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Question 1

First and foremost, it should be noted that a strategic and properly drawn supply chain map brings into perspective the aspect and opportunity for modification and the redesign of the supply chain (Handfield & Nichols, 2002). In line with this, therefore, it is known to be able to assist one to visualize the supply chain more effectively so as relevant persons can be able to identify areas that require further analysis for the betterment of a robust and effective supply chain (Gardner & Cooper, 2003) & (Blackhurst et al., 2018). Through this, therefore, it is possible for the map to reveal a number of inefficiencies that are not easily detected when a small segment of the supply chain is examined by the naked eye. As such, with all these factors being considered, Mrs. Indra Banerjee who has been tasked with reviewing the supply chain of the company will use this mapping process to assist the company in a number of sectors while allowing her to make effective and efficient decisions (Sparks & Badurdeen, 2014).

One, she will be able to gain greater supply chain visibility when it comes to all the areas that are involved when dealing with FastGoods management system. To start with, the company will be able to know the names and addresses of their suppliers so as to make the whole process of communication easy. Through this, Mrs. Banerjee will be able to advise the company on the usefulness of effective communication when it comes to maintaining a successful and profit-generating supply chain (Nagurney, 2006). In addition to this, she will mention that effective communication cuts down on time-wasting and this will be crucial when it comes to their delivery timelines of goods that will make sure that they beat the deadlines each and every time when it matters most. This measure will promote customer loyalty and thus boost sales (Bovet & Martha, 2000).

Second, the mapping will bring the aspect of reducing risk to a minimum (Faisal et al., 2006). Through this, Mrs. Banerjee will be in a position to mention some of the various ways that the company can effectively mitigate the high number of risks that come with managing a supply chain. For example, it is widely known that some of the goods passed through the supply chain process end up getting damaged and some even getting lost. As such, Mrs. Banerjee should recommend that all the tags and tracking codes of the goods being transported are effectively labelled and that they are not prone to wear and tear throughout the whole process. With this being done, it is self-assured that the risk involved in the loss and damage of goods will be reduced to a minimum or even eradicated altogether. Also, this process will reduce the return of goods which has been seen as a common trend when goods arrive while they are knocked up. This aspect will cut down the costs involved in the return of goods and thus these funds can be directed to other ventures of the supply chain that need to be boosted up for efficiency and effectiveness. When all these are done, risk will have been properly assessed and managed through the use of supply chain mapping (Xie et al., 2011).

Third, the mapping process of the supply chain will assist Mrs. Banerjee to spot the potential threats that the company might be facing (Sheffi & Rice, 2005). For example, considering that the supply chain is a humongous monster and machine that allows the flow of goods and services from one place to another, it is curbed on the aspect of growth due to a number of threats. Threats can range from a contractor using cheap labour which is illegal so as to make sure that the company’s objectives are met, or the goods can be passing through countries and persons living in politically unstable regions or regions faced with environmental issues such as floods and landslides. With these aspects being able to be identified by the supply chain mapping process, Mrs. Banerjee can be able to advise the company on what ways it can effectively and efficiently take charge of these threats and make profits without subjecting itself to lawsuits and other cases of not adhering to various aspects of the corporate social responsibility clause (Boyd et al., 2007; Lindgreen et al., 2009; Feng et al., 2017 & Welford, 2004).

Fourth, she can be able to bring up various ways that the company can be ahead of the game. By this, we mean that the company can leverage various loopholes that can only be seen through the mapping process such as the level of demand in various areas. As with the economy and the marketing aspects across the world and in business, supply and demand are two pillars that are intertwined throughout every course. These two aspects should be respected if any profit is to be realized (Burkhard et al., 2012). Therefore, bearing that the mapping process has been designed to showcase the various regions in Asia that show the promise of high demand density for the products, the company should focus on marketing their products to such regions and as such, spearing the supply chain to focus on delivering goods to those regions on a timely manner so that demand does not overpass supply. In line with this, therefore, it is crucial that there should not be a gap between demand and supply, if this happens, the loyal customers will lose focus and will turn to other products produced by other companies and thus the lucrative market for the company will have been lost. Therefore, Mrs. Banerjee should press the management of the company on maintaining these aspects of their marketing strategy so as their supply chain process can remain relevant for a long period of time.

Fifth, the mapping process will effectively allow Mrs. Banerjee to be able to know the areas in the supply chain that the company is dumping unnecessary finances and where it is not pressing even harder for more profits to be realised. Through this mapping process, she will be able to account for every form of capital used and propose some effective structures in terms of financing that will cut down on unnecessary costs while bringing more profits into the company. One thing about business is that everyone is in there to make profits and not to dilly dally for the sake of it. It is a high-pressure kind of situation and a supply chain is one of the most lucrative yet stressful businesses around. Therefore, caution and wit should be implemented when it comes to using available resources.

 

Question 2

When working with moving averages, it comes with various advantages so as it can boast of the nature of its accuracy when it comes to forecasting measures in relation to the errors experienced. On the onset, the period with which the moving average is calculated upon tends to improve the accuracy of the moving average. By this, we mean that the forecast figures produced on the output are seen to be much closer to the real or actual figures that are being provided by the market or the system.

In our case, we implemented the use of a 5-week moving average which produced figures that were seen to almost trying to relate to the actual figures. However, due to the immense amount of data, a rather larger period would have been better for more accurate figures to be produced by the method of moving averages. This nature of thought was brought about through the use of the formula that calculates the median absolute deviation. Through this formula, we were able to see that the larger the period that was used, the smaller the median of absolute deviation, we began with a smaller period all through to the 5 weeks and did up to a 9 week so as to prove our concept. Therefore, it should be noted that the method is sufficient enough to deal with errors depending on the period that was used as this also assists in separating out the random variation that is seen when dealing with large datasets.

Additionally, the method is also crucial as it is effective in providing constant forecasts which relate best when dealing with larger datasets like the one we were dealing with. Therefore, the accuracy is improved when it comes to forecasted figures alongside actual figures while the errors are minimized to a large degree. In line with this, therefore, we should not forget that the method is easy to compute and interpret which is a big plus when dealing with large datasets that are cumbersome to some when it comes to interpretation and jotting down some crucial aspects of the data.

Finally, a big part of the effective workings of the moving average method is in the way that it is able to hold on the long-term forecasts, this is crucial when it comes to demand. Why do we say this? For one, the running of a supply chain needs to be ahead in the game by making sure that it is able to determine the forecast of demand even a year from now. Through these predictions from the method, and making sure that long periods are used to determine these forecasts, the supply chain system operated by a company, will be able to ensure that it is able to meet the demands of the market and as such its loyal customers. This aspect boosts revenue and limits the aspects of time spillage and overcrowding of resources or the over depletion of the same resources.

Using the method, the forecasted demand for week 53 is 30905.5 as seen on the excel sheet.

 

Question 3

What is the economic order quantity of detergent for East Malaysia’s DC’s?

 

For this question, we first need to understand the meaning of EOQ. Within the inventory management spectrum, it is regarded as the order quantity that is effective to be able to minimize the ordering costs together with the holding costs of certain goods and commodities. As such, it has the formula:

 

Based on the formula, we have the value for D, which is (70,000 units per month * 12). On the cost per order, we have not been given a specific amount. Moving to the cost per unit, the value is $8. While for the H, the value is holding cost (I) in % * cost per unit. Therefore the calculation comes to :

 

EOQ = SQUARE ROOT ( 2 * (70,000*12) * (S))/ (I * 8)

 

However, we have been told that 5% of the product selling price happens to be the holding cost per month, therefore, 5% of 8 = 0.4 * 12 = 4.8 $ per year.

 

Therefore the EOQ = SQUARE ROOT ( 2 * (70,000*12) * (0.5))/ (4.8 * 8) = 147.90 UNITS.

 

Discuss how ordering and inventory costs are affected if DC’s set an order amount less or more than the EOQ (+-15% of the EOQ).

 

One thing that should be noted, is that for a company to be able to maximize on the profits that it can potentially make, it is crucial for it to minimize the costs of both the storing of its goods and commodities (inventory) and also the ordering of the same goods and commodities. Therefore, this is where the decisive tool known as the EOQ comes in to determine the optimal quantity in terms of inventory, the company needs to order and also to store in its various warehouses. As such, for the first case, if a company decides to order less than the amount it requires and this is in relation to the EOQ, it will face the lack of inventory to supply to the growing demand in the market. With this, the eager and thirsty customers will decide to move to the company’s competitors as we have seen in this case study. Therefore, the company should always make sure that the inventory procured is substantial enough to sustain the supply chain so as to not crumble because of slow supply or even lack thereof. In addition to this, it is crucial to mention that in doing this, that is, having less inventory, the company will definitely cut the costs of the inventory and also the ordering costs, however, this resources will lack a channel for them to be effective for the company and as such the company will be termed as playing it safe so as to just survive, not taking risks which sometimes are necessary for profits and returns to be made. In a working system, the shareholders will not be able to benefit from such a venture and the business will eventually crumble due to lack of vision and prowess when it comes to management and administration.

On the other hand, a company can decide to go above the EOQ, in this case, we are working with +15%. When this is implemented, it usually means that the company is determined to take more risks into supplying more goods and commodities than the market can take. As such, the company will face more ordering and inventory costs which will highly deplete the company’s resources. Not forgetting that the market does not have the demand needed to take on the high amount of supply being pressed by the company onto it, the company will be left agape, with a slow-moving type of operation when it comes to inventory processing and management. This aspect will lead to the hold up of cash that will have been used to work on other profitable projects within the company. Therefore, taking on a large amount of inventory more than the market can handle and as such more than the economic order quantity, is a risky venture that should be undertaken in very rare cases considering that it only works in also very rare cases. Looking at the ordering and inventory costs, they will be very high which will press into the reserves of the company to a large degree. For example, some goods and commodities will need to be stored for quite a long time for them to be sold at a later date. This happens when companies take stock of large amounts of goods and commodities during certain holidays and events, like Halloween and Christmas. It is definitely crazy for goods and commodities that were to be used during Halloween to be sold during a period like the summer or even winter. Therefore, the company will be subjected to hold onto the goods and commodities for approximately a year for them to be sold. During this period, the inventory costs will skyrocket day by day depending on which service the company uses for its storage purposes.

In conclusion, the use of mapping is a crucial and highly useful tool that companies need to use in this rapidly growing market. It will highly assist them in how they see and do things when it comes to supply chain management. Therefore, based on the recommendations from Mrs. Banerjee it is clear that the company will take the right course of action when it comes to implementing a robust supply chain management system.

 

 

 

 

References

Blackhurst, J., Rungtusanatham, M. J., Scheibe, K., & Ambulkar, S. (2018). Supply chain vulnerability assessment: A network-based visualization and clustering analysis approach. Journal of Purchasing and Supply Management, 24(1), 21-30.

Bovet, D., & Martha, J. (2000). Value nets: breaking the supply chain to unlock hidden profits. John Wiley & Sons.

Boyd, D. E., Spekman, R. E., Kamauff, J. W., & Werhane, P. (2007). Corporate social responsibility in global supply chains: a procedural justice perspective. Long Range Planning, 40(3), 341-356.

Burkhard, B., Kroll, F., Nedkov, S., & Müller, F. (2012). Mapping ecosystem service supply, demand, and budgets. Ecological indicators, 21, 17-29.

Faisal, M. N., Banwet, D. K., & Shankar, R. (2006). Mapping supply chains on risk and customer sensitivity dimensions. Industrial Management & Data Systems.

Feng, Y., Zhu, Q., & Lai, K. H. (2017). Corporate social responsibility for supply chain management: A literature review and bibliometric analysis. Journal of Cleaner Production, 158, 296-307.

Gardner, J. T., & Cooper, M. C. (2003). Strategic supply chain mapping approaches. Journal of business logistics, 24(2), 37-64.

Handfield, R. B., & Nichols, E. L. (2002). Supply chain redesign: transforming supply chains into integrated value systems. Ft Press.

Lindgreen, A., Swaen, V., Maon, F., Andersen, M., & Skjoett‐Larsen, T. (2009). Corporate social responsibility in global supply chains. Supply chain management: an international journal.

Nagurney, A. (2006). Supply chain network economics: dynamics of prices, flows, and profits. Edward Elgar Publishing.

Sheffi, Y., & Rice Jr, J. B. (2005). A supply chain view of the resilient enterprise. MIT Sloan management review, 47(1), 41.

Sparks, D., & Badurdeen, F. (2014). Combining sustainable value stream mapping and simulation to assess supply chain performance. In IIE Annual Conference. Proceedings (p. 1847). Institute of Industrial and Systems Engineers (IISE).

Welford, R. (2004). Corporate social responsibility in Europe and Asia: Critical elements and best practice. Journal of corporate citizenship, (13), 31-47.

Xie, C., Anumba, C. J., Lee, T. R., Tummala, R., & Schoenherr, T. (2011). Assessing and managing risks using the supply chain risk management process (SCRMP). Supply Chain Management: An International Journal.

 

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