Logistic Systems and Supply Chain Principles

Logistic Systems and Supply Chain Principles

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1.0 A brief introduction of the report

Throughout history, Switzerland’s expert watchmakers have come to control the watch industry. Purchasing a Swiss watch is the easiest way to promise an excellent purchase with a well-made, attractive, and durable timepiece. Historically, the Swiss watch industry developed according to an exclusive horizontal structure whereby the distributors, along with subcontractors, distributed movements and the exterior parts to assemblers who assembled the parts of the watch and sold them as a final product. Moreover, Swiss watchmaking adheres to the vertical model structure, which is synchronized to a varying degree where the timepiece is produced in its entirety by the same organization. The Swiss watch industry is currently present in five continents, and it exports about 95 percent of its products into various global markets. Nonetheless, the geographical distribution of the sales of Swiss products is not uniform. For instance, Asia absorbs 53 percent of Swiss watch exports by value, followed by Europe at 31 percent, America at 14 percent while Africa and Oceania account for one percent each. Furthermore, the top three markets for the Swiss watch industry are Hong Kong, the USA, and China. This report, therefore, provides an insight into the supply chain and Swiss watch industry, Zentrum’s current supply chain along with the recommendations to the current logistics and supply chain arrangements.

2.0 Application of methodologies to examine Zentrum’s supply chain and the industry

PESTLE Analysis of Zentrum Precision AG

Political factors

The political factors that might affect the profitability and viability of Zentrum Precision AG entail the political instability, laws enforced by the country, high level of taxation along with the risk of military invasions by the hostile nations. The level of political stability in Switzerland would significantly impact the performance of the company since, with a stable state of political stability, the company would be able to operate without any disturbance effectively, and this would, in turn, enhance the income flow of the company. An increase in the stream of income of Zentrum would consequently promote its financial might, and this would, in turn, boost its competitive advantage and sustainability in the competitive Swiss watch industry. Nonetheless, political instability would curtail the operations of the company, and this would lower its performance and viability in the aggressive Swiss watch industry. Additionally, the laws enforced by the country, particularly regarding the business contract, would affect the operations of the company in different markets in distinct countries. For instance, some states might have some stringent laws regarding business operations, and this might hinder the capacity of Zentrum to operate in such countries, and this would, in turn, threaten the sustainability of the company.

Economic factors

Economic factors encompass all the factors about the economy of the nation in which the firm has its market. The economic factors would affect the aggregate demand, aggregate investment, and the business environment of Zentrum. Some of the economic factors that would affect the company involve the interest rate in the country, the rate of GDP growth, exchange rate alongside the rate of unemployment of a county. The rate of exchange of a country would influence the profitability of Zentrum, especially if the company involved in multinational trade. A high exchange rate would lower the sales and profits gained by the company while trading in international markets. The decline in sales and profit, would consequently lower the profitability of Zentrum, together with its viability in the aggressive Swiss watch industry market. Furthermore, the proportion of GDP surge in a state would influence how fast Zentrum Precision AG is anticipated to increase in the near future.

Social factors

The social components that are likely to affect the company include the demographic population, class distribution among the population, as well as variations in the learning background amidst the marketer, and the identified market. Demographics of a population habitually impact the marketing of a product since it dictates whether a product will be sold or not. The demographic of the target market would affect the sales of Zentrum’s watches since it would determine whether the customers would readily buy the watches or go for substitutes from other companies. Likewise, the variations in the learning background amidst marketers and the identified market may make it challenging to grow in the identified market productively, and this would lower the performance of the company in the competitive Swiss watch market.

Technological factors

The technological factors that would affect Zentrum Precision AG include the current automation advancements along with the breakthroughs made by the rivals, an increase in the cost of technology along with the extent to which the technology would improve and transform the products of the company. The technological developments by the competitors would make Zentrum Precision AG urgently react to the creativity by either matching the automation of the competitors or locating an innovative solution. Finding a solution to the technological advancements made by the competitors would make Zentrum incur extra expenses in innovating solutions to counter the technologies of its rivals, and this would increase the total expenses of the company.

Environmental factors

The environmental factors that would affect the company include climate change and environmental regulations and penalties for the violation of the law. For example, the law might require the company to thrive at protecting endangered species where the failure of the company to conserve the endangered species would result in the imposition of heavy fines and penalties. Climate change would also affect the company since it would directly impact its production and productivity. For example, extreme flooding as a result of climate change would hinder the production and dispensation of the firm’s products to the market as it would affect transportation channels. The decline in the production and dispensation of the corporation’s products would lower the sales, which would consequently lower the performance and viability of the firm.

Legal factors

Similarly, the legal components that would affect the company involve intellectual property policies, health and safety regulations, discrimination policies, along with laws regarding the pricing of products. Intellectual property regulations and other data safety regulations would require the company to stick to its idea of production while also safeguarding the sensitive data of the employees and customers without any violation. The breach of the laws would, therefore, make the firm to incur penalties and huge expenses associated with the lawsuits related to the breaching of intellectual property entitlements. Prolonged lawsuits due to contraventions of the intellectual property entitlements might curtail the ability of the company to manufacture and sell Swiss watches, and this would adversely affect the firm by lowering its performance, competitive edge, and viability in the aggressive Swiss watch industry. Besides, the discriminatory law placed by the government to safeguard the employee to ensure fair treatment of the workers by their employers would affect the company. The law would require the firm to be in the frontline of protecting the employees from any form of discrimination, and it would impose harsh penalties on the company in case the firm practices discriminatory acts to the employees.

Porter’s five analysis of Zentrum company

The threats of new entrants

Zentrum Precision AG would be faced by the threats of new entrants, especially from the uprising small Swiss watch companies. New entrants would make the company compete for the same market share with the new emerging companies. Hence it would lower the sales of the firm, and this would adversely lower the profitability and viability of Zentrum.

The bargaining powers of consumers

High bargaining power of the buyers would make them demand for lower prices of Zentrum’s watches. Therefore, the high bargaining powers of the buyers would affect the company by lowering its profit since selling the products at low prices would reduce the net profits of the company. Buyers usually tend to possess high bargaining power if they work together to purchase multitudes or if there are a lot of substitute products. In a scenario where many companies are offering the same luxury watch brand, the buyers usually have excessive-high bargaining power simply because they can get the substitute watch from other firms even if one firm does not offer them the brand at their price of choice. Zentrum is most likely to experience the force of the high bargaining power of the customers, which might adversely lower its sales and profitability within the competitive swiss watch industry.

The bargaining power of suppliers

High bargaining power of distributors can enable the suppliers to increase the buying price along with the selling price of a product. The high bargaining power of suppliers would make the company incur a lot of expenses in paying its resource suppliers, and this would directly affect the profit margin of the firm from the sale of its luxury watch brands.

The threat of substitute products

Zentrum would experience the threat of substitute products since its watch brand could be substituted using products from other Swiss watch companies. The threat of substitutes would make the company lose its customers to the rivals, thus lowering the customer base of the firm.

Rivalry

Zentrum would face the challenge of stiff competition from the rivals within the competitive Swiss watch industry. The increased rivalry would lower the attractiveness and profits of the company, and this would threaten the sustainability of the company in the competitive Swiss watch industry.

3. Review and evaluation of Zentrum’s current supply chain

The inbound supply chain typically involves the incoming delivery of raw materials from suppliers to the organization. Outbound logistics, on the other side, entails customer service and distribution channels. Likewise, the manufacturing process entails the steps through which raw materials are transformed into finished products.

3.1. Locations of operations

Zentrum company mainly operates in Switzerland, where it manufactures luxurious watches and distributes them to various international markets. The firm produces its pocket watches and wristwatches in Switzerland and later distribute them through its outbound logistics channels to avail them to the customers who are distributed across the globe.

3.2. Capacity of operations

The capacity of operation is the highest level of production that a firm can support to make a product or deliver a service to the consumers. Furthermore, it means the highest production capability that can be achieved within a standard working plan. Zentrum Precision AG has a high capacity of operation since it produces large, luxurious watches within a single production. The company engages in mass production, which entails the fabrication of huge amounts of homogenized commodities using assembly lines or machine technology. Zentrum Precision AG uses automation technology to produce a large number of luxurious watches in a single production, and this makes it have a high capacity operation. Mass production has enabled the firm to deliver large quantities of luxurious watches through its outbound logistics to meet the needs of the customers in the competitive business environment.

3.3. Transportation arrangements

Transportation arrangements are the networks used by the companies to distribute their products to the market to attain the needs of the consumers. Transportation is among the key logistics operations linked with the moving goods on specific automation in the SCM, and it comprises of logistics operations and functions such as cargo administration, transfer of possession of goods and packaging. The transportation arrangements for Zentrum company involve freight and cargo delivery. The company transports its products to its markets through air, land, and ocean plus carriage services when the goods have approached their final landing place. Warehousing and distribution services are typically beneficial to the company because it is cost-effective, and this makes the firm to save on the costs associated with the transportation of its luxurious watches to various markets across the globe.

3.4. Key skills, knowledge, and experience

The vital skills, knowledge, and experience required in the SCM of the company encompass effective problem-solving skills, adaptability, ability to see the big picture, information, and automation knowledge along with project management skills. Based on the increase in the use of technology cross supply chain, supply chain managers must have adequate information technology and automation knowledge. The knowledge would enable the manager to comprehend how the supply chain of the company uses enterprise technology tools like warehouse management and ERP. Therefore, it would resultantly contribute to effective use and reduction in wastage.

Additionally, the supply chain manager should possess the skills and knowledge of project management. The skill would capacitate the manager to plan and manage multiple projects effectively to promote the level of success of Zentrum Precision AG company within the Swiss watch industry. Some of the crucial project management skills that a supply chain manager should have include; a proactive approach to risk management, the ability to negotiate for resources successfully, budgets along with the schedule. The manager also needs to possess skills of a high degree of personal organization, which will enable the manager to keep track of various projects of the company. Similarly, effective problem-solving skills would allow the supply chain manager to solve multiple problems relating to supply and chain management of the company to enhance the performance of an organization. The supply chain manager of Zentrum should, therefore, possess the practical problem-solving skills to assist in solving various issues relating to supply management of the firm to promote its performance and viability in the competitive Swiss watch industry. Likewise, the supply chain manager should be able to adapt to the changes in the trends of SCM to manage the supply chain activities of the company effectively.

3.5. Information system and information requirements

Information systems are interconnected elements that operate together to gather, process, keep, and disseminate facts to support resolution-making, harmonization, control, evaluation, along with visualization in a company. It is typically made up of five components that encompass hardware, program, data, people as well as process. IS is used to run inter-organizational supply chain and electronic markets. Information requirements, on the other hand, are the information needed to back an enterprise or other activity. They are the operational specifications of an IS. Moreover, information requirements include a list of comprehensive transactions like orders and purchases, together with encapsulated information from master documents like clients, vendors, and workers.

3.6 Supply chain performance measures

SCPM are the approaches used to judge the performance of the SCM system. The measures are usually grouped into two broad classes, which entail qualitative measures along with quantitative measures. Qualitative measures are generally used to judge client contentment alongside product standard. Likewise, quantitative steps are usually used in the SCM to measure resource use, delivery performance, flexibility, and SCM response time. Quantitative steps of SCM performance can be further grouped into two classes, which involve non-monetary measures and financial measures. The indicators of non-economic measures entail client service level, cycle time, and resource use capacity to perform. Similarly, financial steps help in gauging distinct fixed and functional costs linked to SCM.

4. Recommended changes to current logistics and supply chain arrangements
5. Some alternations should be made on the current logistic and supply chain arraignments in terms of the location of operations. The locations of operations should be diversified to avoid producing products from a single production point. Diversification of the locations of operations would enable the company to produce its products from various locations, and this would, in turn, alleviate the company from huge expenses incurred in distributing products from one location to another through outbound logistics.
6. Companies should also enhance their capacity of operations to enable them to perform mass production, which would, in turn, enable them to limit the time taken in the production of goods. Mass production would also enable them to meet the market demand of the products within the shortest period, and this would consequently help the companies to maximize the profits from the sale of their products.
7. Similarly, changes should be made in the transportation arrangements to promote faster delivery of the products to the target markets. Also, alterations should be made in the SCM to ensure that the logistic network managers have the requisite skills that would enhance logistic network activities to foster the accomplishment and productivity of the company in the competitive business environment. Likewise, both qualitative and quantitative supply chain performance measures should be implemented to measure the supply chain performance of organizations.

5. A brief conclusion

The Swiss watch industry is the prominent manufacturers of luxurious watches in the globe. Zentrum Precision AG is likely to challenges, which ranges from threats of new entrants to threats of rivals. Based on porter’s five analysis of the Swiss watch industry, Zentrum would face various challenges which would adversely affect its performance, profitability alongside viability in the aggressive swiss switch industry. Moreover, the available measures for gauging the present supply chain management involve qualitative measures and quantitative measures. Likewise, it would be recommended that some alterations would be made in the present SCM in terms of locations of operations along with the capacity of operations.