Supply Chain Strategy At Somerset Furniture Commerce Essay

The main focus of this study lies on the business performance of Somerset Furniture. Consequently, this paper aims to assess the supply chain and logistic practices of Somerset Furniture. With regards to purposes, this paper also aims in exploring the Somerset Furniture’s supply chain strategy, specifically its manufacturing plant establishment in the foreign country-China, has influenced its success. In this paper, the researcher assesses the current business strategy of Somerset Furniture in order to identify its effectiveness and determine how this strategy helps the business in attaining business success. Basically, there are numerous methods and styles that business may use in order to attain success, normally, this methods and strategies were used in determining the target market, encouraging the prospects buy their products with value and generate profit. In fact, this study recognises the importance and outcome of leadership, innovation and motivation to the progress and advancement of Somerset Furniture.

Introduction

Organizations use the supply chain approaches to have control over the operations and reduce the costs, as much as possible. Supply chain strategy is often intertwined with the supply chain management but supply chain strategy is broader than the other which should be managed well in order to compete in the market. The implemented strategy is a kind of process that evaluates the cost and benefit that an organization can gain through its operation. Most of the business strategies are formulated with an aim to effective compete and at the same time, achieve the organizational goals. This idea is true with the implementation of supply chain strategy because it includes the analytic and decision making processes.

Identify the Issues

Actually, there are no specific steps regarding the development of a comprehensive supply chain strategy that can be effective in an organization. Every enterprise is uniquely founded and their environments are differs among the others. This is a challenge that the organization should identify. Before the development, the organization should first assess the existing supply chain management or the factors that might affect the creation of the effective supply chain strategy (Rosenfeld, et al., 2000).

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Commonly, the organization goes back into the basics of business. Through the identification of the essential offers (products or services), when to offer (timing, seasonal), and where to offer (market, retail) the organization can draw its own competitive plan of supply chain. Having a business strategy is a representation of the overview of the business’s future, and having a supply chain strategy can be mirrored through the actual operations. In the end, the supply chain can meet the objectives of the organization. The supply chain strategy is important towards the operations and execution of the activities. In the continuous practice, the efficiencies are maximized and remain competitive in the market. Having a supply chain strategy creates a strong relationship between the suppliers and customers. And an organization should remember that a well executed supply chain strategy creates a value for the organization’s advantage.

Basically, businesses like Somerset Furniture are considering now the advantage of transferring the manufacturing process to China in order to lessen their overhead costs. Actually, setting up manufacturing plants in other countries like China may reduce costs, principally due to the use of economical foreign labour in developing nations. Somerset Furniture can handle costs by transferring their production lines in global setting or in a foreign land that they wish to operate. However, Somerset Furniture practices grasps that they produce employment, generate affluence, and perk up expertise in nations that are in dreadful need of such growth. Censors, on the other hand, point to their unnecessary political anxiety, their operation of developing countries, and the job losses that result in the businesses’ home nations. In the case of Somerset Furniture, the business identified several issues in their supply chain as they considered China as part of their manufacturing processes.

Table 1. List of Issues

Logistics

Duration

days

The company process order weekly or biweekly

Weekly or biweekly

14

It takes 12 and 25 days for the company to develop a purchase order and release it to their Chinese suppliers

12 and 25 days to develop PO

25

This process includes developing a demand forecast, which may take from one week to two weeks; converting the forecast to an order fulfillment schedule; and then developing a purchase order.

1 week to 2 weeks for demand forecast

14

Once the purchase order is processed overseas by the Chinese manufacturer, which may take 10 to 20 days depending on the number of changes made, the manufacturing process requires approximately 60 days.

60 days

60

The foreign logistics process requires finished furniture items to be transported from the manufacturing plants to the Chinese ports, which can take up several weeks depending on trucking availability and schedules.

Several Weeks

ie. 3 weeks?

21

An additional 5 to 10 days is required to arrange for shipping containers and prepare the paperwork for shipping.

5 to 10 days

10

Shipments can then wait from one day to a week for enough available containers.

1 day to a week

7

It requires between three to six days to optimally loading the containers.

3 to 6 days

6

Since 9/11, random security checks of containers can delay shipment another one to three weeks

1 to 3 weeks

21

The trip overseas to Norfolk requires 28 days.

28 days

28

Once in port, one to two weeks are required for a shipment to clear customs

1 to 2 weeks

14

to be loaded onto trucks for transport to Somerset’s warehouse in Randolph County, which takes from one to three days

1 to 3 days

3

When a shipment arrives, it can take from one day up to a month to unload a trailer, depending on the urgency to fill store orders from the shipment.

1 day to a month

31

254

Because of supply chain variability, shipments can be off schedule, (that is, delayed) by as much as 40%.

Delay by 40%

+3

Table 2. Other Issues

Issues

Category

At the same time, keeping excess inventories on hand in its warehouses is very costly and since Somerset redesigns its product lines so frequently a real problem of produce obsolescence arises if products remain in inventory very long.

Cost

Somerset has also been experiencing quality problems. The Chinese suppliers employ quality auditors who rotate among plants every few weeks to perform quality control tests and monitor the manufacturing process for several days before visiting another plant. Store and individual customer complaints have forced Somerset to inspect virtually every piece of furniture it receives from overseas before forwarding it to stores.

Quality

In some instances, customers have complained that tables and chairs creak noisily during use. Somerset subsequently discovered that creaking was caused by humidity differences between the locations of the Chinese plants and the geographic areas in the United States where their furniture is sold

Quality

Replacement parts (like cabinet doors or table legs) are difficult to secure because the Chinese suppliers will only agree to provide replacement parts for the product lines currently in production

Vendor Management

Somerset provides a one year warranty on its furniture, which means that they often need parts for a product no longer being produced. Even when replacement parts were available, it took long to get them from the supplier in order to provide timely customer service

Obsolete Products

Strategic Solution

There is no such thing as constant. Everything in this world evolves, even strategic performance measures. From the issues in the logistic and supply chain process of Somerset Furniture and in accordance to strategic solution, the business must be open to the idea that some measures changes over time. Somerset Furniture must research on different approaches to be at par with the changes on the systems.

In Somerset Furniture, the business may want to incorporate e-commerce strategy in their supply chain management. Actually, this has been the primary role of most businesses, how to incorporate e-commerce strategy in the supply chain management that will help in reduce expenses in the supply chain and at the same time makes the supply chain more responsive and the flow of products or services faster for the benefits of each member of the chain.

According to Jones (2001), SCM practices in business industry like Somerset Furniture integrates the key business processes, from suppliers through end-users that provide products, services, and information that add value for customers and stakeholders. It is also a network of facilities and distribution options that integrate the functions of demand planning and forecasting, procurement of materials, manufacturing, distribution, and return. Basically, in business industry the goal of SCM is to reduce inventory cost and to improve the coordination and collaboration with suppliers and distributors.

In any type of businesses or even in Somerset Furniture, sales are an important part of any commercial transaction. The most common approach to personal selling in a traditional department store concerns to a organized procedure of incessant yet quantifiable techniques in which the one selling explains his offered products or services in such a way that the consumer will be able to envisage how to gain from the offered products or services in a cost-effective means. Selling is basically a part of the implementation procedures of marketing. It often forms a particular grouping within a corporate structure, employing independent specialist operatives known as salesmen (Jones, 2001).

The continued interrogation in order to understand a consumer’s goal as well as the establishment of a set of feasible solutions by conveying the necessary information that convinces a buyer to achieve his goal at a reasonable cost is the main responsibility of the sales person. On the other hand, the main objective of professional sales in a traditional department store is to be able to know the needs and satisfy the wants of consumers effectively, and therefore convert possible customers into actual and reliable ones.

On the other hand, electronic selling refers to the paid endorsement of commodities and services with the use of online trading known as the Internet. While marketing has the main goal to select marketplaces that have the capability to acquire a product, electronic selling, in contrast, is the paid communication through which pertinent data concerning the product is transmitted to latent consumers via the Internet (Carlton, 2001).

In a general sense, electronic selling is being utilized to be able to impart to the consumers the availability of a particular product or service online. In a way, electronic selling is also able to give vital information concerning the product or service through the Internet. When an online selling campaign is attained efficiently, this can direct to an augmented demand for the merchandise.

There are commonly three main objectives of electronic selling: (1) conveying relevant information regarding a particular product or service; (2) persuading clients to buy the promoted product; and, (3) keep the company under the watchful eyes of the public (Carlton, 2001). Most successful electronic selling campaigns typically blend the rudiments of all three objectives. Typically, newly well-known products are supported with informative and persuasive electronic selling ads, while sturdily recognized products make use of institutional and convincing electronic selling ads.

In Somerset Furniture, amplified market rivalry classifies incessant modification and development in the assembly lines, outsourcing and supply chain managing of companies. Interdependence and contribution of suppliers and manufacturers in product plan, innovation, including research and development distinguish the present international business setting consequential to market instability (Sobrero & Roberts, 2001 and Appleyard, 2003). These associations generally share proprietary shared information with peripheral suppliers and associates while guaranteeing utmost protection to improve competence transversely the product lifecycle by reorganization procurement, manufacture, completion, and allocation procedures (Katsikeas, Schlegelmilch & Skarmeas, 2002) which necessitated in incorporation of purposes and information across various geographically discrete supply chain allies, including internal amalgamation with legacy systems (Katsikeas, Schlegelmilch & Skarmeas, 2002 and Appleyard, 2003).

Tactical Solution

In accordance to the tactical solution and with respect to the issues of logistic and supply chain in Somerset Furniture. The business may consider the implementation and integration of Information technology (IT) to their supply chain and logistic process. Basically, the information technology (IT), also commonly referred to as information and communication technology (ICT) can be applied to Somerset Furniture similar to other businesses discussed in McCue, (2006). In Somerset Furniture, IT may play a significant role in enhancing supply chain management (SCM) systems. For instance, a number of information technologies had been made available to owners of business organizations for this purpose, from less-sophisticated to more advanced systems (Reynolds, J, 2004). The supply chain operations of most businesses have been enhanced through information technology mainly when the concepts of business and consumers (B2C) and business partners (B2B) were introduced.

In addition to tactical solution, internet technology may also lead to the development of SCM systems among business organisations. Through this innovation, product customization, information searches and online deliveries are some common services that are now available to the customers. Manufacturers, suppliers and distributors on the other hand, benefit from internet utilization through well-coordinated information sharing. Online auctions are even made possible with this technological development (Emiliani 2000).

In addition to internet technology, specific programs and systems such as Enterprise Resource Planning (ERP) also became one of the most well-known strategies for applying IT within manufacturing enterprises, which helps in facilitating information exchange (Evans et al 1995 and Tesone, D, 2005). In addition to this, ERP also helps the business sector by improving various activities such as the monitoring of orders, materials, schedules and inventories as well as business process engineering. The Electronic Data Interchange (EDI) is yet another IT strategy that is applied by business organizations, particularly in improving their SCM operations. Private wide-area networks or value-added networks (VAN) were conventionally used to implement EDI. This however made EDI too costly for small and medium sized companies. With the introduction of the internet-based EDI, these enterprises are now able to acquire the benefits of EDI application (Johnston & Mark 2000).

The business industry like the business of Somerset Furniture is also one of the business sectors that utilize various information technology strategies so as to enhance its operations. One of these strategies that they may consider was the application of Electronic Point of Sale (EPOS), which was first introduced during the late 1980s. With this strategy, retail companies are able to acquire virtual online information about their respective customers, particularly their demands. These data are derived from the scanned purchases at the checkout counters of retail stores (McCall & Stone 2004).

In this tactical solution, Somerset Furniture may able to acquire a large customer database that can more or less give a good representation of their total demand. Customer data basically include information such as consumer sales in terms of brand, product, outlet and region. Information about the customers such as names, frequency of their visit to a particular outlet and payment method can also be obtained and stored in the database. With these data, businesses are able to develop and make successful television campaigns based on the product sales obtained from a specific region (McCall & Stone 2004).

The information that is stored on the database is mainly derived from the bar code reader. With this system, the reader, which is an electronic data input device, collects information and transmit it to the central computer. Aside from stock control, this data-gathering technique is also used to conduct market basket analysis, which is mainly used for developing profiles of individual shoppers (Czerniawska & Potter 1998 and Katsikeas, Schlegelmilch & Skarmeas, 2002).

The introduction of information technology to business application even made the development of a customer database even easier and more effective. The incorporation of IT to customer data then led to the construction of the EPOS strategy. With this added feature, businesses now can make the most of the data derived from their customers. In addition, the development of results from analyzing these data is now easier and faster than before. Data storage and classification are no longer a problem either.

In organizations that observe regular office settings, IT application strategies had also been used. One of which is the use of information technologies in developing virtual teams. Business organizations have long been searching for mechanisms or systems that will make their operations work more efficiently (Bielski, 2004). In the past, industries had recognized the efficacy of creating teams from their workforce in achieving this objective (Bielski, 2004). Based on corporate experience, organizations have witnessed that team-based working environment is capable of drawing productivity and creativity out of their employees. Moreover, a dynamic business environment exemplified by work teams enables the member to overcome challenges better (Bielski, 2004).

However, as teams are integrated into an organization’s work operation, management had started to encounter several problems and dilemmas. For instance, some work assignments require frequent relocations. This then would call for expensive travel expenses to transfer a particular work team. Due to this, organizations are not able to maximize the use of team-based workforce as work teams tend to be constricted on small projects only. Furthermore, traveling causes much delay on work actions and decisions. Without the full and complete presence of the teams’ members in a common work site or location, no work progress is achieved. This has been the case until information technology was introduced.

With new software programs, faster communication systems and more efficient processors, business sectors now have access to a useful technology known as virtual connectivity (Slack, Chambers, & Johnston, 2004 and Celly, Kamauff & Spekman, 1999). The access to these new technologies and innovations has allowed people all over the world to communicate even at great distances. This transition has given organizations the idea of creating virtual teams. Virtual teams are made up of organizational members whose main form of interaction is made via electronic communication means. Through the use of the telephone, fax machines, the internet or other computer-based media (Townsend, DeMarie & Hendrickson 1996), team members are able to communicate without actually seeing one another and even without being in one work location.

By means of these virtual communication systems, team members can easily decide or select which information system is appropriate for particular work tasks. For instance, in a work assignment that needs the exchange of information, lean technologies, such as electronic mailing or instant messaging, are used. Complicated work duties on the other hand, like conflict resolution or brainstorming, require more advance technologies such as video conferencing. Leonard (1998) noted that as the members of the virtual team are aware of the resources available to them for specific tasks, they are able to develop a refined sense of efficiency in communicating and conducting business operations as a team.

Basically, supply chain management system helps the company to improve their ability to deliver products in more quickly and timely manner. It is now consider as one of the most important aspect of management as well as strategic operations that will help to ensure that companies will be competitive in each and every move that they will take.

The said system also deals with the relationship that a certain company is involved at. Information flow, cash flow and product flow are important in any company and therefore should be taken care of by setting necessary measures that will ensure the communication link between different entities that are involved in any supply chain. The said system will help businesses to conceptualize the processes and information that will help them to manage the cooperation in the supply chain that are based on the holistic view of the entire system (Skjøtt-Larsen & Jespersen, 2005, p.10).

Table 3 The IPO Chart (Input, Process, and Output)

Input

Process

Output

1.Enquiry,Comments and suggestions

1. Analyzing the all the enquiry, comments and suggestion of the customer with regards to the performance of the company

1. Improved and developed service and performance

2. Sales of products

2.1Analyzing all the sales details of a certain products such as number of sold item in a given period of time as well as the range of ages that are buying those products.

2.2 Add to the out-flow of the products

2.1 Demand forecast

2.2 Updated Inventory

3. Pricing information from the distributor

3. Calculate those factors that will affect the price of a certain product such as the suggested price from the distributor and the needed amount to meet the target profit of the company.

3. The retail price for the customer

4. Delivered product from the distributor

4. Check if there is no damage or irregularities about the certain products. If there is any the product will be returned to the distributor

4. Updated Inventory

5. Return request from the customers

5. Ask for the proof of purchase and replace the product

5.1 Replaced product

5.2 Updated inventory

6. Money (Payment from the customer)

6. Information about the financial aspect especially the cash inflow will be saved to the database of the company for future references.

6. Profit

The main focus of the supply management system is to maintain the relationship between the different entities in the entire supply chain such as the customer, the manufacturer, the distributor etc. Figure 1 shows the control of the overall system. The system is consists of four subsystems that are important to the overall operation of the said system. The first subsystem is the planning that focuses on the initial activities of the company such as the demand forecast, the marketing strategy, the process of pricing the product and the inventory management. It is shown in the figure 4 that the entire planning phase is related or connected to the sales activities. This is because the main focus of the first said subsystem is to ensure the loyalty of the previous customers as well as to catch the attention of other target customers. On the other hand, the customer relation is connected to the marketing strategy; this is because, if a company has their pleasant and good implementation product, it will help to make the past customer to be loyal.

The main sub systems here that affect the overall flow of the supply are the returns of the suppliers and the customers, delivery and procurement. This is the core operation since it will handle the inflow and outflow of the product to the company that will help to maintain the level of the inventory to prevent over and under stock.

Figure 2. The Supply Chain Management System

Avoiding Potential Pitfalls

The organization should firstly look on the obvious and existing process that lies within their supply chain. All of the processes involved in the organization can effectively contribute in the successful creation of the supply chain strategy (UPS, 2005).

Performance Management – this is the process on controlling and execution or implementation of the appropriate processed that allows the organization to realize their goals. A well managed performance works with the organization and became the foundation of the supply chain strategy that is being supported and reinforced.

Cost-Benefit Evaluation Process – can be done periodically or annually depending on how complex the supply chain strategy is. This is the investigation regarding on what strategies, practices or methods, products, technologies, etc. can be implemented in the strategy. Within this process, the organization can also look on the new opportunities that can further position the organization towards its success.

Keeping Communication with the Partners – the supply chain strategy is basically deals with many different entities that can be both internally and externally. It very crucial for the organization to align the supply chain strategy along with the business strategy and both ideas are important to achieve the goals of the organization and foster the long-term success. By keeping the communication with the partners and customers creates an impact in rapid pace in realizing the goals because there is consistency in the process and communication.

Having the strategy is not an assurance that the organization is strong enough to achieve the success. Most of the businesses fail because of the poor implementation of the strategy. The execution is the most important that contributes in the strategy’s success or failure and not on its strategic planning, changes and development. If a strategy is not delivered according to its commitments and decisions are not comprehensively done, the alignment of the supply chain strategy with the business strategy is meaningless. If the people created the strategy, there should be commitment and responsibilities to eliminate the consequences or challenges that can be the cause of its failure.

Conclusion

Developing an effective supply chain strategy does not end there, there should also include the appropriate efforts and approach to deliver its value. A supply chain strategy is the focus of the organization towards the suppliers and customers and maintaining the good relationship towards the operational excellence of the organization. It might involve risks, but the organization should bring the emphasis on the supply chain strategy to guide the organization, at least, to gain competitive advantage.