OMIS 6560 SUPPLY CHAIN MANAGEMENT CASE ASSESSMENT 3 PEERLESS PRODUCTS, INC. Submitted by: Sumit Chawla (217427881) sumit19@schulich.yorku.ca Case Assessment 3 Peerless Products, Inc. Executive Summary Peerless Products, Inc, a global manufacturer of consumer electronic products, decided to expand its manufacturing in China. The CEO gave the responsibility to Vice President (Manufacturing) and within two years, the company had a plant up and running in China. However, the company does not have an end-to-end supply chain capability and because of that, the lead times have increased by 4 weeks. This has impacted the way company sells its products, takes orders, plans distribution, sizes warehousing, and manages inbound and outbound logistics throughout the markets being served by the Chinese plant. Although the company has lowered its manufacturing costs, it has increased its supply chain risks and raised its overall cost of ownership. The case also talks about a study by Accenture Inc, which says that the risks in a global supply chain network can be categorized in three ways: uncontrollable (such as natural disasters), somewhat controllable (such as fuel prices) and controllable (such as forecasting accuracy). The study further finds out that controllable factors constitute the greatest disruptions. This is specifically mentioned in the case because the problems related to the supply chain of the Peerless Products, Inc can be classified as controllable factors only. The consequences of failing to manage those risks can have a huge negative impact on the net sales, operating income and inventories. Because of the absence of end-to-end supply chain, there are other risks also. More often than not, the company's image can be negatively affected due to the delayed deliveries that can increase a customer's dissatisfaction. Also, there are warehousing and distribution risks because of the inability to collect and analyze the real-time data can affect the company's operations and profits in the long run. To combat the above-mentioned problems, it is recommended to increase the supply chain visibility by giving suppliers and may be 3PLs the ability to check our real-time inventory, so that they can start production accordingly and fulfil the future demand. This will help the company to eliminate any data silos and the heightened visibility will help the company to minimize mistakes and other hiccups in the supply chain network. The company should also implement strategic sourcing and find suppliers that are capable of providing the raw materials at the lowest cost possible and form strategic partnerships with local suppliers to reduce cost and overall lead time for the company. Further, the company must introduce the best possible supply chain software such as Enterprising Resource Planning (ERP), Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) that will provide the company with real-time data and will contribute significantly to the ability to understand and solve critical supply chain problems and issues. Lastly, securing a partnership with an efficient and fast third-party logistics (3PL) partner will be one of the most key factors to solve major supply chain issues, thereby increasing the revenues and profits for the company. CASE QUESTIONS 1. Assume you are the CEO of Peerless Products and that you are aware of your company’s lack of overall end-to-end supply chain capability. What are some of the high-level, adverse impacts on your business that may occur? Peerless Products, Inc. is a manufacturer of consumer electronics and has decided to expand its business in China. However, the company does not have an end to end supply chain capability. Having an end-to-end supply chain capability is an important pre-requisite for the global expansion of a company. As a CEO of the company, I believe, following are the adverse impacts on the business due to lack of end-to-end supply chain capability: 1. Increased Lead time: Lead time in supply chain refers to the time elapsed between "when a customer places an order" and "when the supplier is ready to ship”. Because the company does not have an end to end supply chain, the delivery of the products in this global supply chain is dependent on the third-party logistics partner. This, apart from increasing the operational costs for the company, reduces the level of control of delivery for Peerless Products, Inc. 2. Increased operational cost: Because the company does not have an end-to-end supply chain capability, the company has to outsource some part of the supply chain process to an outsider. Well, the company will definitely have considered certain factors to choose the best possible outsourcing partner (whether supplier or 3PL), but it will still cost the company more (in the long run) than if they had their own supply chain network. Furthermore, the outsourcing partner may or may nor prioritize our company’s delivery over others. This may lead to customer dissatisfaction. 3. Challenging and complex processes: When you don’t have a complete supply chain visibility (end-to-end supply chain network), it is difficult to integrate all the data and systems in the chain. With complete end-to-end supply chain capability, we not only can prevent problems at an early stage but also highlight the problems very quickly. It will be easier for the company to update shipment status, check product availability, delivery status etc. all under one roof. And once you have identified the errors (if any) in the network, it will be easier for the company to work on it, so that it does not affect the company’s operations. 4. Risk of delayed delivery: There is always a risk of delayed delivery associated with lack of endto-end supply chain capabilities. Since the company will be dependent upon a third party logistic for the end delivery to the customer and due to the lack of complete control over the logistics, the product deliveries can be delayed, which in turn would make the overall experience for the customer really bad. This, if repeated several times, will also negatively affect the company’s image and revenues in the long term. 5. Distribution and Warehousing problems: Not having a complete end-to-end supply chain capability can have an adverse effect on distribution, warehousing and logistics management of the company as a whole. Company will not be able to collect and analyze the real-time data and thus get a chance to find the blind spots. Thus, it will be difficult to modify/shift workflows and prevent a crisis. This can affect the company's operations and profits in the long run. 2. What steps would you recommend be taken to help avoid the types of adverse impacts identified above? I would recommend the following steps to avoid adverse impacts: 1. Source Strategically: The importance of Strategic sourcing can’t be stressed enough. Strategic sourcing will help the company to find a list of suppliers that are capable of providing the raw materials at the lowest cost possible. Wherever possible, it would be beneficial for the company to form strategic partnerships with local suppliers to reduce cost and overall lead time for the company. The overall supply chain can be simplified by establishing long term strategic partnerships with most of the suppliers and providing them with the potential for long-term highvolume purchases in exchange for the lowest prices possible. 2. Information Systems: Across the whole network of supply chain, the inventory refilling decisions are based on the point of sale (POS) data and from demand forecasting. Information connects each part of the supply chain, enabling supply chain managers to make decisions based on the insights about the activities taking place at distant customer and supplier locations. Information regarding customer orders, delivery schedules, inventory stock levels, production schedules gives managers the capability to assess situations, point of errors and manage them efficiently. Using supply chain software such as Enterprising Resource Planning (ERP), Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) will provide the company with real-time data and will contribute significantly to our ability to understand and solve critical supply chain problems and issues. 3. Logistic Partnership: Delivery time might the most important factor for a customer while making an order. As per a survey, the maximum delivery time the average consumer is willing to wait for an online order is 4-5 days. If the customer can't get the delivery they want when they want it, they will most likely buy from somewhere else. Therefore, securing a partnership with efficient and fast third-party logistics (3PL) partner is the key to success. No matter how good a company's product is, if it can't be delivered on time to the customer, the company will incur revenue losses. Therefore, securing relationships with reliable third-party logistics partners for your supply chain is of prime importance to avoid any losses. 4. Improving visibility of your supply chain network: Supply Chain visibility of a company refers to the ability to track every component or product order as it moves from its source of production to its destination. This can be done well when your company can give its suppliers (and also 3PLs if possible) the ability to check your real-time inventory so that they can start production accordingly and fulfil the future demand. This will help the company to eliminate any data silos and the heightened visibility will help the company to minimize mistakes and other hiccups in the supply chain network, which ultimately means more cost savings for the business. 3. As CEO, what would be your expectations of the company’s vice president of supply chain with respect to the potential problems at hand? How would you compare and contrast expectations of the vice president of supply chain with those of the vice president of manufacturing? As a CEO, I expect Vice President of the supply chain to understand and analyze the current problems faced by the company due to lack of an end to end supply chain network. As a vice president, it is his duty to figure out how he can find the best solutions to the problems faced by the company, reducing the overall costs for the company. One of the most important problems faced by the company right now is that the lead time has been increased by 4 weeks. That can be catastrophic for the business of a company. A customer, when places an order, expects the delivery of the product at the earlier. If customers do not get the product when they want it, they will go to some other company for a similar product. The absolute length and reliability of order cycle time influences and company’s inventories and will have resulting impacts on both revenues and profit for Peerless Product, Inc. Thus, I would expect the VP of supply chain to come up with a detailed plan on how to solve the lead time problems first and then other problems such as order and plant distribution, size warehousing and managing inbound and outbound logistics. VP of supply chain can include some of the actions to combat the problems. Firstly, increasing the supply chain visibility by giving suppliers and may be 3PLs the ability to check our real-time inventory, so that they can start production accordingly and fulfil the future demand. This will help us to eliminate any data silos and the heightened visibility will help the company to minimize mistakes and other hiccups in the supply chain network. Secondly, he should implement strategic sourcing and find suppliers that can provide the best products with the lowest cost. Company can form strategic partnerships with local suppliers to reduce cost and overall lead time for the company. Thirdly, the company should implement the best possible supply chain software such as Enterprising Resource Planning (ERP), Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) that will provide company with real-time data and will contribute significantly to our ability to understand and solve critical supply chain problems and issues. On the contrary, I would expect the vice president of manufacturing to provide his full support and collaboration to the vice president of the supply chain, so that the company could benefit from the improved global supply chain network. I would also ask the vice president of manufacturing, to apply the lean process to the manufacturing units and decrease waste as much as possible and increase the productivity and efficiency to the maximum. This would further help Peerless Products, Inc. to reduce its overall operational cost and increase profits. Further, I would ask him to increase the information sharing between both the business departments. Lastly, he should make long-lasting relationships with the current suppliers to improve the current process by leveraging supplier capabilities to mutually benefit both the company and the suppliers.
