Valvoline is one of the top multinationals in the oil industry, dealing with the manufacture and provision of motor oil and automotive lubricant with close to 1000 instant oil change locations and close to 400 service centers. Just like any other multinational, the Chinese firm is undergoing increased supply (SC) chain challenges with respect to creating and keeping more effective and efficient frameworks in its SC department. Both at internal and external organization environments, the firm has repeatedly hosted a number of unpredictable factors arising, deeming the realization of the set goals and objectives within the SC department and the company as a whole. On that note, this paper provides a detailed analysis of Valvoline’s internal and external environments, particularly on its weaknesses and strengths, thereby coming up with suggestions on how to improve the situation.
Valvoline’s top management has adopted some of the best frameworks in designing as well as implementing corporate and business unit strategies that have seen it delivering profitable growth and further enhancing shareholder value. With close to 1000 instant oil change locations and close to 400 service centers, the organization has managed to serve the larger market including upstream, downstream as well service organizations. Valvoline’s management approach with regard to both corporate and business unit strategies has been defined on solid understanding of the client’s business. This includes the organization’s current competitive position and status in this particular industry. Operating in a highly competitive environment, the management has undertaken incisive market assessments with the aim of capitalizing on growth options and the introduction of new technology. However, the organization is still faced with some inefficiencies among other challenges, both in its internal and external operations, as analyzed below:
Internal Organization Environment
From the provided information on logistics cost breakdown, it’s clear that the organization’s production volume vs the logistics costs is skyrocketing. Within a period of a month, the unit cost has risen from 0.27 to 0.52, denoting a 0.25 increment. The firm is experiencing fluctuation in its monthly volume and spending, increase in rental cost and new demands of the clients. All these are rising from internal efficiency in the warehousing activities.
Ineffi ciency, being the major internal weakness in logistics, results from the random product misplacement, unclear pick path, manual order checking and poor analysis of the workflow process (Espinoza, Bond & Kline 9). The organization has failed to come up with a rhyme basing on the placement of its different automotive lubricants. Also, the company has failed to come up with an effective mechanism of identifying the products that have already moved out and those in the bin. As a result, there are increasing instances of time wastage and spending extra money in the process of searching for a product.
The adoption of the manual order checking process has increased the overall cost of warehousing within the organization. The staff within the warehouse and members of the sales team have to constantly recheck on the various orders. Almost a similar scenario is evident during the manual sorting of the received goods, and in some cases, similar items disposed in the same bin due to human errors, hence increasing the overall warehousing costs.
The major internal strengths enjoyed within the warehouse are lean inventory and organized workstations. With a lean inventory, the organization has been able to eliminate some of the safety stocks, hence delivering reduced quantities in a more frequent manner. The organized workstations have seen the organization improving its overall productivity since they can access all the tools and equipment instantly at ease.
- Space Optimization
In order to reduce the inventory and the general logistics costs, the organization should consider maximizing and further optimizing the entire available space within the warehousing. Rather than spending more on expanding the warehouse footprint, it will be wise and more economical to use the vertical space (de Leeuw, Grotenhuis & van Goor 13). This will include installation of taller storage units and the appropriate equipment for keeping and storage.
- Adopt Enabling Environment
Valvoline should adopt a warehouse management system (WMS) or rather an ERP system with a highly effective WMS. This will improve on warehousing efficiency and reducing costs by recommending on the best routes and strategies for picking or putting away the products. The WMS provides an automated pick list, connected with mobile readers and devices which will assist in minimizing mistakes, improving on time management and zero wastage of papers (Kach & Borzabad 19). The barcode will improve on transaction accuracy and reduce the previously witnessed picking errors, hence the reduction in logistics costs.
External Organization Environment
The major external weakness facing Valvoline is the larger traffic volumes causing congestions in China. The growth of traffic volumes and challenges in the region, both on highways and urban roadways, has increasingly challenged freight and delivery services by the company. During the transportation process, the organization is driven by the goal of maintaining highly dependable and reliable schedules, with the opposite emerging to be a reality. This has in turn derailed the supply chains, considering that the company depends on truck transportation.
The big traffic in Chinese roads has seen the organization spending more on transportation, with daily cost implications, both of delay and reliability and adverse effects on the supply chain management. The use of road transport has subjected most of logistics organizations to further spending in assessing opportunities and risks among other returns that come alongside location and decisions on distributions and production. For this reason, the company needs to take note of these perspectives, when analyzing some of the cost impacts that traffic congestion on its supply chain operations.
In order to overcome the above challenges, Valvoline should consider using railway and waterways other than road transport. Some of the important features of the waterways are less maintenance costs, generally cheaper and more appropriate for foreign trade. The adoption of sea transport will see the organization spending less, both in maintenance and overall transportation. It will be relatively cheap for the company to transport the motor oil and automotive lubricant and to foreign countries as well as other cities within China that are far from the main warehouse.
Rail transportation in the other hand, will improve the general reliability of the company to its customers, and suppliers too. Rail transportation is rarely affected by weather conditions as compared to other means like air and road transport, therefore, with this approach, Valvoline will be able to deliver its products to the customers in a timely manner (Taczanowski, 3). This mode of transportation is highly organized as compared to other means. The fixed routes and schedules will increase Valvoline’s efficiency during the logistic operations, hence more increased levels of certainty and uniformity during the supply chain activities.
Warehouse inefficiencies and road transportation have seen Valvoline repeatedly hosting a number of unpredictable factors arising, deeming the realization of the set goals and objectives within the SC department and the company as a whole. It is therefore strongly recommended that the company embark on space optimization and WMS in its warehousing activities. Also, the company should adopt rail and waterways in transporting its products to the various destinations for its customers.
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Espinoza, O. A., Bond, B. H., & Kline, E. (2010). Quality measurement in the wood products supply chain. Forest Products Journal, 60(3), 249-257. Retrieved from https://search.proquest.com/docview/759487476?accountid=45049
Kach, A., & Borzabad, A. F. (2011). Use of RFID technology to overcome inefficiencies in the supply chain: An analysis of renault’s operations in iran. International Journal of Management, 28(4), 365-378. Retrieved from https://search.proquest.com/docview/1008666370?accountid=45049
Taczanowski, J. (2015). The effects of liberalisation of the passenger railway market on the situation of regional rail connections in poland, czech republic, slovakia and austria. Review of Economic Perspectives, 15(3), 249-268. doi:http://dx.doi.org/10.1515/revecp-2015-0019