MT237 Unit 10 Supply Chain Report Example

Nine Weeks of Silence From Penang: A Unit 10 Supply Chain Report on Paying for Shipment Visibility

[Student Name]

Purdue University Global

MT237: Supply Chain Systems

Unit 10 Supply Chain Report

[Instructor Name]

[Date]

Prairie Rise Desk Co., its suppliers, the visibility service and every cost and saving are composite and illustrative; bracketed figures stand where quotes and records would supply the numbers; the sources cited are real.

Summary

Prairie Rise Desk Co. should subscribe to a shipment visibility service that links its supplier in Penang, its freight forwarder and the ocean carrier, so the planning system receives a confirmed ship date, sailing and arrival estimate for every container. The service costs about [$18,000] a year plus about [$12,000] to set up. It should allow lift-column safety stock to fall by about 1,730 sets, avoid most emergency air shipments and cut the planner's time spent chasing dates, saving about [$80,100] in the first year.

Why This Link

The term's earlier work examined seven parts of the chain. The two-layer map in Unit 2 found the Penang leg reported mostly by email. The information flow analysis in Unit 3 found the retailer's daily stock feed too slow, a problem that costs about [$25,000] a year and can be fixed for under [$2,000]. The vulnerability assessment in Unit 4 found the parcel pickup cap and the column stock the thinnest links in January. The inventory calculation in Unit 5 found lead-time uncertainty responsible for most column safety stock. The supplier comparison in Unit 7 kept Tulsa for frames. The transport study in Unit 8 proposed a linehaul test. The disruption plan in Unit 9 showed how much depends on knowing what is at sea.

The column link was chosen because it is the most expensive problem that information alone could solve. The stock feed fix is cheaper but smaller, and should be done regardless. The pickup cap is a contract term, not an information problem.

Diagnosis

Prairie Rise orders lift columns every four weeks with a nine-week average lead time. In practice a container can land a week and a half early or late without anyone being surprised. The Unit 5 calculation showed that late or early ships account for about 1,498 sets of the uncertainty Prairie Rise must cover over thirteen weeks, against 757 from shifts in demand, and that the cost-minimizing safety stock is about 3,690 sets at a 98.6 percent cycle service level, costing about [$95,700] a year to carry.

The variation itself cannot be removed, since sailings and ports are beyond Prairie Rise's control. What can change is when Prairie Rise learns about it. Today the company learns that a container is late only when the forwarder's arrival notice comes, often a week before the ship docks, or when the ship simply does not arrive. Lee and Whang (2000) argued that much of the cost of uncertainty in a chain comes from information arriving too late for anyone to act on it.

The Proposal

The visibility service connects to the supplier's packing records, the forwarder's booking system and the ocean carrier's vessel tracking. When the supplier packs a container, the service records it. When the container is booked, loaded and sails, the service updates the planning system automatically, with a revised arrival estimate whenever the vessel's schedule changes. A planner sees a slipping container weeks earlier than today and can react by moving the next order forward, booking a faster sailing or rationing stock before running out.

Cachon and Fisher (2000) showed that data is worth sharing only to the extent it alters what managers do, and here it changes three: how much safety stock to hold, when to place the next order and whether to expedite.

Alternatives Considered

Two alternatives were weighed. Moving column production closer, to the Taiwanese maker qualified last year or to a Mexican supplier, would shorten the lead time itself but at a higher unit price, about [$9] a set more, which on [48,700] sets a year would cost far more than the visibility service. Asking the Penang supplier to hold a consignment stock in a Kansas City warehouse would move the carrying cost onto the supplier, but the supplier declined when asked last year and would price the cost back into the columns. Visibility is the cheapest way to act on the problem without changing suppliers.

Costs

The service costs about [$18,000] a year for the expected number of containers and about [$12,000] to connect to the planning system and train the supplier's shipping clerk, for about [$30,000] in the first year and [$18,000] after.

Savings

If the visibility narrows the effective lead-time uncertainty from about 1.6 weeks to about 0.5, the Unit 5 calculation gives a safety stock of about 1,960 sets at the same service level, a reduction of about 1,730 sets. At a carrying cost of about [$25.96] a set, that saves about [$45,000] a year, and frees about [$204,000] of cash once, as stock runs down. Earlier warnings should also avoid most emergency air shipments of columns, which cost about [$20,000] last year. And the planner currently spends about six hours a week chasing dates by email and phone, about [$15,100] a year in time that could go to planning. Total yearly savings are about [$80,100].

The first-year net gain is about [$50,100], rising to about [$62,100] a year after setup.

The ships will not sail any faster; Prairie Rise will simply know weeks sooner when they are late.

Implementation

In the first month, Prairie Rise selects the service, signs the forwarder and carrier connections and agrees with the supplier on which packing data it will share. In the second month, the service runs alongside the current email process, and the planner compares arrival estimates with actual arrivals. In the third month, if the estimates are reliable, the planner begins lowering safety stock in steps of about [500] sets per container, watching for shortages. The full reduction is reached over about four months.

Risks

The supplier may be slow to share packing data, which would leave the first leg blind. The visibility estimates may be wrong for some sailings. And reducing stock before the January peak would be risky. The rollout should therefore start in spring, after the peak, and the stock reduction should pause each December until January's containers are confirmed.

Measures

Five measures will track the result: the accuracy of arrival estimates, measured as the average gap between estimated and actual arrival; lift-column safety stock in sets; stockouts of columns; emergency air shipments; and planner hours spent chasing dates. Christopher and Peck (2004) describe visibility as a foundation of resilience, and a year of these figures will tell Prairie Rise whether the subscription earned its place.

References

Cachon, G. P., & Fisher, M. (2000). Supply chain inventory management and the value of shared information. Management Science, 46(8), 1032-1048. https://doi.org/10.1287/mnsc.46.8.1032.12029

Christopher, M., & Peck, H. (2004). Building the resilient supply chain. The International Journal of Logistics Management, 15(2), 1-14. https://doi.org/10.1108/09574090410700275

Lee, H. L., & Whang, S. (2000). Information sharing in a supply chain. International Journal of Manufacturing Technology and Management, 1(1), 79-93. https://doi.org/10.1504/IJMTM.2000.001329