Supply Chain Management

 SUPPLY CHAIN MANAGEMENT

There are many definitions for supply chain management (SCM). The most popular is by Michael Porter in his book The Competitive Advantage. He identified key factors that influence the success of a business and their impact on the customer as well as internal processes with supply chain management being a key element. There was an old saying “The man who thinks he knows everything sells” which is a fair interpretation (Porter, 204). As the definition suggests one can never know what you are doing because it will always be changing and evolving. It has been said before that there are no specific theories of the supply chain because they do not exist. However, it is possible to understand how things work from examples and apply them to real-world scenarios to find the right solutions. An example would be when companies buy into a certain service (e.g., using Amazon Prime membership) and then look at it critically to see if they want to continue with this type of service. 

A company called Bakers Delight and their CEO John Stavropoulos had done extensive research on their business model and decided it was time to start applying some changes to ensure their future success. They started researching new ways of working while also incorporating other retailers as customers (Porter, 2012). This was extremely helpful for understanding the overall picture of how Bakers Delight needed to improve its sales strategy. Once Bakers Delight realized its needs were not met, they went out looking for a solution as a marketer would which led them to begin searching for SCM tools. With so much data available, a complex system called e-scenario analysis was applied to create better plans and make better decisions. Eventually, the whole project, including all major parts, was completed within six months. For example, the creation of a map of product distribution would have taken up to two years. All of these improvements were made without cutting corners or compromising on quality (Porter, 2012).

E-scenario Analysis:

The reason why you don't need to think about it is just that; an e-scenario analysis should be used as a static tool to support your planning process and provide answers to some basic questions such as:

What products are currently stored in each warehouse?

Who wants those products in their stock?

·         When would these products be next delivered?

·         What types of goods would fit into each warehouse?

·         How much space does each warehouse need?

·         What products would be in the centre of each warehouse?

·         How many pallets they do have?

·         How important are these products on a scale of 1–5–5 (five’s lowest)?

·         How many times per day would my trucks arrive?

·         How much could I increase my delivery frequency?

·         What actions would be necessary to maintain a stable flow?

·         What is the best way to allocate workers?

·         What do we need to prepare?

·         What will we need to buy?

·         What decisions did we make?

·         What will happen now?

·         What problems are likely to emerge?

·         What do we need to consider?

·         What is a good plan?

·         What is our budget?

·         What alternatives do we have?

·         What will we do?

·         What would be the mistakes?

·         What actions would we take?

·         What costs would we incur?

·         Why are these options more expensive than others?

·         What is our current capacity? What capacity limits are set?

·         What actions can we apply?

·         What would be our expected results?

·         What should we expect?

·         What is the probability of success?

 In terms of having a balanced inventory between warehouses and products, storage plays a vital role.

Storage:

 This can either be physical storage or the amount to be stored. Physical storage should be limited to minimum levels on the site. To reduce any unnecessary storage requirements, we should minimize the number of units but only keep what’s required. Also reducing storage quantities needs to be kept in the balance against the products coming from suppliers. Storage is divided into three categories as follows:

 Storage Type:

This category includes both large quantities such as perishables/food and small amounts such as liquid fertilizers. These should be stored separately from bulk products until the last hour before delivery or replenishment. Large quantity products should be stored apart for later use. The following storage categories include Ice Cream, Cereals, Bread, Dairy Products & Yogurt, Fish & Seafood, Meat & Poultry, Frozen meat, Produce, Fruits & Vegetables. Small quantities should be stored together in different locations and can be stored in special containers and boxes with lids to minimize exposure to oxygen-free air.

It is usually recommended that this area is opened during the Christmas holidays, the food will usually be delivered early and stored in the main store in store.

The following classification applies to smaller quantities of products as each has a very wide shelf life and is usually stored for reuse before going to market.

There are two reasons for choosing this category; Firstly, it is easier to spot perishables/food/drinks in the fridge and avoid having to open the fridge as that takes longer. Secondly, the temperature is ideal for preservation for long periods making it suitable for storing large quantities.

Frozen Foods:

To make sure the safety of the products being shipped to warehouses we can use ice packs to prevent frozen fruits and vegetables from getting damaged or spoilt. Some items can also be brought on trailers to limit exposure to sun and humidity, although freezing is not recommended as this can affect the freshness of meat and milk products. Fresh fish is best stored on the trailer so that if it gets damaged it doesn’t spoil completely when getting on ships or planes. The freezer itself should also be covered to protect the food from moisture, bacteria, and other microorganisms. On this list, only non-vegetable juices are kept in the fridge, they should be kept separate as perishables due to the variety on the shelves. We should also separate liquid fertilizers so that as soon as they become solid they can be stored in the fridge, however, if there is a hardening point, they should be broken down into smaller portions and stored separately throughout the fridge to avoid spoilage and to prevent mold problems. On one hand, this means less packaging material, therefore more cost savings. On the other hand, the fridge will be bigger and will require extra electrical power.

Bakery:

Bakeries should focus on the brand name, and ensure their bread is made fresh every day to sell as fresh as possible. Most bakers go through a rigorous training period whilst maintaining strict quality control procedures. If someone is buying a loaf from an artisan baker and makes a mistake, the result will be a poor-quality product, even though they may have a high percentage of guarantee claims. Not all bakers will have the same standards and some may even cut corners because it minimizes wastage. When people are talking about Bakers Delight, they should also look at where the raw materials come from too, since over the past couple of decades this trend has improved. Bakeries will have to offer a premium product by producing it in a state-of-the-art facility to give it the same level of customer satisfaction. The second reason Bakers Delight has chosen to source natural products is that they cannot afford to pay high prices for ingredients from external farms, there is no choice in that. By sourcing 100% by themselves, the profit margins are increased. Bakers Delight has a low turnover and profit margin so they tend to spend what they need to save money rather than paying high rates for supplies and labour. As mentioned above, the UK government recently enacted stricter laws regarding domestic producers and therefore they must follow this.

The case of Bakers Delight shows us that it doesn’t matter how much of a business you choose to work for, the importance of your customer relationship is critical. That is crucial in building trust and mutual respect with employees, ensuring their safety, and building a team culture based on diversity and fairness. In every industry, there has always been competition and new players wanting to gain market share so businesses adapt, respond and grow when potential threats emerge. New technology, like artificial intelligence (AI), creates huge benefits for organizations and companies, but it comes with risks as well. Companies need to look beyond the hype by creating strong AI solutions and by thinking about the implications of automation in the future. In addition, companies should be considering what can benefit them and what will reduce their expenses and overhead. This gives businesses access to new marketing opportunities and makes them more efficient.

As mentioned earlier, Amazon can build a strong competitive advantage thanks to e-scenario analysis and forecasting, both of which were implemented by Bakers Delight. Their ability to analyze massive volumes for hundreds of millions of items is incredibly powerful. From here, they were able to see what was sold, where to ship products and what logistics needed to be handled. They have automated their operations so that orders can be placed and delivered as easily as possible. E-scenario analysis and forecasts allow Amazon to estimate their demand in advance and adapt to the new changes needed. Their software analyzes all incoming information quickly, suggesting exactly how much space each warehouse needs, and then estimates that amount of space for that particular SKU (stock unit). Having a deep knowledge of their customers allowed for their expansion and growth. Businesses are constantly competing for market share and sometimes lose their edge over competitors when customers have something better. Since they didn’t use it, Amazon had to be ready to react. Amazon was successful because of the fact they knew how to deliver their customer’s amazing experiences. Whether you like an item with free shipping or a high price on average but with exceptional quality they can deliver your desired results.