A Midwest U.S. commercial manufacturing firm is facing a supply chain problem. T

Question

A Midwest U.S. commercial manufacturing firm is facing a supply chain problem. The manufacturer produces and sells a single product, a general-purpose small motor as a component part to different customers who incorporate the motor into their various finished products. The manufacturer has a supply chain network that connects product centers located in St. Louis, Missouri, and Dallas, Texas, with six warehouse facilities that serve commercial customers located in Kansas City, Missouri; Chicago, Illinois; Houston, Texas; Olahoma City, Oklahoma; Omaha, Nebraska; and Little Rock, Arkansas.

Part of the supply chain problem is the need to keep the cost of shipping motors to the customers as low as possible. The manufacturer adopted a lean management philosophy that seeks to match what it produces with what is demanded at each warehouse. The problem with implementing this philosophy is complicated by the inability to forecast the customer demand month to month. If the forecast of customer demand is too low and not enough inventory is available (an underage of inventory), the manufacturer has to rush motor orders that end up being costly to the manufacturer. If the forecast is too high and the manufacturer produces and ships unwanted inventory (an overage of inventory), the warehouse incurs wasteful storage costs. The management of the manufacturing firm has decided that an analytic-based procedure needs to be developed to improve overall business performance. Analysts could use this procedure each month to develop an optimal supply chain schedule of shipments from the two supply chain centers to the six warehouse demand destinations that would minimize costs.

A key part of this procedure would be to include a means to accurately forecast customer demand and an optimization process for shipping products from the manufacturing centers to the warehouse demand destinations. The question is, "What are some methodologies that could be applied to analyze this problem?"

Explanation / Answer

For one, they focus intensely on actual customer demand. Instead of forcing into the market product that may or may not sell quickly and thereby inviting high warehousing costs, they react to actual customer demand. And by doing so, these supply-chain leaders minimise the flow of raw materials, finished product, and packaging materials at every point in the pipeline. To respond more accurately to actual customer demand and keep inventory to a minimum, leading companies have adopted a number of speed-to-market management techniques. To help organisations make the best decisions, the Miebach Supply Chain Management Group employs an integrated planning approach, consisting of four steps from planning to realisation: Potential analysis, Concept study, Detailed planning Project and change management

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