Assignment Supply Chain and Logistics in a Global Context (SC&LGC)

Learning Outcome 1: Critically analyze cross-functional drivers of supply chain in a globally competitive context.

• PC 1.1: Critically review cross-functional drivers in the context of current globalization trends.
• PC 1.2: Critically analyze a range of relevant theories and concepts that impact on sourcing decisions in supply chain management.
• PC 1.3: Discuss current issues facing global supply chains with in-depth assessment of the market environment.
• PC 1.4: Evaluate outsourcing strategies and develop original and creative responses to the issues surrounding outsourcing strategies.

Learning Outcome 2: Critically analyse and review multi-model logistics systems, warehousing and inventory management in a global context.

• PC 2.1: Critically evaluate multi-model systems and shipping strategies applied globally.
• PC 2.2: Implement an operational project that will address international logistics challenges.
• PC 2.3: Conduct an in-depth analysis of the problems and issues in warehousing and inventory management in your chosen organization.
• PC 2.4: Prepare a comprehensive action plan to address the problems and issues in warehousing and inventory management at your chosen organization.
• PC 2.5: Critically review the different approaches for selecting logistics modes and choosing the best physical distribution strategies.

Learning Outcome 3: Demonstrate a critical understanding of supply chain management system models and techniques.

• PC 3.1: Discuss two supply chain management system models and their influence on advance planning and scheduling strategies.
• PC 3.2: Critically analyze a wide range of ICT applications to support and enhance Collaborative, Planning, Forecasting Replenishing (CPFR) techniques.
• PC 3.3: Critically analyze the relationship between CPFR models and Artificial Intelligence (AI) strategies.
• PC 3.4: Critically discuss supplier relationship management.

Learning Outcome 4: Analyze Financial agreements within supply chain management systems.

• PC 4.1: Evaluate commercial and operational financial statements and agreements.
• PC 4.2: Develop a total cost strategy for the acquisition of capital equipment for an organization.
• PC 4.3: Critically review the impact of digital payment methods on supply chain and logistics, making mention of their features, boundaries, and terminology.

Assignment

Supply Chain Management and Logistics in a Global Context

Assignment Task: Read the following Scenario, and prepare a Report with the guidelines provided.

Scope:

The student is required to discuss several strategies from a global perspective in the context of supply chain management. The Brief is centered around a scenario where the student will develop strategies and propose their own solutions that will remain case-specific.

The scope of the brief also addresses the application of SCOR & CFRP models and their contribution to the case organization’s current situation. The case also addresses the organization’s current financial position and requires student to assess the way forward based on the financial assessment results. All questions would require the student to present some theoretical references

CASE STUDY: FLYCLOUD

Introduction

You have recently been assigned the position of Vice President of procurement of a reputable Middle Eastern airline called Flycloud. The organization was established in 1973 where it operated only 5 aircrafts and two routes within the region. In those days, competition was limited and so, they were able to make significant profits despite some operational challenges.

Looking forty years ahead, the organization has grown significantly with over 2000 employees and an aircraft fleet of 300. The market has since changed with several non-middle eastern airlines running the route with low budget airfare options. Consumers are now targeting and enjoying lower airfare.

These external realities have come with some internal issues. Currently, the reporting and data transfer lines are not linked between flying hours of rotating spares, supplier schedules and the supply chain shipping plans. The organization has also lost favor with many of their strategic suppliers, Super Turbines and North Star Aircraft limited, mainly for engine, landing gear and other high value /high risk spares.

This has led to delays in major overhauls, coupled with reduced supplier concessions. Flycloud has also recently diversified their business model, converting two of their older 777 aircrafts into freighters to support their FlycloudGlobal Caterers subsidiary.

Just two years running, their Oman, and Saudi based airlines have complained that their Dubai location does not allow for the fastest delivery, although FGC thinks otherwise. Management is now considering to dissolvethis new entity, but some board members believe that the new Procurement VP can devise a distribution plan to save the subsidiary. These realities, unfortunately, have been compounded by some other major procurement related shortcomings that has weakened the entire company, soon to the point of closure.

Procurement turnaround

The VP has been given a three-month mandate to turn around the organization, reversing much of its losses, often caused by poor sourcing decisions, a lack of understanding of the market’s cultural dynamics and to now present to the board, a strategic course of action in the form of a comprehensive report.

The report must also address their failure to manage outsourcing contracts effectively. A report done by an external auditing body, hired by the board, concluded that there were also several weaknesses which would have contributed to significant operational & financial losses every year and if not addressed quickly, is likely to lead to a collapse of the operations and an insolvent outcome, just as the board predicted.

The board requires, that any further and future recommendations presented, shall be supported by industry research. The VP is also encouraged to use examples of the successes and challenges of other organizations to support any recommendations made.

Here is a summary of some key issues:

• Cultural and ethical challenges in sourcing consumables from the Asian market.
• Outsourced IT and catering contracts that have contributed to check-in glitches and delayed arrival of food to the terminals.
• Slow turnaround of rotating spares.
• Operational challenges associated with defective OEM spares with a global sourcing partner.
• Uneconomic sea freighted transshipment routes from Europe to Middle East for bulk category C OEMS.
• Cases of expired and surplus spares, costing the operations 5 million USD per year.
• lack of vendor cooperation and support

TASK 1 – 1st Case Scenario.

Supply chain and operations challenges.

a) As VP of Procurement, you are asked to discuss current issues facing global supply chains with in-depth assessment of the environment in the airline and aviation industry. You must present reputable and industry related researched data to the board of directors, needed for procurement and corporate decision making later on. Remember that the board is also seeking confirmation that you are truly the right person for the job.

Critically review cross functional drivers facing Flycloud, in the context of globalization trends which are likely to influence the organization in becoming, once again, a regional market leader. At the end of this analysis, you must ensure to critically analyze a range of procurement and logistics theories and concepts that could impact the supply chain sourcing strategies in the context of the sector.

The student could also explore various business / supply chain models for the company such as leasing vs buying, or refurbishing existing fleets to curtail spend, or exploring backward integration strategies.

The current outsourcing strategy must not ignore common outsourcing strategy issues. You must evaluate outsourcing strategies and develop original and creative responses to the issues surrounding outsourcing strategies at Flycloud.A revamping plan of the strategy must be recommended, exploring contract management methods to address the problem.

Any procurement strategies discussed, must be relevant to the industry with examples given, where other organizations have implemented them. Based on the potential and current global issues known through research discoveries and considering the supply chain challenges listed above, you must then recommend workable supply chain strategies that can help turn the organization around.

Summary of focus:

• The current issues that face global supply chains
• Cultural and ethical considerations when sourcing globally
• A range of procurement strategies and concepts
• Alternative business models
• Exploring global trends
• Workable, case related solutions
• Outsourcing insight and outsourcing strategy improvement
• Industry related data with in-depth research
• Demonstrate an understanding in the specialism / subject area

b) Looking ahead of the strategic plan and market review, experience reminds you that vendor management must be integrated into any proposals prior to implementation. Your years of experience has taught you that if suppliers are not involved then it’s useless without them taking center stage.

A critical and informed discussion on supplier relationship management and its role in transforming the current supplier concerns must be done.Supplier relationship management must be applied rationally, and not with all of the organization’s vendors.

The Kraljic Matrix should be applied to help organize the relationship distribution for Flycloud The supplier’s’ perspective on the reasons why the collaboration has collapsed must also be reviewed where you will apply the Supplier Preferencing model to determine other possible reasons for the supplier’s performance.

Summary of focus:

• Supplier relationship management insight
• Supply base rationalization
• Kraljic Matrix application
• Supplier preferencing model (also called supplier perception matrix)
• Industry related data with in-depth research
• Demonstrate an understanding in the specialism / subject area

c) Implement an operational project that will address international logistics challenges at Flycloud. The proposal would consider a range of route options and strategies for faster delivery and reverse logistics efforts, considering that most import and export shipments for rotating spares shipment are done out of North America and Europe.

This happens to be where the strategic vendors, Super Turbines and North Star Aircraft limited operates so a well thought out plan must be presented. Critically evaluate multi-model systems and shipping strategies that can be applied globally. In other words, some comparisons must be made between air and sea freight cost, dependability and flexibility, operating from Middle East to the western hemisphere.

Flycloud Global Caterers has become a logistics and distribution issue. A critical review with some extensive knowledge must be acquired for the selection of distribution hub and network choices must be evaluated from a geographical and business perspective. You should also critically review the different approaches for selecting logistics modes and also choosing the best physical distribution strategies for the organization.

Summary of focus:

• Reverse logistics insight
• International logistics challenges
• Shipping route planning and investigation of route options
• Multimodal systems insight
• Physical distribution strategies
• import and export shipment concerns
• Exploring geographical shipping options
• Industry related data with in-depth research
• Evidence with numerical and graphical source
• Demonstrate an understanding in the specialism / subject area

d) Considering the summary of key issues highlighted above, the VP of procurement must also explore modern developments in IT, arguing with the help of academic referrals, ways in which IT solutions can advance many of the solutions put forward.

You must critically analyze a wide range ofthese applications to support and enhance CPFR techniques for faster material delivery at the organization. You believe that CPFR techniques will also impact the cost constraints, bring much needed savings while ICT on the whole will bring a sense of accountability between all users.

One such technology is the advent of AI and data analytics which might better manage flying hours and readiness to receive unserviceable spares. You must also discuss at least two supply chain system models and their influence on advance planning and scheduling strategies.

Summary of focus:

• AI and ICT insights
• Demand planning systems (CPFR)
• SCOR model applications

Addressing the financial impact.

As the new VP you have been briefed about several financial and cost related issues that have plagued the enterprise. The Director – Finance, Annie Windsor presented financial data (See figure 1.1 below), arguing that suppliers’ financial assessments are often mismanaged, contributing to the last two catering vendors going into receivership.

This had led to uncompromising delays and eroded supplier relationships, coupled with high switching costs, associated in acquiring a replacement caterer.To add, suppliers have not honored delivery contracts as originally agreed. There is the current challenge of deliveries slipping into lagged performance of 2 months, after their committed date.

The Director of Finance has also shared that the current position of asset management acquisitions included in purchasing a significant fleet of 777 aircrafts, commissioned 10 years ago, ignored the concept of a total cost strategy (whole life costing analysis). Each purchase resulted in the burdening of the company in the tune of an extra 5 billion USD, adding to the 2 billion USD purchase price.

There also exists working capital management issues of vendors not being paid on time and a case where one vendor has received advance payments without delivery of a million-dollar shipment. High inventories have also been plaguing the enterprise, increasing holding costs and with added financial concern, depleting the financial liquidity of the organization. This has also impacted the supply chain’s global reach with restricted budgets from finance.

It was also noted by Annie, that many of the current ordering systems are outdated with disconnection from vendor’s schedules and no internal communication between the warehouse team, other users and the procurement team. They are operating in ‘silos’ she claims. But the problem doesn’t end there. Many stock postings have now been linked to human error. This must be addressed with urgency. The management team now requires that the VP strategize to devise a workable policy to alleviate the problems mentioned and has been asked for a detailed report and short presentation to the board.

TASK 2 – 2nd Case Scenario.

Supply Chain Challenges Impacting Financial issues

a) You are now faced with another mammoth task, involving the review of some financial and operational challenges that needs your urgent attention. One such issue is the payment methods and poor accountability of receipt and order placements. You must then critically review the impact of digital payment methods on supply chain and logistics, making mention of their features, boundaries and terminology.

This approach should bring out credible source reference, for the use of block chain payment strategy at the organization. Other digital forms of payment can be explored. The success or failure of other organizations must be critically reviewed, where this new strategy has been implemented.

As an add on assignment, she has asked that the VP delegate some responsibility of having his procurement lead, critically assess the financial results in a recent supplier appraisal of Rack Aircraft Bearing limited. Using techniques such as supplier appraisal, a critical stage of the supply chain cycle, evaluate the commercial and operational financial statement presented.

They must determine realistic assumptions on the possible causes of the results, propose solutions to address them and the impact it may have on supplier relationships later on. Student will refer to the financial appraisal results in figure 1.1 below.

Summary of focus:

• Digital payment methods
• Supplier financial appraisals
• The procurement cycle
• Assessing the data presented in table
• Block chain insights

b) Conduct an in-depth analysis of the problems and issues in warehousing and inventory management at Flycloud.This must be followed by the preparation of a comprehensive action plan to address these problems and issues identified.

The inventory management shortcomings the organization now faces should be tackled with a detailed plan to correct inventory levels. The student must also distinguish between dependent and independent demand while discussing what other ordering techniques might be fitting for the airline industry. These arguments must be well justified.

For example, EOQ ordering concepts and periodic review replenishment systems could be reviewed. Some other warehousing and inventory management solutions should be explored such as VMI and Demand-Pull strategies for rotating spare parts. For the moment, your assumption is that the airline has not accurately matched supply with demand conditions and have therefore linked this issue with working capital management, cost planning, capital expenditure investment allocation issues and current cash flow constraints.

To add, the matter regarding a poorly integrated ordering and scheduling system must also be addressed simultaneously. While addressing this issue, you must also critically analyze the relationship between CPFR models and AI strategies, exploring their benefits toFlycloud and its affiliated organizations. An in-depth understanding of AI must be discussed, demonstrating ways in which a human less system can improve the current replenishment techniques.

Summary of focus:

• Warehouse and inventory management insights
• Matching demand with supply
• Pull vs Push systems
• CPFR models working with AI strategies
• Financial and statistical data evidence for CPFR success
• Dependent vs independent stock

c) Finally, assess the impact of hidden costs to procurement in the acquisition of capital equipment, similar to the last 777 fleet and develop whole life costing model for future purchases.

In doing so, you must develop a total cost strategy for the acquisition of capital equipment for the organization, considering the implications of decommissioning, pricing and revenue management. You must conduct some research, presenting estimated figures on the cost of training, operations and so on.

Summary of focus:

• Whole life costing strategy insights
• Designing WLC model
• Impact of hidden cost
• Revenue and asset management insights

Figure 1.1 Financial results of Rack Bearing Limited
Ratios 2015 2016 2017
profit margin 9.12 8.63 9.22
profitability 13.12 11.23 9.25
Return on Assets 23.15 16 14.23
Current ratio 1.62 1.45 1.21
Acid or Quick Ratio 0.98 0.82 0.55
Stock turnover 5.1 6.12 4.25
Gearing Ratio 13.15 15.15 21.25