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Huawei Supply Chain Operations

Paper Type: Free Essay Subject: Business
Wordcount: 3435 words Published: 25th Apr 2019

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1.0 Executive summary

Enterprises in the International business competition has been gradually transferred from product competition to the competition between supply chain management. Supply chain collaborative management with its superior performance is superior to the traditional supply chain management, is widely used in the world. Although multinational enterprise supply chain collaborative management development has just started, but some of the best represented by Huawei multinational enterprises through the implementation of supply chain collaboration management technology, help enterprises to improve supply chain performance, operating costs, control of the invisible to expand the coefficient of supply chain risk to minimize. Multi-nation enterprises in transnational operation, should be combined with their own situation and the international competitiveness of supply chain collaboration management operation mode.

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With the constant progress of science and technology and economic rapid development, all countries in the world of the domestic market gradually integrate with the world market, the formation of global information network and global market and the acceleration of technological change, makes the enterprise external environment has changed significantly. With the whole world as a big stage for resource allocation, the global flow of productive capital and the global trade and financial activities that it drives have become one of the main features of the world economy. Wolfgang, L. (2017) Market competition around new products is becoming increasingly fierce, and enterprises are facing new challenges in transnational operation. Transnational operation of enterprises in order to get the maximum profit by international operations, will use cheap resources of developing countries, the appropriate country into its product line, the result is the globalization of competition. If transnational corporations want to maintain their competitive advantage, they must improve their ability to integrate resources globally through strategic adjustment. As a new management concept and model, Supply Chain Management is increasingly valued by enterprises. Especially for multinational companies, effective Global Supply Chain Management is essential to win this global competition.

A supply chain is a chain or network structure consisting of a member of a supplier, manufacturer, distributor, retailer, customer, etc. of a raw material that connects with upstream and downstream members. Supply chain management is in satisfying the needs of the service level at the same time, through to the whole supply chain system planning, organization, coordination, operation, control and optimization, minimize the system cost, overall efficiency optimization and use of the supply chain from supplier to the end user of an integrated management activities and processes. Supply chain management is extremely rich in the modern science and technology to promote products developed under the condition of the management concept, it involves all aspects of all kinds of enterprises and enterprise management, is a kind of cross-industry management, as a trading partner between enterprises, to maximize the use of pursuing mutual economic and work together.

2.0 Background

Huawei technologies co., LTD., founded in 1988, is a high-tech private enterprise owned by employees. Huawei in the communication network technology and product research, development, production and sales, specifically for telecom operators to provide optical network, fixed network, mobile network and the network in the field of value-added business solutions, is one of the major suppliers of telecom market in China, and has successfully entered the global telecom market. Huawei is the world’s leading information and communications solutions provider. Continuous innovation around customers’ needs and open cooperation with partners have built end-to-end solution advantages in telecommunication network, enterprise network, consumer and cloud computing. They are committed to providing competitive ICT solutions and services to telecom operators, enterprises and consumers, continuously improving customer experience and creating maximum value for customers. At present, Huawei’s products and solutions have been applied in more than 170 countries and regions, serving one-third of the world’s population.(HUAWEI, 2018)

Huawei implements the strategy of global operation. Its products and solutions have been applied to more than 100 countries and 36 operators in the top 50 globally, serving over 1 billion users worldwide. Huawei has been committed to building its own supply chain and winning competitive advantages of fast, high-quality and low-cost supply guarantee. Huawei has built a flat manufacturing organization, effectively and flexibly ensuring the demand for goods in the market and earnestly implementing the ISC reform of the integrated supply chain to ensure the implementation of new processes and systems.

Huawei is aware of the weaknesses in supply chain operations. In fact, it was hard to find a better supply chain operation for Huawei. From 1997 to 2005, Huawei introduced the management mode of IBM comprehensively, which was mainly reflected in two major processes, one of which was integrated supply chain (ISC), it also laid the foundation for the future ten years of Huawei. But the problem is that its supply chain infrastructure is around high-margin, high cost but quick response communication equipment building. In the past ten years, because of the diversification of terminal, chip, telecommunications equipment and enterprise services business, the simple supply chain is difficult to adapt to different business needs, such as low profit, low-cost mobile phone business, as well as a typical manufacturing chip business, does not adapt. The customization to accommodate these new businesses is to patch the supply chain to make the process and system more complex and inefficient. That’s the problem with Huawei’s supply chain. (Hafizah, 2013)

There are three shortcomings in traditional logistics management

(1) Massive inventory

The traditional inventory buffer in the supply chain makes both manufacturers and retailers keep some products in stock, which is the reason for the lack of goods in other parts of the supply chain. In the supply chain, if the storage and inventory points of various enterprises are not consistent, the inventory problem will be enlarged. Because each participant has inventory in the supply chain, coupled with the inventory management of supply chain each link of the error and influence each other, when the goods arrived at the last link of supply chain, the inventory level is almost no relationship between the goods and the actual demand.

(2) Slow Response

The loose distribution channels in the traditional market are inherent. Due to the disjointed reordering process in the supply chain, it is impossible to meet the sales demand of hot products.

(3) Slow business processing

Traditional way of dealing with logistics management product of a single, if the enterprise of volatile and non-volatile products inventory levels are similar, and they are distributed in the same kind of logistics network, will cause the goods flow and circulation is slow.

3.0 Integrated Supply Chain Management

The ISC (Integrated Supply Chain) process is tailor-made for Huawei by IBM. ISC asked to every department link involved the operation of the company, as a part of the supply chain, internal departments and external suppliers all need to effective management of each departments in order to improve the supply chain operation efficiency and economic benefits. (Neil, 2017) ISC (Integrated Supply Chain, Supply Chain management is based on the principle of Huawei in the Supply Chain information flow, logistics and cash flow to carry on the design, planning and control, to ensure implementation of the Supply Chain in two key goals: to improve customer satisfaction, reduce the total cost of the Supply Chain. ISC is not only a material supply chain, but integrating financial, information and the management pattern, CEO Ren Zhengfei said: “once the integrated supply chain problem solve, the company’s all management problem is basically solved.”

In Huawei’s ISC reform, the internal departments such as purchasing, inventory, transportation and order fulfillment were completed first, then ERP system was constructed and optimized, the order of e-commerce was developed finally. From the difficulty of the change, the ISC reforming of Huawei’s challenge mainly based on three reasons:

1) ISC change coverage is wider, it includes the company’s internal sales, procurement, manufacturing, logistics and customer service, and other business system, also including external customers and suppliers. Therefore, problems in any link will affect the improvement of the operation performance of the whole ISC chain.

2) To a considerable extent, Huawei’s supply chain management relies on the implementation and improvement of enterprise ERP and MRPII.

3) Supply chain management models in different market environments are quite different, especially IBM is implementing its own ISC project. Huawei has no ready-made template for learning, so it can only explore and carry out projects from the reality of itself and its customers under the guidance of the concept of supply chain.

3.1 Supply & Inventory

Before Huawei restructured its supply chain, its management level was far behind that of other company in the industry. Huawei’s on-time delivery rate for orders is only 50 per cent, compared with an average of 94 per cent for other international telecoms equipment manufacturers. Huawei’s inventory turnover is only 3.6 times a year, compared with the international average of 9.4 times a year. Huawei’s order fulfillment cycle is 20 to 25 days, and the average level of international telecom equipment manufacturers is about 10 days. The purpose of reorganizing the supply chain is to design and build a customer-centric and low-cost integrated supply chain, laying a good foundation for Huawei to become a world-class enterprise at an early date.

After the reorganization of the supply chain, the timely delivery rate of Huawei increased year by year, nearly 40% higher than that of 2001, and the inventory turnover rate nearly doubled. The new warehouse use only 13,000 square meters to store the same amount of goods as before, saving half of the storage space. In the case of a large increase in production, the total operating cost of the warehouse remains unchanged. In the future development, Huawei will save more operating costs. Collaborative supply chain management has increased inventory and order accuracy from 96% to 99.5%. In the past, there was a delay of 2 days in the flow of information in the manual system. When new goods entered, it took two days for the detailed information of goods to be transmitted to the ERP system. Now, by using wireless data communication, new goods can be used in less than one day.  (HUAWEI, 2014)

3.2 Supplier Management

Huawei’s procurement department has set up a materials expert team called CEG (Commodity Expert Groups), each CEG is in charge of purchasing a certain type of material to satisfy the needs of the business department and regional markets. The purpose of sourcing by material group is to leverage Huawei’s procurement leverage around the world. Each CEG is a cross-departmental team to improve purchasing efficiency through unified material group strategy, centralized control supplier management and contract management. CEG must fully understand the capabilities, requirements and needs of Huawei and its suppliers.

Huawei has set up a complete supplier selection and fair value judgment process to ensure that Huawei has selected the supplier that most is in line with Huawei’s interests, and that the procurement is the most fair value, while ensuring that Huawei equally wins the opportunity to win Huawei’s business to all suppliers. The basic principles of this process are fairness, openness and integrity, and are guaranteed by the following mechanisms:

  1. Centralized procurement control
  2. Supplier selection team
  3. Supplier evaluation office

Supplier performance will be assessed in terms of technology, quality, responsiveness, delivery cost and contract performance. The purpose of the assessment process is to provide both parties with open channels of communication to improve their relationship. At the same time, the supplier is encouraged to provide feedback, standing in customer’s point of view how they evaluate Huawei, the evaluation information will be used to improve each other’s business relationship, and improve Huawei internal business operations.

Huawei believes that only good communication can foster good cooperation. Huawei provides diversified communication channels for open dialogue and discussion between Huawei and the supplier.

4.0 Collaborative supply chain management – Four R

With the advent of the era of supply chain competition, there are many theories to guide managers. In summary, it is “4R” — Responsiveness, Reliability, Resilience and Relationships. (Nik, 2015)

Quick response: in this world of “just-in-time” requirements, it is an important capability for an enterprise to respond to customer demands with a shorter time window. In order for a business to produce on demand rather than on forecast, and to trade on agility. To do this, it will take more than just the company itself, but the entire supply chain.

Reliability: one of the key points to improve the reliability of logistics is to improve the visibility of supply chain. Try to make the supply chain more open and visible from end to end.

Resilience: one of the hallmarks of today’s market is volatility. The business and economic environment is uncertain and discontinuous. As a result, supply chains are prone to disruption and business continuity is threatened. In the past, supply chains were designed primarily to minimize costs or optimize services, but now they are “resilient”. Resilience has the ability to respond better to uncertain environments. Flexible supply chains have many characteristics, the most important of which is to pay more attention to where they are most vulnerable.

Relationship: the competitive advantage can come from a win-win model, which is to establish a good long-term relationship with suppliers. The more interdependent they are, the less likely competitors are to break their chains.

The four theories of rapid response, reliability, flexibility and interrelationship provide the foundation for successful logistics management and supply chain management.

5.0 Recommendation

In the rapid change of the global economy, the widespread popularity of network communication technology, and worldwide competition intensifying, supply chain collaborative management will present a globalization, multidimensional network, intelligent and agile development trend. In business, the supply chain can make more accurate, faster and better response in the process of meeting customers’ demand of instant change. In management, the operation of the supply chain can be more visible and self-adjusting. In information transmission, it can be more accurate, more real-time, convenient managers across the enterprise works more deeply, which helps to boost enterprise in the consumer brand recognition and reputation. With the support of information technology, the collaborative technologies to realize the synchronous operation of supply chain mainly include multi-agent technology, workflow management technology and application software technology. Workflow management technology is the core technology to realize enterprise business process modeling, simulation optimization analysis, process management and integration, and finally realize business process automation. As to support the application of collaborative software technology, such as enterprise resource planning (ERP), supplier relationship management (SRM), customer relationship management (CRM) system for enterprises to choose the installation of the application software. The software is the basis and the key to the implementation of supply chain collaborative. At present, many software companies are committed to the research and development of supply chain collaborative technology, and have made great progress.

6.0 References

  1. Wolfgang, L. (2017). The global supply chain: how technology and circular thinking transform our future. Retrieved from: https://link-springer-com.ezproxy.aut.ac.nz/content/pdf/10.1007%2F978-3-319-51115-3.pdf
  2. HUAWEI. (2018). Corporate Information. Retrieved from Huawei: http://www.huawei.com/en/about-huawei/corporate-information
  3. Hafizah, O. (2013). Huawei calls for all ICT companies to join its global supply chain. Retrieved from: https://www.arnnet.com.au/article/522424/huawei_calls_all_ict_companies_join_its_global_supply_chain/
  4. Joy, A. (2014). The Importance Of Supply Chain Collaboration. Retrieved from: http://www.supplytechnologies.com/blog/the-importance-of-supply-chain-collaboration
  5. Neil, K. (2017). What Is Integrated Supply Chain Management? Retrieved from: https://bizfluent.com/about-6690370-integrated-supply-chain-management-.html
  6. HUAWEI. (2014). User-centric operational management. Retrieved from: http://www.huawei.com/en/about-huawei/publications/communicate/72/HW_327218
  7. Nik, D. (2015). Managing the ‘4Rs’. Retrieved from: https://prezi.com/q1tpvivopnym/managing-the-4rs/


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