Global Lighting

This case study contains information on how Global's expectations of quality of service from its suppliers evolved over a number of years. Further changes are affecting these suppliers as Global's own customers continue to demand higher levels of service. If you are unfamiliar with the term material requirements planning $($MRP$),$ Global is one of Britain's largest manufacturers of lighting products. The market for It is explained in architectural lighting, one of its major product lines, has become increasingly volatile and competitive in recent years. Pressure to supply products more cheaply and more quickly to a higher standard on an international basis has meant that Global has had to work hard on shortening product life cycles and reducing delivery lead times. During $1996,$ the new managing director raised the profile of logistics by making an appointment at board level. Following this change in organizational structure, a 'lean' approach to supply chain management and manufacturing was implemented over the next three years. But recently the lean approach to managing the supply chain has been found to have serious shortcomings in terms of meeting increased demand for customized products such as architectural lighting. Consequently, Global's supply chain management strategy has evolved to accommodate the rapid growth in the market for these products. This change resulted in a multifaceted supply chain strategy, which increases Global's ability to meet the mass customization needs of its customer base. This multiple strategy approach has created many challenges for suppliers.

The supply base was managed through an essentially adversarial approach. The supply base was broad, as the strategy of the buying function of the company operated on the principle of lowest price is best. Buyers routinely moved the sourcing of components to a new supplier if the price was lower. New suppliers would be assessed on the basis of price and component quality only, and no obligation of repeat purchase was expected if the supplier did not retain the lowest price. Price, not cost, was the main objective of the buying group.

In addition to restructuring the internal supply chain, the historical approach to managing the external chain of suppliers was altered. Because materials constituted more than $80$ per cent of the cost of sales, the decision was made to acknowledge vendors as an intrinsic part of the organization. Improving the performance of the suppliers and the efficiency of the exchange between the firms was recognized as key to Global's success. In order to achieve the necessary improvements a four$-$phase plan was conceived.

Phase $1$: Supply base reduction

Phase $2$: Information exchange integration and simplification

Phase $3$: Supplier development

Phase $4$: Timely product development

$1$ What actions do you think Global could take to respond to the needs of its customers?

$2$ How will Global's own customer service priorities change as a result of this?

$3$ What are the opportunities and threats facing suppliers as a result of the likely changes to Global's quality of service priorities?