Que Corporation was founded in mid-1960s and has established its headquarters in Brisbane, Queensland. The Corporation is involved in the manufacture of industrial products that are used in the exploitation of mineral resources. As a medium company, Que has steadily grown in domestic mining and exploration of mineral resources. Since its inception, Que has utilized small scale supplier for their moderately priced products with overall good reliability.
In the contemporary world, supply chain management has become a vital component for companies and their businesses to design make and deliver a product or service (Hugos 2010). Basically, supply chain management constitute model of collaboration, planning, forecasting and replenishment (CPFR).
Supply chain management (SCM) has been defined as “the integration of key business processes from end-user through original suppliers that provides products, services, and information that add value for customers and other stakeholders” (Lambert, 2008, p.2). Companies therefore continue to depend more on supply chains to provide them with what they need to endure and thrive.
It has been suggested that companies in any supply chain must make decisions individually and collectively regarding their actions in five areas:
- Production, which includes creation of master production schedules that considers account plant capacities, workload balancing, quality control, and equipment maintenance;
- Inventory, where inventory act as a buffer against uncertainty in the supply chain and the main aim is to know what inventory should be stocked at each stage in a supply chain;
- Location, has to do with where facilities for production and storage inventory should be located, the most cost-effective appropriate locations for production and inventory;
- Transportation, where consideration has to be made as to how inventory should be moved from one supply chain location to another; and
- Information, whereby questions concerning how much information should be collected and how much should be shared (Hugos, 2010).
Immediate Issue at Que Corporation
Que Corporation has made great strides as far as its sales are concerned. As a result of its great success that has been evident in gross sales, the corporation for sometime has been contemplating on increasing its sales and reach new foreign markets.
Notable thing concerning the corporation as far as its delivery systems are concerned is the fact that increased number of the corporation’s customers has constantly preferred and expected faster deliveries; unfortunately, Que corporation continues to experience difficulties in meeting its customers expectations in terms of product delivery.
The impacts of this particular problem have proliferated all the way to Que’s own suppliers. The corporation’s marketing and sales department on the other hand has made future delivery promises but the purchasing department has not managed to achieve the same success especially in sourcing additional suppliers.
But the purchasing department has not entirely failed but has consistently demonstrated efforts but the problem largely emanates from the fact that the current suppliers were finding it unable to meet increased production requirements while at the same time new suppliers are experiencing obstacles in obtaining consistent results in terms of quality, volume and timely delivery. This constitutes the immediate issue that Que corporation faces and which needs immediate address.
Any supply chain basically faces the challenges of meeting or even sometimes of exceeding customer expectations (Bidgoli, 2010, p.48). A supply chain is regarded to be sustainable especially in the long-term when customers’ requirements are fulfilled adequately. But in many cases realizing such in a supply chain is complex and challenging and therefore the best thing is to manage the supply chain with maximum effectiveness in order to achieve sustained competitiveness in terms of cost and customer service (Bidgoli, 2010, p.48).
In ensuring effectiveness in supply chains, it is important to eliminate all the existing delays of information and materials as fast as possible, also question and investigate any form of inventory and why it exists, identify any kind of uncertainty since uncertainty has the potential to lead to poor decision making and also a suboptimized flow of materials, and lastly business entities utilizing supply chain need to try and promote the customer demand signal to the maximum extent possible. In other words the company should create and promote demand-driven supply chain.
Basic Issues at Que Corporation
The first basic issue that has been identified at Que Corporation has to do with first delivery to customers. Compounding this particular issue is the inability of suppliers to meet increased production requirements while the new suppliers are confronted with the issue of being unable to consistently maintain product quality, volume and also delivery on time.
Another basic issue has to do with the Corporation’s compromise on using smaller scale supplier for a moderately priced product that the company has regarded to be reliable. Also, the company has continued to face problems in identifying and investigating potential suppliers that have the capability to foster and promote Que’s corporate strategy.
As a result of undertaking this initiative Que Company has consistently sourced for suppliers who have components or subcomponents that have the ability to provide a quality product without being involved in the final assembly. Further the company’s purchasing team has not had any opportunity to travel and in the process identify and investigate new opportunities as far as international suppliers are concerned.
Suppliers sometimes are unable to take on additional work or expedite the manufacturing process due to their own manufacturing limitations. The company continues to face numerous challenges resulting from the nature of the equipment, operating environment and frequent transportation between various operating sites which have greatly led to increased demand in spare parts.
In most occasions, customers have preferred to maintain the company’s equipment at their site while the company sometimes is forced to return the equipment to the company’s site due to the complexity of the equipment and sometime this has not worked well with many customers. Concerning technology in the company, use of technology has differed in accordance to functions being performed.
Most departments apart from R&D department have no basic network system, for instance, the purchasing department had no specialized applications or the small warehouse communication that is essential in submission of purchase orders or inquiries to suppliers. Inventory management has largely been done using Excel spreadsheet and the problem with this system has to do with time required to verify the data before replying to inquiries.
Generally, the company has experienced problems in its purchasing department as inventory was kept at minimum and no efforts have been made to invest in highly specialized software despite Que Company having the current IM/IT tools and hence possess the capability to do so. Further, the company has not included any cost to cover procurement and training needs for a complex warehouse management system.
In general, basic issues identified to bewilder Que Company were identified as delays experienced by suppliers in responding to additional quotes for work, delays caused by insufficient inventory especially at Que’s assembly facilities, lack of the spare parts that are vital to respond to service requirements and the impact of transportation and customs delays in shipping products to the Asian market.
Strategic Perspective
Que Company has created one effective though small innovative Research and Development (R&D) groups that has constantly continued to be involved in improving the reliability of the current products in the market. At the same this small group of effective innovators has constantly been involved in product innovation using market research and customer feedback reports. One major achievement of R&D group has been the development of the Q10SD equipment which is a multipurpose sensing device.
At the same time the company in an effort to promote its corporate strategy, the purchasing department has been instituted to establish and facilitate strategies of investigating the potential suppliers that are capable of facilitating and spearheading the company’s corporate strategy, Also a key strategy undertaken by the company includes high investment in engineering resources in product improvement and development and the strategy has also involved keeping the company’s suppliers in partitions in order to make the suppliers unaware of the final product once it is assembled.
In other words the strategies employed by the company have aimed at preventing suppliers from adopting the company’s technology hence becoming rivals to the company. In pursuing its international supply strategies, Que Company purchasing staff locates a small but capable supplier primarily from Asia countries with some from Europe where the staff first investigate potential suppliers during any overseas visit.
Price strategy for the company has remained an overall criterion especially when considering the relative competitive market. As a result the company has largely invested strategies in investigating potential sources with the aim to reduce its overall costs but at the same time remain in a competitive position.
Que Company continues to prefer and rely on small-scale manufacturers whom they perceive to be more flexible. Hence establishment of good relationships with small has been at the core strategy formulation of Que Company.
As the degree of flexibility expected among these small manufacturers became less unpredictable, Que Company created lead times making it difficult for many suppliers to change a given due date to an earlier timeline. Furthermore, Que Company strategy has been the one of not holding inventories and tying up capital. This particular strategy has seen the company avoid cases of being exposed to obsolescence and problems associated with inventory control.
Issues Analysis
Effective management of control of inventory continues to be a problem to Que Company and other companies working in international arena (Ross, 2004). While inventory has become necessary and useful especially with regard to timely fulfillment of customer requirements, it is evident that too much or the wrong inventory at the wrong place is destructive of corporation’s well-being (Ross, 2004).
Inventories have the tendency to tie up capital, incur costs, needs to be transported, requires receiving and material handling, needs to be warehoused and with time they can become obsolete (Ross, 2004). Such issues seem to have contributed to the current position Que Company has adopted with regards to inventory. What should be remembered is the fact that product availability at the time, location, quantity, quality and price secures long-term customer allegiance and market leadership.
With regards to issues in transport, Que Company management can reduce the transportation inventory cost by changing the mode of transportation or switching to a supplier closer to the plant. Another approach may be to gain economies by reducing the lot size of inventory received. Success on the part of Que Company has been as a result of strategies that ensure the company remains of medium size, enhancing customer service and largely remaining flexible.
Assumptions
Que Company outsources up to 50per cent of its current gross sales and that Q10SD remain and will continue to be a significant percentage of the total sales. At the same time it has been estimated that an increase in transportation budget and inventory is anticipated and as a result budget forecast for the increases has been done given that there is existence of an elongated supply chain.
Alternatives and options
Viewing and analyzing the proposals made to the purchasing department at Que Company, it would be prudent for the company to pursue strategic actions by accepting De Oro’s proposal with some changes. This position is adopted and appears viable especially when evaluation of the current international supply chains management concepts are done.
Today strategic alliances are fast becoming the norm of conducting international business. For instance, strategic alliances present themselves as multifaceted, goal-oriented, long-term partnerships between two companies whereby the two companies are able to share risks and rewards (Simchi-Levi, Kaminsky and Simchi-Levi, 2003, p.148).
In considering the benefits the company will derive from strategic alliance relation, it is always prudent for the company to address how the relationship will be beneficial in terms of: adding value the company’s products, improving market access for the company, how the relationship will strengthen the company’s operations, how the company will benefit from the technological strength of the other partner, how strategic growth will be enhanced, how to enhance organizational skills and lastly how the financial strength for the company will be built (Simchi-Levi, Kaminsky and Simchi-Levi 2003, p.148). Third party logistics (3PL) has become prevalent in the modern business world (Craig, 2002).
The impact of globalization and need for companies to remain competitive in international business has forced them to adopt 3PL in order to manage logistic processes as well as customer and supplier relationships in the perspectives of supply chain management (Choy et al. 2008, par.1). In general 3PL logistics refers to the use of an outside company to carry out all or part of the company’s material management and product distribution functions (Coyle, Bardi and Langley, 2009).
3PL logistics have been favored due to its numerous advantages:
- Focus on core strength, whereby as company’s resources become limited it becomes difficult for the company to be an expert in every facet of any business undertaking;
- Provides technological flexibility, whereby the changing, delivery and information technology requirements have become essential for the survival of any company (Speedy Air Cargo Inc. n.d) and it is evident that 3PL logistic providers have become vital in meeting these requirements in a quicker, more cost-effective way while at the same 3PL providers demonstrate the capability to meet the needs of a company’s potential customers which in turn enable the company to get access to certain customers that sometimes it might be impossible due to additional costs;
- Provides other flexibilities,3PL generally provide greater flexibility to a company such as flexibility in geographical location and this may mean that meeting customers needs is highly enhanced;
- Ensures cost reduction;
- Frees up resources;
- It eliminates infrastructure resources;
- Very vital in risk-sharing;8) and enhances better cash flows (Green et al. 2008).
Disadvantages on the other hand of 3PL logistics include: loss of control by the company over the logistics function; it has the tendency to impact on in-house workforce; more distance from clients, leading to loss of personal touch; differences of opinion or perception of the service level of the 3PL provide; and lastly, discontinuity of services of a 3PL provider (Green, et al. 2008).
Recommendations
3PL logistics has become useful to companies that have intentions of expanding into international markets. Therefore in order for Que Company to effectively utilize the 3PL services, the following recommendations form a solid base for the company to utilize on. First the recommendations are motivated by the market competitive advantages the company will accrue as a result of using 3PL logistics, and therefore Market Opportunity Analysis (MOA) will be necessary in making the recommendations.
- Que Company needs to look and research extensively on the external (macro-environment) factors that have the potential to influence the company’s opportunities in the international markets. Such information can include; business trends in the desired regions, needs associated with technology, outsourcing requirements especially in international perspective, political situation and stability of the region to venture business in and all other related factors that have the potential to influence the business in international trade.
- Que Company should identify the service-market structure and break down the market it intends to work and compete. This will give the company defined focus in order to increase its competitive advantage.
- Que Company needs to carry out an evaluation of market opportunities and this should be done by instituting customer profiling and other competitors in the destined market as this will be essential in determining the quantity size to be put in the region, the market share, cost and product data, the anticipated short and long-range change trends and expectations.
- The need for the Que Company to remain committed to the 3PL business it intends to create will also be strategically important while at the same time instituting a good management team to carry out the business in the designated region.
Conclusion
As outlined in the report Que Company needs to adhere to the dynamism taking place in the current globalized business trends. The company should weigh the positive options that are presented by the 3PL logistics while at the same time remaining committed to the company’s corporate strategy.
Moreover, the company’s staff should be included in the process of creating and identifying 3PL partners and their innovative ideas should be integrated with the overall company’s needs, strategy and survival reality. To ensure long-term success, it will be necessary for the company to form a cross-functional team, set viable objectives, determine customer service requirements, visit the prospective region and chose a competent 3PL partner in the region.
Reference List
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Choy, K. L.et al. 2008. Leveraging the supply chain flexibility of third party logistics-Hybrid knowledge-based system approach. International Journal of Supply Chain Management. Web.
Coyle, J. J., Bardi, E. J. and Langley, C. J., 2009. Supply chain management: a logistics perspective. KY, Cengage Learning. Web.
Craig, T., 2002. 3PL- How to Do It Successfully or What Investors May Consider. World Wide Shipping. Web.
Green, F. B. et al., 2008. A Practitioner’s Perspective on the Role of a Third-Party Logistics Provider. Journal of Business and Economics Research. Web.
Hugos, M. H., 2010. Essentials of Supply Chain Management. MA, John Wiley and Sons. Web.
Lambert, D. M., 2008. Supply chain management: processes, partnerships, performance. FL, Supply Chain Management Institute. Web.
Ross, D. F., 2004. Distribution: planning and control: managing in the era of supply chain management. NY, Springer. Web.
Simchi-Levi, D., Kaminsky, P. and Simchi-Levi, E., 2003. Designing and managing the supply chain: concepts, strategies, and case studies. NY, McGraw Hill Professional. Web.
Speedy Air Cargo Inc. N.d. Advantages of a Third Party Logistics Provider: Advantages of Using a Third Party Logistics Provider (3PL). Web.