Discuss about the Lean Supply Chain and Logical Management.
Capacity planning refers to the process whereby, production capacity is fully estimated and determined. This is attributed by the high change in product demand in most of the organizations. In the context of operation management, capacity planning is connected to design capacity that indicates the optimum amount of work to be completed in a given timeframe by organizations. Capacity planning include design plan that check input requirements and outputs (Muller, 2011). It is very essential in estimating and determining the maximum production capacity. This can be achieved within a given timeframe and using the normal working program. It is also essential in estimating maximum utilization of resources and enhance proper decision making process. In context of operation management, capacity planning is essential so as to follow certain decision making process such as product modification and high extensive operations. Capacity planning also enhance the innovation of new products. This involve a certain technique applied to find out and measure the production capacity of certain materials used in capital intensive resource.
These factors are referred as determinants of effective capacity. They include facilities, product and service factors, process factors, human factors, policy factors, operation factors, supply chain factors and external factors. To begin with, facilities are important factor in efficient capacity management. The required design of facilities is best based on availability of size and provision of expansion. This factor may include energy sources, market and labor supply. When they are available, work can be performed smoothly. Secondly, process factors is the next determinant of effective capacity. It deal with output quality. Output rate increase if the quality meet the required standards and vice versa. Lastly, human factors is the final determinant of effective capacity. It involves jobs hiring to complete certain arrays of activities. These factors require skills and experience so as to perform the job effectively. Training is also offered so as to increase output.
There are four strategies used capacity and production planning. They include lead strategy, lag strategy, match strategy and adjustment strategy. To begin with, lead strategy refers to the process of increasing capacity in the production unit by the organization due to anticipated rise in demand mechanisms. It is an aggressive strategy whose key objective is luring consumers and customers from other competitors relating to a particular company. In this case, lead strategy is used to by the consumers and customers by increasing the level of service delivery and minimizing lead time (Rothfuss, 2008). It also enhance minimization of stock out costs in production. The main advantage associated with lead time is to make sure that call-us plumbing company has enough capacity to fulfil all the demands especially during high growth rates. Again, the company can utilize lead strategy to preempt competition caused by various competitors whose main aim is to increase their production capacity. However, lead strategy is risk seeker where there is uncertainty in demand and high technological advancements.
The second strategy is called lag strategy. This refers to the strategy that occurs in capacity addition posterior to the organization ability of running all the capacity due to increment in demand mechanisms. Lag strategy is also described as conservative strategy in the sense that it assert the opposite aspect of lead strategy. It main aim is to reduce the risk of wastage (Richard, 2014). However, in the process, the outcome may be loss of customers due to lower service levels and stocking out process. The main advantage of lag strategy is reduction of overbuilding risk. Again, it enhance better production as utilization levels increase. Finally the company has ability to put off the huge investments in a given timeframe.
The next strategy is called match strategy. This refers to addition of minimal amounts based on demand changes in a perfect market. It is also referred as moderate strategy.
The last strategy is called adjustment strategy. It involves addition and reduction capacity in minimized or maximized amounts caused by consumers demand algorithms. It is also caused by change in production and system architectural design.
There are three common capacities or strategies that Call-Us plumbing company can use to improve supply. They include leading capacity, following capacity and tracking capacity. To begin with, leading capacity refers to a situation where a company tends to raise capacity so as to meet anticipated demand (Piasecki, 2009). Next is following capacity. Following capacity refers to situation where companies, before expanding production capabilities, they first check if there is demand increment. Finally, tracking capacity occurs whereby, there is additional increase in capacity overtime so as to deal with anticipated demand.
Time. Supply chain require time management. In every stage of supply chain, it is important to a given amount of inventory that will be used in lead time.
Uncertainty. It is important to keep inventory supply so as to reduce the risk associated to uncertainty in demand and supply mechanisms (Hugos, 2011). This also enhance proper movement of goods.
Economics of scale. It is good to keep supply of inventory so as to gain profit from additional of a single unit in production when the users need the inventory.
Ordering cost = number of orders × ordering cost
= 400 × 5.50 = 2200
Inventory carrying cost = carrying cost per unit × average inventory = 0.40 × 300000= 120000
Present annual stocking cost = ordering cost + inventory carrying cost.
= 2200 + 120000 = 122200.
EOQ = √ ((2 ×D × S) ÷ H)
= √ ((2 × 10000 × 5.5) ÷ 0.4)) = 275000
Ordering cost = number of orders × ordering cost
= 400 × 5.50 = 2200
Inventory carrying cost = carrying cost per unit × average inventory = 0.40 × 275000 = 110000
Present annual stocking cost = ordering cost + inventory carrying cost.
= 2200 + 110000 = 112200.
Saving stocking cost = stocking cost without EOQ less stocking cost using EOQ
= 122200 – 112200 = 10000
EOQ = √ ((2 ×D × S) ÷ H)
= √ ((2 × 10000 × 5.5) ÷ 0.4)) = 275000
Total stocking stock (TSC) = (Q÷2) ×C + (D÷Q) ×S
= (400÷2) × 0.4 + (10000÷400) ×5.5 = 217.5
Reorder = p × d = 40 ×120 = 4800
Estimated saving in total annual stocking cost with EOQ = (Q÷2) ×C + (D÷Q) ×S +reorder
= 217 +4800 = 5017.50
Estimated saving in total annual stocking cost when the values were all delivered at once = reorder – total stocking cost. 4800 – 217.5 = 4582.5
Fixed order inventory management system refers to inventory control mechanism where orders are placed in periodic manner such that a difference arise in order quantity every time orders are placed while on the other hand variable period inventory management refers to inventory control mechanism where a continuous system is used to place orders for a given constant amount in case a decrease in inventory is noted towards a given level.
This critically involves methods used by companies to order inventory and to attain inventory that can be used in production. Using Just-in- time mechanisms, the company do not hold safety stock. This makes their operation of inventory very low. Just in time mechanism require time series analysis to forecast demand. This mechanism applies cost reduction stock management strategy. For example, in Toyota Company, just in time has been used successfully. There is adequate production, proper human resource with skills and knowledge. It also make sure that cases of machine failure does not occur. The suppliers of goods and services need to be reliable (Latham, 2010). For Toyota Company, the method of assembling vehicles should be well defined using just-in-time mechanism
It is a system used in both just-in-time manufacturing and the corresponding lean manufacturing. Its main aim is to enhance supply chain control (Myerson, 2012). Again, many experts used this mechanism tool in the production system and in the improvement of production capacity. The Kanban cards are used to enhance the movements of materials in and out of the production facilities. For example, Kanban inventory system include the popular 3-Bin system which is used in supply parts.
There are many tools used in inventory management and can be recommended to Mr. Swartz to improve the production in his company.
Supply chain management can be broadly defined as management of certain activities that can be used to optimize the value of customer and therefore enhancing the attainment of competitive advantage which by all means possible remain sustainable irrespective of the forces in supply chain (Klosterboer, 2011). This chain represent the channel used by companies to ensure an efficient and effective method used in supply chain. Supply chain basically embrace two ideas. First, it involves movement of products from the suppler to the end user and finally the companies expand their activities outside the walls of the company. Supply chain management involves the following processes.
Fasting moving consumer goods need to plan in a well-organized manner. Planning will the durability of the fast moving customer goods by making sure the demand is meet whenever the goods are required by the consumer (Ellsworth, 2015). Purchasing of fast moving consumer goods need to be paid immediately so as to enhance fast production of other goods without facing financial constraints. Processing of fast moving consumer goods need to adhere to the required basic standards. Finally, distribution of fast moving goods need to done using the fastest channels of distribution.
This flow chart is a representative of call-us plumbing supply. It indicates movement from the supply to producers and to customers.
There are six current trends in supply chain management as highlighted below.
Supply chain strategies are very important in the management of supply chain.
Call-us plumbing supply Company should use the optimization of resources to improve their supply. This strategy will help the company in profit maximization since most of the resources will be fully exploited (Bragg, 2015). The resources could include physical resources and human resources who can burn the midnight oil to ensure full optimization of all the available resources.
This part requires research on supply chain management, inventory and capacity. To start with, the research on supply chain management results are explained after conducting a customized research. ABC Garment Ltd board of directors should note that the research offers a range of supply chain management tools that ABC Garment Company can utilize. It will help the employees to understand the key limitation confronted in supply chain (Ballantyne, 2007). The research also review a perfect instrument that publicly create concern about supply chain management in ABC Company. In inventory, the company need to embrace the best strategies that can manage inventory by highlighting the advantages and disadvantages associated to the strategy. Finally, capacity will involve the production of adequate capacity that meet the anticipated demand. The research need to indicate a perfect correlation between the demand and capacity produce.
Here, the strategy to be recommended to the Call-Us plumbing company is called lead strategy. This strategy will promote supply chain management, inventory and capacity (Baily, Farmer & Crocker, 2015). In supply chain management, lead strategy will be applied in planning, processing, purchasing and distribution. In inventory and capacity, lead strategy will apply the EOQ model to improve inventory and capacity of Call-Us plumbing supply.
References.
Baily, P., Farmer, D., & Crocker, B. (2015). Procurement, Principle & Management. Pearson publishers.
Ballantyne, T. (2007). Capacity. Spectra.
Bragg, S.M. (2015). Accounting for Inventory. Accounting Tools.
Chopra, S. (2012). Supply Chain Management. Pearson Education.
Christopher, M. (2016). Logistic & Supply Chain Management. FT Press.
Ellsworth, T. (2015). Capacity Special Edition. Secret Acres.
Farrington, B., & Lyson, K. (2012). Purchasing and Supply Chain Management. Pearson Publishing.
Grummit, A. (2007). Capacity Management. Van Haren Publishing
Hugos, M.H. (2011). Essentials of Supply Chain Management. Wiley publishers.
Klosterboer, L. (2011). ITIL Capacity Management. IBM Press.
Latham, J. (2010). Java. Just in Time. College Publication.
Muller, M. (2011). Essential of Inventory Management. AMACOM.
Myerson, D. (2012). Lean Supply Chain and Logical Management. McGraw-Hill Education.
Piasecki, D.J. (2009). Inventory Management Explained. OPS publishing.
Richard, G. (2014). Warehouse Management. Kogan Page.
Rothfuss, P. (2008). The Name of the Wind. DAW Books.
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