Final Project Assignment
SCM
301 Spring 2016
Overview of the Case Analysis
We have discussed many concepts in SCM 301
related to planning, sourcing, making and delivering products and services. The
purpose of this case analysis is to integrate the different elements of the
course and to apply tools you have learned evaluate the supply chain
performance.
Consider yourself a consultant assigned to develop
a supply chain management strategy for the companyThrox. You are tasked with evaluating
the company’s recent performance and recommending changes (decisions) to
improve supply chain management performance. You should use concepts and methods discussed in SCM 301 to undertake
these two tasks.
Company Background Information
Throx sells higher-end custom-design socks in three-sock sets (rather
than two). The company operates from a
small packaging and distribution facility in Richmond, CAfrom which it ships
product to customers. Given the
company’s location and focus, 97% of sales are in California, primarily in the
major urban areas of the San Francisco bay area, Los Angeles, Sacramento (and
last but not least) San Diego. The company sells exclusively via online sales,
at an average price of $15/three-sock set, plus shipping costs charged to the
customer.
The company currently orders its product
from the Chinese sock manufacturer Zhejiang Datang Hosiery Group Co.,Ltd in
so-called “Sock City.” Socks are shipped
via truck to the port of Shanghai, from where they are shipped to the port at
Los Angeles-Long Beach via ocean freight.Once offloaded in Los Angeles-Long
Beach, the socks are shipped via truck to the Richmond facility. On average, shipment from the manufacturer to
the Richmond facility takes 4 weeks.In addition to the transit time required
for shipment, thelead timefrom when an order is placed with the manufacturer to
when it is shipped from Zhejiang is 2 weeks. Historically, the standard
deviation of lead time has been 1 week.
Product
Orders(Demand) Information
The company provides you with the following
information for the past two fiscal years:
Product
Forecasting Information
Throx uses two main forecasting methods
based on annual data to predict orders for the following year, a weighted
moving average and exponential smoothing.
They provide you with the following information about forecasts for FY
2014 and FY 2015:
Weighted Moving Average uses Wt
= 0.7 and Wt-1=0.3.
Exponential Smoothing uses ? = 0.9.
Inventory
Management Information
The initial inventory for all sock styles
combined at the beginning of FY 2016 is 3,500 units.You also have information
on current costs, which includes:
·
Unit order cost to Throxfor an order placed with its
current supplier, $/order = S = $500
·
Holding cost per set perper year for materials held in the
company’s warehouse = H = $5
·
The company currently pays $4
for each set of socks.
The company uses a continuous review
replenishment policy, and has IT systems in place that allow constant
monitoring of key information. Last
year, the company used an ROP under this policy of 1,750 units for all sock
styles and an order quantity Q of 4,000 units for all sock styles.
Potential Alternatives to Current Supply Chain
Management
The company has asked you to evaluate a
number of alternatives to their current SCM practices, including their choice
of supplier, transportation modes, warehouse location, order quantities and
safety stock.
Alternative
Suppliers
The company has contacted potential
alternative suppliers in China, who have offered the following information
relative to the current supplier:
To keep their order management simple,
Throx wants to use a single-sourcing strategy, so they want a recommendation
about which supplier would be best.
Alternative Transportation
An alternative to their current transportation
approach available to Throx is shipment by UPS Express Air from Shanghai to
Richmond, which averages 3.5 days. The
comparison of costs is given as:
* No data are
available about variation in transit times, so Throx assumes this is constant.
Similar to their decision about sourcing,
Throx wants to use a single-sourcing strategy for transportation, so they want
a recommendation about which mode would be best.
Alternative
Warehouse Location
The company would also like to assess
whether its current warehouse location is appropriate based on where customers
are located. It provides you the
following information about its key markets, and indicates that its orders in
each market are roughly proportional to the total population.
Final Project Deliverable to Throx
You should develop a document of 4 pages or
less (double-spaced, 12-point font, 1” margins)that addresses each of the
following:
1)
Calculate measures of forecast
accuracy for FY 2014 and FY2015 using the MFE, MAD and MAPE. Do these forecasts seem adequate for the
purposes of decision making? Why or why
not?
2)
Calculate what appropriate values
of EOQ and ROP would have been for FY2015 based on the FY2015 forecast value. Give
your final answer in full sock sets (round to the appropriate whole number.)Then,
calculate what appropriate values for EOQ and ROP would have been for FY2015
based on actual demand. Based on this
difference, indicate what theimplications are for inventory management costs in
FY2015. See additional tips below:
a)
Compare the costs for decisions
based on the forecast to the actual data
b)
Use a service level of 95%
(z=1.65) when calculating the ROP
c)
Calculate average weekly demand
(
) by dividing the forecast by 50
weeks
d)
For the variance inweekly demand,
use the data provided in the table with the FY2015 forecast for all approaches
e)
Annual Inventory management
costs will include the following: Annual Holding Costs, Annual Ordering Costs,
and Purchase Cost.
3)
Calculate inventory management
costs for the company’s current decisions about EOQ and ROP based upon actual
demand in FY2015. Compare these to the
costs to that would have been achieved if the company had used its forecast for
FY2015 to calculate more appropriate EOQ and ROP values (what you calculated in
Question 2).
4)
Develop a forecast for FY 2016 using
the two forecasting methods currently employed by the company. Comment on which of the forecasts is likely
to be more appropriate to support decisions based on your assessment of
forecast accuracy. Use ONE of the
forecast values to support your recommended decisions in Question 5below.
5)
Provide the company with the
following recommendations for FY 2016 to improve SCM performance, based on
analysis of available data and appropriate methods from SCM 301. Include a discussion of WHY the
recommendations would be expected to improve performance,which
usually will require calculating performance metrics for your recommended
decision compared to the company’s current decisions.Use your forecast values
from 4) as input into your decisions.
a)
Indicate which of the three
suppliers should be used for FY2016. It
will be helpful to develop a supplier scorecard (NOTE: Use scores of 3=best, 2=second
best, 1=worst);
b)
Indicate which transportation
mode should be used for FY2016. You may
use a scorecard, but you must also include an analysis of the transportation costs
associated with each option and discuss other implications (such as inventory
levels, safety stock, etc);
c)
Indicate an appropriate
location for a new facility if one is to be built. Round your final coordinates (X, Y) to two decimal
places. Use methods discussed in the course,but be sure to include discussion
of other relevant factors that would influence the choice of a specific
location;
d)
Indicate what appropriate
values for EOQ and ROP would be for FY2016 based on your forecast from 4) and
recommended supplier from Question 5a. Give
your final answer in full sock sets (round to the appropriate whole
number). What are the expected costs for
inventory management based on your decisions, and how do these compare to the
performance observed in FY2015 based on the company’s decisions for that year
(Question 3 numbers based upon the order quantity of 1000)?
6)
Discuss potential issues with
the implementation of your recommendations.
What changes or resources would be necessary to implement them, and what
might create challenges?
Final Project Grading Rubric
Your case analysis document will be
assessed as follows:
Document
Submission
The assignment due date is listed in the
course schedule. The document should be
submitted to the appropriate ANGEL Dropbox as a Word document, with the
filename:
LASTNAME_SCM301.docx(-5 points if not named with this format)
No
late submissions will be accepted due to deadlines for course grade submission.
Please plan
accordingly.
