This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
This report mainly focuses on how contingency factors cause major problems in a manufacturing plant. It analyses various negative impacts in case of large number of suppliers and it emphasizes on the different areas to be addressed to cope with such situation along with maintaining the current production and operational effectiveness. Moreover, it addresses the issues of streamlining the suppliers, improving the quality of procured products, optimizing the operations and productions and satisfying the customers.
Through entire study and findings, it is recommended that the manufacturing plant should adopt measures like supply chain management, buyer-suppliers integration and operational approaches. The best and positive solution is to improve the quality of procured products by streamlining the suppliers and choosing the few but best and reliable suppliers in order to optimize the production.
Table of Contents
Executive Summary 2
Table of Contents 3
1.1 Streamlining suppliers: 6
2.1 Streamlining the suppliers along with maintaining optimum production and operations require spotlight on number of aspects: 6
2.1.4 The importance of supplier management 10
2.1.5 Supplier selection, auditing and supply base reduction 11
184.108.40.206 The effects of supplier base reduction 12
Conclusion and Recommendations 17
The operations manager has the responsibility for productions and operations such as improving the quality of procured products, production capacity and customer satisfaction. Various tasks including the designing of goods and services, managing quality, process and capacity design, strategy formulation for locations, layout and supply chain management (Paulraj & Chen, 2007). The operational management needs to deal with the tasks like the optimization of production and operations improving the operational effectiveness.
The operational manager has to eradicate if any problem arises in manufacturing plant which hinders delivery levels; quality of products and raw material, production scheduling and customer satisfaction. Operational manager needs to streamline on too many suppliers and improving the quality of service as well as improving the employees performance as they are the key factor of their manufacturing plant. Operational manager designs a framework and few new strategies for to implement them in the manufacturing plant to improve operations and performance (Everett, 2000).
The operational manager has to make the operations decisions in such a way to reduce cost, provide better goods and services, improve supply chain, attract and retain global talent, understand market, learn to improve operations and quality of products, maintain optimum productions capacity, satisfy customers and ultimately gain an operational effectiveness and efficiency. All this will provide an opportunity for an operational manager to achieve competitive advantage and creation of customer value in an efficient and sustainable way.
1.1 Streamlining suppliers:
In a manufacturing plant, operational manager is facing major problem related to streamline on their suppliers. As per Ellram (1991), 'the contemporary supply management is to maintain long term partnership with suppliers and use fewer but reliable suppliers'. Therefore choosing the right suppliers involves much more than scanning a series of pricelist and choices will depend on a wide range of factors which involve both quantitative as well as qualitative. The manufacturing plant's operational manager tries to co-ordinate the relationship between the suppliers and the production process. The manufacturer's quick decision on internal production processes not only lead to a winning bid with the competitive price or supplier but also positioning the manufacturer on the market place in terms of responsiveness, efficiency, customer service and potentials sales in the long run (Berger, Gerstenfeld & Zeng, 2004).
According to Hahn, Watts and Kim (1990), 'With globalization and emergence of the extended enterprises of independent manufacturing organizations there has been a steady increase in the outsourcing of raw materials'. This has lead firms to give more importance to the purchasing functions and associated decisions. One of those decisions which impact all the manufacturing areas is the supplier selection. Operational manager specially focuses on the final selection stage that consists of determining the best mixture of vendors and allocating orders for the satisfaction of different purchasing requirements (De Toni & Massimbeni, 1999).
2.1 Streamlining the suppliers along with maintaining optimum production and operations require spotlight on number of aspects:
2.1.1 Strategic Purchasing: To streamline suppliers, there should be strategic purchasing. Strategic Purchasing has a rapid evolution. It is a key function within organizations. It helps to know the importance of the buyer and supplier working together in an ongoing relationship. With it, the focus on a traditional win-lose relationship, based on the location of power between the bargaining positions of the two parties, shifted on the scenario in which win-win relationship can be created (Hines, 1996). There should be implementation of better purchasing strategies:
a) Lean supply model: This model was developed by Lamming in the United Kingdom (Ford, 1980). This model helps to capture the present position of the leading manufacturing and assembly companies.
b) Network sourcing model: This model helps to describe the key elements of the buyer supplier relationship. As per Hines (1990), 'this has a tiered supply structure with the heavy reliance on small firms and a small number of direct suppliers with individual part numbers sourced from one supplier but within the competitive dual sourcing environment. Adoption of this model will help to streamline the suppliers along with improving the quality of procured products, production capacity as well as full customer satisfaction (Choy, Lee & Lo, 2002). This can have many benefits like reduced supplier base which is easier to manage but very reliable and this will reduce the time looking for new suppliers and gathering competitive bids.
2.1.2 Lean Production: It is a system that uses less of all inputs to create outputs similar to the traditional mass production system, while offering increased choices for the end users (Hahn, Watts & Kim, 1990). This will help the companies to identify the value stream for each product by paying close attention to a number of key processes running cross-functionally across the organization. This will help the manufacturing plant to make major changes that will lead towards improvement as well as continuing their ongoing activities. This will help the manufacturing plant to double its productivity and to integrate the supplier network.
Hahn, Watts and Kim (1990) states that a firm's ability to produce a quality product at a reasonable cost and in a timely manner is largely dependent on the capabilities of its suppliers. A firm's ability to compete effectively in the market can be hampered significantly without a competent supplier network so there should be a proper supplier network in order to achieve the operational effectiveness (Davenport, 1998).
Peter Drucker commented on its potential advantage to be gained by working closely with suppliers:
"Nowhere in business is there greater potential for benefitting from interdependence than between customer firms and their suppliers. This is the largest remaining frontier for gaining competitive advantage and nowhere has such a frontier been more neglected" (Hahn, Watts & Kim, 1990).
2.1.3 Supply chain management:
Another area which can help to solve the situation of selecting the best suppliers amongst a large number of suppliers can be the supply chain management and pipeline management. These two areas take the relationship between end consumers and raw material sources further and these are primarily concerned with optimizing the value stream by creating the correct balances, work allocation and good relationship between ram material and consumer (Ellram, 1991).
According to Tyler et al. (2008), 'The supply chain is a collection of physical entities linked to processes that provide goods or services from source through consumption'.Â The physical entities in the supply chain consist of suppliers, manufacturers, distributors, retailers and consumers. To effectively manage the supply chain, all functions and entities in the supply chain must be fully integrated.Â Such integration may be possible using the communications networks which enable collaboration between different actors and functions of the supply chain (Paulraj & Chen, 2007).Â Some supply chains are simple, others are quite complex.Â The complexity of the supply chain will vary depending on firm size and complexity and the number of goods manufactured.
The supply chain management is not an easy task.Â Effective supply chain management requires the integration of supplier manufacturer, distributor, retail, and customer requirements into one cohesive process.Â This requires utilizing the expertise of all stakeholders involved in supply chain.Â Drawing on the experience of all functions change in supply will lead to efficient supply chain management (Carr & Smeltzer, 2002).Â Supply chain management can examine all aspects, the use and purchase of raw materials and services and to link the resources of the leading suppliers to strategic objectives of the company, thereby enhancing market competition advantage. To ensure that supply chains operate as efficiently as possible and produce the highest level of customer satisfaction with lower costs, companies have adopted Supply Chain Management processes and related technology (Gustin & Daugherty, 1995).Â Supply Chain Management has three levels of activities in different parts of the company and it will focus on: strategic, tactical;Â and operational.
Strategic: At this level, the company management will try to look at high-level strategic decisions for the entire organization, such as size and location of production facilities, partnerships with suppliers, products to be manufactured and sales market (De Toni & Nassimbeni, 1999).
Tactical: Tactical decisions focus on measures that will bring economic benefits, such as using industry best practices, developing a strategy to market with favored suppliers, and in co-operation with logistics companies to develop the transport cost effectiveness and develop warehouse strategiesÂ to reduce storage costs of stock (De Toni & Nassimbeni, 1999).
Operational: Decisions at this level occur every day in businesses that affect the way products move along the supply chain.Â Operational decisions involve changes in the program for the production, procurement agreements with suppliers, receiving orders from customers and moving the product to the warehouse (De Toni & Nassimbeni, 1999).
Since supply chain management functions at three levels;Â Strategic, tactical and operational.Â At the strategic level, the management company makes high level strategic decisions in the supply chain that is associated with the entire organization. The decisions taken in the supply chain should reflect the overall corporate strategy that the organization is following.Â The strategy of supply chain includes that management has to decide to cover the breadth of the supply chain.Â These include product development, customers, manufacturing, sales and logistics.
Product Development: As product cycles mature or decline in sales of products should be managed by making strategic decisions to develop and introduce new versions of existing products on the market, the rationalization of current product offerings or develop a new range of products and services (Carr & Pearson, 1999). These strategic decisions may include the need to acquire another company or sell existing businesses.Â However, in making these strategic decisions of product development, the general objectives of the operation should be the determining factor.
Customers: AtÂ the strategic level, the company must identify customers for products and services.Â When the company management makes strategic decisions about products for production, then the key customer segments should be identified where the company's marketing and advertising will be targeted.
Suppliers: The Company's management must decide on the strategic policies of the supply chain with their suppliers.Â The decline in the purchasing spend of a company can have direct bearing on profit growth; there are many decisions that can be done to get this result.Â Leveraging global markets business in many companies may allow the company's management to select strategic global suppliers that offer the biggest discounts (Berger, Gerstenfeld & Zeng, 2004).Â But those decisions must be consistent with the overall objectives of the company.Â If a company has adopted policies for quality, then strategic decisions on their suppliers should be fall within the overall objective of the company.
In an increasingly competitive international business environment of today, many companies focus on supply chain management as a means to achieve long-term competitive advantage.Â The term supply chain management has been used since the 1980's (Choy, Lee & Lo, 2002).Â Modern supply chain management is a complex project management and demanding, for which a number of systems management software have been developed.
An important aspect of supply chain management is supplier management- organizing the optimal flow of high quality, value-for-money materials or components to manufacturing companies from a suitable set of innovative suppliers (Davenport, 1998). Consequently, what used to be regarded as a purely tactical exercise market is now recognized as a strategic function and external suppliers are the most important influence on the success or failure of a business.Â To obtain a competitive advantage, companies are streamlining the number of suppliers from whom they purchase (Wheatley, 1993).Â Reduced supplier base means that closer, longer-term relationships may be established by a few (sometimes single-source) suppliers who then play a crucial role in contributing to the new product design, greatly reducing the costÂ and continuous quality improvement.Â All this is far from the traditional multi-sourcing approach, where each relationship between buyers and suppliers were common and where short-term orders were simply placed with the supplier offering the lowest price.
2.1.4 The importance of supplier management
Supplier management, which is also called supplier base management, is an essential issue for manufacturing companies.Â It is useless for large companies to reform their manufacturing without the strong support of suppliers (Tyler et al. 2008).Â We begin to see positive and strategic contribution of market and procurement process can make towards the overall performance of an enterprise. One reason for the growing importance of supplier management is that many manufacturers focus on core competencies, away from vertical integration and, therefore, need to gain competitive advantage from the supply side of their activities (Paulraj & Chen, 2007). Good suppliers can help manufacturers in developing new products and processes, with long-term quality improvement and cost reduction and can provide enhanced delivery performance. Therefore, the manufacturers' challenge is to maximize performance better than competitors. For companies that spend a high percentage of their revenue on parts and materials, the savings are particularly important. In these cases, savings of 1 per cent on the purchase cost can have the same effect on profits as a 8-10 percent increase in sales (Carr & Smeltzer, 2002).Â Working closely with suppliers quickly brings lower unit costs and long term, even greater quality at lower cost.
2.1.5 Supplier selection, auditing and supply base reduction
The decision criteria used in the traditional approach to purchasing were unit price, the quality and speed of delivery.Â Price is often the main emphasis: selection of the lowest price is probably one of the most primitive features of certain purchases.Â The quality tends to be viewed from the standpoint of compliance, i.e. if the supplier's quality simply meets the required level of current required level, is acceptable.Â A better way of selecting suppliers is not only the current quality, but also their quality record means their potential for further improvement and use of total quality management (Gustin & Daugherty, 1995). Current thinking proposes a wide set of factors to be considered when selecting suppliers.Â It is important to look not only at today's unit price, but also the total costs of purchasing; including procurement, transport and storage costs and the possibility of lowering prices (Hines, 1996). Items to be considered when selecting suppliers are suppliers' financial stability and environmental standards.Â In selecting suppliers, not only the original supply base to be examined, including other foreign suppliers should be taken into account.
It is necessary to explore the potential of strategic suppliers, such as the ability to contribute to product development.Â What are their technological capabilities?Â How does the supplier to contribute to the buyer's competitive advantage? These are the kinds of questions that must be asked during selection of suppliers.Â Co-operation between buyers and suppliers has moved out of the deal, in the long term (Blois, 1992).Â This new relationship is completely different - is of strategic importance for the company.Â Therefore, cross-functional teamwork is important when choosing suppliers.Â Most of the selection criteria focus on measurable actions; however, other more qualitative factors need to be considered.Â For example, the assessment must be whether the culture of the supplier organization can effectively co-operate with the buyer organizational culture (Ellram, 1991).
220.127.116.11 The effects of supplier base reduction
The main effect of reduced supplier base is that it leaves the buyer with more time to develop closer relations with other suppliers. When properly managed, it will lead to a competitive advantage as a producer, through cost reductions, increased quality and innovation resulting from the support of suppliers in product development or process (Ford, 1980).Â Stronger buyer-supplier co-operation necessitates closer communication.Â New technology has played a key role in making closer relationships easier, e.g.Â through Electronic Data Interchange. Factors that determine the closeness of the buyer-supplier relationships include the degree of mutual dependence, the length of the cooperation on the joint projects and technological links and the degree of satisfaction with cooperation (Davenport, 1998).
Supply chain helps to optimize production planning and materials planning.Â Finite materials and capacity planning can be performed at the same time, so that production capacity, inventory levels and purchase terms are taken into account in the planning of production (Wheatley, 1993). The result is more reliable planning of purchasing, production and transfer of order which will result in optimizing production flow and helps to ensure the timely delivery to customers.
2.1.6 Supply chain integration: It is the integration of the activities that produce materials and services, transforming them into intermediate goods and delivering the final products through a distribution system (Heizer & Render, 2008). It a process of integration and collaboration in which manufacturing firms in supply chain work together in a cooperative manner to arrive at mutually acceptable outcomes (Carr & Pearson, 1999). This will help to improve the effectiveness and efficiency of operations.
2.1.7 Strategic buyer-supplier relationship: The concept of strategic buyer-supplier relationships will help the partners to work together to use both the resources and abilities towards a better integration of activities can meet the ultimate needs of its customers (Paulraj & Chen, 2007). This will also help to focus on initiatives that enhance superior relational characteristics between members of the supply chain and create a win-win situation for both buyer and supplier firms.Â The relationship between buyer and supplier is a joint effort through the purchase of manufacturing companies and their suppliers to be emphasized efforts to improve communication and information exchange. Poor communication results in failure to achieve improvement of the quality suppliers (Tyler et al. 2008). Trust plays an important role in achieving successful partnership and alliances. Knowledge sharing will also help operational manager to increase the new product development and decrease in the number of delays and increase of collaboration between buyers and suppliers. Supplier relationships are critical to any organization.Â Suppliers may have a direct impact on economic performance and efficiency of markets business, affecting the cost of product development, inventory levels, construction schedules and timeliness of delivery of goods and services (De Toni & Nassimbeni, 1999).Â Many leading companies have realized the worth invest to ensure that these relationships are effectively managed and effectively.
2.1.8 Porter Value Chain: Porter value chain is also very helpful to sustain the current production and gaining the operational effectiveness as it is meant for seeking excellence. Blois (1992) states that this approach will help to develop logical and long term relationships with suppliers. Implementation of value chain will also help to get quality in processes which will ultimately result in achieving customer satisfaction.
2.1.9 Selection of the best suppliers: Manufacturing plant should be emphasized on the close cooperation and collaboration with a limited number of suppliers that are trustworthy, than with a traditional, full-length arms business with a large number of suppliers (Carr & Smeltzer, 2002). This approach will help in:
Increase trust and credibility of the relationship.
Fewer suppliers to contact in case of orders given on short notice.
Increased economies of scale based on order volume and learning curve effect.
Better customer service.
Market penetration (De Toni & Nassimbeni, 1999).
Selection of suppliers must be done very prudently. The quality of their processes must be checked whether they ensure customer satisfaction, reliability. A number of factors must be evaluated. For instance,
Individual supplier development.
Supplier market research.
Sourcing strategy formulation.
Supplier capability analysis.
As per Hines (1991), 'the purchasing function needs to adapt the new demands for the real-time alignment of the buying and selling organizations at both strategic and operational levels. The key advantage of this is that it will open up the opportunities for competitive advantage by integrating the internal processes with those of value stream partners. Another advantage is gained through the active and continuous development of long term supply sources.
The prudent decision in selecting best and reliable suppliers will help to create a competitive advantage but in it the staff needs to play a role closer to that of an external consultant rather than an operations oriented order placer. This will require a radical overhaul of activities taking a plenty of time (Ellram, 1991).
2.1.10 Effective interfirm communication: There should be effective communication between buyer and seller. When the buyers communicate with suppliers and share information relating to materials procurement and product design issues, they are more likely to:
Improve the quality of their products.
Reduce customer response time.
Reduce the costs of protecting against opportunistic behavior.
Improve cost savings through greater product design and operational efficiencies (Carr & Pearson, 1999).
2.1.11 External logistics integration: There should be a high level of external integration of logistics between buyers and suppliers and strategic relationship. The suppliers in the framework of the strategic relationship often be justified in order to ensure on-time delivery, quality and cost of the buyer of the enterprise, and even they are more willing to cooperate closely Â (Gustin & Daugherty, 1995). So, this will ultimately eradicate the problems in terms of delivery levels, quality of products and raw materials, production scheduling and moreover satisfies the customers.
3.1 Influence of future developments on plant operations: Operation management is confronting with an ever-changing world. This is influencing plant operations and operations management decisions. These dynamics are the result of a variety of forces, from globalization of world trade to the transfer of ideas, products and money at electronic speeds. The major developments include the following:
3.1.1 Global Focus: The rapid decline in communication and transportation costs has made market global. At the same time, a resource in the form of capital, materials, talent and labor have also become global. This will have an impact on the plant operations as the operation managers will need to respond with innovations that generate and move ideas, production and finished goods rapidly (Heizer & Tender, 2008).
3.1.2 Supply Chain Partnering: As the suppliers often have unique expertise, the operation manager needs to outsource and build long term partnerships with critical players in a supply chain.
3.1.3 Mass Customization: With mass customization, the operation manager will need to respond with the production processes that are flexible enough to individual whims of consumers and goal is to produce customized products, whenever and wherever needed (Heizer & Tender, 2008).
3.1.4 Just-in-time Performance: Inventory also impedes response to rapid changes in the market place. So the inventories are needed to cut viciously at every level, from raw materials to finished goods.
3.1.5 Environmentally sensitive production: There is a need to design the products and processes that are environmentally friendly. For instance, biodegradable, recyclable products.
Conclusion and Recommendations
It is concluded that a large number of suppliers can create many problems relating to delivery levels, quality of products and raw materials and customer satisfaction. This situation can be handled by adopting appropriate strategic measures such as supply chain management, buyer-supplier integration, etc. By streamlining the suppliers, using strategic models and other operational approaches, the best suppliers can be selected and long term relationships with them can be maintained along with sustaining the current production and operational efficiency.
Through entire study and findings, it is recommended that the manufacturing plant should adopt strategic measures like supply chain management, buyer-suppliers integration and operational approaches. The best and positive solution is to improve the quality of procured products by streamlining the suppliers and choosing the few but best and reliable suppliers in order to optimize the production.