Per the scheduling department manager (2014), “This part of the plant’s business is a make-to-stock operation in which the future demand for fans is forecasted based on taking the average of sales for the last three years and extrapolating it into the next year”. The assumption in using this forecasting method is that history will repeat itself within manageable limits” (Ordain, 2014, p. 1). Using the forecasting method to determine the optimal quantities to order and using the weighted moving average (metric) will also reduce the necessity and levels of safety stock.
Economic order quantity should be maximized to get the best price break based on this forecasting data. This is also a good metric to determine the best supplier candidates to use most often Jacobs & Chase, 2011, 577). Supply Chain Metrics The metrics to rate supplier’s performance need to evaluate the quality level, on-time livery and service levels so that Ordain can produce the best product for the customer. Using the categorical system will allow Ordain and the customers to categorize and rate the suppliers performance on a five point rating scale (outstanding, satisfactory, neutral, unsatisfactory, unacceptable).
Another metric to measure performance and effectiveness is to use total annual cost to evaluate qualitative factors of the supplier accountability and inventory management. This methodology measures the annual purchase cost, annual ordering cost and annual holding costs and is the basis of the basic fixed order quantity model Jacobs & Chase, 2011, p. 567). The supplier relationship within the country is one in which orders can be picked up directly or can be shipped by a service similar to Feted. The charges are competitive and worth the stable relationship it provides Ordain.
The relationship globally that Ordain has with shipping internationally is with Feted or a Chinese shipping company that competes with Feted. The relationship between the two is business relationship and is used to its fullest potential. Each party knows what is expected of them and until one end of the bargain is not met, the allegations will remain amicable (Ordain Manufacturing Operations, 2014). The supplier location is in Hangout, China, and is a global plastics manufacturer employing 550 people with annual earnings of $46 million. Ordain does however, have supplier locations in Albany, GA and Pontiac, MI.
The company is wholly owned by Ordain Industries, a Fortune 1000 enterprise with revenues in excess of $1 billion (Ordain, 2014, pig 1). The metrics used to measure supplier performance is simple, there is a paperwork done at every stop the material makes, along with checking for damages of the product. If shipping to the United States, upon arrival, there is a broker there to verify the shipment made it there with no damages and signs off in order for the supplier to get paid. There is paperwork with codes, called Product Duty Classification Codes on each shipment, along with the destination address.
Any strategies used for improvement would be only to ensure that there is no damage to any cargo that is being shipped. The lean production principles that could be used to maximize the efficiency and effectiveness of the fan supply chain process could be several. While the principle of making the process flow is productive at this moment, t can always be looked at to strive for a better way. By identifying each step and having an outside team come in, they could gain insight on things that Ordain employee’s complacency hasn’t seen.
Ordain is constantly striving for perfection in the industry, and by asking customer’s what they could do better in a survey could improve their processes. Business Forecasting Technique There are several qualitative and quantitative business forecasting tools available for businesses to adopt. The Ordain marketing organization has a mindset to “build on past knowledge” (Ordain, 2014, Sales and Marketing, pig 1). Moreover the organization has an established system to track historical sales. These two form the perfect foundation for putting in place the quantitative “Time Series” method for business forecasting.
Although, time series forecasting is usually more accurate over shorter durations of a year or less, Radian’s two year plan to reach $50 million revenue mark, can be considered relatively short term for accurate forecasting. Time series forecasting evaluate four aspects – trend, cyclical component, seasonal, and irregular. Interestingly, Radian’s sales data from 2005 (assumption here is that this Ross sales reflects the sales trend for electric fans) shows a very steady or stationary trend. This provides good Justification to use the Simple Moving Average time series method for forecasting.
Since the electric fan division of Ordain has been determined to be a make-to-stock firm, production rate can be readily calculated based off of the sales forecast. Monthly units can be multiplied by the time it takes to produce each unit and this can be divided by the number of working hours for the given month. This will help determine the number required each day. Workforce level can also be readily calculated in a make-to-stock firm based on the production rate. Ordain has chosen to use a stable workforce with varying hours.
Once the monthly production numbers are known and the number of units a worker an typically produce in a given day or even hour, the firm can determine the number of hours their workforce will need to work that month to produce the projected sales volume and maintain the determined safety stock. Inventory on hand or the stock to level for the month will be determined based off the sales forecast plus the predetermined safety stock volume. Use of these simple tactics will ensure Ordain keeps waste to minimum and maintains sustainability from a manufacturing standpoint.
Both material requirements planning (MR.) and master production scheduling (MSP) are interdependent concepts. Master production scheduling helps determine the requirements of the material requirements planning based on a time and space element. The goal of both of these tools is to maintain the lowest inventory levels, both raw materials and finished goods, that still allow the manufacture to meet the needs of its customers based on a determined pack fill rate. The pack fill rate is the determined or goal rate of ability to fill versus back order.
The MSP is the next step in reaching the aggregate production plan. It breaks down the total units to be produced into the actual product families, time, and space (or pacific equipment) they will be produced. For Ordain, this is where an adequate understanding of the MR. is needed. The fans are made of two main components, polymer and assembled motor units. Both of these items are sourced locally, but as some safety stock of polymer is held on site for production, additional motor assemblies held on site are mainly only for warranty repairs (Ordain Manufacturing, 2013).
Ordain ensures impact from the motor supplier is limited by providing them with sales forecast of their fans. This allows the supplier to develop their production schedules and storage quantities around the needs of Ordain. While this company attempts to maintain adequate quantities of electric motors in stock to meet all its order requirements, its on-time deliveries over the past year have averaged only 93%” (Ordain Manufacturing, 2013, Para. 2).
The person in charge of the MSP at Ordain must maintain focus on both the present and the future. If future needs in a given month or longer exceed production capabilities, the scheduler needs to look to produce in a period where demand is not as high. As fans are not perishable, over production in a given month will only be at the expense of triage cost less the cost of overtime in a future period when the units are needed. For Ordain, the MSP must be carefully developed with both the APP and MR. in mind.