1 Introduction
This is a case study report of Supply Chain Strategy―Austral Products. The purpose is to evaluate Austral Products’ current logistics and supply chain strategies and practices, review operations of APG group companies and then generate possible changes, adjustments to strategy, structure and systems after analysis and investigations. And, explains the reasons, rationales behind for the recommendations.
This assignment is a realistic exercise of supply chain practices in modern business. It helps to identify embedded problems in logistic operations and devise changes and recommendations to tackle encountered difficulties.
2 APG Introduction
Austral Products Group (APG) consists five brand companies producing household commodities. The main market of APG is located alone the southeast coast from Brisbane to Adelaide, plus Perth on the west coast and Auckland in New Zealand. The five brand companies are:
2.1 Austral Pharmaceuticals
Austral Pharmaceuticals produces non-prescription products and is the national “own label” chain market in Australia. Products are manufactured in Perth and shipped and distributed by a local logistic company directly delivering to major retail chains on favourable rates. It is looking forward to expand its business to Southeast Asia over the next three years.
2.2 Lord Cosmetics
Lord Cosmetics manufactures personal care products such as shampoo, soap cosmetics. It is located in Sydney with its own national distribution network, intercity and local delivery vehicles and distribution centers and warehouses. However, because of the new development plan from governmental authority, Lord Cosmetics has to move to other places within a reasonable time frame. Lord Cosmetics practices good JIT or almost JIT operations. But one of its key raw material suppliers in Europe failed several times to provide on time, in specification delivery and caused the whole manufacturing line discontinued. Perhaps it is because of the tiny amount of the supplier’s global market share, which cannot draw enough attention from the supplier.
2.3 Kleen Rite
Laundry detergent, scouring powder and dishwashing liquid are major products of Kleen Rite. Kleen Rite is located in the vicinity of Melbourne. Two small warehouses are leased, one is 25 km from Melbourne and the other one is 200 km north of Melbourne. A family-owned transport company provides hourly-rated service to Kleen Rite customers. The major suppliers of Kleen Rite are in Victoria and Queensland. Close to JIT operation is also implemented in Kleen Rite.
2.4 Flash
Flash is in Brisbane and producing auto care products like polishes, waxes and detergent. It recruits four small transport companies to serve its customers throughout South-Eastern Australia. The company has patented a new formula for car body protection recently and expected to introduce to outside of South-Eastern Australia as well.
2.5 Pure Light
Pure Light has been a part of APG for about 5 years. It is a successful company manufacturing and importing of natural household and personal care products. It is considered to be potential because the popularity of natural and organic products. The low business costs in New Zealand and the CER tariff free agreement between Australia and New Zealand make this company more competitive and promising. It is hoping to explore more business through online joint venture in the future.
Figure 1 and figure 2 are maps of Australia and New Zealand to demonstrate a clearer picture of geographic location of cities, provinces and areas of APG’s business extent.
Figure 1: Map of Australia
Figure 2: Map of New Zealand
3 Strategic Changes In Supply Chain Management
Presently, APG is a group company consists of several brand companies scatters in Australia. Geographically it has companies, warehouses, factories and distribution centers in Sydney, Melbourne, Brisbane, Perth and Auckland. Each brand company has its own factories, logistic channels and transport carriers. They even have fairly duplicate, overlapped managerial structures inside each individual company.
Needless to say, it is money wasting and inefficient. APG should make a full-scale adjustment in structure, logistic strategy, relocation and rearrangement of its factories in order to serve customers better. Integration of current resources and elimination of overlaps are the key issue.
3.1 Organizational Structure Change
Currently, each brand company in APG has its own management and operates separately. For example, Austral Pharmaceuticals has a general manager, a finance manager, a human resource manager, a manufacturing manager, an IT manager and a sales/marketing manager. Similarly, Lord Cosmetics also has supply chain manager, finance, human resource and sales/marketing managers. Same job functions and organizational structures appear in Flash and Pure Light. This phenomenon is totally unnecessary. It has too many overlapped structures. Since the uniformities of household products of APG and most overlapped managers and departments are doing similar jobs. APG should integrate 5 separate management teams and organizational structures into one. One manager in each department is responsible for operations in five companies. The adjustment of structure should be made like figure 3 shows.
Figure3: APG Organizational Structure Adjustment
This structure is leaner, more efficient and most importantly, cost efficiently. APG does not need laminated structure.
3.2 Facility Relocation
Each company in APG has its own factory, distribution center, warehouse in most major cities of Australia. Some companies even will be enforced to move by local authorities because of municipal development. Since APG’s markets are contained within 200 kms of the eastern and southern coastline of Australia plus Perth in the west and New Zealand across the ocean. It will be advantageous to move all factories, warehouses, distribution centers etc. to New Zealand for the following reasons:
3.2.1 Cost
Lower business cost in New Zealand is the greatest advantage to APG. Move all facilities from Australia to New Zealand would save remarkable money due to lower cost compared to in Australia.
3.2.2 Tariff-free Agreement Between Australia and New Zealand
Trade between Australia and New Zealand is tariff free under the CER agreement of both governments. Therefore, moving all facilities from Australia to New Zealand will not increase any cost on tariff. APG can use this as a privilege to manufacture products in New Zealand, which enjoys lower costs and then shipping and selling all goods to Australia for greater profits.
3.2.3 Integrate Distribution and Transportation Network
Since Lord Cosmetics has its own national distribution network which consisting of intercity and local delivery vehicles. It is a good idea to expand and enhance this distribution network and its capability for other brand companies. Then terminate the contracts with those small, private and locally operating logistic providers. Strengthen this national network and integrating into one logistic carrier for whole APG members will increase effectiveness and reduce cost further more.
3.2.4 JIT Operations and Integrated Purchase
Some brand companies of APG have implemented JIT or close to JIT operations in supply chain and logistic activities. For example, Kleen Rite measures supplier performance in terms of on time or before the date requested delivery. Lord Cosmetics also intends to practice JIT operation for mechanized production strategy and reduced floor space for storage and raw material awaiting time in spite of some suppliers sometimes cannot meet its requirements. Nevertheless, JIT operation is worth to implement and uplift throughout all brand companies. APG should make continuous efforts to promote JIT strategies and operations for rapid market response and better customer services.
One possible reason of JIT supplies failure may be the APG is barely counted a fraction of its crucial suppliers, because each brand company has its own suppliers and the supply channels have never been integrated. They all operate individually and separately. If APG can unify its purchase actions and integrate all resources to negotiate; APG will gain many bargain chips to have a better deal with its suppliers. Better services, JIT and uninterrupted, reliable, stable and on time deliveries may be achievable from suppliers.
Figure 4 below illustrates the change concept of recommendations.
Figure 4: Recommendations of Integration.
4 Conclusion
Modern businesses need streamline and flat type organizational structures for effectiveness and efficiency. Supply chain and logistic management also requires integrated systems and partnerships with suppliers, transporters and distributors.
APG is a group company comprises 5 brand companies producing household products. Since their products, manufacturing processes, materials procurement and market targets have great similarities and organizational structure overlaps. Downsize and trim down the organizations, simplify job functions, eliminate duplications, reduce overlaps and integrate available resources will be the strategy and direction to strive for.
Credit:ivythesis.typepad.com
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