The supply chain management is an important element for the measurement of the internal and external success of a business. The supply chain management cooperates with the external partners such as suppliers for gaining competitive success and satisfied partners. The supply chain management aims at functions comprising external stakeholders to work towards a common goal and delivering products to the customers as per their convenience. The supply chain management is required to plan, control and execute the flow of products. It enhances the quality and lowers the cost of products. The supply chain management is an effort to run supply chains in the most proficient and effective way (Wang, Gunasekaran, Ngai & Papadopoulos, 2016). The supply chain activities make best use of customer value and achieve a sustainable competitive advantage. The supply chain incorporates the internal functions from marketing to logistics. The activities of the supply chain management lead to the overall success of the business. The supply chain has a great role in driving shareholder’s value.
The retail sector is chosen to discuss the global supply chain management. The supply chain management (SCM) is the management of the flow of goods and services in the retail. It comprises the association and storage of raw materials, works in progress inventory to finished goods. The SCM implements the changes and inventions to keep retail high all the time. The awareness of the consumers is also increasing and they expect perfect services. The evolution of the consumers has stimulated the retail sector. As a result, the retail sector is minimizing the operational costs. The report critically assesses the positive and negative attributes. The gap between the evaluation and the implementation of supply chain improvement in the retail sector has been discussed. Further, the multidimensional global supply chain issues and the applied techniques have been explained.
The positive and negative attributes
The positive attributes if the dairy industry is as follows:
Along with the high per capita income, the health consciousness is growing among the people. The interest of milk consumption is growing among women and it helps dairy industry to expect and maintain the growth at a CAGR of 11.62% during the projection period of 2018-2023. The preference of consumers is changing towards healthy food consist of milk as one of the elements in day-to-day consumption. The consumption of dairy has changed in the last few years from only consumption of milk to cheese, yogurt, cream, butter and more. The milk is considered to be highly nutritional food (Wang & Cullinane, 2015).
The supply chain management can satisfy the needs of customers if there is coordination. When the competition is high then the dairy industry should drop the flow of disruption within the upstream and downstream supply chain activities. This durability can be achieved only with the means of supply chain coordination. The profitability of the supply chain depends on how well the members work together. It is one of the important aspects to share information to customers while supplying the product (Taticchi, et. al 2015). The contact should be maintained between the firm and customers in order to transfer information accurately. The other positive attribute is better product quality which ensures that the products are manufactured as per the requirements of the customers. It is one of the positive attributes of the dairy industry to manufacture the products as per the requirement of the customers.
Another positive attribute of the dairy industry is the hygiene quality of milk which is important in producing milk and milk products. The standards should be applied in the supply chain to achieve the good hygiene practices (Ellram & Cooper, 2014). The difficulties faced in production can be improved by the regulated marketing, sufficient knowledge, and skills in hygiene practices.
The suppliers opt for the well-contented cows which provide high-quality milk. The health of cow is very important to the dairy firms. They provide a balanced diet, a clean place to live and regular medical care.
The intake of dairy products is essential as it improves the bone health, reduces the risk of cardiovascular diseases, diabetes and lowers blood pressure. It also reduces the risk of osteoporosis (Wieland, Handfield & Durach, 2016).
The dairy industry has also provided benefit to the farmers. It helps to increase their level of income and provides employment to the huge crowd. Most of the consumers prefer dairy products which are easy to preserve (Beske & Seuring, 2014). These producers can easily store the products and can supply whenever required.
The negative attributes if the dairy industry is as follows:
Every day the dairy products including milk are delivered to various outlets across the 6 gulf cooperation council countries. The consumption of dairy products is growing at an annual rate of 7.5%. There is a significant challenge in the Middle East. The temperature frequently exceeds 50 degree Celsius on the daily basis which causes the constant need for food security.
The supply chain for the dairy products is affected by the abnormal wastage and poor handling. The wastage is the result of multiple points of handling. The lack of storage facilities and transport equipment lead to the inefficiency in handling dairy products. There is a significant need for storage facilities and refrigeration in imperative to improve the supply chain. The wastage of dairy products causes loss to the farmers as well as consumers (Dabestani, Shahin & Saljoughian, 2017).
The other negative attributes of the dairy industry are the poor health of cattle. There are low-level services for the essential medicines, regular health check-up of veterinaries, drugs for the animals and the poor medical supplies. The lack of marketing facilities causes the poor perception of the farmers towards commercial dairy (Wiengarten, Humphreys, Gimenez & McIvor, 2016). The lack of proper veterinary extension system interrupts the supply chain operations of the dairy industry.
The shortage of green fodder and feed concentrate are the main cause behind the negative attributes of the dairy industry. It causes poor performance in general as the cows cannot be exploited in the absence of proper nutrition.
Another major challenge faced in the dairy industry is the lack of marketing facilities and extension services. The farmers also have poor perception towards commercial dairy enterprise. The dairy products involve a chain of middlemen who reaps the benefit and deprives the producers of their due share (Carbonara & Pellegrino, 2017).
The cattle have higher milk production from the temperature region. The cattle give less because of the climate factors even when the foreign cattle breeds are imported. The quality of fodder seeds is not available all the time. The low quality and productivity are the reasons that processors are not able to achieve the operations up to the scale. The problem of cold storage facilities is also faced (Simpson,et.al. 2015). The increasing cost of the raw materials also results in the feeding of poor material to the animals which cause bad health of animals. As a result, the quality of the dairy products is compromised.
The gap between the evaluation and implementation of supply chain
The demand has increased in the in the dairy industry of Saudi Arabia in the last decade. The managers and the staff are required to use supply chain management in order to fulfill demands. The challenges faced by the managers in the evaluation and implementation of supply chain management are given below:
Relationship with the suppliers:
It is important to form, understand and follow standards to better comprehend the current performance and prospects for the improvement of the supply chain of the dairy industry. The different methods of the performance measurement and communication result in wastage of time and efforts. A relationship should be established for the consistent results and better system. One of the leading challenges which are faced by the industries is to reduce supply chain cost. The dairy industry has relocated the manufacturing to low-cost countries in order to satisfy the price expectation of customers. It also makes effort to decrease direct and indirect costs and to curtail taxes. The global suppliers contribute to the complication which comes from the prolonged delivery lead times (Brandenburg, Govindan, Sarkis & Seuring, 2014).
Fast changing markets:
The behavior of the consumers is affected by the factors like cultural, social, personal and psychological. These are affected by the technology and globalization. The customers are becoming demanding nowadays. It is hard to match their expectations. The dairy companies respond with the product invention, universal networks, and market developments. So, the supply chain managers make effort to optimize the value chain in order to remain competitive. There is the shorter life cycle of dairy products due to constantly fluctuating market demands. The industry is under stress to keep updated with the up-to-date trends and innovate products. The industries are pressurized to keep manufacturing costs low as the trends do not last for a long time. The dairy industries are also required to update product features on the regular basis (Beske-Janssen, Johnson & Schaltegger, 2015).
Quality and compliance:
The companies producing dairy products are under stress to produce good-quality products and to produce them constantly. The companies do so by considering quality at every level of the supply chain such as manufacturing, logistics, packing and product handling. The companies also need to be ensuring that it meets both local and international regulatory criteria of manufacturing, packing, handling, and delivery of products. The industry is also prerequisite to prepare papers such as license, certificates, and permits. It can overwhelm the industry and it’s supply chain management systems (Beske, Land & Seuring, 2014). The evolving capabilities like smart packing are changing the way compliance should be measured.
The Gap analysis
The gap analysis finds out the difference between actual performance and the potential or desired performance. It also assesses whether the business requirements are being met. If not then what steps are prerequisite to meet successfully. It states the difference between ‘where we are’ and ‘where we want to be’. It is one of the best approaches to overcome the challenges faced in the supply chain (Mineraud, Mazhelis, Su & Tarkoma, 2016). The gap analysis of the supply chain operations of the dairy industry can be done by the simple three steps such as by analyzing the current state, identifying ideal future state and by bridging the gap. The current state includes the qualitative information such as sales made in a week. The identification of the ideal future state points out where an industry wants to take it’s supply chain functions (Pennifold, et. al. 2017). The gap figures out how to surpass the difficulties. The gap analysis makes use of tools to bridge the gap such as SWOT analysis and Nadler- Tushman model. It offers a base for determining investment of time, money and human resources requisite to attain a specific outcome. The analysis is also used to identify the gaps in the market. It is helpful in knowing the gap between the offering of existing products and the new products (Ho, Zheng, Yildiz & Talluri, 2015).
Different perspectives of Gap analysis
- Performance gap: The performance gap is the variance between the predictable and the actual performance.
- Product gap: It is the gap among planned sales and the actual sales.
- Profit gap: The profit gap is termed as the variance between a estimated and actual profit of the company.
- Manpower gap: The difference amid the actual and requisite number of workforce is termed as manpower gap.
The types of gaps analysis discussed above help to adopt different strategies in order to overcome the situation. The dairy manufacturers and suppliers can make use of the Gap analysis to solve the challenges faced in the supply chain management. This approach is useful for the managers as issues can be solved by analyzing all the probable risks. It typically compares the current state of the processes, technology, structure, and capabilities. It is a qualitative approach which finds out the risks linked with the execution of new supply chain management practices (Giannakis & Papadopoulos, 2016). The dairy manufacturers can use make use of gap analysis in the supply chain by comparing the past performance with the present one. It is one of the effective approaches to be used by the managers in the supply chain to improve the performance of the supply chain (Jabbour & De Sousa Jabbour, 2016).
Multidimensional global supply chain issues
Managing inventory is beyond the boxes ready in the warehouse. It is a challenge for the dairy manufacturers to ready inventory so that expectations of the customers can be meet on the daily basis, as the dairy products are consumed on the regular basis. It is a critical aspect to manage customer and vendor relationships to manage supply chains. The appropriate timing prevents any kind of delays. The appropriate quantity maintained by the manufacturers prevents insufficient inventory along with reducing effects on the profits (Quarshie, Salmi & Leuschner, 2016). The main issue faced in managing inventory is to cope up with the flows in the supply chain. In such a situation, the lead time should be taking into account. It includes supply delay and reorders delay. The lead time is expected to increase when the suppliers are changed from local to international. Such changes have an significant role in the supply chain management.
Forces driving globalization
The globalization is the process through which the manufacturers develop international influence or start operating in different markets on the global basis. In order to operate on a global basis, the dairy industry is required to make changes in the products as per the culture and preferences of the consumers. It prompts to lose control over the inventory management and visibility. It puts the burden on the industry with different data management across the geographical features. The outsourcing is also one of the risks associated with the globalization. The dairy companies are more likely to move their manufacturing operations to other countries because of the reduced labor costs, manufacturing costs, and the low transportation rates. This process is cost saving but effects in the complication of the supply chain in the different locations (Kwak, Seo & Mason, 2018). The extra charges are required to deal with coordinates and suppliers across borders. It also results in additional efforts and logistics facilities such as dearth of cold storage facilities and the gap in the cold chain and transport facilities.
Quality of the product
A certain level of quality is described by the importers to place orders. The supply chain management should be considered in such a way that it ensures better quality and the safety of the products. However, at the time of supplying dairy products in the global market, the dealers need to make sure that the products are of better quality and meet the standard required by the customers. The quality and the safety measurements should also be checked on time to time. The products went through various processes to pass safety and quality standards.
Planning and risk management
The periodic assessments and the redesigns are required to stay efficient and effective. These adjustments are made in order to react to the changes in the market such as product launching, credit availability and global sourcing. These risks should be identified and quantified in order to control and moderate. The behavior and demand of the consumers should also be kept in the mind in deciding the features of the products such as mass, taste, packaging and more. The company can face a challenge due to variation in the products which is not as per the demand of customers. It can be better managed by cope up with the customers (Roh, Hong & Min, 2014).
Delay and shipment issues
There are various factors which should be considered by the suppliers at the time of supplying stock on a global basis. The quality and safety of the products is the most important thing which should be given importance at the time of transferring products. The other issues faced are logistics and different time zones. The problems are faced related to transport when the goods are exported to other countries (Schaltegger & Burritt, 2014). The time clash also occurs when the products are transferred to other countries which affect working hours of staff as well as delivery time. It leads to delays and the quality of the dairy products can be getting affected due to the shorter life cycle. It is a major concern in the countries like Saudi Arabia as there are varied weather conditions. The variation in weather can turn into adverse and affect the food quality. It is tough to manage the quality of food along with tracking the location of products. The dairy manufacturers need to focus on the each and every activity of logistics.
The globalization has given a better opportunity to the dairy industry to make development and bring diversity. The supply chain management can be designed as per these problems and can be managed and integrated with the use of different strategies. These issues can be resolved by the proper management of the supply chain. The gap analysis is the perfect approach to evaluate and implement supply chain practices. The manufacturer should consider the culture and preferences of the customers and produce products accordingly. These problems can also be solved by the data management along with the proper integration (Rosado & Relvas, 2015).
The report represents an exploration of supply chain management of the dairy industry. It represents the flow of goods and services in the retail. It comprises the drive and storage of raw materials, works in progress inventory to finished goods. The report discusses the positive and the negative attributes of the dairy industry. The positive attributes comprise the hygiene quality of milk, the benefit to the farmers and more. The negative attributes include abnormal wastage, poor handling, poor health of cattle, lack of marketing facilities and more. Further, the report also explains the evaluation and execution of supply chain management. The differences between the evaluation and the implementation of the supply chain are found out with the help of gap analysis. Lastly, the multidimensional global supply chain issues are discussed on the global level.
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