Board members:
As a follow up to the memo I sent you this past month I have prepared the following information about the Advanced Planning Optimizer software (APO) for your review prior to my presentation on the upcoming board meeting.
As you know, in the last couple of years, the soft drinks and beer industry from which we derive our revenue has become increasingly globalized. This has intensified the need to reduce our costs and improve customer satisfaction in order to compete and maintain a competitive advantage in a very price sensitive market.
Analyzing our current situation, we can see that our profit margins have been declining in the past three years due to company wide operational inefficiency. Our distribution costs have been increasing because of the high inventories we carry in the warehouses; we are constantly having oversupply or shortages in our raw materials making it difficult to negotiate lower prices with suppliers; and we have been scheduling shorter production runs, thus incurring in high set up costs.
Another serious issue we need to address is the number of customer complaints about the quality of our services. The most common complaints are that delivery trucks do not arrive on time and that we are constantly having stock outs.
Each of these issues described above has affected our profitability and credibility as a company and we need to address them immediately. After looking at several software applications that could guide us through this change process, I think that Advanced Planning Optimizer from SAP is our best choice.
APO helps a company improve demand forecasts, production planning, scheduling, and product shipping. All of which are critical factors to help a company reduce costs while improving customer satisfaction.
Demand forecasts are improved by facilitating the construction of statistical models where seasonal trends and events (i.e promotions) can be included in a per SKU basis. By creating more precise forecasts, we will cut the costs involved in carrying excess inventory in our depot's warehouses as well as in our material safety stocks. It can also allow us to provide a more stable purchasing plan to suppliers that will help leverage our position in our next negotiation and therefore drive the costs down.
Forecast accuracy can also have an impact on the quality of our customer service. Stock outs can not be measured simply by monetary means because it affects our biggest asset which is brand image; if a product is not available, we lose ground to the competition.
Rocket-Blast, LLC, a beverage maker, has seen its profit margins reduced which presents a real problem for the company going forward (Precord & Macdonald, nd). Management has decided that operating costs must be reduced in order to increase profit margins to
In particular, a recent Y-O-Y inventory increase belies a misread of increased demand, which means short turn times and trendier inventory that grows stale on the store shelves. This, in turn, means customers are less incented to return to the retailer to check out “what 's new”. This decreases in repeat visits in turn leads to longer inventory turn times, which in turns leads to loss of profit. In short, a revamped Kohl 's that moves inventory more quickly immediately becomes more attractive to the
Accommodating customer requirements in most supply chain arrangement requires a forecast to drive the process. (book page 133) When looking into the definition of forecasting which is projecting what is going to be sold (units, seats, rooms etc) it is also important to take into consideration where and when in order to reach the future goals. (book page 133) Since it is argued that effective supply chain and logistical capacity is an important competitive advantage. (Christopher 2005) Where maximizing the revenue is the key element in hospitality sector and for hotel industry there is an increased attention on effective demand management and forecasting for reservation systems. (http://www.sciencedirect.com/science/article/pii/S0169207002000110)
In the effort to lock supplies of limited products, the company was seen ordering enormous quantities in advance. Another symptom of the problem was the artificially inflated projections. Other companies had noted the flaws in their projections, but Cisco failed to notice. This was because there existed other Competitors in the market that compromised Cisco’s projections since customers would turn to suppliers who would deliver the products first. In addition, the triple and double ordering of inventory without contemplating on the accuracy of their projections was a great symptom that squeezed on the supply of goods and bloated the demand
Key success factors in this industry include on time delivery, quality product, and brand recognition. Supermarkets and restaurants cannot afford to have shelves sit empty for even a moment. For a company in this industry to succeed it must have a model that allows for on time delivery. This must combated by the cost of keeping inventory levels to high, and the risk of wasting inventory that is no longer fresh enough to be sold. Forecasting product demand is critical for any company in this industry to have enough inventories to supply, without creating profit eating w...
Target Corporation needs to increase product availability based on the customer needs using a forecasting and supply chain
Reducing risk ; reducing the quantity of manufactured so that reducing burden of stock and burden of frequent discount sales
Over the past few years, the increasing dynamism and competition in the business operating environment has led to a lot of changes in how the companies conduct themselves with respect to its customers. Customers being the focal point of revenue; manufacturers are increasingly taking interest in being focused on customer satisfaction by delivering the products and services on time.
Sperry/MacLellan Architect and Planners are facing another downturn in their industry, where the workload will be on a gradual decline. It is for this reason that Mitch is looking to present a report to the company counterparts, as an explanation of his market research. There are a few opportunities that require improvement and innovation.
The beverage industry is highly competitive and presents many alternative products to satisfy a need from within. The principal areas of competition are in pricing, packaging, product innovation, the development of new products and flavours as well as promotional and marketing strategies. Companies can be grouped into two categories: global operations such as PepsiCo, Coca-Cola Company, Monster Beverage Corp. and Red Bull and regional operations such as Ro...
All these improvements will boost profitability by identifying at least or more that EUR 30 mio required by U.S.A headquarters. However, we believe it is not realistic to manage all this turnaround in 1 year’s time. It might take from 2 – 3 years.
So that our decisions would lead to a better performance on the inventory levels which means a more stable inventory according our policies but our order policy based on the expected demand would not be changed while the impact of our policy on the inventory is better because our orders are met with a better
This competitive advantage has been rendered sustainable as other players have found it difficult to catch up with the company's competitive strategy. In spite of this clear advantage, it was noted that the company faces some challenges being the world leader in soft drink distribution. The canning and bottling of the product which is done in many countries have now fallen into the hands of independent companies, thus it becomes hard for a given company to control the quality of the packaging
Inventory Management has developed as an important fact in organizational efforts to reduce losses. The management of capital within an organization has a significant impact towards profits where inventories are commonly an organization’s largest asset. Inventory Management behaviors impact the sales forecast, operation and sales planning, production planning, inventory rotation and material requirement planning.
...forecasts. Given the high degree of uncertainty in today's marketplace, qualitative forecasting techniques like the Delphi technique may help Firstlogic to better-forecast future sales.