DSM Manufacturing When Network Analysis Meets Business Reality case

Conduct an initial scenario cost analysis that will determine the optimal location for the new contract manufacturer

Decision analysis can be utilized to ascertain a suggested decision alternative or an optimal decision strategy when a decision-maker is encountered with an indeterminate and risk-full configuration of forthcoming happenings. The objective of decision analysis is to pinpoint the best possible decision alternative or the optimal decision strategy provided information regarding the indeterminate events and the potential consequences or payoffs (Anderson et al., 2012). In delineation, scenario analysis is the practice of approximating the anticipated portfolio value subsequent to certain period. This takes into account the supposition of particular variations within the portfolio's securities values or major factors come about; for instance, a variation in the interest rate. Scenario assessment is frequently employed to approximate variations to a portfolio's value as a reaction to an negative occurrence, and might be utilized to study a theoretical worst-case scenario (Investopedia, 2016). The following is an initial cost analysis scenario that will determine the optimal location for the new contract manufacturer, taking into account the data and constraints provided.

DSM Manufacturing has contracted Phil and Jim to assess the supply chain and ascertain the most ideal and optimal location for a contract manufacturer. There are numerous constraints. To start with, 15% of the product volume would emanate from Asia, whereas the rest of it would emanate from Marshall town in Iowa, which is DSM Manufacturing's core location. Secondly, 10% of the product volume from Asia would have to be routed through quality control in Marshall town prior to being shipped to the contract packager. In turn, the contract packager would ship the product to one of the existing regional distribution centers for additional handling and shipping to the final consumer. For the time being, one of the project's sponsors sought to ascertain whether Marshall town, situated in region that was not densely populated, was in fact the optimal and ideal location (Harrington et al., 2010).

The data selected for the difference scenarios is as follows:

To: / From:

CA

GA

IA

NY

TX

MN

Total

IA

1.63

1.72

3.22

1.84

1.81

2.21

12.43

TX

1.13

1.16

1.11

1.22

1.67

1.1

7.39

TN

1.18

1.62

1.24

1.43

1.33

1.22

8.02

SC

1.24

1.89

1.26

1.39

1.31

1.24

8.33

OK

1.41

1.44

1.43

1.52

1.86

1.4

9.06

LA

1.42

1.49

1.43

1.56

1.88

1.4

9.18

WA

1.05

1.04

1.01

1.08

1.06

0.98

6.22

PA

1.12

1.13

1.11

2.15

1.15

1.08

7.74

NM

1.03

1.06

1.02

1.15

1.13

1.04

6.43

AZ

1.13

1.1

1.13

1.18

1.2

1.1

6.84

OR

1.14

1.1

1.06

1.15

1.14

1.03

6.62

MI

1.31

1.34

1.3

1.57

1.34

1.36

8.22

FL

0.93

0.91

0.89

0.96

0.93

0.85

5.47

KY

1.4

1.64

1.46

1.77

1.53

1.43

9.23

1.36

1.44

1.44

1.68

1.39

1.48

8.79

Total

18.48

20.08

20.11

21.65

20.73

18.92

Out of the 26 towns considered by Jim and Phil, this analysis also includes three cities in the calculation, which are the state of Kentucky and Indiana. The baseline selected in this case is Des Moines, as it is closely located to Marshall town. The scenarios are indicated above. In accordance to the calculations, it is can be perceived that the optimal location for the new contract manufacturer should be in Marshall town or in its vicinity.

Focusing on costs is the most obvious way to solve the problem. What are the various options and challenges independent of cost issues that are going on in this case? Be sure to consider supply chain trade-offs that might occur

Different options and challenges that are independent of the cost issues are taking place in this particular case. In the contemporary, the company employs a combination of rail and truck conveyances to import the goods and distribute them between the costs and plants to contract manufacturers and subsequently to the regional distribution centers (RDCs). One of the options is to consider the trade-offs between having ground transportation using rail only and using the trucks only. Another option in this case encompasses having production of paint cans in the similar facility as the contract manufacturer. Not only will this ease and hasten the supply chain, it will also lessen expenses incurred in transportation. Therefore, DSM manufacturing has the option of accommodating all the activities and processes of the difference manufacturers into one single facility (Frannkel, 2013). One of the challenges that DSM manufacturing faces encompasses the routing of product volume along its supply chain. Presently,10% of the products coming from Asia have to be distributed and channeled through Marshall town in order to go through quality control. It is only after this check that the products are distributed to the contract packager. Contemporarily, DSM manufacturing has to face the issue of engaging a contract manufacturer that is positioned within a 150-mile radius of Marshalltown for products that are being factory-made in Asia, to be initially dispatched to Chicago, and subsequently back to Marshalltown. This indicates not only an issue of cost but also an element of redundancy within the supply chain process of the company (Frankel, 2013). This is a challenge because it lengthens the process of the supply chain increasing the number of distribution days. The option that the company has is to have these quality control checks undertaken at a single destination (Frankel, 2013).

Ken issued a challenge to the consultants about considering all possible scenarios:

What other scenarios could lead to a new optimal contract manufacturing location? (Hint: Consider relaxing a constraint to generate a new optimal location. Explain your choice and reasoning, and support with updated data analysis to determine if a new optimal CM location resulted.)

Ken Martins, the global vice president for procurement and product development, issues a request to Phil and Jim regarding taking into consideration all prospective scenarios. Other scenarios could give rise to a new optimal contract manufacturing location. One of these scenarios encompasses the prospect of positioning the contract manufacturer at a location outside of the United States. In particular, the costs might decrease and there would be an optimal manufacturing location, particularly if the contract manufacturer is set close to the regional distribution center in Mexico or Toronto (Frankel, 2013). Another particular scenario that could be taken into consideration by Phil and Jim is to address the inclusion of quality control and set-up costs when considering alternate filling locations for paint (Frankel, 2013).

Origin State

Destination State

Transit Time (Days)

Rail Miles

Equipment Type

Line Haul Rate

CA

IA

5

2,080

53' Intermodal

$1,427

WA

IA

6

1,890

53' Intermodal

$1,466

11

$2,893

This indicates that since the product volumes will not have to be transported to Marshall State, not only will the manufacturing company be able to decrease the transit time within its supply chain, it will also save funds. In particular, the transit time saved will be 22 days and the total line haul costs saved is $2,893.

References

Anderson, D. R., Sweeney, D. J., Williams, T. A., Camm, J. D., & Cochran, J. J. (2012). Quantitative methods for business. Cengage Learning.

Frankel, R. M. (2013). The definitive guide to supply chain best practices: comprehensive lessons and cases in effective SCM. Pearson Education.

Harrington, L. H., Boyson, S., & Corsi, T. (2010). X-SCM: The new science of X-treme supply chain management. Routledge.

Investopedia. (2016). Scenario Analysis. Retrieved from: http://www.investopedia.com/terms/s/scenario_analysis.asp