The Henkel Company’s Supply Chain Management

Summary

Henkel is a pharmaceutical company that deals in the manufacture and distribution of pharmaceutical products under the management of Mark Hamlin. Henkel has its headquarters in New York where the distribution channels spread out to other parts of world. The logistics and supply chain manager is responsible for coordinating the transportation and supply chain activities in supplying the company’s products to pharmacies in different parts of the world and to ensure replenishments are made on time to maintain the right stock (Benton, 2010). However, the company has been experiencing delays, wrong deliveries, increasing costs, and poor coordination of transportation activities that compelled the management to hire a new transportation and logistics supply chain manager to turn around the operations of the company.

Problems statement

When Mark Hamlin joined Henkel Pharmaceuticals it was experiencing constant complaints from the customers because of poor and low response rates for their orders from Henkel Pharmaceuticals, high transportation costs, non-delivery of the right products at the right time and often some of the products were damaged and in need of replacement, poor coordination of transportation and supply chain activities, and a declining market shares and dropping revenue (Benton, 2010). There were constant conflicts between the management and the employees leading to the short term problem of poor estimation of resources and long term effects of the decline in company’s financial performance. The urgency of the problems demanded Mr. Mark Hamlin to act quickly to resolve the problems by seeking the best alternative solutions.

Significance of the problem

The problem highlighted above was already taking toll on Henkel pharmaceutical’s operations because of the significant drop in the market share and demand for the company’s pharmaceutical products, poor coordination of transport ion and supply chain activities that was evident on the wrong shipping and delivery of products to the wrong pharmacies, the delivery of products behind schedule, and the increase in the frequency of damages of the products and delays for requested changes when the wrong products were delivered to the wrong pharmacies (Halldórsson & Kovács, 2010). The resulting effects were putting many of the jobs on the risk of losing the jobs was increasing by each day.

Development of Alternate Action

The first solutions to the problems were to evaluate the current supply chain and transportation logistics to determine the interdependencies of the transportation component with the supply chain activities. It was also established that transportation activities were not properly coordinated and integrated into the supply chain management activities to optimise the transportation component within supply chain logistics of the company. To address the problem, the manager developed an evaluation criterion that could be used to create alternative methods to address the effects of transportation on the supply chain activities of the company.

The first alternatives were to develop supply chain coordination mechanisms for the coordination of the supply chain functions across different members of the logistics and supply chain and transportation activities (Pettit, Fiksel & Croxton, 2010). Each member in the transportation and supply chain was assigned different roles in the suupy chain by use of different supply chain mechanisms that are suitable for each region. The problem with the current supply chain management system is based in individualistic views and interests of the company, leading to a mismatch between the demand and supply of pharmaceutical products. In addition, it was critical for the company to revise its policies, procedures, rules, and coordination mechanism to align them with the modern transportation and supply chain coordination mechanisms.

In addition, the supply chain performance indicators should be aligned with modern methods that optimise the use of information systems in the supply chain transportation logistics to address the problem of delays. Among the proposed mechanisms include the vendor buyer coordination mechanism using the “procurement–Inventory–Production–Distribution processes” (Urciuoli, 2010) and quantity discounts pegged on prices, joint policies, information sharing and decision making coordination, and inventory management techniques.

On the hand, the company should adopt the use of joint execution of tasks across the supply chain and the transportation functions. That includes joint considerations of order quantity, replenishment inventory, reorder points, and the timing of the orders for each element in Henkel’s supply chain and transportation logistics (Waters, 2010). In addition, Pettit et al. (2010) shows that the use of revenue sharing incentives and contracts could enable compensation for the losses that occur within the transportation and logistics supply company. Here, the factors that include the number of actors in the supply chain system, replenishment lead time, transportation costs, obsolescence opportunity cost, and taxes and insurance that is consistent with the dynamic changes in the market.

Recommendations

An investigation of the current supply chain management system shows significant problems in the supply chain and transportation logistics of the company. Among the recommendations for the successful distribution of the company’s products include factoring information technology to link transportation and supply chain activities, use of quantity discount, implementing the joint production delivery policies, and integration of the joint lot scheduling models to formulate effective transportation logistics and supply chain activities. The results could be real time coordination of transportation activities across the entire supply chain system of the company.

References

Benton, W. C. (2010). Purchasing and supply chain management. New York, USA: McGraw-Hill.

Halldórsson, Á., & Kovács, G. (2010). The sustainable agenda and energy efficiency: Logistics solutions and supply chains in times of climate change. International Journal of Physical Distribution & Logistics Management, 40(1/2), 5-13.

Pettit, T. J., Fiksel, J., & Croxton, K. L. (2010). Ensuring supply chain resilience: development of a conceptual framework. Journal of Business Logistics, 31(1), 1-21.

Urciuoli, L. (2010). Supply chain security—mitigation measures and a logistics multi- layered framework. Journal of transportation security, 3(1), 1-28.

Waters, D. (2010). Global logistics: New directions in supply chain management. New York, USA: Kogan Page Publishers.