Process of Supply and Value Chain Management - Assignment Example

 Table of Contents Introduction 3 Thesis Statement 4 Process of Supply and Value Chain Management 4 Benefits of Undertaking the Full Implementation of a Supply and Value Chain Management Approach 11 Risks for Implementation of Full Supply and Value Chain Management Approach 12 Conclusion 17 Works Cited 19 Bibliography 21 21 21 Introduction Supply chain is generally referred as a process by which a company manufacture its products and services to meet the requirements of the customers. Precisely, it can further be said as the entire process of obtaining the raw materials to producing a product and making the finished product available to the customers. Most of the manufacturing companies focus on ways to effectively use the modern concept of supply chain management which plays an imperative role in pricing the products. The concept of value chain is termed as the guidelines for strategically thinking about the activities involved in any business and analysing the different roles and cost required for functioning the business. According to Porter (1998), profit is determined by assessing the difference between the value that the buyers are willing to pay and the actual cost incurred for the activities in creating the product. Furthermore, he recognised that the value chain provides an effective way to understand the sources of the buyer value that determines the price, and why a product or a service is substituted by another company’s product. Thus, the strategies can be defined as an internal formation of activities that differentiates a firm from its rivals (Porter, M. E., “Competitive Advantage: Creating and Sustaining Superior Performance: With a New Introduction”). Founded in the year 1806, William Colgate started a business of selling soap, candle and starch products. Later in the year 1820, a starch factory was founded by him in Jersey City, New Jersey (Colgate-Palmolive Company, “Our Company: History”). The journey began from there and after almost 200 years the small business has turned into a renowned global group, Colgate Palmolive which has been serving millions of consumers worldwide. One of the top consumer products company, it has become a common presence in most of the households around the globe. The prime goal of the company is to use the technologies to create products that will improve the lifestyle qualities of the consumers. Thesis Statement In this report the benefits and the risks of undertaking the full implementation of a supply and value chain management to a multi-product manufacturing company will be explained. Furthermore, the examples of strategy implemented by Colgate Palmolive will be assessed. Thus, whether the implementation of supply and value chain management in an organisation will be profitable to the organisation or not will be recognised. Process of Supply and Value Chain Management A supply chain concept includes different networked companies with the same objective, such as meeting buyer requirements. Furthermore, it is a mutual agreement between interdependent organisations to work together to improve, manage and control the flow of raw materials and information from the suppliers to the consumers. Additionally, it can also be defined as the network of business units that indulge from the initial stages, from procuring the raw materials to manufacturing it and then making the finished products available to the consumers through an effective distribution system. The organisations should ensure that the supply chain is an error- free business network which is required to perform activities at all the levels of the production. Thus, it can be stated that the supply chain consists of interdependent organisations of suppliers and business processes that are needed to be controlled effectively. Therefore, the member organisations are required to know how the materials and information flow all the way through the supply chain, from the initial supplier to the consumers (Vanharanta & Breite, “A Supply and Value Chain Management Methodology for the Internet Environment”). Value chain is referred to the value added by the company to its products as well as services. In addition, the focus is on the company’s customers, their needs and requirements from the products or services offered by the company. Value addition to the products, is mostly done through management accounting. Management accounting is referred to an approach of value adding to a product by the company which identifies exactly what activities will be important to add value to the customer. The management accounting department focuses on the company’s abilities to add value by relocating the resources used as well as invested capital to the operating profit. In other words, it identifies the ways of allocating various costs and activities that will add value to a product (Porter, M. E., “Competitive Advantage: Creating and Sustaining Superior Performance: With a New Introduction”). In order to focus on the customers, a company needs to actively take part in the supply chain management where it directly or indirectly adds value to the consumers. The foremost focus is on the demands of the supply chain and the capabilities of the company to satisfy those demands. It is also important to analyse the company’s abilities to attain the value from its suppliers and the process that the company uses to deliver the added value to its consumers. If a company intends to add direct value to its customers, it has to identify the ways to create value for the customers, and what aspects will have an effect on the consumers’ value thinking. The value chain consists of value added activities and margin. Value added activities are the physical and technological activities that help to add value to a product or a service. Whereas margin is the cost that is generated after subtracting the total value of the product from the costs required for executing the value added activities. Thus, supply channels and value chain are considered in the cost of production of a product which is borne by the ultimate consumer. According to Porter (1998), value added activities include two types, namely primary activities and support activities. Primary activities are referred to the physical activities that include formation of the product, transferring and sale to the buyer along with after sale service. Whereas, support activities are considered to support the primary activities by technological developments, human resource management and various other functions of the firms (Porter, M. E., “Competitive Advantage: Creating and Sustaining Superior Performance: With a New Introduction”). For instance, in the case of Colgate Palmolive, the purchasing initiatives undertaken by the company have led to save costs every year. Furthermore, the company believes that maintaining good relationship with the suppliers helps them to exceed the number of stakeholders of the company. In addition, effective supply chain management also improves the expectations of quality, innovation and cost effectiveness. Thus, a supply chain management can include few of the tools, such as supplier certification, web-enabled transactions, supplier managed inventory and cost modelling. Additionally, diversity in suppliers can help a company to get access to various minority groups that own a business. Thus, choosing an effective supplier not only reflects the reputation of a company but also develops the quality expectations of the customers. Therefore, choosing an effective supplier can be done through a supplier code of conduct provided by a company. It must evidently convey the requirements of the company from the suppliers to maintain the core ethical value that the company follows (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). A code of conduct for the suppliers can be developed with reference to the Colgate Palmolive, which has developed its reputation by utilising ethical business activities and soaring levels of integrity over a period of time. Thus, the code of conduct can consist of the following critical areas that the supplier needs to address. Antitrust/Competition Law: Implementation of the policy is ensures that suppliers completely follow the competition laws/antitrust law. The competition laws ensure that companies in order to compete to get businesses must focus on creating innovative products, better services and offering lower prices, rather than interfering with the market forces of demand and supply (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). Confidential/Proprietary Information: A supplier must maintain trade secrets, intellectual property and other sensitive information of the company, to not to disclose to any other outsider, except the company’s employees. It should only be shared for the advantage of the company and not for the supplier (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). Ethical Dealings: A supplier of the company needs to know that quality, price and vendors’ integrity are the prime objectives to a company’s decision. Therefore, giving and receiving bribes should be strictly prohibited, either by the suppliers or by any employee of the organisation (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). Anti-Bribery/U.S. Foreign Corrupt Practices (USFCP) Act: A multi-product manufacturing company should make sure that it follows the USFCP Act or any other bribery law which exist around the world. Similarly, it should ensure that the suppliers too strictly follow the Act in the process of business dealings with the company. The suppliers must be conveyed the message that the company deals with those suppliers which do not breach the ethical standards by giving and receiving bribes (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). Gifts: A company should make aware to the suppliers that exchange of gifts or payments that manipulate a business decision is strictly prohibited in the organisation. A trivial value such as US$30-40 a year can be fixed by the company which should be adhered to while providing any gift to any employee or family members (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). Health and Safety: Suppliers associated with a company must ensure that they focus on the health as well as safety of the employees, working in their sites. The working environment of the employees should be maintained in accordance with the organisations’ safety standards (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). International Trade Regulations: Suppliers importing goods and materials for supplying to the company should adhere to the import regulations issued by the UK government or any other country’s government which the company operates in (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). Protecting the Environment: The suppliers of the company should strictly follow the rules and regulations of the governing body and policies of the public entities the organisation represents (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). Quality Requirements: A company may do business with suppliers that package and ship products with best in class manufacturing practices of the packages. Moreover, they are expected to deliver products as well as services that meet the required specifications (Colgate-Palmolive Company, “Colgate Palmolive Company Supplier Code of Conduct”). The primary activities included in a multi-product manufacturing company can consist of many activities that can add value to the product. These activities are required while transformation of raw materials to a finished product, such as equipment maintenance, facility operations, packaging and assembling. Therefore, to support the primary activities, support activities play an imperative role that adds value to a product with a minimum cost (Porter, M. E., “Competitive Advantage: Creating and Sustaining Superior Performance: With a New Introduction”). The support activities can use modern and cost effective technologies that will lead to lower the production cost. Moreover, effective management of human resource department can ensure high volume of production through effective training and development of employees in the production units. The motivational factor of employees should be tackled by the human resource department, thus developing the need to appoint best people in the industry. For example, Colgate Palmolive focuses on each category for reduction of cost. The company appointed one supplier for providing the preservatives used in personal and household care products, thus, reducing the cost of appointing various suppliers. Furthermore, the company achieved cost reductions by placing on-site manufacturing programs on their website that provided training on any product manufacturing issues (Colgate-Palmolive Company, “Global Procurement Mission & Goals”). Benefits of Undertaking the Full Implementation of a Supply and Value Chain Management Approach A company that solely focuses on the supply and value chain management approach enjoys a number of benefits. Supply chain is the combination of networking business entities that represent the flow of goods and supplies from the suppliers to the consumers. Whereas, value created in the eyes of the consumers is the source that flows to the suppliers in the form of demand of the product. The prime benefit that can be achieved from the supply and value chain management is reduced operational cost for producing and transferring the finished product (Fellar & Et. Al., “Value Chains Versus Supply Chains”). Furthermore, the implementation of supply and value chain management in an organisation will increase its market share, reduce unused inventories, improved and developed delivery services, improvement of quality and short product development cycles. Apart from these, the effective management of supply and value chains will bestow the organisation a competitive lead over their competitors. The organisation will be in a position to negotiate the prices concerning the supply partners and develop a more effective way of making the products available to the customers. Additional value added to a product will enhance the image of the product which will reflect on the demand of the consumers. Modern technologies and packaging methods will reduce the cost of production, thus, leading to a less price of the product. The other way of improving the value of the product is through the quality of advertisement. Advertisements play an imperative role in promotion of any product. Thus, creative advertisements can thrust the value of the product in the consumers’ mind hence, enhancing the sales of the product. Moreover, the supply chain management will reduce the focus from other departments of the organisation, leading to improvisation of innovative products (Fellar & Et. Al., “Value Chains Versus Supply Chains”). The process of having a supplier’s code of conduct will allow the company to attract potential suppliers who can fit themselves in the company’s code of conduct. The code of conduct will clearly demonstrate the company’s perception from their suppliers in terms of competing with rival firms for generating businesses. Therefore, the company’s reputation and values will remain intact despite having external supply partners. Furthermore, the inventory cost will be reduced if an effective supply chain management is in place. Thus, the space required for piling up stocks can be used for other important functions of operations. Moreover, the delivery services for meeting the customers’ desires can be improved as it is one of the objectives of a supply chain management. Risks for Implementation of Full Supply and Value Chain Management Approach Implementation of modern technicalities can have certain risks included along with it. For instance, the performance of the overall supply chain management is dependent on various networking organisations performances. Thus, it can be assumed that many management teams are responsible for the operations of the networking companies. Therefore, decisions of different managers may collide with each other’s and hence, develop conflicts. These conflicts can hamper the relations with the management of the company and thus, prove to be inefficient in delivering the organisational goals. Additionally, it has been observed that many organisations do not have particular metrics for measuring the performances of their suppliers. For instance, few organisations completely focus on measuring the performance of the suppliers by reduction of inventory costs. Thus, they lack in measuring the suppliers response time against the time of demand by the consumers (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). Few of the uncertainties may be faced by a supply chain manager if variables included in the supply chain management system are not assessed properly. These variables may include delivery performances, supply lead time, manufacturing process time and quality of arriving raw materials among others. Therefore, it is necessary for the manager to analyse these variables in order to reduce the impact of uncertainties in the organisation. Moreover, the manager should ensure that he/she does not overstock few items and under stock others which could lead to a delay of material movement along the supply chain (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). Few suppliers become more dependable in both quality and effective delivery, whereas others become less reliable. Moreover, the demands for mature products become predictable whereas immature products unpredictable. Thus, the risk lies in delivering those products that the company may not stock up due to the nature of demand for the product (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). At times, the supply chain management can be focussed more on the internal factors. Thus, this could lead to less emphasis on the required value of the consumers from the product. Moreover, the inward focus can lead to a rigid direction assigned by the supply chain managers that could not be effective in markets where Just-In-Time (JIT) approach is not followed. Apart from focusing on suppliers as well as customers needs, at times the stakeholders value are being ignored thus, leading to loss of stakeholders association (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). An organisation’s implementation of a full supply and value chain management approach at times may lack in terms of focusing on the innovation of products in the long-run. They intend to focus on developing ways for improving the operational efficiencies of the organisation, thus, neglecting the possibilities of manufacturing innovative products in the long-run (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). The on-site manufacturing tutorials are an innovative way for assessing the required categories of supply chain partners. However, little information provided in the websites can attract suppliers that do not comply with the code of conduct of the organisation. Thus, it may lead to a negative impact upon the organisation’s reputation or values (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). If a customer order is placed that includes multiple supplies from different suppliers, the management identifies a merging point where the supplies are merged to generate the finished product. Thus, a target date is fixed which may be ambiguous due the low information on supply deliveries. This could lead to dissatisfaction from the consumers as their demand date is not met. Furthermore, it may provoke the consumer to shift to rival companies’ product or substitute the product. Moreover, it has been noted that certain supply partners have the habit of accelerating deliveries which could cost higher to the organisation, such as freight cost that could lead to increased price of the product (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). Few supply management managers tend to neglect the opportunity costs, and storage and warehousing costs to add value to the product. This can affect the fund of the organisations when a product is demanded for a very short period, such as storage cost of those products. Moreover, an engineering or technical change in the product can also affect the funds (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). Product design or a new product’s launch generally emphasises on the cost effectiveness and quality improvements. It is the outcome of fast manufacturing and assembly techniques. Thus, at times the costs for implicating supply chain inventory are ignored. As a result, the expected savings may be lost due to the increased cost in distributing and inventory costs. Likewise, product development without a proper supply chain management can lead to unavailability of products, time consumed delivery and unnecessary accelerated delivery costs, hence, affecting the success of the product (Lee & Billington, “Managing Supply Chain Inventory: Pitfalls and Opportunities”). Conclusion Properly maintained supply and value chain management in an organisation has certainly benefited few organisations. However, there are certain risks involved in fully implementing supply and value chain management approach in an organisation. Major international organisations such as Colgate Palmolive have few specialised approaches that helped them to concentrate on all the aspects of a product’s life cycle. Thus, the benefits of supply and value chain management approach ensure that effective quality and on-time delivery systems can be improved. Furthermore, the supply chain manager can find different ways that can be cost effective, though, meet the customers’ requirements. It further creates opportunities for the management of the company to develop or instigate new products that can attract the consumers. In addition, the suppliers’ code of conduct as developed by Colgate Palmolive can be an example for gaining overall reputation in all the areas of the product cycle. The suppliers’ code enables the company to gain potential supply partners that will fit in the company’s value. Furthermore, the additional value added to a product by identifying the consumers’ needs will generate sales, thus increase the revenue of the company. The value can be monetary or in other ways that will play on the emotions of the consumer. For instance, advertisements of care that the product offers to the consumers can help the product to draw new customers. Though, there are risks related to implementing a full supply and value chain approach. Therefore, measures can be taken to avoid those risks. Designing an effective supply chain management system will ensure that low costs are incurred while the product is going throughout the supply chain. This will help in increasing sudden rise in prices due to supply chain difficulties. Furthermore, databases throughout the supply chain will enable available informations such as, inventory status, supply delivery schedule and order forecasts among others to the members in the supply chain. Moreover, to improve co-operation among supply chain sites, companies tend to introduce incentive structures for the various groups involved in different sites. Therefore, a supply and value chain management approach is equally important for an organisation that essentially deals with multi household products. The priority of these products is frequent in day to day activities, thus, proper coordination among the entire supply and value chain is of utmost importance. Works Cited Colgate-Palmolive Company. “Our Company: History”. May 07, 2012. Our Company, 2012. Colgate-Palmolive Company. “Colgate Palmolive Company Supplier Code of Conduct”. May 07, 2012. Global Procurement Group, 2012. Fellar, Andrew. & Et. Al. “Value Chains Versus Supply Chains”. May 07, 2012. BPTrends, 2006. < http://www.ceibs.edu/knowledge/papers/images/20060317/2847.pdf> Lee, Hau, L. & Billington, Corey. “Managing Supply Chain Inventory: Pitfalls and Opportunities”. Sloan Management Review. 33. 3 (1992): 65-73 Porter, Michael, E., Competitive Advantage: Creating and Sustaining Superior Performance: With a New Introduction. Simon and Schuster, 1998. Vanharanta, Hannu & Breite, Rainer. “A Supply and Value Chain Management Methodology for the Internet Environment”. May 07, 2012. Introduction, 2003. Bibliography Jespersen, Birgit Dam & Skjott-Larsen, Tage. Supply Chain Management: In Theory and Practice. Copenhagen Business School Press DK, 2005. Mentzer, John, T. Supply Chain Management SAGE, 2001 Supply Chain Management. “A Comprehensive Guide on Materials & Supply Change Management”. May 07, 2012. Supply Chain Defined, 2012. Read More