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Global Supply Chain

In: Business and Management

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Global Supply Chain Advantages Paper
Lisa Agnew, Heidi Lankford, Renae Pace, Courtney Ray
Strategic Supply Chain Management ISCOM 370
Adrian Crystal Martin
January 31, 2010
University of Phoenix Online

Riordan Manufacturing Supply Chain
Riordan Manufacturing is a worldwide manufacturer of plastics. The organization employs 550 people and has projected annual earnings of $46 million. The company’s products include plastic fans and fan parts produced at its facilities in Hangzhou, China and custom plastic parts produced at its plant in Pontiac, Michigan. The company's major customers for its standard and customized fans are automotive parts manufacturers, aircraft manufacturers, the Department of Defense, and appliance manufacturers.
Recently, the company has experienced some issues with its. On-time deliveries in the China plant have averaged only 93% over the past year, which is inadequate for a Six Sigma company focused on exceeding ISO 9000 manufacturing standards. The senior management team must examine all steps in the material requirements planning, supply chain management, and production and inventory processes to look for potential areas to eliminate waste and redundancies, gain efficiencies through automation or other process changes, and improve the process design and supply chain for the manufacturing of its electric fans.
Production and Inventory Processes Change Recommendations
After reviewing the production process of the plant in Hangzhou, China, the team noted inefficiencies in several departments due to the manual procedures being utilized and redundancies in certain departments, including the inventory system. The importance of a good inventory control system cannot be overstated as it is tied directly to the financial performance of an organization (Chase, 2006). The China plant does not have an integrated inventory system with its receiving and shipping systems. The flows of data between these systems are entered into the systems by an inventory clerk. The Molding Department and Trimming Department appear to duplicate certain aspects of its processes. As a result, several of its manufacturing processes are time consuming and cost ineffective (UOP, 2009).
Under the current process, raw materials are received at the receiving area. The receiving area supervisor reviews the shipping document with scheduled incoming orders and prepares the orders received log at the end of the day to give to the inventory clerk who enters the related information into the inventory system. This process could be streamlined by eliminating the receiving log process and integrating the receiving system with the inventory system. For example, the receiving area supervisor would just check off the items received on the scheduled incoming orders and provide this same documentation to a clerk to enter or scan into the receiving system which would then update the inventory system automatically (UOP, 2009).
When fulfilling a customer’s order, a similar process to the one above can also be applied to the shipping and the billing system. When a shipping document is processed, it should also update the inventory system automatically to reflect the reduction of inventory and cost of sales on the billing the system if all three systems are integrated. With the three systems integrated, there is no need for the inventory clerk to update the inventory system manually.
Another area that the Chinese plant can improve is by consolidating the Molding Department and Trimming Department. It would be possible to combine them because they require almost the same inputs and produce almost the same wastes as well. With these two departments consolidated, the time in setting up the inputs would be less as well as the handling of the wastes due to less numbers of inputs setups and the elimination of redundancy in handling of the wastes.
Material Requirement Planning and Supply Chain Recommendations
The purpose of MRP (material requirements planning) system is for the company to get the all of the necessary components and materials at the right time. The MRP system receives its materials input from the company’s orders received from customer, forecasts of demand, inventory requirement and changes in the product design (Chase, 2006)..
For the current process in China plan, there is a potential problem that the company cannot keep up with its order requirements due to inadequate an MRP system. The plant needs all its materials ready to start its production once the orders come in. It appears that the plant is currently facing problems with materials which are not being ordered or delivered on time. During the three year period that the company did not maintain adequate quantities of electric motors in stock, records showed that the company’s on-time deliveries averaged only 93%. This number is assumed to include both the standard fans and the custom fans currently being produced at the China plant.
The failure to maintain an adequate supply of electric motors for the fan assembly creates a bottleneck in the production process. When there is no supply of motors to feed into the assembly process, the capacity of that workstation falls below the demand placed upon it. This becomes a constraint in the overall system that limits total throughput (Chase, 2006). Using an improved MRP system, the team must use a statistical analysis to determine the appropriate reorder point and level of safety stock required for the electric motors necessary to produce the “made to stock” standardized electric fans.
Another area for improvement is in the use of the China plant for the production of custom fan products. This process makes it hard for the China plant to even attempt to maintain a safety stock of electric motors since it cannot estimate exact material requirements it needs to make custom fans because the orders are randomly received and the quantities vary. There is no forecast since the custom fans are being produced to a particular customer’s unique requirements. The orders are random and vary in quantities. The company does not carry any inventory for these custom production runs which seem to require a tremendous amount of time to set up and produce in relatively small quantities. This increases the risk for late delivery of both the custom products and the standard products. The current MRP system at the China plant does not fit within the MRP model for custom fans. Because Riordan Manufacturing is already set up to service global customers’ custom product need at the plant in Pontiac, Michigan, we recommend that it should no longer produce any custom product in China but should relocate all its custom fan production to Michigan. Besides reducing the frequency of late deliveries to customers, setting the China plant up to produce only the standard fan products might allow the plant to go to a Just in Time (JIT) process, reducing inventory costs related to components. Without the need to shut down the production line of standard fans to produce custom fans, the plant would meet the several of the criteria for considering a JIT process: repetitive manufacturing, stable production levels, little flexibility in products produced, and vendors located near the plant.
As a Six Sigma company focused on exceeding ISO 9000 manufacturing standards, it is important that Riordan Manufacturing continually review its production processes in order to make all necessary improvements. As with all companies, the focus must be on the bottom line, making a profit and sustaining a competitive advantage over other companies. By reducing inefficiencies and redundancies in the manufacturing process and identifying and eliminating bottlenecks, the company can improve its overall financial strength and long-term viability.
References
Chase, R., Jacobs, F., and Aquilano, N. (2006). Operations management for competitive advantage (11th ed.). New York: McGraw Hill.
University of Phoenix rEsource (2009). Week 5: Riordan Manufacturing Scenario. Retrieved from the University of Phoenix Student rEsource on January 31, 2011

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