Smiths Aerospace- How to manage the transition of supply chain operations to China?

Smiths Aerospace- How to manage the transition of supply chain operations to China?

Introduction

Outsourcing is the utilization of a third-party provider who is specialized in the area to perform functions or manufacture products that are considered non-core to the business and previously handled in-house. The benefits of outsourcing are saving costs, improving quality with concentrating core business, enhancing knowledge and capacity for innovation, and accessing to talented and expertise workforce.

Under cost pressures, firms review their core competencies and outsourced more activities such as warehousing, accounting, human resources, data processing, security, and logistics for distribution, transportation, stock control. As businesses are more globalized, companies realize in-house operations are not efficient to emerging markets anymore because of costs and different organization systems as well.

Outsourcing could backfire when service quality, staff turnover, productivity, information security matters are not met each other.

Case Study Solution

Smiths Aerospace owes its transition from regional retailer to global powerhouse largely to changes in and effective management of its supply chain. The main elements of a supply chain include purchasing, operations, distribution, and integration. The supply chain begins with purchasing. Purchasing managers or buyers are typically responsible for determining which products their company will sell, sourcing product suppliers and vendors, and procuring products from vendors at prices and terms that meets profitability goals. Supply chain operations focus on demand planning, forecasting, and inventory management. Forecasts estimate customer demand for a particular product during a specific period of time based on historical data, external drivers such as upcoming sales and promotions, and any changes in trends or competition. Using demand planning to develop accurate forecasts is critical to effective inventory management. Forecasts are compared to inventory levels to ensure that distribution centers have enough, but not too much, inventory to supply stores with a sufficient amount of product to meet demand. This allows companies to reduce inventory carrying costs while still meeting customer needs[2].

This transition occurs through active Chinese entrepreneurs. They learn management and technological know-how from global firms, and use this know-how to start their own businesses and compete against global firms. Legend, a Chinese personal computer manufacturer, has taken this route. Liu Chuanzhi, the founder of the company, opened a shop in Hong Kong in the early 1980s to distribute foreign-made computers and then, in 1990, to make PCs. During that time, he studied eagerly and learned ...