Harvard Case - Sika: Optimizing The APAC Epoxy Flooring Supply Chain
"Sika: Optimizing The APAC Epoxy Flooring Supply Chain" Harvard business case study is written by Singfat Chu, Bruno Oehy. It deals with the challenges in the field of International Business. The case study is 5 page(s) long and it was first published on : Mar 29, 2018
At Fern Fort University, we recommend Sika implement a comprehensive strategy to optimize its APAC epoxy flooring supply chain, focusing on building a robust, localized network that leverages technology, fosters strategic partnerships, and prioritizes sustainability. This strategy will enhance Sika's competitive edge, accelerate growth, and solidify its position as a leading player in the region's rapidly expanding construction market.
2. Background
Sika, a global leader in specialty chemicals, faces challenges in optimizing its epoxy flooring supply chain in the Asia Pacific (APAC) region. The case study highlights the company's rapid expansion in emerging markets, driven by strong demand for construction materials. However, Sika's current supply chain, reliant on centralized manufacturing and distribution, struggles to meet the increasing demand and faces challenges in managing rising costs, lead times, and environmental concerns.
The key protagonists in this case are:
- Sika's APAC management team: Responsible for navigating the complex and dynamic APAC market, balancing growth ambitions with operational efficiency.
- Sika's global headquarters: Providing strategic direction and resources, but also facing pressure to ensure consistent performance across diverse markets.
- Sika's customers: Demanding faster delivery, lower costs, and environmentally friendly solutions, driving the need for supply chain optimization.
3. Analysis of the Case Study
To analyze Sika's situation, we can utilize the Porter's Five Forces framework to understand the competitive landscape and the Value Chain Analysis to identify key areas for improvement in its supply chain.
Porter's Five Forces:
- Threat of New Entrants: High due to the fragmented nature of the APAC construction market and the ease of entry for new players.
- Bargaining Power of Buyers: Moderate, as customers have multiple options but value Sika's brand and product quality.
- Bargaining Power of Suppliers: Moderate, with raw material costs fluctuating, but Sika can leverage its scale to negotiate favorable terms.
- Threat of Substitutes: Moderate, as alternative flooring materials exist, but Sika's epoxy flooring offers unique advantages in durability and performance.
- Competitive Rivalry: High, with numerous local and international players vying for market share.
Value Chain Analysis:
- Inbound Logistics: Sika faces challenges in sourcing raw materials efficiently and managing transportation costs across diverse locations.
- Operations: Centralized manufacturing leads to longer lead times and higher costs, particularly in emerging markets with limited infrastructure.
- Outbound Logistics: Distribution networks are not optimized for rapid delivery and require improvement to address customer needs.
- Marketing and Sales: Sika needs to strengthen its brand presence and tailor marketing efforts to specific market segments.
- Service: Sika needs to enhance its service offerings, including technical support and after-sales service, to build customer loyalty.
4. Recommendations
Sika should implement the following recommendations to optimize its APAC epoxy flooring supply chain:
1. Regionalization and Localization:
- Establish regional manufacturing hubs: Invest in building or acquiring manufacturing facilities in key APAC markets, reducing lead times and transportation costs.
- Develop localized product offerings: Tailor product formulations and packaging to meet specific market needs and regulations, enhancing customer satisfaction.
- Build local partnerships: Collaborate with regional distributors, contractors, and suppliers to strengthen market access and build local expertise.
2. Technology-Driven Efficiency:
- Implement advanced planning and scheduling systems: Utilize software solutions to optimize production planning, inventory management, and logistics.
- Adopt digital supply chain platforms: Leverage technology to track materials, improve visibility, and facilitate real-time communication across the supply chain.
- Invest in automation and robotics: Explore automation solutions to improve efficiency, reduce manual labor costs, and enhance production quality.
3. Sustainability and Environmental Responsibility:
- Develop eco-friendly product formulations: Invest in research and development to create sustainable epoxy flooring solutions with reduced environmental impact.
- Implement green manufacturing practices: Adopt energy-efficient technologies, reduce waste generation, and promote responsible waste management.
- Partner with suppliers committed to sustainability: Collaborate with suppliers who share Sika's commitment to environmental responsibility.
4. Strategic Alliances and Acquisitions:
- Form strategic alliances with local construction companies: Partner with leading construction firms to gain access to new projects and expand market reach.
- Consider selective acquisitions: Evaluate opportunities to acquire local manufacturers or distributors to accelerate market penetration and gain access to valuable assets.
5. Enhanced Customer Service:
- Invest in customer relationship management (CRM) systems: Utilize technology to track customer interactions, personalize communication, and improve service responsiveness.
- Develop dedicated customer support teams: Provide technical support, training, and after-sales service to build customer loyalty and address concerns.
- Offer value-added services: Expand service offerings to include customized solutions, project management support, and technical expertise.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Sika's current situation, the competitive landscape, and the evolving needs of the APAC market. They consider the following factors:
- Core competencies and consistency with mission: The recommendations align with Sika's core competencies in manufacturing and distribution, while supporting its mission to provide innovative and sustainable solutions.
- External customers and internal clients: The recommendations address customer demands for faster delivery, lower costs, and sustainable solutions, while also improving internal efficiency and profitability.
- Competitors: The recommendations aim to differentiate Sika from competitors by offering a more localized and responsive supply chain, leveraging technology, and prioritizing sustainability.
- Attractiveness ' quantitative measures: The recommendations are expected to generate significant returns on investment through reduced costs, improved efficiency, and increased market share.
6. Conclusion
By implementing these recommendations, Sika can optimize its APAC epoxy flooring supply chain, enhancing its competitiveness, accelerating growth, and solidifying its position as a leading player in the region's construction market. This strategy will enable Sika to effectively navigate the challenges of a dynamic and demanding market, while also contributing to sustainable development and building a stronger future for the company.
7. Discussion
Alternatives not selected:
- Maintaining the current centralized model: This option would be less responsive to the market and would likely lead to further cost increases and customer dissatisfaction.
- Outsourcing production entirely: This could compromise quality control and brand reputation, and may not be feasible in all markets due to regulatory and logistical challenges.
Risks and key assumptions:
- Implementation challenges: Successfully implementing these recommendations requires strong leadership, effective communication, and a commitment to change management.
- Economic fluctuations: The APAC market is subject to economic cycles, which could impact demand and profitability.
- Geopolitical risks: Political instability and trade tensions could disrupt supply chains and impact business operations.
8. Next Steps
Sika should establish a dedicated project team to oversee the implementation of these recommendations. A clear timeline with key milestones should be developed, including:
- Year 1: Conduct a detailed feasibility study, identify potential manufacturing locations, and establish regional partnerships.
- Year 2: Begin construction or acquisition of regional facilities, implement technology solutions, and develop localized product offerings.
- Year 3: Optimize supply chain operations, expand customer service capabilities, and monitor performance metrics.
By taking a proactive and strategic approach, Sika can transform its APAC epoxy flooring supply chain into a competitive advantage, enabling sustainable growth and success in the region's dynamic construction market.
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Case Description
In mid-2017, the regional head of Operations and Supply Chain at Sika AG, a Swiss specialty chemicals leader that developed solutions for building and automotive industries, faced a new challenge in the company's epoxy flooring supply chain. She was tasked with identifying a robust solution that would both satisfy a shortened lead time and provide spare capacity to accommodate future growth. How should she proceed with these tasks?
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