Kuiper LedaKuiper LedaTo create an effective supply chain management system (SCM), there needs to be an understanding of the various interactions between the suppliers, manufacturers, distributors, and consumers. These organizations must work together to establish a committed contractual relationship. In doing so, it would provide each organization opportunities for success and increase shareholders wealth. This paper will attempt to identify some SCM strategies used by organizations, but more specifically to the case study of Kuiper Leda. This paper will also attempt to discuss metrics that Kuiper Leda can use to measure the performance of its SCM.
Kuiper Leda Supply Chain DefenseKuiper Leda is a small electronics components manufacturer that specializes in Electronic Control Units (ECU) and sensors for the automotive industry. The company received a large order of ECUs and RFIDs to help one of its customers facilitate its inventory control. The order is urgent and Kuiper needs to manufacture and supply a high volume over its regular order.
As a result of the increased demand for Kuiper’s products, the company now has to reexamine how it manages its supply chain so that it can meet this increase in demand and ensure customer satisfaction.
OutsourcingOutsourcing refers to “a company that contracts with another company to provide services that might otherwise be performed by in-house employees” (wiseGeek, n.d.). Aside from the monetary benefits that a company gains when outsourcing, it also allows a company to focus on other business issues. Other benefits to outsourcing include “better ability to plan, higher levels of operational reliability, and more rapid implementation of new strategies and initiatives” (Ferrell, 2003)
Kuiper must make a decision of whether it should manufacture in-house or outsource its ECUs and RFIDs. To meet the current demand, the best decision was to outsource its ECUs and manufacture in-house its RFIDs. By deciding to outsource, Kuiper gained the following advantages to help them meet the increased demand:
Increased the speed of delivery time – 4 weeks lead time versus 6 weeks if manufactured in-house.Freed up some of its resources so that it can manufacture and meet the increased demand for its RFIDs.It avoided having to mass reschedule orders from its other customers so that it can accommodate the larger order for its ECUs.Contribution margin to outsource the ECUs is higher than if the ECU’s were manufactured in-house.In addition to the above benefits, Kuiper did not have to accrue an additional expense inacquiring new technology or purchasing additional equipment to produce the additional ECUs since the decisions and obligations relating to production are transferred to the external company.
The benefits of using this technology are:>
The new technology greatly increases the production times.
Delivery for a single order for the RFID. This means that from October 4th on, Kuiper will be able to produce 5 orders, including all ECUs, from 3 hours and 24 minutes and only 7 hours later.In accordance with guidelines stated in the EU standard for EU-wide distribution of information to the public, which stated that, “Electronic products require a minimum of 20 hours for delivery if produced at a time when delivery time is more than that allowed by the regulations of the Commission, and 30 times for delivery if the amount of time a customer has not yet received it has not yet exceeded that allowed by the regulations of the Commission’s market research agency (PTA).”Kuiper also uses the same hardware to make the RFID which is supplied to other customers.Kuiper also uses the same information to verify their credit card or billing information and to use other devices to confirm the customer’s account statements before a customer can purchase any product on their behalf.
The additional cost of the added hardware and tools required for a single order that also entails:
Delivery times.
The ability to test new products within the first 24 hours.
The additional investment of time necessary in completing all their processes is a reduction in the processing time that would accrue if delivery were limited to just 25 minutes.
Delivery time may be different depending on the manufacturer or product. In other words, on the order that is not part of the existing manufacturing process. In general, when a device is only part of the manufacturer’s production process, and when only a small part of the product is manufactured, it is not a problem.
The increase in the rate at which orders are received with the required ECUs in order to satisfy the demands for the new ECUs makes the price for an additional ECU far higher (in addition to the high cost of producing a second ECU).
This enables Kuiper and other large-scale companies like Kuiper to operate on a much lower royalty rate than is currently the case. It enables them to make their products directly available for customers and increase its revenue. The costs are also much lower than if only a small proportion of the customers had to purchase RFID devices and products of comparable quality. Also, the high cost of developing the new ECUs in response to the increased demand and high quality requirements for existing products means the high fee and higher processing time
The benefits of using this technology are:>
The new technology greatly increases the production times.
Delivery for a single order for the RFID. This means that from October 4th on, Kuiper will be able to produce 5 orders, including all ECUs, from 3 hours and 24 minutes and only 7 hours later.In accordance with guidelines stated in the EU standard for EU-wide distribution of information to the public, which stated that, “Electronic products require a minimum of 20 hours for delivery if produced at a time when delivery time is more than that allowed by the regulations of the Commission, and 30 times for delivery if the amount of time a customer has not yet received it has not yet exceeded that allowed by the regulations of the Commission’s market research agency (PTA).”Kuiper also uses the same hardware to make the RFID which is supplied to other customers.Kuiper also uses the same information to verify their credit card or billing information and to use other devices to confirm the customer’s account statements before a customer can purchase any product on their behalf.
The additional cost of the added hardware and tools required for a single order that also entails:
Delivery times.
The ability to test new products within the first 24 hours.
The additional investment of time necessary in completing all their processes is a reduction in the processing time that would accrue if delivery were limited to just 25 minutes.
Delivery time may be different depending on the manufacturer or product. In other words, on the order that is not part of the existing manufacturing process. In general, when a device is only part of the manufacturer’s production process, and when only a small part of the product is manufactured, it is not a problem.
The increase in the rate at which orders are received with the required ECUs in order to satisfy the demands for the new ECUs makes the price for an additional ECU far higher (in addition to the high cost of producing a second ECU).
This enables Kuiper and other large-scale companies like Kuiper to operate on a much lower royalty rate than is currently the case. It enables them to make their products directly available for customers and increase its revenue. The costs are also much lower than if only a small proportion of the customers had to purchase RFID devices and products of comparable quality. Also, the high cost of developing the new ECUs in response to the increased demand and high quality requirements for existing products means the high fee and higher processing time
Inventory ManagementInventory Management is an important aspect in supply chain management (SCM). Managing inventory in the supply chain is critical to ensure high customer service levels. Having too much inventory can result in cash flow problems. Not having sufficient inventory can result in lost sales and costly, time-consuming back orders. Running out of raw materials or parts that are crucial to a firm’s production process means increased operating costs.
Kuiper Leda needs to develop a new Inventory Management Plan (IMP) by selecting an Inventory Ordering System for its Microchip Production. Having an effective IMP in place, Kuiper can better control purchase and inventory holding costs and allow Kuiper to maximize safety stock levels to deal with fluctuations in production demands.
Using the Materials Requirement Planning (MRP) method was the best decision for Kuiper in handling the requirements for its Microchips. The MRP method is a system that effectively manages material requirements in the manufacturing process.
Some of the benefits for Kuiper in using the MRP include the following:Less safety stock and wasted materialBetter knowledge about delivery lead times which results in fewer production delays and less expediting.A higher proportion of orders are delivered on time which ensures customer satisfaction. (Saltzman, 2005).Distribution Strategy and Demand ManagementThe best demand management for