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BLUE OCEAN SUPPLY CHAIN MANAGEMENT 1

Blue Ocean Supply Chain Management

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Table of contents

· Introduction

· Current supply chain in Blue Ocean and its impacts

· Application of Lean and Agile supply chain methods in the Blue Ocean Company

· How to manage current and future suppliers of the Company

· Creating long-term supplier base

· The complexity of manufacturing vs. customer demands

· Maintaining stock levels

· Impacts of manufacturing locally and expanding manufacturing in Blue Ocean

· Establishing the returns process to improve customer satisfaction

· conclusion

Introduction

Generally, a supply chain can be defined as a network that exists between suppliers and a company to help in the production and distribution of a particular product or service to the final consumer in the market. The whole process represents all the steps that a product goes through until it reaches the final buyer, that is, change of raw materials to finished product and distribution and transportation of these final products to the buyers (Buurman, 2002). The supply chain helps companies in reducing the costs of operations and also ensures a steady supply of goods and services to the market. Different stakeholders are involved in the supply chain network as different people, resources, entities, information, and also resources have to work together for the successful output to be obtained. Some of the entities that were involved in the supply chain network include logistics companies, vendors, warehouses, retailers, wholesalers, and other distribution centers (Robinson, 2020).

In this paper, we will discuss the supply chain management of the Blue Ocean Company, which is an automobile company that is involved in the manufacturing of electric cars. Recently, the company supply chain has been experiencing several problems which have raised concerns to form the customers about the service delivery of the company. In Blue Ocean, the supply chain team has been divided into two major teams for sales and engineering. Miscommunication and also lack of understanding between these two teams have affected the flow of the production process (Buurman, 2002). The main challenges are evident in the purchase of the car parts, the lead times of purchase, and also the delivery of the cars to the clients. In this discussion, we will be able to analyze the current supply chain in the Blue Ocean company and also be able to state recommendations on how this company can develop an effective relationship with its current customers as well as the future potential customers.

Current Blue Ocean supply chain and its impacts on the company

The current Blue Ocean supply chain management is very inefficient, and this has resulted in poor service delivery to the final consumer. Firstly, due to the fact that there are no preferred suppliers to work with, it is very difficult to determine the suppliers who have the right quality materials for manufacturing. This leads to delay in the materials needed for building the car as they arrive randomly at different times, which are hardly unpredictable. Every new car, the company obtains materials and other essential parts from different suppliers. This is a very inappropriate strategy, as it is not easy to build new business relationships every single time.

Lack of specified suppliers of parts has cost the company huge losses in terms of time and finances in the cases where suppliers provide substandard or even wrong car components. Several cars have been returned back to the company for servicing after failing due to poor quality components used in the manufacturing of the car. Such occurrences tarnish the popularity of the company and give it a bad image in the market. It also scares away potential customers who could have brought the company large amounts of income due to the fear of getting a poor quality (Robinson, 2020). Additionally, the delay of materials slows down the manufacturing process, which leads to the delay in the final delivery of the car to the consumer. Failure to deliver the vehicle at the agreed time frustrates the customers, and they may not be willing to refer the company to other customers.

Operation of the lean and agile supply chain in the company

The lean supply chain is a type of supply chain strategy which is focused on minimization of the costs incurred by the company and avoid all possible sources of wastage. This method is most efficient in occasions where the parts are being ordered at high volumes. In the case of the Blue Ocean company, it seems that the company does not effectively apply the lean supply chain method. This is evident because the company has limited finances, and it has run out of parts, occasionally leading to a delay in the manufacturing of the vehicle at hand. The lean supply chain methods place its major priority in minimizing the costs as much as possible while maintaining the quality of the items being purchased.

On the other hand, the agile supply chain method is a type of strategy in which a company makes its supply chain as flexible as possible. This helps the company to cope effectively with the changes that occur in the market, such as changes in demand, changes in technology, or even changes in government regulation. A flexible supply chain enables a company to avoid; losses that occur resulting from the changes in the market and business environment as it makes it able to adapt and be able to run and operate at any given time (LLC, 2020).

Blue Ocean company seems to be more effective in the application of the agile supply chain method. This is because the case study clearly indicates that whenever a new vehicle is being manufactured, the company supply chain team places orders of parts from different suppliers on every different occasion. However, this supply chain method seems to affect the company negatively because some suppliers provide substandard machine parts, while others delay the supply of these parts, which delays the delivery of the vehicle to the final consumer. The most effective way for a company to operate is by applying both lean and agile supply chain method as it helps the company to be cost-effective and flexible at the same time. Hence, the delays in manufacturing and delivery to the final consumer can be avoided by ensuring the supplier are reliable and that they guarantee high-quality items, which are also cost-effective in order for the company to satisfy its customers (LLC, 2020).

How to manage the current and future suppliers

Suppliers are very important people in the supply chain network. They assure a steady supply of products and services, which helps in the production process to ensure that there are enough commodities available for the final consumer in the market. A steady supply of raw materials needed for any company for production purposes guarantees a company continuity Ans also able to meet the current and future market demand. There are several strategies in which Blue Ocean can use in the management of its current and future suppliers (2020). Firstly, it is important for the company to realize that the relationship with the suppliers should be mutual and two way. Such that both the company and the suppliers benefit from that specific relationship. The suppliers can be managed by the following ways;

· Understanding the cost of the whole supply chain process – a company can best manage its suppliers by evaluating the value and cost of the entire supply chain process from the raw materials to when the final product reaches the final consumer. This knowledge will enable the company to determine the most cost-effective suppliers to work effectively, depending on the cost of the process (Robinson, 2020).

· Accepting accountability – the company should be accountable for its orders and be aware of its roles in the supply chain. For example, for the relationship between the company and the suppliers to work well, the company should place orders which the suppliers are able to supply and also provide a good lead time. The company is also supposed to avoid making any changes to the orders after placing them (2020).

· Sharing of vital information appropriately and on-time – information is very key for the success of the supply chain process. Sensitive information such as the one concerning the time of delivery, the volume to be delivered, and also the payment should be communicated on time to avoid losses and other additional costs that result in form miscommunication for both suppliers and the company.

· Honest dealings – in the relationship between suppliers, the honesty of high levels is expected to prevail and also be upheld. When unusual occurrences happen, the side, which is having a problem, should communicate appropriately. For example, the suppliers should provide honest information in relation to the quantity and quality supplied. The Blue Ocean company should pay its suppliers promptly and in full amounts to encourage more honest transactions while the suppliers are also expected to supply on time and required quality (2020).

Creating long-term supplier base

A good supplier-company relationship is very vital for the achievement of the company goals. In order for a company to assure its customers a steady supply of goods and services, it should also have a guarantee for the steady supply of raw materials needed for production purposes from its suppliers. For this reason, a long-term relationship with suppliers is required for the company to succeed and also achieve its goals and objectives. This long-term supplier base can be achieved by;

· Transparency between suppliers and the company – in order for the Blue Ocean to build a long-term relationship with its suppliers, it must be open and honest in the communication and information provided to its suppliers. This is a good sign of a good relationship with suppliers, and they will accept to work on a long-term basis.

· Concentrating on the specific suppliers – consistency is key when it supply chain management when you become a regular customer for a certain supplier, the supplier will be happy to serve you repeated times. However, Blue Ocean must ensure that it pays the suppliers promptly and the right amount for the relationship to be a stable one.

· Ensure the relationship is mutual, and everyone benefits from the relationship – the supply chain requires that both parties in the relationship benefit equally. The relationship should make sure that the suppliers and the company both reap all the advantages associated with the relationship. This can be achieved by ensuring the goals and objectives of the two parties are known.

The complexity of manufacturing vs. customer demands

Recently, there has been a huge trend in the complexity of the manufacturing industry. This due to the fact that there is numerous variable which interacts in the whole manufacturing process. These variables include the human factor, machines, production techniques, and other tools used in the process. The complexity in manufacturing occurs due to differences in the components which are used in manufacturing ("Complexity in Manufacturing Processes and Systems 2019", 2020).

In the case of Blue Ocean, the complexity in manufacturing results from the delays in the delivery of the machine parts used for the manufacturing of the vehicles. Additionally, the engineering department also has a disagreement with the sales team, which delays decision making. On the other hand, the cost of manufacturing is very high, and sometimes the company runs out of parts when it is not able to purchase any more parts.

Complexity in customer demands occurs as different customers have different preferences for the vehicles. This means that different customers will require different specifications for their vehicles being manufactured at the Blue Ocean company (2020). This brings huge challenges for the company to meet customer demands. Additionally, there is a great issue that is raised when the customers change their demands or the required specifications when the company has already commenced the manufacturing process. This leads to complications and also delay in the manufacturing process.

Standardization could play a very important role in helping the company to balance the complexity in manufactu8ring and the complexity in customer demands. The company should adopt the manufacture of standard cars which, for example, possess similar characteristics and market them well for the customers to accept them. Besides, the company must ensure that the cost of manufacturing is attainable and effective to avoid excessive losses or unnecessary costs.

Maintaining Stock Level

In order to avoid complications and confusion that occur when the company runs out of machine part stock, the company should be able to predict and forces future customer demand in order to maintain appropriate stock levels. On many occasions, stock-outs are one of the most embarrassing situations that may happen to the company while it still has customer demands to meet. Stockouts lead cause reduced levels of customer satisfaction. Some of the other impacts of stockouts include reduced market sales, profits, and also reduction in the levels of customer loyalty. This greatly impacts an organization negatively and also scares away potential customers who would have been of benefit to the company ("Maintain stock levels - Maintain stock levels," 2020).

The Blue Ocean Company may avoid stockout by improving the inventory system and also ensuring that it stays very much vigilant on the stock levels to avoid running out stock without noticing. Based on the previous market sales and customer demands, Blue Ocean should be able to forecast future sales and customer demands. The company should also consider the specifications of the vehicles previously manufactured and be able to predict the most popular specifications which most people would like to order.

Additionally, Blue Ocean must conduct thorough market research and ensure it obtains accurate data from the market, which may help in predicting the future market demand and also help the company to stock appropriately. On the other hand, the company must ensure that they ensure that it communicates well with its suppliers to enable them to supply the parts on time to avoid stockouts, which may frustrate the customers. Besides, the company must also keep in touch and be very keen on monitoring the customer demands and market trends.

On the other hand, the company must consider the previous customer demands and recommendations. This is because customer feedback can help predict future sales and demand; that is, positive customer feedback is a sign of a future increase in sales due to customer satisfaction. Besides, poor or negative customer feedback is a sign of reduced customer loyalty as well as customer satisfaction, which reduces the chances of getting increased customers ("Maintain stock levels - Maintain stock levels," 2020).

Impacts of manufacturing locally and expanding manufacturing in Blue Ocean

In order for a manufacturing company to achieve its set objectives as well as serving the customers effectively, the whole manufacturing process must be sustainable. Sustainable manufacturing should also be cost-effective and manageable by the company. Therefore, Blue Ocean must ensure the whole process is economical for it to obtain efficient profit and serve the customers in the best way possible. The cost of manufacturing depends greatly on the market being served.

Local manufacturing will reduce the costs of manufacturing and also increase the potential profits that the company may obtain. Economically, the company will incur fewer costs of advertising since the company is already known locally, and also will most people understand the objectives of the organization. However, the company will need to ensure that the local market is enough to guarantee it the number of profits expected.

Expanding the manufacturing company in Germany may be more profitable but costly at the same time. The cost of outsourcing parts and expatriates may increase the total production cost hence reducing the overall profits received by the company. Similarly, the company may incur huge costs trying to market its products, yet the market is greatly unpredictable and can not guarantee the organization many profits.

Establishing the returns process to improve customer satisfaction

Customer satisfaction is always a major priority for many companies and organizations. This is because satisfied customers provide a good image of the company and increase the chance of a potential increase in sales in the future. Satisfied customers are happier while making purchases and are able to improve the returns on a company ("How to Improve Customer Satisfaction? 10 Tips for 2020", 2020).

However, customers nowadays are keener on the manufacturer’s attitude towards the retunes from the sales they make. Firstly, customers believe that manufacturers who are more focused or profit-oriented will pay more attention to returns as compared to the quality of the services provided or the commodities. Research conducted in 2015 showed that almost 90% of the customers argue that the ease of returns contributes greatly to their choice of where they do their shopping.

In order to obtain higher levels of customer satisfaction, the customer Blue Ocean company must ensure that the return process is much faster and also make sure that it handles the issues raised by the customers efficiently. The company must be keen to ensure that it takes responsibility and make it clear that it is a priority for the customer returns. A faster return procedure encourages the customers to shop on the Blue Ocean company ("Study: Returns process key to customer satisfaction - Ecommerce archives - BizReport," 2020).

Conclusion

To conclude, as we have seen in the previous paragraphs, supply chain management is a very vital process in the achievement of organizational goals. Blue Ocean company can make its supply chain better by ensuring that there is a good flow of communication between the company and the suppliers. Long term supplier relationships should be maintained by establishing honest communications and also establishing a mutual relationship where the suppliers and the company benefit from the relationship. This can also be achieved by having a preffered number of suppliers who can guarantee the company supply of good quality parts to avoid embarrassment like the one where the door fell off the car.

The company can benefit more through the integration and application of both lean and agile supply chain methods which will enable it to attain flexibility and cost minimization at the same time. Additionally, the company must also be keen in market demand forecasting in order to maintain the right stock levels in its warehouses to avoid last minute rush when the it receives new orders from the clients or even running out of stock parts during the manufacturing process. Besides, the engineering and the sales supply chain teams should work closely together and avoid conflicts for the smooth service delivery to be achieved.

References

Robinson, A. (2020). Effective Supply Chain Management in Manufacturing. Transportation Management Company | Cerasis. Retrieved 21 May 2020, from https://cerasis.com/supply-chain-management-in-manufacturing/.

Buurman, J. (2002). Supply chain logistics management. McGraw-Hill.

Pwc.nl. (2020). Retrieved 19 May 2020, from https://www.pwc.nl/nl/assets/documents/pwc-supplier-relationship-management.pdf.

LLC, T. (2020). Agile vs. Lean Supply Chain Management | The Junction LLC | Omaha. Truckload | Shipping | The Junction LLC Omaha. Retrieved 19 May 2020, from https://thejunctionllc.com/agile-vs-lean-supply-chain-management-omaha/.

Study: Returns process key to customer satisfaction - Ecommerce archives - BizReport. Bizreport.com. (2020). Retrieved 19 May 2020, from http://www.bizreport.com/2017/06/study-returns-process-key-to-customer-satisfaction.html.

Maintain stock levels - Maintain stock levels. Sielearning.tafensw.edu.au. (2020). Retrieved 19 May 2020, from https://sielearning.tafensw.edu.au/MCS/9362/Sterilisation%20disk%202/lo/7421/7421_00.htm

How to Improve Customer Satisfaction? 10 Tips for 2020. Survicate. (2020). Retrieved 21 May 2020, from https://survicate.com/customer-satisfaction/tips/.

Complexity in Manufacturing Processes and Systems 2019. Hindawi. (2020). Retrieved 21 May 2020, from https://www.hindawi.com/journals/complexity/si/519272/.

Apics.org. (2020). Retrieved 21 May 2020, from https://www.apics.org/docs/default-source/scc-non-research/supply-chain-complexity-and-risk-management---vf-corporation.pdf?sfvrsn=2.