Operations Management homework paper -case study
Global Value Chain International Market Entry Strategies
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Global Value Chain Management and Inventory Management
Bright Potential
Vonkel Enterprises recently purchased Thembeka, a company that designs, manufactures and markets fine gold and diamond jewelry throughout South Africa. It had previously been a family- run business, but following the death of the founder and CEO, family members decided to sell the enterprise. Vonkel saw the potential for this business and purchased it, intending to improve supply chain performance.
The domestic supply chain involves inbound shipments of raw materials from multiple small suppliers to a manufacturing location in Pretoria. Once the jewelry has been created, shipments are sent through a transportation intermediary to retail stores in Cape Town, Durban and Johannesburg. The challenges Thembeka faces are common to the fashion industry: rapidly changing styles and preferences require the company to react quickly and adapt designs to suit consumer demands. The peak demand periods occur throughout December and in mid-February, with a smaller one in the spring. The Thembeka brand and style is well established throughout South Africa, and Vonkel decides that it will keep the name to maintain brand loyalty.
In addition to making supply chain improvements, Vonkel Enterprises is planning to export the products to the U.K. The jewelry market has experienced a steady increase over the past ten years, and has continued to grow over the past year despite predictions for an overall industry slow-down. South Africa’s participation in the Kimberley Process should help accelerate Vonkel’s move to the British market. The Kimberley Process is an international certification scheme designed to regulate and prevent the trade in conflict diamonds. Although a certificate is needed in the export of rough diamonds, Vonkel can provide a warranty on its polished diamond jewelry, stating the gems have been purchased from legitimate sources compliant with the United Nations resolutions. Vonkel is in the process of contacting multiple U.K. wholesalers to try and broker an export arrangement.
Global Value Chain International Market Entry Strategies
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Investigating Losses
Despite Vonkel’s desire for expansion and growth, Thembeka has experienced an overall profit loss for the past five years. An initial investigation into the company’s finances revealed an overall business turnover of about USD 63 million, and the cost of inventory alone is USD 27 million. Over 80 percent of the company’s total inventory consists of finished product. Inventory is inconsistently categorized, which also leads to a longer lead time for the organization to fulfill orders. Most of the inventory is held in various retail outlets that Thembeka owns and in franchises where Thembeka owns the stock.
Losses in sales were primarily due to the inability to deliver timely orders because the stock could not be located efficiently in its inventory. This resulted in frequent stock-outs during peak demand periods. In addition, designs were not well aligned to customer preferences, which meant that there were higher volumes of product left in inventory. There was very poor visibility of stock in relation to overall sales and no integrated and efficient method to track shipments, delivery and items in stock. In addition, Vonkel identified over USD 1 million in stock that Thembeka had accumulated over the past twelve months.
Developing Strategies
Vonkel executives have decided to investigate potential distributors and retailers in the U.K. while working on the supply chain improvements. A strategy is being developed to address the critical supply chain problems, while an exporting plan is being created to initiate the company’s international growth strategy.
Learning Outcomes This case study relates to the following learning outcomes from the module Inventory Management in the course Global Value Chain and the module Implementation of Market Entry Strategies in the course International Market Entry Strategies:
• Build inventory systems through a strategic approach to control inventory levels and financial risks when exporting and/or importing on a global basis.
• Examine current business model and supply chain practices to identify the potential value of transitioning to a circular economy business model.
• Implement an indirect exporting strategy by finding and choosing an appropriate domestic intermediary, such as a trading house or confirming house.
Global Value Chain International Market Entry Strategies
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1. Which activities should Vonkel undertake to efficiently manage its inventory?
2. What would be the most appropriate strategy for Vonkel to adopt to maintain optimal inventory levels? Explain your choice.
3. Which supply chain information system would help Vonkel address its immediate issues? Why?
4. Would indirect exporting be a strategy that would benefit Vonkel?
Case Study Questions
Global Value Chain International Market Entry Strategies
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Photo Attributions Photo #1 (Bar code) Attribution: No attribution required Licence: Public Domain, free for commercial use pixabay.com/en/bar-code-information-data-business-24157 Photo #2 (Pendant) Attribution: No attribution required Licence: Public Domain, free for commercial use pixabay.com/en/blue-gold-green-jewellery-1868783 Photo #3 (Flow chart) Attribution: No attribution required Licence: Public Domain, free for commercial use pixabay.com/en/mark-marker-hand-leave-516278
Bright Potential
