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Operations Management Case Presentation on Supply Chain Management and NDL Poultry Farms
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Supply Chain Management Analysis:
Agida Catadman Dantes de Leon Estanislao Lope Peralta
Objectives To observe a local, semi-integrated company comprised of
feed mill, poultry farm and trucking operations
To analyze the key Supply Chain Management (SCM) processes in the operations and give a sound rating of the companies performance in terms of SCM
To give recommendation on how to further improve operations through utilization of SCM
OutlineI. Video presentation: How the company’s
operations work.II. Company HistoryIII. Organizational ChartIV. Operations Flow ChartV. Key Supply Chain ProcessesVI. Q & A with the President VII. SCM Rating and AnalysisVIII. Conclusion and Recommendations
Company History
Late 1980’s – Mrs. Cecilia Picones- de Leon, a midwife, started chicken wholeselling in the local market.
Early 1990’s – Mr. Nilo M. de Leon, a seaman, accrued some capital and retired early to concentrate on trucking/trading of live chicken.
1995 – the couple explored the broiler growing business considering the market potential they established from trading.
- they started with 5,000 birds
1998 – they engaged in feed milling, mixing their own feeds for their farm
○ First feed mill was located beside their residence
Presently, the company has a feedmill capable of producing 10 metric tons of feeds per day, a total farm capacity of 100,000 birds per cycle and hauls 20,000 broilers to costumers in and around Metro Manila every week.
The Average Monthly Production/Sales from NDL Poultry Farm Could Feed
100,000 People a Delicious Chicken Meal
Or more than 1.2 Million
People for an Entire Year!!!
Did you know that…
Organizational Chart
Operation Flow Chart
Raw Material Suppliers
Yellow Corn, US Soy Bean meal, Feed Wheat, Fishmeal, Porkmeal, Coconut Oil, Enzymes, Amino Acids, Vitamins, Minerals, Toxin Binders, Antioxidants, etc Inspection
Loading
Delivery
Order
Feedmill
Delivery Schedule
Unloading
Fail QC Pass QC
Order request
Office
RM Inventory
Low inventory
Feedmill Supplies
Feedmill Feed Production and Delivery
Schedule
Final Feed Mixing
RM Inventory
Hummer Milling Premixing
Packaging
Finished Feeds Stacking
Loading and Delivery
Order requestLow inventory
FARM
Day-old-chick loading schedule
Office
Feedmill Production and Delivery
Feedmill Operations MapFeedmill
Hatchery, Day-old-chick (DOC)
Supplier
FARM
DOCs
feeds
Flock Health Monitoring
Loading schedule
WeighingHauling
Loading
Brooding
Cleaning & Disinfection
Growing
Weighing and inspection
Ready for next loading
Ready for harvest
DOCs
QC Pass
QC Fail
CUSTOMER
Delivery
Office
Unloading
excess feeds
Farm Operations and Delivery
CORN
Soy Bean Meal
Animal Proteins
MicroingredientsWheat
Rice Bran
Silo
Hummer mill 1
2-stage 1/4ton Mixer
Weighing Scale
Finished Feeds Stacking
Loading Area
Feed mill Map
Coco Oil
Hummer mill 2
Key Supply Chain Processes Customer Relationship Mgt
Main clients are chicken dealers from Pasig, Laguna, Antipolo, Binangonan, and other wet markets
Small clientele (less than 20 regular customers)
Individual/Personal client identification Sales secretary coordinates daily orders
Customer Relationship Mgt Payment terms are permitted for long time
clientsNetwork gives leverage – industry updates
available for customers Target is to keep long-term customers
Key Supply Chain Processes
Key Supply Chain Processes Demand Mgt – FARM
Farm supply is only 50% of market demandSlack is outsourced from other farms around
LuzonDifficulty in allocation since this is done on a
daily basis – volume of orders highly dependent on price and available sizes
Day-Old-Chicks(DOCs) are prebooked 3 months in advance
Demand Mgt – FeedmillAllocation and purchasing is often “in panic”No specified replenishment level for stocksA lot of unnecessary hoardingProduction allocation is done on a weekly
basis
Key Supply Chain Processes
Key Supply Chain Processes Order Fulfillment
No structured ordering system and supplier accreditation
Telecommunications – low tech! Purchase orders
Key Supply Chain Processes Supplier Relationship
ProcessSupplier identification
and selection with no formal structure
Cost management– always seek best prices
Industry leaders
vs. Strict evaluation – undergo testing, price evaluation, supplier accreditation and trials before actual purchase
vs. establishing long term supplier – informal tie up based on past experience (delivery speed, openness to returns, reliability, quality, price)
Key Supply Chain Processes Supplier Relationship Management
Pay on time!Follow transactional protocolsAs much as possible, do not lie! Trust is not a
cheap commodity.
Key Supply Chain Processes Product Development and Commercialization
Few personnel are given access to seminars, symposiums, higher education, etc.
There is lack of empowerment among different levels of organization – decision-making highly centralized
Very few general and staff meeting
Purchasing Behavior
Feedmill Inventory
Order Lead time
# of SuppliersBehavior of Purchasing Frequency of Purchase
Microingredients
Acidifiers, Amino Acids, Antibiotics, Anti-Coccidials, Enzymes, Toxin Binders, Vitamin, Mineral Premix, etc
1-2 weeks multiple varies greatly in terms of allowable terms, delivery speed, price, etc. Some products like Vitamin premix is under a yearly contract.
once a month to once every two months
Purchasing BehaviorFeedmill Inventory
Order Lead time # of Suppliers Behavior of Purchasing
Frequency of Purchase
Raw Materials
Corn2-3days multiple adversarial, with
price bid every 2 weeks
Soya
3 weeks to 1 month 2 pre-booked, no
price bidonce to twice a month
Oil2-3days 2 pre-booked, with
price bid once a month
Animal Proteinmonthly 1 semi-contractual once a month
Purchasing Behavior
Farm InventoryOrder Lead time
# of Suppliers Behavior of Purchasing Frequency of
Purchase
Day Old Chickat least 1 month 1 semi-contractual once a week
Hatchery Vaccinesincluded in DOC deal 1 included in DOC deal included in DOC
deal
Farm Vaccines 1-2 weeks 2 to 3 quality/ efficacy driven once every two months
Farm Equipments and UtilitiesPlastic ware 1 month multiple bidding once a yearMetal ware 1 month multiple bidding once a yearWood and hardware 2-3 days multiple "suki" discounting as needed
Q&A with the PresidentWhy don’t you outsource your feeds?
“Savings on feed cost are too large to ignore. And it implies more employment to our fellowmen.”
Why don’t you produce your own chicks?“Lack of finances and technical know how limits integration.”
Why not simply buy and sell chickens instead of growing?“We are now expanding our market and outsourcing more . Maintaining a
growing inventory allows flexibility during shortages or surplus.”Why not dress and process your live chicken yourself?
“Because we fear going too far off our core competence which is growing and trading”
Are you looking for further integration or further outsourcing in the future? “We are looking at more tie-ups. Expansion requires more
capital and higher risks. Small operations want to maximize opportunity. No general rules, but instead we decide on impulse. The determining factor in any activity is whether we see more profit or not. In the long run this may not hold. We need more consistent supply flow to become more productive.”
Q&A with the President
Analysis Key Points
NDL vs World class poultry industry
World class poultry – Internal supply chain focus, supply focus and network mgt focus all working in parallel
Short Term Progress: Proactive - Cross-functional team orientation; emphasize the balance between customer satisfaction, inventory risk and investment; centralized data; improved procurement; development of suppliers; long term contracts
Analysis
Analysis Key Points
NDL vs World class poultry industryStage 1: Internal supply chain focus
Stage 1: Internal Supply Chain FocusTwo major process blocks: Feed mill and Farm
Focus its activities in ensuring that the two major process blocks above are operational, which means that the main focus is to be able to process the raw materials into the product that it will sell.
Analysis
Analysis Key Points
NDL vs World class poultry industryStage 1: Internal supply chain focus“Model 2” – Mechanical
“Model 2” – Mechanical
Transactional Focus, “Bull whip effect”, Relationship with some suppliers adversarial, Data historical present, Reports routinely done, very few organization meetings
Analysis
Analysis Key Points
NDL vs World class poultry industryStage 1: Internal supply chain focus“Model 2” – MechanicalPillars of SCM - DSL
Pillars of SCM – DSL
○ Demand Management – not focused on demand, sustaining the demand is the priority. Internal supply is only 50% of demand. Focus on client relationship is very crucial
○ Supply Management – no established long term suppliers and no formal supplier evaluation and accreditation. Relationship is generally adversarial with just a handful of regular suppliers
○ Logistics Management – poor communications system and poor data management/record keeping
Analysis
Analysis Key Points
NDL vs World class poultry industryStage 1: Internal supply chain focus“Model 2” – MechanicalPillars of SCM – DSL Efficient Supply Chain – Functional Products
Efficient Supply Chain
Broiler birds or broiler meat is primarily a functional product and therefore, the goal for the production process is to be efficient.
Competitive cost and quality gives tremendous advantage in commodities industry.
Analysis
Recommendations Over-all
Invest in technologyHire a few more technical personnel
capable of responsible empowermentMore tie-ups – consistency is the name of
the gameCapitalize on information network. This
may open doors to better customers and suppliers
FarmFocus on core competence, feed milling
requires a significant aggregate inventory value. Finances may be diverted to more trading sales or growing expansion.
Look for regular chicken supplier to guarantee consistent supply
Returns management protocol should be considered
Recommendations
FeedmillConsider a replenishment level for stocksFormalize supplier evaluationFacilities upgrading
Recommendations