Advanced Supply Chain Management
At
Evergreen Products Factory, Ltd.
Table of Contents
Title page…………………………………………………………………………………………………1
Table of Contents………………………………………………………………………………………2
Executive Summary…………………………………………………………………………………..3
Supply Chain Management
at Evergreen Products Factory Ltd………………………………………………………………4
Recommendations…………………………………………………………………………………..7
Conclusion……………………………………………………………………………………………..14
References…………………………………………………………………………………………….15
I. Executive Summary
The competition in the market has moved from competition between the firms to competition between supply chains. The strengths and weaknesses of the company depend greatly in its partners in the supply chain and thus the proper management of the supply chain becomes critical. The management of the supply chain is complex for commodity products and far more in seasonal products such those manufactured and exported by Evergreen.
Evergreen is a seasonal business that sells its Christmas products to major retailers in the United States. The company specializes in Christmas declaration products including stocking, tree skirts, table tops, ornaments, bows and ribbons, etc. For Evergreen Products Factory Ltd, having the structuring drivers should not be enough. Continuous improvement in the supply change management including its facilities, transportation, inventory and information must be facilitated if it is to remain competitive in the future.
Sufficient technology must be invested to improve facilities and communication. The need for appropriate production planning and inventory must also be addressed to avoid stock out and wastage. Transportation is also critical for on time delivery of products. All these aspects need to be improved to maximize the efficiency. However, improvement efforts may not be easily implemented as some barriers exist in each of these aspects. The following section will discuss in detail the present management of these drivers and provide recommendations to promote responsiveness and efficiency.
II. Evergreen Products Factory Ltd
a. Facilities Management
Headquartered in Hong Kong, Evergreen has its production facilities setup in China and Vietnam. These factories are responsible for the majority of the production. The work centers have different machines that vary in capability and functionality. This gives the company the ability to handle the wide variety of products it manufactures. The production process involves the molding, stamping, decorating, painting and assembly. Raw materials include plastic, metal and Polynesian sourced in other Asian countries such as Korea, India, China and Vietnam.
The production unit is equipped with sophisticated machines where the skilled craftsmen put their skills together to craft the products. As a technology driven company, Evergreen has advance and the latest manufacturing facility constantly upgraded to enhance the production. But despite the investment in machinery, there is still a great deal of labor intensive work undertaken in the factory. Heavy labor inputs are necessary because of the large number of small parts that needed to be assembled and painted in the production of detailed products.
b. Transportation Management
The seasonal products are shipped worldwide with the largest markets located in the United States and Europe. Its infrastructure possesses all the facilities for exporting bulks of products to its clients worldwide. The export unit is backed by logistic and packaging facilities and its association with FedEx provides safe and timely delivery of products to the clients.
All products needed to be shipped between June to September and arrive at the distribution centers so that they could meet the seasonal demands. All shipments must pass the US customs requirement. This is ensured by checking the products before they are loaded to the container. The container load plan is submitted to the carrier for at least 24 hours before the closing date. The factory usually allots 5 days before the closing date of the cargo so that it has the maple time to submit all the loading information to the carrier before the cut off. The carrier then forwards the information to the US customs. Such information is entered to the database of the US customs where the goods are checked based on the declared contents upon arrival in the U.S.
c. Inventory Management
The first two months of the year is a time of great pressure for the factory. There is the need to get the suppliers deliver at a short notice and efforts are put to secure the facts delivery of materials, components and packaging. While the peak season is months away, the capacity needs to be guaranteed. By October, the products should have been produced and delivered to the retailers so it is necessary to manufacture in advance. There may not be enough orders to fill the capacity so any demand is grabbed to the production. Consequently, pressure is put on purchasing for short supply lead times. Thus, the company being one with the seasonal demand needs to plan ahead to make the operations easier. The planning and the purchasing can be conducted with consideration of the general demand over the whole year.
d. Information Management
The company has its IT system that facilitates faster processing. At this point, the customers could give their requirements on the samples which may include modifications, additional design and packaging. Upon the receipt of the customer orders, the manufacturing prepares the materials needed for the manufacturing and production. The production of items is dependent on the orders quantities of the customers. Some items have higher minimum quantities depending on the type of the item and the time of the year. Each customer can give their specifications on product design, labeling and product quality.
The product requirements are basically transacted through the company’s IT system. This facilitates the communication between the company and the customers. All the product requirements, specifications and queries are facilitated via this process. Upon the confirmation of product requirements, this information is communicated to the factory staffs that make the products based on the special requirements of different customers. Different customers have different arrangements on products, packaging, marking, shipment and documentation. This requires for an efficient flow of information to avoid customer complaints.
e. Barriers to Improvement
- High investment in technologies reduces difficulties to human errors but also entails great costs. Also, the factory relies heavily on labor intensive work and the introduction of automation may impede the production process initially.
- Establishing a warehouse in the US is a plausible option since the customers are the big US retailers. This will enable fast distribution of products. However, the customers have different standards and arrangements for shipping. Aside from this there is also the different due dates which the factory needs to meet.
- The frequent changes in due dates and order contents make it difficult to forecast demand. This problem is further complicated by the need to order the materials in advance to avoid delays in manufacturing and production. This also increases the complexities in scheduling and planning of people trying to manage the daily operations. The factory pay particular attention to orders that are due while simultaneously considering the resources and the utilization of its machine. Factors such as the changes on orders affect the original plans made by those scheduling the production
- The IT system is basically designed to facilitate the communication between the supplier and the customer. However, it has yet to be used to exploit electronic markets. The sharing of information is limited to placing orders and payments.
III. Recommendations
Improving Facilities
The facilities of production are the factories and the warehouses. The fundamental decision faced by managers is resolving the trade off between responsiveness and efficiency. The factories and warehouses have limited capacities which makes in difficult to respond quickly to demand swings. Such facility with almost all of the capacity being used is not capable of responding to fluctuation in demands. On the other hand, capacity costs money and the excess capacity is idle capacity not in used does not generate revenues.
The management of facilities affects the production and the competition in terms of quality, price, delivery, flexibility and customer relationship management. Customers expect their orders to be delivered with shorter lead times and less wastes. Because of this, the company had to constantly evaluate and improve the design and performance of the facilities based on the industry trends. It must be more efficient by consolidating operations, renovating and building necessary facilities as well as improving workflow and processes to support new technologies.
From the facilities perspective, improving the quality means investing in technology and automated processes which may reduce the difficulties due to human factors. Facilities used by factories today have changed due to technology and its competitive forces. It enables the business to change its work processes so that it can become more efficient. Thus, the factory can restructure its business by incorporating more computer and automation support, higher capacity and more efficient machines. Technology reduces the labor and inventory costs and achieve just in time manufacturing. This though may be difficult if the company lacks the resources to conduct a thorough evaluation of the performance and psychical conditions of the infrastructures. Instead it may contact outside professionals to enhance in house capabilities.
Improving Inventory
Stock levels for materials must undergo thorough inventory to prevent stock out or wastage. The main function of inventory is to serve the customer. As such the company must maintain stock levels that will allow acceptable service for the customers. If for example, a high service level is required and the stock is unavailable, then the customer is likely to go to the competitors.
The retailers are basically the customer of the company and it must understand its requirements in order to determine the desired service. In case of a stock out, the result may a backorder if the customer is served but not at the time or the quantity desired. This can be the cause of customer dissatisfaction and a possible loss of business with them. Stock out due to assemble component shortage also leads to inefficiency in the form of idle workers, idle equipments or the manufacture of other items earlier than what they are required. Stock out which are corrected through product substitution may not also bring favorable results (Toomey, 2000, p.46).
If shortages in parts/materials occur, the manufacturing operation may look into a capacity problem caused by an overloaded work schedule. Solving the problem by releasing some of the work will damage the operation. Because of this, the lack of capacity must be resolved. When the purchased parts/materials are short then the cause must also be examined. For instance, if the materials are delivered on time, then the problem could be the demand. If the purchased materials are late in the requested delivery, there is a supply problem.
Waste must be eliminated through juts-in-time manufacturing. Waste is anything that does not add value to the products. The strategy of eliminating wastes must be applicable both to the supply chain and the JET. It is to make the product flow. In manufacturing products, this is achieved by the assembly by an assembly schedule that controls the flow through the use of pull systems and synchronized scheduling techniques. Product flow can then be achieved by balancing the supply chain with the customer demand (Toomey, 2000, p. 183).
Improving Transportation
Responsiveness in the delivery can be achieved through a transportation mode that is fast and flexible. Some companies that sell catalogs over the internet are able to produce high level of responsiveness by using transportation to deliver their products. The factory can collaborate with companies such as FedEx and UPS that provide responsive transportation. Transportation can be made more efficient by originating it from a central facility hub rather than many branches (Hugo’s, p.35). The company may also transact with appointed consolidators and supply chain management companies designated to cover all the shipments. BJ’s Wholesale for one had appointed the Century Distribution Systems to do this process. As such case, the shipment must be done in accordance with the operating procedures set forth by the company. This includes the cargo receipt and loading, collection of documents, submission of required documents and local charges (‘BJ’s Vendor Shipping Guidelines’, nod.).
Improving information flow
High levels of responsiveness can be achieved by expanding the information flow through the collection and sharing of accurate and timely data generated from the other drivers. It can share data about the customer demand, production and inventory. Where efficiency is the focus, it can limit the information so as not to risk having that information used against the company.
Further communication between the customer and the supplier must occur after the placement of the contract. Evergreen may communicate to the customer with progress reports on the agreed schedule of delivery to provide the customer with warnings of any possible delays in meeting the agreed quantities or times of deliveries. Maintaining such communication may also allow the customers to request for changes to the agreed quantities and time or to other different products. The company can then respond to these change requests from the customer who establishes another flow of communication and negotiation.
The communication does not end with the delivery of the products. The products may not be what the customers wanted because they are the wrong products or were delivered in the wrong quantity in the wrong place and time. The customer may not pay the price originally agreed with the company so the final stage also requires communication. To sum up, the communication of information, materials and finances is much complex than it is illustrated by the simple model.
Improving Customer-Supplier Relationship
The company has potential collaboration partners in the supply chain management: customers and material suppliers. Transactional collaboration can be done to achieve efficient and effective execution of transactions with the customers. This does not mean that transactional relationships involve no strategic value. Rather it can be used to reduce supply chain management costs and increase revenues. The focus is on the improvement of the conduct of transactions, for instance, eliminating the need for frequent negotiations (Cohen & Russell, 2004, p. 144). This relationship requires very little information sharing.
On the other hand, cooperative relationships must be promoted through higher levels of information sharing. The supply chain partners will provide automatic commitment and confirmation or share information on forecasts, inventory availability, purchase orders or order and delivery status. With such collaboration, the partner will provide information which the other reviews and acts on it through the data sent either manually or electronically. The electronic data interchange (IDE) is the primary method for such communication through the internet (2004, p. 145).
The company also needs to constantly review whether it is following the ethical standards set forth by the retailers. For instance, Wal-mart provides an ethical standard manual for the suppliers which they need to follow. It contains the legal requirements as well as additional requirements embodied in the company’s standards for suppliers. Such document is provided to verify whether the factory practices are in accordance with the standards and if it promotes the quality of life of the workers who makes the merchandise (‘Wal-Mart Ethical Standards’, 2006).
Employee Relations and Training
The high pressure on the staff led to high turnover during the peak seasons. If the company is truly interested in reducing the high turn over it must work on the reducing the work load or balancing it during the production season. Excessive workload requires the employees to do more with fewer staff. This causes stress to the employee and also affects the quality and service created to make the numbers.
Examining the workload is the first step to help the employees balance stress in the work place. A balance work load will also help them bring positive and quality results. Assessing the workload might involve improving time management skills so that the employees can better manage their existing work loads or reorganizing schedules so that the work load is reduced.
Employees can also be motivated by engaging them with skill building activities. When appropriate trainings are planned ahead, the commitment becomes powerful motivator. The result of the highly skilled and motivated employee is the increase in job performances. When this is applied to the whole unit it translates to enhanced performance of the business (2003, p.636). Based on the needs of the customers, the learning activities can provide support for development, delivery and management of the supply chain. The company must be encouraged to consider employee development especially in since it require specialized skills or advanced education to promote company growth.
Trainings are accomplished in various ways such as classroom training, e-learning and on-the-job trainings. Other developmental programs can include coaching and mentoring. The main goal of the training and development programs is to assist the company in achieving its objectives by the development of individual and eventually the organizational performance.
VI. Conclusion
Unlike commodity products, the nature of Evergreen’s business is far more complex. It is characterized by seasonality which requires for a more strategic supply chain management. It has to improve the way it manages its inventory, transportation, facilities and information for better performance and eventually improve its relationship with the customers. Such include better planning of production, capacity and inventory. Appropriate forecasts also need to be acquired to avoid wastage and stock out.
Another aspect of the supply chain requiring great attention is the shipment. As an exporter, Evergreen must guarantee the on time and accurate deliveries of its products. It must also improve its customer relationship through improving the communication and collaboration with the customers. This would require compliance to their ethical standards and other requirements. Lastly, the company must not neglect its most valued assets – its people. Without the people it is impossible to meet its deliverables and it must continue to motivate them by addressing their grievances and need for improvement.
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