Building The Relationship Between Two Operators Of A Supply Chain Business Essay

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INTRODUCTION:

The behaviour of an entire supply chain is determined by the relationship between two operators and these can be built in different ways. The competitiveness of an organization is determined by its ability to build correct relationships. As per Wild (2002), "These relationships can be identified and classified by considering the position of the given operations in the supply chain."

GLOBALCAST'S RELATIONSHIP WITH IT'S CUSTOMERS:

"Globalcast was never really in contact with the ultimate customer of the supply chain but sold its product to other commercial businesses from various industries,therefore the relationship with its customers may be categorized as a 'Business to Business (B2B)' relationship. (Slack et al, 2007)

Globalcast introduced innovation to the business. The major reason why their customers stayed with them was their overall approach towards the business. They supplied quality products to their customers,and also provided extra services. They kept in contact with their customers for a longer period of time,and helped their customers in quotations, technical advice etc." 

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Due to their innovative approach,Globalcast received a lot of support from their customers. It is quite evident that Globalcast took each order seriously and made its business customer oriented

Also, the relationship of Globalcast with its customers advanced from short term cost-based relationship to a strategic value added relationship.

Also the company understood that efficiency and on-time deliveries would ascend in the supply chain only if you monitor the discrete stages of the process,making sure that the customers enjoy 

certain benefits. "Globalcast made things less expensive but more efficient and passed on the cost benefits to its customers. The most important aspect of this relationship was due to word-of-mouth recommendations from its satisfied customers. These customers also approached Globalcast for any new design orders implying that Globalcast excells by supporting their customers and growing with them". 

IMPACT OF THE RELATIONSHIPS ON GLOBALCAST'S GROWTH:

Globalcast's growth was driven by its relationships with its customers.

"Their engagement in the pre-design stage was the reflection of their interest in the business with the customer.

Following up enquiries by a quotation was their way to secure the deal. To build the basis, they made technical advise visits and by sharing the information, they made profits.By simplifying the mould disign, they were able to sell it to the customers and get rid of waste in the form of unused finished goods."

MAJOR MARKET CHANGET:

The first change that took place was that many of its major customers began to move their operations to the developing economies. " The reason behind this was to enjoy the benefits of low-cost labour, material and over head costs, and to enter the potential, profitable markets of these developing economies.

The next change was the standardizing of their products globally. This was due to their expansion. They knew that to live up to the demands in the markets overseas, they had to maintain some standard designs throughout. This led to the increase in production with a decrease in the unit cost."

The "third and most improtant change in the market was when the customers started asking the suppliers to do the value addition work for the products. The reason either being the reluctance of the customers to bear additional costs or lack of the testing facilities for the moulds." 

IMPACT OF THE CHANGES IN THE MARKET ON GLOBALCAST:

Though "Globalcast had a good relationship with the customers, the changes in the market place were rapid and they were not be able to interpret and react to the market changes accordingly. Globalcast could have used its factories throughout Europe to respond to and adapt changes but its customers chose the rapidly developing economies, which are outside Europe. This did not help Globalcast's business." 

However, " there was an opportunity for Globalcast to grow along with its customers and benefit from the developments in the market through partnership. According to Russell & Taylor (2000), "Partnership manufacturing is a business culture that promotes open communication and mutual benefits in a supportive environment built on trust. Partnering relationships stimulate continuous quality improvement and a reduction in the total cost of ownership. Partnering is usually referred to as a shift from traditional open market bargaining to cooperative buyer and seller relationships." As a result of these partnerships, Globalcast had the opportunity of becoming the sole supplier of the customer but, to engage into the partnerships and to become the sole supplier Globalcast needed to establish its factories adjacent to the customers'. To do that it would have to leave its existing local factories unused. A delay in deciding whether to go or not was going to give the competitors an opportunity to cash on".

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Standardization of the "products was also a serious challenge for Globalcast, because they were not able to meet the global demand. As the cost of the products from Globalcast varied according to the costs in different regions, globalization and standardization made customers look for the lowest price in Globalcast products making the margin low with the prices being dictated by the customers. The value added work required by the customers did not always produce good results as some simple value addition works did have small profitability but some needed more complex work and this added to the production costs which caused a decrease in profits. It also affected the lead time in some cases."

NATURE OF GLOBALCAST'S RESPONSE TO THE CHANGES IN THE MARKET:

Globalcast's "response was proactive in the context of the value added work for its customers. They already had the technical expertise for this and had been doing it, even before the customers demand. However, Globalcast's response to the changes was reactive in nature. They were not prepared to respond to the shifting activities of the customers to the developing economies. Standardization of product designs also posed as problem in front of them. They started taking measures after the changes took place. The reactive nature is highlighted by the fact that the General Manager of each manufacturing facility had to defend his business."

CHALLENGES THAT CAME AS AN IMPACT OF MARKET CHANGES:

One of the "major challenges was to move its factories nearby and that was not really advisable because on its large number of cutomers. Their customers wanted Globalcast to establish the factories near their sites and if Globalcast failed to react to the change, it would provide an opportunity for its competitors to gain advantage. Also, building new relationships with new customers would not be easy . This affected Globalcast's productivity.

Due to the standardization of the product design, customers had the choice for low cost products and by not adapting to this would give the competitors an edge.

Impact of the third change was that, Globalcast needed to bring in some additional machinery to meet the customer's demand. For this they needed to bear additional costs, do some value added work for the customers and stay competitive in the market."

STRATEGIES GLOBALCAST SHOULD CONSIDER:

The technical expertise has served as an asset to Globalcast. They use it to develop the value added work concepts which, in some cases, turn out to be as high as 10 times profitable. One of the major strategies Globalcast should consider is becoming a single sourced supplier. This will enhance the relationship and insure more commitment from the customers. Also they should consider the use of the nimble supply. This will help to cut down the costs. They can also aim at specializing the discrete stages of the design process so as to achieve rigidity.

RECOMMENDATIONS:

The biggest "crises was copping up with the market changes. For this Globalcast may reorganize some of its manufacturing facilities. As the customers want Globalcast to establish its facility adjacent to their factories, Globalcast can actually move some of its factories from the European region. This would help them increase the production and also maintain a strong relationship with the customers. These facilities can also be used to cater to the customer's demand for value added works rather than keeping them unused. This will make them preferred supplier, which will be beneficial in the future.

They may also consider developing a system of rate for their existing orders. This strategy is particularly helpful in a new location where forecasting sales is difficult and will also help in reducing the terms dictated by the customers."

CONCLUSION:

Supplying global customers is the main stay of the strategic plan for the new decade. Therefore, it can rightly be said that the success of the supply chain lies in the co-ordination of activities and co-operation between the business entities in it.