Given the drifts towards greater specialty and global sourcing, broadening supply chains, and enhancing focus on social, ethical and environmental issues, we are interested in in – depth understanding sustainable supply chain management aspects as well as what can be done to best address the subject.
Today, businesses have acknowledged that the value it offers to its customers is the amount of all the value added along the supply chain. In the same breath, “the sustainability of products and services a company produces is also the sum of all the social, ethical and environmental effects of the produced products and services along the supply chain” (BSR, 2010). As a result, retail companies have realized that they have to acknowledge, understand, and effectively coordinate sustainability elements within their organizations. Retail businesses strive to continue co – operating with other manufacturers and organizations in relevant sectors in the supply chains to ensure that these elements are effectively coordinated throughout the supply chain.
Aim and Objectives
Although many research objectives have examined the Dunham’s Sports’ supply chain initiatives, most of the applied strategies fall into the category of strategic and hypothetical, abstract view of the subject. Conversely, the business sector is under starvation for examples and practical, realistic advice for strategies and innovative operations. As a result, there appears to be some gap between theory and the real world of business regarding the treatment of the subject of Supply Chain Management.
The aim of this report is to help fill this existing gap by drawing an analysis of a lower level, thus use integrated approaches, tools, techniques and frameworks in order to analyze and model the Dunham’s Sports’ business and Supply Chain and Supply Base strategies. The report seek to analyze the general Supply Chain Management elements and the contemporary strategies and practices to adopted by retail business in order to integrate and coordinate sustainability elements into its supply chains.
After a comprehensive examination of these strategies, this report takes strides to apply them to a business process model for the Dunham’s Sports that is strategic, business – goal – oriented and executable. We begin by providing an outline of the definitions using the available literatures and other enabling factors used in Supply Chain management.
This section of the report provides the analysis of the general retail Supply Chain Management processes. It then proceeds to review various literatures that are relevant to our objectives and that will be helpful to the reader to bear in mind throughout the entire report. Since the objective is utilize series of tools and techniques, models and frameworks to enable us see the strategic overview of the supply chain while identifying the risk and gain, it is meaningful to review literature on various subjects.
Retail Supply Chain Structure
A supply chain involves of all parties taking part, either directly or indirectly, in meeting a customer request (Hayley, 2013). Furthermore, a supply chain process involve all companies that work together in developing and delivering an end product to the consumer, as well as the consumer himself. As cited by Handfield and Nichols (2009), the scope of supply chain may differ due to size and complexity of relations between the members and distribution of physical and financial presence. The following figure presents two different types of channel relations. A direct channel is where the entire process is only made up of one supplier and one customer of an organization (Poirier, 2008). An extended channel borrows some parts from a direct channel and consists of a supplier’s supplier, a customer’s customer, etc. In summary, supply chains are quite dynamic and involve channeling information, products and finances between different stages (Poirier, 2008), as illustrated in the diagrams.
Supply Chain Management as defined by Wang, Heng and Chau, (2009) is a systematic, strategic organization of the classical business functions and the strategies across these business functions within a given firm and across businesses within the supply chain, with an intent of improving the long – term performance of the individual parties and the supply chain as a whole.
This definition lays an observation that the focus is not on simply minimizing cost or limiting inventories but rather on taking a systems approach in order to supply chain management as pointed by Waters (2010). He notes that successful incorporation between various elements of a supply chain, such as suppliers, manufacturer’s, warehouses and stores, is equally integral. The key challenge being the management of practices across the supply chain so that the organization can get better performance, while reducing cost, increasing service level, reducing the bullwhip effect which rely upon demand amplification, (Waters, 2010), better use of its assets, and respond effectively to changes in the market (Handfield and Nichols, 2009).
The diagram below is an illustration of a classical supply chain. Vendors supply products to their retail customer’s distribution units as well as operate their own network of distribution centers. Retail supply chains vary in complexity, and this structure can include any number of manufacturers, vendors, distribution units, and retail locations.
Retail supply chains comprise of suppliers providing varied products. These products are delivered to distribution units. At the distribution unit, products are merged with other products and delivered to end customers.
In between each module, various carriers are used for products transportation. Based on the agreement between the involved parties in the supply chains, the inventory ownership and the transfer of ownership differs. For most traditional supplier and retailer partnership, the supplier hands over ownership once the suppliers reach the retailer’s distribution unit.
Along with the physical product there is also an information flow between supply chain parties. The flow of information can be extensive or limited depending on the technology and relationship efforts between these parties. The information shared could include point of sales data or forecast over a given period span. Suppliers and retailers that collaborate extensively share inventory status data as well.
According to Shah (2009), supply Chain Management lays the intent to have the right products in the right quantities at the right time at minimal cost. It lays an environment that would ensure optimal service levels for the customer and optimal performance for the organizations as a whole and individually. As a result, Supply Chain Management includes the management of channels between and among involved parties of the supply chain so as to maximize total supply chain profitability (BVG Associates 2014), and hence optimize the total value produced throughout the supply chain.
Again, the complexity in retail supply chain and the present – day business atmosphere is made up of high levels of inconsistence and complexity in terms of what approaches and balance or activities needs to be put into consideration in coordinating and managing such international supply chains.
Whether it is inventory management or minimization in lead times across the various function of supply chain, coordination plays a quite integral role when it comes to adopting the strategy or a system. This is because planning and operational coordination remain substantial responsibilities of management for Supply Chain Management. As a result, it is substantial and is believed as a key practice in today’s management (Handfield & Nichols, 2009).
Trends in Retail Supply Chain
Retain industry supply chain trends are fundamentally linked to inventory management and supplier and retailer relationships. The growing competitiveness of the retailing environment, particularly for mass merchandisers, has laid an atmosphere with very low profit margins. According to the Dunham’s financial summaries for 2012, the industry average profit margin for discounters was 3.4 percent.
According to S&P, discounters are trying to enhance their profit margins by strategically poisoning initial prices prior to mark downs and also lowering supply chain costs (Hayley, 2013). Designing more efficient practices as well as lowering the level of inventory helps to cut down the overall supply chain cost. According to, one of the major metrics used in determining supply chain efficiency improvement is the change in inventory turnover rate. He also noted that the mean inventory turnover rate has increased by 38 percent for discount retailers. Despite the increase in supply chain efficiencies, the profitability in this sector of the retail industry has not increased as anticipated. This is as a result of lower prices being passed on to the consumers. As a result, they are the real beneficiaries from more efficient supply chains.
Additionally, supplier retailer relationship have become more integral in reducing costs and enhancing supply chain efficiency. Collaborative efforts have since become of a high priority in every sector of the retailing business.
Another retailing industry trend is pushing cost out of the supply chain through continuous improvements and emphasis in efficiency. With more cost – conscience customers, providing the best price to the customer is integral to improving volume of sales. In order to provide the most competitive price, retail businesses, especially mass merchandisers, are using their supply chains competitively to lower costs to the business itself and price to the end consumer.
The roadmap to our solution and actual implementation of the Supply Chain analysis and finance will be comprised of the following steps:
- Analysis phase
- Defining a Supply Chain Management vision
- Defining strategy
- Establishing the information and communication network
- Action strategy translation
Phase I: Analysis.
Supply Chain Opportunities Analysis
This stage involve evaluating end customers’ needs within present and possible customer segment. We acknowledge the fact that delivering the superior service to our customers is the leading driver to the implementation of the supply chain management. As a result, the initial point in this framework and rollout is gathering sizable knowledge of what customers expect, when, where, and why. It is equally integral to identify how all the current supply chain is performing in the context of customer expectations. As mentioned by Hayley (2013), the key to successful Supply Chain Management adoption is to target service improvements to the needs of specific customer segments. This will enable us gear improvements towards those aspects where major problems or opportunities exists. The analysis will present an opportunity for developing added value for an end customer by leveraging the capabilities and knowledge of the business as whole together with business partners. Other anticipated benefits include;
- Reduced costs
- Superior customer service
- New value – added services
- Greater flexibility
- Faster innovation.
Customer Service Analysis.
In order to effectively assess our supply chain opportunities, we seek to conduct an effective customer service analysis to gather key information from customers. This process will accomplish the following:
- Comprehensive understanding of main customer needs for each of the fundamental features of the service profile, such as speed of delivery, order comprehensiveness, availability of products, delivery reliability and billing features.
- Support the creation of customer segments
- Asses the relative importance of each aspect of customer service
- Asses the business performance as compared to the major competitors.
Value Chain Mapping.
This survey is acknowledged to enable brainstorming efforts required, reducing unwanted steps and waste from the value chain. It defines opportunities to leverage the value – adding efforts of the business. These surveys, will jointly result to the creation of a list of continuous improvement strategies including all the aspects of the value chain. Other anticipated impacts include the following;
- Attaining the best and lowest total cost in all processes, business transactions, as well as handling costs for the entire chain
- Achieving the fastest cycle time performance
Phase II: Vision Development
Conducting Cost/ Service Trade – off.
As a starting point, the present and possible needs of customers are identified. After which the focus is turned to creating a mutual vision for the channel parties. While providing superior service remains the intent, the continuing realities of business environment acknowledge the fact that supply chain strategy is a dependence of cost/ service trade – off (Wisner, Tan & Leong, 2012).
This will help guide the application and downstream execution decision. Furthermore, it will ensure that the expected outcome value proposition confirms with the manner the business have positioned itself to compete in the market. We use this to create stretch targets for supply chain management, while challenging the channel parties to obtain innovative ways in improving supply chain performance. This must map our strategy to improve productivity, reduce finished product inventories, enhance product availability, and heighten the business cash – to – cash cycle.
Phase III: Supply Chain Strategy
How then should we get from where we are to where we want to be? We shape our supply chain strategy using the analyses of value chain maps that define the challenges limiting the performance of the entire supply chain as well as the benchmark – piloted strategic assessment. The supply chain strategy will help channeling partners to coordinate defined constraints and attain best performance.
In order to define this strategy, we opt to adopt the use of order – to cash model and customer shareholder alignment. This is a technique used to facilitate knowledge building and sharing efforts (Wisner, Tan & Leong, 2012).
Order to Cash Model
Mapping supply competences with the features of demand ensures that the end customer is considered first in supply chain modelling. However, mapping capabilities with customer requirements is involve more than meeting demand features, and therefore, should engage the business as a whole, including its competitive position (Hayley, 2013).
The idea of customer alignment for the purpose of this report is defined as the process of developing supply strategy mapped with the underlying market strategy. This encompasses aligning initiatives both within and between different parties in a supply chain, finance, and to deliver customer value (CPIS, 2012). The customer value refers to the customer – supposed benefits obtained from products or services compared to the cost of purchase.
We acknowledge the fact that delivering customer value is integral to business processes where no business would exist without customers.
Conversely, generating financial value to the shareholding parties is equally crucial, and is replicated in different business performing evaluations, for example, profit and market development (CPIS, 2013). As a result, we also use the theory of shareholder alignment. According to (Jung, Chen & Jeong, 2007), shareholder alignment is the process of developing business strategy that is compatible with financial strategies and the business operations used to produce them. This includes mapping various strategies and activities within and between involved parties in a supply chain, and delivering shareholder value.
Shareholder value is defined as the financial value developed for shareholders by the invested business. It is a common knowledge that shareholder value business growth and profitability, and a result, operating cost reduction, resources and working capital efficiency are the major driving force. We therefore utilize the market value-added and economic value-added in order to evaluate the shareholder value.
The diagram embody a framework to clearly define links between the shareholder and customer. When executed, we remain solid that any supply chain strategy will work to increase value for customers while simultaneously greeting shareholder value. It fully supports the supply chain strategy related with generating superior customer value and attaining the need for shareholders. It will enable steadfast supply and logistic service, reduced inventory cost, as well as short cash – to – cash cycle times. As a result, it comprehensively addresses shareholders needs in terms of revenue growth, lower operating cost, fixed asset efficiency and working capital efficiency.
Phase IV: Establishing Information and Communication Network
The threats that links different entities of supply chain together is the information and communication network. This network translate various parties into one flawlessly operating supply chain whole. The main objective here is to provide computerized intelligence to a continuously growing network of vendors, warehouses, distribution units, shipping vehicles, and points of sale. This way, every party in the supply chain will perform business with the latest best information from every involved party. One key technique used here is Strategic Business planning.
Supply Chains and Business Strategy
A key theory in supply chain and finance literature is the alignment of supply chain plans with the overall business strategy of an organization. Using the above models, we further develop a supply chains strategy that maps our business strategy.
Operational Effectiveness, Operational Innovation and Strategy.
CPIS (2013) defines differences between functional effective and strategy. He notes that current business trends have concentrated on enhancing operational effectiveness, which at a generic level involves performing the same practices better competitors. On the other hand, strategic positioning encompasses conducting various practices than competitors or doing the same activities differently. Jung, Chen & Jeong, (2007) also defines the application of different or differencing methodologies to conduct activities as operational innovation. He noted that operational innovation has been a crucial component to many great business successes. Supply chain practices such as cross docking enable reduce costs which helps in supporting price reduction.
Therefore with an intent to adopt supply chain best practices, efforts to improve efficiency and cost reduction are not sufficient to differentiate a business from competitors. As a result, we map our operational effectiveness within the context of a cohesive business strategy in order to generate long term differentiation.
Supply Chain and Product Fit
Before we decide which particular activities will be applicable in order to improve supply chain performance, we must first identify what type of supply chain is appropriate for the firm’s products. Ellram (2012) touches on this subject within the scale of two product families;
In both functional and innovative environments, the advantage of making an appropriate choice on supply chain strategies is evident. The difference is based on types of strategies that needs to be applied in order to manage functional and innovative fast moving products. As a result, a supply chain framework focused on operational efficiency and cost reduction should be designed to support functional products. Strategies to enhance efficiency, reduce cost, and reduce inventory are appropriate for this type of supply chain.
Conversely, innovative goods are not predictable demand oriented. Product differentiation here typically allows higher margins. Even though cost is often a fundamental consideration, the types of cost that need to be managed in innovative product supply chains are inherently different than for functional products. As a result, a strategy geared towards lowering inventory carrying costs can adversely impact business profitability, since the cost of out-stocking is comparatively higher than saving that could be obtained by lowering inventory. In this regards, this supply chain design focused on flexibility and responsiveness to demand changes should be designed for innovative products.
Phase V: Action Strategy Translation
Developing effective measures to evaluate the progress of the supply channel network in achieving customer expectations is an integral tool to successfully implement Supply Chain Management. Though various metrics can be used, typical factors in supply chain evaluation systems are customer satisfaction, asset utilization, and cost of operation, service quality and overall cycle time.
A well – coordinated approach to supply chain is crucial to the continued growth of any business. With developing technologies and the pressure to deliver a high level of customer service and turnover of stock, contemporary strategies of supply chain management are being replaced by new approaches aimed at reducing costs while maintaining that all important competitive factor. How effective is the supply chain strategy in optimizing value per dollar spent by a customer? Supply Chain Effectiveness Metrics Indicators will help us answer this question and provide means of assessing supply chain effectiveness.
By adopting this framework and ensuring effective performance by channel alignment, we are solid that we will create a new competitive environment. Furthermore, we can anticipate more than a few benefits to result from the strategy:
- Meets the need for a mutual structure within Dunham’s sport Supply Chain
- Enhance efficiency of Supply Chain by documenting how various processes, procedures, and activities must be executed, and all employees will become more competent and effective.
- Will heighten control and efficient management throughout the supply chain finally resulting to a more improved performance.
- On adoption of this system, the operation of the supply chain can be evaluated which will provide inducements for promoting the supply chain, thereby reducing dependency on one’s decision makers and guaranteeing contribution from all levels within the supply chain.
- As a result, situational knowledge in Supply Chain Management will progress while carrying more authority than formal position as mentioned by Waters (2010). He points out that proficiency in multidimensional and not related to seniority and management experience, in this way operational authority may be unrelated to ordered position, as opposed to the contemporary management practices.
Competitiveness of any manufacturing firm requires the need to efficiently coordinate the raw material supply (Wang, Heng and Chau, 2009). This involve the ability to maximize processing of the raw materials in order to generate high quality products and the capability to efficiently distribute the products minimizing costs along the way. Analysis presented here has promised fundamental investigation of business functions, for instance decision – making tools, operations, and strategic management tools. Innovative changes to the contemporary retail supply chain have been made with objectives to heighten the speed of products through the supply chain while increasing the accuracy of inventory management.
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