Supply Chain Management: Air Solutions - Term Paper Example

Name: Course: Tutor: Date: Supply Chain Management: Case Study of Air Solutions Air Solutions is a company that designs and manufactures industrial compressors and air conditioning units. The company is currently reviewing the spares aspect of its operation. The company has major manufacturing plants in the United Kingdom. These are located in Birmingham and Manchester. The company produces different product ranges at each site. The plant in Birmingham produces a range of industrial air compressors (IAC) that are based around a common design family. On the other hand, the plant in Manchester produces a single line of heavy duty air-conditioning units (HACU). The IAC family of products was launched in 1999, and had a minor update in 2002. The original HACU range of products was launched in 1993. This was followed by a major redesign in 2004, and subsequently the product was re-launched under the support of a large advertising campaign. Later, minor updates followed in 2006. The company policy is to offer support to the products for a period of 15 years from their date of manufacture. The company policy also stipulates that each product has to be serviced regularly, both monthly and annually. As well, there is high demand for routine service parts. Each of the products usually undergoes major rebuilding conventionally after 10 years in operation, and this usually happens as a well planned activity. Air Solutions makes sales of its products worldwide, that is within the United Kingdom, Europe, North America, Africa, and South East Asia. The company’s sales have been significantly stable at 12,000 units of each product every year since each product was introduced. This paper will use the hypothetical case Air Solutions to analyze how such a company would locate its stores or warehouses; where it would obtain its supplies from; how reliability of the company’s products would affect supply operations of the same products; the kind of information that would be needed in order to make updates to the design as well as how the updates would affect various decisions. The paper will also evaluate how to estimate demand for the company’s various products in terms of part types. More importantly, the paper will discuss the factors to be taken into consideration when making decisions to scrap obsolete parts as well as when to decide when particular parts can be termed obsolete. Factors to consider when locating the company’s stores / warehouses The achievement of any warehouse that can be regarded efficient and effective is dependent to a large extent on the existence of the warehouse’s good layout. The layout of the warehouse typically dictates the extent of accessibility of materials, the flow pattern of materials, as well as the locations of traffic bottlenecks. In addition, the warehouse layout influences other factors such as personnel safety, labour efficiencies, and warehouse security (Kulwiec, American Society of Mechanical Engineers and International Material Management Society 665). After considering the factors above, Air Solutions should the ensure that warehouses or stores that are built can facilitate maximum utilization of space while also ensuring that very conducive conditions are provided for most efficient handling of the various materials that are stored. There is also need to ensure that stores or warehouses provide the most economical storage vis-à-vis the cost of equipment to be stored, the amount of space available, potential extent of material damage, and the warehouse labour. Air Solutions also has to consider maximum flexibility in order to meet the changing needs of storage as well as handling requirements. As such, there is need to make an appropriate model of effective housekeeping (Kulwiec, American Society of Mechanical Engineers and International Material Management Society 665). All the considerations mentioned above are aimed at ensuring that clients using the services manufactured by Air Solutions have ample time accessing their required products, including viewing them before making decisions about their purchase. When customers have access to various products prior to the purchase date they are able to make informed decisions about long term purchases such as purchases of air conditioning equipment. Where to obtain supplies There are many suppliers of air compressors and conditioners as well as the device parts and accessories. They can be found within the United Kingdom but as well the equipment may be imported from countries such as Germany and China. How product reliability affects supply operations According to Pecht and ARINC Research Corporation, taking a perspective of a logistician, product reliability translates into demand for logistical resources. Logistical resources in any given company include personnel and product support. Product reliability thus implies that the logistical resources are translated to a common repair action. The interaction that occurs between the various aspects of reliability and maintainability in turn translates to the need for logistics assets that need to be used to maintain a state of operational readiness or availability during a given period as desired by the user (Pecht and ARINC Research Corporation 352; Blumberg 124). Low reliability creates a situation whereby there is an increase in the demand for logistics resources. With this, the arrival rate is the demand that a product or population of particular product places on a logistics (Pecht and ARINC Research Corporation 352). Some of the features associated with low reliability of products include inadequate diagnostic procedures that result in unnecessary removal of functional units, wrong products monitoring (that is false alarms and false fault indications), as well as the removal of one assembly so as to gain access to another (Pecht and ARINC Research Corporation 352). Other issues that are associated with low product reliability and maintenance include “false alarms,” “retest okay,” “cannot duplicate” and “no fault found” (Pecht and ARINC Research Corporation 352). False alarms are indications that usually arise as a result of a built-in test product. They indicate that something is wrong with the product being monitored even though the operator such as Air Solutions fails to diagnose or perceive any degradation in the product performance. In case the operator fails to report a problem the product maintainer may make an attempt to duplicate the problem, and this may trigger other kinds of failure. The level of product failure is however not fixed as this is determined by the nature of person examining the phenomenon. For instance, from an engineer’s perspective, a failure may not have occurred; but from a logistician’s viewpoint it is a failure because logistics resources have been used up ((Pecht and ARINC Research Corporation 352). With the advent of the Internet, there is increased awareness among customers about product reliability as well as quality. This means that brand loyalty is an aspect of vital importance to any company that deals in a wide range of products such as Air Solutions (Blumberg 124). The more the reliable products are in the market, the more they are likely to be demanded, which further increases their supply to the market. Design information needed and how various updates to the design affect decision making A firm that deals in air conditioning products such as Air Solutions needs to understand the features of compressed air equipment. It is notable that running air compressors often use more energy than any other equipment. There is need to understand air compressor efficiency as the ratio of energy input to energy output. There are many air compressors in the market running at an efficiency of less than 10 percent (NC Division of Pollution Prevention and Environmental Assistance) and this is not desirable in the context of consumers. Air Solutions should therefore target designs that improve the efficiency of air conditioners in order to save significantly on production while also increasing customer satisfaction and loyalty. When referring to the efficiency of air conditioners, it is important to note that the compressor itself is only a single art of a larger system. As a result, it is important to look at other aspects of the whole system when discussing the design and efficiency of air conditioners. Compressed air is the product of a system that comprises an air compressor as well as after coolers, air dryers, receivers, air storage tanks, sequencers and many other compressor units (NC Division of Pollution Prevention and Environmental Assistance). Air Solutions has to put all these factors into consideration if it has to please its customers and maintain customer loyalty. Energy use in the compressor is determined by many factors. These include the air compressor type, the model and size. They determine energy consumption, but other aspects of the compressor such as motor power rating, system design, control mechanisms, uses and maintenance practices are also essential in determining the compressor’s energy consumption (NC Division of Pollution Prevention and Environmental Assistance). Control mechanisms have to be matched since the system control tools are an essential component of the entire air compressor’s functioning. Controls should be designed such that they match the compressor output with the system demand. Controls can be made such that they control a single air compressor, but they may also be designed to be involved in the orchestration of many air compressors to satisfy multiple system needs (NC Division of Pollution Prevention and Environmental Assistance). The system design has to put into consideration five aspects that are crucial to the efficiency of the compressor. These include saving time for need, straightening the air compression path, utilization of cooler intake air, whether to use single or multiple compressors, and recovering in waste heat. These are the factors that affect the compressor output and if well considered could result into higher sales and better customer loyalty (NC Division of Pollution Prevention and Environmental Assistance). Uses of the air conditioners should be made specific in order to avoid expending energy on unnecessary tasks. This should be supported with appropriate maintenance practices (NC Division of Pollution Prevention and Environmental Assistance). Estimating demand for different part types Air Solutions has can use demand curves to estimate the demands for its various products. This is commonly referred to as the time-series method (Tisdell & Hartley 95). The demand curve may be applied in estimating product demand using data from time-series, cross sectional data information that is obtained from experience or interviews. For this method to be successful, it may be assumed that the demand for a particular part is depended principally on the price of that item. A demand curve is obtained when (1) the only price subject to variation is the price of the particular item in question (2) other factors that affect demand are constant (3) the supply curve alone is subject to variation and, (4) the prices and observed and quantities traded are at equilibrium (Tisdell & Hartley 95). Having fulfilled these, Air Solutions can come up with the following table on demand and sales: Table 1: Demand and sales Year Price in pounds Quantity sold 2006 x 9,000 2007 x 10,000 2008 x 10,500 2009 x 12,000 Source: Adapted from Tisdell & Hartley, p. 95 Parts that might be shipped in complete kits Various air conditioner parts can be moved in complete parts that do not need dismantling or adjustments. These include control systems, the mixing, atomizing and aspirating parts, and the process coolers. Such systems only need fixed to other components as complete parts. They may not be shipped as separate parts since they have to be integrated in order to be functional (NC Division of Pollution Prevention and Environmental Assistance). What to take into consideration when scraping obsolete parts The reliability and efficiency of air conditioners is determined by their output. This however declines with repeated use. Many a time they will develop leaks; as well, the systems may constantly lose energy. Such problems may be fixed in the initial stages, but when they become persistent, it is high time to consider the equipment obsolete. When the air conditioners seem to be putting too much pressure on filters, the equipment may be considered to be performing below expectations, thus necessitating a lot of filter change. The control systems may also fail frequently, implying that the system components are not in synchrony. When particular components can be regarded obsolete The life expectancy of typical appliances depends largely on the nature of use it receives. In addition, appliances may be replaced long before they are worn out due to changes in styling, technology, consumer preferences and so forth. It is obvious that as new technologies arise, consumers will tend to desire the latest designs. All these factors may be in play such that equipment are declared obsolete earlier but considering efficiency, the equipment should be regarded obsolete after 15 years. Works cited Blumberg, Donald F. Introduction to management of reverse logistics and closed loop supply chain processes. London: CRC Press, 2005. Kulwiec, Raymond A; American Society of Mechanical Engineers and International Material Management Society. Materials Handling Handbook (2nd edition). London: Wiley-IEEE, 1985. NC Division of Pollution Prevention and Environmental Assistance, January 2004. Energy Efficiency in Air Compressors. http://www.p2pays.org/ref/32/31312.pdf Pecht, Michael and ARINC Research Corporation. Product Reliability, Maintainability, and Supportability Handbook. London: CRC Press, 1995. Tisdell, Clem and Hartley, Keith. Microeconomic Policy: A New Perspective (2nd edition). London: Elgar Publishing, 2008. Read More