Upsmoke Corporation: Global Supply Chain Management

Introduction

Organizations are permanently exposed to the impact of volatile outside and inside factors variety, and therefore have to adjust their direction, structure, procedures and systems in order to search new opportunities and stay successful. “Both trade and academic journals have reported cases in which companies have achieved operational excellence by means of focused process improvement and effective management and scheduling of constrained resources” (Gupta, Chahal, Kaur, & Sharma, 2010, p.864). As supply and demand are never in balance there is always a place for improvement in operations. Volatility in demand along with fierce rivalry requires the utmost responsiveness of supply.

1. Prepare a SWOT (Strengths – Weaknesses – Opportunity – Threats) analysis on the current Supply Chain Management configuration at Upsmoke Corporation.

Upsmoke Corporation is primarily engaged in tobacco products sales and manufacturing worldwide. Tobacco market is gradually declining over the years mainly because of (a) aging population in mature markets, (b) growing public concerns related to health risks, and (c) indirect taxes hikes. Smoking incidence and consumption are gradually decreasing, and this trend is expected to persist further. Tobacco taxation for majority of the emerging markets is one of the main income sources for national economies. In mature markets the governments use taxation leverage to limit consumption (Hanson, & Sullivan, 2009).

Exibit 1. Upsmoke Corporation – Supply Chain - SWOT Analysis

In the shrinking markets, where margins can be improved by cost reduction only, competitiveness is vital. Planning lead times (3 months) are estimated as industry average. However, this is rather weakness than strength as can be easily improved by rivalry and become difficult to overachieve and gain competitive advantage.

Upsmoke’s Supply Chain vulnerability comes from disintegrated planning and performance management objectives. SHINE program was implemented successfully; however it is limited to manufacturing efficiency only. Consolidation of the production facilities allowed capitalizing on the economies of scale, as well as to optimize capacity utilization and increase quality standard compliance.

However, distribution and manufacturing have conflicting goals. Manufacturing aims at reducing material costs and benefit from larger lot sizes, as well as stabilize production schedules and decrease the startup costs; however excessive inventories to secure safety stocks are created. Emergency production changeovers drive incremental manufacturing costs. Production short-falls are compensated at higher transportation costs (airfreight delivery). This approach is characteristic of the push-systems.

Despite of the proven efficiency of a pull-system in volatile demand environment, Upsmoke secures stocks as their deficiency have immediate effect – customer switches to competitive product.