Reference no: EM132261941
The CEO at Supply Chain Management Unlimited, LTD, Mr. Hiream Fiream, is frustrated…
• The VP of Marketing has just made the annual pitch for a budget increase to cover inflation, new ad campaigns, and a larger sales force for new international target markets.
• The VP of Procurement is anticipating materials cost increases and a new supplier certification program.
• The VP of Manufacturing is facing labor cost increases and needs more capacity (overtime, outsourcing, expansion) if the marketing campaigns actually deliver. He has also developed a list of potential new plant locations IF he can get the necessary capital expenditures approved AND one or more are cost-justified.
• The VP of Supply Chain (actually, finished goods distribution but the title sounds better) is wrestling with escalating fuel costs, driver shortages, those service enhancements negotiated unilaterally by marketing, and sharply higher transportation costs and port handling charges because of the new Pacific Basin outsourcing initiative.
• That outsourcing initiative blindsided her last year with international duty and tax costs and the 3-month in-transit inventory “float” that somehow got left out of the planning.
• The same VP has prepared a list of possible new DC locations (owned, leased, public…uncertain at this point). She is also open to one or more existing facility closures.
• Everyone has an opinion about inventory. Manufacturing needs the plant warehouse space for expansion and is talking up pushing it to the field and “postponing” final processing. Distribution is championing “risk pooling” and wants it centralized. Marketing says that we are “getting killed” by competitors who have better stock availability and more strategically placed locations.
• Mr. Fiream’s outside consultant is recommending yet another reorganization to get in line with the latest “best practices.”
• Finally, he is being hammered on the quarterly analyst calls because of stagnating profits and wants some answers…soon.
• So…let’s summarize:
• Marketing, as usual, is focused on volume (evaluation and bonus metrics)
• Procurement, manufacturing, and distribution are focused on cost containment (evaluation and bonus metrics)
• Mr. Fiream is being judged in the boardroom and on “The Street” by the profit numbers.
• Speaking of profit, Mr. Fiream desires to identify the marketing initiatives, or campaigns (from among many proposals), that the company should actually implement (as well as those that should not be approved). Furthermore, he wants to allocate those budgets to the markets, channels, and products that yield the greatest margin, while simultaneously evaluating the impact on the entire supply chain, from raw material procurement to final customer delivery (it is clearly pointless to generate demand that cannot be satisfied at all, at a profit, or where there are more profitable alternatives).
How would you propose to help Mr. Fiream? Can anything be done to deal with all of these goals and conflicting forces simultaneously so as to arrive at an effective corporate strategy? Your response must be detailed and specific.