The report attempts to discuss the supply chain management issues that erupted after the company underwent the major transformation of acquiring another competitor. It is also set to acquire one more competitor, BoatUS. The supply chain issues do not occur in silos, but they impact and are impacted by other vital business functions. The report analyzes these issues concerned with logistics and distribution of company’s raw materials and finished products from entry to the point of sale. The company’s philosophy of customer services also infuses life and vigour into the organizational functions. The report not only highlights these issues but also suggests the workable alternatives in the light of available manpower and physical, financial resources to rescue the company’s credibility from falling weak in a competitive market. Having mentioned the alternatives suitable to the company in ongoing problems, the report also suggests the most plausible and feasible alternative in terms of available resources.
The company was facing multifarious problems in areas of financing, general management in general and the logistics, supply chain and distribution issues in particular. As a result of financing and investment issues, the overall infrastructure of the company was at stake, and the inventory was dwindling. The cultural integration between the acquiring and the acquired firm further compounded the problems. There were no more stocks in the stores to meet the seasonal need of the customers of both the companies. This rapid growth made the management conscious of its inability to cope up with it. In the words of the CEO, the supply chain was complex, difficult and broken. The number of SKUs was too large to manage profitable growth. Since the business was seasonal in nature, there were complications in inventory requirements. The company had amazingly large number of different vendors to manage. There was poor coordination between supply chain and merchandising team. Communication with suppliers was not up to the mark. Forecasting was also unrealistic. The acquisition of E&B Marine multiplied the existing problems of West Marine.
The decision making in handling crisis always starts with the formulation of workable alternatives. This goes without saying that while formulating alternatives, the company’s management should take a realistic picture of its current resources and the prospective resources that it will generate in materializing its business ambitions.
The first alternative suggested rescuing the company from crisis is outsourcing its vital supply chain management services. This needs a solid and practical rationale which is supplied by the ongoing situation in the company. The company is defunct as far as its supply chain management is concerned. There are some indigenous weaknesses in the company that has led to the idea of outsourcing logistics and supply chain in to. First of all, the expert labour is in acute shortage in supply chain process of the company. Second, the expert labour will cost heavy finance to the company while on the other hand it is available cheaply in the market. The West Marine will also experience other advantages. First one can be termed as swiftness in service delivery because the outsourced logistics partners have expertise and acumen in their respective field, and they can contribute to expediting service delivery by delivering the products on time. Second, the West Marine will be able to concentrate and solidify their core business processes by hiring the supporting processes; the company will be able to remove digressions from main business functions. Third, the risk management is another major advantage. The outsourcing philosophy shifts certain responsibilities to the outsourced business partners. As the outsourced supply chain partner is a specialist in its field, it will better know to manage and mitigate the risk factors. Fourth, the company will also save the additional costs that it will incur if it does not seek the outsourcing facilities because then the company will have to recruit and hire individuals for its supply chain manpower (Flatworld Solutions, 2010).
Contrary to these benefits, as everything comes with the cost, there are also certain disadvantages that outsourcing naturally carries for the company. First of all, there is a risk of confidentiality when functions like supply chain are outsourced. Secondly, the mismatch between the company and the outsourced partner can play havoc with company’s business. It can result in long lead times, stretched delivery schedules and inappropriate quality of output. These factors require regulation from the company that may create mistrust between the partners, and this is not a good omen for business. Third disadvantage is the involvement of hidden costs in the contact of two partners. Fourth, the customer focus may take a back seat because the outsourced vendors cater to the multiple organizations, and they may not be equipped to gauge the customer focus in company’s products. This requires exclusively reserved partner to turn the tables on (McLaren, Head and Yuan, 2002).
The second alternative is to build the in-house capabilities for carrying out supply chain functions in a decent and profitable manner. This requires a lot of work at home. As the company is continuously acquiring its competitors in an aggressive manner, its core business processes must be ready to adopt the changes ensuing acquisitions keeping the fluctuations in demand under consideration. This will require reforming the recruitment and selection techniques so that there is utilization of the proper person at proper place. Having done this, the inductees should be equipped in the rigorous training and development sessions with the necessary knowledge, skills and abilities to tackle the problems in the field. Apart from the theoretical learning, the trainees should be given hands on experience, exposure and interactive sessions with the able managers to learn from their experience and acumen. The better way will be to introduce the management trainee programmes for all vital functions where fresh graduates must be manufactured for taking the company ahead (Sandberg and Abrahamsson, 2011).
A third alternative is to balance the needs of business by combining outsourcing activities with in-house capabilities. This may create clash of interests and therefore needs a prudent action. The first requires thorough investigation of the current and prospective projects the company will undertake and the core and supporting competencies of its manpower. As supply chain has various components involved in it, the company needs to identify which component it can handle better and which sub function the company needs to outsource. Balancing different functions will also entail the effective and efficient collaboration and coordination among different stakeholders. The agreements must also be long-term because changing partners in a short time may negatively impact the business performance (Konsik and Hoover, 2006).
In the light of the massive mess created in the supply chain function of the company, it is favourable to go for first alternative which suggests that the company should completely outsource services for supply chain management, logistics and distribution functions. The rationale for this recommendation is derived from the fact that company is acutely lacking in supply chain manpower and it is not only an arduous task but time taking as well to develop the manpower to the level of handling the supply chain operations independently and profitably in short duration. This demands rigorous work. Thus, the outsourcing will immediately solve the supply chain issues of the company. It will remove the wastages. It will also ensure the order delivery on time. This will save the company of the major costs that it can utilize in expanding the business instead of installing every facility in-house. The seasoned and expert supply chain partners will supply their tested talent and market intelligence with the company. The company only needs to employ the trusted and reliable supply chain partner which can be accessed on the basis of its market rating. Moreover, some processes in the company are temporary and project-based for which hiring in-house professionals will not be a good business decision. Thus, the advantages of outsourcing in the particular situations outweigh the disadvantages. The company should, therefore, pursue this action.
Outsourcing supply chain partner requires attentive homework and choice. The action plan for this can be segmented into four steps. First of all, the company should determine whether or not, the outsourcing will prove to be beneficial for the company’s business. The current activities should be benchmarked to the industry figures. The second step revolves around the identification of a supply chain partner. For this, it is advisable to seek the counsel of third party specialist in selection and negotiation of a trusted and reliable partner which has highest market rating and is the perfect match for the company. The third step involves the negotiation of the contract. For the contract, there are some essentials that the company should bear in mind. Firstly, the company should plan the end of the contract at the beginning and secondly the partner should be accommodated too to make money as it is the business that is motivated by profits. The last step involves the management of a healthy relationship with the chosen partner. The problems that ever erupt must be sorted out by taking help from an independent committee that should consult the contract negotiated at the time of the agreement.
Flatworld Solutions (2010) The Advantages and Disadvantages of Outsourcing, [Online], Available:"http://www.flatworldsolutions.com/articles/advantages-disadvantages-outsourcing.php" [21 November 2014].
Konsik, T. and Hoover, K. (2006) 'Outsourcing vs in sourcing in the human resource supply chain: a comparison of five generic models', Emerald, vol. 35, no. 6, pp. 671-683.
McLaren, T., Head, M. and Yuan, Y. (2002) 'Supply Chain Collaboration Alternatives: Understanding the Expected Costs and Benefits', Internet Research: Electronic Networking Applications and Policy, vol. 12, no. 4, pp. 348-364.
Sandberg, E. and Abrahamsson, M. (2011) 'Logistics capabilities for sustainable competitive advantage', International Journal of Logistics, pp. 1-22.