espoused the fact that "a supply chain consists of many organizations acting together, with each organization dependent on the performance of other organizations in the chain" (Xu, Beamnon, 2006, p. 4). Based on this definition the problems arising within Potters, a company specializing in product sourcing of construction materials, are not just the concern of the company, but the various organizations that are affected by the problems as well. The authors of the article further state, "coordination within a supply chain is a strategic response to the challenges that arise from these dependencies" (Xu, 2006, p. 4).
The first event to take place, therefore, would be to examine the problem in a head-on fashion to determine what exactly is taking place. Deriving the problem from that examination should lead to further discussions, and the results of those discussions will lead to discovering a solution to the supply chain problems.
The data needed for discussion purposes covers a wide range of areas, including, but not limited to expenses, liabilities, shipping/receiving schedules and quality control numbers. It is a fact that "Supply chain management, seeks to reduce costs by reducing sources of uncertainty. All of these (uncertainties) have had a renewed emphasis on issues related to quality, consistency, and the efficacy of alternative procurement strategies" (Wilson, Dahl, Demcey, 2007, p. 316).
The data for Potters is that they are attempting to satisfy every customer and every customer's needs. This may not be feasible in the long run due to the vast differences between the needs of a house builder and a tradesman.
This is especially true since Potters attempts to have on-hand over 24,000 different products. Potters also offers delivery to the home or the building site which, in light of higher oil and fuel costs, will also have to be examined for feasibility. The company currently operates 24 vehicles to ensure a timely and reliable delivery of their product(s). Extra care will need to be taken in regards to any changes since the same company philosophy has been in place since 1954. Customers are accustomed to receiving their quality products in a very short turn around.
A recent article presents the supposition that "to gain a competitive advantage in today's dynamic business climate, manufacturing organizations are increasingly developing long-term cooperative relationships with their most critical suppliers. To remain competitive in today's marketplace, manufacturers must manage their remaining suppliers effectively" (Prahinski, Fan, 2007, p. 17).
Potters offers over 24,000 different products but the key to developing long-term relationships with suppliers and customers is by figuring out what the most prevalent products are for those customers and then developing long-term relationships with those suppliers who offer those particular products. Potters offers 6,000 of those products, which are defined as 'core products'. It is imperative to examine whether the profit margins on those other product, not designated as 'core products' are enough to continually stock them. There are plenty of reasons a company can use to justify not keeping these additional products in stock.
The key to maximizing profits in the type of business that Potters competes in is by supplying the vast majority of core products while offering other supplemental products on a more flexible timeline. Evidence of this was included in a recent study that showed; "the 200-firm sample provided evidence that strategic supply management is driven by supply and technology uncertainty" (Paulraj, Chen, 2007, p. 39). Customers understand that there is always technological uncertainties and they will be understanding as long as the company is willing to do everything possible in order to fill the orders on a timely basis.
After all, there are three commonly held traits to supplying products to a demanding customer base. One of those three is supplying the product in a timely manner, the other two are price and quality. Since the consistently fastest moving product items include sand, bricks, concrete blocks and clay/plastic drainage it might make sense for the company to purchase any closely located land where those items can be stored, especially the sand, bricks and concrete blocks that can all be kept outdoors with relatively little risk. Because Potters would be buying these items on a much larger scale and on a regular basis in order to replenish supply and the amount(s) being bought would be a lot larger in quantity than is currently purchased, low price volume discount buying opportunities could then be taken advantage of. This would ensure that Potter's bottom line was also being addressed in regards to maximizing profits.
A method of addressing the issue of 'rolling' stocks can be to have the suppliers be responsible for ensuring that their displays are always stocked with new product. In this manner the suppliers would have an agent that would visit the store on a regular basis to track specific sales items and the effects of various promotions. By asking the supplier to be responsible for their own display areas, the responsibility and need to stock new items on a regular basis would be left up to the supplier. This would also cut down on Potter's employee costs by freeing the employees from having to restock the various supplier's displays. Product sales would presumably be more efficient and profitable since the responsibility to do so would be taken on by the suppliers. This method would also eliminate waste and one recent article presented that "Supply chain management (SCM) seeks to improve performance through elimination of waste and more efficient use of internal and external supplier capabilities and technology, creating a seamlessly coordinated supply chain and thus elevating interfirm competition to inter-supply chain competition" (Anderson, Katz, 1998 p. 1).
This method would also allow for better tracking of sales and would presumably lower the cost (one of the three components in keeping customers happy). Anderson's article went on to state, "Supply chain management is generally regarded as the integration of the flows of material, information and financing around three competitive priorities: price, delivery and quality" (Anderson, Katz, 1998, p. 2).
Finally the article said that not all supply problems would be handled through addressing only the cost or delivering a quality product. It states, "a sustained competitive advantage in a supply chain is not achieved through these three dimensions alone. Supply chain partners generally acknowledge the pivotal importance of relationship management, but often, default to conventional measures that are mostly founded on easily quantifiable criteria like price, delivery and quality" (Anderson, Katz, 1998, p. 3).
Another measure that can be taken to address the problems in supply management is through having the forecasts that are being developed by each individual store done so through a weekly general manager's meeting. One study showed that, "Senior managers can assist in attaining higher levels of customer satisfaction by shaping organizational settings conducive to collaborative NPD. Supply chain managers can promote integrated NPD by championing the inclusion of manufacturing, suppliers and customers" (Tan, Tracey, 2007, p. 3). Using the expertise of all the store managers as well as the manufacturers, suppliers and the customers would allow for a freer flow of information that could enhance the timely availability and production of needed product. Other individuals can be included in the meetings as well, including advertising, receiving and warehouse personnel who can add their expertise to the problem.
An additional study provided further evidence of this when it presented that "Many firms have recently embraced the notion of strategic buyer-supplier relationships to (1) improve efficiency and effectiveness across the value chain and (2) seamlessly iness their physical distribution function with supply partners to achieve greater benefits" (Paulraj, Chen, 2007, p.3)
Since NDC currently forecasts the store demand for new product on a 'best guess' scenario, including suppliers, manufacturers, and shippers in the process is one way of alleviating the discrepancies in required product and shipped product. This is especially true for holiday sales such as Easter and Christmas. Holidays are generally going to be busy times of the year with certain anticipated product demand. It is important the all concerned parties be brought into the loop at these times in order to maximize the product sales, availability and profitability.
Potters must take a careful approach towards implementing any changes and can do that by studying the understanding the patterns of supply and demand. Core product forecasting is much simpler than demand forecasting, especially concerning holiday sales.
Understanding that it might take three weeks lead time to replenish certain products as compared to having core products on hand for immediate sale is much easier when dealing with 6,000 products versus 24,000 products.
One proposal might be to upgrade the technology (hardware and software) used by Potters to track and order inventory.
Depending on what system and software is in current use by Potters, it might make sense to replace or upgrade. There are different methods of stock replenishment and using technology as an aid in accomplishing replenishment can be quite advantageous. Some of the methods of stock replenishment include Vendor Managed Inventory (VMI) which allows…