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?
They already use a plethora of techniques on their supply chain, so this is no
mean question. They could always try vertical integration, but this is not an easy
step and Regal Marine is quite far from the “raw materials” step (they already are
selling to the end-customer, in addition to distributors). It is already using a few
suppliers strategy (partnering with them), so the “many suppliers” one is not an
option.
What, then, can be done? They can always upgrade their performance with
distributors, replacing their weekly-based order system with a JIT approach, but
this is no novelty.
2. What kind of response might members of the supply chain expect from Regal in
response to their "partnering" in the supply chain?
They will get help with the design of their new products, and usually will be
included on the creation of new Regal Marine products (which are more of a joint
venture with suppliers).
Regal will help with their innovations too, testing their new products and giving
them a place in the market if they are found useful.
3. Why is supply chain management important to Regal?
They can severely cut costs and improve quality at the same time, helping Regal
to remain best-in-class manufacturer. Besides, partnering means a much shorter
lead development time and innovative designs able to keep up with competitors
(or even out-think them!).
In addition, inventory costs are a critical part of the production costs, and one
that can yield great cost cuts with slight upgrades at that.