• University of Houston

• SCM 4390

Team Supply Chain Strategy: Throughout the first 3 rounds, we believed that the demand would not fluctuate too significantly but quite predictable. Therefore, efficient supply chain strategy fits more to the TFC market and environment than responsive supply chain strategy does. Particularly, we decide to utilize continuous flow supply chain model where continuous replenishment system will be made optimal use. As a result, this model plays a vital role in supporting our focus - customer fulfillment. As rounds starting from round 4 allows us to make our own decision on promotion campaign to have more chances of improving sales volume, until round 7, we have started to run promotion for all customers with heavy promotional pressure to grasph largest amount of potential revenues. While dealing with demand variation, we always keep in mind that we pursue efficient supply chain strategy which is most suitable for stable, constant environment. Thus, we apply and take advantage of forecasting model that have been built earlier to predict expected demand including promotion effects. After each round, we will compare and calculate the round demand difference to improve accuracy of forecasting results. Therefore, we can both earn more profit and be consistent with our initial operation/supply chain strategy to gain the highest possible values for the firm.

Individual Role - Supply Chain Strategy Supply Chain deparment is the one who works with other departments to establish consistency in strategy, decisions and focus among different roles within organization as well as ensure smooth operation to deliver values to end-customers with high satisfaction. As VP of Supply Chain, I clearly understand importance of my role in company success. Therefore, I also come up with strategy for supply chain role. As supply chain concerns about stocks (component and finished goods) whose cost is 4th largest expense in our finance report, my goal is to balance between stock level of finished products and order lines service level in the most cost effective approach. Beginning from round 7, we will also start to produce 2 new capsule products (1 new product has started since round 6). This significant change leads to some adjustment in my initial strategy. However, generally speaking, the idea is still the same: relatively low safety stocks for both components and finished goods so I can have low overall obsolete values and safety stocks will take fewer pallet locations in warehouses; instead, component lot-sizing and production interval will be medium to tackle possbility of stockouts due to low safety stock. My target is not changed when the situation changes because cost-effective balancing in supply chain is essential in maximizing net margin. Besides, about production management, frozen period of production will be considered differently based on characteristics of different bottling lines and their usage to produce different categories of products. Basically, the frozen pepriod should not set too long as it can become obstacles of being flexbile and responsive to demand variation.

KPI's Availability components (%): necessary condition for production to start. This is important contribution factor for production plan adherence because we cannot follow production plan and have finished products at promised time if we do not have raw materials available when needed. Target: average at 97%. Due to fixed inbound warehouse at 600 pallet locations, we need to appropriately organize to reduce overflow and reach desired target simultaneously (which means we cannot stock too much but still guarantee high availability). Approach: As stated aboved, I am not going to set high safety stocks to avoid unnecessary costs. Therefore, safety stocks are expected to below 2 weeks. Whereas, I will order raw material in medium lot sizing (ranged between [2.5; 4.0]). Example: Data in round 6: Component

Safety stock

Pack 1L PET

1.2 1.2

Capsule (orange) Bag

Orange Mango

Vitamin C

1.5 1.9 1.1

3.2 3.2 1.1 2.4 3.8 3.3 1.7

99.8%

100.0% 2.2

100.0% 98.9%

100.0% 3.0

95.2%

Stock Level of finished products (weeks): To meet a customer demand at promised level, we always need to have products available to ship immediately in the warehouse. However, additional stocks cost extra money and cause high obsoletes values. Therefore, I decide to choose this as KPI to monitor and make decisions regarding tradeoffs between stock products and service level. Approach: My target for this KPI is that average stock of finished goods should be below 3 weeks, which is the upper bound I believe to be sufficient to serve customer demand. To avoid risk of stockouts, stock levels should be in range of [1.7; 3.0] depending on each product's demand. In order to reach this KPI at below 3 weeks, safety stocks and production interval need to get to work. Safety stock will not be too high ( under 2 weeks) while production interval will be considered based on specific product to have the products available at the right time. Example: Data in round 6: Product

Safey stocks Fressie Orange 1 liter 1.5 Production interval 9

Fressie Orange/Mango 1 liter 1.4 Fressie Orange/Mango+C 1L

1.5 Fressie Orange PET 1.6

Fressie Orange/C-Power PET Fressie Orange/Mango PET Frespressie Orange

1.1 9

1.6 1.4 5

7 9

1.4

8 9

2.6 2.7 stock (weeks) Service level (order lines)

97.7% 2.3 2.4

98.4% 2.5 2.4

75.1%

Obsolete products (%): Obsolete values depends on different factors - shelf life or inventory. We should reduce obsolete percentage as much as possible because it is worthless expense. We target this KPI at below 5% as it is impossible to bring obsolete products to 0. The larger quantity of stocks we have to serve demand, the higher service level we can meet but the downside is the higher obsolete percent. My job is to balance between inventory and obsolete products as well as work with Sales to agree on appropriate shelf life. In my role, I concern about how much I will stock products (constraint: less than 3 weeks) to meet targeted service level at 96% while keep lowering obsolete percentage at lowest possible point. Approach: Target this KPI at below 5%. For products that have very high demand such as Fressie Orange 1liter (demand in round 6 was 135,397), we have tolerance for obsolete % to be a little more than 5.0% but must be less than 6.0%. Also, during first rounds that introduce capsule products, we will need time to adjust this KPI back to the targeted range. Average obsolete percent is expected to increase according to affected by high obsolete % of new launched products. Generally, to meet this goal, I need to revise after each round to consider if I made good decisions previous round and what should be changed to adapt to the market and improve situation. As obsolete products are not solely affected by inventory, I also work with Sales department to ensure that we are capable of delivering products within promised shelf life at agreed upon service level. Example: Data in round 6 Product

stock (weeks) Service level (order lines) Fressie Orange 1 liter 2.7 97.7%

Fressie Orange/Mango 1 liter 2.3 Fressie Orange/Mango+C 1L

2.4 Fressie Orange PET 2.6

Fressie Orange/C-Power PET Fressie Orange/Mango PET Frespressie Orange

1.4

98.4% 2.5 2.4

75.1%

91.7% 93.2%

3.4%

95.4% 97.9%

23.6%

2.0% 2.1%

5.3%

3.6% 4.8%

Obsolete %

91.7% 93.2%

95.4% 97.9%

94.2% Lot size Availability component (%)