Organizations must have effective and tested supply chain systems and processes to ensure goods and services move smoothly from producers to final consumers. This makes it necessary for companies to have supply chain control and procedures that enable the management to operationalize, strategize and execute the movement of goods and services from one location to another. By adopting a superior supply chain performance, a company can enjoy better revenue, profits, customer satisfaction, and other key performance indicators of success accepted by the management. Lenovo’s implementation of the SCOR model and Blue Yonder system in SCM operations offers the firm noteworthy competitiveness, making it a global force.
Lenovo is an international technology company specializing in manufacturing and marketing electronic products to consumers and businesses. The American Chinese company has been operating since 1984 and continues to expand in revenues, operations, and valuation. Lenovo operates in over 50 countries, distributing its products to over 180 countries (Rashidin, Javed, Chen, & Jian 2020). Therefore, an effective supply chain process must be available for the company to have smooth operations. One of the methods that Lenovo uses to distribute its products is through retail stores, which is one of the most common for the company. Other known methods that Lenovo uses to distribute its products and services are direct sales methods using various company channels and direct sales to customers using channels of account sales. The methods used by Lenovo are known to be effective, but the company has faced various challenges in the recent past. Discussed below are the supply chain processes used by Lenovo, techniques applied to offer customer value, and supply chain strategies to facilitate supply chain responsiveness.
Lenovo’s Supply Chain Processes
Supply chain management is one of the most important activities carried out by Lenovo. The process involves a diverse range of activities, from tapping and processing raw materials to production and finally delivering the products to the consumers (Rajaguru & Matanda, 2020). In procurement, Lenovo uses integrated logistics services to support business operations right from the first step. This system is often complicated as it involves joining together all the activities performed by the organization. The company’s top leadership is usually entrusted with ensuring that all activities, from procurement to production to logistics, run efficiently. Therefore, Lenovo is different from other related organizations as no departmental executives are responsible for managing different phases of the organization’s supply chain management.
Lenovo is a large multinational company, and therefore it is forced to adopt different techniques when dealing with domestic and global products. Domestic products, services, and materials are sent to various departmental headquarters directly. In contrast, international products are shipped directly from the headquarters in Hong Kong when they are notified of demand in any of their over 60 global branches globally. This latter method has been emphasized by the company’s management, who say they want to transition from procuring to ensure production to procuring to ensure sales. The technique improves the company’s competitive advantage since the company has a reduced inventory days sales ratio and a reduced total asset-to-sales ratio. The resources the company could have used to procure raw materials to produce an inventory will an unfavorable turnover can therefore be channeled to more profitable sources. However, this method reduces the company’s safety stock days, and the company has been criticized for regular outages in the recent past.
Lenovo uses the supply chain council’s SCOR Model to measure its supply chain performance. The company sets up key performance indicators of its supply chain activities, such as the safety stock days, number of outages in a year, inventory day’s ratio, and the percentages of negative feedback from its clients. The five main processes of Lenovo’s supply chain are planning, sourcing, making, delivering, and returning (Bryson, Sundbo, Fuglsang, & Daniels, 2020). The five processes of the SCOR model are usually measured using the Fuzzy Analytical Hierarchy Process (FAHP) to show the supply chain performance.
The first stage of performing the SCOR model in Lenovo and other companies is usually planning. In this stage, the marketing and manufacturing departments of the company analyze the available information and forecast market trends and patterns (Prasetyaningsih, Muhamad, & Amolina, 2020). Planning is usually followed by sourcing, where the employees assigned that role do the searching, negotiating, and evaluating agents. Then the manufacturing of goods is done where Lenovo only manufactures goods in high demand to reduce low inventory turnover. Lenovo products are usually manufactured quickly and then delivered to the relevant suppliers whom the company works with. The last step in Lenovo’s SCOR model is receiving or returning goods, where clients can return defective electronics based on different warranties and conditions.
Lenovo uses an improved form of SCOR called the GreenSCOR. This version starts by researching green supply and choosing the first alternative. The existing SCOR is then modeled and assessed if it is environmentally friendly. If there are environmental concerns, Lenovo takes the necessary steps to correct them from their SCOR. A report about the actions decided and taken is then prepared.
Lenovo uses the following performance attributes when using the SCOR method to assess performance in various supply chain departments. First, the technological company assesses the reliability of its operations, and order fulfillment rates are used as the key performance indicator in this respect. Second, the company analyzes the responsiveness of the orders and the time between a client making an order and delivering the product to them. Another metric that the company is keen to measure is the agility, adaptability, and flexibility of its supply chain processes. Lenovo estimates supply chain operations’ costs based on the company’s total cost before delivering the product to the customers (Rymarczyk, 2022). The company’s supply chain managers are further keen to ensure that assets acquired by the company for logistic operations’ facilitation are well utilized and that there is a favorable return on property plant and equipment, as well as working capital.
S&OP Process Applied to Offer Customer Value: Innovation and Strategy
Sales and operations planning (S&OP) is a system used by the management of most organizations to achieve integration in business administration processes. The technique works by synchronizing all the organization’s functions to offer stress-free control. A well-designed S&OP promotes profitable sales, production volume and capacity, worthy inventory management, and an effective financial plan. Lenovo has a bold S&OP vision of developing world-changing technologies and empowering millions of people across the globe to have access to electronic gadgets. To meet customer demands and offer customer value, Lenovo partnered with Blue Yonder’s Luminate, a renowned partner in improving clients’ supply chains’ efficiency (Rymarczyk, 2022). Through this collaboration, Lenovo has improved its innovation and strategy. The company now aims to manufacture affordable electronic devices with all the innovative measures it has at its disposal. Its design also changed for the better, with Lenovo changing the process of procuring and manufacturing those products needed for sale.
Lenovo has an excellent demand management system for manufacturing products according to their levels of turnover. The Chinese company invests a substantial amount of money and time in calculating the level of demand for its various products. Despite this method increases the company’s research and development costs, it results in an overall development because operational demand management reduces working capital (Rymarczyk, 2022). The company uses a closed-loop system where results from previous demand management techniques are used to make future choices. Lenovo goes beyond the normal scope of using previous operations’ results to manage demand, instead focusing on sales for increased competitiveness.
Supply Chain Management (SCM) operations comprise all the goods and services undertakings from manufacturing to consumers. Lenovo’s SCM processes are integrated into one management team, thus ensuring uniformity in attaining all the set standards. These processes follow an engineering process in most organizations, where results and the highest possible financial returns receive more weight. However, Lenovo exhibits alter SCM standards, making the firm nonconforming (Rymarczyk, 2022). The organization highly values human factors, such as ethics and transparency, as the primary customer value drivers. Therefore, Lenovo’s effective supply chain promises to give the company a significant competitive advantage in the short and long run.
S&OP is an intensive process that keeps changing, thus forcing management teams to continuously align supply chain operations for optimal productivity. Lenovo undertakes a quarterly review of the customer service plans and adopts the necessary changes to promote customer value. Operations re-alignment by the firm gives its top management significant room to try new ventures while granting employees fresh motivation. Accordingly, changing the entity’s mode of operations from stock-based to sales-based proves Lenovo’s ability to reposition itself, thus providing employees with a new zeal that pushes the firm to date. Consequently, the present case justifies operational alignment’s effectiveness in straightening organizations’ strategic processes for supplementary effectiveness.
Strategies Applied to Offer Responsiveness of the Supply Chain
Lenovo exhibits a highly responsive edge-cutting supply chain structure based on the Blue Yonder system. The scheme promotes visibility, sustainability, and purpose-driven strategies, thus creating a transparent end-to-end SCM platform (Rymarczyk, 2022). With highly visible software, clients and employees can monitor their inventory levels and respond promptly. Lenovo collaborates well with all stakeholders, including those supplying raw materials and clients. Effective communication strategies adopted by the corporation significantly eliminate inaccuracies, therefore offering the firm rare responsiveness. Lenovo conducts multiple strategic analyses by testing different levels of outcomes to measure the company’s ability to respond efficiently in various circumstances. Rymarczyk (2022) reiterates that appreciating the lowest possible outcome prepares a company for any challenges regarding supply chain management. Consequently, Lenovo ensures responsiveness by having suppliers read and sign supplier contracts where both flexible and fixed terms are discussed (Liang, 2022). A responsive supply chain ensures that Lenovo stays on course even during unanticipated adversaries.
Evaluating Lenovo’s supply chain management process and strategy reveals several insights about the company. For example, the business operates competitively courtesy of the SCOR model and the management’s proactivity. The corporation’s S&OP processes increase customer value, even though the approach leads to outages sometimes. Furthermore, Lenovo adopts a model of manufacturing products based on sales and demand. The strategy saves Lenovo much money, allowing the firm to realize substantial returns all year round. The company can invest the money saved through reduced inventory days and the working capital balance elsewhere to realize a competitive advantage. Finally, the company implements several measures to facilitate responsiveness and enhance supply chain management.
Bryson, J. R., Sundbo, J., Fuglsang, L., & Daniels, P. (2020). Supply chains and logistics services. Service Management, 203–221. Web.
Liang, Y., Sun, Z., Song, T., Chou, Q., Fan, W., Fan, J., Rui, Y., Zhou, Q, Bai, J., Yang, C., & Bai, P. (2022). Lenovo schedules laptop manufacturing using deep reinforcement learning. Informs Journal on Applied Analytics, 52(1), 56–68. Web.
Prasetyaningsih, E., Muhamad, C. R., & Amolina, S. (2020, April). Assessing of supply chain performance by adopting Supply Chain Operation Reference (SCOR) model. In IOP Conference Series: Materials Science and Engineering (Vol. 830, No. 3, p. 032083). IOP Publishing.
Rajaguru, R., & Matanda, M. J. (2019). Role of compatibility and supply chain process integration in facilitating supply chain capabilities and organizational performance. Supply Chain Management: An International Journal.
Rashidin, M. S., Javed, S., Chen, L., & Jian, W. (2020). Assessing the competitiveness of Chinese multinational enterprises development: Evidence from electronics sector. Sage Open, 10(1), 2158244019898214.
Rymarczyk, J. (2022). Transformation of transnational corporations’ supply chains as a result of the fourth industrial revolution and the COVID-19 pandemic. Sustainability, 14(9), 5518. Web.