Supply Chain Management Analytical Case Study - Majid Al Futtaim Properties.

Supply Chain Management Analytical Case Study - Majid Al Futtaim Properties.

Tony.

Tony’s Business Series.

Executive summary.

Supply Chain Management is an essential component of modern business operations as it efficiently streamlines the flow of goods through the production cycle till the finished goods reaches the consumer. For businesses involved in the property markets, the supply chain management enables them to effectively integrate and co-ordinate theirbusiness plan, sourcing and acquisition of the required materials, and the development and sale of their properties. Such integration does reduce the operation costs, and this in turn promotes the financial health of the company. The business entity evaluated in this project is Majid Al Futtaim Properties, a company whose specialty lies in the real estate sector. The project evaluated the company in terms of its price and contract negotiations capabilities, logistic arrangements, and the company’s capabilities to assess its suppliers’ reliability, quality assurance and financial status.

Analysis.

According to the Supply Chain Council (www.supply-chain.org), the supply chain can be defined as follows:“The supply-chain — a term now commonly used internationally — encompasses every effort involved in producing and delivering a final product or service, from the supplier's supplier to the customer's customer. Supply-chain management includes managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer.”(n.d).It thus follows that Supply chain management (SCM) can be defined as the organization, supervision and coordination of the movement or flow of tradable goods (Hines 2004).

Majid Al Futtaim Properties is acompany involved in thedevelopment, proprietorship and management of hotels, shopping malls and mixed-use communities. As such it requires building materials, personnel to manage its operations and products to be fitted in its completed buildings. It utilizes the SCM to strengthen its core competencies and increase the flexibility of its sourcing of products and also flexing its distribution channels.SCM has enabled the company to streamline its operations, maximizing its output and ensuring cost-efficiency in its business operations. It has therefore been able to satisfy the customer demand while concurrently minimizing the control the management exercises on logistics operations. It has also enabled the company to diversify its supply chain partners (Majid Al Futtaim Properties, n.d). Furthermore, SCM has also streamlined the bidirectional flow of funds and information across the segments of the supply chain, therefore providing real-time analytical systems that can be used to direct the management of the operations of the entire supply chain network(Hines, 2004). SCM can therefore be used to analyze the operations of Majid Al Futtaim Properties as discussed below.

SCM does address issues concerning procurement (Hines, 2004). In the case of Majid Al Futtaim Properties, procurement is represented by price and contract negotiations. The company does negotiate the prices for all commodities that it seeks to purchase from its suppliers. Thereafter, it signs a purchasing contract after a price agreement has been reached. Usually the suppliers do offer discounts to the company.Nonetheless, the company does sometimes experience problems when purchasing materials, products and services from new suppliers. The problems are usually associated with the pricing of the first orders. Fortunately, future price agreements are reached without problems because the subsequent orders are benchmarked against the pricing of the first order. Also, in order for the company to avoid purchasing overpriced products, it has adopted a policy that requires three price quotations for the products it intends to purchase in order to assess the current market prices of these products. These quotations also enable the company to manage its price negotiations with its potential suppliers.According to the precepts and theories of SCM, the price and contract negotiations of the company are advantageous since it enables both the supplier and the company to reach an amicable and reasonable understanding regarding the prices for the goods. This in turn results in the establishment and maintenance of a mutually beneficial relationship between the suppliers and the company. Such a relationship is vital for the company especially when it requires certain products that are in high demand, as it would be given priority by its suppliers. There were no major problems that could be observed in the realm of price and contract negotiations.Currently, the only issue that can be improved is the procedure that the company uses to negotiate for prices with a new supplier. The procedural process should elaborate what the company intends to purchase, and the maximum price that the company can pay for the products. This will reduce the problems the company experiences when dealing with the pricing of goods from such a supplier.Based on the SCM analytic models, the procurement procedure used by company does enable it to reduce its purchasing costs by sourcing for its goods directly from the manufacturers or their wholesaler franchises therefore bypassing all the middle men. Low purchase prices do lower the development costs, and this translates to competitive selling prices for its properties.

After the company has sourced its materials, it requires these materials to be transported to its depot. For the company, the logistics arrangements andthe related issues are operationalized as discussed hereafter.The transportation of the goods from the supplier to the company’s depots is usually arranged by the supplier. The supplier transports the goods to the company but the company pays for the transport costs. Usually, transportation costs are reflected as a separate cost that the company must pay. However, there are instances where the supplier transported the purchased goods to the company’s depots without charges, and this was usually construed as a gesture of free will. Transportation is usually outsourced to a third company as this reduces the overhead costs for the supplier. Moreover, such outsourcing of services does streamline the logistics arrangements for the supplier. However, there have been occasions of late deliveries of goods to the company, and this has been due to lack of coordination and/or poor shipment tracking and/or unforeseen weather crisis that usually impact negatively on the delivery-time framework.The company does own a storage facility; and this enables the company to purchase the required goods in huge quantities.The resultant benefit is showcased by the fact that the company is offered quantity discounts by its suppliers. Moreover, the company can also immediately purchase goods (that would be needed later on); if the market survey conducted by the company shows that the price for these goods is going to rise exponentially in the near future. This is particularly important in relation to building materials such as copper and cement which are in high demand across the globe. Therefore, the ownership of a depot does reduce the purchase price of the goods.In terms of logistic arrangements of the company, no noticeable problem was observed. The logistics management of the company ensured that the transportation system was fast, responsive and reliable. However, the logistics cost could be reduced and the logistics arrangement improved if the company diversifies its delivery scheme (especially for non-bulky lightweight goods) and also utilize several modes of transportation as this would reduce the instances of late delivery.

After the goods have been delivered to the company’s depots, the company employees then document the quantity and quality of the goods received in their inventory. Such documentation enables the company to monitor and evaluate its inventory rate. The inventory rate is directly correlated to the extent of development projects being undertaken by the company, and as such its monitoring does enable the company to provide a constant flow of materials to its building projects. This in turn impacts on the quality of the real estate assets of the company, and it can therefore be concluded that the constant monitoring of the inventory rate does improve the quality of the assets possessed by the company.Moreover, inventory monitoring enabled the company to identify and dispose of unproductive inventory thereby reducing its handling and storage costs. In terms of inventory management of the company, no noticeable problem was observed. However, the company would benefit if it would adopt the use of avant-garde inventory management softwares being rolled out in other parts of the worlds.

Regarding quality issues, the suppliers do send a sample of their products to the company for inspection and assessment. The company then evaluates the sample and thereafter selects the best samples. The suppliers of the selected samples are then contacted by the company, in order for the two to negotiate the terms and conditions of their business. Thereafter, the company requests to visit the supplier’s facility. During such visits, the company representatives can confirm that the supplier adheres to the quality assurance standardsset forth by ISO 9000 and the company. No noticeable problem was observed with regards to quality assessment.

The company has never had any disputes with its suppliers. However, the company has a protocol in place to deal with such disputes if they arise. This protocoloutlines the procedure to be followed after detecting a problem and the appropriate solution for that problem, for instance, if the incorrect quantity of goods was delivered to the company, the company would notify the supplier about the problem and then deduct the equivalent amount of the missed goods from its subsequent payments to the supplier. It would also request the supplier to avoid similar mistakes in the future.All in all, no noticeable problem was observed with regards tothe dispute management protocol.

Regarding issues related to the reliability of the suppliers, the company has set forth policies that ensures that it has alternative suppliers that would supply the products needed in instances when the key suppliersare unable to fulfill their commitments. Normally, each and every supplier of the company has certain capabilities that are determined by its unique business environment and settings. Due to these differing capabilities among the suppliers, some suppliers do defer the delivery deadline depending on the prevailing situations. However, the company does initially ensure that the supplier has enough goods in stock, and so the failure to meet deadline are caused by factors other than the supplier’s lack of goods. Usually, when the supplier does not have the required quantity of goods, the supplier would decline the request to supply such goods to the company. One of the main reasons that cause the supplier to fail to meet its commitments to the company is bankruptcy. To counter this possible eventuality, the company has developed a specific pre-qualification questioner that seeks to assess the financial health of the supplier. Nevertheless, in case the supplier goes bankrupt, the company would seek the goods from alternative suppliers.Taking everything into account, no noticeable problem was observed with regards to the company’s assessment of the reliability of the suppliers.

The ranking of the categories evaluated in the project was based on prioritization of needs of the company; and as such, the rankings are reasonable.With regards to the suggestions offered in the paper, they are feasible as they are practical and easy to implement. They are also relatively cheap when compared to the price paid for not implementing the above stated suggestions. For instance, the logistics management for the company would remain dependent on shipments for the delivery of vital electronics that may be required within a short notice, therefore halting construction operations. However, if such electronics are delivered via air transport, the company would be able to avert the loss associated with the halting of its construction projects. Therefore, it is probable that the company would be genuinely interested in the above stated suggestions because they would streamline its operations and also optimize its output while concurrently ensuring that cost-efficiency is maintained.

The most important things learnt in this project are that SCM utilizes cross-functional approaches to integrate the business operations. SCM has enabled Majid Al Futtaim Properties to improve the visibility of its inventory and also accelerate the velocity of movement of the inventory. SCM has also enabled the company to streamline its operations, maximizing its output and ensuring cost-efficiency in its business operations. It has also enabled the company to diversify its supply chain partners.

Conclusions.

Supply chain management (SCM) can be defined as the organization, supervision and coordination of the movement or flow of tradable goods. SCM has streamlined the bidirectional flow of funds and information across the segments of the supply chain, therefore providing real-time analytical systems which can manage the operations of the entire supply chain network. For businesses involved in the property markets, the supply chain management enables them to effectively integrate and co-ordinate their business plan, sourcing and acquisition of the required materials, and the development and sale of their properties.For instance, Majid Al Futtaim Properties has utilized SCM to strengthen its core competencies and also optimize its output and profitability.

References.

Hines, T. (2004).Supply chain strategies: Customer driven and customer focused. Oxford: Elsevier.

Majid Al Futtaim Properties.(n.d). Majid Al Futtaim Properties Website.[Data File].Retrieved from http://majidalfuttaimproperties.com/en/default.aspx.

Supply Chain Council. (n.d).Supply Chain Council Website.[Data File]. Retrieved fromwww.supply-chain.org.