Stakeholders play multiple roles in the supply chain. Most consulting projects impact in some way each of five types of stakeholders: customers, stockholders, employees, suppliers, and the community. The importance of considering the interest of all stakeholders is reflected in the mission statements of virtually all major corporations and, as such, provides guidance for consultants in formulating their recommendations. (Chase, et al., p 388).
Problem Statement
Kuiper Leda received a large order from Midland Motors that exceeds their current daily plant capacity. Kuiper Leda will evaluate the existing supply chain and make strategic decisions concerning all components that will impact its effectiveness.
End-State Vision
Kuiper Leda, Inc. has set the following End-State Vision for the company:
1.) Kuiper Leda is establishing a schedule to meet the growing demand for its products by developing and increasing its assembly plant to accommodate new growth within the company with the next twelve months.
2.) Kuiper Leda will develop a Demand Management plan that covers forecasting, order entry, order promising, brand warehousing requirements, interplant orders, and service parts requirements.
3.) Kuiper Leda will streamline its suppliers to best fit with the supply chain of the company.
Alternative Solutions
Global sourcing is a concept that Toyota has excelled in within the Toyota Production System. “Global sourcing entails identifying, evaluating, negotiating and configuring supply across multiple geographies to reduce costs, maximize performance and mitigate risks,” (Minahan, 2005, p 1). The six major categories that factor into global sourcing are material costs, transportation cost, inventory carrying cost, cross-border taxes, performance and risk. Since the 1980’s Toyota has been able to successfully manage each of these categories, which has led them to become the number one automobile manufacturer in the world. Kuiper Leda can learn a great deal from benchmarking Toyota’s Production System and over all supply chain management strategy.
JIT Production is Just-in-Time production that reduced the amount of inventory on hand to the bare minimum amount of inventory needed to complete a preset cycle. Dell Computer Company’s successful integration of JIT in its procurement, manufacturing, and distribution processes. Through the JIT process, Dell gained better control of the supply chain process. Dell’s decision to sell computers built from components produced by other manufacturers has relieved Dell of the burden of owning assets, research and development risks, and the burden of managing a large workforce. At the same time, Dell only produces to order and thus keeps no finished goods inventory. These business decisions have allowed Dell to grow more rapidly than its competitors and maintain only eight days of inventory.
Lean services premise is that the production of an item can be controlled and minimized to reduce excess cost of holding inventory. Home Depot (HD) has been actively pursuing computer-based inventory controls. Inventory controls allow the company to order only what is estimated to be stocked on the floor of a store. By upgrading the technology of ordering inventory for the retail store, HD has implemented a lean production philosophy.
Management at Hewlett Packard realized that the inventory levels that the company was carrying were being devalued weekly. This devalued inventory made management reconsider the method in which inventory was ordered and stored. “HP had no control over component prices, but it could control how much inventory it was holding” (Callioni, Montgros, Slagmulder, Wassenhove, Wright, 2005, p. 2). HP changed its supply chain by “reducing the number of nodes in the supply chain, consolidating manufacturing facilities, taking possession of components on a just-in-time basis, paying the going price at that time, and working with suppliers to minimize inventory when a price drop was anticipated” (Callioni, et al. p.2) By reviewing and taking action on it current supply chain, HP began to see result immediately. It soon began following this new initiative throughout it production lines with all of its products.
AT&T outsourced their supply chain management needs to Accenture. Accenture has a solid supply chain management history and strong outsourcing credentials. Accenture was able to develop a customer focused supply-chain model, which included all of their supply chain processes such as sourcing, production, scheduling, account service, warehousing, inventory, billing, and services management.
Analysis of Alternative Solutions
Global sourcing received a rating of because it could not meet all of the required goals of the company. The highest rating was given to Develop a Demand Management plan because global sourcing could assist in acquiring the needed material and/or parts.
JIT and forecasting overall rated the highest because it could meet all the end state goals of the company. The highest rating came from developing a demand management concept.
Lean services did not meet the specific goals of the company. Lean service is a philosophy that should be practiced by companies. The elimination of waste within lean services will assist the company in gaining higher profits.
Outsourcing ranked high with all of the goals of the company. Outsourcing can help meet short term needs as well as longer term goals of the company.
Risk Assessment and Mitigation Techniques
Global Sourcing could involve losing a contract to the company in which was contracted to perform activities. The risk is medium. The consequences of losing this contract to the subcontractor could be the lost of a customer along with the loss of revenue and profits. A mitigating technique would be to only global source items and/or activities that are not strategic to the company.
JIT and Forecasting has the risk of being incorrect. The level of risk is low. The consequences are the loss of production time and an increase in delivery time along with the loss of profits. A mitigating techniques is to use historical data and obtain suppliers of materials that can provide additional inventory if needed.
Lean services have the risk of increasing cost to the company if not followed. The risk is low. The consequence is loss of profits and the decrease in value of company stock. A mitigation technique would involve management use lean philosophy from the top down.
Outsourcing has the risk of losing a contract to the company in which was contracted to perform activities. The risk is medium. The consequences of losing this contract to the subcontractor could be the lost of a customer along with the loss of revenue and profits. A mitigating technique would be to only global source items and/or activities that are not strategic to the company.
Optimal Solution
In order to meet current demands, Kuiper Leda will need to partially outsource some of the orders. “Outsourcing goes beyond the more common purchasing and consulting contracts because not only are the activities transferred, but also resources that make the activities occur, including people, facilities, equipment, technology, and other assets, are transferred… the responsibilities for making decisions over certain elements of the activities are transferred as well” (Chase, et al, 2005). According to MDF Systems’ (2004) website, by outsourcing Kuiper can “minimize capital expenditures; improve efficiencies through economies of scale, and level out seasonal fluctuations.” Kuiper Leda would also benefit by increasing efficiency, reducing risks, and gain better control of costs. In addition, Kuiper Leda does not have to accrue additional expense in acquiring new technology and/or equipment to produce the products since the obligation and decisions relating to production are transferred to the external company. Furthermore, Kuiper can focus on core activities or expertise, customers, and markets. In determining which of these products to be outsourced, Kuiper Leda has to consider three things namely lead time, costs, and capacity. Kuiper Leda has to outsource the ECUs because the company does not have ample lead time to outsource the RFIDs. Outsourcing the RFIDs would require three weeks while producing it in-house would only require two weeks. Furthermore, Kuiper Leda cannot exceed the 79,297 ECU-capacity for the first quarter. In Kuiper’s case, outsourcing would assist in reducing costs of goods sold and allow for achieving production targets. Therefore, outsourcing the production of ECUs would be the most optimal solution for Kuiper Leda and its clients.
Implementation Plan
The ECU’s deliverable time table is based upon a quarterly plan. The production manager is the one who would be responsible.
The RFID’s deliverable time table is based upon a quarterly plan. The production manager is the one who would be responsible.
Evaluation of Results
Kuiper Leda is establishing a schedule to meet the growing demand for its products by developing and increasing its assembly plant to accommodate new growth within the company with the next twelve months and this can be measured by the production of a new facility.
Kuiper Leda will develop a Demand Management plan that covers forecasting, order entry, order promising, brand warehousing requirements, interplant orders, and service parts requirements. This goal can e measured by assigning task to appropriate personal and reviewing monthly with a target start date within eight months.
Kuiper Leda will streamline its suppliers to best fit with the supply chain of the company. This can be measured by having only the suppliers that match the supplier evaluation parameters. The target start date is within six months.
Conclusion
Kuiper Leda is on the road to obtain the required ingredients to establish efficient supply chain operations. By following the supporting evidence from other companies across several industries in managing the supply chain, the historical data has proven correct. As long as Kuiper Leda outsources only non-strategic activities they should be able to gain market share in the future with the completion of a new manufacturing facility.
References
Callioni, G., Montgros, X., Slagmulder,R., Wassenhove,L., & Wright, L. (March 2005), Inventory-Driven Cost, Harvard Business Review. Retrieved from Http://www.hp.com October 15, 2008.
Chase, R. B., Jacobs, F. R. & Aquilano, N. J. (2005). Operations Management for Competitive Advantage, 11e. New York. The McGraw Hill Companies
Liker, J. K. (2004). The Toyota Way: The Company That Invented Lean Production. New York. McGraw Hill Professional Retrieved October 15, 2008 from +
management
Minahan, T. (2003). Global Sourcing: What You Need To Know to Make It Work. Aberdeen Group. Retrieved on October 15, 2008 from http://searchcio.techtarget.com/original
Songini, Marc L. Just-In-Time Manufacturing. Computerworld. November 20, 2000. http://www.computerworld.com/softwaretopics/erp/story/0,10801,54131,00.html Accessed October 15, 2008
Table 1
Issue and Opportunity Identification
Table 2
Stakeholder Perspectives
Table 3
Analysis of Alternative Solutions
Table 4
Risk Assessment and Mitigation Techniques
Table 5
Optimal Solution Implementation Plan
Table 6
Evaluation of Results
