Demand Driven Supply Chain Management - Example

Supply Chain Management By: Institution: Course: Instructor: Date of submission: In the past, there has been no inclusion of packaging in the supply chain. Today, packaging is in the forefront of the supply chain management and due to factors such as e-commerce growth. For most companies, packaging is an essential area of supply chain management. The most commonly used packaging material is the corrugated packaging. There has been a booming in the packaging industry with the presence of revolutionary materials for packaging in the market. The packaging of various kinds of goods can be using corrugated boxes. RFC Company is a leader in manufacturing corrugated boxes. These packaging materials have the capacity to ensure the safety of non-fragile and fragile goods. While analyzing the packaging optimization impact, it is important to consider all the imported goods into the US. In order to balance the packaging performance with green, North America does not use over 35 percent of the recycled content. On the other hand, there is the use of 100 percent recycled content in Asia in their corrugated packaging. Of the importance is the fact that the Asian packaging materials are of poor quality than those of the Europe and North America. The use of recycled materials makes the packaging boxes to be weak. Many companies in Asia also have poor logistics compared to those in the Western world. The cost of logistic in US or instance is below 10 percent of GDP whereas that of China is approximately 20 percent of the GDP (Ampuja 2014, p. 1). Manufacturing Companies experience numerous complications in the process of manufacturing and this is the main reason why there is delay in manufacturing. In order to effectively manage the system of manufacturing production, there is a need for ‘lead time’. Lead time entails the amount of time required to act in response to client’s order. Some companies have a delayed lead time and this may anger the customers. Pepsi Company, for instance, has a short lead time and the main contributor to this is the automation of 65% of the production process. Besides, the company provides as well as manage the transportation of its products to the customers thus reducing the lead time (Olhager & Johansson 2012, p. 2). Based on the production systems nature, there are four broad categories of companies namely: Make to stock or instance clothing, television, and packaged food products Assemble to order for instance Toshiba computers Engineer to order e.g. Mercedes Benz cars Make to order for instance, subway sandwiches A company like Pepsi is a make to order since it uses raw materials to make soft drinks once they receive an order. In order to guarantee a good strategy of supply chain, Pepsi Company has a two years advance planning. The company contracts several manufacturers and conveniently receives the raw materials. Supply and demand Several strategies can ensure that supply is meeting the demand. Due to global competition, flexible systems of manufacturing, and faster development of products, there is an intense competition in the market. Owing to this, many retailers as well as manufacturers are unable to give a prediction of their goods that can sell as well as plan orders and production accordingly. As a result, manufacturers and retailers are incurring losses because of the unwanted goods. The solution to the problem of inaccurate forecasting is turning to the system of production scheduling. If what an incorrect forecast is the use of manufacturing resource planning (Fisher 1994, p. 2). Sometimes, a manufacturer may fail to forecast and produce goods at a faster rate to meet a demand, a concept called JIT (just in time). However, the feasibility of JIT or quick response only occurs if the suppliers give response for key components. In responding to the customers’ order, Dell Computer Corporation, for instance, developed the capacity to create personal computers quickly but discovered that capacity inhibited by the long lead time of the component supporter. Accurate response improves the company’s forecast and helps in redesigning the company’s planning process. It (accurate response) also ensures that the supply chain is faster as well as flexible. As a result, the manager will be able to match demand with supply since they will have market signals. Many companies do not measure how much they have lost in terms of sales as well as the production cost. Accurate response to customers’ order differentiates products with predictable demand from those with unpredictable one. It achieves this by using expert judgement as well as historical data’s blend. Having the knowledge of products with unpredictable and predictable demand, manufacturers can employ different approaches to make the products. Accurate response therefore, allows companies effectively to use shorter cycle time as well as flexible manufacturing power (Hanke 2014, p. 2). The capacity to match demand and supply produces savings that can drop to the lowest. By having an accurate response, Pepsi Company has been able to reduce the mismatch cost. By dramatically lowering the cost of mismatch, Pepsi has also been able to lower the price. Presently, suppliers, distributors, as well as, retailers ensure that their prices have mismatch cost. Many organizations make a poor choice of incorporating the uncertainties of demand into the production-planning process. General Motors, for instance, faced problems after redesigning its Eldorado and Seville models. The company assigned half the capability of its plant in Detroit- Hamtramck to the two models. What was left of the capacity was slated to manufacture Oldsmobiles and Buicks. Nevertheless, the demand for Eldorado and Seville surpassed supply and led to a loss of many customers. It is important for companies to use the indicators of demand to improve forecasting as well as institute a system that they can use to track errors (Fisher 1994, p. 5). Forecasting Identifying as well as acknowledging errors in the results of forecasting will ensure that managers are making accurate decisions. In order to perform forecasting, there is also a need to have an in-depth knowledge of the demand management strategy. Demand management entails a method utilised to manage as well as forecast demand for services and goods, whilst working inside restrains (Hanke 2014, p. 2). Long-term capacity management Many corporations all over the globe are ensuring that their core corporate offerings have a benefit through services. Such as many corporations as a way of ensuring that perceive move they are competitive. According to Neely (2008), servitization is not necessarily a way of making profit. Capacity entails the utmost possible output over a certain time. For the operations of manufacturing, there are two divisions of the long-standing problem of capacity management. The first part touches on the capacity as a category of decision in the strategy of manufacturing, deal with the strategic reduction (or acquisition) of capacity relative the enduring demand. The second part touches on operations and sales planning, which entails tactical decisions on the utilization of the existing capability relative demand. A lead strategy give correspondence to the situation where there is a large capacity to cover the premier demand in a given time. A lag strategy on the other hand, keeps in touch to own capability’s level to the lowest demand level over period, such that we are able to utilize our own resources (Brown, Walker, Seuring, Sarkis, & Klassen 2014, p. 23). However, there is a need to utilize temporary capacity to give satisfaction to all demands. At last, a track strategy gives correspondence to setting the level of capacity to the average demand over a certain period. Certain environments of manufacturing have a certain planning and capacity strategy that offer a better fit than others. This is in relation to issues such as leanness, automation, and product modularity. Lag and level strategies are recommended for high volume as well as standardized products. On the other hand, chase and lead strategies are given preference if there is a low as well as a highly customized demand for each individual item. The modelling of the long-term capacity management is in a framework with two dimensions that are strategic. The aim of the capacity strategy is setting the overall level of capacity. The development of the planning strategy is for the capacity utilization. Having a structure that is uniform as well as a terminology that is coherent for manufacturing and service operations aids a parallel approach for a long-standing capacity management of such integrated management. Inventory management Planning and controlling management inventory is essential in comprehending the full possibility of a supply chain as well as minimizing costs. When dealing with large quantities of goods as well as services, it becomes intricate to balance demand and supply using the inventory art. The aim of keeping inventory is, to meet demand variations, allowing production scheduling flexibility, as well as probably taking advantage of discount when the orders are large. Food safety Activities Activity 12 One of the most essential aspects of a product is its quality. It is the responsibility of a manager to ensure that there is the delivery of high quality products to the customers. The customers in return are willing to pay extra cost for products of high quality. When the product is of poor quality, the company is likely to undergo loses. At the same time, the reputation of the company becomes jeopardized. Implementing a suitable strategy of improving quality is essential to combine planning, distribution, Topic 8 Activity one: Unit load, material handling systems, and transportation processes Sometimes, the designing of unit load, transportation processes, and material handling system is a vacuum. However, each of the three influences the performance of each other. In the present day market, the movement of most industrial and consumer products as they journey through the supply chain is unitized load. Shipping and handling processes physically exposes packaged merchandise to mechanical stress from vibration, shock, and compression. This can in turn cause damage to the merchandise on a unit load, slow the load movement, and add the cost. During the supply chain design, the three components can make a difference to operations and supply chain in that they can improve the efficiency of operation, safety, as well as influence the environment (Brown, Walker, Seuring, Sarkis, & Klassen 2014, p. 25). Tutorial activities 8 Activity 1 Make to stock (MTS) products entails those products made in large volume as well as stored until a demand signal receipt from downstream customer. It also entails operations that make products only when a specific customer demands for them. Make to order entails a process of manufacturing where the manufacturing begins after there is an occurrence of a demand for instance where there is an order from a client. Finally, assemble to order entails a process of manufacturing where there is assembling of components as per specific orders, and this is in contrast to fill the level of stock. 2. Definitions Throughput time entails the average time taken for the change of input to output. Throughput time is equal to work in progress times cycle time. Capital intensity entails the efficiency of the firm in its assets’ deployment, computed as total asset value ratio to the ration of sales revenue produced over time. It entails the amount of money invested to generate one dollar of revenues of sales. Capital investment is equal to total assets/ sales revenue. Finally, bottlenecks, also called constrain entails the resources that need the longest time in supply chain operations demand. Bottleneck determines the supply chain’s throughput and making this recognition will increase the flow of cash. 3. Service blueprint entails a practice for plotting the customer process against the structure of the organization. It offers an overview such that the internal units and the employees can communicate what they do to the whole service system. Service blueprint is a tool of excellence that can train workers. Through this tool, the workers are able to see the activities to be performed and the means of performing them, where there is a likelihood of failure and the means of correcting the failure. On the other hand, the traditional flow chart gives a comprehensive breakdown of procedure into tasks, as well as, gives the classification of each activity as a processing operation, a delay, a movement, storage, or a delay. Unlike the traditional flow chart, service blueprint is more popular for the analysis of the service operations (Olhager & Johansson 2012, p. 5). Activity 3 Process analysis entails step by step process phases’ breakdown used to communicate operations, outputs, and inputs that occur in each phase. It can enhance the understanding of the operations of the process as well as establish possible targets for the improvement of the process through the removal of the waste and the increase of the efficiency. Shape Representation Description Start Symbol of termination indicating the system’s start as well as its end. Process This is a representative of a step within a process Predefined process It entails several processes that are joined together to make a sub-process defined to a different place, often on a different page of the same drawing. Decision This gives an indication where the decision’s outcome dictates the subsequent step. Document A printed report or document Data Represent information or material leaving or entering the system such as product (output) or customer order (input). Sequential data Also called magnetic tape, a representation of magnetic tape storage. Parallel mode It establishes the flow throughout the chart. Dynamic link They link various shapes. Stored data A general flowchart for data storage used for storing data for the process. Control transfer It shows the direction of the flow of the process. Termination It is an indicator of the beginning and the end of a process. Activity four Tutorial activities for topic 9 Activity one: Identify and discuss Most systems of ERP incorporate best practices meaning that the reflection of the software is the understanding of the vendor about the most efficient way to carry out each process of the business. There is the variation of the systems in how suitably the client can alter these practices. One of the MRP’s best practices is the planning and budgeting. The changing conditions of the market are making companies to come up with more effective practices of business. Other applications include those used by QAD Enterprise. My assigned company uses early-seasons sales results kind of forecasting because it has the capacity to match the demand with the supply (Brown, Walker, Seuring, Sarkis, & Klassen 2014, p. 23). Activity 2 Sales forecast for the month of May 2015 Month demand 3-month moving average 3 month wt moving average 0.25, 0.25, 0.5 Exponential smoothing Alpha = 0.1 1 3000 2 4000 0.1*3000 + 0.9 * 3000 = 3000 3 3400 0.1 *4000 + 0.9 + 3000 = 3100 4 3800 (3000+4000+3400)/3 = 3466.67 0.25*3000+0.25*4000+0.5*3400 = 3450 0.1*3400+ 0.9 * 3100 = 3130 5 (4000 + 3400 + 3800)/3 = 3733.33 0.25*4000+0.25*3400+0.5*3800 = 3750 0.1*3800 + 0.9 * 3130 = 3197 The sales forecast for the month of May is the moving average of the month of April, which is 3733. Activity three: solving numerical question The two ways moving average for year 2017 to the year 2019 is as follows: Year 2016 = (3000+4000)/2 = 3500 Year 2017 = (4000 + 3400)/2 = 3700 Year 2018= (3400 + 3800)/2 = 3600 Year 2019 = (3800 + 3700)/2 = 3750 The moving average for the sixth year is the moving average for the fifth year = 3750. Calculations for mean average deviation Demand 2 years moving average Deviation Absolute Deviation 4000 3500 4000-3500=500 500 3400 3700 3400-3700= - 300 -300 3800 3600 3800 – 3600 = 200 200 3700 3750 3700 – 3750 = -50 -50 Sum of absolute deviation = 500 + - 300 + 200 + -50 = 350 MAD = 350/2 = 175 Tutorial activity for topic 10 Sales and operations planning Sales and operations planning are all about tactical decisions on the utilization of the existing capability relative demand. One of the categories of the structural decisions in a strategy of manufacturing addresses the amount and timing of the acquisition of the capacity relative demand. Two main strategy capacities do exist and they are lag demand and the lead demand. The appropriate sales and operation planning for my assigned company would be the lead demand strategy. Such a strategy implies that there is an advance acquisition of capacity before there is an increase in demand. The strategy has the capacity to maintain the capacity cushion. There is also a need for capacity strategies when the demand is stationary but fluctuating. A lead strategy keeps in touch with the situation where there is a large capacity that has the capacity to cover the highest demand level in a given time (Larsson & Jonas 2009, p. 13). The provide strategy sets the level of capacity to the maximum level of demand over time. This allows for the strategy of chase planning, and this does not necessitate the production of more than what is demanded. In order to reduce the peak demand, there will be the use of the influence strategy that has the capacity to make the variable capacity to become less problematic. Since the company will use the lead capacity strategy, there will also be the use of chase planning strategy. It is important to use a strategy when there is a demand rise. Generally, certain planning and capacity strategies’ combinations are associated with back either office or front office operations. Lead and choice strategies are essential for the operations of the front office and strongly focus on quality and effectiveness in high contact services. Tutorial activity for topic 11 Inventory management Activity 2: discussion The best inventory model for managing different types of inventories by the company is the single-period model. The choice is necessary because the company deals with one time item purchase. The company specializes in supplying vegetables in major hotels in Australia. Such a model is essential since it can strike a balance between the costs of inventory under stock and overstock. In order to make a decision regarding the amount of vegetables to supply to the hotel, an order is taken from these hotels and this is based on the demand of the commodity. This is essential, as it will help in preventing the loss of the profit linked with the sales. The key costs of inventory include the set up cost, ordering cost, and holding cost. The business is overspending in two areas namely having a large number of employees and advertising. Reducing the number of employees will help reducing the cost. The business is using a large amount of money in advertising and this is mainly because the company hired a top rated agency for designing. In order to reduce the cost, it is important for the company to improve its presence in the social media, as this will cost less than hiring an advertising agency. Activity 3: solving Annual demand (D) = 2,500 Average daily demand D = 2500/365 = 6.84 units Ordering cost = $ 18.75 Carrying cost per item per year = $ 1.5 i. Calculation of EOQ EOQ = SQRT [(2*A*Cp)/Ch] A = Demand for the year Cp = cost for placing a single order Ch = cost to hold one unit inventory for a year EOQ = √ [(2*2500*18.5)/1.5] = SQRT 61,666.67 = 248.33 units Annual demand is 2500 units. Therefore, the number of orders that the company need to place = annual demand divided by order size of 248 = 2500/248 = 10 orders Total ordering cost = cost per order* the number of orders = $1.5 * 10 = $15 Average inventory held = ((0 + 248)/2) = 124 Therefore, total carrying/holding cost = 124 * 10 = $1240 Annual holding cost = average inventory level * holding cost per year = 124 * $1.5 = 186 Total inventory management cost = holding cost + ordering cost = (order quantity/2) * holding cost per unit per year + (annual demand/order quantity) * cost per order = (2500/2) + 186 + (2500) * 18.5 = $47,686 Activity 3 b: How to optimize the cost of inventory Andy can use several strategies to optimize the cost of inventory. Proper communication, for example, by involving procurement as this will help in procuring best quality supplies. Another step is carrying out the assessment of the business. First, Andy should understand the 2uOTD (order-to-delivery) process. The next step is to devise the plans, moving to the state of the ideas. It is also important for Andy to better account the variability impact in supply or demand plans in recommending the level of inventory. Tutorial activity for topic 12 Activity 2 In the case of raspberry, there was the issue of quality came up. The fact that the consumers developed hepatitis A on eating raspberry from China is an indication that the product may have been toxic or was of poor quality. Poor handling and packaging may also have contributed to the emergency of the disease because such an action may have led to the contamination. The costs of internal failure include the rework, the scrap and defective, price, reductions, and downtimes. In the case of raspberry, there was the cost of external failure where people complained of hepatitis A on consuming the product. Other causes could relate to equipment/machinery poor packaging materials, lack of training of the material handlers, poor ingredients. Concerning people, they may have been poorly trained, lacked good personal hygiene, few people during packaging leading to poor quality packaging, rushed packaging, and low payment of the workforce leading to poor handling practices. In terms of methods, the handlers may have lacked experience, people equipment/machinery few workforce unreliable transport system poor personal hygiene little /no money for repairing equipment rushed packaging low wages for workers small packaging box Hepatitis A poor utilization of space poor space utilization low quality packaging materials no training for material handlers poor handling of the food product Do not know how to package lack of experience material method Activity 3: Mapping a process to bake cookies using process chart MAJOR STEPS IN MAKING COOKIES SUPPLIERS INPUTS PROCESSES OUTPUTS CUSTOMERS manufacturer Oven cookies you storekeeper eggs wheat flour salt making cookies Process Bibliography Ampuja, J. 2014. Packaging: think inside and outside the box. Supply Chain Management Review. 18. Brown, S., Walker, H., Seuring, S., Sarkis, J., & Klassen, R. 2014. Sustainable Operations Management. Bradford, Emerald Group Publishing Limited. Retrieved from http://public.eblib.com/choice/publicfullrecord.aspx?p=1752820. Fisher, M. L. 1994. Making supply meet demand in an uncertain world. [Cambridge, Mass.], [Graduate School of Business Administration, Harvard University]. Larsson, Jonas. 2009. One-piece fashion - Demand driven supply chain management. Retrieved from http://hdl.handle.net/2320/5814. Olhager, J., & Johansson, P. 2012. Linking long-term capacity management for manufacturing and service operations. Journal of Engineering and Technology Management. 29, 22-33. waller, M. A., & Esper, T. L. 2014. The definitive guide to inventory management: principles and strategies for the efficient flow of inventory across the supply chain. Hanke, J. E. 2014. Business forecasting. Pearson. Read More