ABC Strategy

Executive Summary

ABC is an organization that despite its current challenges has the potential to continue with its over ten decade’s dominance as a leading fertilizer manufacturing company in Australia. However, this is solely dependent on how the current management handles the current problems that are evident from several departments. Significant shortcomings have been identified in the organization’s current systems and processes. The current report will evaluate the problems that the firm is facing and how the firm can improve its operations and supply chain competitive advantage. ABC Fertilizers Limited is an already established company significantly contributing towards the success of Australia agricultural sector; however, the current problems facing the company stand a chance of ruining the company’s competitive advantage. This report highly recommends reestablishment of coordination and collaboration using modern information technology to solve the challenges that are currently undermining continued excellence.

Introduction

The present report considers the potential performance effects that result from enhanced coordination and collaboration with the help information management technology at ABC. Information management technology is a broad concept or a multidisciplinary approach where there is fusion of information systems, business management and technology for two main purposes. The first aim is to design and utilize information systems and technology to solve any challenges that the company could be undergoing. The second objective is the management of technology and this encompasses product development, supply chain management and product management. Looking at the current situation at ABC, it is apparent that much need to be done. The company is experiencing inventory problems that at times consist of 100, 000 tonnes which remain on the site for nine months before being delivered. The delivery system of finished products is very poor. ABC Company is thus facing both internal and external challenges which are threatening the profitability of the company. Current problems being experienced springs from lack of an effective communication between different departments, and use of outdated information systems that lack the capability to rely real time updates from customers to sales forecast department. In addition, there is inefficient production systems and lack of employee morale. As a result, the current situation not only threatens the position of the company in the industry, but they may lead to closure of the company. Supply chain management appears to be the greatest bottleneck at the company. ABC is lacking an internal and customer focused supply chain strategies. The company thus needs a total review of its system especially in the linkages in the chain that work together to bring customer satisfaction at the end point of delivery.

Background

Problem Analysis

The main problem at ABC seems to be the use of traditional approaches to customer service and failure to adopt modern information systems. Although the company is attempting to use new technology that will automatically perform liquid fertilizer’s measurement, and transmitting the results to the company’s stock system, production and delivery of solid fertilizers in highly compromised by the absence of comprehensive logistics from raw material procurement to delivery of finished products to farmers. While other fertilizer firms are growing towards managing each client segment as a unique service relationship, ABC continues to rely on client demand estimate which are very cyclical thus affecting sales forecast. Some of the leading world companies have realized that supply chain performance on dimensions like in-stock availability and on-time delivery are vital in customer satisfaction. In the information system and processes affected departments include; area Mgr forecast, sales forecast for SAL, demand forecast, supply plan, production plan, inventory control, and procurement plan. As a result of challenges in the above departments production and delivery of fertilizers to the farmers is becoming a major challenge.

Strategies to Solve the Problem

To solve the stalemate at ABC, the management must visualize the entire organization as a system. As a system, every department is crucial to the continued running of the company, and a hitch in one department will thus cause disruption of activities in the next department and so on. A common starting place is to harmonize operations in all departments by ensuring excellent coordination and collaboration. In addition to enhancing coordination, use of current information technology management systems will be vital in streamlining processes.

Effective coordination and collaboration within departments will not only be focused within the organization, but it must be extended beyond its boundaries to include all external parties involved in the production of fertilizers. Coordinating the rate of order fulfillment to match the actual consumption of fertilizer by farmers is successful from the customer’s point of view, if only it results in satisfying their delivery date and lowers logistics costs. It is the high time that ABC introduces point-of-sales data including stocking data and sales. Establishment of a tight coordination between ABC and its key suppliers will drastically increase product availability to farmers and reduce the current stalemate of inventory costs. Therefore, harmonization of operations between departments such as the raw material supplying firms, and distribution departments will be the key to attaining flexibility necessary to enable the company enhance logistics processes in response to the dynamic fertilizer market conditions. Poor coordination is resulting to skyrocketing inventory costs, increased costs related to transportation of fertilizers to the different distribution centers, and long periods before supply reach the end consumers. Wide literature confirms that hitches in one department are likely to affect the operation in other departments, and this makes coordination a good remedy for the current challenges. Coordination will enable management of independent logistics and in so doing help mitigate demand variability and unwarranted inventories.

With the help of information technology management, ABC must adapt a process of planning, executing and controlling the interdependencies of activities carried out by different departments. Coordination will ensure that sales forecast department is able to correctly figure out the expected demand. In addition, effective coordination between ABC and raw materials suppliers will ensure there is a frequent delivery without necessary accumulating large safety stock. With automated production process, it is also expected that the current breakdowns will be reduced. The advantage of an automated production system is that it can alert engineers in case of hitches. With effective coordination and accurate sales forecast from the sales department, the production department will be able to produce the right amount of fertilizers to meet the demand.

The current information systems are very obsolete, and it is time that the management invests in modern information technology. This will not only help in saving unnecessary costs, but it will be an essential element of organization capability and a source of competitive advantage. The management need to consult with IT firms so that only the right mix of information technology is implemented to ensure there is effective business processes, and better information management. In so doing, the managers will have real-time reports and allows departments to function independently. The new information system should have a central database that will allow all managers to know the state of affairs in the next related department. Some of the anticipated benefits of investing in modern information systems will be;

• Enhanced communication, coordination, interaction with farmers (customers), colleagues and suppliers
• Customer service improvement
• Stable growth
• Marketing improvement
• Efficiency increase and direct and indirect cost reductions
• Achievement of competitive advantage and competitiveness power increase

The Benefit Enhancing Coordination and Collaboration Using Modern Information Technology

ABC supply chain consists of a set of activities which currently appear to be uncoordinated. Important processes causing the current challenges include the procurement, distribution, and production. These processes can only be effectively achieved when, for example, all activities related to procurement-ordering, supplier management, acquisition, replenishment and inspection activities, are conducted from a single optimized model. In addition, supply chain at any organization involves interconnection of trading partners, information, financial and product flows. Effective management of these flows thus calls for the presence of a synergistic relationship between supply and distribution partners with the sole purpose of enhancing client value and providing a profit for each supply chain member. Headed by different managers-production, commercial, business and procurement, departments work independently but their actions are interconnected. Therefore, enhancing coordination and collaboration with the help of modern information system will ensure each department at ABC is updated with organization activities and current situations in the market. There are several roles for coordinating different activities in an organization. For example, ordering activities must have total coordination and collaboration. Inventory management at one location involves two major decisions; how much should be ordered and when the order should be made. Other benefits of coordination and collaboration are widely documented in literature and include;

According to Wang, collective working for combined planning, and product development, joint exchange of information in an organization and integrated information systems will make a firm more competitive. Collaborating among departments in a supply chains means that two or more independent or related companies work together to plan and execute supply operations with increased success rates than when acting in isolation-this is almost the case at ABC where departments are working a single entities.

Continued coordination among ABC departments will also be essential because it allows or minimizes risk avoidance, help in the management of any uprising risk and mitigation of the same. Therefore, coordination thus leads to the creation of value. 

Phases

Coordination and collaboration with the help Modern Information Technology will be implemented in several distinctive phases

• Staff Training

This phase will involve enlightening of employees on modern chain supply concepts, enhancing their skills, capabilities, and knowledge. In addition, training on the use of the implemented information systems will be made mandatory for all senior managers at all departments.

• Production and Distribution Coordination

Integration of distribution and production processes will lead to significant saving in costs. In addition, it will assist in the improvement of the relevant service by exploiting economies of scale in movement of fertilizers and production.

• Procurement and Production Coordination

In this phase, integrated procurement production will be classified into categories based on the number of products, planning horizons, solution method utilized, joint replacement of orders and algorithmic processes.

• Production and Inventory Coordination

ABC should consider using heuristics methodology for sole vendor multi-buyer. With the coordination of the replenishments of supplies, ABC will be able to reduce the annual cost by approximately 30 %. According to Hoque and Gayol, ABC can develop an optimal solution procedure for optimal production quantity. In single vendor single buyer production inventory system with unequal and equal sized shipments from the vendor to the buyer and under the capacity constraints of the transport equipment by using simple interval search approach.

• Distribution and Inventory Coordination

Drawing from the works of Napolitano ABC limited should develop an integrated optimization model of inventory distribution system in which any consumer point can be supplied by multiple distribution centers.

• Costs on Implementing the Strategies

Two costs to be incurred in ensuring there is effective coordination, and collaboration among departments with the help of modern technology will involve time and budgetary allocation. Through the finance department, it is highly recommended that ABC do an assessment to determine the cost of implementing the new information system. It will be dependent on the supplier the firm will consult and the extent to which the information system will be implemented.

• What is its timing?

ABC business so very cyclical with much of the farmers buying fertilizers in the month of September; as a result, the full benefit of the proposed strategies will be felt within the first year of implementation. It is highly recommended that ABC embark on the proposed strategy as soon as possible so as to ensure that everything is set by next ordering season.

• Who Will Be Involved?

ABC Limited is divided into four major parts, and they will all be involved in the implementation. The production managers responsible for efficient production of all fertilizer, his involvement will be essential towards the success of the proposed strategy.  The commercial manager will also be part of the team involved. Since he is responsible for sales and marketing of all products, his coordination and collaboration with other departments will ensure he provides valid projections for future sales for the production and procurement departments. The business and procurement managers will also be involved in the implementation of the proposed strategic change.

• How Will You Resource It?

It is recommended that a new quality control department be established to oversee the implementation of the current. Apart from overseeing the implementation of the proposed strategy, the department will continue to recommend further changes in the future. It will streamline the operation between departments.

Disadvantages of the Proposed Strategy

The adoption the proposed strategy will have one major disadvantage. When departments become extensively reliant on each other, there is a chance of failure in the entire system in the event that there is a mistake such as wrong sales forecast. Such a mistake will be translated into high or low production which may lead to more wastefulness and a large inventory.

In conclusion, ABC is a company that can be described to be still at the growth stage. In spite of the cyclic nature of its business, demand for farm solid and liquid fertilizer will remain high as the Australian government continues to empower farmers who play a crucial role in feeding the country. What is mainly lacking at the company is the presence of a clear coordination and collaboration among different department. To a greater extent, this is being caused by the present obsolete information systems. However, if the firm adopts this recommendation, the current situation will be positively improved and make the firm a key player in the industry. Adoption of modern information systems or information technology will enable different departments in the organization to share information about forecasts readily especially because demand for fertilizers is not based cash buying but order placement.

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