Supply Chain Modelling - Essay Example

Supply Chain Modelling Summative Assessment 200 Steps to follow: A. . Determine a theoretical framework on which you are going to use to analyse your case study. In the day to day operation of businesses, the use of network of interrelated activities to make the provision of products and services possible is nothing but a necessity. It is for the existence of these networks of businesses that bring about what has come to be known as supply chain management. Formally, supply chain management was more concerned with supply chain in getting the customer, who is the end user the needed level of demands. Today, there has been a swift change in the entire supply chain management phenomenon. This change in supply chain management is the resultant theoretical framework, which is presently under discussion, known as supply chain business process integration. Supply chain business process integration is more or less related to collaborative ventures that businesses engage themselves in when dealing with buyers, suppliers, joint products development, common systems and shared information (Net Coach, 2012). Indeed, modern reviewers actually argue that the success behind the implementation of any supply chain management is focused on the integration of these processes and that supply chain management cannot be successful without effective supply chain business process integration. Once such integration is undertaken, the benefits and advantages that come the way of businesses is that business operation and management becomes well coordinated and harnessed (quote). Describe the case study as part of an extended supply chain system. The case study used is indeed part of an extended supply chain system as the company involved, Argos was faced with the need to dealing with sustainable growth in sales, quantitative number of sales channels, as well as the growth in choice for the customer (Vanderland Industries, 2009 p. 1). Indeed, supply chain system accounts greatly in the determination of reaching the customer with the demands he makes and thus the desired sustainable growth in sales and number of sales channels. The company was also faced with the challenge of increasing competitiveness on the market because from the strategic focus of the company, an ability to increase the number of sales channels and subsequently increase the number of sales would be a strong indication of the competitiveness of the company on the market. If for nothing at all, increase in sales would represent an increase market share (quote). To overcome the identified challenge, a solution rooted in the principles of supply chain system and supply chain business process integration was instituted. The major deliverable involved in the solution was to have an automated distribution centre established. This automated distribution centre was to make use of the VISION™ Warehouse System integrated into the company’s existing warehouse management system (WMS). This means that a major link of solution adapted by the company was to use the warehousing system to get its demand and supply gaps bridged. Evaluate the supply chain case study and determine the critical issues within this case study (for example high inventory level, reduced customer service level, high transport cost, unreliable forecast, discrepancy between sales forecast and real sales, inappropriate use of performance measures, and so on). Reading through the case study, one of the clearest issues of supply chain that comes up has to do with high inventory levels. For an effective supply chain management, it is expected that the ratio of the number of times a company’s inventory is sold and replaced over a period of time should be balanced in order to achieve inventory turnover (quote). However, Argos released that the company was fast suffering from high inventory levels, which meant that the balance between the company’s inventory sales and rate of replacement over time were tilted towards the inventory levels. Kokemuller (2012) however explains that high inventory level is highly disadvantageous as it leads to poor turnover. This is because high inventory level is a general indication that the company is not selling enough to avoid inventory build up. Another disadvantage with high inventory level is that it leads to loss and damages to products. Even though Argos is in the non-food industry, most of its products are perishable products. What this means is that once the products are allowed to spend several days inventory, they may lead to damages and loss. A direct and corresponding effect of loss and damage is high cost of doing business, which is another disadvantage that plagued Argos in the conduct of its business. Explain which operational techniques studied in this module would be appropriate to solve these issues and why. Once high inventory levels plague a company as has been identified in the case study, Kokemuller (2012) suggests that “Management must figure out how to communicate with suppliers, how to improve ordering processes or how to increase market demand to reduce the high levels of inventory.” This means that an operational technique is always important in solving the issue of high inventory level. Given that the present issue has to do with inventory, and subsequently the portion of Argos’s raw materials, work-in-process goods and completely finished goods that are considered to be their asset (Investopedia, 2013). Due to the raw materials, goods and finished goods involved, the operational technique that is suggested is distribution planning so that through an effective distribution of the raw materials, goods and finished goods, there will be effective distribution of the goods from the company’s warehouse to the customer. It is not surprising therefore that Argos in its own system has decided to use an automated distribution center to solve its problem. One of the most outstanding advantages associated with the use of distribution planning as an operational technique in dealing with the current issue is that distribution planning is multi-variant and thus comes with several compositions for the supply chain manager. Examples of these compositions are said to include product dispatching, product placement, vehicle loading, vehicle choice and vehicle planning. B. A minimum of Even though it has been mentioned earlier that distribution planning is a major operational technique that can be adapted to deal with the issue of high inventory level identified in the case study of Argos, it is also important to note that the use of distribution planning is not recommended to be used as a single solution approach but in consolidation with other operational techniques. If for nothing at all, the theoretical framework selected for the case study is that of supply chain business process integration and so operational techniques must be integrated. Having said this, transportation model and product allocation are selected in relation and together with distribution planning. As far as product allocation is concerned, it is expected that the company will be in a position of creating various criteria for the allocation planning process. For example the criteria could be taken from customer perspective or regional perspective. Given that Argos continues to face the challenge of high inventory levels, it is suggested that the product allocation that is done should have a regional perspective so that the dispatching of products within the inventory can be done with larger quantitative margins. Commonly companies facing high inventory levels are admonished to opt for regional allocation rather than customer allocation because customer allocation only guarantees minimal dispatching of products (quote). In direct relation to the regional criteria that is suggested for Argos, it is also suggested that a transportation model be designed by the company to take care of the actual dispatching process that the regional allocation of products will bring about. Commonly, once the company puts its self in a position where it wants to be effective in the allocation of products, it is recommended that a standby transportation system will be in place to meet the demand of calls for supply. To ensure efficiency, it will be important that the transportation system will be one that can be well monitored for results. For example it should be possible to determine all suppliers, units of commodity and cost involved. Theoretically, the single most effective means to attain this is to make use of a transportation model. A typical transportation model should be able to matrix that outlines the eventual distribution schedules that can best minimise the cost of shipment (quote). In the matrix below, a classic transportation model is shown in a matrix format with three suppliers having 15 units in all to ship. There are equally three demands for the commodity as there are for the suppliers. The numbers written in the cells of the matrix are indicators of the unit shipping cost. Subsequently, this distribution schedule will come with the advantage of making it possible to know the schedule that minimises cost most. Source: Jensen (2004) Distribution Planning systems can address the following operational issues faced by a supply chain manager Product dispatching: When and where should a product be dispatched? Product placement: Which product should be held at each location and in what quantity? Vehicle loading: What products should be loaded on to a vehicle? Vehicle choice: Which mode of transportation should be used? Vehicle planning: How many vehicles of each type would be required on what days in the next one month? The distribution planning is touched on further as part of the three operational techniques that are detailed for use by the company. Already, it has been said that an effective distribution planning will end up in a system where Argos is able to reduce its inventory levels. Distribution planning will help in addressing product dispatching issues, which will answer the basic question of when and where products should be dispatched. Most often, a poor understanding of the best time to dispatch products will create a situation whereby supplies will not match up on the demand needs of customers (quote). When dispatching is not done to the right places also, there will be issues with return of product and this will swell up inventory again. An effective distribution planning system will also solve the issue of product placement. By product placement, it will be possible for the company to easily determine the type and kind of products that should be held at every even location and the quantities needed for these locations. A skilful supply chain manager would know be able to understand the trend in regional supply when product placement is effectively done and so the allocation of specific strategies to deal with specific regions can be outlined. What is more, vehicle loading, vehicle choice and vehicle planning will all advantageous components of the distribution planning. 1 2 3 3 operational techniques should be detailed for this point (for example you can use a selection of the following: product allocation, transportation model, assignment models, trans-shipment model, personnel scheduling, distribution planning, network flow models, vehicle scheduling models, simulation models, and so on). Only techniques studied in the module SHT4009 are accepted. You can also use ARENA and PARAGON based models. Describe the theoretical aspects related to your selected operational techniques in the context of your case study. Determine which performance measures you are going to work with. Indicate the performance measures you are going to analyse in the context of your supply chain case study. Define the model and provide a numerical solution which would indicate an improvement on your performance measures. C. Critically analyse and validate your proposed model/models and results. Present your conclusions and give recommendations for the future. Tips on data collection: The data used can be selected from past experience (for example previous jobs), or secondary data can be used (from published reports, journal papers or books). A selection of case studies can be adopted from published material which link in a logical way to form a supply chain system. Please ensure that this is clearly explained within the report and appropriately referenced. Marking structure: 30 Marks are allocated for part A. Determine an original case study which will support a selection of operation techniques. Aim to synthesise logistical concepts and interrelate operational techniques and theories. Use appropriate references where necessary. Good understanding of the operational techniques studied and their application within a logistics environment is expected here. 35 Marks are allocated for part B. Show good theoretical understanding of the modelling techniques. Critically discuss the mathematical model and its corresponding solution in each case. Evaluate the model limitations Link the model with appropriate performance measures 30 Marks are allocated for part C. Critical analysis of the models used in relation to the selected case study. The ability to test and validate the models forms the basis for this answer. The ability to interrelate logistics theory studied on this course (not only this module) will help you to achieve a high score for this part. Use appropriate references where necessary 5 Marks are allocated for presentation ( CD/DVD should be included for the job done). REFERENCE LIST Vanderland Industries, 2009. Argos goes full speed ahead with automated DC http://www.supplychainstandard.com/assets/getAsset.aspx?liAssetID=779 Kokemuller N(2012). Disadvantages of High Inventory Levels. http://smallbusiness.chron.com/disadvantages-high-inventory-levels-20400.html Investopedia. 2013. Inventory. http://www.investopedia.com/terms/i/inventory.asp#axzz2Vr8XePBY Jensen Paul A. (2004). Transportation Model. http://www.me.utexas.edu/~jensen/ORMM/computation/unit/mp_add/subunits/tran_add/index.html Net Coach, 2012. Supply Chain business process integration. http://www.netcoach.eu.com/index.php?id=228 Read More