Critical assessment of the strategic supply chain management practices

1. Introduction:

In recent years, different trends have emerged in supply chain management (SCM), like globalization of market economies, digitalization, shortened product lifecycles, and sophisticated customer expectations, together with other developments such as stricter regulatory requirements, scarcity of resources, and a more long-term focus. The impact of these trends is the high evolution of the supply chain sector into a more complex sphere. Thus, consideration of environmental and social responsibility issues within the context of the supply chain is now crucial for the sustainability of organizations together with their supply chains. The reason is that companies are now being held more accountable for their activities in relation to the effects they have on the society and economy of their businesses, together with the impact of supply chain participants. Furthermore, in order to be competitive and sustainable, their products must be made available to the right customers at the right time, price, and location while meeting environmental demands.

Furniture Village Africa (FVA) understands the importance of strategic supply chain management. A family company that was founded in 1980 with operations cutting across 10 countries in West Africa, the company has built its success on the following corporate strategies: 1) emphasis on providing low-cost home furnishings; 2) adoption of innovative designs, cost-cutting measures, a global supply chain strategy, and closer relationships with customers and suppliers; 3) enhanced shopping experience facilitated by improved price, range, ambience, layout, and facilities to differentiate their products and gain a competitive edge; 4) reduced carbon footprints through the adoption of renewable energy in response to global preoccupation with climate change.

In view of the above, this research was developed to conduct a critical assessment of the strategic supply chain management practices adopted by the company to create a sustainable competitive edge and an evaluation of four areas of supply chain operations in the company.

2. A critical examination of strategic supply chain management practices for gaining a competitive advantage

In view of the case study under analysis, the company has employed different strategic supply chain management practices in the course of developing its competitive edge. As discussed below, these measures

2.1. Outsourcing and global sourcing

The case documents that the company’s supply chain development started 10 years ago as it sourced products from Asia. With the resources coming from Asia, the company is able to turn out quality products, and it helped it expand its global reach with both sales and purchases across major cities in West Africa. Presently, it runs 33 distribution centres and 11 customer distribution centres that supply goods to the company’s retail stores. There are also 20 trading service offices that are owned by the company and service its markets across Africa.

In a discussion, Madhani (2019) looked at global sourcing and outsourcing as strategic supply chain management practices used in developing a competitive edge. Companies should aim to keep their customers satisfied by offering products and services that meet their needs, which entail sourcing raw materials from the right sources and outsourcing operations that the company is not competent enough to handle (Madhani, 2019). However, arguments have also been raised in this context, with some scholars viewing outsourcing as an impeding competitive edge because the company is dependent on others and they might not be in full control of the entire process (Olsen et al., 2014; Christopher, 2011; Sundaram et al., 2010; Terlunen et al., 2015; Simona and Gómez, 2014; Sreedevi and Saranga, 2017).

2.2. Inventory control

While the above discussions highlight potential issues with global sourcing and outsourcing, FVA made the conscious decision to run a relatively small range of products. It is able to maintain its supply chain. With expansion, the company’s success was linked to its ability to control and coordinate its entire supply chain. Therefore, the company was not affected by these issues because of its quality supply chain management strategies.

One of these supply chain management efforts is the relocation of its manufacturing activities to the emerging low-wage countries that were predominant in Asia, with the resulting influence being a significant reduction in the number of suppliers, creating internal competition among its purchasing teams in different countries, and eventually acquiring a manufacturing company in Ghana in 1991.

Speaking on internal competition among suppliers, Merschmann and Thonemann (2011) stated that it leads to enhanced product quality because these suppliers fight to become the most trusted in order to win more deals – and the only way forward is to turn out the best products for companies. Therefore, the adoption of this measure is a significant one for the company because it helped the company expand its operations, effectively and efficiently satisfy customers, and eventually create a sustainable competitive edge.

To further advance its supply chain management, the company moved to automate the supply chain. The resulting impact was better inventory management, enhanced effectiveness and efficiency of the chain, and improvement in the company’s financial performance.

2.3. Creating a competitive advantage

As time passed on, the company was able to transform itself from a functionally-oriented to a process-oriented organization. By adopting global sourcing, outsourcing, and supply chain management strategies, the company is able to offer products that meet the exact needs of customers at a reduced price. The resulting impact is enhanced sales because these products are affordable and of good quality. Another source of competitive edge for the company is that it offers a wide range of furniture for living rooms, bedrooms, kitchens, and children’s rooms. All of the company’s retail stores have restaurants that offer different choices of organic-local dishes and a play area for the children. The result is customers that are extremely satisfied with the products as well as services they access at the company’s retail stores. The company is also clear that it has the necessary financial muscle to expand its business operations and that the resulting impact will be sustainable as well as enhance its competitive edge.

Discussing the impact of SCM on competitive edge, Dittmann (2012) stated that it does not end with creating the competitive edge as the company will also need to work on sustaining it. To sustain this edge, the company has provided an ambient environment for customers across its retail outlets and adopted environmental sustainability practices to ensure that their operations do not result in a negative influence on the environment.

3. Assessment of four major areas of supply chain performance

3.1. Business Operations

One major highlight in the company’s operations is that its supply chain is mainly make-to-stock with only a few products made available based on customers’ orders. The implication is that the entire supply chain heavily depends on forecasts. Traditionally, the regions and stores have had strong power and a high level of local freedom when it comes to planning and placing replenishment requests. The implication is that the supply chain is fragmented and comes with local optimization together with many manual interventions on many of the plans in the supply chain. On the same note, it was pointed out that, as a result of frequent shortage situations, some of the regions actually overestimate demand in order to guarantee delivery, and this has created a kind of imbalance within the coverage of demand. Essentially, some of the markets have had to experience stock-outs in the course of long-terms, while there are also other markets that have winded up with obsolete inventories. There is also a divergence of goals and a resulting lack of trust among the retail stores.

This is a big deal because while it has overstocked products in some regions and denied others the same products, the products will not end up being sold where they have been stocked, while customers in the areas with less stock will likely switch to other brands in order to meet their goals. To address these issues, the company moved to automate its supply chain, and this has resulted in enhanced performance.

3.2. Individuals

With automation comes the requirement for new skills. To ensure that the employees have the right skills needed to execute their new job descriptions, there have been a series of trainings organized by the company for them in countries like Russia, Bulgaria, and China on responsible forest management.

In terms of the suppliers, the supply volumes are divided between them based on a supplier matrix that determines the split of volume between different suppliers. This is further aided by the need for a planner who also addresses exception messages that might occur. A good example of an exception message that must be handled by the need planner is stock exceptions (low, high, stock-out, etc.), transport exceptions (late-in-transit), and supplier exceptions (capacity, commitment, and so on).

Finance (3.3)

The resulting impact of these new measures put in place by the company to address issues highlighted within its supply chain is improved financial performance. GHs135 billion was generated by the company in annual revenue for 2018, and this gave them enhanced financial muscle to expand their business opportunities as well as better meet the needs of their customers.

3.4. Client satisfaction

With the enhanced automation in supply networks as well as a clear plan for a sustainable environment, customers are increasingly satisfied. Their satisfaction mainly comes from the availability of quality products at a lower price. For instance, all their retail outlets come with restaurants and play areas for children, ensuring that the customers can have the best experience while shopping for their preferred products.

4. Recommendations:

The following proposals are justifiable in order to ensure that the company can actually create a true sustainable competitive edge with its SCM.

4.1. Business Operations

Automated inventory management: the warehouse should be linked to the retail stores. The need is for the company to know when products are being sold and, as such, effectively refill the products in their retail stores (Madhani, 2017a; Madhani, 2017b).

Sales-based supply network: it is recommended that all supplies should be based on sales, in which case, the more a retail store is selling, the more products it will receive. On the same note, the company can move products from stores with low sales to those with higher sales for leverage purposes (Madhani, 2017a; Madhani, 2017b).

4.2. Individuals

Training and development: As previously stated, automation necessitates the acquisition of new skills.Therefore, the entire supply chain should receive the right skills in relation to their role. This will ensure efficiency and effectiveness (Madhani, 2017a; Madhani, 2017b).

Additionally, the supply chain should be adequately motivated with commitment as well as appraisal measures from the company. This will result in improved performance, commitment, and dedication to duty (Madhani, 2017a; Madhani, 2017b).

Finance (4.3)

It is suggested that the company expand its market beyond the current 10 West African nations. This expansion will result in enhanced financial performance and profitability (Madhani, 2017a; Madhani, 2017b).

Additionally, the company should seek to diversify its business to meet the needs of more customers. Diversification is known for creating leverage opportunities because areas of high sales can leverage areas of low sales, eventually leading to sustainable performance (Madhani, 2017a; Madhani, 2017b).

4.4. Client satisfaction

Loyalty programmes: One thing the company can learn from IKEA (Madhani, 2017a; Madhani, 2017b) is the power of loyalty programmes. It can develop loyalty programmes to ensure repeat purchases by rewarding customers with different rewards based on their purchase investments and involvement.

Mass customization: customers’ satisfaction can also be enhanced through mass customization. In this case, the company should allow the customers to actually design their own products based on their taste (quality of material, colour, design, etc.). It is expected that this will lead to enhanced satisfaction from the customers' side (Madhani, 2017a; Madhani, 2017b).

5. Finally,

From experience, it has been demonstrated that with the right SCM strategy, a company can actually create sustainable performance and profitability. Furniture Village Africa (FVA) was able to do this by understanding its flaws and enacting necessary measures to address them. Basically, these measures revolve around automation, which leads to enhanced efficiency and effectiveness in the supply chain, with resulting improvement in the company’s performance as well as sustainability. However, it is recommended that in order to maintain and advance its present market position, the company should seek to expand its market and diversify its product offerings.

References

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