¶ … supply chain challenges facing the company which the chosen application addresses.
4(b) Explain how the chosen application addresses these supply chain challenges
8Q2"IT should be considered as an integral part of the supply chain re-engineering process." Discuss this statement using appropriate references from the course module. Case studies or other source material.
(a) The major supply chain challenges facing the company which the chosen application addresses.
The Levi Strauss e-business and supply chain integration
Levi Strauss is a firm that was very successful and competitive in the manufacture of denim jeans. Like several other companies, it faced a lot of competition and changes in the market conditions. This subsequently led to a decline in its sales and profitability. The company's sales were at a peak value of $1.7 billion in 1996 (Leon-Pena 85). This later declined to about $4.1 in 2002 as pointed out by Girard (Girard). The corporation realized that the trend was becoming permanent since its sales were decreasing in a fashionable manner. Its market share declined from 18.7% to about 12% in 2002 (Girard). The decline in its market share was attributed to the increase in the level of competition in the denim jeans market. The competition presented the consumers with more alternatives and choices and therefore unless the company could come up with a competitive advantage that could allow it to provide their customers with some benefits at a lower cost, then it could not survive.
Levi Strauss noticed their problem and then decided to act. The initial action involved the response to the market needs as well as the provision of fairly priced products at convenient locations. On the basis of this idea, they introduced the Signature jeans line of products. This product demanded a change in their supply chain (Distribution). This is because the corporation recognized that the product was to be made more accessible and more suited to the shops of frequented by the target market. On the basis of this concept, Levis Strauss embarked on a project with Wal-Mart. They teamed up in a supply chain partnership. Wal-Mart was to stock their line of products so as to provide their customers with an easier access to the Signature jeans line of products. Wal-Mart was also to provide the Levi Strauss customers with the much needed volume of products.
This specific decision made a very big impact in the supply chain of Levi Strauss. Prior to the decision to have their products sold through Wal-Mart, Levi sold its products via smaller departmental stores like J.C. Penney and even Macy's. The number of these departmental stores were smaller than the number of Wal-Mart stores that were estimated to be 3400 by Girard (Girard).Levi Strauss' success can be attributed to the improved supply chain that involved a partnership with Wal-Mart. The process of improving or rather modifying the supply chain began with the adoption of a new and improved supply chain management. This is due to the high demands in terms of performance by Wal-Mart. All the suppliers of Wal-Mart were required to have a certain level of performance as well as control. Wal-Mart requires their suppliers to work with their supply chain management system with the demand that they (suppliers) put similar requirements to the process that Wal-Mart puts on them (suppliers). Levi Straus was never familiar with this approach and therefore they embarked on a major rethinking. This is evident from the fact that at Levi's the management was never able to track their products as they moved in their supply chain pipeline. They were never able to tell how many pair of jeans was under manufacture in whichever plant as well as how many of these pairs of trousers were in truck under transportation or were in distribution centers. This was pointed out to have presented...
This is because a corporation cannot control their own distribution process if they lacked the necessary information that is needed to tell what is going on. The lack of information as well as control led to a poor performance with a mere 65% of the original Levi Straus products arriving at their intended destination at the required time. This delay affected customer's perception negatively (Girard).This delay was very bad for business since the poor supply chain leads to late deliveries (Swaminathan 9) and other complexities.
(b) Explain how the chosen application addresses these supply chain challenges
Some of the problems associated with poor supply a chain management are; customization challenges, stock timeouts and distortion of information. Since Wal-Mart insisted on an efficient supply chain management, Chief Information Officer of Levi Strauss David Bergen came up with a method of addressing the problem by implementing information technology-based system of supply chain. This was to be a collaborative integrated e-commerce-based supply chain management system that provides the executives with the information that they needed so as to effectively have control of the distribution process. This IT implementation included a demand replacement module / system as well as a demand and supply forecasting system. The technology allowed the management to access at a glance the sale of the products as well as their movement in the distribution system. The system also provided information on the availability of the products for sale, the demand information in various stores as well as the interaction of the demand and supply dynamics for the products (Gerard). The information obtained provided Levi Strauss with the information as well as control that were necessary for them to effectively manage their supply chain operations as a company. They were also able to suffice the demands of Wal-Mart. Some of the benefits of the system are that it allowed for the stocking of certain products such as Defender pants in a certain quarter of the year 2002 (Gerard). The Defender pants were expected to be sold in quantities totaling 2 million pairs. The system however revealed that the sales figures would be higher. This predictive data allowed Levi Strauss the time to rapidly respond to the increase in predicted demand and supply as well as the quick distribution of the products. The positive outcomes of this were that the company benefited in two areas. The first one being that they were able to bank on the increase in demand and supply for their advantage as they increased their sales. The supply chain e-business system allowed Levi Strauss the chance to quickly recognize an opportunity as well as quickly take advantage by taking maximum advantage of it. The second advantage is that Levi Strauss able to increase the supply function in order for their customers being served through the shelves at Wal-Mart to be served uninterrupted. This was paramount to meeting the demands of Wal-Mart. This case is a true example of how chain supply management can be optimized using e-commerce in a business-to-business scenario. Levi Strauss relied on its relationship with Wal-Mart with the mediation of e-business capabilities in formulating strategy. They are able to supply Wal-Mart with the required quantities at the required time and there for the customers never experience any shortages on Levi Strauss products. The fact that Wal-Mart commands a high umber of customers makes them at apposition to lay demands on their partner suppliers on their terms of operations. As for the Levi Strauss case, the company was required to meet all the strict supplier needs laid down by Wal-Mart for them to realize success through their collaborative supply chain partnership. The implication of this is that the success of Levi Straus was dependent on their ability to manage and control their supply chain as a failure of such would have resulted in a strained relationship with Wal-Mart which in turn would have lead to a discontinuation of their arrangement and hence failure. Later on Bergen the CIO of Levi Strauss improved the supply chain by enhancing the function of the e-business platform to include development of scanning tools to be used by manufacturers in checking the accuracy of the cartons that are ready for shipment as well as the implementation of the AS2 technology that would make it possible for the company to exchange Electronic Data Interchange (EDI) with its partner Wal-Mart (Leon-Pena 87). This enables the companies to effectively participate in collaborative forecasting of demand and supply. This case therefore shows how e-business can allow companies that use the technology in the supply chain to effectively interact as well as work together for their own successes.
The outcome of the e-commerce implementation
The outcome of this is that Levi Strauss has been able to effectively improve its supply chain and profitability using e-business strategies in their supply chain to install control and provide information that is required by their partners and corporate collaborators to achieve their success through a streamlined supply chain.
Girard, Kim. Supply Chain Partnerships: How Levi "s Got Its Jeans into WalMart ..CIO.com . 15 July 2003. 4 May 2008 < http://www.cio.com/article/31948/Supply_Chain_Partnerships_How_Levi_s_Got_Its_Jeans_into_Wal_Mart > "
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