What Factors Should K&s Take into Account in Each Decision to Redesign Its Supply Chain Network?
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What factors should K&S take into account in each decision to redesign its supply chain network?
A firms supply chain allows it to move product from the source to the final point of consumption. Leading firms around the world, from large retailers to high-tech manufacturers, have learned to use their supply chain as a strategic tool. A supply chain can be defined by the suppliers, plants, warehouses, and flows of products from each products origin to the final customer. Watson, Cacioppi, Jayaraman and Lewis (2012) suggest that 80% of the costs of the supply chain are locked in with the location of the facilities and the flow of products between them. Successful companies recognise this and place a significant emphasis on the strategic planning of their supply chain.
In order for K&S to make the most informed decisions regarding their plans to redesign their supply chain network, they will need to take into account the most basic components of their supply chain network; Procurement, Manufacturing and dealing with their finished goods. In terms of procurement, K&S will need to clearly see where are their suppliers and how will they procure the raw materials and components necessary to produce their products. K&S will need to approach its manufacturing issues in order to determine where the best location the factories for manufacturing and assembly. Also, the manufacturing methodology that K&S practises which delivers its high quality products to customers will need to be reviewed in order to determine if new manufacturing facilities can deliver to these standards.
One tool that could help K&S make the most informed decision in their plans to redesign their supply chain would be through the use of a PEST analysis. By performing a PEST (Political, Economic, Social, Technological) K&S can determine the opportunities and risks within the macro-environment of supply chain redesign. A PEST analysis used with a SWOT analysis (Strength, Weakness, Opportunity, Threats) provides a strong framework to develop specific tactics to lessen the possible risks involved in executing their objectives in unfamiliar environments. Further advantages of PEST analysis can include providing an understanding of the wider business environment, encourage further strategic thinking, raise an awareness of possible threats to profitability, help anticipate for future difficulties and finally, can aid an organisation to spot possible business opportunities and fully exploit them successfully.
Political
In terms of deploying in China, K&S face a number of factors by using a PEST analysis. Firstly, China has a different political and regulatory system to what K&S may be used to dealing with. For example, it is not uncommon for the national government to enact and enforce rules and policies aimed at favouring state entities at the expense of privately held firms. These excessive regulations tend to hinder commercial activities, as more time and money must be spent in order to comply with rules and regulations. If K&S want to set up a manufacturing facility in China, it will need to deal with high start-up costs and may have to deal with bureaucracy that may try to get and investor to set up elsewhere, where the national government may feel there investment may be more conducive to its industry.
Singapore is renowned for having an enterprise friendly country. Singapore is an attractive competitive manufacturing location, boasting world capabilities in the design, development and manufacture of cutting edge products. The government has set up several organisations in helping foreign direct investment set up in its country. Examples of these organisations include Ministry of Trade and Industry (MTI), Governmental E-Business Portal and the Corruption Practices Investigation Bureau. Also, in an attempt to gain more foreign investment Singapore has deregulated several markets, two examples include the electricity and telecommunication markets. The government see no benefit to these monopolized markets and leave it open for competition among the industry players. The government also planned to bring down its power costs due to the efficiency private industries can provide.
Jordan is in direct contrast from the two previous location choices due to its political situation. A study carried out by the Al-Quds centre for political studies (2006) revealed that the following political challenges have an impact of businesses currently based in Jordan:
Unstable political condition in the Middle East
Constant reshuffling of governments
Terrorism threats
This study also showed that 48.4% of Jordanian business leaders believe that the role of the Jordanian parliament is effective in developing an effective legislation in relation to the business sector due to an unqualified parliament.
Economic
China has the 3rd largest economy in the world and has a continuously growing economy. In the early 2000s China overtook the U.S as the worlds largest recipient of foreign capital. It still stands as an incredibly attractive location for companies due to its development of infrastructure, resources availability, cheap labour, productivity and workforce skills.
The Singaporean economy is one of world best performers. GDP has been constantly increasing since Singapore became independent in 1965. Singapore has a well-developed and successful free market economy. The economy highly depends on exports, especially in electronics and information. The most competitive advantages of Singapore include its free market and free port. Up to 99% of imports are duty free in Singapore.
Jordan has always faced a challenging economic situation due to its close proximity to an uncertain environment. Jordan is ranked 3rd out of 17 countries in the Middle East/North Africa region. (2012 Index of Economic Freedom). The Jordanian government has established recent reforms which have made business and operations more efficient and dynamic.
Social
China is the most populated state in the world and continues to grow, with expectations of 1.5 billion people by 2050 (Population.com, 2003).
The official language of Jordan is Arabic. English, though without an official status, is widely spoken throughout the country and is the language of commerce and banking.
Singapore is an eastern country who still follows the traditional eastern philosophy of family values, but the younger generation are seen to have started adopting western cultures and values. The current population 4.8million and English is the primary language used