
20
40
60
80
100
120
140
Mancehster
Sheffiled
Birmingham
Cardiff
Derby
Loughborough
Leeds
New Place Series2
Figure 4: Centroid Method Result
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