Kuiper Leda

8/8/2019 Kuiper Leda

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Ref: http://www.allfreeessays.com/essays/Problem-Solution-Kuiper-Leda/5206.html

The 21st century corporate environment is distinguished by competition, complexity, and

change. With the globalization of markets and rapidly increasing foreign competition, supply

chain management is becoming an organizations most powerful business tool in reducing costwhile improving production and customer satisfaction. Supply chain management is also

transforming the way companies purchase raw materials, run production, and distribute final

products.

Kuiper Leda, Inc. (Kuiper) is an electronic components manufacturer, specializing in the

production of Electronic Control Units (ECUs) and sensors for the automotive industry. After

finding success with this niche during the past 10 years, the company has recently entered into

the Radio Frequency Identification Device (RFID) market and has been in production for six

months.

This new capability has caused notice from Midland Motors and they placed an urgent,

substantial order for ECUs and RFIDs; an amount that exceeds Kuipers current daily

production capacity. To complete this order to Midlands specifications and time frame, Kuiper

needs to determine the best way to undertake this order while meeting the production needs of

orders already in the pipeline as their current capacity is insufficient to meet the additional

demands. To further complicate the situation, Kuipers production planning, inventory tracking,

and supply chain management systems are inadequate to meet the demands of increased

production.

Situation Analysis

Issue and Opportunity Identification

There are several issues and challenges facing Kuiper Leda and for each issue and challenge

there is an equal opportunity. Each opportunity that Kuiper Leda faces can be used as a bridge

in the growth of the organization. Identifying the issues and opportunities for Kuiper Leda will

help in the creation of the end-state vision.

The issue being faced by Kuiper Leda is whether to be manufacturing both products in-house orto outsource the products completely or partially without jeopardizing their high standard of

quality. Kuiper Leda has an opportunity to choose outsourcing one part and manufacturing the

other in-house at a quality and cost savings. The work load can affect the quality of the goods if

production exceeds quality. "Quality at the source is frequently discussed in the context of

conformance quality. This means that the person who does the work takes responsibility for

making sure that his or her output meets specifications." (Chase, Jacobs, &Aquilano 2006)


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Another issue is the decision of which inventory system to use for the organization. The

opportunity for Kuiper Leda is choosing the best cost affective inventory system. "If there were

no costs or loss of time in changing from one product to another, many small lots would be

produced. This would reduce inventory levels, with a resulting savings in cost. One challenge

today is to try to reduce these setup costs to permit smaller lot sizes." (Chase, Jacobs, &Aquilano

2006)

Kuiper Leda has an issue with bottlenecks in the inventory management portion for Kuiper Leda.

Having the capacity to deliver the products in a timely manner is an opportunity for Kuiper Leda.

Decisions must be made on how to control the work flow to find the balance between capacity

and bottlenecking. A bottleneck is defined as any resource whose capacity is less than the

demand placed upon it. A bottleneck is a constraint within the system that limits throughput.

Throughput is that point in the manufacturing process where flow thins to a narrow stream. A

bottleneck may be a machine, scarce or highly skilled labor, or a specialized tool. (Chase, Jacobs,

&Aquilano 2006)

Controlling demand is an issue for Kuiper, how product is to be distributed and the storing for

these products. Kuiper Leda has the opportunity to control the flow of demand for their

products by having a solid demand management plan in affect. "The purpose of demand

management is to coordinate and control all sources of demand so the productive system can be

used efficiently and the product delivered on time." (Chase, Jacobs, &Aquilano 2006)

The issue of, "Can Kuiper maintain its high level of quality and reliable delivery of their

products", is an important challenge for Kuiper Leda. The opportunity to create a Total Quality

Management (TQM) plan that will ensure the continued success of their high standards is evident

to the organization. "Total quality management may be defined as "managing the entire

organization so that it excels on all dimensions of products and services that are important to the

customer. TQM has two fundamental operational goals, namely: Careful design of the product

or service and Ensuring that the organization's systems can consistently produce the design."

(Chase, Jacobs, &Aquilano 2006)

Stakeholder Perspectives/Ethical Dilemmas

The main stakeholders involved in the inventory management of Kuiper Leda would be Midland

Motors, Kuiper Leda's suppliers, Kuiper Leda's employees, and the shareholders of the company.

Every stakeholder has their own vision of what concerns they have about Kuiper Leda and their

inventory management.

Midland Motor has placed a large order, which was accepted by Kuiper Leda with the

understanding Kuiper Leda has the capacity to handle the order and deliver high quality in a

timely manner. With the strain this has put on Kuiper Leda to meet the demand, Midland

Motors may have reason to worry when it comes to Kuiper meeting its deadlines.


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Kuiper Leda will be pushing its suppliers to meet demand as it attempts to meet the deadlines for

the large Midland Motors order. The suppliers will have to work harder than normal to meet

Kuiper Leda's needs during this time span. Kuiper Leda may consider alternative purchasing

agents for the components and whole parts of their products.

Kuiper Leda's shareholders have a large financial gain or loss riding on this. An order this big

represents a large opportunity for profit and Kuiper Leda has a big responsibility to make this a

positive experience and achieve the maximum profitability for its shareholders.

The company's employees will have a great deal of pressure on them as the project proceeds

forward throughout the future. Kuiper Leda will expect more from its employees and cannot

afford to have delays due to employee matters or miscommunication. The question remains,

will the employees step-up to the plate?

Problem StatementAfter understanding the issues and challenges that are being faced, Kuiper Leda will use the

opportunity to successfully create and implement manufacturing plans to meet the demand for

high capacity orders by configuring the best alternatives for increasing capacity while keeping

production costs low. Kuiper Leda (KL) will evaluate the existing supply chain and make

strategic decisions concerning all components that will impact its effectiveness.

End-State Vision

After evaluating the issues and opportunities for Kuiper Leda, an end-state vision can be

developed by creating a set of end-state goals for supply chain management. The end-state

goals for Kuiper Leda should be as follows. An end-state goal of creating an inventory system

that uses independent ordering by lot size with an order fill rate of zero percent with a frequency

system of two-bin. By develop outsourcing partnerships for production overflows caused by

large orders with current delivery dates. An end-state goal to maintain reduced inventory costs

will increase profitability for the organization. An end-state goal of streamlining the supplier

chains by using any alternative purchasing markets available for components needed for the

production of their products.

Alternative Solutions

Kuiper Leda has several alternatives to consider that can solve the challenges and reach one or

more the end-state goals. Kuiper Leda can choose to manufacture both products in-house.

Kuiper Leda can outsource the products completely or partially. This is a strategic decision thatcould greatly affect the end results because of the cost involved with expanding current capacity.

Although Kuiper Leda is in need of supply chain reform, it has also done well with the current

system. Kuiper Leda could keep its current inventory system intact. This would minimize costs

and not disrupt current production. Kuiper Leda must also determine which suppliers it needs to

keep and which to let go. Kuiper Leda would most likely benefit from dropping AutoMart

Supplies and Axle Electronics; however, this may not be necessary. The final decision will be


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determined as Kuiper Leda top executives; who are determining the final solution and plan for

the future.

Analysis of Alternative Solutions

All the alternatives that are available to Kuiper Leda have two predominating themes in the

analysis of the alternative solutions. The supply chain themes are that of existing supply chain

management practices and opportunities for improving supply chain operating efficiency.

Existing supply chain management practices

Supply chain management practices can be identified by looking at companies and their "total

systems approach to managing the entire flow of information, materials, and services from raw

materials suppliers through factories and warehoused to the end customer," (Chase, Jacobs and

Aquilano, 2005). One of the existing formats within Kuiper Leda is planning. Planning is the

strategic portion of the supply chain management. Planning is needed for managing all the

resources that go toward meeting customer demand for product or service offered by the

organization. A big piece of planning is developing a set of metrics to monitor the supply chainso that the supply chain is efficient, costs less and delivers high quality and value to customers.

To identify strengthens and weaknesses within the supply chain function, a company should have

a good sound supply design strategy, "You have to make [the supply chain] seamless for global

customers," declares Tim Carroll, vice president of supply chain operations, IBM. (Kerr, John,

2006). He sees a continuous need for "more cross-discipline experience, beyond the functional

expertise in procurement, manufacturing, and logistics". (Kerr, John 2006) There are many

existing supply chain management practices that have been used effectively and the companies

illustrate some good examples. Logistics is part of the necessary elements for effective supply

chain management, which give organizations the ability to have a competitive advantage.

Carroll says that the hierarchy is king, but the need to understand the matrix and how to pull ittogether. Data Exchange Corp (DEX) developed a system to use reverse logistics, which is the

recycling of unused or unwanted supplies to help eliminate waste, strengthen customer loyalty

and increase profits.(M2 Communications, 2007).

Production is the manufacturing step. Schedule the activities necessary for production, testing,

packaging and preparation for delivery. As the most metric-intensive portion of the supply chain,

measure quality levels, production output and worker productivity. A unique opportunity for any

production facility is the procurement of materials needed for the production. The importance

of being able to track the origin of supplies and materials can be a cost efficient part of the

supply chain. As seen in two separate cases involving Target and the FDA, Target was able to

prove its case by have the documentation, whereas the FDA failed to have documentation in a

timely manner. Time response can have a large impact of the financial well-being of an

organization. (Gentry, C., 2006). A majority of retailer success is largely due to their effective

practice of keeping purchasing cost low thus helping them to offer discounted merchandise. Like

the companies mentioned above, to meet greater demands Kuiper Leda can initiate strategies that

use outsourcing, logistics, a Just In Time delivery system, and an inventory tracking system. The


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problem part of the supply chain is creating a network for receiving of defective and excess

products back from customers and supporting customers who have problems with delivered

products. For Kuiper Leda these practices have the potential to enhance effectiveness, increase

flexibility and expand sales and production capacity.

Opportunities for improving supply chain operating efficiency

The opportunities that are available to Kuiper Leda are within the sourcing of supplies for the

organization. Choosing the suppliers that will deliver the goods and services needed to create

the product. There are opportunities for the development to set pricing, delivery and payment

processes with suppliers, create metrics for monitoring, and improving the relationships. And put

together processes for managing the inventory of goods and services the organization receives

from suppliers, including receiving shipments, verifying, transferring supplies to the

manufacturing facilities and authorizing supplier payments. Kuiper Leda can use the examples

from Netgear and Countrywide for the opportunities for improving supply chain efficiency.

These opportunities can be used for creating improvements in the operations of the supply chain

from the beginning to the end processes for the organization.This is the part that many insiders refer to as logistics. Coordinate the receipt of orders from

customers, develop a network of warehouses, pick carriers to get products to customers and set

up an invoicing system to receive payments. "External integration, breadth, and initiation are

used to capture functionality, and their effect on process efficiency and sourcing leverage is

examined" (Khawaja A Saeed, Manoj K Malhotra, Varun Grover, 2006) could be an example of

what and how logistics is quoted. Relationships, both internal and external, are also a key

component in maintaining the effectiveness of a supply chain process. (Khawaja A Saeed,

Manoj K Malhotra, Varun Grover, 2006)

Kuiper Leda will benefit by knowing that efficiency comes with hard work and the dedication to

achieve top performance just as Netgear has accomplished. By have individuals within theorganization, Kuiper Leda will have a smooth running supply chain by having the expertise on-

board and having the in-depth knowledge of their industry. Kuiper Leda will be able to say that

they too are able to sustain their competitive edge by having supply chain operating efficiencies

within their organization.

Kuiper Leda can learn from this Countrywide by understanding that the use of tools available

within the organization can and will create efficiency. This efficiency can be used in the supply

chain operates. Kuiper Leda should use the internet to its fullest ability to enhance the

streamlining of supplier for better communication that is critical in maintain that competitive

edge within any industry.

Risk Assessment and Mitigation Techniques

When Kuiper Leda determines which products to produce in-house and which to outsource,

management must determine which would be most cost effective. Obviously there will be some

lost profits if some orders are outsourced but then if Kuiper Leda is overloaded by not

outsourcing, there will be lost profits and a possibility of lost future orders due to slow deliveries

and unmet time constraints.


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When Kuiper Leda chooses to go to a Just in Time (JIT) inventory (delivery) system, the

organization runs the risk of increasing shipping and other transportation costs if orders are not

shipped in bulk. As long as Midland continues to place high quantity orders, Kuiper Leda will

thrive from converting to a Just in Time system.

Optimal Solution

In order to meet the demand of the Midland high volume order, Kuiper Leda will need to

outsource the ECUs and microchip productions that are above the normal manufacturing ability

currently for the production department at Kuiper Leda. This will allow Kuiper Leda to have

time to develop plans for future expansion without jeopardizing current orders with this one big

order. If Kuiper Leda meets Midlands first order in a timely manner, hopefully, more large

orders will follow.

Kuiper Leda will drop Auto Mart Supplies because the Multiplexers and Electronics Sets that are

produced are of very small value supplied. The quantities supplied by this supplier is not very

large, and the shortage in supply can be accommodated to meet Kuiper Leda's net requirements

by use of independent ordering by lot size with an order fill rate of zero percent with a frequencysystem of two-bin. With this system, Kuiper Leda will order exactly what is needed. This way

the order quantity changes whenever the requirements change. As the number of orders increase

this system increases ordering costs. This supports a Just in Time environment where orders are

known in advance.

Kuiper Leda will use an Independent Ordering System for handling the requirements for

Microchips. This system is a forward looking inventory arrangement. In this system, a

specified order point is decided in advance. When the inventory drops below the safety stock

level, the order point is released and a fresh order is created.

Implementation Plan

Kuiper Leda will organize within the first week a team to jumpstart the reorganization of thesupply chain function. Once the team is assembled, work will begin on which parts of the

supply chain to be reorganized, which to create, and which to drop. Kuiper Leda's

reorganization team will consist of top management and be headed by the CEO. This will be the

most important venture Kuiper Leda will make and will prove to be the most pivotal when it

comes to fulfilling future orders in a timely manner and creating and growing more business.

Kuiper Leda will streamline its suppliers and select only its key suppliers and cut the rest. This

will result in better and more efficient communication. With a smaller number of suppliers,

trust will be built much easier.

Kuiper Leda's leaders will meet with the chosen suppliers and discuss the new supply chain

procedures and what is expected out of the suppliers and what the suppliers can expect from

Kuiper Leda. Once the suppliers are in place Kuiper Leda will transition into a Just in Time

supply method, reducing inventory costs and increasing efficiency. Once the suppliers and the

Just in Time system are in place, parameters will be set to monitor the activity including success

factor measurements and quality control measurements.

Evaluation of Results


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By implementing the above-mentioned plans, Kuiper Leda will achieve a 50% reduction in

inventory costs. The creation of a centralized delivery will be measured by the number of

reduce miles for delivery. Outsourcing production cost will be measured against internal

production costs. Streamlining the entire process from order placement to final delivery will

ensure a growth potential of 25% of the organization. By streamlining and reducing the number

of suppliers there should be additional inventory savings yearly as the company positions itself to

take on larger orders and deliver the final high quality products in a timely manner.

Conclusion

There is evidence to support that in order to better maximize value to its end consumer and the

organization, Kuiper Leda should continue using the MRP system currently in place, however,

they should seek to employ it to its optimal capacity. With operating its system at full

consumption, the company can then focus on improving its capacity management and delivery.

By building a strong defense for its outsourcing portion of production, Kuiper Leda will realize a

reduction in costs related to in-house storage and continued customer satisfaction in the area of

delivery specifications. Each of the choices presented to Kuiper Leda will prove to offeroptimal returns on inventory levels, which in turns will reduce costs and overstocking.

With implementing JIT, Kuiper Leda will fully realize the ability to meet demands for high-

volume production, while keeping inventory parts to a minimum. Keeping Kuiper Leda

profitability will ultimately be determined by properly forecasting its consumer demands while

still maintaining their good standing and reputation with their suppliers, customers and business

partners.

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