Premium Essay

Supply Chain Methods

In: Business and Management

Submitted By ericvitous
Words 696
Pages 3
Application of Supply Chain Methods

Problem/Opportunity Description: High level of complexity of a vehicle line, with too many possible configurations that can be ordered (approximately 2,000)

Background: Our product began with >10,000 configurations. With high level support, we successfully lowered the number of configurations to 800 for 2014 Model Year, but then increased it to 2,000 for 2015 Model Year with newly introduced features.

While our Supply Chain team is eager to reduce the number of configurations, the high level organization support is no longer there. Further, our Marketing Team believes the higher number of configuration allows more flexibility and maximizes option revenue.

Potential impact: * Long “days-on-lot” inventory for unpopular configurations leads to: * Higher inventory cost from valuable parking lot space * Possible maintenance costs due to “lot rot” or damage from exposure to weather elements * Lost revenue from adding incentives to lower the price and sell the product

* Higher resources to engineer and produce parts/systems to support complexity, including: * Internal costs to update IT systems (BOM), * Complexity and time required to source the parts (receive and negotiating quotes) * Cost of warehousing complex inventory like wiring harnesses that require expensive “sequencing” when stocking the parts on the line * Costs of making and maintaining expensive equipment for parts that are produced infrequently * Because operators don’t often produce some combinations, they may take more cycle time leading to loss-of-production units. This can also lead to higher quality risks if the operator has low familiarity with an operation from low-repitition. * Dealers may ‘gamble’ on configurations they order that they believe will sell and may miss. * Customers...

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