Discussing how the “Fresh Connection “ company could improve its financial and non-financial performance by engaging in the strategic management of its supply chain processes.
It is certain that in order to create a positive impact on financial and non-financial performance, the supply chain processes of the company are to be in place supported with the strategic management strategies (Janvier-James, 2012). Several small and medium size companies might not have the resource in-house to deal with the challenges associated with logistics. However, the Fresh Connection produces the ultimate value chain learning experience. A well-enhanced supply chain strategy of Fresh Connection is supported by tactical skills and knowledge (DE Leeuw, SchipperS & Hoogervorst, 2015). The following are some of the strategic management elements existing in the supply chain network of Fresh Connection, which certainly helps to improve financial and non-financial performance.
Service-level- Certainly, the service level is the most significant of the agreements, which can positive influence the financial performance through sales. As put forward by Monczka et al., (2015), the customers naturally demand a high service level but they offer a high contract index in return. However, in order to keep this level in place, the service level has to be effective because the failure to the promised service, the customers may want a substantial discount on the contract index, which could be detrimental to the ultimate sales price.
Sales- Gross margin
- Fresh Connectionneeds to maximize the gross margin as much as possible insisting on the large potential customers
- The organization should try not to lose gross margin on the small customers significantly
- The organization could introduce a promotional pressure for the consumers during the later rounds
The organization should align the capacity of supply chain and operations to match the negotiated and service as well as the self-life levels.
Shelf-life- It is observed that all the customers tend to focus on having a part of total shelf period of a finished product, which is the requested shelf life percentage. Usually, the customers demand a highest percentage of that shelf life, allowing them to keep the product in stock for a longer period and offer customers a greater shelf-life (Stadtler, 2015). However, the longer time the consumers can keep the product in stock, in a shorter time period, Fresh Connection can implement so. Thus, the probability of the finished goods expiring increase in proportion to the percentage of shelf life assured to the customers. It is necessary to understand that assured shelf life has a wide impact on the whole operation as highly assured shelf-life minimizing the amount of time that finished goods could be kept in stock.
Inbound- The delivered packaging is stored or kept in the raw material warehouse, whereas fruit pulp as well as additives produced in “Intermediate Bulk Containers” are kept in the same warehouse (Ashby, Leat & Hudson-Smith, 2012). The costs related to the raw material warehouse should be around € 200 for each pallet location annually. Hence, the financial performance of the Fresh Connection will not be affected because increasing and decreasing the pallet location involves no additional expenditure. The organization always plays the fixed rate for each pallet location annually. The required amount of pallet location depends on the supply of goods and safety stock levels. Fresh Connection developed a component safety stock level are high, so if the company increases the lot size, the required location will be high (Leeuw, Schippers & Hoogervorst, 2015). Nevertheless, if the components arrive in tanks, the organization does not need to reserve pallet location for them in the law materials because they can be stored in the tank yard only.
Warehousing- The above-mentioned discussion suggests the utilization of the inbound warehouse with the inclusion of tank yard and the finished goods warehouse. Hence, both the utilization of space and utilization of labor should be reported. If the overflow remains high, the capacity could be too large.
- The organization optimizes the pallet allocation to avoid overflow and outsourcing
- The organization could also allocate a proper number of shifts. It can reduce the variability in processes and smooth earning from the raw materials
- The company has to be ready to deal with all sort of demands
Mixing and bottling- To reduce the operational cost, the organization needs to make use of the mixing machine as well as availability of bottling machine.
Production- The organization needs to allocate adequate number of shifts and they should select new investment appropriately to smooth production and maximize the return on investment. In addition, the firm also needs to minimize the production cost, unused capacity as well as breakdown time.
Component- (Safety Stock)- As put forward by Sarkis (2012) the safety stock that organization sets aside to avoid uncertainty in terms of production requirements as well as supply reliability from the supplier. If the organization increases the stock, it can lower the risk of running out of stocks and so, with increasing safety stock. Moreover, with a high safety stock, the company can assure reliability of supply to production. As put forward by Vierasu & Balasescu (2011), a high safety stock may also lead to high stock expense and increased capital demand. The safety stock of Fresh Connection is expressed in forecast weeks. At the time of frozen period of production, the production planning should be fixed and likewise, the demand should also be fixed (Cao & Zhang, 2011). Hence, the company needs to be aware of the fact that if one of the components is missing it might affect the production of one or more finished products. In addition, it can be mentioned that components can be stored for a long time and will be storing them not to have any influence on the freshness of the finished products. Thus, the decision of safety stock level remains as the tradeoff between the storage cost and the use of CO2 versus reliability.
- The firm should guarantee the availability of components to satisfy the demands
- The firm needs to keep the cost of stock at the min level.
- The adequate lot size should depend on the stock cost as well as the transport cost given by procurement.
- The firm needs to lower average stock weeks of demand and obsolete products without compromising service level according to contract index per customer
- The organization needs to make sure high diversity reliability as well as low rejection rate for the best price
- Purchasing unit of the company also needs to ensure the lead time and trade. Hence, expected amount should be planned and aligned with the operation.
- Raw materials cost is one the significant KPIs of Fresh Connection. Hence, purchase cost remains as the percentage of total revenue
2. Discussing how strategic risk management is useful to manage supply chain disruption -
The major aim of the supply chain strategy is to reach the stage of the integrated supply chain with the major goal of achieving a greater level of efficiency via reduction of costs. The “Hudd Team 28” in Fresh Connection Game had the goal to accomplish an efficient supply chain strategy to implement long-term partnership with the consumers (Cai et al., 2013). As put forward by Savino, Manzini and Mazza (2015), the supply chain risk management is an integrated management approach which remains along with whole chain particularly with a view to deal with the exposure to serious business disruption appearing from the risks within the supply chain and risk external to the supply chain. On the other side, the strategic risk management helps to evaluate how a broad range of possible events as well as scenarios could affect the strategy and its implementation and the eventual impact on organization’s value (Wieland & Marcus Wallenburg, 2012). Hence, risk is all- inclusive, encompassing everything from product innovation risk as well as market risk to supply chain risk.
The risk management strategies directly control the supply chain design framework. The architecture of supply chain should be appropriately enhanced in terms of shipping, location of sources and warehouse. As put forward by Tang and Musa (2011), a proper design could deliver cost, performance and emission response that consumers demand. SRM strategies at Fresh Connection are developed to reshape the supply chain network during the stable times. The strategies enable the supply chain operators to synthesize internal and external data and increasingly take actions to reduce the influence of disruption.
Moreover, Fresh Connection has a wide supply chain network, the financial challenge remains as the significant risk. Hence, the organization should use the approach of reshaping the supply chain structure adaptable and agile, thereby, it can be easy to quickly adjust and respond to the market as well as economic conditions. In addition to this, Cai et al., (2013) mentioned that transparent organizational structure, with a clearly defined corporate structure and a coordinated departments with clear responsibilities could help to reduce confusion and disruptive event occurs. As the risk management approach, the supply chain managers of Fresh Connection should strike a balance between efficiency and effectiveness (DE Leeuw, SchipperS & Hoogervorst, 2015). They require a diversity of activities, reach of marketers and suppliers instead of an overspecialization in one sector.
As the strategic risk management approach, in the supply chain department, the safety stock management could handle the reduction of the stock as well as the handling cost. On the other side, the relationship between the customer management handled by the sales department as well as supply chain management could affect the decision that should be taken to enhance the efficiency of the organization.
Return on InvestmentTo implement an effective strategic management in the supply chain management, the organization has to make use of the advantages to respond to their return on investment. Hence, this different leverages has been assessed through the ratio that backs the organization to supervise and control its progress over the game period.
The above mentioned ratio analysis helps to learn that profitability ratio demonstrates the return on investment of the organization have gone through a larger hole to eventually come out with a large amount of profits. Hence, the analysis helped to encountered was a high level of raw materials and finished products obsolescence, which certainly influences the cost of products sold and also influenced the operating margin.
References and Bibliography
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