QUESTION 1 (MARKS: 20)
“Q 1.1 According to the Supply Chain Council, there are five key challenges that a business faces. Using the organisation at which you are employed or an organisation of your choice, discuss these challenges and suggest ways in which the organisation you have chosen ensures that they overcome manage these challenges and possibly turn these challenges into a strategic advantage. (10)
According to the Supply chain council the 5 common supply chain challenges faced as follows
1. Customer Service – This remains the center of supply chain management. It is all about providing the right quantity of the right product, to the right place and at the right time, sound simple right…. this is by no means a simple task at all.
Every client/customer has different needs. We no longer live in a world of “one size fits all” when it comes to products and service package. We find that we as clients/customers live in an era of customization. This shift from the old model of fitting customer into pre-packed products and services is long gone and we find that evolution of demand has dictated that the service providers and manufactures are now taking a stance of designing to customers’ needs, this has impacted the manufacturing and, consequently, the logistics of getting these products to consumers which has become the corner stone of the demand and supply process that we find in the supply chain and operations management as a whole.
With these advancements, good customer service depends on information. Rather, it depends on the visibility of information. It’s necessary to be able to provide as much data as possible to the client, in order to make decisions and communicate shifts and changes in the supply chain and the operations management before they cause issues.
It may even be advancement in technology such as online shopping at Tesco, customizing you BMW order online or even building your very own custom pizza at Pizza Hut this function gives the sense of control to the customer.
When we look at British American Tobacco South Africa, we recently changed our logistics network to supply our top key accounts from the Heidelberg manufacturing plan as endeavor to avoid a short supply as a result of out of stock of items at depot and hubs and furthermore to reduce logistics. Thus far we have been successful with the transition of the redesign of the key accounts supply network and the management of the operation of that network, however we will need to push on to ensure that we can make a real difference beyond what we promise in order to win dictate the supply to these markets. An article published on the APICS online Magazine in the March/April 2015 issues talk about Revere Electric Supply transformation of to improve the customer satisfaction by the automatic sales order processing solution automatically captures and transforms computer-generated purchase orders into electronic sales orders.
Should BATSA push for the integration of the Key Accounts sales out of there business into the BATSA supply chain, that we will be able to analyses live data and build trends to optimize replenishment of material, effectively manage resources and warehouse space that will lead to customer satisfaction.
2. Cost Control – cash-money cost control Rising energy/fuel and freight costs, a greater number of global customers, new technology, increasing labor rates, new regulations, and rising commodity prices mean that operating costs are under extreme pressure.
The rising cost of transportation is a problem for some companies. Supply chain globalization means that reduced transportation costs will be a major objective for many companies. Again, the solution can be found in visibility and, in this case, it’s the visibility of the supply chain. Technology is the greatest weapon in a supply chain’s arsenal. Investment into platforms like TMS (Transportation Management System) and IMS (Inventory Management Systems) can give professionals the visibility that they need, allowing them to see the parts of their supply chain that are notorious for hiding waste.
The answer isn’t just technology, of course. The key to improving cost control is business intelligence, and it’s not necessarily about data analytics. It’s about using the information at your disposal to make the soundest possible judgments.
More than anything else, improving cost control is about having a plan and executing it properly. You carefully monitor your original plan and adjust as needed, which leads us to our next challenge and solution.
3. Planning ; Risk Management – Changes in the market, like new product launches, global sourcing, political agendas, credit availability, and consumer demand, can give rise to major issues, and these changes can come from almost any direction.
In order to stay as efficient and effective as possible, periodic assessments and redesigns are needed.
These risks must be identified and quantified in order to control and mitigate them. Creating a risk management plan for how your company will handle and overcome possible major disruptions to its supply chain will allow your operations to bounce back in no time.
There is no room for surprises. It’s like Sun Tzu says: “Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.”
4. Supplier/Partner Relationship Management – It’s important to create, understand, and follow mutually agreed-upon standards. This allows you to better understand current performance, as well as opportunities for improvement.
The importance of supplier/buyer relationship is growing. You should aim to build a strong working relationship. Communication and visibility are the key to maintaining a healthy relationship between buyer and supplier.
5. Talent – It’s becoming increasingly difficult to find qualified, interested talent. Supply chain leaders need an extensive understanding of the key competencies and duties needed for supply chain management roles. They need the ability to efficiently source specific skill sets and methods for developing future leaders.
Locating this type of talent, as well as warehouse talent, is becoming difficult. Consequently, the market value of these professionals is rising. We’re also seeing a shift from the old perspective, which was to simply put bodies into the warehouse to handle product as a cost reduction tactic.
This tactic looks cost-effective on the front-end on paper, but the impact is large and overarching, especially when it comes to costs. Quality talent wins over quantity, and you may have to pay above market price to attract the talent that you need. It costs companies more, but it’s worth it in the long run
Q 1.2 With the aid of an example/examples, explain what is meant by the following terms:
Q.1.2.1 Benchmarking – is a way of evaluating performance metrics in a given organization by comparing them to similar performances in one or more (usually external) sources – these may be competing organizations, an industry standard or a compilation of industry bests such as speed to market, transport rates and warehouse utilization to mention a few and the globally famous that all would love to be on is the Forbes Fortune Global 500 benchmarking against revenue.
Q.1.2.2 Business Process Re-engineering. (BPR)- It’s the radical reconsideration of a business process to achieve dramatic improvement in cost, quality, service and speed performance. Business process reengineering is the analysis and redesign of company processes. One such case is What BATSA is doing to move the deployment to Key accounts from manufacturing hub instead of national depot.
Q1.2.3 Total Quality Management (TQM) – A core definition of total quality management (TQM) describes a management approach to long–term success through improvement of the quality, productivity and profitability. In a TQM effort, all members of an organization participate in improving processes, products, services, and the culture in which they work. One can look at Woolworths and the management of quality from the farm or manufacture to the consumer they control the grade and quality of production and ensure that only the best grades is stocked in their stores which aids them in branding the “Woolies” name with this standard
Q.1.2.4 Industrial Engineering – is a branch of engineering which deals with the optimization of complex processes, systems, or organizations. Industrial engineers work to eliminate waste of time, money, materials, person-hours, machine time, energy and other resources that do not generate value. One example can be the review of the product mix in a group and the complexity of the manufacturing process on the various plants, one could deduce that id site 1 is strong in producing product A ; B and site 2 is strong in product C ; E and site 3 is strong in product B, the we move the majority of volume to site 1 this will reduce your operating cost in site 1 and do the same with the other 2 sites but this need to be taken into account with other factors of logistics, BCP so we will still need the functionality in the other sites should we need to call for it.
Q.1.2.5 Ergonomics. “Ergonomics is the scientific discipline concerned with the fundamental understanding of interactions among humans and other elements of a system, and the profession that applies theory, principles, data and methods to design in order to optimize human well-being and overall system performance.” Definition as provided by the International Ergonomics Association. We can look F1 cars to see how the human drive interacts with the technology and high pressure and high speed moments I will look at Fernando Alonso’s ergonomic clutch paddles design that helps him get an advantage over the rest of the field and from an article on the formula1.com that describes steering wheel designs that has become ever more intricate over the years, particularly in the shape of the gear paddles that control the clutch. McLaren have gone down the route of ergonomically designed holes into which the driver can insert his fingers with a very soft spring, this concept gives the driver better feel and control over the clutch, and also allows him to disengage it quickly. This allowed Alonso greater control to maneuver around corners and gain the speed need to come out of them with an advantage, along with order design changes to the car the F1 Drive managed to regain the Drivers’ championship in 2017 from fellow driver Nico Rosberg.
QUESTION 2 (MARKS: 14)
Q.2.1Noting the definition, briefly explain, with examples the situational factors that the planning forecaster at the Independent Institute of Education (IIE) has to consider when deciding to offer a program, e.g. A Diploma in Supply Chain Management as a purely online offering.
Q2.2 What does the term Economic Order Quantity (EOQ) model mean and why is it important in purchasing forecasting?
Economic order quantity (EOQ) is the ideal order quantity a company should purchase for its inventory given a set cost of production, demand rate and other variables. The importance of EOQ on the purchasing forecast can be mainly seen in minimizing variable inventory costs, and the equation for EOQ considers storage, ordering costs and shortage costs. The full equation can be expressed as
EOQ = ?(2SD / H), or the square root of (2 x S x D / H).
Where : S = Setup costs (per order, generally includes shipping and handling)
D = Demand rate (quantity sold per year)
H = Holding costs (per year, per unit)
QUESTION 3 (MARKS: 6)
Q.3.1 Explain the meaning of the term/ratio “inventory turnover”. Why is it important for an organisation to calculate and manage its inventory turnover ratio/s.
Businesses that sell goods strive to attain the appropriate level of inventory turnover. Turnover is a measure of how quickly products move through a business from the time they are purchased until they are sold.
The Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a period. The company can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. It is calculated as sales divided by average inventory.
The importance of this term/ratio calculation is to show the how quick the organisation can convert stock into cash, it will also highlight any issues with SLOB’s (slow or obsolete material) by sowing a low rate of turnover when completed on item level
Q.3.2 “The higher the inventory turnover ratio, the better”, but is it possible that this could lead to problems? Explain.
While rapid turnover is generally a favorable occurrence for a business, problems can arise if turnover occurs too rapidly as well as too slowly effect the business in namely two main fields but not only impacts:
If inventory turns over too quickly, it could have a negative impact on the sales. customers may elect to limit the purchase variety of products they carry to prevent a backlog of inventory and keep goods moving through the operation. While merchants might quickly sell the stock they have on hand, they may have difficulty keeping shelves full or may not offer a broad enough selection to meet customer needs. Customers who cannot find what they’re looking for or are not impressed with the product mix will look elsewhere and may not return to the establishment.
Merchants who purchase in small quantities to keep inventory turnover high typically incur greater costs. They may not be eligible for volume discounts or special deals available to those who buy in bulk. Transportation costs may also be higher, as manufacturers and distributors often charge higher shipping prices for small orders. In some cases, merchants may have to resort to expensive express delivery methods to prevent out-of-stock situations. Merchants may need to place orders more frequently, resulting in greater processing expenses. ”
Research sites Used for Understanding
2016. Deloitte. Online (used to better understand the impact of high inventory turn over by reviewing market beavior)
Available at: https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/cip/deloitte-cn-cip-china-online-retail-market-report-en-170123.pdf
Forbes Financial Glossary. Online
Available at: https://www.forbes.com/sites/forbesfinancialglossary/2011/07/11/inventory-turnover-ratio/#1d8ebb277217
Accessed 11 07 2011.
Piasecki, D., . Optimizing Economic Order Quantity EOQ – InventoryOps.com. Online
Available at: http://www.inventoryops.com/economic_order_quantity.htm
Accessed 7 9 2018.