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    Supply chain and location planning recommendations

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    It is time for you to finalize your findings for your boss. He is expecting your "analysis of your division's operations and to produce a plan to improve operations with an eye for reducing costs."

    Your boss wants you to summarize our recommendations in no more than 2-3 pages. Include your thoughts on the "laundry list" below.

    Should production remain in Mexico or be brought back to the US?
    If so, where would you recommend?
    Should only part of the production be brought back to the US?
    Should production be shifted to Asia (China)?

    Should the product distribution network be changed?
    Production in Mexico, central warehouse (NAW) in St. Louis, regional distribution centers in Pennsylvania, Georgia, Texas, Colorado, California
    Close NAW, ship from Mexico directly to regional distribution centers listed in letter "a" above
    Close NAW, create a new central warehouse in Texas near the Mexico plant, ship to regional distribution centers in letter "a" above (with a distribution center in St. Louis/Chicago region)
    Close NAW, create a new central warehouse in Texas near the Mexico plant, ship directly to customers.
    Hire a professional distribution company to handle distribution.

    Should the St. Louis Customer Service staff be decentralized to the regional distribution centers listed above?

    Can the sales forecast process be improved? If so, how?

    To review the company scenario, open the attached company scenario.doc

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    Solution Preview

    Background of the Division

    The division is a $50,000,000 (sales) subsidiary of a $750,000,000 corporation. This division produces industrial products that are used in the construction, maintenance, transportation, and equipment manufacturing industries. Division is currently number three in your market place having 15% of the market.


    - Develop a systematic framework for analyzing the behavior of complex supply chain networks and supply chain drivers.
    - Examine the concepts of managing operations as they apply to the production of goods and services.
    - Apply the appropriate operations tools to aid in decision-making and optimize performance.

    1. Should production remain in Mexico or be brought back to the US?

    a. If so, where would you recommend?

    This issue deals with facility location planning. The prime objectives of location planning are:
    - Access to customers and raw material
    - Improving productivity
    - Increasing revenues and bottom line
    - Labour costs
    - Ease of doing business (Level of bureaucracy, regulatory environment)
    - Infrastructure reliability
    - Level of taxation

    Yes, currently it should remain in Mexico as they are not facing any problems except delay in distribution and high distribution costs and they should focus on improvement in supply chain management by applying benchmarking and flexible manufacturing systems as discussed below.

    b. Should only part of the production be brought back to the US?

    No, because it will lead to high costs and also there will be no economies of scale and scope involved.

    c. Should production be shifted to Asia (China)?

    First of all, the marketing of products in Asia should be started, then only this option should be explored. Otherwise it will lead to increase in distribution costs.

    Application of Flexible manufacturing system to improve productivity and reduce costs:

    Flexible Manufacturing Systems (FMS) involve substituting machines capable of performing a wide and redefinable variety of tasks for machines dedicated to the performance of specific tasks. FMS can also be programmed to handle new products, thus extending the machines' life cycles. Thus they represent a change from "standardized goods produced by customized machines" to "customized goods produced by standardized machines".

    For this Flexibility process layout is preferred as operators can trade elements of work. One can add and subtract operators. Trained one can nearly self balance at different output rates.

    While variations abound in what specifically constitutes flexibility, there is a general consensus about the core elements.

    2. Seeking benefits on flexibility

    Today's manufacturing strategy is to seek benefits from flexibility. This is only feasible when a production system is under complete control of FMS technology. Having in mind the Process- Product Matrix you may realize that for an industry it is possible to reach for high flexibility by making innovative technical and organizational efforts. See the Volvo's process structure that makes cars on movable pallets, rather than an assembly line. The process gains in flexibility. Also, the Volvo system has more ...