Supply Chain Management
Acme Automotive’s newly acquired Reynosa facility is losing, on average, twelve million dollars per year. It is critical to become more efficient, reduce costs, improve the supply chain, improve employee morale and turn a profit, within one year. Although all of these tasks are connected, each presents its own unique problem. The goal of this report is to find a solution by analyzing inventory and supply chain management, transportation costs and organizational structure.
The major problem for the Reynosa facility is that they are not turning a profit which can be attributed to several factors. The first being that the factory has not been able to cost-effectively meet demand due to poor inventory and supply chain management. For example, five million dollars was lost, in a span of four months, just in premium costs for rush orders due to component shortages. This problem is consistent because the SAP system is not being fully utilized. The next major factor is the lack of communication between suppliers and other branches of the company, specifically the Texas and Canadian facility. Lastly, due to the two changes of ownership in the past three months, employee morale is also a concern.
The current supply chain system starts with Canada shipping raw materials in reusable plastic boxes to the Texas warehouse for storage. Next, when needed, the raw materials are shipped to the Reynosa plant and used for production. Finished products are then shipped back to Texas and eventually to Canada for distribution of the final product. Although this structure is in place as a way to concentrate distribution from Canada, in order to be efficient open lines of communication are necessary. Currently, the factories are only in contact if there is problem. Furthermore, the Canadian factory transferring the cost of utilizing reusable containers is a win- lose situation and should be renegotiated.
Acme Automotive Company’s culture is very focused on transparency but the facilities are not pooling their resources. If the Reynosa plant can utilize their sister plants in Mexico and their employees to make the plant more profitable then they will boost morale and implement the company culture simultaneously.
First, we need to fully utilize the SAP system capabilities which will streamline sales, operations, services and financials. Through this system they have access to real time inventory levels, a CRM database and management tools such as inventory expense and sales tracking which works seamlessly with Microsoft Excel spreadsheets, currently in use. Fully utilizing SAP will reduce or eliminate human errors that result in overstock and shortages that prevent the factory from cost effectively meeting demand. The next step is to reorganize the MRP department by integrating the Buyer and Planner Committees under the leadership of the Planner Supervisor. The Buyer Supervisor will lead a new Communications Division that will be tasked with transportation planning control. The committee will be composed of the extra office workers and it will include a liaison for the Canadian and Texas warehouses in an effort to open lines of communication, reduce costs, increase transparency and increase efficiency by eventually reducing suppliers by half.
In the short term, the new MRP department will be tasked with implementing the full utilization of SAP and training management to do so. This will include the process of integrating EDI and SAP. Furthermore, the real time location system (RTLS) will replace the fixed locator system which will make inventory storage more efficient. The buyers will be tasked with searching for new suppliers in order to reduce the current number of suppliers we contract. The head of the Communications Department will also be tasked with working on a plan that optimizes our material supply routes. The real time locating system will correct many of the issues with the current fixed locating system. It will automatically identify and track the location of objects or people in real time, and will help organize our inventory dramatically.
In the long term, we are working on building strong supplier relationships that will in turn result in more beneficial contracting. After showing the results of pooling resources with the Mexican sister plants, the new Communications department will begin planning a corporate wide North American Management Convention. At the convention we will exchange feedback regarding suppliers, data for best business practices and success employee incentives which will without a doubt increase the company vision of transparency and enhance communication between firms. Lastly, we want to develop Texas as a distribution hub, which is part of our process of becoming independent from Canada.