BATANGAS STATE UNIVERSITY

College of Accountancy, Business Economics and International Hospitality Management

GRADUATE SCHOOL

BA-519 LOGISTICS MANAGEMENT

SOMERSET FURNITURE COMPANY’S

GLOBAL SUPPLY CHAIN

April 2019

I. Executive Summary

The Company, Somerset Furniture was founded in 1957, in Randolf Country,

Virginina. The company has manufactured large, medium – priced, ornate residential

home wood furniture.

Somerset Furniture Company wants to maintain its customer service record and

resolve of its global supply chain issues before it has going against something on the

brand and losing customers. Fast growing changes or innovations in the designs, over

stocks or too much inventory will cut down its profit and some of the product may become

outmoded even before the furniture delivered in the retail outlet stores. To attain success

of the business, management of the company plans and studies the new operational

system to be adopted and used the supply chain strategy one of the operational

management techniques that uses systematic decision making process to attain the goals

and provide tools to effectively compete in the market.

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 BATANGAS STATE UNIVERSITY
College of Accountancy, Business Economics and International Hospitality Management
GRADUATE SCHOOL

Somerset Furniture Company’s way of managing its supply chain has resulted in

unsuccessful business performance, the foreseen problems and other negative effects

on their management including poor logistics management as well as product quality.

II. Statement of the Problem

The main problem facing Somerset Furniture Company is how to manage its global

supply chain and the possible remedies for its supply chain problems, including

strategies, and tactical changes that might improve the company’s supply chain

performance, reduce system variability, and improve quality and customer service.

Without addressing these concerns will be in a serious trouble and may not be problems

able to regain their standing as an industry leader.

III. Causes of the Problem

Since the company SFC was considered global innovator in furniture

manufacturing processes and they apply quality management principles in their

operations we believe that they can manage and will adopt the global supply chain. On

the other hand, due to unexpected changes happened in the mid-1990s, challenged with

increasing competition, high labour rates, and weakening profits, SFC contracted to

outsourced some of its furniture product line to manufacturers in China, that

simultaneously reducing its own domestic manufacturing facility and labour force in the

United States. Somehow it is successful in minimizing cost and increasing profits, but in

the near future SFC had decided to close its entire manufacturing facility in the US and

outsource all of its manufacturing to suppliers in China.

When adopting global supply chain, we must include and fulfil a strong

management strategy for the good selection and best suppliers, establish good

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 BATANGAS STATE UNIVERSITY
College of Accountancy, Business Economics and International Hospitality Management
GRADUATE SCHOOL

relationship with the distributors, suppliers, customers and remain competitive in the

market. Otherwise, if not the company, SFC will not get better or not survive. While,

when SFC applying the Total Quality Management (TQM) in its operation somewhere

during mid of twentieth century they got positive effects on their operation. But in the mid

– 1990s, the company encounter the harder competition, high labour rate, and decreasing

profits. And to eliminate this situation, SFC is looking for solutions and they started to

outsource some furniture products to China, can help benefits from cost-saving or

reduced operating costs. The company’s initiated another strategy to keep low cost and

reducing manufacturing facility and labour force strategy. The result of marketing strategy

becomes successful in reducing costs and looking for increase in profit.

Since the Chinese manufacturers are very good in copying the designs without

expensive machinery, the average labour rate for furniture manufacturing in the US is

much higher costs. Instead the SFC is outsourcing their products at a minimal cost.

Finished products that outsource can ship from Hongkong or Shanghai to Norfolk Virginia.

In this situation the company will reduce the labour cost. Though there was a time that

the company experience the delay of delivery or the arrival on the expected time. Products

or items not delivered on time will cause the income losses for the company and limit their

clients to acquire the items. It also a ground for the loss of credibility of the company and

may be resulted for the cancellation orders and lost customers.

IV. DISCUSSION AND ALTERNATIVE SOLUTIONS

Outsourcing might be a result of a supply chain problem. The company, SFC facing

this problem and to look for possible remedies one step they do is reduce variability. The

customer order furniture process on a weekly and bi-weekly basis. It takes between 12

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 BATANGAS STATE UNIVERSITY
College of Accountancy, Business Economics and International Hospitality Management
GRADUATE SCHOOL

and 25 days to make the purchase order and will be released to the Chinese suppliers.

In this process it is hard to make it and difficult to forecast the demand. Supply chain can

be improved by implementing a real-time internet driven system that agrees for direct

communication between the producer and the supplier.

To become successful in outsourcing and as a supply chain becomes more global,

increase complexities are encountered. These complexities results from longer

distances, demand differentials, cultural diversity, and complex documentation.

Nevertheless, firms will increasingly confront the need to expand operations into the

global arena. Strategies to achieve a share of the rapidly expanding world market range

from export / import to local presence to true globalization. Regardless of the strategic

focus, success will, to a large extent, be dependent upon a company’s logistics

capabilities. With increased global marketing and manufacturing operations, logistics

management needs to be more involved in developing and implementing global

strategies.

SFC is looking for more opportunities with other global suppliers. Given quality

concerns with production facilities and the difficulties with improving transportation and

shipping resources, China may not be the best supplier for the said company. In securing

a different provider Somerset can not only improve its quality (thus securing its

reputation), but also improve the expedience with receiving its order goods. The

mentioned improvement will result to cost savings and improved customer service for the

company.

V. RECOMMENDATIONS, IMPLEMENTATION

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 BATANGAS STATE UNIVERSITY
College of Accountancy, Business Economics and International Hospitality Management
GRADUATE SCHOOL

Somerset's global supply chain and possible solutions for its supply chain

problems, and a strategic modification that can progress the supply chain, decrease

inconsistency and increase quality and service. Though their methods to manage their

supply chain lead to in low performance, this also includes insufficient order and inventory

structure and management and also unreliable quality. Somerset must integrate and put

into practice a vital supply chain management plan. Somerset must increase their

collaboration with their other vendor’s of their products.

Since Somerset has the machinery to produce or make the customer order

furniture, parts of the agreement should include and requiring their outsource

manufacturers to use them. They have to find other manufacturers to ease the risk of

their primary manufacturer experiences a problem example meeting the deadline or there

is a problem with a shipment deadlines.

Delayed transport, should control technology with its transportation companies.

Different technologies can be used to give real-time updates to the transportation

company. With improved forecasting, thresholds can be established so that once

reached, on time transportation for the pre-ordered with an expectation that a complete

order will be reached, once transport reaches the manufacturing facility. With the

improved forecasting and the use of technology, the transport company would better

estimate to consumer needs, and improving their preparedness.

The shipping partnership, in order to improve probability of securing shipping

containers and to reduce the delays caused by security checks, Somerset should

leverage partnership with companies that have similar shipping needs. In increasing the

scale of their shipping needs, Somerset and there partner can compete with larger

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 BATANGAS STATE UNIVERSITY
College of Accountancy, Business Economics and International Hospitality Management
GRADUATE SCHOOL

companies. And also, SFC will capable to experience cost savings, because of the

shared costs.

Collaborative data collection is a technique that could help in proper decision on

what is really happened in the company’s operation. When company getting better or at

lost so that the management of the company can do the corrective measures regarding

their situation. The data gathered will be used to address supply chain reaction to and

make their production more flexible. Through evaluating the data gathered and

comparing it with data about their competitors SFC can develop a perfect model for

forecasting future sales and positive returns by reducing the changeability on lead-time.

Given then the implication to the management, to assists operations managers in

supply chain decision making –diversification, plant location. Examining the feasibility of

a country becoming an export hub based on for example tariff structure and exchange

rate between the host and the destination country. Global sourcing decisions prediction

and which countries would be more open to. Logistics strategy must complement

sourcing strategy to reduce total cost of ownership of the supply chain.

As a supply chain strategy becomes more global, increase complexities

encountered. Why is it happened? These complexities results from longer distances,

demand differentials, cultural diversity, and complex documentation. Nevertheless, SFC

will increasingly confront the end to expand operations into the global arena. Regardless

of the strategic focus, success will, to a large intent, be dependent upon a firm’s logistical

capabilities.

REFERENCES

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 BATANGAS STATE UNIVERSITY
College of Accountancy, Business Economics and International Hospitality Management
GRADUATE SCHOOL

Donald J. Bowersox, David J. Closs, M. Bixby Cooper, John J. Bowersox;

Fourth edition;
Supply Chain Logistics Management

https://studymoose.com/%EF%BB%BFdiscuss-somersets-global-supply-chain-essay

https://www.ukessays.com/essays/commerce/supply-chain-strategy-at-somerset-

furniture-commerce-essay.php

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BATANGAS STATE UNIVERSITY
College of Accountancy, Business Economics and International Hospitality Management
GRADUATE SCHOOL

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