Upon reading the research study the CEO, Mr. Charles O'Run, realizes which were some core conditions that need to be addressed to be able to provide a competitive advantages. The first thing I noticed was that during the period of time, the ORUN remote procedures have been become independent in their local procedures. This could have been caused by numerous reasons such as poor information sharing during employee changeover or strategic level management start to look at the future and push more and more responsibility to themed level managers. But no matter the reason why, there's now been a significant communication gap between your corporate headquarters and the 4 plants situated in the three states. This is a problem because all the plants are reliant on each other's information for daily operations. While using metrics used by operating units being developed at each remote site rather than distributed throughout the business, this creates a lack of information getting to the local and headquarters management on time, the headquarters staff can get confused because everyone isn't on the same page, affecting future company decisions. There has also been a lack of supply chain metrics that has prevented managers to see what and how the individual plants improvements done and how it hasn't lead to improved overall performance of the supply chain. The objective of supply chain metrics is to give the foundation for evaluations of the performance of the whole supply chain as you system. Supply chain managers tend to be focused only on the internal supply chain. Going beyond the inner supply chain by including external suppliers and customers often exposes new opportunities for improving internal operations. (Supply Chain Management, 1997)\
This not only goes for different metrics being used, but they have also been using different procedures for the manufacturing, supply chain management, marketing, and financial reporting throughout the various plants. With different procedures, it is costing them time and money. This also helps it be difficult for their suppliers to comprehend the process creating far more mistakes and creating poor relationships. Because the upper level did not have a whole understanding of the procedures from each plant and plant section, that is the reason why there was some resistance to improve by the staff and by mid-level management at the many plants. Just by having the whole company on the same page, it'll make it better to streamline ORUNs supply chain and help them achieve their primary goals of controlling the rapidly fluctuating material purchase costs and reduce a significant upsurge in raw material and finished goods inventories.
Addressing the Five Goals
PROC 5820, Operations Management course
Allow ORUN to minimize costly inventory.
To minimize the costly inventory and acquire the principal goal that the owners identified, which is to control the rapidly fluctuating material purchase costs also to reduce a substantial increase in raw material and finished goods inventories, they need to go through the whole process. Having too much inventory can be an indicator of a costly business process and systems problems that can be seen throughout the business. These may include poor forecasting, inadequate order/product specifications, ineffective production scheduling, low quality, bottlenecks, long cycle times, product and process problems and inappropriate performance metrics. And these problems can compound themselves. (Donovan) a lot of these can be fixed with a long lead time, but long lead times lead to a dependence on an accurate and stable forecast. However the downfall to that is that it's very difficult to acquire and permanent forecasts can be inaccurate. They have to ensure that forecast is accurate as is feasible since it creates an overage or shortfall of products. Unsold inventory quickly accumulates in expensive piles, while expensive expediting is employed to produce the needed products that are an issue. It isn't that simple to lessen costly inventory. If were that easy to reduce inventory, you will automatically inventory management to lessen cost, if which were so, everyone company would be running perfect. But in reality, the largest problems will be the inefficient business processes that cause excessive inventories to exist. (Donovan)
ORUN requires a major decrease in all forms of inventory, without harming customer service. This will require the re-engineering of the order-to-delivery cycle to find ways to do it faster, better and cheaper. This could bring about significant reductions in lead times and increases in charge that get rid of the dependence on inventory buffers. This will also benefits them with the increase of quality and improved customer support. (Donovan) ORUN needs to develop transform their production to more of a flexible manufacturing system. Whenever a manufacturer is set up to produce long production runs, there's a tendency to keep up greater than necessary production levels even when confronted with reduced demand. The "inflexible" manufacturer maintains high production to soak up overhead. By developing this flexibility, this will help ORUN minimize inventor, improve customer responsiveness and allow them to use to quickly respond to changing customer demand.
Another thing that ORUN must do, is to reduce cycle times. Cycle-time reduction can mean reduced costs, reduced inventory levels, improved production predictability, increased customer service, and better quality. To lessen cycle time, manufacturers need to streamline every part with their operations, especially the order-to-delivery process. (Donovan) ORUN also needs to consider trying to better streamline their supply chain system. This allows them to lessen inventory, improve time to advertise, compress cycle times, decrease costs and improve profitability. By consolidating their supplier base, they can set up a closer relationship with those they work with. They can work together to boost products and operations, thereby reducing material costs, improve delivery timing, etc. (Donovan) Streamlining their supply chain system can really change their company for the better. This may remove the situation which may have with poor production scheduling that can cause product flow imbalance, bottlenecks, poor customer service, high inventory and long cycle times.
ORUN may also want to consider using a "pull" based method. ORUN may be using the "push" method at this time and therefore they will always conclude with high inventories. But with the "pull" method, it will require a well-engineered order-to-delivery process that can have enormous benefits beyond just inventory reduction, especially in customer support. (Donovan)
Improve the overall supply chain management within the company.
The first they needs to look at when wanting to enhance the overall supply chain is by understanding internal processes of their supply chain system. They have to understand each section and make sure everyone is on a single page. This can not only help them see what changes can and have to be change but presents themselves to their customers, suppliers, and competition professionally. In order to enhance the overall supply chain, all sections have to talk about goals to the extent to which the manager of every focal function are aware of the strategic goals of the other focal functions. There also needs be some collaboration. Members of the function need to actively focus on problems with members from the other focal functions. Supply chain within the company can be complex, especially if the firm has multiple divisions and global organizational structures. (Teigen, 1997) ORUN should create cross functional teams to help create process objectives and performance measures. These cross functional teams will contain representatives from each of the organizations divisions that play a major role in the organizations internal supply chain.
Another way to enhance the overall supply chain by communicating along the chain and not only over the chain at the same level. As explained in the event study, before, there have been attempts to improve far less complex organizational problems, but there was considerable resistance to improve, both by the personnel and by mid-level management at the many plants. The strategic, tactical and operational management need to communicate and also have input with any changes. There is poor communication and perhaps little knowledge of each other role. The strategic level makes permanent decisions. These decisions are related to location, production, inventory, and transportation. Location decisions are worried with the scale, number, and geographic located area of the supply chain entities, such as plants, inventories, or distribution centers. The production decisions are meant to determine which products to create, where to produce them, which suppliers to utilize, that plants to provide distribution centers, and so on. Inventory decisions are worried with the way of managing inventories throughout the supply chain. Transport decisions are made on the modes of transport to utilize. The tactical level is where in fact the mid level decisions are created, such as weekly demand forecasts, distribution and transportation planning, production planning, and materials requirement planning. The operational degree of supply chain management is concerned with the very short-term decisions made from day to day. The border between your tactical and operational levels is vague. (Teigen, 1997) I believe it might be beneficial if they have representatives from each level during major ORUN meetings. This might help everyone have a whole understanding of the changes and the experts from each level can provide their input on the expertise. This can help save money and time on change future changes.
Ensure demand requirements are met, avoiding stock outs and reducing overall cost.
The problem with inventory management is that keeping inadequate stock may result in production problems while keeping too much means investing a lot of money unnecessarily. Business can be lost through cancelled orders, and their trustworthiness of outstanding customer support can be severely damaged. A stock-out occurs in a distribution center when there are orders that can't be filled within their due date. It is when at a given moment in a given inventory there isn't the amount of a component or something that is demanded. Stating that, it is ORUN's interest to balance inventory holding cost and the price tag on imperfect client satisfaction. A manufacturer will account for the uncertainties and unforeseen events by keeping safety stocks. The safety stocks assure the necessary flexibility; or rather they become buffers for the lack of flexibility in the supply chain. (Supply Chain Management, 1997)
Finding the right balance is therefore necessary. There are various different ways to inventory. The very first thing they need to do is find the economic order quantity (EOQ). The output of EOQ formula helps to find out the optimum level of stocks that needs to be kept to minimize a firm's costs. Another option that they can do is by using fixed re-order stock level. That is when they identify the minimum degree of stocks it can tolerate, and re-orders when stock reaches that level. Addititionally there is the option of fixed time re-ordering. This technique suggests only reordering of stocks at a fixed time every month or week. (Kakati, 2008) Although this seems like a easy and simple way to regulate stock, fixed time re-ordering is an inflexible method, because the amount of inventory may fluctuate depending on market demand of products. As stating above, ORUN needs to become more flexible in their supply chain process to become more productive in expense. In my view and recommendation I would use the popular method of "just with time". This method of inventory management aims reducing cost by keeping stocks to a complete minimum. Raw materials are ordered "just-in-time" or when they are required. This saves warehouse space and costs. But this technique does involve threat of running out of stock, depends after reliability of the suppliers, and requires higher level of organizational skill to be maintained effectively. With ORUN using similar parts for every item, I believe it would well suited for them to utilize this method to avoid stock out and reduce overall cost. (Kakati, 2008)
Just in time would minimize storage costs. Storing less work-in-progress inventory and fewer finished goods reduces space requirements. Just in time will make the company a far more flexible business with better communication with customers and suppliers and can react quickly to advertise demands. Implementing thorough just in time procedures can involve a significant overhaul of your business systems and it will be difficult and expensive to introduce. Although it will be difficult, there is a lot of upside to the new process. The huge benefits to the method are that they create better quality products, reduced scrap and rework, reduced cycle times, smoother production flow, less inventory, of raw materials, work-in-progress and finished goods and reduced space requirements. The Just in Time method entails sourcing the mandatory raw material or item for processing on demand, and scheduling the task based on order or demand for the merchandise. This synchronization of supply with production, and production with demand enhances the flow of goods and reduces the necessity for storage facilities. Just with time focuses on eliminating waste from the production process building a smooth flow of goods. Eliminating redundant tasks and minimizing transportation of the merchandise over the workspace. (Nayad, 2010)
Standardize business practices among plants with confirmed supplier.
ORUN needs to develop a unified supplier management throughout the company, instead letting individual plant purchasing managers do what they want and how they want. The principal purchasing manager would accountable for buying or approving the acquisition of goods and services needed by the company. The position obligations would include a wider supervisory and managerial responsibility. The Purchasing Manager would oversee the acquisition of materials necessary for production and equipment. They might also supervise purchasing agents and buyers. Insurance agencies, the burkha purchasing manager, this would create a typical practice between every individual plant, continuity and accountability for every single plant purchasing manager. They have to plan, execute, and oversee purchasing strategies that are conducive to company profitability. (Cyprus)
Another way to help standardize business other than just creating a primary purchase manager or head of purchases is by having an individual supplier. This will reduce the quantity of logistics and distribution cost of your business because you only have to deal with one company to provide your basic raw material. (Heche) Insurance agencies a single supplier, it creates its benefits and drawbacks. By having an individual supplier, you will certainly know that the qualities of the raw materials purchased are steady with the prior batches. This makes the product quality assurance function of ORUN better to conduct plus they can expect to acquire lesser production difficulties and even less customer complaints. After choosing the right company for these people, this will also give me some peace of mind knowing that they have the technical expertise and proven network integration capability with that supplier. This also allows ORUN to create a close relationship with their supplier because they'll be able to understand their specific requirements. A number of the disadvantages for ORUN will be that they will become highly dependent on a single supplier to provide all of them the raw materials they need. They will likewise have less negotiating leverage if indeed they become dependent on an individual supplier who supplies their needs. The best way to have the advantages and stop the disadvantages is by having an individual supplier but at the same time you also know of a regress to something easier supplier who is able to satisfy your requirements when the first supplier does not deliver. (Heche, 2009) All in all, with a standardized and simplified process for many purchasing managers whatsoever levels, it allows ORUN to focus on continuous trying to boost their service and products while reducing service costs.
Increase supplier efficiency with real-time home elevators firm planned orders and forecast.
Creating a proper rounded inventory management, it could involve making a list of inventory stock and recording its location and value. But with today's ever enhancing technology, this process has been made simpler by using bar-codes. ORUN should think about using bar codes to keep an eye on their stocks using Radio Frequency Identification (RFID) and software applications. This will avoid the significant communication gap between the corporate headquarters and the 4 plants. They have to implement this automated system that can track inventory across multiple warehouses, in different locations within one facility, and then for the different serial amounts of different inventory items. (Kakati, 2008) This will help them with their daily operations, since they are quite dependent on the speed and option of information.
The new system will monitor that being purchased on one minute by minute basis, enabling the business to make real-time decisions on where you can send more inventory items from its warehouses. This real-time information will help ORUN better manage their supply chains. This can also help obtain the plant's operating results get to local and headquarters management on time. This will also simplify headquarters staff reports. Real-time supply chain technology will reduce the quantity of unneeded item. This new system allows ORUN to react to any changes in buying pattern on a single day rather than overnight, meaning they can make much better decisions on where you can send stock before it leaves their depots. This may also solve the problem of have different metrics that are used by the several operating units at each remote site. This can simplify what's needed or not and this will reduce the risk by knowing precisely what is selling well at any given moment so we can react more quickly than some of our competitors, and provide their customers with what they want. (Sainsbury's Uses REAL-TIME Supply Chain Technology to boost Efficiency, Reduce Waste, 2010)
All in every, by using RFID, it ensures accurate stock figures and stock-counting becomes considerably faster and more accurate. In addition, it creates better supply chain visibility at multiple points by ensuring that accuracy of forecasts, security of stock, etc. RFID will help facilitate real-time information, cross-network information sharing and decision making. Through the use of RFID, this will help create standard procedures for the manufacturing, supply chain management, marketing, and financial reporting throughout the many plants. RFID can delete the complexity from the supply chain by providing one network environment and the framework for efficient transactions and information sharing. For the finish user, it enhances product availability creating more satisfied customers because the merchandise is on the shelf. (Supply Chain Delivering Real Time Visibility, 2005) The advantages of RFID are that this can improve the quality of inventory operations, boost the throughput distribution centers, lower operating costs, assist with supply chain logistics tracking, improve the transparency of supply chain management, capture data and help with the transmission of information quicker, accurately and safely. (forwarder, 2010)
Resolving the Issues
Supply chain benchmarking is a management tool companies use to gauge the efficiency and effectiveness of these supply chain. Performance measures need to operate a vehicle a consistent emphasis on the overall supply chain strategy and corresponding process objectives. ORUN would use these benchmarking to compare their company's supply chain with a competing company's supply chain or the industry standard. It allows management to identify problem areas. They can also compare their supply chain performance to previous periods to see if previous changes to the supply chain incurred any improvements. (Vitez)
A few types of supply chain measurements or metrics are inventory turnover, cycle time, fill rate, product quality, customer satisfaction, etc, may be used to track supply chain performance. These metrics can help ORUN know how their company is operating over a given period of time. Supply chain measurements can cover many areas including procurement, production, distribution, warehousing, inventory, transportation, and customer service. (Donovan)
Supply chain performance indicators are classified in two obviously defined but closely interrelated categories, functional indicators and end-to-end supply chain indicators. One measures the potency of the function and second measures how well these functions are coordinated. While they are measured separately, they must not be looked at in separation. Together with the advent of supply chain and focus on overall coordination and effectiveness, a few of the functional indicators turn out to be conflicting and counterproductive. These need to be removed, for example a company trying to improve its customer support cannot have reduction in machine change over as an indicator. (DecisionCraft) However, a good performance in one part of the Supply Chain is not sufficient. The supply chain is only as strong as its weakest link. The answer is to give attention to the main element metrics in each region of your supply chain. To be able to enhance the supply chain performance, ORUN must know what to measure and what targets to create. Tracking the measurements and corrections, it allows ORUN to see their performance as time passes and gives them a better understanding about how to optimize their supply chain. Measurements alone aren't the solution to their weak areas. The solution is based on corrective actions that are taken up to improve the measure.
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