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Integrated Logistics for Dep/Gard

In: Business and Management

Submitted By dstuck
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Course 616—Global Logistics Management
Don Stuck (15-041).

Lesson # 7

1.a. DEP/GARD DIAGRAM: (1) SUPPLIERS (six) to (2) DEP receiving to (3) DEP manufacturing to (4) DEP warehouse to (5) DEP/commercial transportation to (6) GARD

1.b. The stages adding value are: the performance criteria of the suppliers (product quality and timeliness in delivery); DEP’s advanced manufacturing equipment and ability to quickly change the manufacturing process; product packaging and prep for shipment; DEP’s internal transportation for delivery.

1.c The stages not adding value are: all of the time the compounds sit in the warehouse; the seven day inventory; the antiquated way (manual) they match manufacturing ticket with the purchase order and prepare shipping documents; possibly the use of common carriers and 6+ days of shipment (max).

2.Minimum order cycle time: 2 days shortest lead time for suppliers+ 6 days orders produced+ 3 days from manufacturing to shipment + 1 day shipping = 8 days minimum. Maximum order cycle time: 9 days longest lead time for suppliers + 8 days orders produced+6 days from manufacturing to shipment + 6 days shipping = 25 days maximum

3. Yes, the performance cycle can be improved using the 25/15% suppliers. The trade-offs are: the compounds may cost more vs. more reliability in filling orders; more cost vs. better service levels; greater reliability in filling orders vs. requirement to maintain high inventory levels; lower inventory levels = lower total costs.

4.a. I’d make the following changes; (1) I’d change the way we purchase our compounds; specifically, (1) the lowest price is not always the best value (consider costs, delivery, service levels) (2) I’d reduce the inventory levels since holding the amount we have is not based on need; if we order from suppliers with a better fill rate we can reduce the amount of days we keep inventory (3) start an information sharing program with the intent to improving communications both within and outside of DEP.

4.b. The mere thought of change seldom sits well with those that are comfortable with the way things are nor to those who benefit financially with the status quo. DEP has a potential communications problem both internally (manufacturing and shipping) and externally (suppliers who will lose shares of sales and those who stand to gain).

5. DEP has become too complacent in their relationship GARD and the new blood within the organization (Binish) will make them regret it. DEP has to immediately determine if they intend to keep GARD as a customer and determine what are the practicable limits they can employ to for them to maintain/regain the business. Of major importance is to fully understand Binish’s approach and methods and, if practical to do so, go about incorporating internal changes to meet GARD’s expectations. And then, DEP needs to ensure Binish is fully aware they are “on-board” and have made the changes necessary to meet GARD’s expectations. Binish’s definition of “qualifying criteria” appears to be the minimum threshold a company has to meet in order to move to the “finals” (“order winning criteria”)…. things like service levels, price, communications/public relations, responsiveness, product quality/quality assurance. “Order winning criteria” are those things that set you apart from the other bidders; these were addressed in 4.a. and 5, specifically, Binish/GARD needs to be assured the performance cycle and service levels meet/exceed their expectations and that the communication flow between the two companies (information sharing) is solid.

Both “qualifying and order winning criteria” will change over time as technology moves from the paper-based exchange of business to an standardized electronic one (electronic data interchange). This will reduce costs, improve the speed in which orders are processed, fewer processing errors and bette customer communication/relationships. Supply chain management is a dynamic, ever changing process. A commercial has a person staring “I want my cash and I want it now!”…we can expect clients will insist for the same in a continued movement right to ever shorter performance cycles and fill rates.

PROBLEM SETS 1.a. Yes, EDI would pay for itself in the first five years (five year cost for EDI = $368,247, five year costs for manual system is $378,000.

1.b. The effects will depend on the overall automation of the Illumination Light Company..the higher the integrated automation level within the company + the addition of EDI may lead to lower costs, higher productivity, and reduced order-cycle times.

2. Yes, incorporating EDI will effect their manual order management system. Illumination Light Company will have to alter internal business systems, change their internal organizational business relationships,and adopt new information technology, and probably have to hire/contract for more information system personnel. There will be a lot of socio-technical change (the benefits of EDI, the conditions under which those benefits will develop, and the obstacles starting an EDI program and payoff) that Illumination Light Company may be ill equipped to handle internally.

3. I would discuss with the Quikee Stop the following advantages/benefits of UPC and bar coding applications: When integrated into an existing information system, barcoding allows you to track your merchandise and to conduct inventory control; inventory can be reconciled in a day instead of weeks. Barcoding provides more accurate data while saving both time and costs. Inventory cycle counts, point-of-sale checkout, purchasing, and sales analysis are just a few of the benefits I would stress.

4.a. Top-down sales forecasting begins with combined data on sales of all products and then applies a methods of statistics to predict sales of individual items at particular locations. A demand estimation process whereby product demand predictions for a business are generated for the highest product group level first and are then projected downwards to lower levels. Each Distribution Center should receive the following: Los Angles:3,000 (12000x.25), Memphis: 3,600 and Dayton: 4,200. The warehouse would retain 10% or 1,200 pair.

4.b. Based on a 6% increase over June’s forecast, each Distribution Center should receive the following share of 12,720 socks (12,000x1.06): Los Angles: 3180 (12720 x.25), Memphis: 3,816 and Dayton: 4,452. The warehouse would retain 10% or 1,272 pair.

5.a. Moving average (time-series forecast method ) is the mean of time series data (observations equally spaced in time) from several consecutive periods. Called 'moving' because it is continually recomputed as new data becomes available, it progresses by dropping the earliest value and adding the latest value. The time in this problem is three months. Forecast for 3rdQ 2004 is 1000+1300+800=3,100/3=1033.

5.b. Simple exponential smoothing is a statistical technique for detecting significant changes in data by ignoring the fluctuations irrelevant to the purpose at hand. The quarterly forecasts for 2004 using an alpha factor of 0.1 are :
Q1 =.1(1000)+(1-.1)(900)=910
Q2 =.1(1300)+(1-.1)(910)=949
Q3 =.1(800)+(1-.1)(949)=934
Q1 =.1(250)+(1-.1)(934)=866

5.c. The quarterly forecasts for 2004 using an alpha factor of 0.2 are:
Q1 =.2(1000) + (1-.2)(900)=920
Q2= .2(1300) + (.8)(920)=996
Q3= .2(800) + .8(996)= 957
Q4= .2(250) + .8(957)= 816

5.d. Moving averages (1) reduce the effect of temporary variations in data, (2) improve the 'fit' of data to a line (a process called 'smoothing') to show the data's trend more clearly, and (3) highlight any value above or below the trend. In exponential smoothing (as opposed to in moving averages smoothing) older data is given progressively-less relative weight (importance) whereas newer data is given progressively-greater weight. In this case, the moving average is not very accurate because of the large fluctuations in sales and without also using qualitative or casual forecasting tools, the forecasts may be of little use. The same judgement factors should be applied to the exponential smoothing process as we used low alpha factors (not able to keep up with the swings.

References:

Global Logistics Management, Second Edition
Kent N. Gourdin

Supply Chain Logistics Management
D. J. Bowersox, D.J. Closs, M.B. Cooper

Electronic Data Interchange: Concepts and Effects
Kenneth W. Copeland, U.S. Department of Veterans Affairs

Promoting Electronic Data Interchange: Building a Foundation for Support to Small Business
Jonathan A. Morell, Ph.D.’ William Neal, Viki Fries

http://www.businessdictionary.com/definition…...

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