Supply Chain Management.
As firms become increasingly focused and specialized, the supply chain performance
grows in importance. Money spent with suppliers represents a huge portion of most
firms' revenues. This is the case at Regal Marine where suppliers are relied upon not
only for quality components delivered on time, but for up-to-date technology and
innovation. Regal expects members of its supply chain to be full partners. Suppliers are
expected to join Regal in providing the customer not just quality and on time delivery,
but performance and image. Luxury performance boats require no less. At the same
time, Regal expects value.
Vendors meet with Regal’s designers to discuss changes to be incorporated into new
product designs. Regal’s strategy of differentiating itself by building luxury
performance boats means that suppliers must participate in this ongoing effort. The
characteristics expected of suppliers when the strategy is one of differentiation include:
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Share market research; jointly develop products and options.
Select primarily for product development skills.
Use modular processes that lend themselves to mass customization.
Minimize inventory in the chain to avoid obsolescence.
Invest aggressively to reduce development lead time.
Use modular design to postpone product differentiation for as long as possible.
These characteristics are high on the list of issues between Regal and its suppliers and
lead to the concept of ‘partnering’. ‘Partnering’ extends from jointly developing
components, to modular designs at suppliers and at Regal, to rapid delivery and low
inventories. These techniques allow innovative products to be rapidly and economically
included in Regal’s boats.
Regal has also developed special arrangements with suppliers who maintain shop floor
components for Regal. In some instances title transfers when the item is used, and in
other cases title transfers when items are delivered to the property. Both approaches
help Regal reduce total inventory and the related costs.
Additionally, Regal’s membership in the American Boat Builders Association allows it
to participate in lower costs because of the combined purchase strength of the
association.
Finally, Regal works with an Orlando personnel agency to outsource part of the
recruiting and screening process for employees. In all of these cases, Regal is
demonstrating creative approaches to supply chain management that help Regal and the
end user.
Discussion Questions
1. What other techniques might be used by Regal to improve supply chain
management?
Apparently the most appropriate technique for Regal Marine is the few suppliers
strategy, having quality vendors and partnering.
Other possible techniques would not be suitable for Regal Marine:
for example a vertical integration strategy would require a very high investment, and
would be unsuitable for the boat manufacturing rapidly improving technology.
Also, a many suppliers strategy results in sporadic deliveries of high quantities, which
would clearly increase required inventory and eliminate the “just in time” advantage
which Regal has.
2. What kind of response might members of the supply chain expect from Regal in
response to their "partnering" in the supply chain?
They can expect loyalty from Regal, and the suppliers can gain prestige by representing
the high-quality products which Royal Marine produces, which can result in profit
margins. Suppliers can also largely benefit from economies of scale and learning curves,
reducing the production cost. The “friendship” and loyalty which arise from partnership
gives confidence and stability to the business
3. Why is supply chain management important to Regal?
Firstly Regal needs the highest possible quality. It cannot possibly achieve highest
quality on every single component which boats use by itself.
It’s far better to do partnership with suppliers for each item, so that each producer can
focus on a particular item, resulting in the best product, innovative and using the newest
technology.
Secondly, a very important cost reduction which Regal Marine uses is the lack of stock
or inventory, eliminating the costs and time associated to them. This can only possibly
be achieved through partnering: producers provide on a regular basis directly to the
production line, in the quantities needed, just in time.