Discuss about the Supply Chain Management for Saudi Electricity.
The aim of the report is to analyse effective supply chain management for a Middle East company. Saudi Electricity has been taken as case study. This company generates, transmits and distributes electric power in Saudi Arabia (Se.com.sa, 2016). This company tries to keep good relation with its partners, customers and the suppliers. Supply chain management practice becomes complex while maintaining large scale of operation (Christopher, 2016). Effective supply chain management improves performance of the organisation. Due to uncertainty in business environment, supply chain management has been challenging for the organisations. Hence, possible challenges that may be faced by Saudi electricity are discussed in this report.
Considerations in creating effective supply chain management
Supply chain of Saudi Electricity Company is as follows:
Figure 1: Supply chain of Saudi Electricity Company
(Source: Stadtler, 2015)
Choosing right supplier
Identification of effective supplier is important aspect of supply chain management. Right supplier increases Company’s sourcing leverages and provides an opportunity to the company to evaluate alternative suppliers across the geographical area. There are several ways that can be followed by the company. In the view of Seuring (2013), traditional method of choosing suppler is tedious and time consuming. Hence, use of sourcing tool may be effective to engage with the suppliers. These tools set some parameters for choosing right suppliers.
Supplier on boarding
Availability of information and knowledge is essential for effective supply chain management. As stated by Barney (2012), supply on boarding is the process to equip potential suppliers with required knowledge and behaviour for effective supply chain management. The supplier is required to submit documents and certificate regarding company registration, insurance and quality certificate. Rushton, Croucher & Baker (2014) opined that automating on boarding process is less costly and less time consuming.
Inventory of Saudi Electricity are raw materials, cash and others. As mentioned by Yue, You & Snyder (2014), effective management of inventory optimises the supply chain. Bullwhip effect is seen in the supply chain. Bolstorff (2015) stated that due to this effect, variability in demand increases with moving up the supply chain. This process can distort information flow through the supply chain. Bullwhip effect increases supply chain inefficiencies. As the consumer demand is not stable, businesses keep a certain level of inventory to meet consumer demand while moving up the supply chain from raw material supplier o the consumers.
Use of technology
Development of technology enables Saudi Electricity to get information easily with in supply chain. Technologies are helpful in coordinating different activities of supply chain such as customer relation, supplier relation, production and distribution. Computer, data recognition equipment and communication technology help in supply chain management. Technological development adds competitive advantage to the company through electronic data interchange. Technology improves customer services recording electricity usage by different customer groups. Payment of electricity bill, providing several information such as change in company rule, offers become easier through use of technology (Christopher, 2016).
Collaboration with other companies is effective in supply chain management. Partnership with other firms regarding finance, supply of raw materials and marketing support are helpful for improving supply chain management of Saudi Electricity. Saudi Electricity tries to maintain good relation with the partners by preparing a code of document for both the company and the partners. This document includes property rights of the company. This company provides shared services to all subsidiary company through service level agreement (Se.com.sa, 2016).
There are other aspects in the company which are required to consider for effective supply chain management. Those aspects are accurate market analysis and demand forecast, undertaking development strategies, internal strength, weakness and, opportunity analysis, plan executive strategy (Bolstorff, 2015).
Figure 2: Supply chain management strategies
(Source: Bolstorff, 2015)
Disruption in supply
Electric supplier such as Saudi Electricity may face disruption in electricity supply due to natural disasters. Supplies are needed to shut down at that time, which causes loss in business. Therefore, this company needs to find alternative supply sources in order to ensure business continuity. Possible challenge that can be faced in this case is taking long time to build up relation with the prospective supplier. It is a cumbersome process to validate an evaluate supplier (Rushton, Croucher & Baker, 2014).
Qualification of suppliers
If unscrupulous suppliers of raw materials enter into the supply chain, there will be question regarding quality of service to the consumers. Moreover, chances of wastage increase along with the increasing cost (Yue, You & Snyder, 2014).
The company may face inventory management cost in terms of capital cost, storage space cost, inventory service cost. Moreover, installing new technology for improving supply chain management increases cost of operation of the company. This may impact the pricing policy of the company. Change in price can affect the demand for electricity for this company (Barney, 2012).
Implementation of supplier management solution can be a solution to overcome challenges regarding choosing right suppliers. The sourcing team of Saudi Electricity needs to be careful about the fraudulent suppliers supplying substandard raw materials. It is recommended to Saudi Electrics to keep transparency for efficient supply chain management. Continuous improvement is required for the SCM.
The report has analysed several aspects of supply chain management of the chosen company. Saudi Electricity supplies electricity all over the Saudi Arabia. Hence, it has monopoly power in this country. Supply chain management practices improve operational efficiency of the company. Relations with supplier, customers and other partners are important criteria for the supply chain management. The company may face several challenges during SCM. Challenges and possible recommendations have been discussed in this study.
Barney, J. B. (2012). Purchasing, supply chain management and sustained competitive advantage: The relevance of resource?based theory. Journal of Supply Chain Management, 48(2), 3-6.
Bolstorff, P. (2015). The Seven Principles of Effective Supply Chain Planning. Apics.org. Retrieved 6 December 2016, from https://www.apics.org/sites/apics-blog/think-supply-chain-landing-page/thinking-supply-chain/2015/05/20/the-seven-principles-of-effective-supply-chain-planning
Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.
Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
Se.com.sa. (2016) Corporate social responsibilities. Retrieved 6 December 2016, from https://www.se.com.sa/en-us/pages/corporateresponsibility.aspx
Seuring, S. (2013). A review of modeling approaches for sustainable supply chain management. Decision support systems, 54(4), 1513-1520.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.
Yue, D., You, F., & Snyder, S. W. (2014). Biomass-to-bioenergy and biofuel supply chain optimization: overview, key issues and challenges. Computers & Chemical Engineering, 66, 36-56.