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Kuiper Leda is currently faced with an opportunity to grow its business by acquiring more and larger clients for its manufactured electronic components. The company needs to ensure that its current supply chain is streamlined. Kuiper Leda, who specializes in producing Electronic Control Units (ECUs), has customers who include manufacturers in the automobile industry and OEMs. The company recently entered into the production line of Radio Frequency Identification Devices (RFIS). This production line has only been in operation for a short-time. Kuiper Leda now has many of the same supply management concerns, such as the availability of resources, production capacity, and on time delivery of their products to customers. With its ever fluctuating demand in recent months, it has seemingly taken its affect on Kuiper Leda’s already overloaded supply chain. Having built and maintained a strong reputation with its customers, the company has come to be recognized for its quality and delivery responsiveness. Kuiper Leda is part of a very competitive industry, so it’s no wonder that Kuiper Leda has come to thrive on their client’s repeat orders and their relationships with their suppliers, however, they are careful to acknowledge a clear awareness of its competitors and the business environment. Due to the large scale of operations, Kuiper Leda must focus its immediate attention on the company’s ability to manage their capacity and delivery. With this latest production, there appears to be no uniformity in the current production process, which has left their suppliers struggling to keep up with Kuiper Leda’s customer demands and specific requirements. Although Kuiper Leda must maintain its customer responsiveness, they need to also ensure that the plant or its suppliers are not adversely affected by the increase in demand.
Due primarily to the increase in recent immediate demand, Kuiper Leda‘s current supply chain has become ineffective, therefore, Kuiper Leda has sought to making changes.
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• To ensure that delivery of materials and products are on-time for production
• To ensure the availability of materials to maintain the lowest possible level of inventory; and
• To better plan manufacturing activities such as delivery schedules and purchasing activities.
With having a full comprehension and make the most of the software’s capability, Kuiper Leda will have the opportunity to manage its inventory and address its other related concerns.
With having an efficient management of its operations, it will prove to be meaningful, as it collates to the three major objectives identified. As an industry leader, Kuiper Leda has come to recognize that in order to compete successfully and to remain competitive in both the domestic and foreign markets, will depend greatly on the company’s capability to develop an operations strategy that aligns accurately to its mission to serve and deliver to its customers (Chase-Jacobs-Aquilano, 2006)
Kuiper Leda recognizes that it is vital to the company’s sustainability to employ the most efficient and most profitable options available to them in order to support its outsourcing objectives. The options being considered are:
1. To manufacture the products in-house,
2. To outsource the production of the products with the option of purchasing the complete item or just key components from another manufacturer;
3. To purchase the product and or its components, from a gateway which sells the electronic items and components;
4. Outsourcing the labor portion of production to another manufacturer
Kipper understands that by has the knowledge that by improving their supply chain management, with implementing an outsourcing plan to address their short and long-term production needs, the company would be better positioned to meet the satisfaction needs of their customers while meeting the expectations and specifications for delivery. With outsourcing to another manufacturer, it would elevate any major rescheduling or burdens that may have been created in the company’s restricted capacity. The trade-off between the time it takes to procure the product and the increase cost of production is significant, however, outsourcing proves to be the most feasible solution for Kuiper Leda.
Based on Kuiper Leda’s current capacity, they will need to employ a constant production level in order to prevent their plants from running over or under stock levels. Should the company find themselves in a position of not running at required levels, this will undoubtedly increase holding costs, while under stocking will create a production bottleneck. Kuiper Leda will need to work within their management system to ensure that order forecasting during identified time periods meet required levels. Kuiper Leda will also need to have enough supplies for their finished product, as well as for any excess or shortages they may encounter in inventory and supplies. Because Kuiper Leda has several other product lines, it must also be able to manage different types of inventory, while still remaining competitive. As explained by Chase, Jacobs, and Aquilano in Operations Management, “A firm considers inventory an investment because the intent is for it to be used in the future inventory ties up funds that could be used for other purposes and a firm may have to borrow money to finance the inventory investment. The objective is to have the proper amount of inventory and to have it in the correct locations in the supply chain.”
Inventory management is a very important concept in any organization. It involves planning and controlling inventory from the raw material stage to the final delivery at the customer’s end. In the case of Kuiper Leda, it should be analyzed on all levels and stages of production at Kuiper Leda. Each of the levels should be allowed to develop its own production metrics to better determine inventory management and forecasting models which would allow statistical analysis to be used. This will potentially drive supply chain decisions. Kuiper Leda should also continue to fully make use of the JIT concept. By doing this, they will be better able in determining how material should be processed and moved within the system, in order to arrive “Just In Time” for the next processing activity. With the JIT concept, an integrated set of activities are used to achieve the goal of a high-volume production, using minimal inventories of components that arrive at the point of production when needed. The theory, paired with total quality control (TQC), which strongly seeks to eliminate causes of production defects, is now a cornerstone in many manufacturers’ production practices (Chase-Jacobs-Aquilano, 2008).
There is evidence to support that in order to better maximize value to its end consumer and the organization, Kuiper Leda should continue using the MRP system currently in place, however, they should seek to employ it to its optimal capacity. With operating its system at full consumption, the company can then focus on improving its capacity management and delivery. By building a strong defense for its outsourcing portion of production, Kuiper Leda will realize a reduction in costs related to in-house storage and continued customer satisfaction in the area of delivery specifications. Each of the choices presented to Kuiper Leda will prove to offer optimal returns on inventory levels, which in turns will reduce costs and overstocking.
With implementing JIT, Kuiper Leda will fully realize the ability to meet demands for high-volume production, while keeping inventory parts to a minimum. Keeping Kuiper Leda profitability will ultimately be determined by properly forecasting its consumer demands while still maintaining their good standing and reputation with their suppliers, customers and business partners.
Chase, Richard B., Jacob, Robert F., Aquilano, Nicholas J. Operations Management for Competitive Advantage. 11th ed. (2006), pp 16, 24, 408.
Just In Time – JIT. www.investopedia.com (2008). Retrieved June 3, 2008 from the World Wide Web.
Operations Management. University of Phoenix Week 4-6 simulation (2008). Retrieved May 23, 2008 from UoP website.
Procurement and Supply Chain Management. www.bp.com (2007). Retrieved June 5, 2008, from the World Wide Web