The Dallas, Texas-based Global Company was a family-owned and conservatively managed business. Over four decades, the company grew slowly and steadily to reach its current employment level of approximately 200. All expansions were entirely financed by earnings. Periodically, the company's operating procedures were reexamined and modified to accommodate the complex problems that accompany expansion. The business designed, manufactured, and marketed metering and flow control devices for the chemical industry. As a result of declining profits, the company's management recently considered installing a more formal system for controlling its material costs. The company's product line consisted of approximately forty items, ranging from gauges and simple fittings to large flow meters weighing up to 150 pounds. The majority of these were produced in a variety of models and sizes, resulting in approximately 300 distinct products. 

About half were standard models whose design had not changed significantly in the past ten years; others were subject to significant technological change; a few featured special features for different customers and were occasionally made of special alloys to resist the corrosive effects of certain chemicals. Some of the more intricate items were supplied with or without particular accessories and enhancements. The company's industry standing depended on its ability to outperform its rivals in design, product quality, customer service, and price, roughly in that order. The supply manager was responsible for acquiring the specified castings, materials, and parts. The exact quantity of castings required for the manufacturing order was acquired. The same largely held true for bar stock, plate, and similar materials. 

On extremely standard-sized materials, it may be possible to purchase more than is needed for a single order, and full lengths are typically ordered rather than fractions. On odd-sized, costly alloys, the exact quantity would be purchased down to the inch. Standard nuts, bolts, studs, pipe fittings, and similar items were typically purchased in standard commercial lot quantities, but even here the quantities did not significantly exceed immediate needs, and these items were frequently purchased piecemeal. Molded plastics and special fittings or stampings were sometimes purchased in excess of immediate needs, particularly when the cost of procuring small lots was prohibitive. The supply manager did not change the quantities listed on the make-and-buy sheet without first consulting the superintendent. When materials began to arrive, they were checked off the make-and-buy sheet and delivered to the storeroom, production floor, or, if they were finished parts, assembly. Little effort was made to schedule work for the machine shop, and the foreman was free to work on any orders for which materials had been received. It was his responsibility to keep his employees and machines occupied and to meet the anticipated completion dates. As parts were completed, they were transferred to assembly, where they were placed in a tote box along with other parts that had accumulated for that order. After completion of all components, assembly could begin. Units that were complete were either stored in the shipping room or shipped out immediately in response to orders. The sales and production record did not reflect the lot's completion until the entire lot was finished. Due to the fact that some units were frequently assembled well in advance of the completion of the entire lot, the sales and production record frequently indicated that the earliest delivery date was in the future when, in fact, completed units were already stored on the shelves of the shipping room. In this manner, sales were lost to competitors offering earlier delivery dates. Other sales were lost as a result of the superintendent's habit of allocating more time than necessary for ordering, machining, and assembly when estimating completion dates. The organization lacked a formal inventory management system. Raw materials, purchased parts, and manufactured parts were not recorded. For each item, an informal record of sales and production of finished goods was maintained. 

This displayed the inventory balance, the quantity currently being manufactured, orders received, customer names, and shipment dates. In addition, it displayed the minimum stock balance and the standard production quantity. These were determined at the top management level, taking into account past sales of the item, the time required for a production run, manufacturing economies, the possibility of obsolescence, the available storage space, and the company's financial resources. Due to a substantial increase in volume, delivery delays, and more frequent production runs, the minimum stock balance and manufacturing quantity for the majority of products were revised upwards over the past year. The company believed that three to four production runs per year were sufficient for each item. A typical production run required nine to twelve weeks, the majority of which was spent acquiring castings. Actual plant processing required two to four weeks. Recently, it was discovered that jobs are frequently sold prior to completion and a second lot is initiated before the first is completed. Approximately fifty to sixty shop orders are currently initiated each month. As orders were received from customers, they were entered into the sales and production record. When such orders reduced the quantity on hand and in production to the predetermined minimum, a notice of depletions was generated, indicating the quantity remaining and the standard manufacturing quantity. This notification was sent to the plant manager. 

Global lacked a standardized production planning and inventory control process. Before each production run, the plant superintendent consulted informally with the engineer, development, sales, and finance departments to determine the exact number of units to manufacture. Then, he created a make-and-buy sheet for the item in question, detailing the various parts required, the shop print numbers, the materials from which the parts were fabricated, the quantity of each part required per unit, and the estimated completion date. The make-and-buy sheet was forwarded to the assembly foreman, who checked off for each component the quantity of that component that had been accumulated from previous orders' overruns. No records were kept regarding the accumulation of such components. In the assembly department, the parts were stored in bins, and those counted out against the make-andbuy sheet were separated into tote boxes according to the assembly time for that order. The make-and-buy sheet was returned to the plant superintendent, who edited it to determine whether certain parts should be manufactured or purchased in larger quantities than the order required. Where parts were interchangeable, he could also combine them with orders from other customers. The plant superintendent was familiar with the manufacturing process and associated setups, was aware of the price breaks on materials, and had a general understanding of future demand. Before forwarding the make-and-buy sheet to the supply manager, the superintendent updated the sales and production record with an estimated completion date. The plant superintendent's secretary was responsible for traffic. Receiving and warehousing were performed by three young employees who were more or less subordinate to the superintendent. Typically, when a shipment arrived, the foreman would supervise its receipt. 

The supply was reported to the plant manager. Certain executives believed that the company should establish a more systematic control over its inventories of raw materials, manufactured and completed parts, and completed goods. They cited the lost orders, the inefficiency of purchasing and producing in small quantities, the delays in production and assembly caused by a lack of materials and components, and the losses due to misplacement, breakage, and theft. These concerned officials also believed that Global might be able to realize substantial cost reductions through the systematic management of surplus and salvage. Two of the officials were concerned about the amount spent on transportation. Since no records were kept, no evaluation of potential savings in these areas had been conducted. Inventory losses were not measurable. The only items with real intrinsic value (thermometers and similar components) were secured in a locked cabinet by the assembly supervisor, reducing the likelihood of theft. Transportation costs were estimated to account for 12 percent of the total cost of the materials purchased. Those opposed to changing the inventory control procedure pointed out the risks of obsolescence in any inventory accumulation and, more importantly, the amount of funds that could be tied up in inventory and the amount of space that would be required if substantial stocks of materials, parts, or finished assemblies were to be accumulated. They resisted the implementation of changes in production planning and control, receiving, storage, and traffic. In addition, they indicated that other uses of company buildings, equipment, and research and development would generate greater returns.

Question 1

Provide a discussion of all activities and flows involved in Global Companys’ supply chain.

Question 2

With the use of practical examples, explain how Global will understand its customers and supply chain uncertainty

Answer rating: 100% (QA)

Question 1 Discussion of Activities and Flows in Global Companys Supply Chain Global Companys supply chain encompasses various activities and flows that contribute to the design production and deliver... View the full answer