EBUS602 Strategic Operations Management- Xilinx and Cisco
Case Studies: Procter & Gamble and Xilinx
2. List using bullet points the likely reasons that resulted in the demand versus supply variance at Cisco. Draw a diagram of the Cisco/Xilinx new supply chain arrangement. Tabulate the possible advantages and disadvantages of this new approach?
3. Identify one key order winner for P & G and Cisco. Explain how the supply chain for each company is constructed (or should be constructed) to support this order winner (make use of steps 3, 4 and 5 of the “Hill framework”).
Answers
1. The bullwhip effect can be described as a phenomenon detected through supply chain in which the number of orders has been sent to the manufacturer and supplier as well to create huge deviation then the sales to the end customer. These orders has the nature of irregular which comes in the part of lower of the supply chain develop to be more distinct higher up in the supply chain. There are many factors which can be the cause of bull whip effect in the organization such as lack of communication, disorganization, free return policies, deviation in prices, information of demand and order batching. The effect of bullwhip has been discussed in broad manner by many researchers in the field of supply chain and resolutions still has no found from them (Crandall, Crandall and Chen, 2014). However, there are various actions which had been taken by many companies to in order to reduce its effect on the company. The steps that P&G took in order to decrease the impact of the bullwhip effect are as follows:
- It is the trust of P&G that it is required for each employee to forecast the demand in the supply chain because non-efficient information contributes to an excess in safety stock which enhance the cost of inventory.
- The supplier, customer and Wal-Mart of P&G are considered in the Vendor Managed Inventory (VMI) system which allows them to watch the demand information of the consumer that is depending on the point of sale data (Khan, Khan, and Sohail, 2014).
- Sales information connecting with point of sale data
, P&G authorize supplier who are the part of P&G are able to generate an efficient plan. - P&G is a company that established the program of consumer-driven supply network so that immediate link can be provided between the real sales and the procedure of supply chain.
- To decrease the impact of Bullwhip on the sales of P&G, demand plan should be discussed on monthly basis so that all employees as well as higher authorities can share their suggestion in the favor of growth of the company. It will enhance the planning for further demand (Wang and Disney, 2016).
To reduce the effect of bullwhip, there can be so many approaches which have been developed by researcher that the company could adopt to reduce the bullwhip effect, as exemplified in the following list:
- It has been found from article that the good bonding between company and their supplier are able to meet the demand of the customer within time frame because it is not possible for the company to have the numerous orders from numerous suppliers at same time.
- To take excess time for manufacturing a particular product can enhance the effect of bullwhip in the company. Lead time reduction is the element which is able to reduce the impact and it can be done via the relationship between supplier and the company. It can be gained by sharing high level of information between a company and their supplier (Mittal, Sharma and Dalal, 2014).
- Order policies can be another approach that can be implemented to reduce the impact of the bullwhip effect.
However, it has been analyzed that these above approaches are dependent upon a high level of coordination among the partners in a supply chain. It is not possible within the organization to keep coordinating for a long time to reduce the bullwhip effects from the organization.
2. Xilinx & Cisco
Due to demand and supply variance, internal as well as external factor were neglected by Cisco. These internal and external factors are explained below:
External factors: it has been found that a major deterioration in the market of US which led to a fall in demand for the products of electronic (Gutiez and Ramaiah, 2014).
Internal factors: the inventory of Cisco has been excess demand it is done due to a lack of communication between Cisco and Xilinax (it is a company that is able to manufacture the electronics products not only for Cisco but also for other producers). Apart from that there is other reason which is following:
- Cisco has been observed very optimistic regarding the future scope of electronics industry. It is the reason which led to excess production and the market was unable to get what had expected (Haque, 2015).
- It is important for the company to keep this part in the form of extra contingency buffer so that high position or demand can be occurred. It will give outcome in the form of excess inventory when demand dropped. However, the excess inventory will increase the benefit point often company in the future and due to this firm would be able to contingent lift to the suppliers.
To resolve the variance issues, Xilinx has been taken the following steps:
- It initiated to sell the products directly to the end user.
- It started to interact by an on-line store so that they could save the time of consumer and show the goods and services to the customers at their home. It allows them to order goods by using firm’s website (Russell and Hiller, 2015).
- It has enhanced a network of partners with pre arranged jobs and focused on contacts with their customers.
- Vendor Managed Inventory (VMI) program has been started by Xilinx which renamed with the Direct Fulfillment Program.
Figure 1: Diagram of the Cisco new supply chain management
Source: (Eckstein, Goellner, Blome and Henke, 2015).
Possible advantages of the new approach
There can be lot of possible advantages of new approach VMI system. The advantages are following:
- Xilinx has the VMI system and Cisco has the Electronic Manufacturing Service provider allow Xilinx to decrease its own inventory along with downstream channel inventory.
- VMI is able to reduce the impact of demand’s uncertainty within the company.
- Multi firm supply chain can be improved in efficient manner through the capability of VMI system.
- The level of inventory can be reduced with the help of VMI by decreasing the peak and valley of production (Crandall, Crandall and Chen, 2014).
- VMI allows supplier to resupply the products which is able to decrease the cost of transportation. Due to this the cost of inventory has been reduced.
- Suppliers can interact through the website with company that enables high level of information which is able to improve the flow of information among manufacturers and suppliers. It can lead a company to efficient supply chain performance.
- Web technology is an advance approach which is able to support the supply chain management in an efficient and inexpensive way. It enables a company along with their supplier to manage a real time access so that direct link can be done with customers regarding inventory level. It facilitates to address the based on demand on the place of market.
- Having a website in the supply chain can be benefited to the company because lot of issues and perception of customers can be viewed easily on websites.
Possible disadvantages of the new approach
However, the new approach is showing the numerous points of benefits nevertheless it has some disadvantages point.
- VMI will be benefited if suppliers have the trust on them otherwise it would not be that much affected.
- Suppliers get the higher responsibility to fulfill the demand or requirements of the company.
- The cost of company will be increased through using of VMI because for the use of VMI system, company will required of new software system or technology such as Electronic data interchange (EDI) software.
- Trust is most important element to initiate online or website system (McCormack and Johnson, 2016).
3. Key order winner for P & G and Cisco.
|
Company’s Name |
A key order winner |
How the supply chain is constructed to support the order winner |
Sources |
|
P & G |
Efficient responses from customers |
Customer responses are reliable and effective because P&G lays on the shared information and interaction on their chain of supply. VMI is a system which helps to construct Supply Chain. VMI make enable customer to use products of P&G efficiently (. P&G is a company which use two applications that produced by HP. These applications were HP Applications Development Services and HP Applications Management Services. These services are being used to improve the efficiency of the company so that they could give better experience to customers. This is because these applications are able to satisfy the customers regarding their query. It has supplier, extensive customer, retailer, consumer and distributer, real time integration and electronic invoice capabilities.
|
(Kannan, Grigore, Devika and Senthilkumar, 2013) |
|
Cisco |
Lead time reduction |
Cisco starts to focus on direct deal with customers. Cisco starts to interact with direct distributor to cut the intermediate so that lead time can be reduced. With the benefit of VMI system the employee of Cisco is able to decrease the lead time between their goods and buyer. As an applying of VMI system, Cisco is able to get success in lesser time in the electronic industry as competition factor. |
(Yang, Kang, and Yu, 2016). |
Hill framework
Step 3- Designing sustainable products and services
P&G
In this stage company started to find out the products which is unfriendly for the environment. The other key winner point of P&G is Tide Coldwater. It has been invented by P&G when lifecycle assessment is conducted to analyze the amount of energy; it has been found that detergents can make U.S. household’s energy guzzlers. They spent almost 3 percent of their annual electricity to warm water for washing clothes. To protect the electricity, P&G started to work on cold water detergent and in 2005 it launched Tide cold water detergent.
Cisco
In the 3rd stages of Hill frame work include the price, brand image, delivery speed, technical service, quality and design and range of products and services. Cisco started to work on recycling and as scrap. Four years ago Cisco tried to find uses for the equipment and at that time it had been found that used equipments were in working condition (Hill, Roberts, Alderson, and Gale, 2015).
Step 4- Operating design choice
P&G
P&G produced new models to grow faster. It comprises store equipment technology, new products, trade off analysis and redesign of packaging and warehousing. P&G is able to explore the needs of the customers.
Cisco
Cisco started to give training which the key winner of the company is. All employees of the company get trained before starting work. New technologies are able to start ups with the capability to challenge conventional wisdom.
Step 5- creating next practice platforms
P&G
Next practices platforms are able to change the paradigms. Sustainability is necessary to reach the next platform. P&G has the sustainability to progress further. To attain an advantage from next practice platform, it is required to have the employee with happy behavior because next platforms for practice will be successful when the employees of the company will be satisfied. P&G is a company which has the ability of quality control, compensation system, and laboratory testing, organizational structure and support services.
Cisco
Cisco uses digital technology to manage power generation and distribution from all types of sources included customer demand. Cisco has invested huge around to enhance the next practice platforms. This investment will allow Cisco to optimize the energy use of network devices, computers and the equipment of building (Lu, Huang and Heng, 2006).
References
Crandall, R.E., Crandall, W.R. and Chen, C.C., 2014, Principles of supply chain management. CRC Press.
Crandall, R.E., Crandall, W.R. and Chen, C.C., 2014, Principles of supply chain management, CRC Press.
Eckstein, D., Goellner, M., Blome, C. and Henke, M., 2015, The performance impact of supply chain agility and supply chain adaptability: the moderating effect of product complexity. International Journal of Production Research, 53(10), pp.3028-3046.
Gutiez, M.T. and Ramaiah, R., 2014, Demand versus supply in intensive care: an ever-growing problem, Critical Care, 18(1), p.P9.
Haque, M., 2015, Fuzzy genetic algorithm based model for bull whip effect reduction in a supply chain.
Hill, M.R., Roberts, M.J., Alderson, M.L. and Gale, T.C.E., 2015, Safety culture and the 5 steps to safer surgery: an intervention study, BJA: British Journal of Anaesthesia, 114(6), pp.958-962.
Kannan, G., Grigore, M.C., Devika, K. and Senthilkumar, A., 2013, An analysis of the general benefits of a centralised VMI system based on the EOQ model, International Journal of Production Research, 51(1), pp.172-188.
Khan, S.N., Khan, M.A. and Sohail, R., 2014, The Bullwhip Effect in Different Manufacturing Paradigm: An Analysis, Economia. Seria Management, 17(1), pp.140-171.
Lu, X.H., Huang, L.H. and Heng, M.S., 2006, Critical success factors of inter-organizational information systems—A case study of Cisco and Xiao Tong in China, Information & management, 43(3), pp.395-408.
McCormack, K.P. and Johnson, W.C., 2016, Supply chain networks and business process orientation: advanced strategies and best practices, CRC Press.
Mittal, A., Sharma, K.K. and Dalal, S., 2014, Approach of BPEL in supply chain activities for managing Bullwhip effect of SCM system.
Russell, R.S. and Hiller, J.S., 2015, Applying Best Supply Chain Practices to Humanitarian Relief, In ISCRAM.
Wang, X. and Disney, S.M., 2016, The bullwhip effect: Progress, trends and directions, European Journal of Operational Research, 250(3), pp.691-701.
Yang, J.G., Kang, K.S. and Yu, Y.M., 2016, A Study on Vendor Managed Inventory to Apply Technology Acceptance Model, Journal of the Korea Industrial Information Systems Research, 21(2), pp.45-57.
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