Case: Exel’s PLC -Supply Management at Haus Mart Case
- What is the main decision confronting Exel? What happens if they do nothing?
- What possible and feasible options are available to Exel?
- If you were Perry Watts, what would you recommend to Exel’s top management?
- If you were Haus Mart, what would be the risks and benefits of your recommendation?
This case is a prime example showing how a company that has become a pioneer as well as an expert in its area of work now is thinking of the various ways in which it should expand its business by vertically integrating its expertise in its line of business thus becoming a one-stop for all kinds of supply chain problems that the clients may be having. However, the amount of risks that might accompany this new line of business which has previously not been trodden is something that is creating concerns in many of the executives in charge of taking these decisions.
The decision that now looks into the face of the company is whether they should increase their already booming business of providing an end to end solution for the supply chain facilities and requirements of the clients starting from the freight movements to the more controlled management can be increased or expanded to partnering in planning the supply chain with the client. This will help not only to intensely increase the business possibility that the company now has with the various clients but will also help the company Exel to control the movement of supply chain from a much more initial level by determining the number of goods required and forecasting the sales and thus through cascading effect end up improving and thus supply chain management that the company does in the downstream.
However in the situation that the company does not do anything in this opportunity that has presented itself through the chances of risks of the failure of such a measure will be reduced drastically letting the company to maintain its current run of heavy profit and revenues but will also completely rob the company to experiment a potential prime revenue earner with a company which is very stable in its partnership and will only pave the way for future competitors to take up the opportunity and take a larger share of this new market by being the early movers.
One of the possible and I believe the logical options that the company should take is to pitch this idea with the HM Mart to completely regulate their planning for the various forecasts and inventory requirements. However, it should also be kept in mind that the company is very new in this business and thus should not put any lofty goals as part of the contract. Exel should take up this planning approach one step at a time by taking up small chunks of the business and processes that HM mart does so that the safety net is high. It should also make sure to create a team comprised of the most senior member is the Exel logistics team with a thorough expertise in the problems and the uncertainties that are wont and possible in the downstream in case a faulty forecasting is done, in combination with some members from the client team of HM Mart to make sure there is no lack of understanding between the companies and the interests of the client company is taken into utmost importance. Another option that Exel can ponder into is completely assimilating itself in the planning phase of the company. This though holds a much more risk in the number of things that has a potential to go bad but if coordinated in the right amount will lead to much faster and visible exhibitions of results that will further spur the client company to foray forward into this new partnership. One more possible opportunity that the company can ponder is to do nothing. The result as well the loss of which has been described in details above.
In present scenario the prime requirement that Perry Watts should try to solve is to make sure to make a case that will make HM Mart completely understand the amount of benefit doing a partnership with Exel would do them, as at the end for any sort of company to almost completely give up all their operations to another company right from planning to execution is generally met with heavy resistance as it opens the company to a lot of fluctuations to the whims and problems of the controlling company. However, before coming up with a plan to do so, Perry Watts should make sure to sway over the top management of Exel in order to put his ideas in motion. In order to do that Perry should recommend the technique of taking certain parts of the HM Mart planning preferably the goods in much lower demand under their planning wing right now. This will not only give Exel the necessary training ground that they will need to start off something new but will also minimize the risk that they pose in case the ventures go wrong. It will also make it much easier to get an agreement from the HM Mart executives who would them be needed to be impressed by the excellent planning made by Exel and thus give up the best part of their business to them. However, Perry should also show the top management the amount of benefit that Exel would get if they venture into this domain. He would be able to show that Exel having become the top dog in this industry has almost saturated and in order to continuously progress needs to open up new avenues of work and challenge and what best that to vertically integrate to the job and function that they already excel in. Also, this will make them the first movers in a type of business which will help them to swoop up a huge lot of business before any other companies decide to move in and thus create a humongous source of future revenue.
From the Haus Mart part, however, this new idea is mired with both benefits and risks. The biggest benefit as has been told multiple times is to create a well-oiled machine where the top of the upstream is completely in tandem with the downstream and also to reduce the inventory costs as well as the operation cost drastically by using the efficiency and the expertise of Exel. However, on the other hand, there are risks involved too. For example, as this is the first time exel is moving into this business HM Mart will become like a training ground for them, and as a result, obviously, there will be multiple times when things will go wrong, and it will have to be tackled and healed only through trial and error. This might result in the loss of some business as well as heavy stress in everyday life of the HM Mart in the early days. On the other hand giving up every part of the business from the top to bottom to another company also makes it very vulnerable as well as very dependant on the other company and HM Mart may soon find its inability to maintain its own items because of over-reliance on Exel as well as heavy downward turn of business in some case if Exel decides to cut their partnership
In summary, this case teaches us that for every well-established company there always comes a time when it can try to foray into the unknown domain with the risks involved or stay snug and happy with the business it already does. And the decisions are taken by the companies in these times generally either create a history or leads to its complete downfall