High School

**Case Study: Supply Chain Strategies**

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**Sophisticated Supply-Chain Strategies Keep Products on the Move**

Headquartered in Tokyo but with offices around the world, shipping company MOL (Mitsui O.S.K. Lines, Ltd.) is taking integration with its customers to new levels. It is joining its customers in a series of joint ventures to build and operate dedicated vessels for as long as 25 years. One such joint venture teamed MOL with a Chinese steel mill to build and sail ships bringing Brazilian iron ore and coal across the Pacific Ocean for processing.

Sophisticated supply-chain systems that control every aspect of production and transportation are the key to making offshore manufacturing work. Supply-chain software that monitors operations and continually makes adjustments ensures that all processes are running at peak efficiency. By tightly mapping an entire sequence—from order to final delivery—and by automating it as much as possible, supply-chain management can deliver products from across the world while at the same time cutting costs. Companies that can carry a small inventory and get paid faster improve their cash flow and profitability.

Acer, a $7 billion Taiwanese computer and electronics maker, brings components from around the world and assembles them into everything from PC notebooks to TVs at factories in Taiwan and mainland China. It then reverses the flow by shipping these products to international buyers. "Acer sold four million portable systems. Without a solid supply-chain infrastructure behind us, we couldn’t hope to do it," says Sumit Agnihotry, Acer’s American director of notebook product marketing.

The synchronizing of trade is essential. If goods don’t get into the stores in time, sales might be lost or the company might have to carry larger inventories to avoid sellouts, which would cut into its profits. Companies need to continually monitor demand and react quickly by adjusting production. "This gets increasingly difficult when the supply chain stretches across thousands of miles and a dozen time zones," says David Bovet, managing director of Mercer Management Consulting, a Boston-based firm that advises on business tactics. "There are strategies that smart companies are using to bring costs down to earth. Getting the most of lower labor costs overseas requires an emphasis on transportation, and supply-chain skills are a required core competency," he says. His advice to global manufacturers: cooperate with shippers, and integrate supply chains into one cohesive system.

An important aspect of a solid supply chain is the availability of inventory, as the needs of the customer cannot be met without an in-stock supply of products. Inventory can refer to components such as the goods and materials on hand. In international global supply, some things to consider are the availability of labor, geography, and local regulations.

There needs to be a well-developed strategy in order to have a successful supply chain. Strategies include knowing your customers and their needs and planning what you want to achieve and how you are going to make it happen.

The acknowledged master of supply-chain dynamics is Dell, with its global logistics control room lined with big screens that monitor its shipping lanes at all times. Alongside Dell executives are representatives of its logistics suppliers for guidance and quick action if anything goes wrong.

Risk is the name of the game when it comes to international trade, and companies need to decide whether to play it safe with extra inventory or scramble if a disaster like a port strike occurs. Either way, they need to have contingency plans and be ready to react, and solid supply-chain strategies will ensure they are prepared for any eventuality.

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**Critical Thinking Questions**

1. Why are solid supply-chain strategies so important?

2. What problems is a company likely to experience without such strategies in place?

3. Research and cite a recent concern with supply chain management resulting from disruption from the pandemic.

4. Analyze the example, make recommendations. You may thread chapter content in providing solutions.

Answer :

Solid supply-chain strategies are important because they play a crucial role in ensuring the smooth and efficient movement of products and materials from suppliers to customers. These strategies help companies optimize their operations, reduce costs, improve customer satisfaction, and maintain a competitive advantage in the market.

Without solid supply-chain strategies in place, a company is likely to experience various problems and challenges. Some of these include:

1. Inefficient operations: Without effective strategies, companies may struggle to streamline their processes and manage the flow of goods and information. This can result in delays, bottlenecks, and increased costs.

2. Poor inventory management: A lack of supply-chain strategies can lead to inventory imbalances, either having too much or too little stock. This can result in excess carrying costs, stockouts, lost sales, and customer dissatisfaction.

3. Limited visibility and coordination: Without proper strategies, companies may have limited visibility into their supply chains, making it difficult to coordinate activities, track shipments, and respond to changes in demand or disruptions in the network.

4. Increased risks: Ineffective supply-chain strategies can make companies more vulnerable to risks and disruptions, such as natural disasters, political instability, or global pandemics. This can lead to supply shortages, production disruptions, and negative impacts on customer service and profitability.

5. Higher costs: Without optimized supply-chain strategies, companies may incur unnecessary costs, such as expedited shipping, excess inventory holding costs, or inefficient transportation routes. This can erode profit margins and hinder business growth.

An example of a recent concern with supply chain management resulting from disruption from the pandemic is the shortage of personal protective equipment (PPE) and medical supplies. The COVID-19 pandemic caused a surge in demand for PPE, such as masks and gloves, and medical equipment, such as ventilators. Many countries faced challenges in meeting the increased demand due to disrupted supply chains, limited production capacity, and export restrictions. This highlighted the importance of robust supply-chain strategies to ensure the availability and timely delivery of critical healthcare supplies during times of crisis.

Analyzing the example of Acer, a Taiwanese computer and electronics maker, there are a few recommendations for improving their supply-chain strategies:

1. Collaboration with suppliers: Acer should establish strong partnerships and collaboration with their suppliers to ensure a smooth flow of components and materials. This can involve regular communication, joint planning, and shared information to improve visibility and responsiveness.

2. Demand forecasting and planning: Acer should invest in accurate demand forecasting and planning systems to anticipate customer needs and align production accordingly. This can help prevent inventory imbalances and ensure that the right products are available at the right time.

3. Diversification of suppliers and manufacturing locations: To mitigate risks and reduce dependency on specific regions or suppliers, Acer should consider diversifying its supply base and manufacturing locations. This can help prevent disruptions caused by localized events or geopolitical factors.

4. Enhancing visibility and tracking: Acer should implement supply-chain software and technologies to improve visibility and tracking of products throughout the supply chain. This can help identify bottlenecks, monitor performance, and quickly respond to any disruptions or changes in demand.

By implementing these recommendations, Acer can strengthen its supply-chain strategies and achieve greater efficiency, resilience, and customer satisfaction.

To know more about supply-chain strategies:

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