The case study explores the challenge faced by Hunt Company when it shifted from manufacturing to an offshore outsourcing company. When the company shifted its operations, it faced intense competitive pressure, and its margin began to shrink. The company needed a better strategy to solve the primary issue of huge cist required to switch to a new outsource volume and start new management of lead times. The company could, however, benefit by outsourcing to other countries where the manufacturing cost in supplying office equipment to educational institutions is lower. Also, Hunt Company is concerned with a high increase in inventory and charges of shipping during the lead time. Hunt material manager says that the company has changed its various distribution strategies and mainly rely on partners and less on manufacturing prowess (Hugos, 2018). The manager has highlighted the need for the company to develop a new supply chain and logistics to manage large size to China and reduce lead time. With a shift in operation, the company has improved its communication with customers by implementing supply visualization and use it to reduce lead time from 95 days to 60. The company will, however, be forced to implement more changes to achieve the required lead time for supply and logistics companies and improve the level of inventory.
The Main Problems or Issues Facing the Hunt Company.
Based on the case, the major problem or challenge faced by Hunt Company is on managing the supply chain to switch to offshore sourcing. The company requires an effective strategy to reduce lead time and increase inventory supply during distribution. When Hunt was dealing with in-house manufacturing, it had set lead time to 95 days. However, a shift to offshore sourcing requires lead time to reduce to 60 days and below (Zhang & Huang, 2012). Another issue is an increase in the cost of supply and logistics. The company will incur more cost in shipping and inventories due to an increase in distance and change in the mode of transport. Also, offshore outsourcing incurs extra storage cost while at shipping docks and cost and more cost in airfreight charges for products reach to its various customers.
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Since Hunt Company has already decided to deal with outsourcing, it will have to change its strength from manufacturing to a prowess distribution and supply chain. Also, the company faces the problem of reduced goods due to long lead time and acceptance of large lot sizes. Inaccurate forecasting is common when changing a manufacturing company to outsourcing (Zhang & Huang, 2012). Hunt may experience the additional problem of cumbersome management of unplanned increase in demand. The last problem experienced by Hunt is ineffective communication with its various suppliers. The company will be required to develop supply chain processes that promote a continuous flow of products and one that creates a competitive advantage irrespective of prices.
The Possible Solutions
Hunt Company needs to come up with adequate solutions to help them gain a competitive advantage in the new line of offshore sourcing. Hunt Company manager has come up with several solutions that can be effectively implemented in their new supply chain process to improve performance. The first solution suggested by the manager is to design and implement new supply chain processes that would improve overall communication and enhance the relationship with various suppliers. A new process would also assist in reducing lead time, reduce air freight cost and minimize the level of inventory on the imported goods (Hugos, 2018). Hunt Company needs to work closely with its various suppliers through effective scheduling and to allow them operation extension to reduce the lead time ((Andrisani et al., 2002). This solution will allow the company to offer adequate customer services by reducing the order-to-delivery cycle leading to competitive advantage and customer satisfaction.
Another vital solution is Hunt Company to change its forecasting process for better planning. Instead of creating one-level of commitment, the company should establish as slushy and free time zones. Slush zones are essential in assisting the company commit to purchasing raw materials and standard components to allow good supply plan. Free zone acts as reference information useful in improving management (Hugos, 2018). With better management in place, the company can organize its various departments to yield high results and get a quick return on investment. Lastly, the use of a full suite of QAD Inc; an ERP run application will allow Hunt to manage an internal business and give proper visibility of forecast and inventory levels.
Rationale for These Solutions
In the first solution, Hunt Company decides to work closely with key suppliers for better management and planning. Effective communication throughout the process is important since it allows the company to establish a good relationship with customers globally. A browser-based system in place allows translation of information to native language for better understanding by Chinese customers. Constant supply check-ups enable the company to shorten the cycle of order-to-delivery and in return, lead time and cost of inventory reduce significantly (Liker & Choi, 2004). Modification of the forecasting process creates a discrete order in the supply chain, allowing the company to chose between purchasing finished goods or raw materials. The solution ensures a good supply plan for various purchases and production. The solution creates a competitive advantage and promotes high return on investment.
The other rationale suggested is the application of ERP application which are integrated with MFG/PRO software for the better casting of data inventory. The company published the information over the internet to allow suppliers to access the information any time without having to wait for fax or e-mails. The contingency plan enables Hunt to meet its demand, and also communication with suppliers is achieved. Hunt need to uphold the forecasting process to ensure effective distribution strategy.
Steps to Implement the New Strategy
When implementing a new distribution strategy, Hunt Company will go through three important steps. The first step is the identification of proper distribution channel that suits their products. The selected channel should put into consideration the suppliers and other intermediaries that are in between the supplying company and the customers (Zimmer, 2019). Although intermediaries are inevitable, the company should ensure the process is short to reduce the lead time. The second step is developing a strategy to understand the audience. According to Zimmer (2019), when a company is shifting to a new environment, it needs to evaluate its customers to understand the effective communication strategy to adapt. The needs of customers should be placed ahead, and Hunt should provide recommended means for accessing the product. During this step, Hunt should consider cost and lead time to meet satisfy customer's needs. The last step is evaluation and adaption to the selected channel by improving distribution strategy. Hunt Company should use various logistics performance metrics to evaluate channels and ensure an effective strategy is chosen to deliver products. Once the three strategies are selected, the Hunt Company will thrive in its new plan of offshore outsourcing to China.
References
Andrisani, P. J., Hakim, S., & Savas, E. S. (Eds.). (2002). The new public management: Lessons from innovating governors and mayors. Springer Science & Business Media.
Hugos, M. H. (2018). Essentials of supply chain management. John Wiley & Sons.
Liker, J. K., & Choi, T. Y. (2004). Building deep supplier relationships. Harvard business review, 82(12), 104-113.
http://111.68.98.38/Library/Library/MGT563/Course%20Contents/HANDOUTS/SA LM AN -HBR-Deeper%20supplier%2Orelationships.pdf
Zhang, A., & Huang, G. Q. (2012). Impacts of business environment changes on global manufacturing outsourcing in China. Supply Chain Management: An International Journal. http://dx.doi.org/10.1108/13598541211212889
Zimmer, T. (2019). How to Develop a Distribution Channel Strategy. Chron. Retrieved from: haps://smallbusiness.chron.comidevelop-distribution-channel-strategy-56913.html
