Sony and Supply Chain Management Sony Corporation Term Paper

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Sony and Supply Chain Management

Sony Corporation is one of the world's leaders in supply chain management initiatives. The electronics giant has taken considerable steps to modernize its supply chain management, with generally excellent results. However, recent problems with business forecasting, and a continually challenging marketplace suggest that Sony must continue and even step up efforts to improve its supply chain management process. At the same time, the company is faced with a number of ethical considerations that impact this process. Overall, maintaining and improving an efficient supply chain management system will likely remain an important challenge for Sony Corporation.

The flow of materials within and to the Sony Corporation is related closely to the organization's function and the customers Sony serves. The Sony Corporation of America is a subsidiary of Sony Corporation of Tokyo. Sony Corporation had $20 billion in sales in the United States, and an impressive $62.3 billion of consolidated annual sales for the March 31, 2003 fiscal year. Sony is an established corporation, founded in 1946. Corporate headquarters are in Tokyo, and the company employs 161,100 people worldwide.

The company manufactures a diverse variety of consumer electronics goods, including televisions, home and car audio systems, personal computers, personal data assistants, digital cameras, video cameras, DVDs, semiconductors, the Sony Playstation for video games, entertainment robots and even batteries (Sony Corporation). Given the amazing diversity and breadth of Sony's products, and the large multinational nature of the company, Sony's customers accordingly are largely diverse. Sony customers can include a diversity of races, income, and nationalities. A Sony customer could be a single mother in Utah with a Sony car stereo, a 10-year-old Japanese child with a Sony Playstation, or even a Kenyan millionaire with a Sony home entertainment system.

Sony's flow of materials must reflect the company's Sony's function as a manufacturer of consumer electronics. As such, the company must maintain inventory and increase the turnover of their products even in an uncertain global marketplace. This can be a profoundly difficult task, given the large numbers of products that Sony produces, combined with the enormous international marketplace that Sony serves.

There are number of effective supply chain practices that exist for companies on both domestic and global markets.

The supply chain is simply "the process of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer" (Snell). Almost all businesses have supply chains that are simply networks that get supplies and components, change these into the finished product, and then distribute the finished product to the consumer (Snell). The supply chain can include inventory control, production scheduling, plants, warehouses, distribution centers, product delivery, demand forecasting, and transportation of goods (Chudykowski).

Supply chain management is simply an approach that "oversees materials, finances and also information as each move in a process, such as from supplier to manufacturer to wholesaler to retailer to consumer" (Snell). Supply chain management involves the coordination of these flows between and within organizations. Effective supply chain management should focus on the most effective and efficient movement of assets in order to fulfill demand or customer service needs (Snell). The best supply chain management systems are able to quickly adapt to change, works well within the company, and work well with suppliers and customers (Chudykowski).

In today's modern workplace information technologies (IT) are absolutely crucial in synchronizing these flows, and making sure that changes are instantly updated. The two main types of supply chain management software focus on either planning or execution. Planning software uses algorithms to help decide how to best fill a specific order. Execution software tracks the physical status of the supply chain. Many types of supply chain management software contain information for both within and without the organization, allowing for sharing between diverse database systems. This information can include that from suppliers or even customers (Snell).

Supply chain management automation has numerous advantages. For example, automation can quickly tell a corporation if its inventory of a specific product is low or non-existent, or even if there is little or no consumer demand for the product. As a result of this almost instantaneous information, companies can realize lower production costs, improved quality, and reduced product development cycles. It can also improve customer service by allowing customers to find the best product available at the best price, and helps suppliers by giving them inventory control, and reducing excess inventory. Ultimately, supply chain management automation results in cost savings for corporations, especially in a poor economy where companies focus largely on bottom-line savings (Snell).

Sony Corporation uses a number of supply chain management processes. Sony Corporation has recently incorporated quantitative methods of business forecasting to help improve its Canadian inventory system through a new supply chain management process. The new system was designed to cost-effectively help reduce inventory and increase product turnover. Sony turned to Deloitte & Touche LLP to help them with SAP software and supply chain management processes (Deloitte & Touche).

Excess inventory is significant for Sony because of the expensive nature of consumer electronics. As such, excess inventory results in tying up a lot of the company's working capital. Further, older inventory blocks the path for newer consumer items. As such, Sony wanted Deloitte & Touche LLP to create an inventory supply system that focused on a "just-in-time" inventory system. In this system, Sony would be able to scientifically forecast the products that would sell at a specific location at a specific point in time. This differs significantly from Sony's previous "just in case" inventory system that focused on maintaining inventory in the retail arena in order to reduce lost sales. In this older system, information is used to forecast product demand before putting inventory at the retail site. The never "just-in-time" system allows Sony to have less overall inventory, and turn this inventory over more rapidly through the new supply chain management system. Further, the new system helped Sony reduce inventory loss, increase revenue, and improve customer service (Deloitte & Touche).

Sony has certainly been successful in implementing changes to its supply chain management system. Changes to Sony Espana's information system systems have resulted in improving productivity by 15%, and reducing time to market by 30. Further, a modification of inventory systems also reduced inventory levels to 15 days' stock from 40 days stock. These are certainly impressive statistics, and clearly demonstrate Sony's ability to use supply chain management technology to the company's advantage (AME Info FZ LLC).

Sony has effectively used supply chain management to significantly slash distribution time. Sony Electronics CIO Bill Gauld notes that supply chain is important in endearing Sony to its customers, as well as helping the company's bottom line. Sony Electronics serves a wide variety of customers, including consumers, businesses, and retailers, and is thus faced with the challenge of satisfying a number of customers, all with different needs (Paul).

Sony Electronics' direct-ship initiative has been an important change to their existing supply chain management system. In this initiative, Sony Electronics ships products directly from the factory to the consumer. This innovative system allows Sony to save on the cost of warehousing inventory. However, this system also requires that Sony employees have information on data from almost every portion of the supply chain in order to tell where products are at almost every point, and thus determine the most efficient method to get the product to the customer (Paul).

Sony has taken the initiative in creating a number of pilot supply chain management initiatives. Interestingly, the company shipped camcorders from Japanese Sony factories directly to retailers in the United States. Previously, the camcorders were sent to the U.S. By boat, going through multiple staging points, and taking about three to four months, causing retailers to stockpile inventory. In the new process, retailers now only have to wait four or five days to receive their product. The success of this initiative reduced Sony logistics costs by 15% in 2000 (Paul).

Sony notes that its procurement activities come from the base of two core principles. The first is to meet the expectations of Sony's worldwide customers. These customers expect Sony to be a good corporate citizen, and offer high value products and services. The second principle is maintaining relationships with suppliers. Sony uses a number of suppliers worldwide, and thus requires a synergistic relationship that is rooted in trust and cooperation. Sony aims to provide high quality products, and be good corporate citizen through activities like environmentally conscious procurement (Sony).

Sony's supply chain practices are similar to other supply chain practices, both on the domestic and global markets. Certainly, Sony's "just-in-time" supply chain management process is used by a number of other companies worldwide. This process takes advantage of supply chain automation that is used by a wide variety of corporations in a number of industries. Further, Sony's reliance on supply chain management software is shared by a number of other corporations.

Sony, along with Toyota and Dell, is among the leaders in adopting new supply chain…[continue]

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