Why Scm Strategy Is Important For An Organization Business Essay
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Published: Mon, 5 Dec 2016
Supply chain management plays a vital role in modern day business operations, as carefully planned supply chain process adds value to customers. CIC is a company involved in agricultural products and the only company in Sri Lanka that serve ‘Seed to Shelf’ motive in local and foreign markets. This document discusses the effectiveness of supply chain and possible waste reduction strategies that can adopt by the CIC, also some measures they have to implement in terms of logistics when they are planning their products in the shelves of other counties. Finally this report discusses about the importance of integrating the supply chain using modern information technology and how it can results in the long run while generating a competitive advantage to the business.
CIC Agro Businesses (Private) Limited is a subsidiary of CIC, which encompasses all the agriculture related businesses that are carried out within the CIC Group. CIC Agro Businesses (Private) Limited comprises of a number of companies.
With its wider goal to enhance farmer income, improve the rural economy and contribute towards the development of Agriculture making Sri Lanka a nutritious & healthy nation.
To be the leader in enriching Sri Lanka’s agriculture with the best quality produce from Seed to Shelf.
To provide innovative technologies and professional management to the agriculture sector contributing significantly to Sri Lanka’s GDP whilst ensuring trust from farmer to consumer.
(Source: www. cic .com)
1.0 Supply Chain Management
Supply chain management is the oversight of finances, information, and material as they move in a route from supplier to consumer, passing manufacturer, wholesaler, retailer, etc in between. Supply chain management is an efficient and accepted management philosophy focused at improving the business process of an organization. A supply chain is the network of different aspects. Knowledge, technology, resources, and people involved in the production or manufacturing, and transportation, distribution and marketing are involved delivering products to the final customer. In modern business supply chain activities are used to maximize customer value and achieve sustainable competitive advantage. There are four major elements in Supply chain management, they are
Production is a major factor in SCM. This element aims on the products the market is demanding and particular products consumers want. At the production element, many features are considered such as what products are to manufactures and in what quantities.
Supply and Inventory
Inventory visibility and Inventory control are two very significant factors in any supply chain operations, for these elements are the cost factors and directly affect the bottom lines in the balance sheet of the business. Inventory is an asset for the organization. Every business has a standard inventory turnover which is optimum for the business, this means the number of times the inventory is sold and replaced in a given period of time. The health of the inventory turn relates to the health of business
Location and Transportation
The company decides the best locations to produce the indented goods and focuses on the best process for producing, storing and distributing the production. This decision is depends on the available resources and existing buyers. Other aspects considered in this decision are the location of suppliers. Then the company decides the modes of transportation that is most appropriate for delivering goods..
The final element of SCM is information and how it is used, which means the methods of record keeping and passing information that are accurate and effective. This may include using computerized software and integrating all systems together.
1.1 Why SCM strategy is important for an Organization
Supply Chain Strategies are the vital backbone to modern business. Successful Market coverage and product availability at locations are the keys to revenue generation, and it depends on the effectiveness of Supply Chain Strategy implemented. In simply terms, when products are introduced to the market and promoted, the company must make sure the accessibility and availability of the products where the customers are able to purchase and take delivery. If the products are not being available at the right time and the right place, can cause a drop in customer interest and demand, which can eventually be disastrous to business.
1.2 Eliminating waste in ‘Seed to Shelf’ program
CIS has a wide product range in their Agriculture and Livestock industry, such as vegetables, fruits, seed paddy, yogurt, curd, rice, eggs, etc which are introduced to the market under the brand name ‘CIC’, the brand name is well known in both in the international and local market. The company is dedicated towards agriculture business, and help farmers to increase their incomes, improve rural economies while contributing to the development of the Agro industry in Sri Lanka. CIC Agri also provides with facilities and expertise in the purchasing, set up and maintenance of agricultural equipment and machinery. Furthermore the expertise are been provided in the use of fertilizers and irrigation equipment to increase the production. CIC is carefully managing the ‘seed to shelf’ supply chain operation effectively and efficiently. But when studying this process, there can be possible areas which can cause waste or cost to the process. Below are the areas CIC must focus their attention in eliminating waste in their of “Seed to Shelf” program.
Over-production: producing more than or ahead of demand. The result of producing to speculative (forecast) demand or supposed economic batches, it is visible as excessive, time consuming and costly material stores.
Employee waiting: this might occur at any stage of the supply chain process, the result is wasted worker time. The goal is to maximize the utilization and/or efficiency of operatives first and machines second.
Transportation: this means unnecessary transportation cost in production process, CIC face this problem as the production locations are in rural areas. Work In Progress (WIP) and finished goods adds no value to the product. Therefore it is more cost efficient to minimizing or eliminate unnecessary transportation system, than thinking of improving them.
Non-value added processing: doing more work than is necessary to complete a task, or in other words activities that do not contribute to the product or the process. According to Lean methods it is best to use simpler tools and processers in the production, where possible.
Unnecessary motion: relating to people stretching, bending, or walking too far, this is a common waste factor can be seen in agricultural industry. This happens primarily due to the inappropriate location of tools, parts inventories and fixtures.
Excess inventory: specifically referring to Work In Progress (WIP) between operations and purchased parts within the supply chain, often resulting from overproduction, usually due to excessively large batch manufacturing or processes with long cycle times – leading in turn to cost and waste. This will result additional waste in the form of increased lead-times, extra handling, high interest charges, avoidable people movement, excessive floor space requirements and paperwork and, again, the associated costs.
Defects: agricultural products are often exposed to pests and other deceases, which cause rotten or putrid crop. This decayed crop adds significant production waste and costs. The organization must focuses on preventing the occurrence of this pest and diseases, before focusing on improving the cultivation processes.
2.0 Logistics Management
The Council of Supply Chain Management Professionals (CSCMP), the preeminent worldwide professional association of supply chain management professionals, defines logistics as “â€¦that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.”. This definition includes inbound, outbound, internal, and external movements, and return of materials for environmental purposes.’
Logistics plays an important role in business operation of an organization. Logistics involves from the very beginning of the business process, it starts with post procumbent stage, purchasing and delivering raw materials to production locations which is known as inbound logistics. After production process is completed, logistics again comes to the scene by delivering the final product to end users which is known as the outbound logistics. Therefore it is obvious that the effectiveness and efficiency of logistics process will directly impact the bottom line of the balance sheet. The strength and the productivity of Supply Change Management lies on the factors which are directly involved with logistics such as, Suppliers from various levels and territories, Distributors locally and internationally, Agents and freight forwarders such as cargo, railway, air cargo, sea cargo and so on.
2.1 Logistics Challenges for CIC
CIC is focusing on ‘seed to shelf’ concept on foreign countries as well, there are possible barriers CIC might face in agricultural logistics, some of the identifies barriers are,
High supply uncertainty due to natural production: unpredictable variations in quality and quantity of supply, which demands for flexibility in logistic processes and planning and early warning and pro-active control mechanisms;
High perishability of fresh food products, which demand for temperature conditioned transportation and storage (cold chains) and very short order-to delivery lead-times;
Seasonable growing, which demands for global sourcing to ensure year-round availability;
High demands on food safety, quality and (environmental) legislation, which demands for the ability to trace production information of products in transit;
High flow complexities, due to a combination of continuous and discrete product flows, diverging and converging processes and by-products; this demands for advanced tracking and tracing and logistic planning capabilities;
Important role of export, including additional phytosanitary inspections (Formal certificate issued by an exporting country’s agricultural authorities to ensure the shipment is inspected and is free from pests and plant diseases)
2.2 Measures to overcome logistics challenges
CIC can overcome above identified barriers by implementing certain measures to their business processes. Supply uncertainty can manage to a certain extend by focusing at vertical and horizontal integration of value chains. At one end of the value chain the organization can align the support activities that reallocate to sustainable production and precision agriculture, and at the other end of the chain, the company can aim on developing agro logistics with distribution and consolidation centers which are directly serving export and local markets. Therefore by integrating the value chain CIC is able to pre determine the supply planning and the logistic process.
CIC must also focus on post harvest technology since agricultural products are highly perishable, CIC must take appropriate precautions to maintain the freshness of the agri products till it goes to the shelves of other countries, some possible precautions to overcome this are;
Smart fresh technology
‘Smart Fresh’ technology successfully controls fruit and vegetable ripening by controlling naturally occurring ethylene during storage and transport. Ethylene triggers ripening and spoilage in most fruits and vegetables; in some cases it is responsible for important storage disorders, which can cause the spoilage and waste of entire storage areas.
‘Smart Fresh’ Quality System reduces fruit waste and maintains texture, firmness, taste and appearance of fruits by warding off negative ethylene effects
Cold Chain management
Cold chain management means maintaining a constant temperature of a product to ensure the wholesomeness as it is processed, delivered, shipped and stored at the pre determine destination. The cold chain must never be interrupted or disturbed to ensure the long shelf life of the product. This involves relevant equipment, knowledge and people skills during the transportation and storage process from the time they are produced up until they are administered.
Packaging of perishables
For CIC packaging plays a major role in adding value to their products. CIC should pay a special attention to food safety, protection, tampering resistance and hygiene when packaging agro products. Additionally packaging act as the interface of a CIC product it also using as a medium of reflecting quality which promotes itself compared to other products. When it comes to packaging it is one of the mile stone standards that the company has to focus since they are perishable products.
Proper quality measures must be implemented in order to add value to the products, on perspective of nationally as well as internationally adding another competitive advantage for the company and its products and continues improving process. Some quality measures are;
Quality Control (QC) – this means maintaining and evaluating the standard of manufactured product prior to its marketing.
Quality Assurance (QA) – set of activities implemented such as quality checks, processes, procedures, etc to identify and correct any mistake that would reduce the quality of the products at each production stage.
Standard Operation Procedure (SOP) – often the best practice prescribed for recurring use as a the standers operation, in reference to agreed upon specifications focused at obtaining a desired outcome
Good Manufacturing Practice (GMP) – critical preventive guidelines for production operations. GMP addresses areas such as personal hygiene, food hygiene, pest control, waste disposal, water supply and so on
Furthermore CIC can expand their logistics process by collaborating with logistics companies which have facilities, reputation, and experience like Maclerens and Logiventure cargo will be one of the way the company could expand and outsource the logistics process.
3.0 Role of information technology in supply chain management
Supply chain has always been different companies and different departments within the company working together. Supply chain integration means integrating all activities in the supply chain in to a one key processes.
Today, the internet has allowed companies to move these functions to web based networks where clusters of business that typically do business with each other come to gather via the connectivity of the internet. Companies can collaborate and communicate with each other through a single internet interface. When all the participants in the supply chain become connected electronically, allowing the unfettered flow of information, the supply becomes fully integrated.
Utilizing web based technologies; companies are starting to integrate their supply chains in a system-to-system manner, minimizing the need for human contact, human data entry or any sort of human involvement. Moreover data can move in real time and disparities in size of companies are becoming less critical as software providers come up with solution that allows small companies to connect with large customers through the web. While the application to connect companies with their trading partners are far from free, the internet is relatively inexpensive medium, unlike a value added network (VAN) that charges a per transaction fee for data transmission.
E-commerce is driving a revolution of the supply chain, as we have known it. With processes once took days or weeks now taking minutes to perform, the potential to cost saving through efficiency is greater than ever.
E commerce solution providers have come forward with new tools that enable supply chain participants the opportunity to connect and collaborate via web based net works. While analysts, consultants, solution providers and enterprises continue to debate how companies ultimately will integrate those new tools into their operations and the shape of the supply chain of the future, there is a consensus forming around one vision for the next generation supply chain. The underlying theme is connectivity.
As a result, we are moving from production base supply chain to a fulfillment base model. In industrial age, production was the primary business activity. In the technology age, fulfillment becomes the primary business activity. The trading networks that are set up turn the chain upside down and create a demand chain where customer order drives the business activity. Consequently fulfillment of customer demand is the key, it is no longer about tossing the customer a product; it is also about improving customer relationships through better customer service.
3.1 Enterprise Resource Planning System for CIC
Each stage of the supply chain must be aimed on making the transition as productive and cost effective as possible. But, most of activities in the supply chain add little to the final outcome. This scenario is also same with CIC, therefore CIC can integrate their supply chain using modern E strategy, and most appropriate solution would be an ERP system. Enterprise Resource Planning (ERP) systems streamline business processes by allowing all departments and divisions within a company to access a common database which they upgrade via their own ‘module.’ An ERP System will enable communication and information sharing between all business functions and helps to manage the connection with its internal and external stake holders.
By implementing an ERP system it is easy for the organization to trace the companies upstream and downstream functions and other relevant business functions, facilitating Lean supply chain management. Effective ERP System can add value to CIC in improving many business functionalities. For an example it will improve and complement the Value chain, VMI (Vendor manger inventories), ECR (Efficient customer response), Global supply chain – Seeds to shelves from global perspectives and Contribution to business objective that means aligning SCM and corporate objectives and strategies.
3.2 Benefits of Integrated supply chain
An obvious benefit CIC can gain is reduction of inventories. CIC can change from ‘Just in case’ inventory management to ‘Just in time’ inventory management. Better inventory management allows increased turns in the inventory cycle, which reduces holding cost while increasing the cash flow.
CIC supply chain runs from rural villages in Sri Lanka to market shelves of other countries. Therefore information sharing and information management is very vital to manage the business from ‘seed to shelf’. By having better information and better access to the information, customer service can be substantially improved by being able to make more timely and accurate sales and on time delivery, replenishment and shipping decisions. Emerging technologies allow trading partners to collaboratively plan, track orders through fulfillment process, maximize process efficiency based upon historical performance data and provide superior service to the point of delivery.
Finally process automation across the extended enterprise reduces the amount of manual process and potential error. This removes the opportunities for incorrect data entry. Incorrect data or information cause reliance upon confusing and contradictory information, which often leads to customer dissatisfaction and disputes between trading partners. Not only does this reduce cycle time, if it occurs repeatedly over time it is likely to cripple the very relationship that is the heart of the business.
The companies that adapt the collaborative tools and processes available today, and into the future, will find that the ultimate benefit of participating in a networked supply chain is a significant competitive advantage over their competitors that do not participate. In that case, supply chain integration does become the end game.
Supply chain plays a major role in CIC on achieving the ‘seed to shelf’ vision. To achieve this vision effectively CIC must first focus and take necessary steps to eliminating waste in their supply chain process. Then the company should take needed precautions in terms of logistics in order to ensure the quality and the availability of the CIC products in the shelves of other countries. Finally CIC can use modern information technology to integrate the supply chain process and optimize their service.
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