OPS FPX 5620 Assessment 1 Analyzing Global Supply Chain Infrastructure and Operations

Student Name

Capella University

OPS-FPX5620 Supply Chain Foundations and Management

Prof. Name:

Date

Executive Summary

This report was prepared for Thomson Tools, following their acquisition of Mainland Tools, a small tool company located in China. The purpose of the report is to evaluate Mainland’s processes and infrastructure, as it will now become part of Thomson’s supply chain. The acquired company operates from an older building, constructed in phases as the business expanded. In addition to offering products, the company provides technical support to its North American customers. Supply chains rely on the effective management of internal operations by an Operations Manager (Venkataraman & Pinto, 2018). When internal operations are properly maintained, it adds value to both services and products, leading to lower costs for customers, improved product quality, and enhanced services (Venkataraman & Pinto, 2018). Consequently, operations management within a supply chain involves careful planning and organization of both short- and long-term tasks, with collaboration between internal business owners and external supply chain partners (Venkataraman & Pinto, 2018). Thus, operations management plays a vital role in the success of a business and impacts everyday life (Venkataraman & Pinto, 2018).

Thomson’s Operations Manager will conduct an evaluation and analysis of Mainland’s current operational state and supply chain infrastructure. This analysis is crucial for the seamless integration of Mainland Tools into Thomson’s global market and supply chain. The Operations Manager has been assigned to identify potential issues and recommend improvements. The analysis will employ systems thinking, viewing the company holistically, with a focus on technology, facilities, and inventory control.

Brief Partner Company Description

Mainland Tools is a China-based company that provides goods and services, generating approximately $6 million annually. During the analysis of Mainland’s operations and infrastructure, several issues were identified that are negatively impacting its efficiency. These include unnecessary inventory and the loss of prepared orders, which accounts for 15 percent of total orders, costing the company approximately $900,000 per year. This loss is attributed to the outdated order-taking process. The company’s structure and department layout were not well-planned as it expanded, necessitating the rental of an offsite warehouse five miles away to store excess inventory. These inefficiencies hamper Mainland’s ability to deliver products promptly to its customers, which could affect Thomson’s reputation as a leader in supply chain efficiency. These issues will be further explored in the company analysis section.

Company Analysis

Systems thinking involves a structured approach to understanding complex behaviors and diagnosing systemic issues that may lead to unintended consequences (Ballé, 2018). In a supply chain, any internal or external occurrence, whether directly or indirectly related, can have a significant impact on operations (“Supply…”, 2016). This analysis will use systems thinking to examine the interactions and relationships between the components of Mainland Tools’ operations (“Supply…”, 2016).

Lean manufacturing and agile manufacturing are two practices that can help eliminate waste or enable quick adaptation to changes within a company (Venkataraman & Pinto, 2018). Lean manufacturing, also known as lean production, focuses on eliminating processes or activities that do not add value to the company (Venkataraman & Pinto, 2018). In contrast, agile manufacturing allows for a faster response to external changes using specialized tools and processes (Venkataraman & Pinto, 2018). While an agile approach would be beneficial for Mainland Tools, it is not what is currently needed. Instead, lean manufacturing is recommended, as it will help identify areas that require improvement or elimination. This approach will allow the Operations Manager to increase both the company’s value and profitability (Mirdad & Eseonu, 2014). Lean production and systems thinking work well together due to their similarities and complementary nature (Ballé, 2018).

Infrastructure Analysis

Mainland Tools’ infrastructure was developed in stages as the business grew, resulting in mismatched departments and insufficient storage. The building’s layout has led to inefficiencies in product movement and workflow. Products must pass through multiple departments before reaching their destination, which is not optimal. Additionally, the company has rented a warehouse five miles from the main facility, leading to delays in product movement and inventory issues.

The company also faces a significant lack of technology, which contributes to inefficiencies in handling orders, inventory, and customer support. The absence of vital software, such as Customer Relationship Management (CRM), Supplier Relationship Management (SRM), and Computer-Assisted Ordering (CAO) systems, further exacerbates these issues (Chopra & Meindl, 2013). Implementing such software would address these problems and reduce product lead times. The absence of an inventory management system has resulted in excessive cycle inventory and the need for an additional warehouse (Chopra & Meindl, 2013).

Operations Analysis

The operations analysis highlighted other areas that need improvement at Mainland Tools. The company’s current order-handling process, which relies on interoffice mail, has proven to be costly, with 15 percent of orders lost, delayed, or not placed, resulting in a $900,000 annual loss. This has increased cycle and lead times, further hindering efficiency in order processing and customer service.

Value Stream Map Explanation

A Value Stream Map (VSM) is a tool used to analyze, evaluate, and document the flow of materials and information required to produce a product (“Value Stream…”, 2019). It is designed to highlight critical elements in a production system, enabling better understanding of customer, production control, inventory, transportation, and supplier flows (Suarez-Barraza et al., 2016). The VSM also illustrates the time taken to complete each process (Suarez-Barraza et al., 2016).

Appendix A

Mainland’s current state value stream map (CSVSM) shows the flow of orders within the company. Mainland operates with two warehouses, one on-site and another off-site. Customer orders are received through technical support and routed via interoffice mail. This slow process often results in lost orders, contributing to a bullwhip effect, where excess inventory is created (Venkataraman & Pinto, 2018). To manage this, Mainland utilizes the secondary warehouse, but this increases response times for customer orders.

Appendix B

In Appendix B, the Operations Manager implemented lean manufacturing to reduce waste and improve responsiveness to external changes (Venkataraman & Pinto, 2018). A SAP system was introduced to provide visibility into supply chain logistics and reduce order response times. SAP’s customer experience module allows customers to enter orders directly and receive assistance, improving both efficiency and profitability. The system also coordinates inventory restocking and supply chain activities.

Recommendations

The Operations Manager has several recommendations to address Mainland Tools’ issues. These include shutting down the company for 30 days to renovate its facilities, which would result in a $500,000 loss in revenue. During this period, CRM/SRM and CAO software will be implemented, specifically SAP’s business suite, which will optimize inventory, logistics, and supply chain visibility (“Digital…”, 2019). The SAP system will also improve supply chain coordination with Thomson Tools and eliminate the bullwhip effect (Venkataraman & Pinto, 2018). All internal and external communications will be conducted through Office 365, replacing the outdated interoffice mail system, which has caused a $900,000 annual loss.

Another recommendation is to relocate the shipping and receiving departments closer to the on-site warehouse, eliminating the need for the offsite facility, saving $15,000 per month or $180,000 annually. This restructuring will enhance the company’s ability to handle orders and ship products efficiently.

The estimated cost of renovation, SAP software, and Office 365 implementation is $174,000. With a potential loss of $900,000 per year and an additional $100,000 in efficiency gains, the total estimated profit increase would be $1 million, bringing the company’s total revenue to $7 million. After subtracting the $500,000 loss during the renovation, the projected revenue would be $6.5 million, giving the project a 36 percent return on investment (ROI).

Conclusion

This report was created by Thomson Tools’ Operations Manager after the acquisition of Mainland Tools, a small tool company in China. Mainland’s segmented growth and outdated processes have led to multiple inefficiencies, including delayed response times and a 15 percent order loss, costing the company $900,000 annually. To address these issues, lean manufacturing and systems thinking will be employed, supported by SAP and Office 365. This plan is expected to increase efficiency, reduce losses, and provide a solid return on investment.

References

Ballé, M. (2018). Lean thinking: A system’s approach. Manufacturing Engineering, 32(2), 56-61.

Chopra, S., & Meindl, P. (2013). Supply chain management: Strategy, planning, and operation. Pearson.

Mirdad, W., & Eseonu, C. (2014). Lean systems thinking: Applying lean principles to improve the performance of university systems. Journal of Systems and Software, 92(4), 144-155.