Strategic Supply Chain Management and Logistics – Humes Company

STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTICS A RESEARCH PAPER ON HUMES COMPANY INTRODUCTION: Walter Reginald Hume an inventor and industrialist, he started his business in Australia with his brother Ernest Hume in 1892 t0 1920. They manufacture and innovate new ways in producing pipes. In 1923, Walter Hume transfers to New Zealand and founded Humes Pipeline System. He builds his company on his knowledge and expertise in manufacturing concrete pipes. With the growing population and the demand for development in the country, he research and develop new innovation and introduced the Vertical Technology (VT) pipe manufacturing in New Zealand. This innovation, VT pipe becomes part of the Titan Concrete Pipe Range. He is considered as one of the biggest contributors in the development of infrastructure throughout New Zealand. For the past 75 years, Humes grow, introducing more new products such as culvert pipes, manholes, concrete precast, et cetera. He became so successful in his line of business that he was able to put up 8 manufacturing operations and 22 sales Centres throughout New Zealand. Humes Pipeline Systems is successfully operating throughout New Zealand. He was one of the major supplier of small and big infrastructures projects and building development. To cope up with the growing populations and the booming of infrastructures, Humes innovate more new products to cope up with the demand. Nowadays, he become part of the divisions of Fletcher Building Ltd., a New Zealand based group businesses. Fletcher Building Ltd is the major controller of all the brand under the supply chain management of Fletcher Building Ltd. As part of the Fletcher Building Ltd. he was doing business in a vertical integrated manner. The purpose of this research is an overview of the Humes Pipeline Systems company. The role of Supply chain management model in the company to reach their organisational business objectives. I will assess and compare the advantages of supply chain models for the organisation, which includes Push and Pull Model, Value Chain Model and Lean Supply Model. I will also assess and evaluate the link between supply chain management and their business functions to Humes Pipeline System. These business functions includes marketing, manufacturing, and human resources. And lastly, I will also discuss the four key drivers for achieving an integrated supply chain strategy in an organisation. These key drivers include the inventory, transportation, technology, and customer expectation. After assessing and evaluating, I will give the strength, weaknesses, opportunities and threats (SWOT) analysis of the organisation. Fig.1, Fletcher Building Ltd. Supply Chain Management Chart (Pippos , J. Tutor DB704) According to the Supply Chain Management chart as shown above Fig. 1, it shows that there is an integrated supply system in the Fletcher Building business organization. As shown, Fletchers Building supply chain management uses a vertical integrated system type of system. Humes is part of the brand under the supply chain management of Fletcher Building. Humes is considered one of the brand under the Fletcher group. Other than Humes, Flectcher supply chain includes the Cement brand under Firth Concrete and Golden Bay Cement. Steel under Easy Steel and Pacific Steel, Sand under Winstone. All these will lead to Humes finished products. The finished products of the supply chain will be distributed either on Retail or commercial. In retail, it will be distributed or use as a materials to be manufactured into new product. In commercial, it will be used by Fletcher for their infrastructure and construction projects. I choose the following supply chain models that are needed to assist Humes Pipeline Systems to achieve its business objectives: The Push and Pull Mode. Push means the manufacturer get new information of a certain product, develop it, produce and put it in the market for consumers. Pull means the consumers will purchase or demand the product introduce in the market. The advantages of the Push strategy as a manufacturers is that your seller will be the one responsible in promoting the products to the market; it will also give the manufacturers large exposure in the market and test their product, they will receive bulk orders. However, manufacturers will make sure that there will be a formal signing of the contract because they might change their mind and not promote or distribute your product. One problem also is that the seller might ask for promotional discount and demand to lower the price. So, it is very important to have a written contract that will state all concerns including the bulk of orders, mode of payment and pricing. Under the Pull strategy, he is the distributor of the products. The advantage on the part of the distributor is that they will receive cash transactions and more profit because no discount will be given to the consumers. They will have direct access to the consumers with regards to their opinion on the new product introduced. Their disadvantages are that they will hire more employees and will only receive small order of the product. In this supply chain model, Humes as a brand and part of the vertical integrated system of Fletcher Building Ltd. will purchase all of his raw materials from the brand supply chain of Fletcher Group, from the cement which is Firth Concrete and Golden Bay Cement, to steel which is Easy Steel and Pacific Steel and Winstone for the sand. In this method, Humes acts as the consumer, who demand or purchase all of his raw materials within the supply chain, and the brand who carries these raw materials needed, will be the seller. The finish products of Humes will also be distributed not only on retail but also commercial. Using the Push and Pull Method, Humes will push the product on retail for further use as raw materials to create a new product under Fletcher group of companies, the brand are the Place makers, Micro or Pink Batts or pull the product commercially to be used in the construction of commercial buildings and other infrastructure projects. For me, this kind of supply chain management is an advantage because there is a demand and a supply within the supply chain and business organisation. Because of this advantage, they will be able to minimize cost and optimize their profit. The next supply chain model I will discuss is the Value chain model. Value chain means adding value to the raw materials given by the manufacturer and sell the finish product to the consumers. In short, adding value to a certain product. The process involved in converting the raw materials into finish products which can be divided into two, namely: the primary activities which involve outbound and inbound logistics, operations, marketing and sales, and services. And the secondary activities involve the procurement of raw materials, human resources management, technological development and infrastructure. There two activities involve will help determine the organisational cost involve to manufacture the product and its expected profit. I believe that every brand in the supply chain of Fletcher Building Ltd. will have an impact in supplying materials or input to Humes to produce the product. Let us say Humes is the system, and a system compose of sub-system which I will identify as the brand in the supply chain of Fletcher group, they will provide input such as cement, steel, and sand as shown on the supply chain chart, and will act as contributor to be able to determine the expected cost Humes will incur in producing their products. These sub-system is very important to determine the cost incur that will contributes to its manufacturing cost. Proper supply chain management of each one of them will have an impact on the total cost incur to produce the product. Proper integration control between each contributor will help Humes optimize his profit. Therefore, I think Value Chain strategy and proper integration control on each supply chain of each contributor will lead to more profit. The last supply chain model I will discuss is the Lean Supply Model. Lean Supply means that a manufacturing company will find ways to eliminate unnecessary waste and non-value activities. By eliminating these unnecessary waste will optimize efficiency of the manufacturing company. Examples of eliminating unnecessary waste includes quality control of finish product, minimize inventory that are not needed, and making wrong shipping decision to satisfy customers. I think each brand that are under the vertical integrated system of Fletcher Building should apply the Lean supply management because each one of them is interlink with each other. Each of them has its own contribution in the supply chain management, by examining and identifying the areas that are not needed within the organization, it will help improve company’s competence and increase profitability. For the business functions that will link supply chain management, I choose the following: Marketing, the art or process on how to sell the product to the consumers. Its function is to create, deliver and communicate the value of the product to the consumers. In marketing, you have to understand the behaviour of the customers in the market. Do market analysis and market segmentation to hit your target market. By understanding the needs and behaviour of the customer. Customer satisfaction means profit. Humes target markets are divided into three. First, some of Humes finished products will be sold to its retail brand within the supply chain system, these are the Place Makers, Micro and Pink Batts. These three will use Humes finish products as their raw materials to develop another new products or directly sell the finish product. 2nd, Humes will sell their products for commercial use, these products will be used during construction and infrastructure projects of Fletcher. 3rd, outside market or customers not within the organisation of Fletcher . These are walk-in customers or customers who just inquire and order products on demand. Manufacturing, this is a process of producing a product using labor, materials and machineries. Manufacturing will start from research and development, to procurement of raw materials and production. Factors to consider in manufacturing includes the availability and source of materials, the reliability of the materials used, political stability of the source, price of materials and quality. Taking into consideration these factors in procuring materials needed for manufacturing will put the industry to operate smoothly. Humes manufacturing process starts from the procurement of its raw materials within the supply chain or group of businesses of Fletcher Building. Procurement of materials for cement from two suppliers namely Firth Concrete and Golden Bay Cement, then steel from Easy Steel and Pacific Steel, for the sand from Winstone Aggregates. After procurement, manufacturing process starts. Availability and reliability of supplies on hand will lead to an increase in production and optimize profit for Humes. Human Resources are the work force of the organisation. They are the people involved in an organisation. Human resources are the assets of the company, without them the company cannot operate by itself. These employees have their own individual talents and knowledge in a certain department which is beneficial to the company. Human Resources management is responsible for recruiting, hiring of new employees, and training. They will hire those who have the skills and qualifications needed in the company. To update employees, human resources development will introduce trainings and further learning of workers in an organisation. These programs will refresh their previous knowledge and further develop their skills. Trainings and career opportunities will also be given. These employees will also be properly compensated for their contribution to the company. Humes Pipeline is part of a big supply chain system, he must have a competent and well trained workforce for the whole system to work. It is estimated that Fletchers Building whole system has about 19,000 employees. With this big number of employees, the company must provide necessary trainings and career opportunities. Will hire, develop and recruit skilled and with high qualifications and experience. Proper management of human resources will optimise their value in the company and create a well organise system. The four key drivers that I choose that can help Humes Pipeline Systems achieve their integrated supply chain management are: Transportation, transportation plays an important role to logistics. It is important to Humes Pipeline system because it is their only way to distribute the products they manufactured on time to different construction projects of Fletcher Building. I believe that Humes Pipeline have their own transport for delivery because it is one of the important key factor in logistic. Humes practice the Just-in-Time (JIT) concept for a company to be profitable. Management will see to it that the products delivered will arrived at its destination as specified on the contract. To do that, management will check the movement of the product delivered from the time it leaves the factory to its arrival to its destination. Humes will tackle the issues on communication, freight, customs and movement of the product itself. With proper coordination it will be a cost savings to the company and customer satisfaction. Other factors to consider for transportation is the security of the product, by taking insurance policy to cover the product in case of damage, lost, or stolen. Inventory, for me Inventory plays a very important in achieving an integrated supply chain strategy for Humes Pipeline Systems. Inventory not only includes inventories of their raw materials but also inventories of their finished products. Inventory procurement of raw materials within the supply chain plays a very important role because it shows reliability and availability of materials as needed. Finished product of Humes will be sold either commercially or on retail. Technology. Humes as part of the supply chain system will use an advance technology that will be able to control their inventory within the organisation, a software that helps them manage inventory efficiently. They can also implement high tech security system that will such as 24 hours CCTV cameras. Humes as part of the supply chain will also have a uniform accounting system so that financial statements and balance sheets will be easily monitored by the top management. Customer expectation. Humes must establish and maintain good customer relationship externally and internally. Good relationship internally will create a harmonious relationship and easy flow of supply and demand. When I say internal, it means relationship between the organizational system itself. And also, Customer always expect quality and reliable product from their supplier. Humes’ relationship with Firth Concrete and Golden Bay Cement, or with easy Steel and Pacific and all the other brands involve in the system. Their satisfaction and good relationship with Humes will provide a seamless flow of goods and Sales among them and will be beneficial for all of them. Good external relationship means customer satisfaction. When a customer is satisfied it also means profit for the company. By maintaining customer satisfaction, there will a continuous order of the products. Customer satisfaction means providing them reliable and quality product, outbound logistics by checking the whereabouts of the products, answer queries, all these minor details will give customer satisfaction. CONCLUSION: Each of the supply chain model plays an important role in the supply chain management of an organisation. It has its own advantages and disadvantages in a supply chain management as discuss in the paper. Humes Pipeline as a division of Fletcher group has its own strength, weaknesses, opportunites and threats. Humes strength is innovative, expertise to the product, number one in their industry and a dominant brand all over the world. Their weakness is they no longer own their company but as a brand of Fletcher Building Ltd. Further expansion to other countries is their opportunity and their threat is the emergence of global competitors. REFERENCES: Mckinsey Quarterly October 2005 Retrieved from: www.advantage international.com www. Lafarge-na.com/ Pippos, J. 2014. Tutor Notes: Supply Chain Management and Logistics References Human resources – Wikipedia, the free encyclopedia. (n.d.). Retrieved September 24, 2014, from https://en.wikipedia.org/wiki/Human_resources Humes Pipeline Systems : About Us. (n.d.). Retrieved from https://www.humes.co.nz/About.php Lean Supply Chain Management – Expert Guide. (n.d.). Retrieved from https://logistics.about.com/od/supplychainintroduction/a/Lean_SCM.htm Marketing – Wikipedia, the free encyclopedia. (n.d.). Retrieved September 24, 2014, from https://en.wikipedia.org/wiki/Marketing Porter’s Value Chain. (n.d.). Retrieved from https://www.ifm.eng.cam.ac.uk/research/dstools/value-chain-/ The Push and Pull product distribution model – Smart Insights Digital Marketing Advice. (n.d.). Retrieved from https://www.smartinsights.com/marketing-planning/marketing-models/push-pull-product-distribution-model/ Push–pull strategy – Wikipedia, the free encyclopedia. (n.d.). Retrieved September 23, 2014, from https://en.wikipedia.org/wiki/Push%E2%80%93pull_strategy Value chain – Wikipedia, the free encyclopedia. (n.d.). Retrieved September 26, 2014, from https://en.wikipedia.org/wiki/Value_chain Value Chain Definition | Investopedia. (n.d.). Retrieved from https://www.investopedia.com/terms/v/valuechain.asp

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