1. Provide a comprehensive explanation of the essential concepts of SCM and explain to what extent SCM is applicable to a service operation such as CII.
2. Evaluate how partnering with some of the suppliers could benefit CII. What issues should CII consider when developing partnerships?
3. Purchasing, a major function in SCM, is critical in the cruise line industry. Critique the potential conflicts of interest or ethical issues facing the purchasing function.
The Importance of Supply Chain Management in the Cruise Industry
This report outlines the case study of Cruise International, Inc., a virtual organisation committed to delivering superior quality of service and embracing continuous innovation and improvements as per the respective information.
Today customer asserts more on different varieties, high quality, lowest price and quick delivery including superior customer services (Casadesus-Masanell and Ricart, 2011). To achieve customer expectation in a dynamic environment, organisation must have the necessary resource and capabilities to meet these expectations effectively and efficiently. These business aspects and considerations are not industry specific as it is applicable to various industries including the business in Cruise industry. According to Risposte Tourismo, Italian tourism strengthen on rising number of total passengers in the cruise industry from some 500,000 in the early 1970s with reach to five million in 1990 and rise in 2010 to 19 million. $126 billion in total economic impact and 1 million jobs paying $41 billion in wages and salaries were generated by the global cruise industry in 2016 (F-cca.com, 2017). Year-on-year, the global cruises industry is growing by seeking long-term relationship with the customers and sustain their business with the competitiveness advantage including at its supply chain management. Satisfaction of passengers or customer is very important for all service industry organisation. Hence, in current economy, the Cruise companies can able to achieve this by improving their elements of supply chain.
Cruise is considered to be one the most dynamic shipping and tourism sector and its entire market is extent with high concentration as there are strong market players but few. In the shipping industry, cruise is also a special case as the practices of transport services is not only the transportation itself but it is concerned with pleasure to the passengers on board cruise ships.
Carter and Liane Easton (2011) define supply chain by stating it as an integrated assortment of firms that administers products, information, flow of resources and money from a point of source to a point of consumption with the objective of increasing consumer happiness and also reducing organisation total assests. Various elements of a supply chain include manufacturers, suppliers, retailers, distributors, service providers and customers. In addition, competition among Cruise corporations mostly found in vertical form i.e. refers to quality, and horizontal differentiation (offerings and varieties).
SCM can be projected as a capability that ensures that services and products are delivered to the right place, with right quantity, at the right cost and at the right time. Ponomarov and Holcomb (2009) also stated that various elements of supply chain are directly associated with upstream and downstream levels including flow of products and services from a respective source to the consumer. The goal of SCM can be understood in term of Cruise line while reducing both inventory and functioning costs. In respect with supply chain of Cruise enterprise, manufacturing plant helps in making the product available to the end customers and serve the needs of clients.
Elements of the Cruise Supply Chain
In a service supply chain, Cruise International, Inc. is delivering cruise as a service to travellers with various sorts of ships. A Service supply chain is also called to be as grid of suppliers, service providers, customers and further subsidiary elements that perform the function of matter of resources necessary to create services; conversion of these resources into core and supporting services, and offering of these services to consumers.
Considering Cruise supply chain, there are many elements such as ships manufacturers, office supplies suppliers, fuel suppliers, food and beverage suppliers and information system suppliers (Veronneau and Roy, 2009).
They need to take decisions in all the above areas such as how many small, medium and large ships will be required and when and where? Decision related to quantity of foods and beverage? What type of information or data needed to collect? These are relevant to their management and operations areas and help in creation of various sorts of policies.
In addition, Cruise Line International will practice the applications of SCM in various spaces like coach services, food supply, port services, warehousing near harbours, consumables supply, and entertainment among others through other business agencies so as to deliver best client experience on their cruise (Sun, Feng and Gauri, 2014). Clients of CII also needs of various services in terms of hotel accommodations, however, Cruise lie international must focus on its core services and so they can accommodate these services through other businesses and it would form part of supply chain.
Cruise Line international needs to develop partnership with the suppliers based on the services and products required by the organisation to effectively serve its clients. Each of the partner Cruise lines wants to select must be flexible enough for doing business. Moreover, partners should not let short term objectives to obstruct the achievement of long-run strategies. They also need to ensure that their SCM strategy is properly aligned with the reward structure.
As per one operational principle, there is a mutual benefit as well as mutual sacrifice involves in true ‘partner’ relationships (Stanley, Rhoades and Whitton, 2010). In addition, a partnership program can also be developed by CII including with some suppliers ensuring advantages for all supply chain network as they can get many other benefits as compared to those they are gaining alone.
Suppliers’ practices and policies must approve with every single applicable law and regulations comprising those related to child or forced labour, aggregate haggling, liberty of association, benefits and wages, extra time and working hours (Greenhill, Mosley and Prakash, 2009). Observing and governing this system of suppliers and partnerships needs a synthesis of significant and provincial associations – though monitoring and governing of execution of supplier and routine interaction to logistics collaborators are top watch over on the inside aspects.
Partnering Strategies for Cruise International
CII will also get benefit in terms of reduced cost with partnering, however, there are some issues that CII needs to consider. These aspects plays a relevant role in a partnership of any two firms or organisations.
- Trust - is an important element in the successful partnership and also most difficult to develop and maintain. Trust is considered to be a belief that the association will generate profit for both parties.
- Joint learning– For ensuring development of relationships learning from experience is one of vital element. CII and partners should be committed to learning from each other experience.
- Transparency in information – An open-ended flow of information considering between CII and partners will lead to more confidence between them and thus help in developing effective mechanism.
- Joint problem solving – Approaching to issues mutually will expand closeness after over time in spite of the fact that partnership does not function simply (Gadde and Dubois, 2010).
- Joint co-ordination of activities – Both CII and partners can effectively coordinate activities like payment, flow of materials and services, etc. as there are fewer relationships.
Supply chain partnership will help Cruise line Internal in various prospects to improve their business operations. For example, more broad delivery of services at lower cost without instant physical presence in the places where the customers of business are located.
The most significant thing that will occur in supply chain partnership will be the consumption of the power of synergy (Nair, Narasimhan and Bendoly, 2011). This makes all enterprise to be involved in the SCM in order to produce greater output and also for the success of their business.
As such CII could decide to focus on core functions only by transferring or outsourcing to all non-core functions. Partnering can enable Cruise International amongst others to spread its system and devouring contact to shared expertise, resources and skills through help of a definite partnership programme and by assisting to gain new prospective customers.
In a supply chain, it is normal for a conflict of interest to occur. Potential conflicts emerge from individual, business, family or budgetary connections (Hamilton, 2009). To avoid these, partners must ensure that any business, individual or other activities do not conflict with the lawful interest of Cruise line international. They also need to embrace other definite areas which can result in such conflict of interest such as relationships, advertising, market standards, gifts or entertainment.
An actual or perceived conflict of interest is a position where a worker is in situation to acquire individual advantage from activities or verdicts made in authorised premises (Grant and Patil, 2012). Many researchers have considered conflict of interest as the biggest problem in purchasing function. Some of the possible conflicts of interest that might arise in the buying function of Cruise International includes receiving and giving of gifts may be alleged to a conflict of interest. Hence, it is suggested to reject the gift or proposal that does not associate to these circumstances. Considering procurement activities, the issues of personal and family relationships also arises a conflict of interest. For instance, a CII procurement is liable for selecting a household member as a supplier of a good or service for the CII. It can be treated as conflicts of resource.
Other conflict issue arises when an employee exploits a company resources for his personal uses. Commonly, it is incongruous to use organisation assets, material or services for personal related activities. In addition, if CII worker is a purchaser for CII and is also an investor in a business firm who is a supplier for goods and services to that CII, there is chances of arising potential conflicts. However, this is significant to consider that employees must avoid these situations where there are chances of appearance such conflicts.
Conflict of Interest in the Supply Chain
Members of the supply chain must avoid these actions or behaviours which can cause negative effect on supply decisions before the creation of supply chain services. In addition, there should also be a Conflict of Interest or Commitment Disclosure form that is needed to be duly signed from all the partners.
Three methods can be used by CII for reporting potential conflicts of interest (generally used by several enterprises) –
- Ethics hotline – It allows individual to report anonymously to management not only potential conflicts of interest but also perceived immoral behaviour.
- Self-reporting – It includes encouragement of employees to report to their immediate managers or leaders in relation to potential conflict of interest (Sims, 2009).
- Anonymous mail/internet – If any individual wants to secretly report conflicts of interest and some other immoral behaviour to an ethics website or an email account, an anonymous reporting system will be very helpful in doing so.
Supply chain management plays a significant role in coordinating and managing all the activities to get the consumer satisfied. It is also treated as a central functional area of an enterprise irrespective of service or manufacturing industry.
Cruise Line international strive for satisfaction of clientele which includes different customer characteristics and age groups with varieties of on-land and on-the-ship services. The aspects and approaches of SCM are pertinent to the Cruise International service operations including all stages from the primary suppliers to extent of final services delivered to the end consumer. Various benefits lie to CII with partnering so as to broaden its market, improve product portfolio, increase revenue and lastly penetrate the competitive market.
Supply chain management in relation with Cruise operations is required in pre-embarkation, onboard and post disembarkation aspects of the corporation. At CII, there can also be conflict of interest in the purchasing function of SCM such as receiving and giving of gifts, relationship and family or use of any business resources for personal benefit.
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