Assignment 1: Flowchart and 2 pages.
The ABC Shoe Company wants to use supply chain management to help move the product (running shoes) through production and on to customers. Your boss asked you to set up a supply-chain management flowchart to determine inventory quantities that are needed and ordering policies.
- Create a 1-page flowchart of the supply-chain management process.
- Create a document of 2–3 body pages (using APA format) detailing how inventory quantities will be determined based on the following: ?The company will produce 10,000 pairs of running shoes on 10 machines.
Each machine (or workstation) can make 500 pairs of shoes per day. The products will use the following ingredients: ?Rubber soles (purchased intact)
Body of the shoes
- Create 5 policies that will be required to determine and sustain inventory quantities.
ABC Shoe Company Supply Chain Management
The increasing need for efficiency and effectiveness has placed more emphasis on supply chain management than ever before. Supply chain management is gaining importance in the recent years in a dynamic business environment with the increase in technological and financial innovation. The current competition in the market calls for a flexible supply chain management to allow for changes that are likely to storm the production and manufacturing industries. An effective and efficient supply chain consist of dynamic processes that assist the constant flow of information, raw material and funds across various functional areas both inside and outside an organization. For this supply chain to succeed and deliver favorable and positive results, it calls for cooperation from all levels of management and all stakeholders to deliver the highest possible satisfaction to their customers (Christopher, 2016). Moreover, a supply chain is more than redistribution of a company’s goods and services. It comprises of a network of suppliers, factories, warehouses, distribution centers and retailers. All these departments and sectors help to acquire raw materials, transform them and distribute them to ensure that they get to the target customers on time and in good condition. However, each industry has a unique and separate supply chain depending on the industry, the parent organization and the product produced.
ABC supply chain management
The supply chain management of the ABC Company starts with the company management partnership with suppliers who supply the company with raw materials. Before commencement of operations, the company must procure raw materials from various suppliers. The company needs to have inventory management experts who monitor changes in the stock. The application of knowledge to produce and manufacture the goods is paramount to the organization as well as the management of the shoe lifecycle to ensure they remain in the market for a foreseeable future (Gil, 2010). Moreover, determination of the right prices is crucial to the business as it determines the success or failure of the business. Finally, managing the demand and ensuring that the company can supply the required number of the shoes. The demand management department should ensure that the company does not under or over produce.
Inventory quantities determination and evaluation
Inventory consists all the raw materials, work-in-process and finished goods of a company. It is the duty of the inventory manager to ensure that the company is neither overstocked nor understocked but should have enough stock to facilitate its operations. The valuation of the stock is paramount to an organization. Some of the inventory estimation methods that the company should think of exploiting include:
- Specific identification method – this method aid in tracking the cost of each item in the inventory that is the rubber soles, the material used to make the body of the shoes and the shoe races and charge them separately. This method may prove hard and tedious considering that one has to keep a massive data of all the inventories necessary for the production of a specific product.
- First in, first out (FIFO) – under this method, there is an assumption that the items bought first will be the first to be utilized in production or to be disposed. Due to the fluctuations of prices in various industries and sectors of the economy, the method suits most organizations as it closely matches the actual movement of inventory in the parent companies. Thus, the first set of inventory will be used to make shoes while as the company waits for the second lot of inventory(Stadtler, 2015).
- Last in, first out (LIFO) – this method is the opposite of LIFO as the raw, materials that get into the company stores is used first to make and produce the shoes. Thus, the items in stock are the oldest one. However, this method does not follow the natural of inventory in most companies and the method may fail to consider the constant changes in prices in the market.
- Weighted average method – under this method, the cost of new inventory is rolled into the existing stock to derive a new price of the stock which may be favorable to the organization than the cost derived from the three previous methods. However, the prices of the prices of the stock change with the supply of new stock.
Policies for determination and sustenance of inventory quantities
- Reduction of lead time – lead time is the time between when the order is made and the time the inventory is delivered. Reduction of this lead time ensures that minimum time is needed, and this may help reduce the holding cost.
- Revision of order cycles – smaller and manageable order quantities calls for less but sufficient inventory. Proper determination of order quantities ensures that the organization does not overstock or understock its stores.
- Improved forecasting – improved projection of future operations and demand of a company ensures that the company prepares in advance to cope with any changes.
- Elimination of old stock – accumulation of obsolete stock leads to an increase in holding stock and minimizes the available space to store fast moving stock.
- Centralization of the organization inventory – having a central control unit provides an easy control and monitor of the stock levels at all times(Gil, 2010).
In conclusion, we can say that a good supply chain ensures the excellence and going concern of the business. As a result, each and every company should take the variable time to formulate a supply chain management process and implement supportive policies to ensure that the company has enough and sufficient stock for all its operations.
Christopher, M. (2016). Logistics & supply chain management. Pearson Higher Ed.
Gil, R. G. (2010). U.S. Patent No. 7,761,319. Washington, DC: U.S. Patent and Trademark Office.
Stadtler, H. (2015). Supply chain management: An overview. in Supply chain management and advanced planning, 3-28.