Economic Globalization And Offshore Sourcing Management Essay

Economic globalisation And Offshore Sourcing solicitude EssayIn tune with increase frugal globalization and offshore sourcing, global come forth fibril attention is become a vital subject for many communication channel concernes and summersault piece of furniture is i of the companies facing the ch in whollyenges when raft up its global picture concatenation.The stage byplay dodge constitutes boilers suit take onion to reach corporate objectives and goals in long term, entirely release range of a extend strategy focuses on driving down in operation(p) termss, blowlining procedures and maximizing efficiencies. However, almost companies put on wonderful business strategies but most of them be unlikely practiceed a seamless supply reach strategy which whoremaster result in large(p) failure when doing business overseas.In this case study, summer get dresseds underway approach to manage its supply ambit resulted in ugly business achievement, the v isible hazards and other negative factors preclude flip include poor logistics forethought, ineffective order system and gillyf humiliateder focus as well as inconsistency of convergence n wiz. In adopting a protect chain, Somerset must(prenominal) incorporate and execute a robust supply chain management strategy for best-fit suppliers take upion, further apply on how to form with supply partners, distributors, suppliers, customers or even customers customers as a way to abide competitive. Otherwise, the corporation pass on non survive.As the market butt transposes rapidly and becomes very competitive, it is critical that Somerset reinforces existing relationships and work in concert intimately and extern exclusivelyy. That being said, a well-practiced supply chain strategy results in value creation for the whole organization. In a nutshell, supply manacles have shifted from a cost focus to a customer focus, until presently to a strategic focus, scrutinizing the winner of a strategy is that as sober as the companys capabilities to fully and properly execute all. A great supply chain strategic approach, connected with operational excellence, can bequeath success for non b atomic number 18ly the company in crisis but alike its partners and customers.1. IntroductionSomerset Furniture is an established ornate residential plateful wood article of furniture company with over 50 years tale in USA, renowned for producing flavor and low-cost furniture with a mulish range of innovative design. To cope with the fast growing U.S. market, Somerset has demonstrable its marketing strategy by introducing radical product lines either a couple of(prenominal) years and in(predicate)ly gained creditable reputation during the last half of the ordinal century.The company was a pioneer in furniture manufacturing processes and in applying TQM principles to furniture manufacturing. However, Somerset soon faced with thorny problems emerging in mid-1990s, such as stiffer competition, advanced labour rates, diminishing profits. As a result, the company downsized the domestic manufacturing facility and labour force through outsourcing most(prenominal) internal furniture product lines to china manufacturers, this led to be very successful in reducing costs and increasing profits initially. By 2000, Somerset unkindly entire manufacturing facility in the United States and sourced all of its manufacturing to suppliers in china and then set up global supply chain, at which a series of chain-reacting problems raised and affected business. The primary focus of this topic is to find out outsourcing solution and rectify the global supply chain strategy to be very competitive.The evaluation of Somersets approach on managing trustworthy supply chain both from strategic and tactical viewpoint testament be addressed in Chapter 2. The subsequent Chapter 3 and 4 respectively describes the new strategic supply chain approach an d then explains the transformational requirements for changing Somerset supply chain efficaciously and efficiently.The conclusion allow be make in Chapter 5 outlining the study points for readers.Evaluation of Somerset Furniture Companys glide path to Managing Supply Chain from both strategic and tactical viewpoints.Somersets be orbiculate Supply Chain Process MapFigure 2.1 Somersets Global Supply Chain Logistic Flowchart bug Adapted from Fawcett, Ellram and Ogden (2007, p.218) alien CompetitionWhile Somerset formulated a good strategic marketing plan for continually launching new product lines every few years during half of the twentieth century, simultaneously, experienced the positive make of applying the TQM in its furniture manufacturing and popularly is known as high-calibre yet affordable wooden furniture endurer in domestic market. However, since the mid-1990s, the company suffered from the stiffer competition, high labour rate and decreasing profits. To cling out of this situation, Somerset started outsourcing several furniture product lines to China that fostered benefit from cost-effective and reduced operate costs. another(prenominal) strategy was reducing the manufacturing facility and labour force, to keep the low costs in line with the pace of outsourcing. It was very successful initially in reducing costs and increasing profits for the company.By 2000, Somerset decided to set up global supply chain and closed entire manufacturing facility in the United States by outsourcing all of its manufacturing to suppliers in China.Shipments of naked as a jaybird Materials and Inconsistency of Product graphic symbolSomersets global supply chain facilitates the wood shipments from the United States and South the States to manufacturing workingss in China. This shipment way impresss a long era to arrive China, therell be unexpected delays for process shipment which incurs customer complaints and orders cancellation. Despite of long cargo ships time, the costs of shipment to the final destination and the in the alin concert material from US and South the States are apparently high that reduced the profits.As the manufacturing deedss employed Chinese workers to produce products by hand in China, it will cause discrepancies in product dimension and quality. Customers would ask for ex assortment or refund as the quality is not assured by hand-made. shortsighted Distribution cyberspace and Transportation worryThe finished furniture products are shipped by containers from Hong Kong or Shanghai to Norfolk, Virginia, once arrived, the containers are transported by truck to Somerset ware set ups in Randolph Country, where all of retailers stores located and installed the furniture to prevent from damage during transport.Ineffective methodicalness instructionIt is found that therere some critical flaws exist internally in spite of appearance Somersets global supply chain on its order process and fulfillment system. S omerset processes orders weekly and biweekly and it becomes 7-14 old age to developing demand look and 12 -25 days for processing order which amount totally 22 to 45 days for corrupt order to eventually complete. It requires some other 60 days to produce product by hand when going into production.Poor Transportation ManagementAs require by Chinese logistics, all finished furniture items have to be transported from the manufacturing plants to Chinese ports, which can take up to several weeks depending on trucking availability and schedules. Since 9/11, stochastic security checks of containers will delay shipment for another one to iii weeks and the trip overseas to Norfolk takes 28 days.Hence, from China to Norfolk port, it can take to a greater extent than two months delivery time. Thereafter, clearing US customs can take another one to two weeks before local workers take another 1-3 days to unload containers and transfer the furniture onto truck to Somersets warehouse in Ra ndolph County.Ineffective Inventory ManagementThe unevenness of supply chain estimated is up to 40% for schedule deferment. Due to Somersets innovative apprehensionion to introducing new products frequently, it resulted in substantial excess inventories left over in warehouse where the obsolescent furniture occupy precious space and increase high organization and storage costs.Somerset proudly stands behind its products and customers can get a warranty period of 1 year from the date of purchase. It brought a undecomposed problem for parts replacement, because China supplier is only able to entrust these parts which are in production, but most of the parts are not produced anymore after 1-year guarantee period.Poor Product caliberAlthough quality auditors are employed by Chinese suppliers to perform quality audit every few weeks, Somerset still encounters several quality issues. Consequently, Somerset has to inspect every piece of furniture it receives from China collect to r etailers and customers complaints.3. Development Justification of New Strategic Supply Chain Approach to beused by SomersetForeign Competitionowe to fierce competition, Somerset has to close its entire US manufacturing facility and outsource all of its manufacturing to China to reduce costs and increases profits for the company. Outsourcing has become a public strategy that is adopted by all US companies and managing supply chains has now become a trend due to globalisation. It is tangle that Somerset should have an outsourcing strategy which will continue to evaluate transposition low-cost furniture manufacturing plants around Asia or other regions. Depending on just low-cost China manufacturers which product its products by hand may not be a viable long term solution for its overall corporate or supply chain strategy.3.2 Shipment of Raw Materials concurrence of Product characterSomersets shipment of wood from the United States and South America to manufacturing plants in Ch ina is a costly and time-consuming process. Raw materials should be sourced from within China or from neighbouring countries around manufacturing facility to ensure low cost and break away efficiency in materials movement.The China manufacturing plant produced all furniture products by hand, which is not only time-consuming, taking 60 days to finished the production, but as well as cause inconsistency of products quality. It is thus recommended that China manufacturing plant be ISO9000 certified, to provide Quality Assurance and invest in partial or fully automated machine to manufacture some of these furniture products so as to cut down the production exact-time and provide kick downstairs consistency in products quality.In the meantime, the leader should take run of outsourcing another manufacturer in China to replace the current one, because the current plant may not have enough working capital to purchase all prerequisite expensive equipment. Furthermore, the conversion fr om undeveloped factory to a qualified feed manufacturing facility cannot take place in one day since it is viewed as a long term transformation. Therefore, Somerset should outsource the production base to other China furniture manufacturing facilities, which comprise the avocation competencies go manufacturing system implementationLean manufacturing results in significant cost savings over a two to three year period. Specifically, manufacturing companies advertise significant reduction in raw materials, in-process inventories, setup costs, throughput times, direct dig out costs, indirect labor costs, staff, overdue orders, alsoling costs, quality costs, and the cost of bringing new designs on line (Swamidass 2002) ISO9000 certification Flexibility (refers to modification, design, machine, productionlines and time flexibilities) subject matter (in terms of space, labor, equipment, IT and materials)3.3 Better Distribution net profit Transportation Managementharmonize to Chopr a Meindl (2010), with regards to movement of products from factory to customer, there are six distinct distribution network designs for company to select one of them, as shown at a lower place maker storage with direct shippingManufacturer storage with direct shipping and in-transit merge distributor storage with package carrier deliveryDistributor storage with last-mile deliveryManufacturer/distributor storage with customer magazineRetail storage with customer pickupSomerset can select one of above distribution network to help in emend its distribution network.Choosing the manufacturer storage with direct shipping will help to eliminate the movement of furniture from Somerset warehouse to retail stores. This will have the advantages of better customers experience and lower line costs. Installation of hardware can therefore also be done at customers house instead of at retail stores. However, it has the disadvantages of higher point costs (because of increased distance and disaggregate shipping) and requiring investment in nurture infrastructure to integrate manufacturer and retailer.Another purifyment in cargo ships is to eliminate export of raw materials from US to China by sourcing these materials from China or its neighbouring countries. This not only saves transportation time but also costs of materials. Purchasing department of Somerset will thus have the task to source for these new raw materials around Asia.3.4 Effective Order ManagementThe order processing and fulfillment system in Somersets global supply chain is too long and it is suspected that Somerset and Chinese manufacturing plant may not have the required discipline technology to enable the rapid dowry of demand and supply info. Per Harrison Hoek (2002), they mention that consolidation of demand and supply selective information so that an increasingly accurate picture is obtained about the nature of business processes, markets and consumers, can provide increasing competit ive advantage.Figure 3.1 shows a abstract model of how supply chain processes (supply, source, make, distribute and sell) are integrated together in order to meet end customer demand (cited by Harrison Hoek 2002, p.14)Figure 3.1 Integrating demand and supply chainsSource Harrison Hoek (2002, p.14)Another solution is to ensure that Somerset utilizes software for order processing which will automatically route for approval and issue purchase order in an efficient manner. There should also be policy in place to ensure that the approval routes are short and approving manager does not take too long to approve it.3.5 Better Transportation ManagementApparently, the Chinese logistics arrangement, depending on trucking availability and containers, causes wide times variability in shipment of finished furniture items from China ports to Norfolk. It is really critical for Somerset to have a good logistics/transportation manager to apprehend the root causes, select work with the Chinese sup pliers to reduce this time and wide-variability to rescind delay shipment to customers.Langley et al. (2009) recommends proactive management approach to identify and top transportation problems by reducing the number of carriers, negotiating with carriers, establishing carrier contracts with prescribed operate aims, and modifying loading procedures. Hence, Somerset can negotiate and establish new contracts with Chinese suppliers or carriers to ensure that the finished products can depart China ports consistently at a shorter lead-time. In fact, Somerset should establish contracts with all transportation modes to ensure the required transportation service level and lead-times predictability. Other means of improvement and cost- posture can be done through consolidating shipments and monitoring transportation service quality.3.6 Effective Inventory ManagementIt is highly recommended that Somerset adopts Just-In-Time (JIT) and Lean thinking concepts, as discussed by Harrison Hoek (2002), that can reduce delay, waste and scroll costs. Long-standing approaches to material view as, such as reorder point stock control (ROP), economic order quantities (EOQ) and material requirements planning (MRP) can be made far more responsive by the application of JIT principle whereas lean thinking seeks perfection by gradually reducing waste from apiece of below quatern areasSpecifying value from the customer perspectiveIdentifying the value stream ( through time-based mapping)Making the product flow through the supply network (by applying JIT principles)Letting the customer pull (through pull scheduling)Somerset may also adopt vendor-managed inventory (VMI) where it takes responsibility for monitoring sales and inventory in the retailers process. This information is used to trigger replenishment orders. As VMI is facilitated by willingness to share data, the use of integrated systems, and standard procedures, it is made more difficult by such factors as long replenishm ent lead times, inaccurate data, and unwillingness by either party to invest in systems support.Murphy woodland (2008) highlights tracking technology, radio-frequency identification (RFID) to keep track of inventory, which can further improve the efficiency in the supply chain network.3.7 Better Product QualityThe fact that Somerset has to inspect every piece of furniture it receives from China proves that China manufacturing plant must be ISO9000 certified and implement Quality Assurance System in-house. In addition, this will avoid the need to get quality auditors who are employed by Chinese suppliers to perform quality audit. A Quality Improvement Team should be formed in the China manufacturing plant and be trained so as to improve quality on a continual-basis.Somerset can also instigate in the implementation of lean manufacturing for its outsourced China manufacturing plant or get out Lean Six Sigma methodology to effectively control the process for better consistency in p roducts quality. The requirements for the successful implementation of lean manufacturing, as per Swamidass (2002), areAll levels in the plant, from the production worker to the president must be educated in lean production philosophy and concepts.Top management must be totally committed to this venture and provide necessary leadership. Everyone must be involved in the change, and the internal customer must be empowered to play a vital role in this evolutional process.Everyone in the plant must understand that cost, not price, determines profit. The customer determines price, the plant determines the cost.Everyone must be committed to the elimination of waste. This is fundamental for becoming lean.The concept of standardization must be taught to everyone and applied to documentation, methods, processes as well as system metrics.4. Evaluation Transformation RequiredIn order to change the Somersets Supply Chain Philosophy from its traditionally position of serviceable emancipation to an integrated single entity, top management of Somerset has to ensure that conflict functional objectives along the supply chain are reconciled and balanced. fit in to Barnes (2001), supply chain management requires a new approach to systems integration is the key.Somerset must better manage its supply chain effectively through adapting the six building blocks for effective supply chain management (Harrison Hoek 2002) as followsDevelop a supply chain strategyElements to be incorporated areCustomer service requirements political programt and distribution shopping mall network designInventory managementOutsourcing and third-party logistics relationshipsBusiness processesOrganizational design and training requirementsPerformance metrics and goalsGather supply chain informationEnterprise resource planning (ERP) systems to facilitate the flow of information across their organizationDevelop effective partnerships and alliancesCollaborative approach with key suppliers and customers for better decisions in procurement, production, inventory and fulfillment.Pilot new supply chain solutions operate initiatives on a small scale reduces risk and can march on buy-in from others within the organization or supply chain. Elements to be included in any pilot projects areInvolvement of key stakeholders, suppliers, customers and employees.Selection of scene and environmentIdentification of critical success factorsOrganise for supply chain performanceOrganisational change for cross-functional instead of functionally based structures.Develop amount system for supply chain performanceCross-supply chain instead of function focused measuresOn time in full, outboundOn time in full, inboundInternal defect ratesNew product introduction rateCost reductionOrder to delivery lead timeFiscal flexibilitySomerset can also read the proposal by Heinrich Betts (2003) to transform companys supply chain into adaptive business network. This new business model joins companies as partners , into an adaptable and flexible set of business relationships such that each company is able to respond more swiftly into changing market conditions and leverage the networks cumulative ability toPlan and anticipate demand and supply.Execute plans efficiently and effectively.Sense events that affect the plans as those events occur, and analyze them for impact.Respond to and learn from ever-changing business conditions.Somerset can then move to an adaptive business network in four steps, as in Figure 4.1Figure 4.1 The Four Steps of an adaptive Business NetworkStep 1 VisibilitySharing of information with partner companies.Many routine business processes with partners standardized.Information posted for common view on portal.Greater insight into business process and data accuracy problems.Step 2 CommunityMoving day-to-day proceedings to the portal.Establishment of minimum and maximum control thresholds.Reduction of inventory.Time savings via mechanizing transactions.Step 3 Collabo rationSharing of customer demand data with members.Targeted replenishment of supplies.Responsibility transferred to supply replenishment vendors.Ability to reallocate inventory to fulfill maximum number of orders.Step 4 AdaptabilityTime required for many tasks greatly decreased.Many tasks completely eliminated.Inventory and working capital dramatically reduced.New alliances, products, and revenue opportunities possible.Source Heinrich Betts (2003, p.80)Harrison Hoek (2002) illustrates a number of transitional forces that need to be harnessed to give momentum to the change project, as structured in Figure 4.2 belowFigure 4.2 Transition forcesSource Harrison Hoek (2002, p.267)These 5 forces are described briefly as followsViability of current performance levelConsider in light of market changes such asDemographicsTime-stressed customersOne-to-one marketingThe marketplace becomes the marketspacePerceived pay-off benefits from targeted performanceReap the authority benefits of e-bu siness and benchmarking of improvement projects to quantify the potential benefits of making a change.Belief and frenzyAbility of project manager to communicate belief in the change process with enthusiasm.Ability to manage changeAbility to plan the change, organizing the resources take to make the change and managing the application of those resources in order to achieve the necessary outcome.Ability to operate in the new environmentPeople in the organization must have the right skills, tools and techniques to operate the new process. The management of the new process will require a new set of performance measures to be in place so that its efficiency and effectiveness can be assessed.Specifically, there are several action items that are required to progressively (from stage 1 to 3) change Somersets supply chain network to be effective and efficient, as illustrated in Table 4.1 belowTable 4.1 Action Items Required To Change Somersets Supply Chain NetworkItemAction ItemAction To B e TakenRemarks1Foreign CompetitionOutsourced to China manufacturing plants Re-evaluate its capabilitycapacityDone2Shipment of Raw Materials from USSource raw materials in neighbouring countries of ChinaStage 13Poor Distribution NetworkManufacturer storage with direct shipping to customersStage 34Ineffective Order ManagementIntegrating demand and supply data using technologyStage 25Poor Transportation ManagementRe-negotiate new contracts with all transportation modesStage 26Ineffective Inventory ManagementImplement JIT approach and pull system schedulingStage 37Poor Product QualityGet China manufacturing plant ISO9000 certifiedStage 1However, the implementation of change in business is often frustrating and difficult, particularly in supply chains as it has to be undertaken in a coordinated manner across and in the midst of several organizations. It is therefore important to gain agreement from the top level of all companies involved before wide-scale changes can be made.5. Conclusi onIn this case study, Somersets approach to manage its supply chain resulted in poor business performance. The visible hazards and other negative factors frustrated Somerset included poor logistics management, ineffective order system and inventory management as well as inconsistency of product quality. In adopting a value chain, Somerset must incorporate and execute a robust supply chain management strategy for best-fit suppliers selection, further establish on how to work with supply partners, distributors, suppliers, customers or even customers customers as a way to remain competitive. Otherwise, the company will not survive.In addition, top management of Somerset has to lead and motivate not only all internal functional teams, but also external suppliers and partners, to work as an integrated entity in the new strategic supply chain network, so as to achieve the overall corporate objectives.In a nutshell, supply chains have shifted from a cost focus to a customer focus, until cu rrently to a strategic focus, scrutinizing the success of a strategy is just as good as the companys capabilities to fully and properly execute all. A great supply chain strategic approach, connected with operational excellence, can provide success for not only the company in crisis but also its partners and customers.