Supply Chain

University Degree Business and Administrative studies

SUPPLY CHAIN DEFENSE

Running head: KUIPER LEDA SUPPLY CHAIN DEFENSE

Kuiper Leda Supply Chain Defense

Name

University of Phoenix

Kuiper Leda Supply Chain System

Kuiper Leda is an electronic manufacturer focuses on Electronic Control Unit (ECU’s) and its clients including automobile manufacturers and OEMs. The Electronic Control Unit is to control the fuel injection system, ignition timing, and speed control system (Wikepedia, 2008). The ECU consists of 8-bit microprocessors, random access memory (RAM), read only memory (ROM), and an input and output interface. The company also entered a new market of Radio Frequency Identification Device (RFID) an automatic identification method, relying on storing and remotely retrieving data by using devices or radio waves. Kuiper supply chain management has several issues on different levels of production such as resources, shop and capacity, and delivery of product.

The first issue, Kuiper only works with smaller customers and has a limited daily capacity of ECUs and RFIDs. Even though the company encounters different issues the company has good reputation with its customers, and known for quality and delivery responsiveness. The second issue, Kuiper thrives harder to meet the repeat orders and relationship with supplier because the company has multiple competitors within the industry. Kuiper needs to focus more on producing large-scale capacity and delivery. The third issue is the fluctuation of demands and Kuiper has been struggling because supplier ordered different number of units that causes Kuiper not to meet the supplier requirements. As a result, Kuiper supply chain become inefficient and unproductive and forced the company to implement changes. One of the biggest implementation is the Material Planning Software System, “the importance of MRP system allows rejecting a larger batch than what is needed” (Chase, Jacobs & Aquilano, 2005). For instance, MRP uses backward scheduling or working backwards in time to meet the desired completion date. The website Alpha Digital Solution emphasize the core functionalities of MRP are the following:

Engineering Management a functional or project management who perform in the field of manufacturing industry.
Demand Management is a personnel that controls the demand and avoid recession.
Sales Order Management software provides services by addressing the customer’s need. SOM is an automation process using electronic workflows and integrate online transactions between customers and suppliers.
Master Production Planning and Scheduling software are being used in providing information from sales forecasts and integrating the sales into single comprehensive production schedule.
Production Order Release orders that need to release by manufacturing company to the shop floor.
Shop Floor Control with Lot Traveler and Machine Loading Sheets provide solution to job/production management, process instructions, production scheduling, in time inventory control, tool tracking, production tracking, traceability, labor tracking, and machine integration.
Shipment Management an automation of shipment processing solution.
Purchase Management module a solution provide the ability to analyze and report comprehensive database of supplier information and to improve buying power.
Quality Control and Plant and Machinery Maintenance Module reduced unplanned breakdowns, streamline the work process, minimize equipment life cycle cost, and increase labor productivity.

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These core functionalities are important for Kuiper to remain competitive and continue to produce microchips to meet the needs of suppliers and customers. Aside from the fundamentals mentioned, Kuiper Leda also need to take Manufacturing Resource Planning (MRP) into consideration because of the large scale of ordering the company is able to use Bill of Materials (BOM). The importance of BOM indicated the lists of orders and components that are needed for each item like parts, sub assembly, final assembly, and finished goods). The BOM will give Kuiper number of levels such as structure assemblies and sub assemblies. After finalizing the BOM, the next step is the netting, which mean any stock on hand must be subtracted from the gross requirement and the calculation will give the quantity of each item needed to manufacture the required finished product. Then the last step is offsetting meaning to determine when the manufacturing company should start the process so when the customers and suppliers ordered in bulk the items are available for them to purchase. The advantage of Manufacturing Resource Planning (MRP) is to control the process through formulation, production, and distribution and which resulted in diligent batch scaling, date coding, tracking and lot tracing. By understanding the processes and benefits of MRP, Kuiper profit will increase and able to manage its inventory and related issues.

Kuiper Leda Supply Chain Defense

The purposes of operation management is to manage the purchases, inventory control, storage, logistics, and an evaluation which means Kuiper Leda’s main focus is to work on efficiency and effectiveness of the company’s process. Additionally, operation management is an area of business includes production of goods and services, and involves responsibility of the business (Wikepedia, 2008). Even though Kuiper maintain its suppliers, the company wants to expand business and become more efficient in order to compete in the same high-tech industry. In order to meet the demands Kuiper need to consider the option of outsourcing the manufacturing products and the production process. The benefits of outsourcing to Kuiper are production savings, strengthen the company’s core business, higher leads, superiors repeatability, better resource for better product, more representative prototypes, reduce cycle times, quicker turn around, and lower inventory and other related costs (Natel Engineering, 2002). Kuiper understand in order to improve the supply chain management the company needs to outsource ECU and retain RFID tag to manufacture in-house. The company believes that this result to a four week lead time of outsourcing the ECU production will satisfies the need of the customers in specific timeframe. Due to the increase of cost in materials that being used in production Kuiper must consider outsourcing the production process.

According to Martec International Incorporated, the several steps of achieving integrated supply chain in adapting new process and procedures by:

Using newly emerging global data to attach industry standard product identification number to each item on an order.
Sending orders and receiving confirmation through EDI or Internet.
Used a scannable labels or RFID tags.
Using the Advance Ship Notification transaction to advise the retailer of the new product so it can sell quickly.
Shipping via customer specified the business usually used a third party carrier such as UPS, FedEx, and common carrier. The shipment would take usually a month if its international and local for a week. This could cost more money but if Kuiper contracted with these carriers atleast for a year or more these carriers would provide a price discount for the term the company negotiated.

In order for Kuiper to be successful need to take to consideration each steps to speed up the process and produce high quality product that would satisfy the consumers and suppliers.

Kuiper Leda Measure and Metrics

Kuiper Leda need to monitor the efficiency of the company’s production by using different key metrics and these includes costs of good sold, inventory turn, inventory service level, inventory carrying cost, and lead-time which gives the company’s financial position in making better decision in meeting the needs of the stakeholder such as the company management and employees, suppliers, and customers. Martec International Incorporated describes the measurement and metrics could be beneficial and Kuiper could also use the following tools:

Cost of Good Sold is the total costs of good sold to the customers. The calculation

would be (purchase this year + inbound freight + workroom cost + opening inventory – closing inventory). The purpose of the calculation is to increased profit while the costs of goods are reduced.

Inventory Turn can be calculated in two ways. The first one is cost method calculated as (inventory turn = cost of good sold / average inventory at cost). The second is the retail method (inventory turn = sales / average inventory at retail). The calculation purpose is to ensure that Kuiper productivity and gross margin increased. The 80/20 rule to ensure the company maximize the productivity of the inventory.

Inventory Service Level is the percentage of customers comes into the actual stores to buy a product and pay item that day. The rule for the inventory service level is to ensure that 97% of the customers are to purchase the item at fist attempt. Some days are going to be slow like Monday and Friday by putting the quantity on stock by small or bigger batch on specific day so its easy to track all the stock in – store levels.

Inventory carrying cost is the sum of all the costs of every product that Leda produced and calculate as percentage of the value of each inventory. The activity that should be include are cost of handling of equipment and plant that is part of supply chain that are being used, cost of storage where to stock all the inventory, shipping point, and cost of insurance. The purpose of the calculation is to ensure the monetary carrying cost is affordable and at the end of the day the company is going to make profit.

Lead-time is know exactly where are the goods are going to ship and the lead should be getting the goods from time that the order is placed and hits the floor or distribution center. For instance, if Kuiper Leda will ship product overseas this mean the company need to plan the shipment two weeks or month to meet the demands of the consumers.

Aside from the information above Kuiper always need to have enough supplies in to finish the product but also the company should be able to handle shortages and excess products to remain competitive within the business. The company needs to run in a fast- environment that the quality of the product is in jeopardy. The book explains that Just-In-Time (JIT) is a system that cannot be tolerate because of the poor quality and should be based on balanced capacity (Chase, Jacobs & Aquilano, 2005). The major benefits of JIT are to raise quality and lower costs. To reduced costs Kuiper needs to store less work-in progress and less finished goods to reduce storage requirements. For instance, if Kuiper Leda could reduce the inventory withhold from $50,000 to $30,000 the company does not need an expensive warehouse to store their products. To have higher productivity Kuiper need to consider on reducing the stock holdings by 95% so the company is able to cut the assembly time. The competitive advantage of having this kind of process it creates more flexibility within the business and able to communicate better with the customers and suppliers, and Kuiper could react quickly to the demands. JIT would help the business to move forward quickly and to keep up with competitors. The way Just In Time works when everything arrives at right time. The customer or suppliers demand for the product so the company creates a production line and ensure that the demand is immediately in works. The is4profit website mentioned that the principles of JIT should be:

Inventory levels must be as close as zero.
Quality needs to be the responsibility of all employees, with zero tolerance of quality defects.
Lead-time, waiting times, processing times and lot sizes should be reduced.
Production facilities and staff need to be more flexible.
Staff should be actively involved in improving working practices, solving problems and improving efficiency.
Anything that does not add value to product or service should be continued.

The main reason Just-In-Time system is important because Kuiper Leda is able to save warehouse cost and space. This result to high competitive market and have better relations with suppliers. The manufacturing company is able to increase their profit by minimizing the cost that would benefit the entire business.

Conclusion

In conclusion, Kuiper Leda needs to continue using the MRP system and help the company use the capacity of the products. The proper usage of the operating system will help the company to focus on capacity management and delivering the products on time. Kuiper has a strong defense of outsourcing the production process and reducing the storage cost that will satisfy the supplier and the customer based on the delivery date. In competing globally as a result of increasing the company profit and production. Kuiper must consider outsourcing the microchips or other production processes in order to compete globally .The measurement and metrics are used only for the company to keep track on production, overhead costs, manufacturing cost are all reasonable because the purpose of all these is to increase production and profit. Lastly, by choosing the Just-In-Time system management the business is able to produce materials that is only needed and noting will be wasted. As a result, the company will a great deal in warehouse storage. The intention of JIT is to not to overstock and reduce the carrying costs.

References

Chase, Jacobs & Aquilano (2005). Operations management for competitive

advantage: Supply Chain Design. New York: The McGraw-Hill Companies

JIT. Retrieved on October 5, 2008, from advice/general-advice/jit-working_9.html

Natel Engineering (2002). Microelectronics Manufacturing Solutions: The Benefits and

Considerations of Outsourcing. Retrieved on October 5, 2008, from

Martec International Incorporated (2008). Smarter Supply Chain Utilization for the

Retailer. Retrieved on October 5, 2008, from www.martec-international.com

MRP Benefits. Alpha Digital Solution. Retrieved on October 4, 2008 from,

Operations Management. Retrieved on October 4, 2008, from

University of Phoenix. (2008). Managing Inventory in a Supply Chain. Retrieved on October 3, 2008, from University of Phoenix, rEsource, Simulation, MBA550 – Resource Optimization Course Web site.