To beat the competition, a business has to critically analyze both the internal and external factors that affect its performance in order to come up with the right strategy. The aim of this paper is to look at how operations and supply chain management can be used to do just that. The objective of a supply chain management is to oversee the flow of materials, finances, and information as they move in the processes involved while at suppliers, manufacturers, wholesalers, retailers and finally to the consumer (Beske, Land & Seuring, 2014). The process is managed both within a company and in relation to other companies in the same chain. The end game of supply chain management is to ensure just in time supply of goods at the lowest possible price.
The company that we will be using in our analysis is known as Essential Ingredients. Essential Ingredients was started by Chris Gerlach and Kris Maynard in 1996 as a chemical distribution company (Essential Ingredients, 2017).
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The main strength of Essential Ingredients is its willingness to sit down with its customers to find ways of smoothening the supply process. This has led to a very efficient and effective system. Customers see the company as a partner rather than just a vendor.
Competitor Analysis
According to the Boston Consulting Group ( 2016), the market for chemicals in the United States has been improving since 2011. The market for specialty chemicals has been growing at an even faster rate. Specifically, there were sales of over 1$ trillion dollars in the North American market in 2014 (Boston Consulting Group, 2016). The 2016 report by the Boston Consulting Group further believes that this growth is set to increase at a rate of 3.5% up to 2020. This article looks at medium-sized players in the chemical distribution industry that have homecare products as a big chunk of their supplies.
Chart 1.
A Rating of the Supply Chain Management Fundamentals of Essential Ingredients and Two Other Immediate Competitors
| Factors |
Essential Ingredients |
Fitz Chemicals |
LabChem |
| Technology adoption rate |
3/5 |
4/5 |
2/5 |
| Technical expertise |
2/5 |
5/5 |
4/5 |
| Customer relationships |
5/5 |
4/5 |
2/5 |
| Operations and Logistics |
3/5 |
3/5 |
2/5 |
| Flexibility and ease of change |
3/5 |
2/5 |
1/5 |
Notes: Every Item is rated on a scale of 1-5. 1 being the lowest and 5 being the highest. Source: own based on Business Queensland (2017).
There are numerous competitors in the chemical distribution industry. Fitz Chem and LabChem were chosen for this paper because of their similarity in size and the range of products they distribute in relation to Essential Ingredients. Chart 1 is a simple comparison chart based on the information obtained from researching the respective websites. The matrices for scoring these companies were used because they form fundamentals needed to make it in any supply chain.
The main competitor firm in this analysis is Fitz Chem Corporation because its total score of 18 is higher than that of Essential Ingredients at 16. Fitz Chem primarily focuses its operations in the central parts of the USA (Fitz Chem, 2017). The company has been around since 1985 enabling it to borrow a lot from its experience and long-term customer relationship (Fitz Chem, 2017).
Fitz Chem started at the time when the main purpose of a distribution company was to obtain raw materials from the respective vendors and to transport them to the required customers. This is what relates to the core competency of the company. That is transport and logistics. The company has developed its own internal systems for monitoring the drivers and the materials and over the years has developed a database that is large enough to make meaningful predictions for planning purposes (Fitz Chem, 2017).
Another core competency for Fitz is its level of technical expertise. Unlike other chemical distributors who focus solely on transportation and logistics, Fitz also believes in knowing its products. Chemicals are sensitive items requiring proper storage and handling. These comes with the right equipment and skills. The company ensures that all its facilities have temperature control systems, qualified pharmacists, and the right types of trucks. The manual laborers are also well trained on how to interact with the various chemicals. This has given Fitz the right kind of reputation needed where minimal spoilage and waste is concerned.
Fitz Chem’s main disadvantage is her inability to respond quickly to change. The company relies on its internal logistics monitoring system that cannot be integrated with those of its suppliers and customers. A shift to an Enterprise Resource Planning system that is easier to implement across the supply chain could make matters easier for them.
Labchem, on the other hand, scored poorly on a number of factors. This is because the company also manufactures some of the chemicals they distribute themselves. Nevertheless, due to this, she scores highly on technical expertise. The company also employs chemists as its sales personnel to be able to interact with customers better (LabChem 2017). However, the operations of the company have suffered as a result. It is difficult for employees at LabChem to know what is happening on both their customer and supplier ends. As a result, they do not make reliable supplies to their customers when it is required.
Strategies to beat the Competition
The home care retailers and manufacturers do their best to generate demand for the latest products or a line of products through advertising. The need for a given commodity is seasonal or a one-time affair as a result of these marketing activities. The products must, therefore, be availed to the shelves as quickly as possible before the attention of consumer’s moves on to other items. This means that transportation needs to be punctual and in the right quantity at all times.
One of the strategies that Essential Ingredients need to employ is a good Transport Management System (TMS). A good transport management system shared between Essential Ingredients, its suppliers and customers can help to improve visibility and efficiency. For instance, some of the suppliers working with Essential Ingredients come from countries in South America where traffic is a nightmare. The modern TMS has route mapping transportation systems that constantly look for the most efficient routes within a given radius based on real-time data (Su and Tang, 2010). They can also be used for simulations of traffic and best routes days and weeks beforehand . This injects some form of certainty and optimization in the process. As was highlighted before, Fitz Chem use its own internal system that cannot be used by its own suppliers. Most TMSs have been designed to be used by every single actor in the value chain, all that is needed is credentials to a dashboard. Unlike Fitz Chem Essential Ingredients can then be able to monitor goods as they come from their supplier factories with that have the added benefits of route mapping.
Essential Ingredients can also directly borrow a thing or two from its competitor Fitz Chem. A lot needs to be done to reduce wastage at storage and on transit. Essential Ingredients has been running mainly as a distributor. The collaborations it has had with its customers are mainly about solving some of the logistical problems that the customers have internally or externally. Little attention has been given to perishable items or temperature controls within their warehouses. Hence, Essential Ingredients will benefit a lot from hiring its own army of pharmacists and upgrading its warehouses. A good research and development department can also be thrown in to always look out for the best methodologies for handling the immense portfolio of chemicals going through the company.
As it has been stated, the personal care industry is mostly demand driven due to marketing campaigns and other strategies. The product is a constant push and pulls between supply and demand. Essential Ingredients delivers raw materials and finished goods to manufacturers, wholesalers, and retailers. In the supply chain, all these players currently work separately and without any coordination. Since Essential Ingredients acts as the glue between all these firms, it has the clout to improve matters. According to Thun and Hoeing ( 2011), sales and marketing decisions should be made hand in hand with logistical ones across the whole supply chain. When this is done, all the members involved would know when to hold off on certain goods and when to increase their stock. Essential Ingredients can then know when to reconfigure its resources to supply what, in what quantity and when. The value created out of the companies in the supply chain coming together to make sales and marketing decisions together would be lower warehousing and storage costs that eventually increase net profits to all parties involved.
The preceding point leads us to the most important strategy needed for Essential Ingredients to go forwards. That is, embracing innovation and change. Essential Ingredients should encourage innovations not only within its own processes but from her own suppliers too. These innovations can then be integrated by every other operator in the chain to enable an environment of coordinated growth. Technologies change every day. Anything that is state of the art today can be obsolete tomorrow. All avenues for technological adaptation and innovation should be embraced. Diabat and Govidan (2011) also believe that due to the global nature of businesses today, companies should go out and understand the different cultures of members in their supply chain before pushing out innovations to other countries. The innovations themselves bring value to the supply chain depending on whether they improve the efficiency of the process or reduce unnecessary costs. Customers would see value in opting for Essential Ingredients instead of other suppliers because of the resultant reliability and low prices.
Conclusion and Recommendation
At the end of the day, the supply chain is about collaboration and transparency. In an increasingly global market, different licenses , laws, and taxes exist. It is up to the individual links in that chain to bond with each other for there to be strength in the whole system. A company hoping to benefit from its supply chain must be ready to open its doors to both vendors and customers.
However, top management commitment to the supply chain management strategy is needed for any of the strategies discussed to work. Top management is responsible for welcoming other players, signing of the projects that bring in the required software and forming the bond with other companies so that information flow can be possible (Kumar and Shankar, 2015).
When everything else in the supply chain has been safely secured, then a company can focus on its core competencies. It will benefit from the advantages of specialization while riding on the reliability and efficiency of the whole system. The cost cuts and customer continued belief in a company employing a good supply chain management system will then serve to bring more revenues and profits.
References
Beske, P., Land, A., & Seuring, S. (2014). Sustainable supply chain management practices and dynamic capabilities in the food industry: A critical analysis of the literature. International Journal of Production Economics , 152 , 131-143.
Boston Consulting Group. (2016, March 3). Specialty Chemical Distribution in North America . BCG Perspectives. Retrieved from https://www.bcgperspectives.com/content/articles/process-industries-supply-chain-management-specialty-chemical-distribution-north-america/?chapter=2
Business Queensland (2017 July, 18). Competitor profile chart. Retrieved from https://www.business.qld.gov.au/starting-business/planning/market-customer-research/competitor-profile
Diabat, A., & Govindan, K. (2011). An analysis of the drivers affecting the implementation of green supply chain management. Resources, Conservation and Recycling , 55 (6), 659-667.
Essential Ingredients (2017 October, 17). About Us . Essential Ingredients. Retrieved from http://www.essentialingredients.com/default.aspx
FitzChem (2017, October 17). About Us . Retrieved from https://www.fitzchem.com/
Kumar, R., Singh, R.J., & Shankar, R. (2015). Critical success factors for implementation of supply chain management in Indian small and medium enterprises and their impact on performance. IIMB Management Review , 27(2), 92-104.
LabChem (2017 October, 17). About Us . Retrieved from http://www.labchem.com/
Su, Y. F., & Yang, C. (2010). Why are enterprise resource planning systems indispensable to supply chain management? European Journal of Operational Research , 203 (1), 81-94.
Thun, J. H., & Hoenig, D. (2011). An empirical analysis of supply chain risk management in the German automotive industry. International Journal of Production Economics , 131 (1), 242-249.
