-Manufacturer or Distributor Storage with Consumer Pickup is the approach where inventory is stored at the manufacturer or distributor warehouse; however customers place their orders online or on the phone and then come to select pickup points to collect their orders. Orders are shipped from the storage site to the pickup points as required. The information flow in the network is from the customer via retailer to the factories, where as the product flow start at the factories via cross docks to the pick up sites, where the customers collect the products.
-Retail Storage with Consumer Pickup is the option where inventory is stored locally at retail stores. Customers either walk into the retail store or place an order online or over the phone, and collect the products at the retail store. The information flow is from the customer to the retailer and the product flow is from the factories to the retailers, where customers collect the products.
Finally the service which is offered to the consumers affects the perception of the whole product tremendously, therefore by providing the consumers with the right quantity of information and an attentive assistance the organisation can contribute a great amount to the customer’s overall satisfaction.
4) How core competencies affect supply chain designs
On the basis of the following examples we will be demonstrating how specific core competencies of the chosen companies have been affecting their supply chain designs.
4.1) Dell
Dell is the largest computer systems company with a product line including desktop computers, notebook computers, network servers, workstations, and storage products. We will be demonstrating how Dell has integrated their core competencies into the supply chain as it is one of the key factors contributing to dell’s major success.
As Dell offers personalised products and therefore handles and manufactures each order individually, we will not be presenting their supply chain structure in the original chronology. We will be starting by illustrating the placement of the order and further continuing with the procurement of material as well as the manufacture and the handling of the end product.
Customers have the option of ordering their desired Dell product either online or over the phone. Before confirming any order, Dell checks the customer’s payment details as well as feasibility of the order regarding their own resources. As soon as this stage has gone through successfully, every order will be sent to the manufacturing plant in Texas.
This close relationship has been formed to be able to satisfied personalised customers needs and provide them with a convenient service and in return to get immediate responses on product queries or quality issues to continuously upgrade their handling process.
The 2nd tier suppliers of the single components produce their goods in Southeast Asia, from where the component are sent to Texas (1st tier) as the completion of the products are all manufactured there. Every individual product will than be shipped from Texas to all over the world within an aimed time period of five days.
A main benefit won out of this structure, is the high level of control of time, quality and variety of products, out of which Dell has formed their core competencies such as a their flexibility, reliability and fast processing.
“…by sharing dynamic inventory information with suppliers, Dell can work both on the input and output ends of the supply chain to match demand with supply” (S. Chopra and J. A.Van Mieghem, 2000)
Dell has efficiently implemented their core competencies into the supply chain which has provided them with a strong competitive advantaged, as customer’s requirements of a convenient experience added with a personalised, fast and reliable approach, have been fully satisfied.
4.2) British Airway
British Airways is the largest airline as well as flag carrier of the United Kingdom. As the organisation has implemented the core competencies of every element within the supply chain very efficiently, we will be presenting British Airways as one of the examples.
In the model of British Airways the 1st tier manufacturers are mainly Boing and Airbus, who are responsible of producing nearly all their aircrafts using Rolls Royce engines, which therefore is the 2nd tier. As British Airways specially emphasises on high standard of quality when it comes to their aircraft production, they cautiously choose their suppliers within the supply chain, to be able to offer their customer the best possible safety measure and comfort. Therefore the high level of quality forms their core competence in this part and affects supply chain design in regards of the careful selection of their suppliers in order to deliver their core competence.
As British Airways has recognised the current importance of technology in our society, they have adopted their supply chain accordingly to be able to provide their customer with an adequate service. Flight tickets can be booked conveniently and fast online at any time of the day, as well as over the phone or through travel agencies. Their competent and reliable service on ground also includes the confirmation of tickets, seat reservation and early check- in, which is followed by the on- board offering of high quality food, beverage, assistance and the choice of different classes. Furthermore for any kind of issue British Airways has a hotline and email addresses through which they are able to contact the organisation.
“The shift in the efficient frontier on adding the Internet to available channels will vary by industry… For example, going online would benefit an airline more than a travel agent” (S. Chopra and J. A.Van Mieghem, 2000)
To be able to achieve a competitive advantage the Airlines has to stay consistent through out the whole management of the supply chain to deliver the core competencies. In total British Airways offers their customer a high quality, comfortable and convenient service by concentrating on integrating their core competencies of each component into the supply chain as they do very successfully.
4.3) Toyota
Toyota Motor Corporation is one the biggest car production company in the world which was found in 1937. The brand Toyota has been able to established and maintain their success over several decades by innovatively incorporating their core competencies in the supply chain.
As the Toyota Corporation focuses strongly on the quality of their cars, they undertake the processes of design and manufacturing themselves to stay in control of their product and service.
Many Japanese companies (such as Toyota)… write their own software to aid the design and manufacture of their products…we believe that it is part of an important
pattern in how advanced companies design and produce their products. Design software is one of many elements of what we call the “manufacturing infrastructure” to distinguish it from the technologies that comprise the products themselves. (C. H. Fine and D. E. Whitney)
Therefore they possess strong internal resources who engineer unique systems and designs which only Toyota cars are equipped with. For instance at the moment Toyota is focusing on future Hybrid cars and they are not only the first company launching this product, in fact they are also the only manufacturer producing this car. Toyota has recognised the continuously growing need and interest on becoming environmentally friendlier and has cleverly token over the niche market. Their core competence clearly lies in the originality and quality of their production which deservedly enabled Toyota to obtain such high revenues.
As Toyota has factories all over Europe, America and Asia, they are able to provide their customers with their products in a very short period of time, which forms another core competence that makes Toyota cars highly competitive. Wisely chosen retailers are located near by the customers, to provide them with the needed assistance and the convenience of finding them close by.
As a whole the organisation Toyota definitely knows how to satisfy their customer needs and make full use of their ability and knowledge, by integrating them correctly into their supply chain. They have been able to deliver their capabilities as their original and high quality products as well as a convenient service consistently throughout the entire process of their supply chain and have adapted the structure according to their core competencies.
4.4) IKEA
Ikea’s business idea is to offer wide range of home furniture’s with modern design with good functioning at a good value for money. Since the Swedish company has been founded in 1943, they have gone through a remarkable success story by applying their core competencies appropriately in their supply chain.
The buyers working within Ikea’s cooperation choose suppliers from all over the world, which meet IKEA criteria’s low price and high quality. IKEA buys their raw materials in bulk on a global scale to provide all the countries with the same product range. Through the economy of scale the material is bought very cheap and therefore the end product can be sold to a reasonable price. Hence the core competence of 2nd tier procurement is the low cost yet good quality material.
Ikea’s distribution objective is all about keeping the process as convenient as possible. As the Ikea product is furniture that is not putted together yet, Ikea has token the opportunity to pack their goods in the most efficient way, in regards of using space. Therefore the overall transportation from central distribution to retailer or central distribution to customer’s home or even retailer to customer’s home can be accomplished more effectively, as a greater amount of products can be carried. Furthermore it gives the customer the alternative not having to rely on curriers delivering the orders, but being able to independently pick up their desired product by using their “normal” sized car. This is a highly rated convenience factor, which differentiates Ikea from many other companies.
“Distribution goes through all three business functions and is a very important piece of the puzzle for IKEA’s strive for low prices. IKEA has one of their trademarks within distribution with their invention of flat packages. An efficient supply chain from supplier to end customer is necessary to provide secure lead times, efficient handling and competitive prices. Since the focus of this thesis will be in the area of distribution this will be covered in more depth than other parts of the pipeline” (B. Larsson and O. Qviberg, 2004)
Moreover local stores distribute the whole range of IKEA products and they have globally chosen their layout to be extremely spacious, to be able to demonstrate their customers ideas how the furniture could be integrated into their homes. This is another way to ease to buying procedure of the customers, as less imaginative power is required. In addition to the local retailers, Ikea also offers a home delivery on most of their products, to once again decrease the effort that should be made.
As IKEA aims strongly for customer’s satisfaction, they have established several assistance measures such as on their homepage, hotline and in-store staff. These are all tools to support the customers as well as to create an enhanced positive perception.
As Ikea’s core competence is their low- cost yet good quality products combined with the provisioning of a convenient and proficient service, the company has adapted their whole supply chain to be able to deliver their strength appropriately and tap their full potential.
5) Conclusion
As customer needs are constantly changing, markets are getting more difficult to predict and consequently hitting the target group’s desires become more challenging as well. Organisations have to respond to their changing environment while maintaining a focus on a long term idea of integrating core competencies into the supply chain. Possessing core competencies are no longer enough to obtain a competitive advantage, in fact only the adequate implementation of the core competencies into the supply chain will be able to make a company sustainably competitive and bring out the maximum gaining’s of time and cost.
The similarity of the core competencies from the selected companies is clearly recognisable and has been purposely chosen to be able to point out that even though these four companies are operating in completely different markets, the needs of the customer are nowadays strongly time orientated. Through the ever growing pressure in our time and society, people are struggling to cope with all their duties, therefore companies are forced to adapt their distribution and service to these strongly needed requirements. As the four companies were able to recognise these demands, they have enhanced their supply chain accordingly and consequently they are enjoying a great success.
6) Reference
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