Final Project Assignment SCM 301 Fall 2017 Overview of the Case Analysis We have

Question

Final Project Assignment SCM 301 Fall 2017 Overview of the Case Analysis We have discussed many concepts in SCM 301 related to planning, sourcing, making and delivering products and services. The purpose of this case analysis is to integrate the different elements of the course and to apply tools you have learned evaluate the supply chain performance. Consider yourself a consultant assigned to develop a supply chain management strategy for the company Throx. You are tasked with evaluating the company’s recent performance and recommending changes (decisions) to improve supply chain management performance. You should use concepts and methods discussed in SCM 301 to undertake these two tasks. Company Background Information Throx sells higher-end custom-design socks in three-sock sets (rather than two). The company operates from a small packaging and distribution facility in Richmond, CA from which it ships product to customers. Given the company’s location and focus, 97% of sales are in California, primarily in the major urban areas of the San Francisco bay area, Los Angeles, Sacramento (and last but not least) San Diego. The company sells exclusively via online sales, at an average price of $15/three-sock set, plus shipping costs charged to the customer. The company currently orders its product from the Chinese sock manufacturer Zhejiang Datang Hosiery Group Co., Ltd in so-called “Sock City.” Socks are shipped via truck to the port of Shanghai, from where they are shipped to the port at Los Angeles-Long Beach via ocean freight. Once offloaded in Los Angeles-Long Beach, the socks are shipped via truck to the Richmond facility. On average, shipment from the manufacturer to the Richmond facility takes 4 weeks. In addition to the transit time required for shipment, the lead time from when an order is placed with the manufacturer to when it is shipped from Zhejiang is 2 weeks. So, the total lead time is considered to be 6 weeks from when Throx places an order til it reaches the Richmond facility. Historically, the standard deviation of lead time has been 1 week. Product Orders (Demand) Information The company provides you with the following information for the past two fiscal years: Demand FY 2015 FY 2016 Annual Demand, units 15,000 21,000 Average Weekly Demand, units 310 420 Variance of Weekly Demand, units 100 150 Product Forecasting Information Throx uses two main forecasting methods based on annual data to predict orders for the following year, a weighted moving average and exponential smoothing. They provide you with the following information about forecasts for FY 2015 and FY 2016: Weighted Moving Average uses Wt = 0.8 and Wt-1 =0.2. Exponential Smoothing uses = 0.9. Inventory Management Information The initial inventory for all sock styles combined at the beginning of FY 2017 is 3,500 units. You also have information on current costs, which includes: • Order cost to Throx for an order placed with its current supplier, $/order = S = $400 • Holding cost per set per per year = H = $6 • The company currently pays $5 for each set of socks. = P The company uses a continuous review replenishment policy, and has IT systems in place that allow constant monitoring of key information. Last year, the company used an ROP under this policy of 1,450 units for all sock styles and an order quantity Q of 4,000 units for all sock styles. Potential Alternatives to Current Supply Chain Management The company has asked you to evaluate a number of alternatives to their current SCM practices, including at a minimum their choice of supplier, transportation modes, warehouse capacity, order quantities and safety stock. Alternative Suppliers The company has contacted potential alternative suppliers in China, who have offered the following information relative to the current supplier: To keep their order management simple, Throx wants to use a single-sourcing strategy, so they want a recommendation about which supplier would be best. Alternative Transportation An alternative to their current transportation approach available to Throx is shipment by UPS Express Air from Shanghai to Richmond, which averages 3.5 days. The comparison of costs is given as: * No data are available about variation in transit times, so Throx assumes this is constant. Similar to their decision about sourcing, Throx wants to use a single-sourcing strategy for transportation, so they want a recommendation about which mode would be best. Alternative Warehouse Location The company would also like to assess whether its current warehouse location is appropriate based on where customers are located. It provides you the following information about its key markets, and indicates that its orders in each market are roughly proportional to the total population.

Explanation / Answer

Supplier A, becasue:

Defects are very low, altohugh overall cost is more than Supplier B, but losses are less with Supplier A, hence supplier A

Best mode will be Mearsk because:

UPS, reduces transit time by 0.5 day; damage rate is very low; unit costvery high.

Mearsk Ocean Freight transit time is 4 days; damage rate is 2% (roughly 440 sock sets)

Comparing, the transit time and costs, it is better to continue with Mearsk Ocean Freight.

The total cost to transport 22,000 sock sets through UPS ExpressAir ($60,500) is roughly twice the current costs ($33,000) with only 0.5 day reduction in transit time.

Supplier No. of orders Annual demand defects Ordering cost Procurement cost Total cost Current 5.5 22000 220 2750 88000 90750 A 5.5 22000 110 2200 66000 68200 B 5.5 22000 880 1375 33000 34375

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.