Sustainable Logistic - Case Study Example

Sustainable Logistic of the Subject Name of the Concerned Professor 12 May 2009 Executive Summary PlastCo Ltd. Though being one of the few plastic re-processors in the UK, faces many issues so far as it's logistic and supply chain management is concerned. The primary reason behind most of the problems pertaining to logistic and supply chain management being faced by PlastCo Ltd. seems to be originating from the utter failure of the company to have a holistic and broad based approach towards this aspect of the business. The firm's attitude towards the supply chain management is to some extent outdated and fragmented. Its compartmentalized perspective towards its logistic problems is giving way to many problems in the respective isolated functional areas of the PlastCo Ltd. One factor that is drastically impacting the viability of the firm under consideration is its inability to forge and coordinate channel relationships. The company definitely has an insatiable demand for plastic waste and there also exists an abundant supply of the plastic waste in the UK. Still PlastCo has failed to strike mutual strategic alliances with the plastic waste suppliers to ensure an uninterrupted and reliable supply of plastic waste. Information management is the key factor that determines success in logistical operations. PlastCo has failed to incorporate integrated information technology solutions within its logistic and supply chain management operations. The information portals and networks being used by the firm are outdated and inefficient. One other aspect that is jeopardizing the logistic viability of PlastCo is its inability to define the operational and economic functions of the warehouses at its disposal. A possible realignment of the operational mechanisms within its warehouses will certainly add to the firm's efficiency and cost effectiveness. Maintenance of cordial and symbiotic channel relationships will bring in an element of predictability to its plastic waste requirements. Similarly, adoption of integrated information technology solutions will make the system more open, transparent and manageable. A grip over the operational and economic priorities in warehousing will amply streamline the logistic operations. Table of Contents Chapter Page I. A RESUME OF THE CURRENT SITUATION 5 II. STATEMENT OF THE MAIN ISSUES AND PROBLEMS 7 III. OUTLINE OF ALTERNATIVE OPTIONS 13 IV. RECOMMENDATIONS 14 V. IMPLEMENTATION 15 VI. ANALYSIS 16 Works Cited 17 Section I: A Resume of the Current Situation Going by the current statutory regulations and the general accentuated awareness about plastic recycling, plastic re-processing firms definitely have an immense potential in the present times. Still on primary problem with PlastCo is its inability to streamline its procurement of plastic waste. Despite there being an abundance of the plastic waste being generated in the UK, PlastCo seems to be having problems in accessing the reliable and dependable vendors of plastic waste. The firm has failed to chalk out a strategic and planned approach towards vendor selection and management (David 2002). Little efforts seem to have been put into promoting vendor-company relationships and scarce investment has made in vendor training and development. Prompt and reliable information is the backbone of successful logistic operations (Ballou 1987). The management of information at PlastCo is segregated and fragmented. There seems to be no mechanism existing for assuring a free internal flow of the information amongst various departments at PlastCo, like purchasing, manufacturing, warehousing and marketing. Nor there seems to exist a viable framework for the hassle free forward and backward flow of information and data, thereby making the task of forecasting at levels within the firm, utterly cumbersome and confusing (Gaither 1994). In any logistic system, proper warehouse management is a perquisite for regulating key marketing and manufacturing operations. The storage strategy at PlastCo is not intimately integrated with the production procedures (The Logistics Handbook 1994). The economic functions of the warehouses like monitoring of market trends, consolidation, storage and dispatch of goods with allied activities, etc are not well defined. There exists no authentic system for proper recording of inventory. There is a dearth of coordination between the anticipated demand patterns and the policies regarding maintaining safety stocks. No special stocks have been assigned to various types of products and feedstock. Therefore it gets really difficult to locate the required feedstock and products. Section II: Statement of main Issues and Problems A. The vendors supplying plastic waste to PlastCo are not reliable and dependable. In the given scenario, the performance and efficiency of the vendors supplying plastic waste could play a key role in improving the performance in the firm (Robert 2004). However, this is an aspect of the business that is immensely being ignored by the firm. There exists no well calibrated procurement policy that is clear cut and transparent regarding the shipment and supply of plastic waste. The primary requirements for the plastic waste in the long and the short run are not clearly defined due to a lack of integration between the supply of the plastic waste and the production of finished goods. The inventory management in the procurement section is primarily manual and the automated systems for the operational flow of the information do not exist. The parameters for a realistic measurement and assessment of vendor performance are not there. No efforts have been made to put in place the integrated supply concepts and any notion of a mutual partnership between the firm and the plastic waste vendors is almost absent. The vendors supplying the plastic waste are coarsely defined as the UK based and the Europeans and no attempt has been made to come out with a rationalized list of vendors by tiering them on the basis of their reliability and the quality of the waste supplied by them (Cravens 1997).. The firm does not have any long term contractual relationships with the vendors of plastic waste to guard against the market fluctuations. No collaborative deals have been extended to the vendors to assure their assistance in the productivity improvement activities. There exist no procedures for the evaluation of the vendors on the basis of the non-price criteria like their past performance and their ability to respond quickly to the changes in the demand. The use of information technology for the sharing of information between PlastCo and the vendors does not exist (Tapscott 1996). No pains have been taken to transfer the required technology and managerial skills to the plastic waste suppliers to encourage a more professional approach on their part. No incentives and advantages have been extended to the local vendors so as to motivate them to be more responsible and accountable for the quality of the plastic waste being supplied by them. Thus the suppliers are left free to operate their logistic operations in an unorganized manner, without any assistance from and integration with the logistic setup of PlastCo. Therefore the suppliers are totally oblivious of their pivotal responsibilities like supplying the plastic waste as per the quality specified by them in the contracts, inspecting the quality of the plastic waste being supplied by them to PlastCo and ensuring a regular and reliable supply. PlastCo has done little to transform its relationship with its suppliers from being price driven to the one based on cooperation and profit-cost sharing (Agrawal 2004). In the given scenario, the purchasing staff can certainly contribute to the objective of assuring a supply of the plastic waste of high quality. However, this vital objective is being jeopardized owing to the communication gap existing between the purchasing staff and the laboratory staff. Besides, the suppliers have not been extended the appropriate incentives to improve their in house quality control procedures. The firm is also vulnerable to the fluctuations in the price of the plastic waste owing to a variety of reasons. Still, no initiatives have been taken by the concerned personnel to go for an integrated supply chain management and to foster collaborative relationships with the suppliers of the plastic waste. B. The primary objective of the logistic and supply chain management in any organization is to enhance customer satisfaction and to cut costs (Fites 2001). PlastCo seem to be ignoring the fact that sharing of the information and data is the key to ensuring efficiency in logistic and supply chain management. A manual data entry and interpretation system is drastically hampering the cause of forward and backward integration. The response time of the suppliers and the in house personnel is getting unnecessarily prolonged due to the lack of integrated information technology solutions. Slow access to information and flawed data analysis is also negatively impacting the task of redesigning the business processes within PlastCo so as to ensure their continual improvement. In the dearth of a timely sharing of information, it is next to impossible to streamline the logistics activities along the entire supply chain, thereby resulting in the augmentation of costs and the compromise of efficiency. The establishment of the value supply chain relationships with the suppliers and the customers require transparency and sharing of information. Fragmented and slow information systems within PlastCo are making it difficult to do so. This is severely curtailing the competitive edge that the firm commands in the re-processing market. Obsolete information systems are also withholding the firm from achieving international quality standards and are impeding its access to the world markets (Anderson 1997). The employees and the suppliers are not in a position to take quality decision due to a lack of the required information and the unwarranted delay in the sharing of information. It is not merely enough to procure raw materials and to churn out finished products. It is imperative that the logistic managers in a firm should be in a position to decide when and where the raw materials and the finished products should move at a given time and situation (Show 1981). The accuracy of such decision making requires a timely and exact access to information at all the levels within a supply chain. The problem at PlastCo is that the logistical information is either not available when it is required or it is moving at a slow pace or not moving at all amongst various departments. This blockage in the forward and backward flow of information within this firm is curtailing efficiency and augmenting costs. The constraints to the backward flow of information are making it difficult to define and aptly achieve the desired logistical objectives. Similarly the impediments to the forward flow of information are negatively affecting the operational performance of the entire supply chain. A lack of fast and coordinated flow of information is making it difficult for the logistics managers to take timely and accurate decision regarding the allocation of resources and to successfully manage the operational performance at all levels, right from the procurement of the raw materials to the delivery of the finished products. This is diluting the logistical competitive competency of the PlastCo and is eating into its stability and profitability. PlastCo pathetically seems to lack the desired hardware, software and connectivity that can automatically gather, analyze and summarize the information for the purchasing staff and the logistic managers. PlastCo precariously seems to be deficient in the apt resources required for the management of modern logistic information systems. It does not have any human resources pertaining to the management of logistic information systems like system analysits, operators and programmers. Most of the data entry, analysis and forecasting is being done the regular staff that is deficient in the professional credentials and background that goes into the data analysis in a modern corporate concern. Thus PlastCo has a more then average vulnerability to alterations in the quality and reliability of the raw material, price volatility and other related factors and influences like currency exchange fluctuations. It also lacks the software resources like operating system programs, SCM and ERP solutions, automated data entry procedures, error correction procedures, data processing procedures etc (Agrawal 2002). Logistics and supply chain management is an information intensive aspect of business and PlastCo seems to have made no managerial commitment or budgetary allocations to take care of such business operations. C. Another big problem at PlastCo is the shoddy management of its production inventories, in-process inventories and finished goods inventories. This is resulting in the accrual of inventory procurement costs and multiple inventory carrying costs like the rent being paid on the space being used for the storage of raw materials and finished goods, costs incurred due to obsolescence or deterioration of the inventory being stocked, costs incurred on retaining the substandard or below quality inventory, the working capital that is locked in retaining unnecessary and not required inventory, cost of carrying insurance on the inventory being retained, etc (Bowersox & Closs 1966). One major reason behind this faulty inventory management is the faulty and reliable demand forecast at all the levels, be it the customer end or the supplier end. The company is constantly under the pressure to carry abundant safety inventory owing to the unreliable nature of its demand forecasts. One another reason for this inventory mismanagement is the lack of information, data and expertise required to forecast demand. PlastCo has pathetically failed to replace its bulky inventory with accurate and reliable information. The firm has also failed to chalk out a proactive approach towards markets resulting in the mismanagement of the demand side and the supply side pressures. The raw materials are being procured and the finished goods are being turned out in a random and haphazard manner, leading to the rampant confusion and clutter in the warehouses. One another major reason for this piling up of the inventories at PlastCo's warehouses and storage facilities is its failure to forge and nurture parternering relationships with its suppliers and the customers. Section III: Outline of Alternative Options i. PlastCo can take the overall and direct responsibility for arranging for the plastic waste or feedstock required by it. If it does so, it will have a direct control over the procurement of raw plastic required by it and will be able to incorporate the better recycling systems and grading facilities to ensure that it gets the right kind of raw material (Johnson and Wood 1996). This will also make it relatively easier for the PlastCo to introduce and adopt integrated information system solutions, which will ensure a seamless flow of information and data across all its departments. The task of ensuring a better and efficient inventory management will also become feasible by adopting this option. However, this task is easier said then done. The plastic waste market is a very vast entity and it is practically impossible for a single firm to have a deciding control over it. ii. The PlastCo can choose to opt for an integrated supply chain management. This will make the plastic waste suppliers a partner in the operations being carried on by the firm and will imbue them with a sense of responsibility with regards to the quality and reliability of the plastic waste being supplied by them. Section IV: Recommendations The best solution in the given scenario is to go for an integrated supply chain management. This will enable PlastCo to benefit from the services of a relatively large number of feedstock suppliers, while leaving the suppliers autonomous and independent. This option is also less capital intensive and more cost effective. PlastCo will have to spend much less on transferring the information and expertise to the desired vendors to ensure a continual and reliable supply of feedstock. PlastCo is already procuring approximately 50 percent of its feedstock from the European vendors, which though being of a good grade is more expensive. Thus PlastCo can spend these extra expenses in transferring the skills and expertise to the local vendors. This will imbue the local vendors with a sense of partnership and the ensuing trust will enable PlastCo to have a direct say in the logistic operations of its suppliers. Responsibilities like the testing of quality and reliability can be delegated to these vendors. The onerous task of introducing integrated information technology solutions and an efficient inventory management would also be readily achieved by following this option. Section V: Implementation Supply Chain Integration- The objective of achieving the supply chain integration can be established by forging symbiotic and mutually profitable relationships with the feedstock suppliers. This will require the commitment of the top management at PlastCo. The stakeholders within the firm like purchase staff and the laboratory staff can be given the responsibility to transfer the requisite skills and expertise to the cooperative vendors. Integrated Information Technology Solutions - The automation and digitalization of the information management procedures at PlastCo will certainly aid the task of integrating demand side pressures with the supply side constraints, leading to the optimum inventory management. This will certainly require ample investments to begin with, but this will immensely pay in the long run. Section VI: Analysis So far as the task of establishing collaborative and mutually beneficial relationships with the feedstock vendors is concerned, this step will amply benefit PlastCo in the long and the short run. Some costs will be incurred on the transfer of the requisite expertise and skills to the friendly vendors, but these costs will be compensated for by the reliable and dependable supply of the plastic waste from these local vendors. Over the years, PlastCo will be able to transfer many of its overhead costs and liabilities to these vendors. This mutual cooperation and coordination between the channel relationships will turn out to be a win-win solution for all the parties involved and will facilitate a highly efficient exchange and transfer of information and an efficient inventory management. By doing so, PlastCo will come in a position to clear cut define its goals and priorities and to focus on its core competencies. External integration cannot take place without inside integration. This step will have a percolation impact on the inbound logistics also. Works Cited Agrawal, D.K. 2002, Logistics and Supply Chain Management, New York, Macmillan. Agrawal, D.K. 2004, Distribution and Logistics Management, New York, Macmillan. Anderson, H. 1997, Sales & Field Force Automation, viewed 14 May 2009, Read More