Convincing Features
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Case Study
Baba Sdn Bhd manufactures and distributes chemicals at a plant and onsite distribution centre in the northern part of West Malaysia.
Baba’s purchasing manager is currently rethinking the firm’s relationship with KJ Sdn Bhd, a major supplier. KJ has frequently delivered late, delivered the wrong order or backordered Baba’s supplies. Historically, Baba has dealt with supply problems by simply changing suppliers.
The purchasing manager thinks that it may be time to consider additional changes. KJ is one of Baba’s main suppliers. KJ holds a large inventory, but some slow-moving items must be ordered from China with up to three months’ lead time. When Baba places an urgent order for these items, KJ must order the items from China. Baba pressures KJ about the slow delivery time, so KJ appears to let Baba down repeatedly. KJ’s management wonders whether the business with Baba is worth keeping. KJ is a major client, but the constant threat of losing their business disrupts KJ’s operations.
Top management may change the customer base to one that focuses on long-term customers and relies less on Baba. The current process works like this. At the beginning of each month, Baba customers estimate their requirements for the next month. Throughout the month they phone their orders to Baba’s marketing department. Representatives from the marketing department relay the forecasts to the logistics department. Baba’s purchasing department then orders from suppliers like KJ. Baba’s customers often place expedited orders, which cannot always be met because the stock is already reserved for other customers.
Questions:
1. What are Baba’s logistical problems? (12.5 marks)
2. How can Baba improve its logistical operations? (12.5 marks)
3. What should KJ expect from its customers? (12.5 marks)
4. What options are available to KJ in the short-term and the long-term?
Case study
Company History
Rapid Moving Bhd (RMB) is a public transportation operator that was incorporated in early 2010 in Kelana Jaya, Selangor. The mission of the company is to provide a reliable, safe and comfortable transportation service at an affordable price to the general public. To achieve the required service level, RMB set up a maintenance department in the second year of its operation. Unfortunately, the maintenance department is having some difficulty with parts inventory and availability.
The Problem
During a recent informal visit to the workshop, the managing director, Mr Roshan overheard a frustrated staff member complaining to his supervisor. He lamented that he had gone to four different storage areas to collect the
required material but managed to fill only part of the order because some items were out of stock. For some reason, the material management system (MMS) showed sufficient items in stock. The managing director worried about a recent steady escalation in maintenance costs and parts inventory carrying
costs. He requested that the general manager of the maintenance department, Mr Stivan, study these problems and submit a proposal to resolve them. Mr Stivan investigated and identified the following problems:
1. The materials management information system required manual updating. The staff often assumed the information in the system was up to date when requisition vouchers were waiting to be entered. This time lag meant that the system showed inventory as available when it had already been used.
2. Most users withdrew more material than they needed so they could avoid stockouts.
3. Many users set up unofficial mini-warehouses – just in case.
4. Warehouse staff were reluctant to use the computer-based system. The MMS could provide online system information, but resistance from the warehouse staff kept that part of the system from being implemented.
5. No records on material consumption were kept.
6. Users had to submit a material requisition form for items kept in each of four warehouses and had to collect them personally.
7. Seventy per cent of the maintenance costs came from materials.
Questions
1. Prepare a brief report in which you critically examine the inventory issues presented in the case. Recommend improvements for parts inventory management and maintenance cost reductions.
2. At present, the chief supplies officer is in charge of purchasing the warehouse. He reports to the assistant manager of administrative support services. Mr Stivan intends to appoint an integrated logistics manager to form an integrated logistics department under the maintenance division to resolve the problems and improve maintenance productivity. Do you think that Mr Stivan’s proposal will work? Why or why not? Discuss this fully.
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