Innovative Global Supply Chain and Logistics Methods - the Saudi Arabian Market - Research Proposal Example

Exploring innovative global supply chain and logistics methods and applying them to the business in the Saudi Arabian market Introduction The purpose of this study is to explore the various innovative global supply chain management methods and logistic methods that are found in the global supply chain and how they can be applied to the Saudi Arabian market. This study explores the current supply chain and logistics methods used in the Saudi Arabian market and compare them to the global methods. This is in turn to be used to make recommendation on those methods that can be deployed in the Saudi Arabian market to spur it to international standards. The advantages and disadvantages of supply chain and logistics methods used currently in the Saudi Arabian market will be investigated and recommendations made on how to adopt or improve on these methods. The unique nature of the Saudi Arabian supply chain market Saudi Arabia is the Arab world’s largest economy. There are various business and investment opportunities in Saudi Arabia. In spite this; the Saudi Arabian market is very competitive and many transactions (business) are based on quality and cost (Davis-Sramek and Brian, 2007). Foreign investment in Saudi Arabia is stimulated by advanced infrastructure that is continually upgraded. Largest percentage of Saudi Arabia’s income is spend on development of infrastructure and boosting economic growth. There are other several factors that stimulate foreign investment in Saudi Arabia. One such factor is the respect for private ownership, free entrepreneurial spirit and private sector that is energetic. Another contributing factor is the availability of capital, stable exchange rates and the convertibility of foreign hard currencies into Saudi Riyal (Bandyopadhyay, 2005). The country also has respect for intellectual property rights and thus offers protection to patents, copy rights and trade marks. The country does not have capital movement controls and profit repatriation that attract foreign investors. The banking system in Saudi Arabia is advanced (Åkesson, et al, 2007). The liberal tax system of Saudi Arabia is another contributing factor behind foreign investor attraction. Research significance To be globally competitive the supply chain management and logistics need to be efficient and streamlined. Research has indicated that companies working in supply chain and logistics in Saudi Arabia are facing challenges related to growing complexity, volumes and variations in supply chain. Saudi Arabia lacks physical capacity to address these challenges and this is leading to a decline in the service levels in the Kingdom (Åkesson, et al, 2007). The country has seen demand for warehousing exceeds their supply in the past few years. As a result the capacity of companies are increasingly threatened by capacity since firm’s can no longer efficiently offer the required services to the growing consumer markets. To be able to address these challenges there is need to understand the innovative global supply chain and logistic methods. This will aid in achieving capacity solutions in addition to world class services in the country (Barros, 2003). Objectives 1. To explore the current innovative global supply chain and logistic methods 2. To explore the current supply chain and logistic methods used in Saudi Arabia market 3. To compare the Saudi Arabian and the innovative supply chain and logistic methods 4. To draw summaries on how the innovative global supply chain and logistic methods could be applied in the Saudi Arabian market. Literature review a) Innovative global supply chain and logistics methods Due to increasing globalization of economy, most production is being outsourced. Thus to commercially survive in the global economy, there is need to have innovative global supply chain management. The accelerated globalization is leading to major structural shifts in the global supply chain which in turn is leading to new challenges for managing supply chains. The increased pressures to cut down costs and to penetrate local markets are some of the key drivers of globalization (Gupta and Gautam, 2002). Most companies face challenges in realizing the savings in the management of costs. The differences that exist between the planned and the actual benefits results from the internal barriers which are bottlenecks of globalization and external network partners who do not achieve the expected performance. Factors which affect expansion of supply chain globally include quality and safety of products and security (Adewole, 2005). The inflexibility of supply chain and lack competency among local managers to manage partners is major barriers to globalization. Compliance with the set regulations and meeting the demand of consumers ensures environmental sustainability. It is expected that in the near future flexibility of supply chain will overtake customer service and product quality as major driver for supply chain strategy improvement. Many industries are in various geographic regions are converging to improve the flexibility and performance of supply chain. Supply chain management involves a high level of combined thinking. Thus the supplier selection, the facility location and the choice of channels of distribution should be in line with the achievement of the firm’s goal through realization of marketing objectives. Most supply chains are designed from the customers backwards instead of factory outwards (Campbell, et al, 2004). This is aimed at achieving efficiency goals rather than effectiveness goals. Global sourcing and supply have been enabled by the movement of geopolitical events toward technological development and trade deregulation. It is a paradox that low cost off shore sourcing could lead to costly outcomes in supply chain (Defee, and Theodore, 2005). This may be due to high transport costs and extension in lead times. Lead time extension may result from distance and complications involved in the coordination of shipping from far off suppliers via forwarders, customs, shippers and delivery networks. Time is increasingly becoming a competitive variable in markets. This is both in terms of time to market for new product introductions and time to respond to the needs of time sensitive customers. To be successful companies need to reduce their costs by having tight controls on their expenses and redesigning their work process. This implies that the workforce ought to be small but at the same time productive and re-engineering the supply chain. This calls for partnership with company customers. Thus to be successful the companies operations should be designed to be multi level. These include combined efforts of engineers in troubleshooting process problems in their respective manufacturing lines and improvement of productivity; discussion of new products and trends by marketing teams and development of mutually beneficial business opportunities by management through close working. Some of innovations that have occurred in the supply chain include management product and information flows. Innovations in the management of products comprise concepts such as postponement, modularization, mass customization and flexible automation, cross docking and time based logistics. Postponement strategy involves delaying some supply chain activities when the demand is low until the demand rises again (Åkesson, et al, 2007). Its popularity was witnessed in 1990s. This helps maintaining fast response and low system wide cost. In supply chain postmen strategies include purchasing postponement, manufacturing postponement, logistic postponement and time postponement. Other postponement in the supply chain includes product development, price, and passage of title and demand postponement. Postponement strategies in supply chain have several benefits. It reduces inventory and transport costs in addition to reducing risk of obsolescence and demand variability. Postponement also improves the competitiveness of a firm through provision of customized products quickly. Modularization involves specializing in the production of a part of a product by a company and cooperating with another firm to produce another part that they have advantage in. in supply chain modularization is the basis of outsourcing where a company outsources services that it can not perform well. Mass customization involves designing and manufacturing customized products which are tailored to meet the needs of customers at mass production costs and speed. Mass customization enables satisfaction of customers (Batt, 2003). Knowledge based software, modularization of products and process and flexible automation has enabled supply chain to reduce challenges associated with mass customization. Flexible automation have been used to design flexible factories. This allows firms to be cost competitive. Automation systems include manufacturing systems, software support systems, industrial communication systems, mechatronics, production control systems and e-business. The automation enables firms to reduce labor force, to increase flexibility, improve quality and yields of products, increase capacity, reduce changeover and installation times, reduce floor space requirements, reduce downtimes and improve safety (Adrangi, et al, 2001). Most supply chain companies have functional units which are concerned with certain steps in the production of a product. This has often resulted in poor coordination and conflicts among different functional units. Thus much time is wasted to solve the disputes that arise and some such disputes go on unresolved. In most cases these require redesigning and retooling of the units. The new innovations in the supply chain require a new approach which combines individuals from various functional units to form an integrated product development team. The involvement of suppliers in the development of products helps to save finances in supply chain. In addition outsourcing of materials required for production of new products help to cut down costs of production. Innovations in the management of information flows include strategic partnership and information technologies which improve transparency of information. b) Innovative logistics in supply chain Innovative advances in the area of supply chain logistics are transforming the traditional transport management. The new advances consist of material movement across the value chain. The advent of internet has enabled robust and flexible collaboration and process execution. Thus supply chain logistics can be executed as they are conceived for immediate and sustained competitive advantage (Carter and Lisa, 2003). New innovations in supply chain logistics include indirect materials procurement, global inbound movements, direct material procurement, domestic inbound movements, intra enterprise, finished goods, global outbound and domestic outbound. This logistic strategies enable supply chain firms to be competitive than those employing traditional model of transportation management. It also shortens the time required to move finished goods. Changes in global logistics are being driven by e-commerce, globalization and customer expectations. E-commerce propels the two other factors. The internet and related technologies have improved the way firms transact their businesses dramatically. Production, supply and customer bases are being internationalized by corporation in order to exploit opportunities for cost reduction and revenue growth. New supply chain logistic management methods help firms to reduce costs through combination of logistic operations. The combination reduces redundancy in systems and procedures (Basnet, et al, 2003). This in turn reduces transportation costs. The new logistic methods also enable corporations to take control of logistic process through information visibility. Information visibility requires that firms collaborate and streamline with external logistic partners. Taking control reduces variability and improved reliable customer service. Another advantage of new methods of logistics is that they act as new business models which generate revenue. Effective logistic capabilities are valued assets of any firm. Such firms can sell their logistics services to other companies. New methods of logistics also increase revenues and profits of an organization. E-commerce and globalization enabled by these new methods of logistics are essential for revenue growth through expansion in both domestic and international markets. Logistics determine the customer satisfaction and profitability of any firm. c) The benefits of outsourcing The current complex global markets calls for relying on specialists to perform key tasks of an organization. Outsourcing thus relieves the organization off the load of carrying out specialized responsibilities such as advertising and promotions. This enables the company to concentrate more on its main business activities (Adrangi, et al, 2001). In addition outsourcing creates a great atmosphere for competition. Global IT outsourcing and business process outsourcing is driven by the need to cut costs by organizations. Other factors that have seen many firms to embrace outsourcing include the ability to access talent which is not available in the firm, innovation processes which the firm lacks and to achieve business transformation. In long term outsourcing contracts the businesses expect that large vendors will be capable of providing g end to end services across many business towers. Outsourcing also allows flexibility since it allows businesses to quickly scale down or up its operations as a response to changes in market demand without the bearing of the costs involved. The competitiveness of a firm is also improved by outsourcing arrangements of IT development and business processes. It is believed that outsourcing is about to bring about major transformation in the globalization. Future successful organization will be those who will be able to work with a network of suppliers. Such firms will be more competent and thus outsourcing will determine what is core and what is non-core to the organization. Outsourcing is likely to continue in the IT infrastructure and data management. Research strategy and methods Various research strategies are available for collection of data. Some of these methods are suited for deductive approach while others are more suited for inductive approach. The research question and objectives are key determinants of the strategy to be employed. Some of the common strategies used in gathering data include experiment, survey, case study, action research and grounded research. To address our research objectives in this study we shall employ the following survey strategy. Given the large amount of data that we intent to gather in our study from a large sample size we shall use survey strategy. Questionnaires will be administered to the study population. The use of survey is expected to yield findings which are a representation of the whole population at a lower cost. The following research methods will be used to collect data to address the research objectives. 1. Use of secondary data: documentary secondary data will be used in this research to gather information concerning current innovative global supply chain and logistics methods. This will aid in saving enormous amount of resources that could otherwise be used to collect this data using other methods. To ensure quality of the data obtained using this method other methods will be used to gather data to supplement the secondary data. 2. Use of self completion survey method: this will involve use of structured questionnaires to collect data. The questionnaires will be administered electronically to respondents. This will allow faster and cheap collection of data. The questionnaires will contain both closed and open ended questions and they will be developed from the literature review. A pilot study will be carried out on selected respondents to test the effectiveness of the questionnaires and allow revision and refinement. 3. Use of semi structured interviews: these will be used to collect qualitative data via interviews. Open ended questions will be used to gather the information from respondents. Data sampling Non probability sampling methods will used to sample data due to the qualitative nature of this research. The purposive sampling method will be used in this case. Respondents to structured questionnaires will include all managers of supply chain companies, outsourcing firms and logistic companies from allover the world that have contact information (e-mail address) on the internet. In addition, some of those who have telephone numbers and their companies are known to be successful will be interviewed via telephone. Research ethics Participation in this study will be voluntary and any participant will have a right to withdraw from the study at any given time. All data collected from individuals will be kept confidentially. The identity of participants will not be required and for those who can easily be traced by the information given, the confidentiality of the information will be provided. The data and information obtained in this study will solely be used for accomplishment of this academic work. References Adewole, A. 2005. Developing a Strategic Framework for Efficient and Effective Optimisation of Information in the Supply Chains of the UK Clothing Manufacture Industry. Supply Chain Management: An International Journal, 10(5), pp. 357-366. Adrangi, B., Arjun, C. and Kambiz, R. 2001. 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Applying the Strategy-Stracture-Performance Paradigm to the Supply Chain Environment. The International Journal of Logistics Management, 16(1), pp. 28-50. Dimitrov, P. 2005. Logistics in Bulgarian Manufacturing Companies. International Journal of Production Economics, 93-94, pp. 207-215. Gupta, M. and Gautam, N. 2002. Analysis of Flexibility and Supply Chain Management in Select Indian Industries. Global Journal of Flexible Systems Management, 3(2), pp. 31-44. Read More