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You will prepare a distribution improvement strategy for the Hunt Company. Recently, the company began outsourcing its manufacturing to overseas companies. Due to this recent change, they have suffered various issues and problems with their distribution processes.
Instructions: Read the Hunt Company case study on pages 85-88 of the Hugos textbook for additional information pertaining to the challenges, issues, and problems facing the company. In a 3-4 page written paper, address the following items in your distribution improvement strategy:
1. The major facts of the case study.
2. The main problems or issues facing the Hunt Company.
3. The possible solutions to these problems or issues (1-3 solutions).
4. Rationale for these solutions using concepts, terms, processes, procedures, and/or real-world examples discussed in the course materials.
5. The main steps to implement the new strategy or plan.
Please remember to include a title page, in-text citations, and reference page in APA style. The title page and reference page are not included in the page count.
Requirements: 3-4 Full Pages Times New Roman Size 12 Font Double-Spaced APA Format Excluding the Title and Reference Pages
Please provide an answer that is 100% original and do not copy the answer to this question from any other website since I am already well aware of this. I will be sure to check this.
Please be sure that the answer comes up with way less than 18% on Studypool’s internal plagiarism checker since anything above this is not acceptable according to Studypool’s standards. I will not accept answers that are above this standard.
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Please be sure to carefully follow the instructions.
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Please be sure to include an introduction paragraph with a clear thesis statement in the last sentence of the introduction paragraph and a conclusion paragraph.
Please be sure to include at least one in-text citation in each body paragraph.
Please be sure to read, use, and cite the case study attached. Please be sure that any additional sources used are credible or scholarly sources published within the last 5 years.
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SUPPLY CHAIN SKILLS—WORKING WITH GLOBAL PARTNERS
Faced with shrinking margins and intense competitive pressure, officials at Hunt Corp. (in Philadel- phia,
Pennsylvania) knew something had to change. So, in 2002, the privately owned maker of office and
graphics supplies decided to outsource manufacturing of its high-volume products to contrac- tors in
China and to use other lower-cost offshore suppliers.
The good news: Hunt, a supplier of office supplies used worldwide by businesses, consumers, educational institutions, and professional photographers and framers, got the lower manufacturing costs it
was after. The bad news: The switch to offshore sourcing and manufacturing put new strains on the
company’s supply chain. Lead times—the time it took for Hunt orders to arrive at its shipping dock—grew
from days or weeks when manufacturing was done in-house to an average of 95 days, for example.
Inventory costs and overnight shipping charges also rose.
As a result, says Bill Bracey, Hunt’s materials manager, the company has been forced to “undergo a
model change.” This means Hunt had to switch from being a company that could respond quickly to
customer requests for supplies such as paper clips, pens, and X-ACTO brand items by depending on its
manufacturing prowess to one that has to rely on its partners.
“Our role in the market is changing from [one centered on] our strength as a manufacturer to [one in
which] our strength [is] our distribution and supply chain prowess,” adds Bracey.
To get the most out of this changing business model, Hunt began designing and implementing new
supply chain processes intended to improve communication and collaboration with suppliers. So far it’s
working. Hunt has been able to reduce its lead times from 95 to 65 days, cut airfreight charges and
reduce inventory levels on imported items by 10 percent.
Hunt isn’t the only company that, having outsourced some manufacturing offshore, will be forced to
revamp its supply chain. With many companies turning to overseas suppliers to lower unit prices, Bracey
says, manufacturers that focus only on lowering manufacturing costs will eventually lag behind.
“Companies can afford to acquire a lot of inventory while the cost of money is low, but that won’t always
be the case,” he says.“As companies begin to pay the same amount for goods, that cost bene- fit also
goes away. The only way to create sustainable advantage is through a well-run supply chain.”
As Hunt has learned, there are challenges to doing business overseas. Outsourcing production can
significantly reduce the cost of goods. But it also typically means working around long lead times and
accepting large lot sizes. Long lead times lead to less accurate forecasts and make it difficult to manage
unplanned spikes in demand, while large lot sizes can mean carrying excess inventory. It soon became
clear to Hunt officials that a 95-day lead-time was “unacceptably long,” according to Tony Stafford, Hunt’s
purchasing manager. The long lead time was not only driving up inventories, it
was also making it difficult for Hunt to service customers quickly and to efficiently manage returns, a
significant issue as retailers increasingly move to a consignment model where they return any unsold
inventory to Hunt.
In order to cut lead times, Hunt officials realized they had to work much more efficiently with sup- pliers.
“We had to schedule capacity and get [suppliers] to operate as an extension of our organiz- ation,” says
Bracey.
Hunt set its sights on developing supply chain processes that would provide “a more continuous flow of
product so when price is less of a factor, we still have competitive advantage in being able to service our
customers without carrying excess inventory,” Bracey explains. That means continuing to improve
communication and collaboration with its suppliers to shorten the order-to- delivery cycle.
To help suppliers plan capacity, Hunt first modified its forecasting process. Rather than giving suppli- ers
just one level of commitment—a discrete order—Hunt established what Bracey calls “firm, slushy, and
free time zones in our forecasts.” In the firm zone, the company is committed to buying the finished goods
in the amount specified. In the slushy zone, the company is committed to pur- chasing the raw materials
and standard components so the supplier can plan its purchases and pro- duction. In the free zone, Hunt
has no commitment to buy.
“The free zone is typically three to five months out and is strictly for reference information to help them
manage capacity,” says Bracey.
At the same time, Hunt worked to give suppliers better visibility into its forecasts and inventory levels.
Hunt uses the full suite of QAD Inc. (based in Carpinteria, California) MFG/PRO enterprise resource
planning (ERP) applications to run its internal business, so it was natural for the company to use QAD’s
hosted Supply Visualization application. The application, hosted by QAD on its MFGx.net site, is designed
to provide suppliers with visibility into a manufacturer’s forecasts and in- ventory levels. Using a hosted
version of the application, says Bracey, helped Hunt get a quick return on its investment.
Supply Visualization helped Hunt communicate effectively with suppliers and, ultimately, drive lead times
down to 60 days. The Supply Visualization application is integrated with the company’s MFG/PRO
software applications. Inventory and forecast data from MFG/PRO are published to part- ners over
standard Internet browsers, which means suppliers can access inventory and forecast in- formation as
soon as it’s updated rather than waiting for a fax or e-mail from Hunt when the data is rolled up monthly or
quarterly. So now, even if suppliers can only meet part of Hunt’s demand, they can more quickly and
easily communicate that, and Hunt can make contingency plans.
Hunt updates its forecasts monthly and can update a forecast on individual products or by group as
needed. To develop its forecasts, Hunt uses the Demand Solutions forecast applications from Demand
Management Inc. (based in St. Louis, Missouri) and imports/exports that data into its
MFG/PRO ERP system. In the new process, Hunt meets with suppliers once a month (or more frequently if necessary) via conference call to discuss the forecast and plans and how they compare to
Hunt’s actual needs.
“In the past, we didn’t have a tool that would force us to get together and work out the details,” says
Bracey. Sharing forecast data and improving communication with suppliers also means all members
always have the same data from which to work. Stafford says Hunt’s partners look at the Web site for
changes or new information “daily, if not more often.” One advantage of the browser- based system is
that supplier browsers can be set up in Chinese so the information appears in their native language. That
way Hunt doesn’t have to depend on just a few people who are fluent in English.
Shorter lead times have delivered several benefits to Hunt. For one thing, they’ve made for more accurate
forecasts because, with 35 fewer days between order and delivery, there is less data to try to analyze and
less time for surprises to hit the process.“The further out you look, the less accu- rate your forecasts are
and the more you have to hedge on that forecast. Having a 50 percent longer lead time more than
doubles the work with far less certain results,” says Stafford.
Shorter lead times also let Hunt cut off product pipelines more efficiently when it sees the end of an item’s
selling period. That’s important as product life cycles shorten. Shorter lead times also re- duce the need
for safety inventory. That’s important to Hunt because “if that inventory goes obso- lete, it’s a real struggle
to get rid of it without contaminating your market,” says Stafford.
Hunt also found that by moving its manufacturing processes to suppliers, it moved its work-in- progress
(WIP) and raw materials inventory to those suppliers. It’s then the suppliers that have to improve the way
they manage that inventory. To do that, suppliers need more accurate and timely demand and forecast
data from Hunt.
Besides cutting lead times and inventory levels, Hunt has been able to reduce its airfreight costs for items
it couldn’t wait 35 travel days to receive. Under the previous process, when it needed product in less than
95 days, the company would have to airfreight product from China to its distribution center. The new
process let the company cut $200,000 in airfreight charges in the first half of 2003.
But Bracey says Hunt isn’t stopping there. The next step in improving its supply chain is for the company
to use the Supply Visualization tool to move away from creating a discrete purchase order for each item
and toward generating a firm release of the forecast so suppliers can simply package product and send it
to Hunt efficiently.
“Letting our schedule float could shorten lead times to 45 days,” says Bracey.“With a floating schedule,
when our customer orders change, we don’t have purchase orders clouding the picture of what we really
need. At the latest possible moment, our suppliers could take the latest require- ments, load the
container, and let us know what’s coming.”
To make the supply chain even more efficient, Bracey is also beginning to discuss with Hunt’s productengineering group the standardization of parts. That would mean, rather than carrying a finished goods
inventory, Hunt’s suppliers could carry a parts/materials inventory. That could allow the company to carry
less total inventory and possibly reduce the company’s risk and need for safety stock.
Already, though, Hunt has increased its level of service and reduced cost by improving its supply chain.“If
you don’t have the right processes in place when the cost of money rises and the price of goods levels
out for everyone, you won’t be competitive,” Bracey says.“We assume that day will come, and we’re
developing processes that will put us ahead of the curve.”
Source: This article originally appeared as “Syncing the Supply Chain” by David Kodama, Managing Automation magazine, March
2004. © Thomas Publishing Company, LLC, New York and reprinted with permission of Managing Automation.
finished goods to the customers. In turn, these decisions also affect the overall supply chain’s ability to meet
market demands.
More companies are facing the reality that at least some of their supply chain partners—notably suppliers,
manufacturers, and customer service functions—are located in foreign countries. The information in this
book about procurement, inventory levels, credit terms, manufacturing schedules, and so on applies just as
surely to them as to any United States-based company. The article about Hunt Corp. (see sidebar) has been
included in this chapter as an introduction to the shifts in supply chain operation that become necessary
when its member companies span the globe.
CHAPTER SUMMARY
Manufacturing is a critical part of the supply chain. Without it, there would be little for retailers to sell.
This chapter began with a look at the sourcing or procurement process—terms for how companies purchase
everything they need to do business, from paper clips to fleet vehicles to the products that they resell to their
own customers. They make decisions about whether to use multiple or single sources of each product, and
the chapter included information about what to look for in a reliable supplier. Once trusted suppliers are in
place, routine procurement is of- ten done nowadays on secure Internet Web sites, which saves time and
money.
Credit and collections are considered part of sourcing, since they are the ways companies “procure” the
money for what they have sold to customers.
Sourcing of supplies and the actual manufacturing of products go hand in hand—and the design or
development process should include input from cross-functional teams to ensure real-world considerations:
Can we get the parts we need to do this? Is the design more complex (and therefore, more expensive) than it
needs to be? Can we design services to bundle with the product for added value?
When the design is complete and the raw materials have been procured, the manufacturing process cannot
begin without scheduling the production of the item. Plant capacity must be determined and a certain portion
of that capacity must be allocated to each product the plant produces. The processes
of scheduling and facility management sound simple and logical, but they are a constant juggling act in order
to balance the workloads of people and machinery with desired inventory levels and customers’ orders.
The chapter ended with a look at how one U.S.-based supplier, Hunt Corp., has modified its business
operations in order to work with supply chain partners in China.
DISCUSSION QUESTIONS
1. Find out more about e-procurement and compare the benefits and sales claims of three
different e-procurement software systems based on their Web sites. As a purchasing manager
for a multiplant manufacturer, which would you choose and why?
2. As a retailer, what would you expect from a good supplier, in terms of added services and
perks?
3. As a retail executive, you are at the mercy of the credit policies of your suppliers. How
generous do you think they should be if your store is hav- ing financial difficulties and has
fallen behind on some payments?
4. Why should designers of a product have to be constrained by the limita- tions of a supply
chain? Explain the theory here. If you were designing the product, how would you try to work
around ineffective or unrespon- sive supply chain partners?
5. How are the “Four M’s of Manufacturing” impacted by mass customiza- tion? How are they
impacted by the use of foreign suppliers?
ENDNOTES
1. Thomas Y. Choi and Jeffrey K. Liker, “Building Deep Supplier Relationships,” Harvard Business Review, December 2004.
2. ElizaG.C.CollinsandMaryAnneDevanna,ThePortableMBA(NewYork:JohnWiley & Sons, 1990).
3. Ibid.
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