Supply Chain and Design
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Riordan Manufacturing is a fortune 1000 company that manufactures plastic fan parts, and other products in relations to plastics. The company had an expansion in 2000, when operations were opened in China. At that time, the entire fan manufacturing operation was in China. The following paper will discuss Riordan’s supply chain design applicable to manufacturing its electric fans Riordan’s Manufacturing Strategy
Riordan manufacturing strategy is a combination of both chase and level. When the company produces enough goods to match the demand for goods, it applies the chase strategy. On the contrary, when Riordan continuously produces a product, it is using the level strategy. Riordan manufactures the fan parts based upon the forecasts from previous years. The company attempts to keep parts in stock to meet order demands. However, Riordan also manufactures customized fans. This means these are manufactured based upon consumer demand. The benefits of chase strategy for Riordan is it keeps inventories low and frees up cash to buy raw materials, and reduces costs associated with holding inventory in stock. The benefits of level production strategy are that if a company produces goods according to the demand, there is a consistent schedule for the goods. Performance Metrics
Delivery performance is one metric that can be used to evaluate the performance of the electric fan supply chain. This metric is identified by the amount of consumers orders shipped upon consumer request. The number is based upon a percentage. Riordan on-time deliveries in the past year averaged 93 percent. Another metric that can be used to evaluate the performance of the electric fan supply chain is inventory turnover. This can be defined as the measure of number of times inventory is sold within a time period. The equation for inventory turnover equals the cost of goods sold divided by the average inventory. Supplier Locations
Riordan Manufacturing is a global plastics manufacturer with projected annual earnings of 46 million dollars (Apollo Group, 2013). Riordan Manufacturing has four different locations: California, Albany, GA, Pontiac, MI, and Hangzhou, China. The facility in California is where the research and development department is located, and it also serves as Riordan’s corporate headquarters. Riordan Manufacturing’s American locations – California, Georgia, and Michigan – employ over 300 people (Apollo, 2013); the Chinese location employs 250 (Apollo, 2013).
Because Riordan’s manufacturing strategy reflects customer needs and customized products, it does not have a large stock of inventory, which lowers the amount of overhead. This also creates a wait time for the customer to receive his product. At the facility in Albany, Georgia, contracts are negotiated with customers for their yearly quantities of plastic bottles. Riordan Manufacturing will keep a small inventory of the more popular standard containers in case customers need a smaller quantity of plastic bottles (Apollo Group, 2013).
The company policy is to provide total customer satisfaction by shipping the products to customers on time and having the products delivered to the customer on time (Apollo Group, 2013). The plant has an average of 96% on-time deliveries met; however some delay in shipping is caused by adverse weather conditions. (Apollo Group, 2013). This facility uses ground transportation by truck to ship customers their products, but also use air transportation to meet expedite deliveries (Apollo Group, 2013).
In Pontiac, MI, employees focus on the custom plastic fabrication. Because part design and color of finished parts are customized, each project requires its own set of dyes for the injection molding process (Apollo Group, 2013). As a way respond quickly to customer requests, the facility will stock a wide variety of raw materials to speed up the production process (Apollo Group, 2013).
The facility in China designs and develops customized products for the electric fans. It operates as a decentralized unit in Riordan Manufacturing meaning that is operated under separate powers from the American facilities (Apollo Group. There are about 250 employees in this facility where the initial production pilot run is conducted. Not only does this facility product customized products for the fans, but also where the fans are produced, packaged, and shipped for local or international use (Apollo Group, 2013). Supplier Improvement Strategies
Customer service improvement can be made to meet consumer demands. To ensure customers receive their products on time, Riordan’s employment will need to match that of product demand. It is also important the company evaluates the value of available tools and technology early on in the planning process, so if needed, new tools or technology can be invested meet production and consumer demands. Each plant should also have a backup generator in case a power outage is to occur, which can wipe out project data.
Maximizing Efficiency using Lean Production
Lean production principles such as Just-In-Time (JIT) will benefit Riordan in maximizing the efficiency and effectiveness of its electric fan supply chain process. “The purpose of JIT production is to avoid the waste associated with overproduction, waiting and excess inventory,”(Techtarget.com).
If implemented, JIT would make Riordan more efficient because they could start and stop production if a customer demands more or less of the electric fan. It would also serve as benefit if a customer increased or decreased their need without an adequate amount of notice to them. Ultimately, defects would become less as they would be able to spot any production issues faster.
Another benefit of JIT production is the amount of inventory tied up in the business. That inventory that is sitting idle on warehouse shelves, or seeking potential damage, can be converted into funds to invest in other areas of the business. The amount of space needed for its warehouse(s), would not be as much because it would not be used as a storage facility. Therefore, for these said reasons, it is recommended that Riordan using Just in Time production to maximize efficiency and effectiveness of it electric fan production process. Forecasting Techniques
The two main forecasting techniques that can be used to project a sales forecast are quantitative and qualitative. The type of forecast model to be used depends on forecast horizon, available data, accuracy required, forecasting budget, and the individuals forecasting (Jacobs & Chase, 2011). Qualitative methods are more subjective and rely on leadership for the projection so a certain level of experience and knowledge is needed for an accurate forecast. Quantitative methods rely on mathematical calculations using historical data or external data factors that affect the sale of the product. Riordan is trying to determine a production plan, so a short to medium forecast is needed. Prior year’s data (“Riordan Manufacturing”, 2013) is also available so these two factors lead to the forecast selection of simple moving average, which is a quantitative technique.
The method uses an average of the most current historical data over a defined time period. In exhibit A, both 3-month and 9-month periods were calculated and the results were similar. A linear regression analysis was also performed as a validation for the simple moving average method. In exhibit B the results of the linear regression analysis are displayed and show the forecast decreasing from prior year because the trend in 2005 steadily declines. Although there is a decline, the results are still similar to the simple moving average method so that technique is used. The sales forecast for Riordan will be a straight $724,536 per month, which will produce less than one percent growth over 2005.
Riordan has a strong supply and chain design that is geared toward customer satisfaction. However, there is room for improvement. The performance metrics are an important aspect in determining how well demand is being met, therefore these metrics should be closely monitored in or to determine what if any processes need to changed or improved. Also, employees should be involved and educated on how their jobs impact customers. Riordan has a great delivery process, where products are vigorously shipped worldwide. The company might benefit from integrating its operations, sales, and finance to overall improve its supply and chain management. Conclusively Riordan will be able to maintain its consumers by, offering competitive pricing, quality products, and an efficient ordering and delivery turnaround.