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LOG1301i

Logistics Exam

06.06.2013. Gergo Kiss

1. Analzye TUPAs logistics situation and identify the logistics challenges facing the company today and in the future, using the following tools: a. Porters 5-Forces b. Value chain model c. Product Life Cycle Porters 5-forces: Competitive rivalry: HIGH o the company itself is quite competitive, since its a unique and precise area, probably with not a big competition o there are most likely some bigger, leading companies Threats of new entrants: LOW o low threat, as it is a very specific area o expensive to enter the area o previous experience, contacts and a large amount of capital is neccessary to enter such a market o hard to start as a small company, since the products must prove to be high quality and production is complicated Bargaining power of suppliers: MEDIUM o only first tier suppliers, which is good o lot of possible suppliers -> high competition for them o price and quality need to be competitive against other market players, but they can play with the minimum order, which causes some trouble for TUPA Bargaining power of buyers: HIGH o high quality is a neccesity o the industry has highly developed companies, mostly with a good working LEAN production plan, meaning precise delivery is a must o buyers require a reliable supplier o constant communication is also neccesary to keep a good relationship and flow of information Threat of substitute products: LOW o some of the products are customized, in this case its a low threat ; some other companies might not be able to produce the same items o by standardized products it can be bigger, but each car manufacturer need their own specific part, which the company specialized for o as mentioned above, hard to enter the market o these parts are neccessary for the cars, they cant be substituted by other random similar products

LOG1301i

Logistics Exam

06.06.2013. Gergo Kiss

Value Chain Model:

The Value Chain model helps to understand and discover the process of manufacturing, just as well the organization and supply chain.

Support activities: The company has a firm organizational infrastructure, and the hierarchy is in order in my opinion. They seem the have sufficient human resources as well, and previous experience from the area, which gives them an advantage. The technology needs a lot of improvement, as the companys ERP system doesnt work properly. Resetting the system or introducing a new ERP system could highly improve the performance of the company, help it follow the flow of materials and save capacity of the office workers as well. Some problems can be found in the purchasing line as well. The large number of suppliers, and the delays by different reasons (lack of materials, delivery delays) big problems for the company. As the number is constantly growing, following is just most difficult. A limited amount of suppliers should be enough to make things work. Primary activities: Within inbound logistics the biggest problem the company faces is the lack of space in warehouses and the delay of warehousing. Its caused both by the lack of a good working ERP system and organized warehousing. The manufacturing, as part of the operations faces some problems as well, as the machines often need to be reset for another model if an urgent order comes up, which doesnt add value to the product, but takes up time and capacity. The machines often function just at their limit, which means that the slightest mistake brings a delay of the production. The outbound logistics are set up well, with the use of EXW clause, the company doesnt have responsibility of the delivery and its a smart idea, to offer another incoterms clause as an option, for extra delivery fee. The B2B marketing is a good strategy for the company, and its also important that they keep in touch with their current buyers. Further marketing methods and

LOG1301i

Logistics Exam

06.06.2013. Gergo Kiss

market research, also offering new customer services can help in the future to keep the good relationships. Product Life Cycle:

o o

2 main types of products: low and high volume High volume products: Could be considered as the cash cow for the company as 60% of the revenue is earned from these These products are in the Maturity period, as most of the development is done and theyre highly standardized Low volume products: Could be considered as the `?, needs a lot of improvement, but can be a success These products are still in the Growth period, as the company expects further sales to rise and development needs to be done by these products

2. Using Martin Christophers Generic Supply Chain Model please elaborate how zou would implement Supply Chain Strategies in TUPA. Since the company has 2 different products, a highly standardized and a highly customized one, both of these products require a different supply chain strategy. As sales are quite high for the standardized (high volume) products and the future sales are relatively predictable and the lead times are long for resupply, production and delivery Id recommend a LEAN strategy. With that company could minimize the cost of a single product, using the maximum capacity. It would allow continuous production and could mean a continuous flow of resources both in and out of the company. As for the customized products (low volume) Id recommend using a different strategy, since sales are quite unpredictable and each customer demands a different kind of product, specifically made for their own brand. Since the company already has its base of customers a Kanban system could be useful, as they often face a problem in production, lacking materials. With that system, they could have a safety stock all the time and continuously replenish their resources. An agile,

LOG1301i

Logistics Exam

06.06.2013. Gergo Kiss

quick response strategy could also an option, considering, that the firm might grow and get bigger market share, with new customers or changing demands.

3. The financial manager has approached the purchasing maanger because he feels that raw materials are re-ordered far too often. The re-ordered goods often arrive long before they are taken into use. The purchasing manager has therefore asked for suggestions as to how the reorder point can be reduced without detracting from the targeted service level. The companys using the Just In Time delivery system for its high volume products. For this system continuous stock is required without the lack of materials. As for that I would definitely recommend keeping a safety stock for the companys resources, considering the sales of both high and low volume products, so that production wouldnt have to stop. It seems as the company would try to use the pull nature of the JIT system, but still experiencing some push effects from its suppliers. The reorder point should be optimalized to save warehousing costs and avoid stacking up not necessary materials. To find the right reorder point lead time of the supplier must be considered, as well as the minimal order of each material. I would recommend a longer reorder period for the materials stacking up constantly and a reconsideration of the Economic Order Quantity. Since the companys production depends on the demand two different strategies would be the best option. For the standardized parts a Central warehouse inventory type would be satisfying, as they sell large amounts for their buyers. For the more customized parts an inventory strategy of a Regional distribution centre would be a considerable option, as they dont require large amounts of materials, but a big diversity of them.

LOG1301i

Logistics Exam

06.06.2013. Gergo Kiss

4. Carry out an ABC analysis of low volume goods. Comment on your calculations and result. The ABC analysis helps a lot to determine the most valuable customers measured by the amount of items sold or the turnover. In our case the turnover is given, so I made my calculations regarding this. As the chart shows in category A would be Aston Martin with the highest amount of individual turnover (21%). B customers are Bentley and Ferrari each with a turnover of 17% (34% together). The last 44% percent would include the C category buyers as Knigsegg, Lotus, Bugatti and Zonda. Company
Aston Martin Bentley Ferrari Knigsegg Lotus Bugatti Zonda Total turnover

Turnover 100 80 80 78 71 45 20 474

% of Turnover 21% 17% 17% 16% 15% 9% 4%

Category A - 21% B - 34%

C - 44%

ABC Diagram by Turnover


50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% A 44% 34%

21%

% of total Turnover

LOG1301i

Logistics Exam

06.06.2013. Gergo Kiss

5. Which other proposals for improvement on the Strategic level, Tactical level, Operational level would you recommend that the logistics manager implement? Strategic level: Most of the problem occur on this level in my opinion, and solution for these can help the companys growth for a longer period. As these plans come from the management and are long-term plans they highly determine the behavior of the company. I would recommend a change of the companys suppliers as the amount of the suppliers is too high. A limited amount, some with a good relationship could work better, even a co-operational supply strategy could be possible with the main suppliers. A smaller amount of suppliers could be kept also for safety reasons and urgent material needs, but the company definitely doesnt need 92, like it nowadays has. Investing into new CNC machines and ovens could improve the production, and these machines help the future growth as well. Introducing a new ERP system for the warehousing and communication can help the company save a lot of capacity of their workers, giving them extra development options and control for the materials, production and delivery. Having a lot of suppliers with different incoterms clauses leave the company in big confusion. They should have 1 or 2 incoterms clauses, which suit the company (EXW or DDP for example) both for incoming and outgoing products. Tactical level: Since these strategies are for a shorter period (1-2 years) I would recommend making an ABC analysis of the buyers and reconsidering it every 6-12 months. A new warehousing system would also make a big improvement, instead of packing goods randomly wherever they find free space for them. Quality control for the raw materials and finished products is also a necessity, but it can take some extra capacity, which the management must consider. Operational level: Stocking discrepancies are big problems, which should be handled and solved for a short-term improvement. Lowering the crap rate by better quality control is also a considerable option, as well as checking the raw material quality of the new suppliers. Bottleneck items need to be found and a new stocking strategy, with a constant reorder and safety stock has to be introduced.

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