Supply Chain Integration
Supply Chain Integration
As a market leader in the fruit drinks industry, Delicious Fruity Company (DFC) offers fresh juice, long life fruit juice and juice concentrates to the consumer market. It has been establish in year 2001 located at Butterworth, Penang and with 12 years of experience, Delicious Fruity Company serve their consumers with the highest honour by practise continuous improvement and innovation in the fruit production process.
The vision of Delicious Fruity Company is ‘To become one of the leading company in fruit beverage manufacturers and develop healthy and high quality products to serve our customers. ’ There is a wide distribution of network that enable customers to purchase fruit juice and juice concentrates of Delicious Fruity Company as the company situated their products in the most biggest supermarket in Malaysia which they are Tesco, Giant, Carrefour, Sunshine , Aeon, Jusco , Pacific and Econsave.
The main consumer market that is target by Delicious Fruity Company is consumers in Malaysia which Delicious Fruity Company concentrate on local distribution channel. Description of Product According to The Times of India, benefits of drinking fruit juice such as oranges will keep your skin glow and keep you away from cold. Besides that, fruits juice contains essential nutrients that is much higher than a meal normally consumed by an individual.
Delicious Fruity Company formulates fruits juices, long life fruit juice and juice concentrates that is high in nutrients and also quality as a promise to their customer where they think of quality, they will think of Delicious Fruity Company. They use fresh oranges, apples, lemons and etc. to extract the natural flavour of the fruit which there is no artificial flavouring used in the process of formulating the fruit juice and juice concentrates. This would reflect the safety of ingredient used by Delicious Fruity Company as it is insured from excessive use of chemical in their products.
Problem Statement As mention before, Delicious Fruity Company use the extraction of fruits to transform the unprocessed fruit juice to become long life fruit juice. The main raw material that is largely used by Delicious Fruity would be fresh fruits like oranges, apples, lemons, grapes and etc. Repeated ordering from local growers below a significant time would likely to raise the cost of ordering, shipping and holding of fresh fruits and also the availability of materials which is always a major issue for Delicious Fruits Company.
However, in the last two years, General Manager of Delicious Fruity Company, Ms Serena had come out with a plan which raw material would be order in bulk, which this idea would effectively help to brings down the figure of cost of ordering and shipping, ensure the availability of raw material but it would cause an increase in holding cost as those raw materials were about to keep under Delicious Fruity Company’s warehouse and facilities like huge refrigerator would have to be ready for the arrival of those fresh fruits.
The benefit of the decision seems to be higher than the cost of the decision which in the end, Delicious Fruity Company started practice Ms Serena’s plan. Economies of scale would sound pleasant to Delicious Fruity Company but there is a serious problem arise from this decision which this approach creates overstocking problems, and as those fresh fruits are perishable commodities, the issue transform from bad to worse as the fruits lifespan ends. Proposal of Solution
Nowadays, corporation with supply chain partners seems to be a new and better option for most of the company to run their businesses. The problem faced by Delicious Fruity Company would be able to be solve by using some of the strategies in supply chain integration which they are cross docking, collaborative, planning, forecasting, replenishment (CPFR) and joint product development. These strategies would be explain in details in the following paragraph.
Cross Docking As cost of holding and handling materials is quite expensive which Delicious Fruity Company is not just pay for the rental of warehouse but they also pay for other overhead cost such as utilities of warehouse, insurance of raw materials and etc. Cross Docking would help to reduce this cost to minimum which cross docking is the practise of loading goods from an incoming truck and shift the goods directly in to another truck, trailers or rail cars.
It is a combination of shipment and warehouse are not function as a storage house but it act as a distribution centre that receive shipment in bulk and break them into specific packaging and then send them out immediately to the manufacturer. As a fruit beverage manufacturing company, raw materials of Delicious Fruity Company are mostly perishable items which they are better suited to cross docking than others. Cross docking will ensure the freshness of those fruits that needs to be process.
As the fruits needed to be kept in wooden crates and held in refrigerated cool rooms which the time required to be stored would decrease the lifespan of those fruits, therefore, fresh fruits is essential for Delicious Fruity Company which with this, ordering in large quantities and in large volumes would not work. The benefit that comes with this strategy would be cut down the time from the beginning of production which raw material could be deliver in a short period of time and the finished goods would be able to send out to customers faster which would keep the freshness of the fruit juice that brings out customer satisfaction.
But to really implement this strategy, Delicious Fruity Company need to understand the demands in the market so that forecast would be carryout and accurate estimation of needs in the market would provide sufficient information to those local growers so that the quantity of each shipment can be send correctly and also the freshness of those fruits would be ensured. Joint Product Development One of the reasons that causes the General Manager, Ms Serena to make the wrong decision is because of insufficient information regarding Delicious Fruity Company.
Ms Serena fail to make forecast of the market demand and focusing on only cost effectiveness and left the most important issue behind which is the equilibrium of the consumer market. Joint product development is an alliance between two or more parties in the supply chain. Delicious Fruity Company could implement this strategy with their retailers as retailers understands more on how consumer behave, this is because of retailers are the one who have daily contact with the final consumers and they share some of the customers’ preference by better understanding and keep up-date the consumers’ behaviour.
With the help of Delicious Fruity Company’s partners such as Tesco, Giant and etc. Delicious Fruity Company should be able to forecast the demand of fruit juice beverage more accurate than before. Collaborative, Planning, Forecasting, Replenishment (CPFR) This strategy facilitate the demand forecasting process which the demand patterns and plan promotion activities for product were run cooperatively with supply chain partners. As CPFR not only just forecasting market demand and doing logistics stuff to help a firm, instead, it proactively articipate the whole process of business between the firm and its supply chain partners. For Example, may be the reason for bulk ordering to be fail is not cause by the inaccurate of forecasting market demand, but it is cause by the economic crisis that hits the consumers. Hence, if CPFR is about to implement, suppliers of raw materials would help in decreasing the price of fruits and the retailer of the company would introduce promotion to the final consumers so that the market demand would not fall too sharply from normal season.
There is a few steps that need to be followed while implementing CPFR which the first step would be Front-end agreement where participating company such as those local growers and retailers such as Jusco, Tesco agree to confidentiality and dispute resolution processes, develop a scorecard to track key supply chain metrics relative to success criteria, and establish any financial incentives or penalties.
The second steps would be joint business plan where suppliers, retailers and also Delicious Fruity Company develop plans for promotions, inventory policy changes, store openings and closings, and product changes for each beverage category as to adopt the changes brought by CPFR. After that, retailers such as Tesco, and Delicious Fruity Company share consumer demand forecasts, and identify exceptions that occur when the plans that design do not match, or change dramatically. Delicious Fruity Company and their retailers resolve exceptions by determining causal factors, adjusting plans where necessary.
This process is known as sales forecast collaboration. The next steps would be order forecast collaboration, which Delicious Fruity Company and its retailers and also raw material suppliers share the replenishment plan that had been design collaboratively with the retailer and then identify and resolving exceptions that would altered the initial plan. Finally, Order generation or delivery execution will be performed and the results from database of the retailer such as point of sales (POS), orders, shipment data and etc. s widely shared among supply chain partners. This would resolved the issue that mention before by this paper such as forecast accuracy problems, overstock or understock conditions, and execution issues. Challenges of Implementing Supply Chain Integration Although supply chain integration had been recognized as a successful strategy to manage the problem face during the operation process from a manufacturer to a retailer, however, there are issues and challenges that face by most of the industry to perform supply chain integration.
Delicious Fruity Company need to overcome some of these barriers so that the implementation of supply chain integration would be successful. Trust would be the first element that a Delicious Fruity Company had to keep practising once the firm went into a supply chain integration which with if Delicious Fruity Company do not keep in faith in their suppliers, they will be unwilling to share data with their suppliers. In the end, the supply chain integration would not be able to perform.
As a company is about to implement new policy, some stages of changes within the company will be required. As Delicious Fruity Company will implement this new strategy in the future, the management personal should consider the adaptiveness of the firm upon the implementation of new strategies. Besides that, there will be an increase in interdependency as Delicious Fruity Company engage in supply chain integration which suppliers, retailers and the firm are dependent on each other to survive in the market place.
Yet, this interdependency would rise another issue which in reality there will be one or few parties or stakeholders in supply chain would better off and they enjoy the supply chain integration strategy the most, this situation been known as uneven partner benefit which Delicious Fruity Company needs to tame their emotion while they face such kinds of situation in reality. Lastly, most of the supply chain integration strategies requires extensive information technologies which Delicious Fruity Company need to equip themselves with hardware and software that is needed to implement a brand new supply chain integration policy.
This would actually means that Delicious Fruity Company needs to allocate a large amount of cash flow as the restructuring cost that will be invested into the relationship with their supply chain partners. Conclusion Implementation of supply chain integration by Delicious Fruity Company is needed in order to keep up with its company vision which is ‘To become one of the leading company in fruit beverage manufacturers and develop healthy and high quality products to serve our customers. This is because of supply chain integration create more value for Delicious Fruity Company and also its customers, which can create stronger attraction for its products and services as extra competitive advantage. As stated in this proposal, where some of the practise of supply chain integration may lead Delicious Fruity Company to a better platform of serving their customers. But obstacles that faced by Delicious Fruity Company need to be overcome so that the successfulness of implementing supply chain integration strategy would be ensured.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 4 November 2016
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