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In real, individuals expect for different consumption needs. In order to achieve the objective of consumption needs of everyone, there are four generic service outputs should be considered. These are relating to time, place and delivery needs of the channel.
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First of all, the first service output, spatial convenience is defined as the degree of channel centralization and decentralization. In term of time and place of shopping are quite critical to the customers. To put it in simple, it means that the shopping time and effort contributed are interrelated with each other.
Higher degree of spatial convenience providing with its customers larger spaces of product availability and accordingly reduce shopping effort as well as reduce time to travel around to search for substitute products. Contrast, lower degree of spatial convenience leads to limited spaces of product availability, thus shopping effort and shopping time also increase in relevant.
By giving an instance, hypermarkets like Giant or Tesco make available of higher level of spatial convenience to the customers if compared to traditional grocery stores or convenience stores. It could be make sense those customers able to look for a broad variety of products in Giant, comparing the price of different brands and choose for the preferable items.
Consider, Jaya Jusco as another example, after you purchase an item for a gift, you may request to make a wrapping in the counter and it is more convenient instead of you have to walk in to another shop to do for wrapping stuff. Nowadays, customers quite prefer to shop in centralized shop. Anyways, some customers are also willing to spend much more time and effort to search for a preferable stuff such as looking around in different brand of vehicle showrooms. However, logistics costs may vary for each.
The second supply chain service output is lot size. It refers to the quantity of units to be purchased in each transaction. In reality, when a bulk purchase is required, the customer may need to further incur the cost for storage and taking the risk of products damage and obsolescence.
On the other way, smaller purchase will more easily meet the consumption requirements of customers and foster to faster delivery, greater level of service, facilitate the payment flows and reduce the needs of storage.
In case, experiencing to purchase a big box of instant noodles may be applicable in supermarket or hypermarket. However, if customer wants to buy only one unit of instant noodle for immediate consumption, they may visit to local grocery store. Yet, even small purchase may match customers’ consumption requirement, but they also may notice that smaller purchase may incur higher unit cost compared to bulk purchase. It is because the seller has to cover their cost and therefore setting for a higher unit price to customers.
To be continued, the following service output is waiting time. Waiting time is identified as the total time that the customer must wait from the moment of order placement to the delivery of goods and services. Normally, the lower the waiting time leads to the better the supply chain service. Whereas, the faster the delivery of products, the lower of level of safety stocks have to been kept by customers as it can be forecasted.
Consider as a simple illustration, Cold Storage in Singapore, a customer may directly walk in to the store, looking for the desired items, make payment and then carry the items home. Instead of surfing the catalog via internet, make order online, make online payment and waiting for delivery. So here, the waiting time for between this two ways of consumption is visible, waiting time of purchasing in physical store should be shorter than online purchase.
Though, it could make sense if the customers are more willing to wait whenever the prices are lower.
Lastly, product variety is the fourth service output. It refers to the number of variety of products to be sold in each marketplace. Nowadays, people are more willing to shop in stores offering much more options and product lines to be chosen. It is appropriate to supermarkets or hypermarkets. As in Tesco, we can see a wide range of products line in the shelves. For example, when we want to buy a instant noodles, we can find from the wide range of brands, and within the brand, we can find from the flavour options, it make it customized to different customers of different appetite.
While, the convenience stores like 7-eleven may just selling the instant noodles which suited most population of customers or regular flavour of noodles.
On the whole, no such society appears as homogenous, so that, accessing to customers’ sensitivity is vital in order to develop the optimum level of performance and satisfaction.
Compare and contrast the role of the planning/coordination and operations in improving firm competitiveness.
Today, supply chain planning applications are increasing with the aim of facilitating the flow of activities within the supply chain scopes. In this competitive environment, it is crucial to stabilize the firm’s status in the market. Initially, there are three kinds of planning to be considered here. These consist of demand planning, production planning and logistics planning.
To begin, demand planning is being carried out due to the increasing complexity of product offerings with the determination of accuracy, flexibility and consistency in terms of inventory requirements. The existence of demand management enables the forecasting of daily, weekly, monthly or even yearly demand of the particular products.
Typically, demand management is performing based on the historical data or past records which kept by the company and such factors of promotional tactics, new products introduction, promotional plans, and changes in distribution channels also take into account in forecasting.
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The accuracy of demand planning is important because over-prediction or under-prediction also carry costs to the company. For instance, if the company forecasts that item A must be good selling in next month, so they may stores adequate inventories according to the forecast report, if it is not happened, then the company may incur further storage costs for those inventories and suffer the risk of products obsolescence. Contrary, if it is under-forecast, they may facing stock out problem, lost sales costs, and lose reputations as well as lose competitiveness.
Yet, demand planning or forecasting may be differ from time to time and difficult to identify. As a result, quite a number of company are applying the strategy of make-to-order strategy, so that, demand planning can be ignorance.
Second method of planning is production planning. It is refers to the requirements obtained from the demand management with manufacturing resources to create a workable production plan. This will identify what items are needed, how much are needed and when are needed.
Although, there has a trend of application of pull and push strategy or known as make-to-order method or make-to-stock method, but clearly it is not applicable in most industry due to the production technology, capacity, or the nature of industry.
However, if the company able to satisfy the production requirements at the lowest possible total production cost while at the same time utilize the resources, labors, and machinery. Then, it should be a great competitive advantage of the company while can minimizing the total costs and may offer a lower price to the customers.
In addition, logistics planning is related to the transportation, warehousing and inventory management within the company.
In terms of transportation, transportation of raw materials from suppliers, transportation of semi-finished to the production plants or movement of finished goods to the distribution centers or end-users. All of these are incurred costs. Thus, the company should make the appropriate decision in transporting all these inventories based on the nature of the products, speed, and costs.
In case, if a company wants to ship the raw materials from the suppliers’ factory, they may choose to use the sea freight or even rail carrier, both of these are providing lower costs to the customers for shipping the inventories which are not time-critical.
Moreover, warehouse costs also critical for the overall costs of company. It is not a situation where a company reduces cost in transportation side, but incurs a higher cost in warehousing side. In truth, a company has to reduce to total costs of the supply chain. In terms of storage costs, it could be reduce by applying the cross docking strategy where after the inventories unload in receiving dock, it may straightaway pack it into the desired load, then ship it out without having to store it again. So here, the storage costs can be eliminated.
On the other hand, controlling and managing inventories is one of the critical phases of operation elements. The company can have some introductions to the Material Requirements Planning (MRP) software system as the purpose of managing the inventory. Furthermore, as a reason to link or interact with supply chain partners or customers more conveniently, the company may also introduce the Enterprise Resource Planning (ERP) which providing real-time sales data, inventory status and any other relevant information to the supply chain partners. This software can significantly increase the stability of a company’s extended enterprise strategy.
Consider an example, a computer manufacturer, Hewlett-Packard (HP) may collecting the orders from the customers, shipping it out to customers, so here, the system may check the level of inventories on stock, the suppliers may find it visible and supply them with enough inventories when their inventories are reaching a certain level of safety before out-of-stock. It is all very convenient as the supplier can get to know their inventory level from the linkage system, it can eliminate the communicating costs and leads to shorter lead time.
Then, pull system is one of the operation elements. Its objective is to result in faster delivery times, lower inventory levels and better quality. By giving an instance, another computer manufacturer, Dell, produces mass computer components and after they receive the order from the customers either from internet or call. Dell will assemble the computer from the in-stock mass produced components and then deliver the fully-assembled computer to the customers in few days. So here, Dell can mass-produced computer components but still able to make it customize to the customers.
In another example, car manufacturer such as Proton, may produce bulk quantity of cars in white or grey colours, after they receive an order from customer which wanted a green colour car, they may just paint it into green.
The other operation element may include Just-In-Time (JIT) approach. JIT is the delivery of inventories at the time when customer needs. It is characterized with lower inventory levels and it usually employs with Total Quality Management (TQM) in order to make sure the quality of continuous supply from the supplier is achieved.
In overall, the supply chain planning and operation elements also aimed to facilitate the operation flows, reduce the total cost and providing a competitive price to the customers as a meaning to increase their competitive advantage.
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