Analyzing Supply Chain Issues For Sadafco: Proposal For An Optimized Supply Chain Essay.

The Framework of Supply Chain Management

Questions:

1.Use a framework to determine a suitable supply chain for this Organisation. You may wish to focus on one product or many ?

2.Discuss which aspect of the chain should or could be Optimised and Discuss how this is affected by the various Environmental Impacts on the Supply Chain ?

3.Having determined a suitable supply chain give an outline proposal plan to Implement the new supply chain ?

4.Consider the Financial Implications of this supply chain, investments in plant and equipment, sources of finance and measures of Financial Performance ?

5.For your Chosen Company suggest the Control Policies for items of stock ?

The purpose of this report is to analyze on the supply chain issues for developing the proposal for supply chain for Sadafco. Saudi Arabia and Foodstuff company ( Sadafco) has been one of the market leader in Milk Market (UHT) in Saudi Arabia. This company captures half of the UHT milk market and near about one third of the total milk. Even this organization also produces different products other than UHT milk that includes Ice-cream, Cheese, Ketchup , Butter etc. The company’s mission is to develop, manufacture and market nutritious food for each age groups as well as create high shareholder value through their teamwork. The supply chain refers to the system of companies , activities, resources and information that are involved in distributing the goods from the suppliers to buyers (Aya?, Samanlioglu & Büyüközkan, 2013). The activities of supply chain involves in transformation of raw materials or natural resources to finished goods, which is then delivered to the buyers. The study also elucidates on the framework that is used to determine suitable supply chain for this company. One of the challenges that the company faces is to incorporate supply chain in appropriate way in order to benefit their customers and maximize profit (Badri,  Bashiri & Hejazi, 2013). The aspect of the supply chain of this organization that should be optimized is also discussed in this study. The environmental impact on the supply chain that affects this aspect of chain is also illustrated in this report. The study also focuses on the proposal plan for implementation of new supply chain to this company. The financial implications of supply chain, sources of finance and the measures of financial performance of this firm are also explained in this study. The recommendation of control policies for the items of this company is also highlighted in this study.

The Supply Chain Diagram of Sadafco

In current changing marketplace, as the competition among the companies has been fierce, Sadafco expands their business focus on encompassing the supply chain in order to gain competitive advantage against their rivals. In present decades, the companies implements new business framework that is based on their customized production as well as relationship with the supply chain members (Bilgen & Çelebi, 2013). Historically, there are three basic stages of supply chain including- procurement, manufacturing and distribution that the organization tries to manage it in effective way. Increase in competitive pressures as well as globalization in the market forced the organizations in developing supply chains, which facilitates them in quickly responding to the requirements of the customers. Supply chain integration procedure through investment in technologies as well as cooperative arrangements aids in strategic ranking of the organizations (Brindley, 2017). The conceptual framework helps in emphasizing the nature of supply chain management (SCM) within the organization. The SCM model mainly consists of interrelated elements that includes-

The network structure of supply chain – The organization participates in the supply chain as the relationship at various points varies between the firms and networks. However, the management of the organization focuses on choosing the partnership level that has been appropriate for that specific supply chain.

The business processes of supply chain- Successful SCM mainly need change from supervising the functions of individual to incorporating activities into processes of supply chain (Estampe et al., 2013). The business processes mainly requires flow of information that in turn aids in creating the flow of best commodity.

The management components of supply chain- There are nine components of SCM that includes-management procedure, company’s structure, planning and controlling, leadership structure, goods flow structure, reward structure, structure of work, business culture, attitude of employees and information flow framework.

Figure 1:Framework of supply chain management

Source: (Huo, 2012)

The framework used for determining the suitable supply chain for Sadafco is SCOR (supply chain operations reference model). This model illustrates the business procedure that is required for satisfying the demand of customers. In addition, this framework mainly focuses on the five key supply chain areas that includes – planning, sourcing, making, delivering and returning.

Planning- This step includes planning of demand and supply of products. The elements involve balancing resources according to their needs and communication within the process.  This plan includes determination of business rules for improving the efficiency of supply chain.

Optimization of Supply Chain using QAD DSCP

Sourcing- It illustrates sourcing infrastructure as well as material acquisition. It also explains management of inventories, suppliers network and performance.

Making- It reflects activities of production, packaging, product staging and launching. It also involves managing manufacturing network, services and transportation.

Delivering-This area includes warehousing, order management and transportation.  It also involves transportation, requirements of import as well as export, commodities life cycles and management of inventories.

Returning- This involves management of assets, inventory, transportation, business rules and other regulatory requirements.

Figure 2: Supply chain diagrm of Sadafco

Source: (As created by author)

The above framework illustrates the supply chain diagram of sadafco orgamization. Technically, the supply chain begins at producing raw milk from the direct inputs to the dairy animals and them moving to their dairy farms. This raw milk is then purchased by sadafco’s milk buyers, which is then processed by the dairy processors of sadafco. This dairy processors then pasteurizes the liquid milk that results in yoghurt, milk powders, juices etc. After that it is transported to their dairy factories for processing cheese, butter and other dairy products. Then it passes on to the distributors for selling these dairy products to the customers.

As the supply chain of the companies has become complex in recent period, it becomes critical for Sadafco in managing the whole supply chain network for optimizing their business performance. Optimization of supply chain refers to the application of processes that facilitates in ensuring the operation of production as well as distribution of product supply chain.  This mainly includes optimal inventory placement within the process, reducing cost of operation etc. This organization implements technology for optimizing their supply chain. This company invests in technology in order to track their resources and improve the automated processes.

Sadafco selects QAD DSCP (Demand and supply chain planning) in order to improve their forecasting and optimizing their supply chain. QAD is one of the leading providers of software as well as services that has been designed for production organization in the global market. It provides the organization with enterprise applications, ERP (enterprise resource planning) system that aids in supporting their operational needs that includes financial, production, buyers management, planning of demand and supply chain, process management of business and business intelligence. These enterprise applications offers flexible deployment framework in the business environment.  It also improves their production, distribution and marketing process of wide variety of commodities in those regions where they operates. QAD DSCP basically consists of various solutions that includes planning of demand, manufacturing, distribution and procurement. It has been noted from the recent study that QAD DSCP helps in reducing cost as well as inefficiency in the process of supply chain. This company implements QAD’s application in order to improve their business process and their supply chain. This organization initially adopts demand planning in their business for optimizing their processes.  This organization chooses this DSCP for the given reasons that includes-

• QAD DSCP usually offers comprehensive solution to the company
• It also helps in integrating with the existing QAD ERP as well as with their van loading system
• The food industry of QAD is experienced
• This QAD DSCP is flexible and hence helps in meeting the company’s requirements without customization

The Impact of Supply Chain on the Environment

This implementation of QAD DSCP allows the organization in managing their inventories in better way, improving their level of customer service, reduce their lead time of makeup order and improve their promotional profit. It also facilitates in improving their communication with their suppliers that leads to decrease in their purchasing cost. However, it also aids the company in delivering their product at right place in less time.

It is well known that the cost of supply chain adversely affects the environment. Therefore, delivering the products efficiently helps in reducing their carbon footprint in the environment.  Several environmental affect from the supply chain includes toxic waste, biodiversity loss, long term ecosystem damage, water pollution, deforestation, risky air emissions and greenhouse gas emission.  This organization with the initiatives of sustainability works with their suppliers in identifying the pollution sources and waste for discovering preventive measures. This environmental impacts adversely affects the demand and supply chain planning aspect of this organization. The demand of the product depends on the climatic conditions as the consumers flock outdoors. Increase in demand for product owing to weather conditions influences the organizations supply chain through reduction of inventories as well as creating challenges that the sellers tries to meet. In addition, the supply of goods becomes restricted due to this harmful environmental impact as the adverse weather impacts production of products (Chopra & Sodhi, 2014). The toxic waste that has been caused due to supply chain kill the crops , which  in turn affects the health of dairy animals and this results in poor quality of raw materials. Moreover, it also creates delivery issues from distributors to retailers. As a result, the shortage in supply of goods occurs due to this inconvenience of transportation and reduced production.

This organization is mainly based on IDI (Interfirm demand integration) process. IDI process refers to the systematic coordination of functions that is consumer focused and tactics used in the process of supply chain. It main purpose is to improve the financial performance of each organization and whole of its supply chain. (Rushton, Croucher & Baker, 2012) This procedure mainly consists of three activities that are being coordinated between the trading partners that includes demand management, demand planning and collaborative forecasting.  Each of this helps in improving the performance of supply chain.

Demand management- These activities are applied for creating demand in order to optimize product supply. This might include various forms namely- exclusive goods, packaging as well as bundling options. Brand promotions etc,

Interfirm Demand Integration (IDI) Process

Demand planning- it refers to the coordination of dependent flow through organization in supply chain. Therefore, dependent demand refers to the demand for materials that has been taken from customer demand for any particular commodities.

Collaborative planning- it refers to the  exchange of information among the trading partners for developing single shared demand projection.

The implementation of this process revealed the direct relationship between incorporation of activities in business and enhancing performance of supply chain.

Figure 2: Framework of IDI process

Source: (Rangel, de Oliveira & Leite,2015)

There are some key supply chain issues including alliance, transportation, storage and financing that creates problem in their supply chain operation. Transportation plays significant role in the supply chain that aids in providing the movement of commodities. As dairy products have short life span, transportation has become major problem in the supply chain. In addition, distance of delivery route also creates problems in customer service as well as the cost of transportation. Strategic alliance refers to the agreement among the parties for pursuing upon the objectives that is required by the business (Prajogo & Olhager,, 2012). This alliance involves transfer of technology or access to expertise, shared risk as well expenses and specialization in the economy. However, the partners might provide alliance with some resources that includes commodities, manufacturing capability, funding of project, capital equipment and intellectual property.  This might create problem of congestion in the organization while technology and expertise transfer might adversely affects the product quality and total productivity. Storing milk and dairy products at right temperature helps in keeping the products fresh. If the storage is not done at right temperature, then it affects the quality of dairy product and this in turn dissatisfies the customer (Rangel, de Oliveira & Leite,, 2015). Flow of finance within the supply chain helps the organization in reducing total cost of production of dairy products. But it might create problem in the supply chain management if the flow of finance is improper.

Supply chain of Sadafco continues its function in sourcing, buying, transporting, storing unprocessed materials and packaging materials that has been required for domestic production of this organizations’ product (Seuring, 2013). The proposal plan for implementing new supply chain to Sadafco is explained below:

• Firstly, the collection of raw materials should be monitored with the implementation of new technology and then should be transferred from firm to the factory
• Then the planning should be done for the total quantity of dairy products to be manufactured according to the consumers demand.
• The milk that is sent to the factory should undergo some processes that include chilling as well as processing of raw milk.
• While manufacturing the products, the activities must be scheduled and the product quality must be measured
• In order to keep the milk as well as the milk products fresh, the company should transport these products through refrigerated vans, insulated tanker vans etc from one region to another.
• These processed products should be delivered by coordinating order receipt and developing warehouses to the retail markets. The product then reaches to the customers from this retail market.
• The company should create the network with the help of new information technology in order to receive defective commodities and gather feedback from customers. This stage also helps in developing new product according to the preference of their customers.

The three basic functions of the organization supply chain includes procurement, planning operations and logistics. However, investment in plant and equipment facilitates in improving productivity as well as performance of the supply chains. This investment in technologies enhances the return on investment (ROI) of the organization. Automatic milking system (AMS) is basically the robotic systems that helps the company in organizing the whole milking process. In addition, it reduces the workload of the workers due to implementation of equipment in the company. The cost of production reduces and quality of product improves due to adoption of equipment (Stadtler, 2015). Moreover, it also minimizes adverse environmental affect and satisfies the customers in providing the product at right time. As a result, it utilizes the resource in proper way and improves the efficiency in supply chain operations.  The sources of finance in the supply chain are also termed as supply chain finance. These includes letters of credit, trade loans, bills collection, bank guarantees etc where the customers are usually given the time period for paying for the products that has been supplied to them.

There are various measures of financial performance including- liquidity, profitability, financial efficiency, solvency, working capital etc. Liquidity refers to the measurement of firms business ability for meeting the financial obligations without disrupting the existing business operations. Liquidity of the company is measured by current ratio as well as working capital. Solvency measures total amount of capital borrowed that has been utilized by the company. It is mainly concerned with short-term as well as long-term liabilities and assets. It is usually measured by debt-to asset and equity- to asset ratio. Profitability refers to the total amount of profit generated by business from the production factors such as management, labor and capital. ROA( rate of return on assets of firm), operating profit margin etc are some of the profitability measurement. Financial efficiency measures the efficiency degree in utilizing labor and capital. Asset turnover ratio, depreciation expense ratio are few measures of financial efficiency. Proper implementation of supply chain management enhances the competitiveness of supply chain through coordination of activities (Huo, 2012). The function of supply chain affects the working capital of the organization. This means that sourcing as well as delivery time, bad debt, predicting accuracy, change in exchange rate etc creates problem in supply chain and this in turn influences their financial performance. In addition, lead time, product quality and returns, stock out, inventory and transportation cost , packaging cost also affects the company profitability level (Wagner, Grosse-Ruyken & Erhun, 2012)

The basic purpose of management of stock is to enhance the profit of store by ensuring that stock levels are available in the store every time.  The following recommendations on control policies for the items of stock will help Sadafco in expanding their business in the global market. These include-

• The management of Sadafco must establish stocking policies annually and must set optimized safety level of stock and inventory level
• The company must plan as well as evaluate the range of their product for meeting the requirements of the target market
• Each store must vary in procedures and technology that is mainly used  for controlling stock. However, it is recommended that Sadafco must implement new systems that will provide unit control, dollar control and manage inventory.
• The management of Sadafco must keep documentation of stock in order to monitor it in the store (Wisner, Tan & Leong, 2013). These documentation will help the company in identifying the present state of inventory in store with regards to – fast or slow movement of stock , damaged stock and stockturn. In addition, the company should also interpret the information of stock in a report in order to enhance the operation in the store.

Conclusion

From the above report, it can be concluded that Sadafco has good position in the marketplace. The mission and values of this organization reflects that it is mainly focused on ethical business operation, which not only improves its value of shareholder but also manufactures commodities that benefits their customers. Additionally, internal assessment also highlights that the supply chain operation of this organization is better as compared to other dairy firms in this nation and hence shows good leadership structure. This company has managed in creating the business culture that focuses on positive business values. Although this organization faces huge competition from other rivals, their business strategy helps them in gaining competitive advantage in the marketplace. Furthermore, the proposal plan for implementation of new supply chain to this organization might improve their supply chain operations and enhance their financial performance. Selection of DSCP is appropriate as it helps them in optimizing their supply chain. The implementation of new technology improves their supply chain operations and hence enables them in overcoming the challenges from external environment.

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