OPS FPX 5620 Assessment 1 Analyzing Global Supply Chain Infrastructure and Operations
Infrastructure Analysis
Mainland Tools’ infrastructure was developed in stages as the business grew, resulting in mismatched departments and insufficient storage. The building’s layout has led to inefficiencies in product movement and workflow. Products must pass through multiple departments before reaching their destination, which is not optimal. Additionally, the company has rented a warehouse five miles from the main facility, leading to delays in product movement and inventory issues.
The company also faces a significant lack of technology, which contributes to inefficiencies in handling orders, inventory, and customer support. The absence of vital software, such as Customer Relationship Management (CRM), Supplier Relationship Management (SRM), and Computer-Assisted Ordering (CAO) systems, further exacerbates these issues (Chopra & Meindl, 2013). Implementing such software would address these problems and reduce product lead times. The absence of an inventory management system has resulted in excessive cycle inventory and the need for an additional warehouse (Chopra & Meindl, 2013).
Operations Analysis
The operations analysis highlighted other areas that need improvement at Mainland Tools. The company’s current order-handling process, which relies on interoffice mail, has proven to be costly, with 15 percent of orders lost, delayed, or not placed, resulting in a $900,000 annual loss. This has increased cycle and lead times, further hindering efficiency in order processing and customer service.
Value Stream Map Explanation
A Value Stream Map (VSM) is a tool used to analyze, evaluate, and document the flow of materials and information required to produce a product (“Value Stream…”, 2019). It is designed to highlight critical elements in a production system, enabling better understanding of customer, production control, inventory, transportation, and supplier flows (Suarez-Barraza et al., 2016). The VSM also illustrates the time taken to complete each process (Suarez-Barraza et al., 2016).
Appendix A
Mainland’s current state value stream map (CSVSM) shows the flow of orders within the company. Mainland operates with two warehouses, one on-site and another off-site. Customer orders are received through technical support and routed via interoffice mail. This slow process often results in lost orders, contributing to a bullwhip effect, where excess inventory is created (Venkataraman & Pinto, 2018). To manage this, Mainland utilizes the secondary warehouse, but this increases response times for customer orders.
Appendix B
In Appendix B, the Operations Manager implemented lean manufacturing to reduce waste and improve responsiveness to external changes (Venkataraman & Pinto, 2018). A SAP system was introduced to provide visibility into supply chain logistics and reduce order response times. SAP’s customer experience module allows customers to enter orders directly and receive assistance, improving both efficiency and profitability. The system also coordinates inventory restocking and supply chain activities.
Recommendations
The Operations Manager has several recommendations to address Mainland Tools’ issues. These include shutting down the company for 30 days to renovate its facilities, which would result in a $500,000 loss in revenue. During this period, CRM/SRM and CAO software will be implemented, specifically SAP’s business suite, which will optimize inventory, logistics, and supply chain visibility (“Digital…”, 2019). The SAP system will also improve supply chain coordination with Thomson Tools and eliminate the bullwhip effect (Venkataraman & Pinto, 2018). All internal and external communications will be conducted through Office 365, replacing the outdated interoffice mail system, which has caused a $900,000 annual loss.
Another recommendation is to relocate the shipping and receiving departments closer to the on-site warehouse, eliminating the need for the offsite facility, saving $15,000 per month or $180,000 annually. This restructuring will enhance the company’s ability to handle orders and ship products efficiently.
The estimated cost of renovation, SAP software, and Office 365 implementation is $174,000. With a potential loss of $900,000 per year and an additional $100,000 in efficiency gains, the total estimated profit increase would be $1 million, bringing the company’s total revenue to $7 million. After subtracting the $500,000 loss during the renovation, the projected revenue would be $6.5 million, giving the project a 36 percent return on investment (ROI).
Conclusion
This report was created by Thomson Tools’ Operations Manager after the acquisition of Mainland Tools, a small tool company in China. Mainland’s se