Introduction
Contemporary business environment places a lot of pressure on the costs, which the companies encounter to deliver the product or service to their final customer. The reality shows that in the majority of cases the major cost is attributed to the Supply Chain Management (SCM) operations, such as procurement, manufacturing and distribution. The impact of these costs on the profitability of the product is paramount, and the issue is especially sensitive when it comes to low margin products. With that in mind, management of operations and continuous improvement mentality is critical for the success of the companies (Peng 2014). This document will look at the specific operations of the Hagen Style company, which operates on the retail market and offers a number of kitchen equipment, tableware, tapper ware and other items through direct marketing channel.
Operation Management at Hagen Style
Hagen Style business model is built upon the sales of medium and low margin products in the variety of geographical locations and through over ten thousand representatives. With that in mind, the company operates high volume and high variety supply chain, which determines the complexity of the supply chain operations in the company. Operations management at Hagen Style is extremely important to the company is shapes the activities on all three levels of the supply chain, operations, processes and activities. The effectiveness of the operations management enables delivery of the products to the customer and, consequently, determines the profitability of the organization. Lack of coherency and focus on operational efficiency could lead to extreme cost increase and loss of competitiveness.
Hagen Style business and brand image are built upon the following components: quality, accuracy of order fulfillment and on-time delivery. With that in mind, the ability to align all the operations in the supply chain is essential to meet the above objectives. It is evidenced from the case that the majority of the operations are built to-order and the level of automation is critical. The management of these processes is, therefore, easier from the human factor perspective and, at the same time, more complex in terms of standardization of the processes. Additionally, the structure of the distribution of the company is very lean, and the accuracy and “waste-free” operation is critical for the success of the company and the ability to meet the commitment to their clients and ensure on-time deliveries. The reality shows that current business model is fully aligned with the supply chain
Business Evaluation
The analysis of the case illustrates that the focus of the company on timeliness, accuracy of order fulfillment and low-cost order operations are incorporated in the supply chain design. One of the critical success factors for any company is the ability to align the product design with the supply chain design. Looking at this aspect of Hagen Style business, it is possible to argue that the company achieved complete integration of the processes, which adequately reflect the upstream and downstream requirements for the product. The case provides evidence that current distribution and logistics, operations are able to meet the demand and ensure effective to-order operation under the business design, utilizing direct marketing of the products. The alignment is based on the adequate operation for the order fulfillment based on the existing network of sales agents and order consolidation principle at the two distribution centers of the company.
An insight into the specific processes illustrates the effectiveness of the operations in terms of reduction of “waste” in the operations themselves as well as in the product. The company realized the major “stumble blocks” of the SCM, being the order accuracy and downstream logistics and it currently places a lot of emphasis on reducing the negative impact of wrong agent orders through the internet and potential of consolidation of the goods in the downstream logistics operations. This recognition and the set of measures, taken by the company explain the effectiveness and success of the entire operation.
Another important factor, which contributes to the success of the operations, is the understanding of the business model and the ability to achieve very high level of automation of routine processes. The company runs very low human involvement processes within order acceptance and processing, packing and distribution operations. This allows reducing the costs of the operations and risks of human error.
With the above in mind, Hagen Style managed to achieve impressive results in terms of kaizen (continuous improvement), which resulted in one of the lowest operational cost levels in the industry. The case, however, illustrates that the company has to consider the restructuring of its current operations under the market pull strategy (Armstrong & Kotler 2012). The reality shows that the external environment places pressure on the effectiveness of commercial operations and in order to change the structure the company should recognize the need for full realignment of SCM with product and service design (Senge & Prokesh 2010).
4V´s of Operation Process
Looking at the Hagen Style operations from the typology of operations and processes perspective the 4V´s Model can provide a helicopter view on the internal processes and evaluate the similarities and differences between the processes within the company. It should be noted that this model does not intend to provide a definite measure of these processes in terms of volume, variety, variation in demand and visibility as the role of this exercise is to understand the operations from the general standpoint. Based on the facts of the case, it is possible to gather enough data only about the distribution in-out operations, which includes the following processes at Hagen Style: order processing and receipt, pre-packaging (automated), special item packing finalization (manual), downstream trucking operation. Schematically, the distribution operation is illustrated below:
Based on the above process diagram, it is possible to perform the evaluation of the five processes from the 4Vs Model perspective.
Order placement and processing –
Automated packaging –
Manual packaging –
Consolidation and loading –
Delivery -
The above allocation of the processes in distribution operation allows understanding that the on average, the majority of the processes has relatively high volume and variation of demand. Variation and volume, however, reduce significantly at the point of delivery and consolidation of the products on the downstream of the fact that the company places a lot of emphasis on logistics operation optimization and maximum utilization of truck capacity to reduce the logistics costs. It should be noted that the shift from current direct marketing to other type of sales operations will significantly affect these two processes and will require readjustment and restricting of logistics operations in order to avoid additional costs and errors in the operations.
References
Senge P. and Prokesh S. (2010). The Sustainable Supply Chain. Harvard Business Review, October 2010, viewed 14 may 2014, http://hbr.org/2010/10/the-sustainable-supply-chain/ar/1
Peng M. (2014). Global Strategy. 3rd Edition. Mason, OH: South-Western Publishing. Print.
Johnson G, Scholes K and Wittington R (2011). Exploring Strategy. 9th Edition. London: Prentice Hall.
Armstrong G and Kotler P (2012). Marketing.An Introduction. London, UK: Pearson Education. Print.
