Strategic Supply Chain Management in United Arab Emirates - Research Paper Example

Strategic Supply Chain Management in United Arab Emirates Introduction The platform of conducting businesses in the world is changing and different businesses, irrespective of their size and geographical locations, are being affected. In this midst, there is increasing pressure on businesses to change their methods of conducting business and embrace more appropriate and sustainable business methods of operation. One such source of influence on how business is conducted all over the world is the increasing aspects of globalization, which continues to affect all sectors of economy. As a result of globalization, businesses in different parts of the world are being forced to adopt relevant strategies with regard to production, marketing, distribution, and consumption of products and services. One such area where great changes are being witnessed is in the supply chain management where different strategic solutions are being adopted, with the aim centering on supply base reduction, increased customer focus, and improved cooperation between supply chain partners (Seuring, 2003). United Arab Emirates is a country experiencing increased industrial activities; businesses are booming and the general economy is growing. Given all these, industries in this country are not immune to effects of globalization and there have been concerted efforts to develop the most appropriate, efficient, customer-focused, and short lead-time strategic supply chains. There are different strategic supply chain practices companies in this country have adopted, depending on the needs of each company. Of particular interest to this research report will be assessment of why the adoption of Collaborative Planning Forecasting and Replenishment (CPFR) supply practice is necessary and important to strategic supply chain of Gulf Extrusions Company Ltd. Aims and Objectives of the Research Strategic supply chain management is a new concept that majority of companies with strategic objectives of growth and future continuity and sustainability cannot ignore or under-value. Likewise, companies in UAE are actively being influenced by forces of globalization and as a result, there is increased attention to operate within frameworks of reduced costs, enhanced customer satisfaction, productive cooperation, and collaboration among suppliers, and short lead-time together with decreased inventories. Adoption and implementation of Collaborative Planning Forecasting and Replenishment (CPFR) as supply chain practice in other parts of the world has proved successful and as a result, it is deemed that such an endeavor in Gulf Extrusions Company Ltd will yield numerous benefits as far as supply chain needs of the company are involved. Major objective of this research report is to assess and elaborate on the most effective way adoption and implementation of Collaborative Planning Forecasting and Replenishment (CPFR) supply practice can be achieved at Gulf Extrusions Company Ltd. As a result, detailed analysis of CPFR will be carried out with regard to Strategic supply chain goals of the company. Overview of Gulf Extrusion Company Ltd Gulf Extrusion is located in the hub-business center of Dubai, in the United Arab Emirates. It was established in 1978 and remains part of the Al Ghurair Group of Companies (Gulf Extrusion n.d). Over the years, the company has evolved to become one of the global leading aluminum extrusion companies, both in Gulf region and outside. Gulf Extrusion has developed modern sophisticated equipment that enables the company to make a range of over 7000 profiles of aluminum diverse products customized to the specification of customers (Gulf Extrusion, n.d). About 70% of the company’s products are used locally while the rest are channeled to the external markets. Key external markets of the company include South East Asia, majority of GCC nations, Europe, Africa, Middle East, and Canada (Gulf Extrusion, n.d). The company’s corporate strategy is built on broad objective of producing quality aluminum products and being able to deliver the products on time based on cost effective strategies while being attentive to customer needs (Gulf Extrusion n.d). As globalization continues to impact different companies in different ways, Gulf Extrusion is finding it inevitable to avoid business dynamism taking place around the world. It has to remain relevant to the needs of its customers, in addition to fulfilling the objectives of shareholders, operating within limits of cost effectiveness, and further ensuring only the right products reach customers at the right place and in the right time. Given this scenario, the next front upon which the company will establish and implement its competitive strategy is within its supply chain systems, which it has to align with aspects being witnessed in the dynamic market environment. Gulf Extrusion has to develop the most appropriate supply chain system that reflects aspects of collaboration and cooperation among different partners. Appropriate information that reflect customers needs and stakeholders concerns is what the company require to be able to develop new strategic production, marketing, and distribution units that possess the ability to leverage competitive advantage for the company. Literature Review Supply Chain Management Supply chain management is a concept that for some decades now has become synonymous with competitiveness operation of companies (Lambert, 2008). In essence, supply chain management has been defined as, “the task of integrating organizational units a long a supply chain and coordinating material, information and financial flows in order to fulfill the customer demands with the aim of improving competitivess of supply chain as whole” (Stadtler and Kilger 2008, p.11). Observation made from this definition is that material and information flow both up and down the supply chain. As a result, supply chain can be regarded to constitute the process of integrating all the above-involved activities and this normally takes place through improved supply chain relationships aimed at obtaining sustainable competitive advantage (Stadtler and Kilger 2008). Therefore, supply chain management can be regarded as a process within which materials and information flows, together with partnerships and how well they are managed and coordinated (Seuring 2003). Competitiveness is the ultimate desire and as a result, growth and sustainability constitute key aspects many companies and organizations are adopting in the changing world of globalization. In the new dispensation as to how businesses should be carried out, it is becoming clear that no particular single organization unit possesses the power and capability to enhance company’s competitiveness in the eyes of customers; rather, majority of customers tend to prefer a whole supply chain that satisfy their needs (Seuring 2003). As emphasis among organizations shifts towards adoption of superior supply chain practices that fulfill customers’ needs, it has been found that improving competitiveness of supply chain can be achieved in two ways. The two ways include closer integration, which also means cooperation of the organization, and through enhanced coordination of material, information, and financial flows (Stadtler and Kilger 2008). Through this, many companies are involved in attempts to overcome barriers limiting the progress of the company while at same time aligning strategies and speeding up flows along the supply chain. Strategic supply chain management Strategic supply chain management is becoming an avenue for competitiveness and growth sustainability, and as a result, there is need for companies to evaluate key elements of SCM, which in turn can propel strategic supply chain. Today, it is becoming clearer that contemporary business climate is represented by shrinking product cycles coupled with shifting market niches (Ross 1998). As a result, companies are forced to adopt strategic goals of supply chain, which requires such companies to leverage and fuse the core competencies together with physical resources available. Moreover, this fusion needs to integrate and include marketing and production processes, information technologies, and the logistic capabilities of the supply chain partners (Ross 1998). What this implies is that, modern day business operators are looking for business growth and sustainability through exploiting the productive and innovative capabilities of closely interwoven network that support channel systems and in the process be able to realize order-of-magnitude breakthroughs. The breakthroughs, which many operators are looking for, are to be found in product design, delivery, customer service, cost management, and value-added services. As a result, strategic supply chain management operates to make it possible and easy for companies to realize unique marketplace value, which squeezes out the competition. More importantly, is the fact that modern day supply chain management has to be perceived within the antennas of external strategic orientation. What this posits is that, as more companies pay attention to the product improvement through productive and innovative competencies and logistics, there is also great need for companies to integrate into the supply chain the strategic elements of finance, marketing, operations planning, and product development largely through enhanced supply chain systems (Ross 1998). Therefore formation of cooperative strategic alliances coupled with utilization of information technology capabilities should be the new avenues and fronts upon which modern day supply chain systems are built on with major objective of leveraging competitive advantage in the market place. Strategic supply chain collaboration constitute the new frontier upon which companies and organization are channeling resources as the need to enhance supply chain and improve customer service while reducing overall cost become the basic elements companies are fighting to achieve (Tsai 2006). In this regard cooperation that various stakeholders within the supply chain are initiating and implementing are aimed at re-designing supply chain operations which in turn lead to better improved customer services and costs are reduced to manageable levels. As a result, productive collaborative efforts within the supply chain systems requires companies to develop and implement integrated supply chain processes that reflects aspects of customer satisfaction and reduced operation costs. Moreover, Croxton et al. (2001) observes that an effective collaborative supply chain management system should be built on the aspects of: customer relationship management, supplier relationship management, manufacture flow management, demand management, order fulfillment, new product development and commercialization, and returns management (Lambert 2008). Collaborative Planning, Forecasting and Replenishment (CPFR) It is no doubt that modern world requires collaboration and working together of key business partners (Wisner and Stanley 2007). This aspect is speedily becoming an aspect in supply chain especially with the increasing information technology and globalization. Collaboration is viewed as essential in obtaining accurate feedback about customers among the collaborating partners and this in turn is vital in forecasting and demand planning. Demand planning in this new phenomenon is perceived to be successful when there is ability to integrate supply chain management by involving suppliers and customers in a wider productive process known as ‘collaborative planning, forecasting, and replenishment-CPFR (Wisner and Stanley, 2007). The Voluntary Interindustry Commerce Standards (VICS) provides definition of CPFR as, “business practice that combines the intelligence of multiple trading partners in the planning and fulfillment of customer demand” (Wisner and Stanley 2007, p.164). In order to achieve this CPFR create a link among sales and marketing excellent practices which in most cases may include; category management, which in turn are transformed into supply chain planning, before execution processes are initiated (Wisner and Stanley 2007). This is largely done to increase product availability while at same time being able to reduce inventory, transportation, and logistics costs (Wisner and Stanley 2007). CPFR Model Source: Coyle et al. 2008 Through productive collaborations, businesses have the opportunity to create and spread benefits among the partners that match demand with supply (Simatupang and Sridharan 2005). As a result, collaboration in supply chain management is seen to generate benefits of increased positive return on investment and enhance inventory management (Wisner and Stanley 2007). Collaborative relationships that are beneficial as far as supply chain is concerned can be realized through planning, forecasting, and replacement of products (Simatupang and Sridharan 2005). Moreover, cooperative benefits to be realized in this include improvement in stock levels among key suppliers and retailers, shortened lead times, reduced inventories, consistent and timely fulfillment of orders, and more important sales increase is realized (Simatupang and Sridharan 2005). In the case of Gulf Extrusion, it can be seen that development of an appropriate CPFR is essential in ensuring customer demands are satisfied without necessarily having large inventory in place. In other words, the company needs to have build-to-order system where collaborating partners are able to eliminate the cost of having to hold inventory and assemble huge aluminum product orders (Simatupang and Sridharan 2005). CPFR Model for Gulf Extrusion The nature of operation at Gulf Extrusion Company requires a strategic supply chain system that responds to customer needs through collaborative relationships. For instance, the company strategic goal is to enhance cooperative relationships with its customers that in turn results into development of customized products, which have ability to add value to overall product development process. As much this remains strategic goal, there is also tendency to achieve it through reduced cost framework but which remains efficient and quality-based in nature. Therefore, this is a hurdle process requires an enhanced supply chain management system. Gulf Extrusion has both local and international presence hence its retailers, distributors and customers have wide geographical and cultural presence. Due to these aspects, the CPFR system that the company should develop has to reflect five main collaboration features of collaborative performance system; information sharing; decision synchronization; incentive alignment; and lastly, integrated supply chain processes (Simatupang and Sridharan 2005). This will therefore require the company to integrate its key retailers, distributors, and customers in the system. Both the five features have the capacity to facilitate collaborative actions where they also operate and function in interdependence. Customized CPFR Model for Gulf Extrusion Source: Simatupang and Sridharan 2005 Collaborative performance system constitute the main avenue for the company to carry out effective performance metrics and this will be enabled through collaborative intelligence information concerning product, customer service, quality, price, supply cost, and general product responsiveness (Simatupang and Sridharan 2005). Information will involve the company establishing collaboration with its partners which it can generate diverse and productive information product movement, workflow, cost, and market performance status for decision-making purposes (Simatupang and Sridharan 2005). Decision synchronization on the other hand among collaborating partners will be important in ensuring critical decisions with regard to planning and executions are perfectly optimized within supply chain with ability to generate positive returns. More so, incentive alignment will see the company execute avenues to motivate the partners in the cooperation network and this will involve sharing costs, risks, and benefits (Simatupang and Sridharan 2005). As a result, strategic supply chain objectives should be set within the parameters where partners are able to provide useful information for the company. Lastly, the integrated supply chain processes to be developed must reflect capability to deliver products to customers in timely and at lower cost. This will further require the supply chain to be flexible and responsive to variety of customer needs (Simatupang and Sridharan 2005). Conclusion Strategic supply chain management constitutes the new avenue Gulf Extrusion Company will create and leverage a competitive market structure. The company has global presence and its customer needs should always remain top priority. As the issues of cost cutting continue to become the strategic goal of most companies, Gulf Extrusion needs to develop customized products, which have short lead times, and further are able to reach customers in time. This requires the company to initiate productive collaborative relationships with its key partners. Collaborative relationships can be achieved through development and adoption of CPFR systems that reflects five main features. As shown in the research project, successful integration of the five features with broader corporate strategy of the company provides viable ground for the company to establish strong competitive edge in the market place via supply chain. References Coyle, JJ, Langley, CJ, Gibson, B, Novack, RA & Bardi, EJ 2008, Supply chain management: A logistics perspective, Cengage Learning, OH, viewed 13 November 2011, http://books.google.com/books?id=TbuZnzcXGysC&pg=PA249&dq=Strategic+supply+chain+through+Collaborative+Planning+Forecasting+and+Replenishment+%28CPFR%29&hl=en&ei=QXDATsDDAcSmhAePzvDABA&sa=X&oi=book_result&ct=result&resnum=3&ved=0CEIQ6AEwAg#v=onepage&q&f=false. Gulf Extrusion N.d, ‘Company Profile’, viewed 13 November 2011, http://www.gulfex.com/link1.html. Lambert, DM 2008, Supply chain management: processes, partnerships, performance, Supply Chain Management Institute, USA, viewed 13 November 2011, http://books.google.com/books?id=eue8KAZ4mn4C&pg=PA71&dq=Fundamentals+of+logistic+management&hl=en&ei=HIPATuX7OoXBhAeMvK3HBA&sa=X&oi=book_result&ct=result&resnum=6&ved=0CFEQ6AEwBQ#v=onepage&q&f=false. Ross, DF1998, Competing through supply chain management: creating market-winning strategies through supply chain partnerships, Springer, NY, viewed 13 November 2011, http://books.google.com/books?id=eKLJEzEyOEoC&pg=PA23&dq=Strategic+supply+chain+management&hl=en&ei=50zATpu1C9KZhQe266WvBA&sa=X&oi=book_result&ct=result&resnum=4&ved=0CEwQ6AEwAzgK#v=onepage&q=Strategic%20supply%20chain%20management&f=false. Seuring, S A 2003, Strategy and organization in supply chains, Springer, NY, viewed 13 November 2011, http://books.google.com/books?id=BVktTO2T_3oC&pg=PA181&dq=Strategic+supply+chain+management&hl=en&ei=DdS-TobwNMHDhAeIs7W2BA&sa=X&oi=book_result&ct=result&resnum=5&ved=0CFIQ6AEwBA#v=onepage&q=Strategic%20supply%20chain%20management&f=false. Simatupang, TM & Sridharan, R 2005, ‘An integrative framework for supply chain collaboration’, The International Journal of Logistics Management, vol. 16, no. 2, pp. 257-274, viewed 13 November 2011, http://moodle2.sbm.itb.ac.id/files/integrative_scc.pdf. Stadtler, H & Kilger, C 2008, Supply chain management and advanced planning: concepts, models, software, and case studies, Springer, NY, viewed 13 November 2011, http://books.google.com/books?id=DwanrjYTi9wC&pg=PA128&dq=Strategic+supply+chain+management&hl=en&ei=DdS-TobwNMHDhAeIs7W2BA&sa=X&oi=book_result&ct=result&resnum=7&ved=0CFwQ6AEwBg#v=onepage&q=Strategic%20supply%20chain%20management&f=false. Tsai, YL 2006, ‘Supply chain collaborative practices: A supplier perspective’, University of Stirling, UK, viewed 13 November 2011, http://www.apcadec.org.pt/pdfs/ifpsm_Ya-Ling-Tsai.pdf. Wisner, JD & Stanley, LL 2007, Process management: Creating value along the supply chain, Cengage Learning, OH, viewed 13 November 2011, http://books.google.com/books?id=FahHh9UMSXIC&pg=PA164&dq=Strategic+supply+chain+through+Collaborative+Planning+Forecasting+and+Replenishment+%28CPFR%29&hl=en&ei=wmHATvrdI5C6hAeOwZC3BA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDcQ6AEwAA#v=onepage&q=Strategic%20supply%20chain%20through%20Collaborative%20Planning%20Forecasting%20and%20Replenishment%20%28CPFR%29&f=false. Read More