International Supply Chain Management

Introduction

Owing to the intense global competition that is experienced in the business market today, most of the global companies are surveying the world to establish strategies for manufacturing outside their home country. As supported by literature, international purchasing strategies are likely to reduce the production prices, enhance responsiveness in the production of various products as well as optimize on their quality (Tayur, Ganeshan & Magazine, 2012). According to Manuj (2013) international purchasing and manufacturing strategy is considered a major competitive factor for organizations that seek globalization. The fact that manufacturing outside the home country will mean that the organization seeks for supplies from vendors across the world, rather than being limited to the local supplies justifies the suitability of the approach (Monczka, Handfield, Giunipero & Patterson, 2015). Having a wide range of vendors to select is an added advantage to the organization since it will only choose on the vendor that is likely to contribute towards its higher competitive advantage. Manufacturing abroad is therefore likely to be beneficial to the global organizations that desire to remain highly competitive.

The increase in the cross-border trading in goods and services has enhanced the economic interdependence amongst the different nations of the world. The extent of economic globalization as currently observed is high that various organizations that need to globalize are required to adopt global strategies to succeed. Global outsourcing is one of the major strategies that are capable of assisting the global company remains competitive within the global economy (Kreyenschmidt, 2016). For most manufacturers, it is critical to make use of the international resources that will assist them cut down on costs, spur innovation and improve on quality. This explains the reason why most manufacturers have considered producing their products outside their home country.

Rolls-Royce is one of the global manufacturers that have considered the adoption of the global sourcing strategy. In the year 2012, the UK based company that deals in aerospace business moved into Singapore to carry out the production of titanium fan blades and assembling of its Trent series of engine. The major reason that drove the organization to consider manufacturing in Singapore was the low corporate tax rate that was offered by the nation. According to Prajogo & Sohal (2013) Singapore charged a basic of 17% tax rate that is relatively cheaper in comparison with other nations across the world. The political stability of the region as well as the transparent government regulations also makes the region a suitable hub for any manufacturer. The growth of the customer base in Asia also provides ready market making it a suitable place for any manufacturing company. The suitability of the region in terms of clientele base as well as the favorable taxation observed in Singapore justifies the reason why Royal-Royce chose it as a manufacturing hub.

As much as Singapore looks suitable for Aerospace manufacturing, there are certain challenges that Royal-Royce is likely to experience in their global sourcing strategy. The current paper identifies the possible challenges that are likely to be experienced by the organization followed with the provision of suitable recommendations that can be adopted to ensure that the Royal-Royce’s manufacturing abroad is a success.

Challenges in Rolls-Royce’s international supply chain

Complicated logistics is one of the major challenges that Rolls-Royce is likely to experience while manufacturing in Singapore. The organization is likely to experience problems in inventory management, border-crossing procedures and delays in transportation. According to Morali & Searcy (2013) there is a possibility of lack of holistic logistic knowledge in the developing nations, as such, the suppliers in the region are likely to be short of the experience need to effectively manage the logistics. For instance, the suppliers in the developing nations are likely to be unfamiliar with approaches such as electronic data interchange, vendor managed inventory as well as sequence deliveries that are normally combined with Just-in-Time approaches (Melnyk, Narasimhan & DeCampos (2014). The lack of these logistics knowledge by the suppliers from the host country is likely to lead to the Rolls-Royce experiencing delays in receipt of the raw materials needed for production. Moreover, the organization is likely to experience problems in meeting the demands of its customers following the delays in transportation. The complicated nature of logistic management that is likely to arise in the Rolls-Royce international supply chain is likely to affect its performance hence the need for proper management to be put in place.

Cultural issues are also a challenge to the effective management of the Rolls-Royce international supply chain. According to Roh, Hong & Min (2014) as much as the cultural issues in the international supply chain are manageable, they can still cause a great mess if not proper dealt with. A mutual understanding between the foreign company and the local can only be observed when respect is shown to the cultural beliefs and values of the local citizens. The lingual differences that are likely to be observed between the different cultures are also likely to threaten the communication between the people from the two different regions (Prajogo & Sohal, 2013). Rolls-Royce is likely to have experts from the home country; in addition, the company is also likely to engage the locals in the manufacturing process. As such, the lingual difference that is likely to be observed between these two groups of individuals is likely to interfere with the effectiveness of the communication process. The issue of language barrier is also likely to cause problems while interacting with the local suppliers. Although some local suppliers might have the technical staff to assist in the communication process, these individuals may not be useful when technical discussions are to be carried out. The cultural and lingual differences that are likely to be experienced by Rolls- Royce are likely to cause a major challenge to the organization in the management of its international supply chain.

The volatile economic nature of the host country is also a challenge to Rolls-Royce. According to Melnyk, Narasimhan & DeCampos (2014) the local economic environment is a major primary risk factor for any organization that has an international supply chain. Melnyk, Narasimhan & DeCampos (2014) have pointed out that following the cheap labor that are observed in the developing nations, they are likely to experience uncertain economic situations. The volatility nature of the economy is likely to have negative implications on any firm that has the nation as its manufacturing hub. In the year 1999, a pronounced financial crisis occurred that led to a decline in the economy of every nation in Asia. Later development have seen most of the nations in Asia, revive their economies, nevertheless, the same scenario is likely to occur owing to the volatility nature of the economic environment of the region. Since Rolls-Royce has its manufacturing plant in an Asian based nation, the company is likely to be affected negatively in case the region experiences another financial crisis.

Supplier selection complexity is another challenge that Rolls-Royce is likely to experience. The company will need to acquire raw materials from the local suppliers as such their selection is necessary to settle on the best supplier. However, as opposed to the domestic suppliers that the management is aware of their history and effectiveness in the provision of quality raw materials, the selection of a suitable supply in the foreign nation may be hectic and time consuming (Prajogo & Sohal, 2013). In addition, additional costs will be incurred by the procurement managers to arrive at the best supplier that can be hired by the company. The complexity arises due to the fact that the management to the organization are new in the region and therefore do not know any information on the various suppliers that might have interest in working with the organization. It is evident that there are various approaches that can be adopted to properly choose on the most suitable supply, the management to the company need to be patient and consider exploring all the strategies to ensure they select on the most suitable and reliable supplier.

The issue of product quality is also a major challenge in the management of the organization’s international supply chain. According to Danese, Romano & Formentini (2013) the current supply chain does not only focus on the acquisition of raw materials, but also encompasses the production and manufacturing of the product to the release of the finished product to the final consumer. The issue of product quality is therefore still included in the supply chain management. Focusing on the case of Rolls-Royce Company is likely to face the challenge of maintaining its product quality. Since the products are to be made from raw materials sourced from a different region, the possibility of maintaining the quality level as was initially produced by the organization is unlikely. Customer rejection of the products is likely to be experienced if the quality changed to the negative. Moreover, bad company reputation is likely to be developed in situations where the product manufactured in Singapore differs from the products that were initially offered by the company. The issue of product quality is likely to be a major challenge to the organization as must therefore be put into consideration during the management of the organization’s international supply chain.

Recommendations

From the situations analyzed, it is observed that Rolls-Royce is likely to experience a number of challenges it its manufacturing in Singapore. As much as the nation is considered politically stable and has the best taxation rates for manufacturers in comparison with other nations, Rolls-Royce should address the challenged identified for it to enjoy fully the perceived benefits of having a manufacturing hub in the region. The recommendations on the strategies that need to be adopted by the organization to address the challenges identified are advanced in this section.

To address the complexity of the transportation logistics in Singapore and the challenges that are likely to come along with it, the management of Rolls-Royce should consider making orders for the raw materials needed in advance, prior to the date of the manufacturing process. This is to give leeway for the delays in the suppliers that can be experienced due to the inexperience nature of the suppliers in effective logistics management. According to Melnyk, Narasimhan & DeCampos (2014) to avoid any delays in production and consequently in the delivery of the finished products, the raw materials should reach the factory two days prior to the production process. This will not only solve the issue of delay but will also prevent the losses that might come along with the over storage of the raw materials. Apart from the lack of knowledge on effective logistic management by the suppliers, poor roads in the region are also likely to interfere with the timely delivery of the raw materials to the manufacturing plant, as such, proper planning is necessary to ensure that the raw materials reach on time. The management of Rolls-Royce should therefore ensure that there is proper planning on ordering for the raw materials so that they arrive prior to the set manufacturing date.

The issue of cultural difference is manageable hence can be managed by the organization to ensure that they achieve the desired objective for operating in the foreign land. It is important that the expatriates from the UK based company learn the basic information on the special culture of Singapore and learn some basic language that they need to communicate with the locals. According to Robles, Wei & Noche (2013) the possibility of cooperating successfully with the locals on a personal level can only go along way through the development of a win-win working relationship. It is vital that the foreigners learn the cultures that are of significance to the locals, to enable them interact freely with them. As the success of the organization in its manufacturing in the foreign country is dependent on the effectiveness of the interactions between the foreigners and the locals, learning of the culture and some of the vital language is recommended to the Rolls- Royce expatriates to ensure that this kind of corporation is achieved.

The volatility nature of the economic environment of developing nations is unpredictable. Financial crisis can occur at any time of the year that can have significant negative effects on the manufacturers in the region. Rolls-Royce is not an exception and any financial crisis that might be reported within the Asian economy will have significant negative effects on its performance. According to Roh, Hong & Min (2014) the presence of cheap labor in the region is a clear indication that the country is likely to experience uncertain economic situation. As such, the possibility of having a financial crisis within the years that Rolls-Royce will be operating in the region cannot be eliminated. It is however, recommended that the organization put up reserves that will take care of the possible losses that are likely to be incurred during the recession. The management should ensure that finances and assets are put in place to take care of the damages that might occur during the financial crisis period. In the event that there is no financial crisis, then the organization is still likely to benefit from the reserves, much benefits are likely to be attained in case that the crisis occur due to the availability of funds needed to take care of the emergency. The Rolls-Royce Company should therefore put up financial reserves that will take care of any losses that might arise from the financial crisis that is likely to be experienced in the Asian economy.

The selection of a suitable supply is a complex process in the international supply chain management. Melnyk, Narasimhan & DeCampos (2014) have indicated that the lack of knowledge on the suitability and effectiveness of the supply in the provision of the required raw materials makes it a major challenge to the organization in deciding on the most appropriate supply that will offer quality raw materials consistently as desired. As much as the complexity in the selection of the suppliers is pervasive, it is recommended that the procurement managers of Rolls-Royce consider the implementation of different kinds of supplier selection strategy in choosing of the most appropriate supplier. The managers should consider the quality levels offered by each of the suppliers, their level or reliability based on historical information, their location from the manufacturing plant, their process technology, and their capacity to settle on the most suitable supplier. Of course the suitable supplier should be able to offer quality products, be reliable and have the technology and capacity needed to supply a particular commodity. As much as the selection process may be time consuming and hectic, the manufacturers to the organization should ensure that they check the qualifications of the suppliers against the specifications identified to ensure that they settle on the most suitable supplier that will offer quality products needed for the manufacturing process.

Maintaining the product quality is a major challenge that Rolls-Royce is likely to experience. To ensure that the organization offers the same quality of the aerospace products consistently, the quality of the raw materials used in the production process needs also to be consistent. It is recommended that the procurement officers analyze the quality of the raw materials against the original specifications stated to ensure that they comply with the quality levels desired. The management should only pick on the raw materials that meet the quality levels that have been originally used by the company. This approach will ensure that there is consistency in the quality of the final products that are offered by the organization (Monczka, Handfield, Giunipero & Patterson, 2015). Full implementation of the aforementioned recommendations will ensure that Rolls-Royce obtain maximum benefits from manufacturing its products in Singapore.

Conclusion

From the discussion advanced, it is evident that the political stability of Singapore as well as the relatively lower taxation rates charged by the nation attracted Rolls-Royce to establish its manufacturing plant in the country. Rolls-Royce had an objective of acquiring a higher competitive advantage in the global market hence opted for an international supply chain that will entail the outsourcing of raw materials, human resources and clientele base from a foreign nation apart from its home country the UK. As much as the environmental condition of Singapore presented a suitable opportunity for the company to carry out its aerospace manufacturing processes, there are a number of challenges that the organization is likely to experience, the complexity nature of the logistics management is one of the major challenges that is likely to be experienced. It is evident that the suppliers in the developing nations, are unlikely to have the knowhow and experience needed to manage effectively the logistics, as such leading to delays in transportation. Cultural and language barriers are also likely to interfere with the effectiveness of the communication process between the foreigners and the locals. The organization is also likely to experience a challenge in the proper selection of a suitable supply for the raw materials that they require to manufacture their range of product. The maintenance of product quality is also another challenge that the company is likely to experience in their manufacturing in Singapore.

It is recommended that the management to the organization make orders earlier before the production day to ensure that any delays caused by the complexity nature of the logistics process do not affect the effectiveness of the production process and timely distribution of the products. The procurement manager should also compare the qualifications of the supplier against criteria such as quality, reliability, capacity amongst others to settle on the most suitable and appropriate supplier capable of offering the highest quality raw materials needed. Apart from the proper selection of the suppliers, the procurement manager should also ensure that the raw materials offered by the suppliers meet the quality levels desired. This will not only enhance the ability of the organization to provide products of higher consistent quality, but will also ensure that the company maintains its positive reputation. It is also recommended that the foreign employees and expatriates learn the most critical and special culture and language such that they interact freely with the locals. This kind of interaction will promote positive association between the two groups of individuals that is desirable in enhancing the overall performance of the organization. The full implementation of the aforementioned recommendations will ensure that the organization achieve maximum benefits from manufacturing in Singapore. The suitability nature of the nation in terms of political stability and lower taxation rates, coupled with the effective implementation of the recommendation will ensure that the expected challenges are addressed for the company to achieve maximum benefits from operating their manufacturing plant in a foreign nation.

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