Supply chain management problems and solutions

Jolly Jumper Memo

Melanie Tan, CEO Jolly Jumper

Casey Manager, Corporate Solutions, Inc.

Ms. Tan: This overview is in response to your recent request from our office that we examine the current operating paradigm for Jolly Jumper and make recommendations to three major issues: 1) Change management and impact; 2) Design, Production and Ordering processes (Supply Chain Management; and 3) Consumer metrics and target demographics.

Company Overview -- Jolly Jumper was established in 1973 and currently has almost 40 full time employees. The company is based in Australia, purchases high-quality jumpers from China, and sews creative and innovative designs onto the jumpers for resale. The company has no brick and mortar stores, but sells directly to independent retail outlets. The demographic for the current customer is a higher-end stakeholder expectation willing to pay a higher price for handmade, high-quality clothing.

Major Issues - Jolly Jumper currently works to fill orders from retail customers using demand forecasting, feedback from management, and experience. This works well when items are in stock and there is no seasonal rush, however, there are issues of seasonality, peaks and valleys in customer orders, and lack of quick enough response to produce hot selling styles. Typically, lead times of 2-4 weeks are feasible because the product is perceived as "hand-made" and of exceptional quality. However, this does limit marketing, distribution, and foreign expansion.

One of the areas in which JJ may not be maximizing both profits and efficiencies is that of Supply Chain Management. Because of the nature of the organization, JJ fits more into a merging of entrepreneurial theory and supply chain management. Of course, the process of SCM may be simple or complex, depending on the nature of the item, and in this case the flow is logical, but somewhat inefficient. For instance, JJ purchases the blank "jumpers" from China, has them shipped to Melbourne, then processes the additions and design, then repackages the jumpers and reships. Taking lessons from entrepreneurial SCM theory, the manner in which the elements of the supply chain may be improved has a clear benefit to all stakeholders (the company, retailers, and eventually consumers). At its most basic form, JJ needs to put the right product in the right place at the right time in a manner that will maximize quality, profit, and growth potential (Jongebloed, 2007).

You note that you have been approached by your Chinese manufacturer and another company with solutions to your situation, all which have negatives based on your business model, your concerns about employee retention, and a realistic view of stakeholder expectations and your own manufacturing knowledge.

Recommendation -- Any solution has both positives and negatives. However, the company has grown to a point that without some changes, there may be a decline in market share. If, in fact, the business plan and mission focus on producing a high-quality produce assembled in Australia, then we recommend that you meet with your Chinese manufacturer and begin robust contractual negotiations that will limit the amount of production time, shipping time, yet still maintain the uniqueness (copyright protection) and quality control from which your organization has become known. Of course, using the CAD system and exporting designs directly to the manufacturer will have overriding effects on almost every aspects of the business -- from strategic planning to design and through the entire manufacturing process and ultimately to delivery of the product to retailers. Once trained on the CAD system, the JJ design team can tweak design changes and/or customize designs for clients or seasons much quicker (Gitman and McDaniel, 2008, pp. 275-6).

Briefly, the following matrix outlines the potential impact of this solution on several aspects of your business:

Issue

Solution

Analysis

Clear and robust legal guidelines protecting the design and rights of the product.

Problematic with a Chinese manufacturer, but doable if agreements are specific and the company stands to lose business if they do not comply.

Demographics

Keep the mid-range, handcrafted demographic.

Expand internationally using the Internet and/or certain outlets (Amazon, com; Ebay, etc.) as a way to penetrate complex markets.

Design

It is clear that you wish to keep as much design in house as possible. The best way to do so would be to learn the CAD/CAM system, or form a design team (current employees) who will learn the program and keep up on current trends and designs.

This is relatively inexpensive, allows you to keep the design aspect in house; while saving time and conversion issues with the manufacturer. Further, it opens up the door for employee development, training, and actualization

Design Process

The CAD system will be a steep learning curve at the beginning, but will add efficiencies and flexibilities to the process once the system is mastered.

There will be more internal control and creativity available in the design process once the CAD system is mastered. Having a design team will ensure this process goes quicker and the knowledge shared at a deeper rate.

Human Resources

Rather than eliminating positions, expand the company operations by allowing current employees to move into teams (design, QC, retailer support, production management, etc.)

There is tremendous knowledge and experience within the company. Most of the employees would likely welcome the ability to expand their job responsibilities by helping the company grow. Perhaps expand internationally with a team approach that sells directly to consumers in certain countries via the Internet.

Manufacturing Time

Allow designs to be sent to manufacturer electronically; then an imaged proof returned. This would cut manufacturing time by eliminating several steps.

In essence, this would eliminate many of the delays at peak times or for popular products. Orders could be sent electronically, packed at the manufacturer, and shipped directly to the retailer; ostensibly saving weeks.

Order Processing

Order processing will need to change a bit so that retailer orders can be sent to the manufacturer for fulfillment.

Span of control will change and move more towards Chinese manufacturer to fill orders; The Australian team will still need to market, talk with retailers, and perhaps expand into e-sales.

Production Process

Ultimately, using the CAD system will streamline the production process; ensure quality control, and greater speed from design to production.