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Consultant:
Yuen Ki Kevin Chan (n9216120)
Lee-Anne Rice (n91303222)
Leonardo Flores Gonzales (n8934860)
Maria Brandt (n8900141)
Researcher Executive
Top Research Alliance
Word count: 1,595
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AMB304 Logistics Operations
The Fresh Connection - Final Consultant Report
KLLM Consultant: Team Four
1. Executive Summary
This final consultant report examines the operational activities, strategies, and tactics
The Fresh Connection Company's managers have adopted for the last periods of the
company. It includes report outcome for each section of the company, including
purchasing, sales, supply chain management, and operations. Initial proposed
strategies and directions for the company and actual results of the objectives and
targets discovered through the simulation rounds. In addition, the report includes
critical reflection explanations for each area of management, which were vital for the
progress leading to our objective goals as a company and as individual managers. A
process which was achieved by descriptive and collaborative decision-making
strategies, implemented between the team managers on a cross-functionally level to
ultimately improve the value chain of the Fresh Connection Company.
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KLLM Consultant: Team Four
The following report will disclose the performance of the Fresh connection company.
The company's supply chain, sales, operating and purchasing department have
undergone a different strategic direction over the phase of eight weeks under new
management.
The initial intended strategic direction of the Fresh Connection Company was to
source high-quality supplies that ensure availability while maintaining cost efficiency
to deliver a premium product. Selecting the right supply source was crucial in order
to ensure the right materials are sourced with timely delivery. The selection of the
supplier had to meet the company's main focus which is quality.
Since the initial phase of the business this strategic direction changed minimally. The
ROI goal was 4% and above as we intended to steadily increase about one to two
percent each round. Sales: Strategic direction was clear throughout the takeover, but
results of sales performance proved it did not reach full potential due to an emphasis
on achieving high levels of 95% in service agreements, the team finished with 93.6%.
Operations objective was based on cube utilisation, the production adherence.
Target's set by the operation manager was keeping utilisations at 80%. Operations
finished with cube utilizations of 85.8% in raw materials and 90.6% utilisation in
finished goods warehouses which was higher than the set goal. The purchasing
department has reaches its aim to obtain 95% supplier delivery reliability at least.
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3. Collaborative Decision-Making
The initial proposal for the supply chain main strategy was to decrease costs,
increase efficiency, keeping high components and product availability, implementing
a cost efficient supply chain strategy. This strategy would utilise maximum capacity,
reducing inventories, based on costs while relying on reliability from the purchasing
department (Fischer, 1997).
Following rounds 5, 6, and 7, there was a problem regarding obsoletes that was
turned in the last round 8 (See Appendix 5) by reducing safety stock and increasing
production intervals. Calculating efficient production intervals and stock for the
finished products in the DC Netherlands warehouse for availability and distribution
in the sales department (Meyer & Bishop, 2016)
The initial objective for the supply chain was to manage the costs of keeping the
correct amount of stock, space and interest costs. Aiming to reduce Stock costs
below 150,000€. This was not completely achieved at 250,000€ in stock costs in the
last round, but managed to keep a reliable availability of components through all
rounds and low costs in rounds 3 and 7 (See Appendix 8). Aiming for 95% utilisation
rate on the bottling lines that resulted in 70%. As well as managing frozen period of
production times to have more fixed production plans ensuring deliveries and
production times (See Appendix 7).
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From the collection of information through critical reflections and weekly reviews, it
was evident that our teams’ strategic approach surrounded joint operational
objectives, especially in providing a premium product to the market. This strategy
was set from the beginning of the takeover. As research suggest (D.A. & & Prioni,
2002), the most effective way of judging premium pricing comes from using service
quality as an index for assessing actual contract performance. Changes in round three
(See Appendix 9) saw an increase in contract indexes due to increased shelf life and
service level agreements. Such actions allowed a higher product quality perception to
the market. In relation, promotional pressure was only used lightly to guide premium
prices. For example, In round three (see Appendix 11) we shifted promotions for our
largest customers Food and Grocers from medium to low.
Researchers find that fresh produce in particular face unexpected spoilages that can
lead to excess waste and thereby economic losses as products are perishable
(Bruckner, Albrecht, Petersen, & Kreyenschmidt, 2013). To make sure our quality
approach was effective, we discussed new agreements with our customers.
Contracted sales revenue remained strong throughout the takeover, but penalties
lured around (see Appendix 9 to 11).
Some decisions that did not work so well for the fresh connection became evident by
the final round; Penalty rates were a sign of over promising in our agreements with
customers, while research (Eriksson et al., 2013) states that penalties are a case of
ineffective management of the customers expectation. In other words, service level
agreements were not altered accordingly to performance. The initial sales objective
of obtaining a service level of 95% was not achieved as we just fell short finishing on
93.3%, but we learnt from round 4 (see Appendix 10) when our service levels were
at 98.6% that our consumers receive most satisfaction from receiving realistic
agreements in areas such as shelf life and on-time delivery. Overall, setting these
high benchmarks allowed The Fresh Connections full potential to be exposed, now
sitting in a profitable position.
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Onwards from rounds four to six managing wastage was the focus in pallet locations
(See Appendix 15 to 17). The decisions made in operations during these rounds
confirmed with joint forecasting gained through meetings with the supply chain and
marketing managers on a constant basis (See Reflection). The company gained good
profit. However, our small efforts to expand saw the team ’s ROI decline. (See
Appendix 16) This lead to more reductions in capacity and exhibited that our wait-
and-see approach in expanding supply chains and operations was not effective.
Round six results proved problematic as our team’s ROI was at a low of 2.56% since
the initial training round ROI of -11.93 (See Appendix 17). This elevated our
attention to more aggressive expansion as the team re-evaluated the wait-and-see
approach we had undertaken. Life cycle and capacity are tightly linked and as our
decisions did not account for the life cycle changes and being limited by time (See
appendix 17) the appraised changes in operations such as new bottling lines and
mixers to reduce costs and improve efficiencies were not feasible.
The strategy for operations was to maintain flexible operations leading to low costs,
high reliability and product availability. Referring to research (Simchi-Levi & ebrary,
2010), the company aimed to move from a static sourcing strategy to a dynamic one
through optimising production sourcing decisions, taking into account demand,
supply, various costs and the company's constraints. Through lateral linkages
between functional departments flexibility was gained (Mills & Harvard University.
Graduate School of Business, 1985). However, there was a shortfall in reaching full
flexibility due to organisational structure that did not plan to expand. Flexibility was
incorporated in the goal of 80%. This allowed leeway for changes and fluctuations
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The procurement primary assist with quality, availability and cost and waste
elimination, low prices and high product component reliability. To ensure this,
supplier reliability of 95% at least is required. As all supplier must be constantly
evaluated to ensure the products fit for use. There are several criteria to consider.
Firstly, the correlation between supplier reliability and contract index must be taken
into account. Supplier reliability developed well since round 6 as three from five
could meet the delivery reliability of 99% and 4 hours’ delivery windows (see
Appendix 24). With the further rounds, the delivery reliability had developed better
and all five suppliers could meet the agreed delivery reliability of 95% and 4 hours’
delivery window. It can be assumed, that the supplier might have been high
pressured to delivery in too high terms as well as other changes such as dual sourcing,
certification or shorter lead time have influenced the excellent performance in the
last round. It can be said that the best contract index is 95% and 4 hours’ delivery, as
supplier had the best performance based on the average and median with the lowest
value below 50% and the greatest amount of above 80% (see Appendix 25). The
contract index should be considered carefully as it affects sales department. In round
three, the index effects Dominick`s in their performance.
However, the largest cost factor was the dual sourcing. This is commonly applied to
allow supply flexibility and availability of a high demand product. However, it leads
to higher cost and has not improved lead times. Based on the financial figures in
round six, the activity has increased cost in transport and therefore results in
termination of the activity (see Appendix 26). Based on the round figure, dual
sourcing lead to high cost, high wastage and there is no evidence for higher product
component reliability.
The focus on shorter lead time in the supply source can be seen. It has benefited the
company with the flexibility in its order schedule, enhance fewer lost orders and
increases cash flow. As research suggest inventory shortage is less likely to occur if
lead-time is under 7 days (Bandaly, Satir, & Shanker, 2016). It is recommended to
prioritise this as a criterion when evaluating supplier.
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The implementation of the contract index of 95% and 4 delivery window; shorter
lead time; and elimination of dual sourcing, has help the organisation to lower prices,
eliminate low wastage within the supply source process and enhance high product
component reliability to assist the supply chain department with the availability of
products.
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One important aspect of the consultant activity was the focus on communication
in two aspects by emphasising collaborative decision making across the
departments and by creating a common communication platform. Each
department manager had made individual decisions while working closely with
other departments on a cross-functionally level to ensure process efficiency. For
example, the supply chain management collaborates with the sales department by
reducing shelf life while increasing production interval and increase the frozen
period to reduce product obsolete and promote flexibility. This cross-cultural
teamwork should be implied to benefit from varying sources of expertise and
knowledge which promote better decisions making in product development
(Holland, Gaston, & Gomes, 2000). Also, this eliminated common problems
early (Jaber, Marle, & Jankovic, 2015). The communication channel had
encouraged proactive behaviour and the organisation should emphasise this for
future activities.
We will focus on the maintenance of these factors to continue the current leading
position within the simulation to achieve a respective goal in maintaining the
current leading position with an ROI of 7%. We will continue the weekly
meetings and protocol taking as it assist the group to reflect on both individual
and group performance.
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5. Reference list
Bandaly, D., Satir, A., & Shanker, L. (2016). Impact of lead time variability in supply chain
risk management. International Journal of Production Economics, 180, 88-100.
doi:10.1016/j.ijpe.2016.07.014
Bruckner, S., Albrecht, A., Petersen, B., & Kreyenschmidt, J. (2013). A predictive shelf life
model as a tool for the improvement of quality management in pork and poultry
chains. Food Control, 29(2), 451-460. doi:10.1016/j.foodcont.2012.05.048
D.A., H., & & Prioni, P. (2002). A Service Quality Index for Area-wide Contract
Performance Assessment. Journal of Transport Economics and Policy (JTEP), 36(1),
93-113.
Eriksson, D., Hilletofth, P., Hilmola, O.-P., produktion, J. T. H. F. I., Tekniska, H., &
Högskolan i, J. (2013). Creating value through wholesaler and retailer interface.
Industrial management + data systems, 113(8), 1169.
Fischer, M. (1997). What Is the Right Supply Chain for Your Product? Harvard Business
Review. Retrieved from https://hbr.org/1997/03/what-is-the-right-supply-chain-for-
your-product
Holland, S., Gaston, K., & Gomes, J. (2000). Critical success factors for cross‐functional
teamwork in new product development. International Journal of Management
Reviews, 2(3), 231-259. doi:10.1111/1468-2370.00040
Jaber, H., Marle, F., & Jankovic, M. (2015). Improving Collaborative Decision Making in
New Product Development Projects Using Clustering Algorithms. IEEE
Transactions on Engineering Management, 62(4), 475-483.
doi:10.1109/TEM.2015.2458332
Lee, H. L., & Billington, C. (1992). MANAGING SUPPLY CHAIN INVENTORY -
PITFALLS AND OPPORTUNITIES. SLOAN MANAGEMENT REVIEW, 33(3), 65-
73.
Meyer, B. C., & Bishop, D. S. (2016). Stock Control: Learning Inventory Concepts by
Beating Levels and Winning Prizes: Stock Control. Decision Sciences Journal of
Innovative Education, 14(3), 315-336. doi:10.1111/dsji.12102
Mills, D. Q., & Harvard University. Graduate School of Business, A. (1985). The new
competitors: a report on American managers from D. Quinn Mills of the Harvard
Business School. New York: Wiley.
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Schmitz, J., & Platts, K. W. (2004). Supplier logistics performance measurement: Indications
from a study in the automotive industry. International Journal of Production
Economics, 89(2), 231-243. doi:10.1016/S0925-5273(02)00469-3
Simchi-Levi, D., & ebrary, I. (2010). Operations rules: delivering customer value through
flexible operations. Cambridge, Mass: MIT Press.
The Fresh Connection. (2016). Analysis. Retrieved from
http://game.thefreshconnection.eu/v6tfcgsc/MyCompany/Analysis/Report?role=1
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6. Appendices
There was a lack of stock for the raw Mango material component and finished
product leaving warehouse with unused space. Decrease the Orange component and
finished product by little as it is the main product due to a high level of obsoletes
compared to the other products and components. In overall, small changes (Except
mango components and materials) to reduce costs from warehousing and stock.
This week changes: Components - Increased safety stock and lot sizes for Mango a
little as stock was running low , but didn’t want to have too much stock on hand like
1st round
I spoke with Sales and Operations managers in order to analyse the previous round
compared to the recent one, after consulting with one another we decided the
changes that needed to be done to improve the company’s performance.
What did I learn from the decisions and processes in this round:
An important link between the operations and sales manager in order to focus on
areas of more importance (Sales) and warehousing stock, to ensure our decisions are
aiming for the same outcome and that can help one another.
How will I address/approach my decisions in the next round:
Focus on the new tools available (Production interval tool) to try to get the best
outcome. Weekly meeting with the team members, aiming to improve KPI’s relating
to the other manager’s decisions affecting supply chain management.
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KLLM Consultant: Team Four
Similar to last week, there was a lack of safety stock and lot sizes for the Orange,
Mango and Vitamin C components and finished product leaving warehouse with
unused space. Increased frozen period of production to have more fixed production
plans to ensure deliveries and production times. Increased products safety stock in
order to use warehousing space more efficiently.
This week changes: For components: Increase safety stock of Orange, Mango, and
Vitamin C as well as lot sizes. For Production changed from 1 week to 3 weeks in
Frozen period of production. For Products: Increased safety stock for Orange/Mango
and Orange/Vitamin C Liter and Pet.
What was the outcome (results) of the decisions I made:
Overall ROI% increased. Increase in stock value and almost 100% in the availability
of components. Keeping Product obsoletes less than 3%.
Who did I consult with on my team:
I the meeting everyone spoke with every branch of the organisation. My main
relation being the supply chain manager was with purchasing and operation
managers. We agreed in the utilisation space and how much I should increase stocks
for the warehouses, as well as delivery reliability with the purchasing department.
What did I learn from the decisions and processes in this round:
Keep focusing on the (Production interval tool) to try to get the best outcome,
reducing costs overall. Aim for efficient utilisation rates on the bottling lines. And
regular weekly meeting with the team members, aiming to improve KPI’s relating to
the other manager's decisions affecting supply chain management.
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Similar to previous weeks, there was a lack of safety stock and lot sizes for the
Orange, Mango and Vitamin C components and finished product leaving warehouse
with unused space and with pallet locations open. Increased frozen period of
production from 3 to 4 weeks to have more fixed production plans ensuring
deliveries and production times. Increased products safety stock in order to use
warehousing space more efficiently.
Changes in the supply chain: For components, increase the safety stock of Pack 1
liter, and Pet packs by 0.4 (weeks). In production increase the frozen period of
production from 3 weeks to 4 to ensure delivery rates and quantity for suppliers. In
product, production interval (days) changed from 6, 7, 9, 5, 6, 5, to 6, 7, 9, 6, 6 8
respectively. Calculating reduction in total costs of almost 10k maintaining 80%
utilization rate in the bottling line. Kpis returned to Availability of components,
Stock components, and stock products.
What was the outcome (results) of the decisions I made:
Overall positive ROI% but decreased from 7.3% to 6.7%. Reduction in indirect costs
by 15,000 and 99.9% in the availability of components. Keeping Product obsoletes
less than 2%
Who did I consult with on my team:
Everyone spoke with every branch of the organisation. We agreed on the changes
with my most relation being with the operation managers. We agreed in the
utilisation space and how much I should increase stocks for the warehouses (an
increase from 50% to 70% utilisation rate), as well as delivery reliability with the
purchasing department.
What did I learn from the decisions and processes in this round:
Links between the operations and purchasing departments in order to keep reducing
costs and increasing space efficiency in the warehouses.
How will I address/approach my decisions in the next round:
Keep focusing on the (Production interval tool) to try to get the best outcome,
reducing costs overall. Aim for efficient utilisation rates on the bottling lines. And
regular weekly meeting with the team members, aiming to improve KPI’s relating to
the other manager's decisions affecting supply chain management.
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There was a lack of safety stock and lot sizes for the Orange, Mango and Vitamin C
components and finished product leaving warehouse with unused space and with
pallet locations open from the previous week to this week, 50% to 70%. Keep frozen
period of production at 4 weeks. Increased products safety stock in order to use
warehousing space more efficiently, aiming for 80% usage.
Changes in the supply chain: For components, increase the safety stock of Orange,
Mango, and Vitamin C by 0.2 (weeks). Production interval (days) changed from 6, 7,
9, 6, 6, 8 to 6, 7, 10, 6, 6, 11 respectively. Calculating reduction in total costs of
almost 3k, reducing total time (hours), maintaining 79% utilization rate in the
bottling line.
What was the outcome (results) of the decisions I made:
Overall positive ROI% but decreased from 6.7% to 5.27%. Reduction in indirect
costs by 3,000 and 100% in the availability of components. Product obsoletes
increased a lot specially Freddie Orange/C-power PET at 10%, Fressie Orange 1 liter
at 8.3%; Fressie Orange/C-power 1 liter & Fressie Orange PET surrounding 7%. And
Fressie Orange/C-power 1 liter has a low level of stock.
Who did I consult with on my team:
As every week, everyone spoke with every branch of the organisation. We agreed on
the changes, relating supply chain more to operations management. We agreed in the
utilisation space and how much I should increase stocks for the warehouses (an
increase from 70% to 80% utilisation rate).
What did I learn from the decisions and processes in this round:
Links between the operations and purchasing departments in order to keep reducing
costs and increasing space efficiency in the warehouses. This week, there was a
problem regarding obsoletes which could have been avoided by increasing sales in
the sales department after deciding to increase stock and finished goods (by
promotions e.g).
How will I address/approach my decisions in the next round:
For this week result of 5.27% ROI, decreasing over the last 2 weeks will be of
concern to the team. I will continue aim for efficient utilisation rates on the bottling
lines. Additionally, in order to answer to the high % of obsoletes, optimize
planning, demand forecasting and replenishment processes (through stock and order
sizes). Increase the safety stock or manufacture the product in larger batches for
Fressie Orange/C-Power 1 Liter due to low levels of stock. Continue regular weekly
meeting with the team members, aiming to improve KPI’s relating to the other
managers decisions affecting supply chain management.
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There was a lack of safety stock for Fressie Orange/C-Power 1 liter and Fressie
Orange/Mango 1 liter. Increased safety stock to ensure finished product reliability.
Change frozen period of production from 3 to 4 weeks to increase customer levels
and flexibility of production.
Fressie Orange/C-power 1 liter & Fressie Orange/Mango 1 liter has a low level of
stock, Increase the safety stock (weeks) 1.6 to 1.8 & 10 to 8 / 7 to 6 respectively
reduction in production intervals.
Frozen period of production (weeks) changed from 3 to 4 weeks to increase customer
levels.
Overall positive ROI% increased from 2.56% to 3.45%. 100 % in the availability of
components. Product reduced and increased stock safety for Orange/Mango 1 liter
which had low levels of stock.
Who did I consult with on my team:
As every week, everyone spoke with every branch of the organisation. We agreed on
the changes, this week relating more with the sales manager. We agreed on the
changes needed to be made to reduce high levels of obsoletes products and stock
forecasting.
What did I learn from the decisions and processes in this round:
Links between the purchasing department in order to solve the issue regarding
obsoletes which could have been avoided by better forecasting in stock and
production intervals, as well as self-life of the products.
How will I address/approach my decisions in the next round:
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For this week result of 3.45% ROI, finally increasing from three weeks going down.
Future possible changes outside the simulation would still aim for efficient utilisation
rates on the bottling lines. Additionally, in order to answer to the high % of
obsoletes, deeper planning involving the operations manager should be looked at.
Continue regular weekly meeting with the team members, aiming to improve KPI’s
relating to the other manager’s decisions affecting supply chain management.
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Look more carefully into the results, find correlations and links across all
departments. Penalties need to be reduced and service levels need to increase.
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Before making changes in the next round, careful examination between this rounds
figures and round 3’s figures will be compared. Hopefully pointing out obvious areas
that need changing.
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I selected another supplier for the packing supply by changing from our current
German supplier, with 10 lead time days, to an English supplier who offers half of
the lead time (5 days). The contract had negotiated to the standard of 1-day delivery
windows with 98% reliability level and illustrate an excellent contract index (above
one).
As we are focusing on bringing high quality to the customer and to keep our cost to a
minimum. I made the decision in changing the supplier to take advantage of the
shorter lead time so that small lot sizes can be ordered on a more frequent basis to
reduce cost in holding inventory. Also, geographical location is an important
criterion to consider as it impacts the delivery lead time. England is close to our
production location in the Netherlands.
The delivery rate of the English supplier in pack supply is very good and is currently
96.6 under 1-day delivery windows and 98% reliability. Therefore, the supplier is
consistent with its delivery within the promised time.
What did I learn from the decisions and processes in this round:
I have learnt that we are on the right path by focusing in supplier in high-quality
products and short lead time. Moreover, the certification for the supplier is important
as well. Particular in this round, I have learnt that the constant evaluation of supplier
is crucial in order to eliminate early problems within the supply chain, for example,
long delivery, as it has an impact on the organisation performance.
For the next round, I will continue in the evaluation of each required product that
meets our key source requirement and strategy and making the product available in a
timely manner. I will also pay more attention to the supplier rejection rate and will
calculate transport cost when evaluating supplier to take advantage of cost methods
that ensure cost efficiency.
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I changed the terms of each supplier contract by delivering within 4-hours delivery
windows with a 99% delivery reliability instead of 1-day delivery windows with
95% delivery reliability. Supplier performance has developed well over the last three
rounds which show that the supplier is performing well in terms of its quality. In
order to benefit from higher product availability, I changed the delivery window to
ensure reliability.
Refer to my KPI changes, I change to the raw material COGS while maintaining
performance measurement in rejection component and delivery reliability supplier to
focus on cost, rejection, and quality.
We need to emphasise on the important role of selecting the right supplier to ensure
availability and quality of our products. We will continue to emphasise the
importance of communication across the organisation, for example, I will work
closely with the supply chain management in the next week to assess if enough
products are available.
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What did I learn from the decisions and processes in this round:
I have learnt that we are on the right path by focusing in supplier in high-quality
products and short lead time. Moreover, the certification for the supplier is important
as well. Particular in this round, I have learnt that shorten the delivery window is
crucial in order to receive the products in a timely manner. I will do some further
research in order to solve the rejection rate of the Pack 1 Litre and PET supply
source.
For the next round, I will do some further research in order to solve the rejection rate
of the Pack 1 Litre and PET supply source. I will calculate transport cost when
evaluating supplier to take advantage of cost methods that ensure cost efficiency.
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For this week, I have not made many changes in the procurement department.
Supplier performance has been excellent in terms of delivery reliability and low level
of rejection rate. In order to benefit from the further price reduction, dual-sourcing is
targeted.
Refer to my KPI changes for this week, I have changed in COGS, Handling cost and
availability component.
The firm's supplier have performed well. In order to implement further cost
reduction, the KPI in handling cost and availability component have been adapted to
undertake further analysis. By doing so, I can analyse each supplier and might take
advantage of dual-sourcing to benefit from cost reduction.
Cost analysis and preparation will be conducted to take advantage of cost reduction
in dual-sourcing.
What did I learn from the decisions and processes in this round:
We are in the right track and past decision in the procurement department has been
done well based on excellent supplier performance.
I will calculate handling cost when evaluating supplier to take advantage of cost
reduction in the dual-sourcing process.
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I selected another supplier for the packing supply by changing from our current
German supplier, with 10 lead time days, to an English supplier who offers half of
the lead time (5 days). The contract had negotiated to the standard of 1-day delivery
windows with 98% reliability level and illustrate an excellent contract index (above
one).
As we are focusing on bringing high quality to the customer and to keep our cost to a
minimum. I made the decision in changing the supplier to take advantage of the
shorter lead time so that small lot sizes can be ordered on a more frequent basis to
reduce cost in holding inventory. Also, geographical location is an important
criterion to consider as it impacts the delivery lead time. England is close to our
production location in the Netherlands.
The delivery rate of the English supplier in pack supply is very good and is currently
96.6 under 1-day delivery windows and 98% reliability. Therefore, the supplier is
consistent with its delivery within the promised time.
What did I learn from the decisions and processes in this round:
I have learnt that we are on the right path by focusing in supplier in high-quality
products and short lead time. Moreover, the certification for the supplier is important
as well. Particular in this round, I have learnt that the constant evaluation of supplier
is crucial in order to eliminate early problems within the supply chain, for example,
long delivery, as it has an impact on the organisation performance.
For the next round, I will continue in the evaluation of each required product that
meets our key source requirement and strategy and making the product available in a
timely manner. I will also pay more attention to the supplier rejection rate and will
calculate transport cost when evaluating supplier to take advantage of cost methods
that ensure cost efficiency.
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Changes in supplier have been made. Pack supplier changes from English supplier to
German Supplier. Change has been made based on high rejection rate of English
supplier. The German supplier has 10 days’ lead time compare to 5 days’ lead time.
By doing this changes, we are hoping to take advantage of making products more
available as English supplier has not performed well (see picture below) when
comparing reliability performance with the rejection rate.
A French supplier in the PET segment has been compared to the current Dutch
supplier which has low performance (illustrates in the table above). Comparing both
contract index to each other, the Dutch supplier's contract index would indicate a
value of 0.988 while the current supplier would perform better with an index of 1.03.
Taking this into consideration, no changes in supply has been made. A similar
decision has been made in the Vitamin C by changing from the current Dutch
supplier to a French competitor in order to take advantage of the certification while
reducing cost in the quality inspection cost in the operations sector.
No changes in KPI this week and maintain in COGS, Handling cost and availability
component.
The firms supplier have performed well. In order to implement further cost
reduction, the KPI in handling cost and availability component have been adapted to
undertake further analysis. By doing so, I can analyse each supplier and might take
advantage of dual-sourcing to benefit from cost reduction.
Purchase value of orders have increased which might be a result of the dual sourcing
and changes in supplier. The PACK supplier was unable to meet services deliveries,
therefore the English supplier (Brit Pack) changed to the German merchant (Smurfat
Kippa Cartons) which result in increased cost from 108,685 with Brit Pack to
112,999 with Smurfat Kippa. Similar case can be applied to the Vitamin supply
changed which result in very small cost increase. Overall, the supplier changed have
results in overspendings of $20,000.
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I spoke to the Operations manager, and will work closely together in the future.
What did I learn from the decisions and processes in this round:
I need to look at purchase value and consider more increase cost. As procurement is
an excellent way to provide quality, make the product available and save cost. I do
not need to purchase via dual sourcing as current supplier performance is excellent
and dual sourcing results in high cost.
We are holding the groups weekly meeting on Thursday to discuss our approach in
the upcoming final round. I suggest the procurement department is looking to
decrease further cost while focus on quality and high availability to ensure constant
product flow. I will suggest that supply chain management and operation
management should empathise further qualitative cost reduction by adapting to
adequate operations facility and service level.
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The table below compares the rejection rate to delivery rate by using a 99%
contract index with 1-day delivery windows and 97% contract index with a 4
delivery hours to estimate the best terms of contract to achieve supplier reliability.
As the tables shows, the 97% contract index and 4 hours’ delivery window has a
best outcome based on better performance figures as outcomes are above 80 and
it has a higher average and median. Research shows that automotive companies
have strict delivery windows and less strict contract index to ensure higher
reliability (Schmitz & Platts, 2004). This is also likely to decrease cost based on
the lower contract index and requirements. In round 6 (see Appendix 22),
changes in several supplier selections have been made based on high rejection
rate and results improved in the upcoming rounds.
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Total 191066 189897 189897 329363 138899 138354 130689 130444 135407 139510 139762
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Purchasing Department
Supplier performance is okay. Seitan Vitamins could improve delivery
reliability from previous changes in delivery windows and reliability. We
focus on short lead time and high quality, particular for the most popular
products orange and PET orange. All of the supplier are required to delivery
within one day, 98% agree reliability rate and certification.
Problem zone: PET TRIO PLS
Poor Delivery reliability of 88.4% and highest purchased amount of
5,586,742 with 10 days’ lead time.
Solution: Change PET supplier with better performance in reliability,
delivery windows and lead time of 5 days. Changes of 1-day delivery
windows and 98% reliability.
Other: Overall supplier performance is satisfied and doesn’t require changes
at this stage. However, it is recommended to watch this important section of
the supply chain to eliminate early problems within the value chain. There is
no certification for our Vitamin C supplier.
Current Supplier: Pack (Germany); PET (Netherlands); Orange (Spain);
Mango (Spain); Vitamin C (France)
Operations Department
Raw materials warehousing is doubled in its usage than it has capacity.
Currently 900 pallets location compare to 1826.
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AMB304 Logistics Operations
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Supply Chain;
Components - Increased safety stock and lot sizes for Mango a little as stock was
running low, but didn’t want to have to much stock on hand like 1st round
Changed orange, reduced in safety stock and lot sizes
Operations;
Warehousing – Reduced pallet locations and fixed raw materials according to
results from round 2. From 1950 down to 1500 for raw materials, as space was
not being fully utilized
Purchasing;
Selecting another supplier for pack supply. Changed from German supplier with
10 lead time days to an English supplier with half of the lead time (5days).
Contract has a 1 day delivery windows with 98% reliability and excellent
contract index.
Sales;
Sales was only slightly altered considering that we increased stock for mango,
which running low. With Better space utilization of our warehousing, We
negotiated a new deal with Dominicks to extend the order deadline, which
increased the overall contract index for them. We made the smallest revenue last
week through Dominicks so hopefully this change will see an increase in revenue.
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PURCHASING
Changed terms of supplier contract by delivering within 4 with 99% reliability
instead of 1-day delivery to 95% reliability. Supplier performance has developed
well, however, I evaluate supplier constantly to ensure quality and low price of
raw material.
KPIS are currently: Raw Material cost, rejection component, delivery reliability
supplier. Changed from the raw material cost of goods while maintaining
performance measurement in rejection component and delivery reliability
supplier to focus on cost, rejection, and quality.
OPERATIONS
The raw materials warehouse was relatively empty, with pallet locations open.
Pallet locations in raw materials were at 33.6% utilization. Therefore, a reduction
of pallet locations was carried out and the number of FTE’s (full-time
employees) was reduced as well and intake time.
Finished goods pallet locations were left as it is from previous weeks decisions.
As it had a and 80% utilization and more stock is expected to be ordered
therefore it allows flexibility if more pallets are needed. KPI choices included -
Cube utilization - Flexible labor raw materials warehouse - Production plan
adherence
No other changes were made in operations.
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PURCHASING
Dual sourcing in Orange supplier, which is the most popular product. Current
supplier is a Spanish supplier (high quality, short lead time of 10 Days and
Certification). Dual sourcing would be made from another Spanish supplier, with
similar features (15 days lead time, middle quality and certification).
Dual-sourcing would be made with US Supplier (high quality, 30 days’ lead time
and certification). Dual sourcing will allow the business to take advantage of
flexibility in not rely on supplier to handle the current demand and to ensure
availability. Dual sourcing is costly is expensive, but provides product to our
customer. And when managed adequantly, it can lead to cost savings as well
service lea times improvements.
KPI in shelf availability (sales) and safety stock of finished product (Supply
Chain) is important. KPIs are changed to fit the purpose of dual-sourcing.
Current KPIS are distribution cost, handling cost and availability components.
Changed terms of supplier contract by delivering within 4 with 99% reliability
instead of 1-day delivery to 95% reliability. Supplier performance has developed
well, however, I evaluate supplier constantly to ensure quality and low price of
raw material.
KPIS are currently: Raw Material cost, rejection component, delivery reliability
supplier. Changed from the raw material cost of goods while maintaining
performance measurement in rejection component and delivery reliability
supplier to focus on cost, rejection, and quality.
OPERATIONS
Decisions made in operations this week included : added inspections in raw
materials (NO8DO Mango and SYI "vitamin C) 1 extra FT employee in raw and
finished materials warehouse in response to new packaging of trade units.
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3k, reducing total time (hours), maintaining 79% utilization rate in the bottling
line.
SALES
Based on service levels dropping and increases in penalties the following changes
occurred; Sales; changed shelf life agreement for food and grocers from 75-80%.
Closed off order deadline fromm 8pm to 5pm, but gave them the option to have
there units in boxes rather then pallet layers, this means they are allowed to order
smaller units and more frequently. Contract index agreement is now 1.0421, from
1.014. Changed trade unit pallet layer to pallets, and shelf life agreement up to 80%
from 75%. Contract index went from 0.962 to 0.988 Changed shelf life
agreement from 75 to 80% for Dominicks. This increased contract index from
1.027 to 1.041.
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AMB304 Logistics Operations
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KLLM Consultant: Team Four
PURCHASING
Changes in supplier have been made. Pack supplier changes from English
supplier to German Supplier. Change has been made based on high rejection rate
of English supplier. The German supplier has 10 days’ lead time compare to 5
days’ lead time. By doing this changes, we are hoping to take advantage of
making products more available as English supplier has not performed well (see
picture below) when comparing reliability performance with the rejection rate.
Agreed
Agreed Reliability /
Product Supplier Reliability Rejection
Rejection Rate
(%)
Pack Brit 99.1 2.6 38.1
Pet Philip 98.9 2.9 34.1
Vitamin C Syi 99.1 3.7 26.8
Mango Mango 98.8 1.7 58.1
Orange Arancia 97.8 1 97.8
Orange Medina 100 0 #DIV/0!
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OPERATIONS
In operations, our main focus for round 7 was in reducing costs. The quality
control measures were reduced by removing all raw material inspections from
suppliers due to them being costly, and increasing lead times. Moreover, the
purchasing department has decided upon having suppliers that have certification
and good quality so there is little need for them either way. Furthermore, from
last week decisions; the increase of employees and their intake time were very
costly. So these were reduced in both raw materials and the finished goods
warehouse from 4 to 2 full-time employees. Pallet locations were reduced in the
finished goods warehouse from 1100 to 800 to reduce wastage as utilization was
at 67%.
SALES
Changes made in the sales area were made after discussing the strategic approach
we should be making to reduce penalties and handling costs (direct and indirect)
although revenue has increased. After discussing with the supply chain manager
on stock levels and quality management, changes were made in regards to
reducing the obsolete costs, trying to achieve better service level agreements.
Specific changes in every customer sales category were made to tackle these
issues: -Increases in promotional activity was made from medium to high for
Land Market, hopefully reducing obsoletes by increasing turnover of products
from better sales. -Payment terms for Food and Grocer were extended from 4-5
weeks with an aim to increase service level. Increasing contract index from 1.038
to 1.044. - Pallet Layer has been selected over pallets for Dominick’s In a way to
approach better service delivery and meet required orders. The promotion has
been changed from Medium back down to light to continue our quality/fresh
Brand image. As a result, overall contract indices increased to 1.050.
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PURCHASING
- Removed the dual sourcing in the orange product to reduce cost. Due to
financial figure, the dual sourcing has led to increased cost and supplier
performance nor higher product availability has not been achieved.
- Change the contract index from 99% to 97% as current delivery reliability
has an average of 98.3%, with the lowest value of 97.7%. The figures are
excellent and have been achieved since the earlier rounds, however in
reducing the contract index will allow every supplier to meet current delivery
requirements.
OPERATIONS
- For round 7 operations is performing at an optimal level with cube utilization
in raw materials warehouse at 86.9%, cube utilization in the finished goods
warehouse at 93.1% and 92.7% production plan adherence. The only issue
that was raised was the hours for workers in the finished goods warehouse
where between two workers there was 115 hours reducing the delivery
efficiency of finished goods. Therefore, an additional worker has been added
to resolve this issue.
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SALES
- This round we aim to not trigger too many promises that are unrealistic,
performances must be inline with agreements and agreements must be inline
with our performance. Therefore we will focus on changes in service level
and shelf life agreements, whilst keeping obseletes in mind.
- Changes in our Sales:
- Food and Groceries - Service level agreement was altered from 95% down to
92%, as this is the level we are performing at for them currently. We do not
want to over promise, performance should meet our agreement. Shelf life
agreement is currently at 80% but we are performing close to 90%. Therefore
shelf life has been changed to 85%. Agreed Contract index therefore dropped
from 1.0439 to 1.0034. Although the drop, the index is still above 1 and gives
Food and Groceries a perceived premium quality.
- LAND market- Service level was changed from 95 to 92%. Promotional
pressure has been changed from Heavy to middle to aim for consistency.
Overall agreed Contract index dropped from 0.987 to 0.9523, closer to where
land market is performing (0.951)
- Dominick’s – they are performing well within our agreements and it is seen
in to be a financially stable investment for TFC. Contract index agreement
was at 1.0503 – changed to 1.0188 Closer to the Performance in the market
which is 1.036
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