The impact of sustainable supplier selection on the supply chain performance of Bin Khalf Group

Home Blog Uncategorized The impact of sustainable supplier selection on the supply chain performance of Bin Khalf Group

The impact of sustainable supplier selection on the supply chain performance of Bin Khalf Group

0.1 Abstract

The purpose of this project is to select a service company that is operating in UAE. We have selected Maintenance Company in UAE for this purpose and we aimed to discover the challenges from the implementation of sustainability on this firm which is the main aim of this project.

The main aim/purpose of this project is to discover the challenges facing a firm operation in the UAE market – Al Mariah United Group – during the implementation of a sustainability plan.

We focused in determining where the company stands the best practices in management & operations and whether it applies ISO 9001 or ISO 14001. Moreover, we sensibly observed at the sustainability & environmental issues and whether the company apply the safety measurements in its places and whether it obstructed the security and safety issues in its policies and processes.

We will clarify the operational challenges in the UAE market and how to keep sustainability and balance between the profitability issues, social responsibilities and green practices. Finally, we will confer the obstacle and a setback that may face the service company in implementing their sustainable polices and how they might ease them.

Our main purpose is to observe whether the Al Mariah United Group company applies the sustainability in their practices and implementing the quality in their services and management, however there is still much to be done and a lot of efforts to be exerted to ease the continuing risks on operational and financial phases of the company.

We will be also propping for operational challenges in the area of changing and how to keep sustainability and balance between the profitability issues and social responsibilities and green practices.

Finally, we will discuss the difficulties that may face the company in implementing their sustainable polices and how they could moderate them.

After conducting the survey, figures have been calculated through graphs and ANOVAs data analysis representing and concluding the Al Mariah United Group company applies the sustainability in their practices and implementing the quality in their services

0.2 Introduction

The central aim of any business is to increase the profit as much as possible. We have chosen the Al Mariah United Group which is a professional services organization committed to serve the society by providing a competitive price & implied needs of the customer. Their goal is to go beyond customer expectations through improving processes and give the best services by promotion of Professionalism, Creativity, Growth, Honesty and Integrity.

According to many changes and competitions that any business could face this would made a challenge for any company, for that we will discover the challenges that this group face.

Some challenges that faced by the Al Mariah United Group

Understanding sustainability dimensions and focusing on environmental and safety aspects to ensure the quality of the services.

Focusing on the training and well equipped workers

Cost change is another challenge that could face to the group. One of the most important reasons of the cost change/increase is the price increase of the equipment prices, especially it is a fixed cost which the company cannot control or change and affects the price of the products. The price changes in a competitive market really affects the sales of any company.

Having information sharing and concentrating on the technical side

Customer satisfaction

Concerning of the profit.

All of what we have mentioned above are challenges facing Al Mariah United Group, not because they not applying them but it’s in order to keep providing an improving sustainability and the quality of the organization.

0.3 Brief History of Bin Khalf Group (under Al Mariah United Group)

Al Mariah United Group are professional services organization dedicated to excellence and committed to serve the society by providing a competitive price, bearing in mind stated & implied needs of the customer. Company’s goal is to exceed customer expectations through continually improving processes and by promotion of Professionalism, Creativity, Growth, Honesty and Integrity.

The highly qualified, experienced and professional multi-national team now exceeds (1500) – and this is expected to continue to grow in line with planned expansion. Established in Dubai in 1970, Al Mariah Engineering has grown into one of the largest companies in the UAE, undertaking major projects throughout the UAE. These include high-rise structures, mixed use developments, Catering Units, Entertainment Facilities, Retail Facilities, Buildings, Malls, Construction Services, Building Maintenance Services, Biomedical & Water Treatment supplies and service, Transportation Services, Manpower Supply and Human Resource Services in both on-shore and off-shore engineering projects.

They are committed to the quality services to the benefit of their customer, nation and society through professionalism, ethics, quality and customer care.

3.1 Services

Al Mariah Electro Mechanical Services Bin Khalaf Group

Al Mariah General Transport Test Catering & Camp Services

Al Mariah Mall

Test Engineering General Maintenance

Al Mariah Travels and Tourism

Al Mariah Human Resource Al Dhafra Fire Equipment Al Mariah Haj and Umra

Wuzhoulong Buses Al Mariah Cleaning Services 3.2 Water Treatment Division

Bin Khalaf Group in Abu Dhabi which comprises of Electro-Mechanical Division , Air conditioning Division and, Bio Medical Division which are already operational with government and semi-government contracts. The Organization imports the equipments, components and chemicals from reputed suppliers such as Aqua purification – USA for Filters, Filter Media Cartridge, Cartridges, Accessories & Clack Corporation USA. Control values of different types. The manufacturing team is responsible in all aspects such as designing, supplying , installing and also carrying annual maintenance of all types of Filtration Systems, RO Systems, Swimming Pools, supply of swimming pool equipments, Softening Systems, Deionizer Systems, Fountains, Ultraviolet Sterilizer Systems, Chemical Dosing Systems, Water Treatment Chemicals for Boilers, Chillers, Cooling towers and would be expanding our activities further.

3.3 Company’s Clients

Abu Dhabi Health Services Co. (SEHA)

General Authority for Health Services

Abu Dhabi Municipality

Abu Dhabi Chamber of Commerce and Industry

Abu Dhabi Company of Onshore Oil Operations

3.4 Why Al Mariah united group – ( Bin Khalf group)?

As per recommendation of Abu Dhabi Food Control Authority – Procurements & Contract Division, Bin Khalf group is considered as one of the competent supplier who was evaluated based on Supplier Prequalification criteria. These criteria includes Experience , Facilities , capabilities (Agencies , stocking & sourcing ) , Delivery , Organization and manpower , Quality Management system requirements and financial status of the supplier .

0.4 Methodology:

Quantitative method is used in this project, 15 questionnaires are used to determine the level of five variables and two constant elements in the evaluation. The variables are Environmental Management, Social Criteria, Green Product, Technology standards and risk management.

The constant elements are two economics performance and competitiveness. The expected results of questionnaire will focused on the relationship between the responses of both top management and middle management by using the statistical analysis ANOVA.

The questionnaires were distributed to the staff of Bin khalf group by e-mail . Water Treatment Division Manager agreed to cooperate and distribute the questionnaire to their suppliers in order to obtain the required number of responses. The items used were based on Likert scale to facilitate the data analysis, scale of five response status starting from strongly disagree 1 to strongly agree 5. All questions featured were guided by project objectives which consist of sustainability elements. The participants provided general information like name of organization, names, designations, title and the type of organization (Service, Manufacturing and construction). The project group used these contact details as references for data collection and determines the responses of the top and the middle management. This pilot project was conducted to 15 staff at Bin Khalf group and their suppliers.

0.5 Literature review

Supplier selection is a critical part of supplier management. According to Moser, (2006) it is important to select specific suppliers for the basic material needed for eh project. An agreement can be struck with such suppliers to supply material either to supply the material on short term of long term basis. Be deciding a supplier(s) it is necessary to conduct supplier analysis and take those who score highly. The analysis includes examination of critical components of suppliers. On a scale of 1 to 10, Pooler et al (2004) rate the components as follows:

Quality of product 9.7

The intensive competition in the global market has forced Bin Khalf Group And other businesses to focus on offering quality products and services. In the recent years, firms which have managed to deliver quality goods and services have prospered. Primarily, Bin Khalf Group can achieve this objective through quality workforce. According to Fishman (2006), employees are the building blocks of any business entity hence firms ought to ensure that it embraces the appropriate employment practices. It can therefore be noted that Bin Khalf Group has imporved oits serves to compete other incoming and existing maintenance companies.

Competitive prices

In the marketing mix, price is one of the core elements, it is often viewed as the most difficult to implement effectively. This is mainly because the price a company pays for its services and products has a direct influence on the profits and bottom line revenue. However, pricing is also an essential element of positioning a product in a market segment and strategic issue. In this understanding companies have to take into consideration how their implemented prices are affected or affect other elements in the marketing mix, their marketing strategy, and environmental factors. In addition, Bin Khalf Group has concentrated on detemrining how the enacted prices will affect how the variable and fixed costs will change with time, how it will influence demand and the company’s overall strategic goal. In this manner the pricing issue affects the business regardless if it is maximized in terms of revenue, profit, or growth, only after meeting these terms can a structure and pricing method truly be determined and implemented effectively.

Delivery dependability 9.0

In any country particularly those with a large geographical spread the process of transforming raw material to production and delivery products for consumption is interspaced by both time and distance. Bin Khalf Group has overcoming time and distance constraints in moving goods or delivering services in an effective and timely manner is an onerous task and warrants meticulous planning. Some of the comnaies cannot reach Bin Khalf Group for services and so such markets go untapped.

Total cost reduction assistance

It is undeniable that lowering production cost plays a great role in the ceaseless existence of Bin Khalf Group as well as ensuring profit maximization. Cost minimization certainly enhances the smooth operation of the organization and reduces raw materials wastage. Modern efficient and effective production processes should oftentimes be geared towards organizational goal achievement. Inventories take a greater component in the statement of financial position hence deemed fundamental in financial perspective. Manufacturing a suitable quality and quantity at appropriate time that satisfies customer needs is a fitting inventory production. Satisfying customer needs is achieved by meticulously designing products. (Babatunde & Arogundad, 2011).

In Bin Khalf Group, production should always be based on the best optimal way that emphasizes on customer value maximization. More importantly, proper controls on the production process and insistent of manufacturing only what is deemed necessary overwhelmingly reduces the cost of production. Natural resources and labor costs are the major expenses incurred in creating final product. The optimum ordering levels should be maintained including the Economic Order Quantity (EOQ) to enable smooth flow of production process. The natural resources, work in progress, and final goods must be honestly accounted for. Integration of organizational departments plays a pivotal role in minimizing cost of production (Babatunde & Arogundad, 2011).

New product and R&D ideas 6.2

A successful idea generation process is part of searching for an idea that is superior and which has not been discovered. There are various methods that can be used in generating an idea for the new products. Ideas for the new product can be got from research using various aspects such as SWOT analysis, the trends of market and consumers, the competitors of the product, trade shows and so on. The basic approach is to ensure that full creativity is harnessed when developing the new idea. Open innovation will also be used in idea development where research will be conducted on the product. This research should be conducted in a speedy so that costs can be cut and at the same time generate new ideas that are innovative. Input can be got from internal sources like strategic planning and external sources like market information and customers (Boundless, 2013).

Financial strength

Bin Khalf Group should ensure that the financial state of the company gets better. This can be done by ensuring that the employees are not hired on a contract basis (Delong, 2005). This will allow for flexibility in labour during trying times in the business cycle. There should also be an in house training to all employees on how to ensure quality services are offered. This increases efficiency. Contract also limit opportunities that may arise in between the contracts, this makes the firm to lose out on more opportunities.

Mergers require a higher liquidity asset ratio of the firm; Bin Khalf Group can achieve this by increasing the price of the tickets to increase profits and investable income. The higher the profits, the better the financial status of the company (Gaughan, 2005). The company should ensure that the prominent employees that are known to the clients are retained; this will ensure stability and consistency in the management. An increase in the profits should also be not too high as it will scare away clients and potential customers, so just a slight increase can make all the difference.

The major weakness is financial crisis, this is because the firm has currently a debt of $450,000, this means that for last several financial year there has been problems in financial budgeting. The asset liquidity ratio is also very low because the company has most of its assets tied up in productions areas (Delong, 2005). This brings in the issue of repayment of the debt by both firms after the merger. The other weakness is that there are different interests in the leadership. Increase in conflicts creates an unstable environment for commercial activities. The leaders do not seem to agree on most issue and it has led to lack of decisive decision making and unity.

Others 2.0

Using an appropriate supplier management system, the Purchasing and supply management team can compare the score of all probable supplier based on the project preferences.

Negotiation is a crucial process of communication between to parties regarding terms of engagement and so on. The best strategy for negotiation price is bargaining. Before embarking on bargaining the best price, the purchases team should first compare prices to determine the highest price and the lowest price in the market. After that, aim at buying materials at a lower price and contact a supplier with the chosen price. The team should not take “NO” for an answer but should be ready to walk away when it fails to get a fair price. The team should counter all the reason a supplier gives for not being able to lower prices. Just be because a supplier reject the initial offer, it does not mean that they can not reduce the prices. If the supplier, however, keeps the price high, the team should move on and try another supplier, unless they must, buy from the first supplier. The team should also negotiate for price reductions on subsequent purchases to ensure they get a fair and consistent price. Some suppliers may be reluctant to reduce price, but may willing lower them on subsequent purchases. The supply and management team can also use bidding. The use of bids allows suppliers to offer price and the team take the supplier who offer the best price, service package and quality.

0.6 The impact of supplier selection on the supply chain management

When organizations decide to focus on their core a competency, most of their attention gets focused on are that generate a competitive advantages over competitors. The organizations focus on what directly serves their customers. As a result, they start to buy services that were initially provided internally by their employees. This is outsources. Costs are critical when outsource and the firm must consider whether it is more effective to outsource a service to develop the service internally. The cost analysis of these two alternatives is critical.

According to Pooler (2004) outsourcing can yield huge savings through both employment and benefit costs reduction, and economies of scale. Companies give their permanent employees almost equal benefits. Getting an outside provide reduces the benefits cost a company can incur, and also the outsourced service is not permanent thus the company only pays when using it. In this case, the only actual labor need is paid for when a company purchases a service. This generates great flexibility during low and high demand periods and minimizes service cost. The fact that suppliers or service provider is likely to be a specialist in a specific field increases the efficiency with which a company can improve it performance through outsourcing.

Outsourcing is on the increase. Many firms and companies are adopting it due to its cost efficiency. Outsourcing is expanding since most companies are assigning labor intensive task to service providers and concentrating on their main line of operations. For instance, most companies are increasingly outsourcing tasks such as creation of software codes in India. This trend is not likely to change since companies continue to minimize cost through seeking inexpensive material and labor and preferable utilize them at the source to minimize cots of transportation.

0.7 Benchmark organizations in purchasing and supply management

There are several companies and organization that are exemplary in purchasing and supply management. Toyota identified suppliers and developed long term relationships with suppliers. After identifying suppliers, the company focused on supplier development. This enhanced supplier competences and performance. The main competence of this approach are the ability to manage business with individual suppliers, ability to evaluate and influence the performance of suppliers, involvement of suppliers in product design, recruitment of highly skilled personnel , development of personnel to have a thorough knowledge of suppliers and facilitation of dialogue with suppliers. Toyota also employed total quality management and a lean system of supply chain. The balance and efficiency was achieve through realizing operational efficiency, ensuring steady movement through the supply chain, managing inconsistencies to minimize costs and continuously improve quality, and ensuring transparency and continuous learning.

Tesco too, having learnt from Toyota came up with an impressive supply chain management approach (Jones &Cheshunt, 2002). The retail store introduced POS scanning, centralized distribution, centralized automated ordering automated control of warehouses and EDI with its major suppliers. This increased its efficiency and capacity. According to Jones &Cheshunt (2002) Tesco borrowed the following Toyota values:

Identification of what the customers want

Differentiation between action the bright about value and those that only increase costs

Align value creation steps to ensure product movement is uninterrupted

Only transported what is needed so that nothing stays on the shelves from long and gets spoiled

Consistently reconfigure value stream to eliminate interruptions and increase responsiveness

Tesco mapped its traditional value streams, developed new value streams that flow and forged close relationships with suppliers.

0.8 Analysis of Variance (ANOVA)

ANOVA is statistical method and there are many reasons to doing this method to show us where is the different between group or variables.

In our group project we tried several times to find the p- value less than (.05) to know where is the variation in the survey in order to decide the different responses between the management levels , as table (1) shows the p-value of question 25 in the competitiveness

Management Level: Middle Management = 1 Top Management = 2 Number of Employees: Less than 500 = 1 Between 500 and 1000 = 2 More than 1000 = 3

Question Response: Q25: How sustainable supplier selection practices significantly increase Efficiency?

Anova analysis of : Is the response to question 25 affected by management level

Table (1)

ANOVAs: Single Factor

SUMMARY

Groups Count Sum Average Variance

Column 1 8 25 3.125 2.410714

Column 2 7 16 2.285714 0.571429

ANOVA

Source of Variation SS df MS F P-value F crit

Between Groups 2.6298 1 2.629762 1.683788 0.216976 4.667193

Within Groups 20.304 13 1.561813

Total 22.933 14

Table (2)

After implementing the data analysis using Anova single factor as shows in table (2) on the question of how sustainable supplier selection practices significantly increase Efficiency through different channels and wither responses affected by management level, we have concluded that since p-value (0.2) >0.05 and F(1.6)<F crit (4.6), the responses are not significantly different. That means management level does not significantly impact the response to question 25.

0.9 The Analysis of Survey data

To measure the impact of sustainable supplier selection on the performance of the supply chain in Bin-Khalaf group. A survey has been distributed to a total of 15 managers from both top management and middle management levels. The objective of the questionnaire is to gather the responses toward the following seven components:

Environmental management (4 questions)

Social criteria (3 questions)

Green product (3 questions)

Technology standards (3 questions)

Risk management (2 questions)

Economic performance (3 questions)

Competitiveness (4 questions)

The first 5 components are about the suppliers; however, the remaining 2 are focused on the performance of the Bin-Khalaf supply chain. The below tables show the results that represent each component of the seven listed criteria.

Table (3) shows the results of the supplier’s variable components, as there are significant opinion differences between both the middle & top managements, but they share the disagreements against each component.

Table (3)

In the other hand , table (4) below states a high variation in the economic performance. However, in the competitiveness the results are almost the same and those components concentrated on performance of the company.

Table (4)

The descriptive statistics analysis was conducted in this project to analyze the results for better understanding of the distribution, central tendency and the dispersion.

9.1 Environmental Management

Chart (A)

In this component the management shows how much they concern about all pollution controls system, environmental management system, and resource consumption system for all suppliers.

Chart (A) shows the different management’s responses as follows:

The middle management level shows higher (91%) than the top management that shows (61%) with the belief that the company selects suppliers who implement the environmental management.

The neutral percentage shows that the top management is ( 39% )and the middle managers are( 9%.) We can also assume that behind the existing differences in the company could be because of the low focus on production.

Both level of the management have (0%) in disagree Colum that means the company dealing with selected suppliers with high stander of environment management

9.2 Social Criteria

Chart (B)

Chart (B) shows the result of the social criteria, it represents employment practices and local communities influence of suppliers. A considerable number of middle management who believes that the suppliers implement the social criteria (67%) and the top management shows (33%.). also we noticed that Bin Khalf group is considering the social side which to build a strong reputation as shown on the chart above (0%).

9.3 Green Product

Chart ( C )

The green product considers recycling policy, green packaging and the ability to alter process and product of supplier for reducing the impact on natural resources. Chart ( C ) shows the top management has a high agreed responses in supplier sustainability in the green product component, which is realistic in Bin-Khalaf as air condition service Company and its part of social and environmental protection. As Bin- Khalaf group develop a long term strategy to increase the sustainability of the green product

9.4 Technology Standard

Chart (D)

In this component the majority of the middle management believe on technology standard with percent’s of (92%) and the top management represent (71%). The technology reflects the supplier’s capability of R&D, level of technology and capability of design a new model. Bin-Khalaf group try to increase the quality of the product and reduce lean time to increase the profit with highest stander as shown in chart ( D).

9.5 Risk Management

Chart ( E )

In this section, the survey illustrates positive results, and no disagreement results against any of the questions, Chart (E).

It shows very high percentage in both middle and top managements with (100% ) and (86% ) respectively. It is known that the UAE is considering the safety and standards requirements to provide safe working environment and it is compulsory for the companies to have quality & safety standards and meeting the local regulations. The labor rights also implemented in the UAE to ensure the occupational health and safety of labors in open and close working environment and reduce the number of the accidents in the work.

9.6 Economic Performance

Chart ( F )

Sustainability of suppliers plays a big role in improving the economic performance for any company. Economic performance in the survey which represents significant increase in all sales, capital investments, decrease operating expenditures and in the new market opportunities. The Chart ( F ) shows that the top management less agree than the suppliers and that can affect the economic performance of the company, but the middle management is high agree, But in the neutral the top management shows higher than middle management.

9.7 Competitiveness

Chart (G)

Chart ( G ) illustrates that 97% of the middle management and 93% of the top management agreed that sustainable supplier improve the competitiveness to increase customer satisfaction , increase efficiency and to improve the quality of the services.

0.10 Summary of descriptive analysis:

The middle management represents high percentage in the following four components (Economic performance, technology standard, social criteria and environmental management). They also agreed that the selection of sustainable supplier selection impact on the performance of the supply chain.

The top management shows a high percentage (in the neural level) in the following six components (Economic performance, technology standard, social criteria, competitiveness, risk management and environmental management).

In the competitiveness, risk management and green product the result shows almost equal in both managements level.

The discrepancy between the middle and top management in some components maybe refer to:

The high focus from the middle management of the quality of the suppliers.

The survey was not limited to one supplier.

Lack of knowledge from the top managers about the company standards of choosing a supplier (They could be new joiners to the company and are not fully aware of the company’s policy)

However both managements agreed on green product, risk management of suppliers affect the supply chain management; therefore, the competitiveness is increasing.

0.11 Conclusion

Purchasing and supply management are important factors in the success of any business or project. They involve a number of activities such as inventory management, negotiating with suppliers and manufactures. Due to the critical nature of purchasing and supply mana

Academic Research Pro