STRATEGIC OUTSOURCING

strategic outsourcing is a process involving outsourced service provider to manage all the tasks are important and otherwise will be manage by the organization. this is often done to allow a business to arrange the use of its assets to best advantage, and allow the company to move closer to the achievement of its goals. Outsourcing refers to the complete of a business process that has been traditionally operated and managed internally to an independently owned external service provider. A complete transfer means that the people, facilities, equipment, technology, and other assets are no longer maintained internally once the business process is outsourced. Outsourcing can be conceptualized as a process rather than simply an event.

Some of the generic strategic benefits outsourcing is cost minimization by reducing direct operating cost, eliminate overhead costs, and transforming fixed costs into variable costs. The second is by focusing what the organization does best or transforming the business to focus on new product and service we can refocus the organization to its core competencies. The third is improvement in operating performance is accomplished by increasing quality, increasing productivity, and obtaining new capabilities technologies from external sources. The last one is we can increased market share and revenue by assessing the providers network and accelerating expansion into new market. Specific purposes and benefits of outsourcing is to reduce and control operating cost. Besides that, purposes of outsourcing also to improve the quality of the products, to change company focus, to acquire external capabilities, to reduce risk, to turn fixed costs into variable costs and etc. While a contract is required to legally protect one’s interests, an extensive strategic assessment and a true commitment to a cooperative relationship with the service provider are both necessary to realize expected outsourcing benefits.

 An outsourcing strategy of this type may be employed by businesses and other organizations of any size, and normally helps to reduce the cost of operations as well as allow available resources to be allocated to the other necessary functions that are still managed within the organization proper. Many people tend to associate outsourcing with small companies that operate with limited budgets. This is often true, since a smaller business enterprise is likely to have limited resources. When this is the case, a strategic outsourcing effort may involve contracting with a provider to manage the process of generating invoices to customers, receiving those payments, and paying any outstanding debts using the proceeds from those payments.

TOTAL QUALITY MANAGEMENT IN PHARMACEUTICAL

Quality assurance policy had become the most important goal of pharmaceutical industry. The concept of quality assurance and quality control develops and follows standard operating procedures are directed towards assuring the quality, safety and efficacy. World Health Organization has issued a primary or fundamental regulation to pharmaceutical industries entitled good manufacturing practice (GMP) for pharmaceuticals.

Thus, quality is critically important ingredient to organizational success today which can be achieved by total quality management (TQM) in an organization wide approach that focuses on quality as an over arching goal. The basis of this approach is the organizational units should be working harmoniously to satisfy the customer. Since the customer’s needs are in constant flux, the organization must strive to continuously improve its system and practices. The TQM perspective views quality as the central purpose of the organization, in contrast to the focus on efficiency advocated by the operational perspective.

Quality is a very commonly used term but can be described very vague. Quality is an unusually concept, easy to visualize and difficult to define. It is a matter of feeling and the definition varies from person to person depending on the perspective in which defined. Quality has been defined in different ways by the quality gurus as – conformance to standards or specifications; fitness for use; meeting customer requirements or expectations; delighting the customer or more. The code defines as ‘quality therefore is the totality of features and characteristics of a product/service that bears on its ability to satisfy given needs.

If we are selecting a tablet for buy, we shall compare the different brands of that particular tablet on the basis of their efficacy and side-effects, colors and odors’. Thus a customer/user of a product makes a comparison of features or attributes of the product and also the absence of deficiency in it, while comparing the quality.

The control decisions should be independent, and they must not yield to or be overruled by, production or marketing under any circumstances. Because the control decision can involve the health of the consumer and the reputation of the pharmaceutical manufacturer, the climate necessary for making judicious decisions is essential. In times of major disagreements, the control decision should be subjected to review only at the highest level of management.

SUPPLY-CHAIN PARTNERSHIP BETWEEN P&G AND WALMART

Major changes in the fast-growing digital economy occurred in the traditional supply chain and e-commerce company. Information technology has enabled channel partners to trade items to share information, and integrate them, thus it will reshape the dynamics of the organization and lead to more efficient channels. Electronic data integration and automation of business practices would have driven down costs and build sales with customer needs.

The development of channel partnership between a manufacturer (Procter and Gamble, or P&G) and retailer (Wal-Mart) .Both major players in their industries, P&G and Wal-Mart found a way to leverage on information technology by sharing data across their mutual supply chains. The result channel has become more efficient because channel activities are better arranged. Reduced needs for inventories but greater returns by focusing on selling what the customers want. All in all, the supply chain between P&G and Wal-Mart has adopted a much better customer focus through the channel partnership and it is mutually beneficial.

The power of inter-organizational information systems (IOIS) is well known in the literature of information systems research and has proven to be an effective strategic weapon. But the P&G and Wal-Mart partnership does further. To understand the impact fully, one has to think about three progressive degrees of IOIS: transactional, operational, and strategic. The strategic partnership is the most involved, with the greatest commitments from the partners and requiring the strongest trust. The two companies essentially stumbled into it and then progressively built stronger collaboration as more benefits were released.

To fully understanding the role that technology has played in the Procter&Gamble and Wal-Mart business relationship, an understanding of the business relationship before 1988 is needed. The business situation in 1988 between P&G and Wal-Mart was broken. The business itself was $375 million and growing. Athough, the business relationship between the two companies was poor. P & G had organized itself into 12 different internal product divisions. Each division had different sales managers that would separately and independently call on Wal-Mart. These individuals were accountable for the sales results of each division and never came together to represent P&G as a whole. At that time, the relationship between P&G and Wal-Mart was characterized as anything but collaborative. As a matter of fact, their relationship was adversarial, obsessed by day-to-day transactions. Furthermore, their business relationship was conducted through fragmented processes.

Looking back over the ten-year period between Wal-Mart and P&G, information technology has created a common language, driven down costs, and provided an avenue for increased sales for the P&G and Wal-Mart partnership. Several key lessons learned for understanding the role that Information Technology can play in the manufacturer / supplier relation.

Partnership To Improve Supply Chain

companies and their supplier can working closely together to create highly competitive supply chains. when companies fail collaborate, result in the distortion of information as its moves though a supply chain and which in turn can lead to costly inefficiencies.this "bullwhip effect" which result in excess inventories, slow response, and loss profit. companies can reduce problem and ensure ongoing improvement when companies do a supply chain partnership.

the partnership have a several benefit, increase market share, inventory reductions, improved delivery service, improved quality, and shorter product development cycles. companies must focus on the trading partner s it consider most important in the long run. this type of partnership differs from a strategics alliances or project based partnership in which two firms may work toward a common goal but later dissolve the association after achieving the goal. 

these have a characteristics of successful partnership. free exchange of information such as sharing cost and demand data, and coordinated decision making reduce the inefficiencies inherent in less collaborative relationship. mutual trust is most important because that information shared with a partner will not be used against them. long term commitment to the partnership encourages parties to invest in further improvement of the joint supply chain to mutual advantage.

the distinction between logistics and commercial success is critical, but often important in practice. logistics define success as the degree to which the overall supply chain is improved, regardless of how costs and benefit are allocated. commercial success depends on the degree to which trading with the partner in question becomes more profitable. whether by getting a share of logistics improvements or by obtaining better trading terms. A supplier investing substantial effort in a joint supply chain improvement project with a customer will almost certainly be aiming for more than potential logistics improvements. the supplier want to solidify its relationship with the customer to gain a larger market share or reduce price pressure. there found that sacrificing some short term logistics success may be worth achieving commercial benefits.

JIDOKA IN TPS

     The Toyota Production System (TPS) is very important to the Toyota company to achive their goals or the objective of "making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible." The Toyota Production System (TPS) was established based on two concepts, the first is called "Jidoka" (which can be loosely translated as "automation with a human touch") which means that when a problem occurs, the equipment stops immediately, preventing defective products from being produced; The second is the concept of "Just-in-Time," in which each process produces only what is needed by the next process in a continuous flow.

     Based on the basic philosophies of jidoka and Just-in-Time, the TPS can efficiently and quickly produce vehicles of sound quality, one at a time, that fully satisfy customer requirements.

     Jidoka is quality must be built in during the manufacturing process. If equipment malfunction or a defective part is discovered, the affected machine automatically stops, and operators cease production and correct the problem.

     For the Just-in-Time system to function, all of the parts that are made and supplied must meet predetermined quality standards. This is achieved through jidoka. Jidoka means that a machine safely stops when the normal processing is completed. It also means that, should a quality / equipment problem arise, the machine detects the problem on its own and stops, preventing defective products from being produced. As a result, only products satisfying quality standards will be passed on to the following processes on the production line.

     Since a machine automatically stops when processing is completed or when a problem arises and is communicated via the "andon" (problem display board), operators can confidently continue performing work at another machine, as well as easily identify the problem cause to prevent its recurrence. This means that each operator can be in charge of many machines, resulting in higher productivity, while continuous improvements lead to greater processing capacity.

Just In Time In Toyota Production System

     Toyota was the largest listed company in Japan by market capitalization and by revenue. The company was founded by Kiichiro Toyoda in 1937 as a spinoff from his father company Toyota Industries to create automobiles.

     Many benefit about Just-in-Time (JIT) system to Toyota Production System. A production system which is steeped in the philosophy of "the complete elimination of all waste" imbuing all aspects of production in pursuit of the most efficient methods. Toyota Motor Corporation's vehicle production system is a way of "making things" that is sometimes referred to as a "lean manufacturing system" or a "Just-in-Time (JIT) system," and has come to be well known and studied worldwide.

     This production control system has been established based on many years of continuous improvements, with the objective of "making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible." 

     Just-in-Time (JIT) system can make productivity improvement. Just-in-Time (JIT) system is making only "what is needed, when it is needed, and in the amount needed!" Producing quality products efficiently through the complete elimination of waste, inconsistencies, and unreasonable requirements on the production line.

     In order to deliver a vehicle ordered by a customer as quickly as possible, the vehicle is efficiently built within the shortest possible period of time by adhering to the following four factor. First is when a vehicle order is received, a production instruction must be issued to the beginning of the vehicle production line as soon as possible. Second is the assembly line must be stocked with required number of all needed parts so that any type of ordered vehicle can be assembled.

    Beside, third is the assembly line must replace the parts used by retrieving the same number of parts from the parts-producing process (the preceding process). The last one is number four about the preceding process must be stocked with small numbers of all types of parts and produce only the numbers of parts that were retrieved by an operator from the next process.

Negotiation Strategies

Within a supply chain many supplier-buyer relationships exist. Even though supply chain management aims to take a high level view, these dyadic relationships form the basis of the supply chain and therefore should be the focus of a supply chain analysis.

The negotiation of the terms of these relationships defines the structure of the supply chain and can affect the power and profit distribution within the supply chain itself.

So, this week we’ll have a closer look at negotiations in the supply chain using a 2008 paper by Frederik Zachariassen.

Method

As usual the work starts with an overview on negotiation-related literature in supply chain management and more general cases. We finds several sources dealing with supply chain related negotiations, but notes:

The amount of negotiation literature dealing with negotiation strategies in a [general] commercial, business relationship is sparse and lacking in empirical research as stated in the introduction.

Two universal negotiation types emerge:

The distributive negotiation strategy is used by those negotiators, who believe that they and their counterpart have fundamentally opposed interests. As a result, negotiators believe that negotiations essentially can be described as win-lose situations, in which one should try to argue as aggressively and intensively as possible in order to convince the other party of price reductions, reduced delivery time, etc. In negotiation literature, it has been paralleled to one-off relationships, e.g. arm’s length relationships.

On the contrary, the integrative approach seeks to reconcile the parties’ divergent interests and provide both parties with joint benefits as an outcome of the specific negotiation. This approach emphasises the need for trust, mutual understanding, openness and a sense for empathy. As such, the integrative approach attempts to capture synergistic advantages in the form of mutual gains, and therefore believes in win-win relationships.

In the ritual case a arms-length relationship is met with a distributive/competitive negotiation approach.

As an arm’s length relationship has relatively low-switching costs compared to the more strategic partnership, both parties expressed an indifference towards the other party when considering the outcome of the negotiation. That is, should the counterpart in the negotiations demand a too unrealizable price when compared with the market price, the negotiator would simply exit the negotiation and contact other suppliers/buyers. Graphs of for instance the recent price development of a standard good would often be manipulated, so that curves would be represented as flatter or steeper depending on the point, buyers or suppliers wanted to make.

In a exploitation setting greater integration is sought in a arms-length-relationship setting. This combination is seen very critical:

Buyers and suppliers remarked that taking the chance of being completely open and trusting towards the other party would be too high considering the risk of the other party exploiting the other party. One supplier remarked that that would at best be naive and would be inexpedient insofar as negotiating the best deal for their respective firms.

For the partnership approach the manipulation category represents the case where companies used more subtile techniques to enforce their competitive pricing ideas, example:

The buyers resided in a larger and more powerful firm that all things being equal had more negotiation power than the suppliers. During the participant observations of strategic partnership negotiations, it quickly became apparent that the buyers opted for a distributive negotiation strategy. It differed, however, from the arm’s length relationship one by employing more subtle, rhetorical devices in order to argue towards the suppliers that prices should go down. The subtlety lied in the buyers’ sophisticated approach to bargaining.

Lastly, in a partnership relationship a more integrative approach could be used, leading to alignment categorization:

This was characterized as a more of a hypothetical situation by buyers and suppliers. That is, both would not opt for this approach when considering strategic partnerships. both buyers and suppliers would express concern regarding the disclosure of strategically relevant information, loss of power  and loss of control in strategic partnerships due to a too open approach to negotiating and cooperating.