Faced with intense market competition,Somerset chose to close its domestic manufacturing facility and outsource its entire manufacturing business to Chinese suppliers. Even though Somerset could reduce labor costs, as a qualified company, it should realize that labor cost is just a small part of the entire supply chain management. A supply chain includes many interrelated members, such as raw material suppliers, the product or service producer, distributors and customer. Each stage would consume a lot of costs (Chopra&Meindl, 2004).
We should look for some ways to improve Somerset’s operational effectiveness and customer satisfaction. One proven approach is to consolidate cooperating and communicating among members (suppliers & consumers). In other words, the members should share information, especially demand forecasts. If the supply chain exhibits to be transparent, members could get well known with each other’s information, reducing or eliminating uncertainty (Schecter& Gordon, 2002). Excess inventory and obsolete products could rapidly lose recovery value. According to Reorganisation von Bauprozessen, excessive stock may result in loss of revenue. The company would invest a lot of additional fundsin storing the surplus products. In this case, excessive stock may result from over delivery from Chinese suppliers or from disqualified purchase ordering and poor management of stock . On the other hand, suppliers and customers should take partall at once in designingthe supply chain to achieve their common goals and to allow for close proximityto each other ,which means making the communication information more smooth. With the continuous development of network technology, the company could produce orders and send them out to suppliers online.In this way, its suppliers could get well known with Somerset’s inventories and the related plans. At the same time, Somerset Furniture Company could also receive regular feedback on if they are conforming to the shipping schedules. The other measure we should take is to engage in “risk management”, coping with supply chain uncertainty. In this case, risk sources are identified and located in human factor variability, as well as infrastructural or other tangible variables. In general,the effective strategies to manage risk consist of refraining from the threat, reducing the adverse impact, as well as transferring risk,which means the company would elect all or part of the risks/uncertainties to another one.Specifically, Somerset Furniture Company should consolidatethe relative information exchange and consider professional strategies across countries. In order to collect useful information and improve the ability of coping with supply chain risks, Somerset must evaluate and anticipate the likelihood and possible impact of variability. These processes range from identifying circumstances in advance that could cause disruptions, to developing alternative scheme for the occurrence of disruptions. In this case, Somerset gave up its domestic manufacturing facility and contracted solely with China,outsourcing all of its manufacturing business to Chinese suppliers. Even worse, its products have quality problems because of different environmental conditions between production base and consumption area. Hence, it is better for Somerset reselecting the proper contractors, which means including a pool of alternative suppliers or logistics providers to fall back on when disruptions occur.
In summary, Somerset Furniture Company could take following two specific measures to prove the problems: one proven approach is the consolidation of cooperation and communication among members; the other one is to engage in “risk management”.