Implications of the Project
The holding company with chain of supply stores in several countries made a decision to decline a consultancy advice for an integrated IT system among its supply chain stores without selling off the chain stores. This brings a new dimension to the strategy process. Supply chain decisions must be evaluated in a strategic context based on the desired strategic position, chain capabilities, and how the supply can be structured. The first step is to create a goal that balances desired strategies, supply chain capabilities, and customer needs (Porter, 1996).
The determinant of the way forward will be prioritization of customer needs targeting timeliness, accessibility, availability, price, and appropriateness of product service. A trade-off between costs and customer needs is necessary. The change of project course and its shock implications require a new strategy design that should leverage emerging risks. The selling of supply chains complicates the business dynamics since all the potential clients shall be variegated into geographic regions.
It further complicates the IT integrated system since the change of ownership from the parent company to new owners requires a readjustment of IT portal management. The new IT system takes into account that the core businesses will still rely on former supply chain clients. It implies that they will still need the IT portal as a convergence zone.
Potential Alternatives
It can be noted that e-business using the IT system does not change the chain supply processes but makes it easier to implement. An IT system enhances e-business through an interface of convergence where client needs are customized. It is also advantageous because it will allow the flexibility of prices, promotions, and product portfolio. It may converge information in one place.
There have been new developments in organizational design and information technology. The trend has made both large and small firms compete on an equal platform. Where markets are regional or global, there is a relationship between market share and profitability. It has been linked to economies of scale, low-cost operations that encourage market entry. Technological advances have enabled products to gain shelf space on the IT portals, which galvanize purchasing power to access lower prices and customer-oriented relationship to its suppliers (Lawler, L 1999).
First, by providing on-line product information on the IT portal, supply chains can still benefit from the centralized information. In this regard, an information model will be required to link physical goods and services to supply chain regions. Information convergence offers a broad product portfolio from where revenue will be enhanced. It is possible for the IT portal to cut across regions in Europe easily and satisfy clients by directing them to physical locations. The system should be designed to provide information on products, services, supply chain capabilities and technological advances. The portal will cut off the middlemen and leverage product costs and services (Chopra, S & Van Mieghem 2000).
The IT system may enhance the capacities of the company by increasing opportunities because intermediaries will be eliminated. The system could be faster, effective and efficient in marketing products. It may provide an easy mechanism for efficient funds transfer that can be accessed from any place (Chopra, S & Van Mieghem 2000). Besides, the IT system allows information aggregation and provides a wider product portfolio from many sources. This eventually would enhance revenue to the holding company. A good example can be learned from Amazon or yahoo shopping where a wider number of retailers bring economies of scale leading to high revenue at production low cost.
New technologies have made it possible to satisfy customers globally where geographical location is no longer a problem. Technologies have made it possible to link customers to other companies through and their products. It is possible to develop a similar portal that enables customers in France, Belgium, England and Spain to shop from the centralized stores of the holding company. It is also possible for prices and contracts to be negotiated with potential customers and suppliers on line which allows for service, product and price tailoring to suit needs. It also possible to adjust to customer specifications before supplies are done. This enables the company to attend to individualized requests which may be adjusted accordingly satisfy the client.
This ability to provide price and product variability to suit every individual (Lawler, L 1999) customer needs, will not only retain customers, but increase revenues sustainably. An IT portal provides accessibility to all at any time from any geographical location. The IT system will be viable for the holding company since it will cut across regional markets. Since the portal may allow communication between the customers and the product innovation processing departments, it may reduce processing costs when customer participation is increased. This will ensure products capturing customer interests are designed and produced in a short period of time. Inventory costs incurred by the company during physical centralization of supply chains may be reduced by the IT portal.
The inventory costs are likely to be reduced by postponing product differentiation until the client has placed their bids on products and services. The ability to postpone product design allows the processing section to tailor products to desired effects. The ability to postpone reduces processes that are conducted in push mode (when the customer has not placed an order) and increases those conducted in pull mode (when the customer has placed an order). This flexibility allows company management to separate order placement from fulfillment. The supply chains could have extra time to perfect on delivery of products and services. On the same vein, re-adjusted orders to suit clientele needs usually reduces inbound transportation costs than customer orders which require re-ordering. It system portal narrows this gap and allows the customer and the company to save and use time appropriately (Juttner & Maklan 2011). In essence, information dissemination through the portal allows smooth supply chain coordination. It is possible to share market information, emerging trends, inventory positions or new technologies in the industry that may improve supply chain coordination.
Another option available to the management would be outsourcing the supply chains to regional business people in the clustered markets. This would reduce management costs, increase economies of scale, retain the market and keep hold on the product design of important departments with core value to the holding company. In this regard, it is possible to convince the management to reconsider the option which will have equally increased revenue to the holding company. While there are risks involved in outsourcing such as intellectual property rights violation, the advantages outweigh the risks. The supply chain resilience capabilities include; flexibility, velocity, visibility and collaboration. When these elements are fused with an IT portal, it becomes a highly leveraged cost-free operation with increased revenues. The regional experiences may be shared and improve day by day based on the analysis of information from the repository center (Juttner & Maklan 2011). These innovations will enable the system to respond to future challenges with ease, it means that, supply chains are important and can be retained contrary to management’s position to sell off.
Thirdly, since the parent company decided to retain core departments where they have comparative advantage and expertise, it is imperative to identify a geographically central location. This may be a central component for development of an information analysis center for regional and global markets. This will reduce inventory costs and limit in bound transportation costs. The physical centralization of departments and expertise in key product and service areas increases the distance travelled over the portal as compared to several outlets which have a higher transportation costs per unit.
At the same time the cost is transferred through divestiture. Besides, inventory costs such as recycled stock may be handled though geographic centralization. The enhanced information sharing may promote chain coordination at local levels. This is because information is sent to a repository center, analyzed and interpreted for decision making (Chopra, S & Van Meighem 2000).
RACI Chart depicting important organizational actors
Holding company executive is responsible for decisions concerning IT portal and divestiture. He/she has to support this initiative. He is also supported the BOG of the company. The IT regional directors may be responsible for IT system development. This is the core of the business which is why support by the executive and the BOG is key for to its success across the regional markets. Regional store operations managers are responsible for regional store operations; they support divestiture process with required information and ensure supply chains are interconnected. This implies the need for departmental synergies particularly among the finance, IT and chain operations departments. The consultants support the five activities with strategy development and information analysis.
A central repository will be imperative in the implementation and monitoring of processes keenly. The consultant’s advises will be instrumental for the success or failure of the new structure of business. The BOG supports the five activity areas for the better of the holding company. The BOG have the political role to traverse through region and interlink with government officials and negotiate for a smoother transition from current to newly re-adjusted organizational design. The BOG effect may be felt more when they enhance support to the executive officer.
Reference List
Chopra, S. & Van Mighem (2000). Which e-Business is Right for Your Supply Chain? Supply Management Review, 1-8.
Lawler, E. (1999). Rethinking Organizatiion. Los Angeles: University of Southern Carlifornnia.
Porter, M. E. (1996). What is Strategy? Harvard Business Review, 5-62.
Juttner, V & Maklan, S (2011). Supply Chain Resilience in the Global Financial Crisis, Supply Management: An International Journal, Vol. 16, No.4 246-259.