Introduction
According to the case study, Somerset had a good strategic marketing plan through a continuous launch of new products after every few years. This took place during the 20th C where the company experienced some positive effects after the application of the total quality management (TQM) in its furniture manufacturing. Somerset is known for the high quality products that are affordable in the domestic market. On the other hand, Somerset experienced stiff competition in the 1990s, high rate of labor and this made the proceeds of the company to decrease.
While trying to solve the above problems, Somerset began to outsource most of its furniture product lines to China with the main aim of enjoying the cost benefits such as reduced operating costs. The second strategy involved the reduction of the manufacturing facilities, and the labor force. This was to keep a low cost of production in line with the speed of outsourcing. However, the strategy was successful at the beginning of cost reduction and increasing the proceeds of Somerset Furniture Company.
Challenges
Inconsistency in the quality of the products and shipment of raw products
The global supply chain of Somerset accelerated the shipment of wood furniture from U.S and South America to the manufacturing companies in China. The process of this shipment took a long time for the goods to arrive in China. Consequently, the unexpected delays for shipment processes that led to the cancellation of some order due to customer complaints. Alongside the long shipping time, the shipment cost of raw materials from the United States and South America to the final destination is always high, and this reduces the profit. Moreover, the manufacturing plants have hired workers from China to produce the goods by use of hand. This will lead to discrepancies concerning product dimension and quality. Consequently, clients of Somerset will demand refunds since the quality of the products is not assured through hand made.
Poor transport and distribution network
The final products of the furniture are transported by containers from Hong Kong and Shanghai to Norfolk, Virginia. However, once the containers reach Norfolk, they are transported through road to the warehouses of Somerset in the country of Randolph where the stores of the retailers are located. In these stores, the furniture is installed to prevent damages during transportation.
Ineffective management of the orders
Some critical errors exist within the global supply chain of Somerset while processing and fulfilling its system. For instance, processes of the orders take one week or a fortnight that is seven to fourteen days to develop the demand forecasts. Similarly, order processing takes twelve to twenty-five days. Therefore, for the purchase order to be complete, it takes about twenty-two to forty-five days. Moreover, it will require another sixty days to produce the products by hand.
Poor management of transport system
According to the Chinese Logistics, the finished products must be transported to the Chinese ports from the manufacturing plants. Depending on the truck availability and schedules, it will take many weeks for the process to be complete. For instance, the products will take two months. Additionally, customs from the United States will take another two weeks, and the local employees will take a maximum of three days to unload the containers and transfer the furniture on trucks to the warehouses of Somerset in Randolph County.
Poor management of inventories
The variability of the supply chain in Somerset has been estimated at 40% especially for the department schedule. Due to the innovative ideas of Somerset by frequently producing new products, there has been substantial excess left over of the inventories in the warehouse. Similarly, the obsolete furniture also occupies more space, and this increases the cost of storage.
Poor quality of the products.
Despite the employment of quality auditors by the supplier from China to conduct the quality audit after every few weeks, there are still some quality issues at Somerset. Therefore, the company must inspect each piece of the furniture from China to prevent complaints from the retailers and customers.
Supply chain performance in Somerset
Competition overseas
Steady supply of raw material
The cost of shipping wood from U.S and South America to the Chinese manufacturing plants is high and time-consuming. Therefore, the raw materials should be sourced within the country (China) or neighboring nations around the manufacturing facility to ensure low cost and efficient movement of raw materials. According to Chopra & Meindl, the flow of goods from the factory to the consumers should follow six distribution network designs (Chopra & Meindl, 2012). They include storage by the manufacturer with direct shipping, shipping and in-transit merge, the distributor storage with package delivery carrier, the distributor storage that has last mile delivery, distributor storage with customer pickup, and retail storage with customer pickup. Therefore, Somerset can make a selection from one of the distribution networks to assist it in making the improvement of the channels of distribution. For instance, selecting the manufacturer storage with direct shipping will eliminate the movement of the products from Somerset warehouse to retail stores.
Proper management of transport system
The arrangement of the logistics in China is causing wide variability of time in a shipment of the finished furniture from China to Norfolk. Therefore, is important for Somerset to have a good manager in logistics that can understand the root causes of the issues, work with the supplier from China to avoid delay for shipment to the customers. However, there should be a proactive approach to identifying and solving problems in transportation (Langley, Coyle, Gibson, Novack & Bardi, 2009).
Somerset have to inspect each piece of the furniture that it receives from China. Therefore, the Chinese plant must be ISO9000 certified. Additionally, this will prevent the need for quality auditors that are employed by the Chinese suppliers to conduct a quality audit.
According to Swamidass, it is a requirement for Somerset to implement the lean manufacturing (Swamidass, 2002). After which, it should assist in implementing the lean manufacturing to the outsourced manufacturing plants in China. Moreover, it should introduce the methodology of Lean Six Sigma for effective control of the manufacturing process to attain better consistency in the quality of the products.
References
Chopra, S., & Meindl, P. (2012). Supply Chain Management (5th ed.). Pearson.
Langley, J., Coyle, J., Gibson, B., Novack, R., & Bardi, E. (2009). Managing Supply Chains: A logistic Approach (9th ed.). Boston: South-Western College Publishing.
Swamidass, P. (2002). Innovation in Competitive Manufacturing. New York: America Management Association (AMACOM).
