Introduction
NPW is an organization that is involved in providing toy products to children in different markets across the world. In the recent past, the firm has witnessed a sharp rise in demand due to increase in population, which implies more consumers and markets. NPW has to fulfil its pledge to provide high quality products to kids on Christmas day.
However, Santa can hardly keep up due to many changes in the supply chain of the business establishment. In fact, the company is facing the following problems in its endeavors to achieve its business objectives: demand planning, logistics, supply chain unpreparedness, production, information technology, and production. In order for the business enterprise to gain competitive advantage, it should work toward resolving its challenges.
This paper focuses on selecting the best strategy that would have the greatest impact on future operations and performance outcomes of NPW. It also suggests the better approach between outsourcing of IT and manufacturing. The main goal of the paper is to help the management to fix the dilemma of the company.
Strategies
In order to select the best approach among the three proposed strategies for fixing the dilemma of the firm, it would be important to analyze them in detail. One of the experts in supply chain management has proposed that Santa should be at the forefront in creating fads with regard to the use of toys among children.
In fact, the expert argues that Santa should stop reacting to fads because this would not help the firm to identify solutions to the dilemma that is facing. The toy business is characterized by a considerable amount of research that helps to understand the needs of children.
For example, research is critical in assessing the types of toys that children in a particular market would require, which would certainly be different from other markets. With regard to this approach, it has been shown that even the best IT applications cannot be applied in predicting market demands due to the uniqueness that is associated with toy business.
Thus, the expert contends Santa should focus on investing heavily on aiding children to comprehend cool toys in the market, which would be followed by the creation of an agile supply chain that would support the delivery of cool toy products. Old-fashioned advertising might be an ideal approach for the firm.
For example, the management many focus on sending workers to children’s playgrounds where they could interact with children and learn about their toy needs. Thereafter, the business establishment may link toys with certain movies that children adore.
The expert clearly states that NPW should focus on outsourcing its products from established firms in foreign countries. For example, Mattel sourced from China, a practice that enabled it to gain more market share and competitive advantage.
Another expert believes that Santa can best respond to the current dynamics in customer demand by applying planning methodology in its operations. However, the approach is based on a sound platform of point forecasting for demand. The Newsvendor model, which has four distinct steps, would be applied in the organization.
First, a bell-shaped curve would be plotted to represent uncertainty with regard to demand. Second, the cost of underage would assessed. Third, the cost of overage would be determined. Fourth, in order to minimize expected costs, an economic balancing study would be conducted. It is important of the management to understand that it cannot satisfy a hundred percent of demand.
In fact, this is supported by the orientation of the curve that is inclined toward the right. After the model is successfully adopted, Santa can think about ways of dealing with toy shortage in the market, which might be solved through product substitution, hedging and postponement.
The third expert contends that NPW should do away with real-time technology and, instead, focus on effective planning. In fact, the company, in order for it to meet the demand of customers, should adopt this approach. One of the most important aspects in planning is effective execution. During this process, the items that are associated with the best value in the business establishment should be identified.
Thereafter, demand prediction of such products should be conducted. Some of the essential aspects that cold be applied in this context could include unit sales, frequency of sales of certain products, inventory costs, and net profit. The management should focus on establishing a matrix that groups toys based on the aspects of demand and expected sales.
In fact, production would be based on the matrix because the units of toys to be produced by the firm would be based on the two parameters of the matrix adopted. This would result in considerable production cost savings, as it would only produce toys that would have substantial demand in the market.
Planning is a process framework that would not require substantial investment, unlike the adoption of a new technology, which would have little impact with regard to meeting customer demand.
Outsourcing of IT versus manufacturing
Some experts in supply chain management have proposed bringing more activities in house while others have asserted that additional outsourcing should be adopted. This paper recommends that outsourcing of IT should used by the firm. Outsourcing of IT by NPW would imply that the company would contract out the processes supported by the applications of IT to a third party.
This approach would allow the firm to focus on core activities that would result in meeting customer demand. In fact, manufacturing in house might lead to the consumption of resources, a fact that might negatively impact activities. Examples of core functions include human and financial activities. Staffing flexibility could be associated with adopting outsourcing of IT by NPW.
The strategy would require that seasonal demands be correlated with additional staffing resources. It is worth noting that outsourcing of IT by the business enterprise would be important in protecting the organization against currency risk and political risks, which could negative impact the performance outcomes of the business.
Thus, it would be essential for the management to consider reducing overhead costs by contracting IT processes to other businesses that have better experience and technical expertise. The reduction of overhead costs would culminate in significant savings, which can be used to support other activities with the firm.
Conclusion
The management of NPW should conduct an effective research to understand the needs of customers. Effective planning, which uses the Newsvendor model, should be adopted. In addition to planning methodology, NPW should also consider utilizing outsourcing of IT, which would result in substantial savings and concentration on core activities.
The firm should be active toward executing approaches that would help it to meet demand from consumers.