Supply Chain Management

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like to maintain very low inventory levels.

Production Room

• Model A : Demand was high so there was a need for 2 suppliers. Far away suppliers can be chosen for this product due to relatively standard demand and the costs of backlogs are lower. Large order was given to supplier with shorter lead time. The initial order estimate was too high leading to high inventories. Decreased the order quantity in between

• Model B : Demand was small so a single supplier was sufficient. A far away plant cannot be chosen due to the varying value and demand of model B and the higher costs for inventories or backlogs. The very close supplier was chosen due to the anticipated increase in demand and hence extra capacity would be required.

• I invested in Celldex because the cost of the survey is only $2 million but the costs of understocking and overstocking of the models is very high if the quantity of phones is varying highly from the demand.

• I changed the demand in between for Model A since the inventory levels were rising and increased demand for Model B since demand increased.

• Initial production levels were set very high for Model A due to high cost of understocking when compared to cost of over stocking but the exact opposite case for Model B and hence ordered a little less than estimated value.

Year 4

Design Room

• Speakers increases the demand and adds to the profits. But it doesn’t increase the variation in forecasts a lot and also the costs so we will choose this option.

• Anti-theft, slimness and mini dvd increase the costs a lot and ceeate a huge variation in the demand forecasts. To avoid excess or understockings I am avoiding these options.

Forecast Room

• A basic phone does not require high end features and since we avoided them there could be an increase in demand. But seeing the patterns in the previous years I would like to be cautious and order less this time.

• A high end phone with the extra features could be attractive to the customers and might increase the sales. But the markdown price is very low so i would like to maintain very low inventory levels. But there is a high standard deviation and I expect the demand for model B to increase this year.

Production Room:

• Model A : Demand was not high so there was no need for 2 suppliers. Far away suppliers can be chosen for this product due to relatively standard demand and the costs of backlogs are lower. Large order was given to supplier with shorter lead time. Decreased the order quantity in between due to increasing inventories.

• Model B : Demand was small so a single supplier was taken. But this was a mistake since demand drastically increase leading to high stockouts. A far away plant cannot be chosen due to the varying value and demand of model B and the higher costs for inventories or backlogs. The very close supplier was chosen due high demand and hence extra capacity would be required.

• I couldn’t change the demand in between for Model A since there was only 1 supplier and demand couldn’t be met.

• Initial production levels were set very high for Model A due to high cost of understocking when compared to cost of over stocking but the exact opposite case for Model B and hence ordered a little less than estimated value.

Lessons learned:

• I believe it is better to selects options for the phone which increase demand and simultaneously not increase variation in the demand. In the 2nd and 3rd years I’ve concentrated more on the estimated consensus forecast and selected options which increase this number but selecting the option which doesn’t increase the variation improved my forecasts and profits.

• The major mistake I’ve seen throughout my 4 years was that I’ve been focusing more on the consensus forecast rather than the averages of individual forecasts which would have given more accurate results.

• When there is high deviation or even a scope for deviation, it is always better to have more than 1 supplier unless the demand is very less. This avoids risks and stockouts.

• It is always profitable to avoid high orders for products with high overstocking costs. There has been a constant high cost of overstocking for model B and hence I avoided ordering in huge quantities.

• Make changes in order as early as possible, especially for far away suppliers due to the lead time.

• It is always better to have the CELLDEX conference to increase forecasting accuracy.