Background
Supply chain management (SCM) has become increasingly important in the last couple of years compared to the past years. SCM has been incorporated into the business strategies of most organizations to give them a competitive advantage. Supply chain management refers to the management of how goods flow from the manufacturer to the final consumer.
Raw materials are moved to the factory so that they can be processed. The finished goods have to be distributed to reach the customers on time and at the right place. In general, supply chain management deals with the design, planning, controlling, and executing, as well as monitoring how supply chain activities are carried out (Dutta, 2011).
Every product that reaches the end consumer goes through several stages. The whole process is a combined effort of several organizations or departments. The supply chain components have to be connected, the physical flow of goods and services, as well as the flow of information. The main objective of supply chain management is to add value to business organizations and give them a competitive edge.
This essay is about EMAL, a company that is based in the United Arab Emirates and deals with the smelting of aluminum. The company is owned by Mubadala Development Company in Abu Dhabi, together with the Investment Corporation of Dubai. The company operates in the global market. It has been supplying many countries with aluminum across the world. EMAL produces an approximate 800,000 tons of aluminum each year (Emirates Aluminium, 2014).
According to the information on the company’s website, EMAL supplies about 150 customers across the world. The production capacity of the company has been on the rise, and it is expected to rise to about 1.3 million tons by the end of the year 2014. This will also make EMAL one of the biggest sites in the world where aluminum is smelted.
One of the factors that have led to the success of EMAL is its successful supply chain. The company has a supply chain that has given it a competitive advantage over most of its rival companies because it has helped in its distribution and manufacture of aluminum. This essay will focus on the supply chain of EMAL.
EMAL’s Supply Chain
The supply chain starts from the point of manufacture to the point where the customer gets the products. Therefore, the supply chain of EMAL can be analyzed from the area where aluminum is smelted to where the final customer gets the product. Despite the many similarities in supply chains, the supply chain of each company differs depending on the specific products it deals with. The supply chain of EMAL is a bit different from those of many companies due to the uniqueness of the product it handles.
In analyzing the supply chain department of EMAL, it is important to first understand the major activities that are carried out in the logistics department. These are the activities that the organization is supposed to follow in its supply chain management. It is imperative to note that the main objective of supply chain management is to help the organization gain a competitive advantage. Therefore, all the activities that are carried out in the supply chain should be aimed at helping in achieving the competitive advantage of the company.
The first activity that should be executed is ensuring that the customers’ standards are well understood and they are met. This should be understood even before the raw materials are acquired because the kind of raw materials that the company acquires will have a direct impact on the final product that will be produced. Therefore, understanding what the customer needs will be very crucial because it will dictate the kind of raw materials that will be acquired.
The organization should always aim to satisfy the needs of the customers. This is a sure way through which it can gain a competitive edge. Satisfying the customers means that the organization has to manufacture what the customers need and deliver the same on time (Dutta, 2011). The main activity of EMAL is to smelt aluminum. Therefore, the customers of the company are mostly organizations that manufacture aluminum products. EMAL, therefore, smelts aluminum based on the company that it is to supply to.
The kind of products that the customer needs is what guides how the aluminum is to be smelted. Also, the customer guides the amount of aluminum to be smelted. EMAL can produce or to smelt aluminum based on the specific requirements of specific customers. This is one of the factors that have been able to give EMAL a competitive advantage.
The company understands the needs of its customers and produces the kind of aluminum they need. Aluminum is manufactured in different categories. Therefore, EMAL smelts a given category of aluminum as per its customer’s request.
The other activity that is carried out in the supply chain is transportation, which is essential as it, arguably, forms the core of the supply chain management. Supply chain management is often confused with being transportation management. Raw materials need to be transported to the point where manufacturing takes place.
Once they have been manufactured, the products need to be transported to the area where they are stored, or supplied to the final customer. Finished goods are supposed to reach the customer in good time, as this is essential in ensuring consumer satisfaction (Department for Transport, 2013). In essence, it satisfies the time and place utility of the customer. In transportation, the mode of transport to be used is important because different products require different modes of transport.
For instance, goods that are perishable require a mode of transport that is fast. Fragile goods, on the other hand, require a mode of transport that is safe. The urgency with which the goods are required also influences the mode of transport to be used. If goods are required within a short time, then they have to be transported using a fast means.
Other factors that are significant in transportation include carrier routing, vehicle scheduling, equipment selection, as well as claims processing and rate auditing. Carrier routing is important, as it influences the speed with which the goods will reach their required destination. It is similar to vehicle scheduling. Vehicle scheduling should be done according to the urgency with which the goods are required or the distance that they need to be transported.
The products made by EMAL are heavy and bulky. Therefore, they need to be transported using means that are convenient for bulky goods. In most cases, the goods are transported via the sea. The aluminum to be smelted is usually transported from the mining grounds to the port. The port that EMAL uses to transport the product is the Khalifa Port. The raw materials have to be transported from the sea to the place where they are to be melted.
They are also usually transported through the Khalifa Port. The port is very crucial in the supply chain, as it usually shortens the supply chain of the raw materials. In other words, the raw materials are usually transported directly from the port to the smelter (Emirates Aluminium, 2014). The road infrastructure through which the raw materials are transported is good and highly reliable. As a result, the company smelts the aluminum in good time.
From the port, the aluminum is usually transported to the smelter by road or train. Heavy trucks have to be used for transportation. Aluminum is a heavy product. Thus it cannot be transported using smaller vehicles. Therefore, the company has trucks that it uses to transport aluminum. It can hire other trucks of its transport means is not sufficient. The company has a large fleet of vehicles that help in transportation. It chooses the faster means between road and train, depending on the urgency.
Inventory management is the other activity that is very important in supply chain management. At times, raw materials need to be stored in the warehouses. The finished goods may also require being stored (Department for Transport, 2013). The reason why the raw materials may need to be stored is to ensure continuous processing or continuous manufacture. The storage of finished goods also ensures a continuous supply of goods to the customers.
The company needs to have good and efficient policies that are used in inventory management. For instance, EMAL should ensure that the volume of goods that are stored at any given time is low to reduce the holding costs. However, the volume should be high enough to ensure sufficient manufacture or sufficient supply of the finished goods.
The right product mix needs to be stored because it affects production and customer satisfaction. The company needs to adopt the right strategy in inventory management. For instance, it can adopt the just-in-time strategy, or it can adopt the push and pull strategy.
Inventory management is an activity that is essential and needs special attention at EMAL due to the nature of the products that the company deals with. First, the products are not perishable; therefore, they do not need refrigerated storage. However, they are bulky, and they consume a big space for storage. Therefore, the cost of holding inventory is high.
The management of the supply chain has to make decisions on the amount of aluminum to be stored at any given time. The company has managers who have knowledge and expertise in this area; therefore, they can determine the amount of aluminum to store at a given time. Consequently, the company has been able to reduce the cost of holding stock, thereby making EMAL a profitable organization (Emirates Aluminium, 2014).
Other activities that should be included in the supply chain management are the support activities. These vary from company to company. Some of the support activities include material handling, purchasing, warehousing, packaging, information maintenance, and supply, as well as cooperation with production and operations. In warehousing, the supply chain manager will determine the space required for storage.
This will depend on the kind of raw materials or the end products that the company produces. Bulky products will require a big space, while less bulky products will require a relatively small space. Material handling also depends on the kind of products the company deals with. Some materials are fragile compared to others. Thus they require special handling.
Similarly, there are some products that are bulky and require special handling at the same time. EMAL’s products are bulky and heavy. Thus they need special equipment to lift (EMAL, 2012). The company has cranes and other machines that it uses to carry the products. It also has special equipment that is used to handle the aluminum for smelting. Smelting requires high-level heating. Thus it should be handled with the utmost care during smelting. EMAL has the equipment for that purpose.
In purchasing, the supply chain manager will require to understand the best time to make a purchase, the number of goods to be purchased, and the supply source selection to be purchased. Timing of the supply chain management helps in the timely manufacture of goods, as well as the timely supply of the products (EMAL, 2012).
The essence of managing the quantities purchased is to help with inventory management. The supply chain manager needs to purchase sufficient quantities of raw materials to ensure sufficient manufacture of goods. It is important to note that sufficient manufacture of goods is essential in the sufficient supply of finished goods, thereby helping in consumer satisfaction.
The quantities purchased, on the other hand, are important in lowering the holding cost of goods. The supply chain manager should ensure that the goods purchased are not too many to raise the holding cost, as this will affect the profitability of the company. On the other hand, the goods purchased should be sufficient to ensure a consistent supply.
EMAL cannot buy aluminum in high quantities, given the high cost of holding aluminum. However, it has to buy in quantities that are sufficient for its production. It is the duty of the supply chain managers at EMAL to determine the amount of aluminum to be purchased at any given time.
It should also be noted that aluminum is expensive. Buying too much of it will mean that the value of money foregone to buy the same is too high. It will lead to a lot of money being used in purchasing one item, instead of investing it elsewhere to generate income faster.
Also, the packaging is equally an important factor in supply chain management. Different goods are packaged in different ways. Fragile goods, for instance, need to be packaged in a manner that will protect them from breaking (Department for Transport, 2013). Similarly, perishable goods should be packaged in a manner that will keep them fresh for a relatively long period.
For instance, goods can be stored in a refrigerated place. However, goods that are not perishable and fragile may not need special packaging. It is important to note that packaging plays a very important role when it comes to the marketing of the products.
Therefore, the products should be packaged well, depending on the type and the target market, as well as the mode of transport to be used. The design of handling should also be a factor to be taken into account when it comes to packaging. Therefore, how the goods are packed should help in handling.
Aluminum does not require special packaging. EMAL smelts aluminum that is then sold to other companies, which in turn produce other finished goods (EMAL, 2012). Therefore, the packaging is not a major activity for EMAL. However, it can package the final products as per the customer’s request, in case the customer needs such services.
Information maintenance is another important support activity in supply chain management. Information is important in any department in an organization, as it helps the company stay in the competitive range. Lack of information can lead to the company losing its competitive advantage (Ghiani, Laporte & Musmanno, 2013).
The supply chain department should get information regarding what the customers’ need and what is available in the company. The kinds of raw materials available determine the kind of goods to be manufactured, and they direct the company in its innovative strategies.
It should be noted that the company will have a strategy for innovation if it has information about what is required in the market, what is available in other companies, as well as the kind of raw materials it has at its disposal. It is important for the company to have information regarding the other competitors to help in strategizing itself so that it does not lose its competitive advantage.
EMAL has an information system that helps it in getting and keeping the information that it requires. The company is one of the largest companies in the industry. This has been achieved as a result of being in a position to acquire information that helps it in being competitive. The company can gather information about what the customers need and what is available for it. Thus it plans its activities based on this information.
Cooperation with the operations manager is also important in the supply chain management, despite being a support activity, as it helps the supply chain managers to determine the goods that need to be manufactured (Ghiani, Laporte & Musmanno, 2013). The sequence and timing of production should also be known to the supply chain manager. Thus the manager needs to liaise with the production and the operations department.
This cooperation is essential, as it helps the supply chain department in planning its activities. The supply chain department is also able to know the number of raw materials required at any given time. It is also able to know the number of goods needed to be stored at a given time. The amount of goods available to supply to the final customer is also known, which helps in determining whether more goods need to be manufactured or not.
Above all, cooperation is essential in the management of the supply chain department. Cooperation in EMAL is essential. First, it helps it in lowering the costs of operation. Getting the information regarding the quantities required helps in lowering the holding costs and the general inventory costs. The supply chain management of EMAL has been working in cooperation with the operations and the production departments, leading to the successful execution of the company’s supply chain management activities.
References
Department for Transport. (2013). Draft national policy statement for national networks. London, UK: Department for Transport.
Dutta, B. (2011). Sales and distribution management. New Delhi, India: I K International Publishers.
EMAL (2012). EMAL Today. Web.
Emirates Aluminium (2014). EMAL. Web.
Ghiani, G., Laporte, G., & Musmanno, R. (2013). Introduction to logistics systems management. New York, NY: Wiley.