I just need an idea of where to go with this question. As the Supply Chain Direc
ID: 410995 • Letter: I
Question
I just need an idea of where to go with this question.
As the Supply Chain Director, summarize in a 3/4 to 1-page MEMO to senior management where the company is today regarding the company's supply chain.
Williams Companv Case Company Information Williams Company has made major changes to its supply chain over the last 3-years, all in an effort to improve its supply chain throughput. Improved throughput means cost savings, improved overall operations from materials acquisitions to inventory control, reduced returns and higher customer satisfaction levels Some (not all) of Williams Company Metrics Related to Their Supply Chain Metrics Over the Last Three Years e Planning: o Average Inventory carrying cost 3-years ago $0.58 per product item . Today = $0.41 per product item o Average percentage of obsolete inventory on hand · 3-years ago = 4.8% of total product sales · Today = 2.2% of total product sales Annual production volume 3-years ago=2.19M units Today2.47M units . Source: o Average material acquisition costs · 3-years ago = $2.98 per unit . Today = $2.46 per unit o Average payment period · 3-years ago = 31 days per supplier/partner ·Today = 22 days per supplier/partner Make: o Average number of defects per thousand units - 3-years ago 98 . Today=88 o Average make cycle time · 3-years ago = 21 days Today 23 days o Average capacity utilization (with no new expansion or capital expenditures) · 3-years ago = 92% . Today=83% Deliver: o Average fill rate 3-years ago=78% . Today = 93% o Average return rate per 1000 units sold 3-years ago=5.6% . Today= 4.1% Additional information Williams Annual Sales Today = $23.9M 3-years ago= $18.3MExplanation / Answer
Overview
To: Williams Company Managers
cc: Directors
From: Supply Chain Director
Date: 11-01-2018
This is my letter about the firm's changes and improvement in the supply chain over the last three years. The organization made changes to the supply chain over the last three years. This has resulted in improvement at various levels in production and operations. It is observed in data in planning, procurement, manufacturing, and, delivery and returns.
Analysis and recommendations
Average inventory carrying cost has reduced by about 29% over the mentioned duration. Obsolete inventory on hand has reduced by 2.6 percentage point of the total sales. This, even when the annual production volume has increased by 13 percent. Sales have increased by 25%.
Suppliers or partners have gained as the average payment period has reduced from 31 days to 22 days. Average material acquisition cost has reduced by nearly 26 percent. As both the number of units produced and sales have increased; with supply chain management, inventory acquisition and carrying cost have reduced and economies have scale is being observed as a result of changes made to the supply chain from 2014-17.
Average fill rate for the firm is 93%. It is not just the economies of scale, but, a reduction in the number of defective products has been observed. Average return rate per 1000 units is 4.1% as compared to 5.6% in 2014. The average number of defects per thousand units has reduced from 98 to 88; this is a change of 10%.
Capital expenditure remains the same and investment has not been made for expansion but the plant capacity utilization has reduced from 92% to 83%. Costs have reduced and the cycle time for manufacturing has reduced. As a result, the capacity utilization has reduced by nearly 10 percent. Average cycle time has reduced by 2 days, from 23 days to 21 days.
Next Steps
Supply chain management has resulted in an improvement at every stage. The organization has gained in terms of economies of scale, and, higher sales. Suppliers have also gained. Procurement has increased due to increase in production. The average payment period for the supplier has decreased. Inventory carrying cost has reduced by nearly 30 percent. If the process is worked upon for improvement at the sourcing and planning level, the organization can further gain in terms of improvement in productivity and profitability.