Operation Management Riordan - Supply

Operation Management

Riordan - Supply Chain Management Case Study

Manufacturing Strategy

Riordan Manufacturing's plant in Hangzhou, China, is responsible for the manufacture of fans. The current process for the manufacture of the firm starts with the firm manufacturing the plastic parts which are needed out of polymers, which are then assembled with the motors. It is stated that the orders are sent to the shipping department where the orders are assembled and sent out. This would indicate that the firm is following a level strategy, where goods are manufactured and held in inventory until they are ordered (Buzzacot et al., 2012). The alternate is a chase strategy; this is best used where a firm faces a high level of variability, as the goods are only produced as needed (Buzzacot et al., 2012).

Riordan have a range of fans that are sold, but the firm also provides some custom made fans, this is possible as the firm manufactures the plastic components themselves out of the polymers. For these fans the production process must be a chase process. Riordan are currently using a combination of level and chase inventory management strategies.

Process Flow Diagram

The supply chain starts with the Chinese suppliers. The firm orders goods based on the sales forecast, with the orders going to local Chinese suppliers. The orders are placed and the goods are received. When the goods arrive the orders are checked against the order, and, as long s they are correct, the raw input materials are placed in the holding area, ready to be sent to the factory. From here the materials are in the internal supply chain, going through the manufacturing process until they are sent to the shipping department, where the orders are sent out using third party logistics suppliers, although some customers may come and collect their fans. The process is shown below.

Figure 1; Process flow chart

Metrics

Metrics may be used to assess the efficiency of the supply chain. In order to measure the efficiency of the supply chain one metric which may be used is the level of on time supplies. At the current time it appears that there is a little difficulty in terms of the suppliers, as only 93% of the deliveries are received on time. If there are delays in the supply chain they have the potential to interrupt the production, waste resources, and if there is not sufficient buffer inventory, or if the order is for custom fans, there may be a delay in the delivery of the order, which in turn may create dissatisfaction in the customers. The metric which may be utilized in the supply chain may be linked to delivery quality and accuracy, measuring the level of goods which need to be returned or rejected, seeking to have a level which is as low as possible.

Influence of Supplier Relationships

The relationship that a firm has with its suppliers will impact on the way that the supply chain performs. There are a number of different influences, which ultimately work in conjunction with each other. However, to appreciate the potential impact, some of the major influences will be considered separately.

The first influence will be the type of relationship that is present. Where a firm has a long-term relationship with a firm, either it is with a long-term fixed contract, or a high trust relationship where it is understood orders will be placed at regular intervals, the supplier is likely to ensure that they have the relevant more materials, and delays between order supply are likely to be minimized. It is natural that suppliers forecast their own demand, and where long-term relationships have developed, there is a greater potential for the supplier to make the loan for cost. Furthermore, where Riordan is a major customer for that supplier, there may be a greater willingness to fulfill the order, and put that customer before smaller competing firms in terms of priority. If Riordan are ordering from a firm they do not regularly use, there will not be the same level of forecasting, and a supplier may need to obtain relevant inputs before making a delivery.

The situation of the supply themselves will also be relevant. Smaller organizations are likely to have more cash constraints, and have a lower level of inventory on hand, as inventories tie up capital. This problem may be particularly pertinent where organizations lack financial stability. If the organization is small, the influence of production constraints may also impact on the readiness of supplies, especially if Riordan are competing with other companies for similar supplies.

The location of a supplier may also be important, local suppliers may find it easier to make regular frequent deliveries, due to the low cost associated with that delivery. However, if a supplier is located at a significant distance, orders may need to be a minimum size to make delivery financially viable. Furthermore, longer distance deliveries may require more notice in terms of logistics arrangements, especially where the supplier makes deliveries themselves rather than using third party logistics firms.

The way in which any deliveries are made and services received may also reflect the details of any contract, which may include the utilization of performance metrics.

For example, if there is an agreement to on-time deliveries, the penalty for late deliveries, there is likely to be a higher level of on-time deliveries, especially where suppliers may be struggling to make delivery deadlines.

In many instances organizations may work with the suppliers in order to improve the supply chain. Strategic supply chain management will often see companies working with their suppliers in order to share information, and improve forecasting, which benefits the supplier, as they are able to make more accurate forecasts which will help to optimize both production scheduling and investment in stock, and benefits the buyer as the stock will be ready when they needed. However, this will only take place where there is a high level of trust between the two firms.