Key issues
Operational arrangements
T2S, which is the main supplier of OEMA, have a contract with both T1SA and T1SB. Even though the contract between these companies is formal, it has no expiry date and any party that wishes to terminate the contract must give the others a 90-day notice. This poses a challenge because if OEMA is not happy with the services of T1SA, it cannot terminate the contract given that timings are not specified. T1SA may not be very effective in terms of product design, quality assurance, in meeting delivery requirements or fulfilling other requirements but the manufacturer cannot seek the services of another supplier (Mangan, 20112).
Every two hours OEMA gives an order to T1SA, which is in contrast to its co-manufacturer, OEMB that gives longer time cycle. This means that the quality of supplied goods may be compromised because the supplier is under very high pressure to supply the required goods failure to that will attract a penalty from the manufacturer. The manufacturer will therefore be disadvantaged over the other partner. The imposition of penalty in case of failure to supply the required goods is another loophole that can create conflict between the manufacturer and the supplier.
Information flow and sharing practices
The manufacturer also releases a weekly rolling forecast that serves the whole year. The weekly rolling plan may inconvenient T1SA because almost every time there is a change in the requirements (Mangan, 20112). Since T1SA is a production company, it must receive information, which should remain constant at least for one month because the frequent change of requirements is always a problem especially in assembling the required materials, one week is a very short span.
Collaborative planning and production
The practice of consulting other chain partners limits OEMA from invention for instance, before OEMA stops or roll out a new production it must consult T2S and T1SA, which may therefore lead to inventory build -up and conflict between the three supply chain partners. The desire to satisfy the desires of each company is by itself a potential source of conflict given that an invention may be an advantage and a disadvantage to another partner. There is need to ensure that there is mutual benefit, that is each partner receives a fair share and in so doing it prevents another partner from coming up with inventions as it wishes to do so.
Link of the identified issues with SCM techniques
As in the Supply chain management the contract between the parties engaged in the whole process of the movement of products from the point of material supply to the consumer to create value should be valid for a stipulated period. As for the requirements of business law, integrity, and legality of business entities’ agreements, contracts should be binding and valid for a stipulated period and same should be reflected between T1SA and OEMA. It would not be reasonable for OEMA to impose charges to T1SA in case of failing to meet timely delivery of inventory under mere informal contract (Mangan, 20112). This might compromise the key issue in supply chain management, that is the material and applied resource as disagreement may prevail between the two companies.
OEMA places its order some reasonably less time to T1SA, this will pressure T1SA leading to it producing auto-spares while in hurry which might cause T1SA to supply carelessly produced inventory. According to the principle Supply chain management, the management of sources of supply is of critical importance. By compromising the convenience of T1SA to produce and supply the inventory is not recommendable as it does not show any proper course of supply chain management as the T1SA will feel pressed to the wall. The company should also consider having itself in good position to compete and ensure survival in the current business environment.
Proper planning in a company is critical for success in business as it involves laying daily strategies and executing the whole process of company financial activities. OEMA had caused T1SA to incur extra adjustment safety measures to accommodate any unplanned expansion in inventory ordered by OEMA. These costs are re8flected in prices of the inventory and to the total products and services offered by OEMA and hence having the supply chain management not worthy and loyal to its principles (Mangan, 20112).
Recommendations
The manufacturer must ensure that the terms of the contract are specified. Any formal contract must have the specific timelines including expiry date to avoid any exploitation and allow OEMA to sue the supplier in case it does not meet the supply requirements. The firm should also give enough time cycle for T1SA to prepare the supplies in advance and to produce quality products.
The firm should also adopt a monthly rolling forecast that will give the supplier enough time to assemble the necessary raw materials for production. There is also need to introduce a fair competition in the supply chain just to make sure that one supplier does not become monopolistic. In future other companies, which have better supplies may rise up and so OEMA must put measures to ensure that it will have the freedom to shift to another company that will offer better services.
References
Mangan John; Chandra Lalwani; Tim Butcher; Roya Javadpour (2012)Global Logistics and Supply Chain Management.
ISBN: 978-1-119-99884-6
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