Supply chain Management (MAN 6920) Semester 1 – 2017 Individual Assignment Assignment 1: Individual Assignment- 50% Students will prepare and deliver a business report about supply chain and logistics management Note: Within the scope of assessment 1, it is not necessary to explain the theoretical merits of the analytical tools employed in analysis. Rather, the purpose of this assignment is to practically apply these analytical tools in analysing the firm. References should be included to validate the information presented to establish the credibility of your information and subsequent conclusions. At no time should students resort to referencing the material presented within the lecture slides. The assessment will be discussed briefly in Week 1 and in more depth in week 4. You are advised to complete some form of basic research on the firm/industry (i.e. read information available on the web and visit company website). Due Week 12 on 23 May 2017, 20:30pm Write a 3000 word academic report (300- 400 words of which will constitute an Executive Summary) and see the following requirements: Assignment requirements Discuss the key problems that the firm faces and how the firm can improve its operations and supply chain competitive advantage. You need to solve ABC’s supply chain management problems and provide the company with strategies to address the problems as well as the plan to implement your suggested strategies. Analyse the problems of the company using the tools discussed in the class (lecture 1-7) such as supply chain drivers (facilities, inventory, information, and transportations), value chain model, Risk pooling and inventory management, information integration in supply chain, demand forecasting and others. The report should include following key contents: 1. Executive summary 2. Introduction 3. Body a. Problem analysis; b. Your strategies to solve the problems; c. The benefits from the strategies to the company; d. Plan to implement the strategies (time, cost & resource requirements). 4. Conclusion Marking Guide Structure and conventions Total marks Executive Summary - Poorly summarized- does not reflect the overall report. 1. 2. 3. 4. 5. Summarized excellently- Reflects the overall report 5 Introduction- Briefly introduce the company and its problems- Information is not clear 1. 2. 3. 4. 5. Information about the company and the problems are excellently presented 5 Problem Analysis- Analysed poorly in the light of existing theory 1. 2. 3. 4. 5. Analysed Excellently in the light of existing theory 20 Strategies to solve the problems- Little relevance to problems 1. 2. 3. 4. 5. Suggested strategies are highly relevant to problems 20 Benefit/advantages from the strategies- Not adequately presented 1. 2. 3. 4. 5. Benefit/advantages are very nicely presented 10 Strategy Implementation- Time, cost and resource requirements are not properly mentioned 1. 2. 3. 4. 5. Time, cost and resource requirements are properly mentioned 10 Conclusion- Solutions are poorly summarized 1. 2. 3. 4. 5. Solutions are summarized excellently 5 Overall report structure- Poorly structured and incoherent writing 1. 2. 3. 4. 5. Structured Excellently and coherent writing 5 References- Academic references are not adequate and not consistent in style 1. 2. 3. 4. 5. Adequate academic references are used (at least 10) and consistent in style 10 Presentation- Is not clear, precise and confident 1. 2. 3. 4. 5. Very clear, precise and confident 10 Note* - Academic references referring to journal articles. Website references will not be considered academic references. Total worth of the assignment 100 x 50% = 50 Individual assignment Fact Sheet ABC Fertilisers Limited Background & history of the company ABC Fertilisers Limited (ABC) is a major manufacturer and supplier of fertilisers to the agricultural sector. ABC has been operating in Western Australia for more than 80 years and has a long and proud history working with the state's communities. Since this time, ABC has been a leader in fertiliser manufacture in Western Australia and now supplies a range of quality fertilisers to thousands of farmers throughout the State's agricultural regions. Since the early 1920s, much of Western Australia's agricultural growth has been closely linked to the success of ABC in developing, manufacturing and marketing fertilisers suited to local farming conditions. Through both its manufacturing and importing activity, ABC provides a wide range of highly competitive products and services for use in broad acre cropping, livestock, horticulture and dairy operations. In order to maximise the productivity of rural producers, ABC operates one of Australia's most modern soil and plant testing laboratories. ABC also maintains a strong commitment to the use of innovative technology through its satellite image analysis systems and comprehensive soil and plant fertiliser programmes. Locations The Company's head office and fertiliser production complex is situated 40 kilometres out of Perth, in Kwinana Western Australia. Major fertiliser despatch facilities are located at the four major centres in southwest of WA; in Bunbury, Geraldton, Albany and Esperance. Fertilisers are shipped to these facilities and held there for pickup Fertiliser depots and field-based agricultural advisers are located throughout Western Australia's agricultural regions. Organisation Structure The organisation is divided into four parts, each headed by a senior manager reporting to the CEO. Each senior manager has KPIs that reflect the purpose of their part of the business: • Production: Responsible for efficient production of all fertilisers. This includes minimizing total running costs of the plant, managing maintenance schedules, and managing the finished goods warehouses. • Commercial: Responsible for sales and marketing of all products. This includes finding new customers, providing projections of future sales and setting sales targets, managing the dispatch centre and distribution network • Business: Responsible for administration support and financial services in the company. This includes accounting, legal, administration and HR. • Procurement: Responsible for ensuring all raw materials and maintenance parts are delivered to other parts of the business in a timely fashion. This includes managing suppliers, contracts, deliveries and goods inwards storage. It also includes a separate group to manage international purchases. Products The main solid fertiliser made by ABC is based on superphosphate, representing 80% of total production, which aids production of crops: Specific proportions of fertiliser must be added to a crop, so the amount farmers grow is directly connected to the amount of fertiliser that can be sold. While all the company’s fertilisers have superphosphate as the main constituent, they are divided into 30 different products based on the presence of “trace elements” and other additives. These represent only a fraction of 1% by weight of the product but allow it to meet specific cropping needs, for example adding copper or manganese. These trace elements are all imported and added to the product while it is in the finished goods area. As well, farmers may make up their own formula of fertiliser by specifying what additives are to be used. These “custom products” are made to order. ABC has a modern laboratory to assist farmers in making these choices. Solid fertilisers are sold as pellets and can be stored for up to 2 years once produced. They may be sold as bags but more typically they are sold as bulk truck loads. ABC has also manufactured liquid fertilisers since 1999. These are much easier to handle without blockages through farmers’ sprayers and may be stored for 12 months or more without deterioration. They can also be mixed with herbicides by the customer. This represents 20% sales by weight and is growing due to its popularity. Liquid fertilisers are slightly more expensive but are easier to manufacture, and can be readily stored and used by farmers. Once produced this product is shipped by trucks to tanks (owned by ABC) held on customers’ farms, where the farmers use the product as required. Representatives of the company visit the tanks periodically to measure usage, and this forms the basis of charges to the customer. New technology is being trialed that automatically performs these measurements and transmits the results to the company’s stock systems. Raw materials for production The plant requires a total of 350,000 tonnes of raw materials, mainly ammonium nitrate. This is delivered to the plant by sea, and the plant has its own bulk delivery port: Typically, a ship will hold about 25,000 tonnes of product, which is sourced from a single production plant. These plants are situated in several countries. With smaller plants, ABC’s needs represent up to 3 months full output, and therefore it must negotiate to buy major proportions of suppliers’ production capacity. This often requires forward planning of up to 6 months, which with the actual shipping time of 3 months, means that it may take up to 9 months from placing an order to receiving product. Delays are also common due to supplier and transport problems. Ships dock at the plant once a month, and significant warehousing space is required to store it in time for production. A large amount of safety stock is always held to prevent disruption to the production process. Finished Goods After production is completed and the product cured, finished goods will be stored in a large warehouse as a massive stock “heap”. This may be up to 100,000 tonnes in weight and perhaps 30m high. When dispatch is required, it is moved to conveyer belts and from there to the dispatch centre. Being highly seasonal, production may continue through the year and product stockpiled for delivery, which occurs mostly in the 3 months September. Stock left over from the previous season will be in finished goods for almost a year before it is likely to be sold. Dispatch Once sold, customers arrange bulk trucks through their own contractors. These then queue in the main dispatch centre, and are loaded by conveyer belt. The process is fairly automated, with computers weighing the load and matching it with the customer’s order. Alternatively, if fertiliser is to be shipped to distribution centres, trucks are arranged through ABC’s own outsourced transport contract, and product is moved to one of 3 distribution centres. Depending on changing local needs, the centres may have product moved backwards and forwards between them. Sales process ABC has a selling “cycle” peaking in September each year. This has evolved over a long time based on farmers’ practices of planning their fertiliser needs annually. 12 month contracts are generally established between customers and farmers. These are based on farmers’ projected requirements and can provide major discounts. Most farmers take up these contracts, since they represent an “intention” to purchase rather than a “commitment” to purchase. These contracts are then used to assist ABC with production planning. Throughout the year customers draw down from this contract, although they often vary considerably from their original estimates during the course of a year. Of course, fertiliser can purchased ad hoc. An order is taken and pickup date arranged. This represents about 20% of the total of all sales by weight. Pricing, sales and contracts Each and every sale must have a price calculated for it. There are no “retail” prices, and the actual price is a complex formula based on the current production run, time of the month, produced amount purchased and many other factors. This differs from other competitors who quote prices based on weight only. ABC states this is a benefit because prices are not easily understood by competitors, and it also reflects changing costs of production and distribution. Information systems and processes The following diagram shows the main processes of used at ABC. Each group is supported by the company’s information systems. Significant shortcomings have been identified for those process groups in orange. Currently, spreadsheets are used extensively to provide appropriate reporting. Problems perceived by ABC ABC has stated it has the following concerns: • Significant finished goods inventory, sometimes consisting of 100,000 tonnes, which may sometimes sit for 9 months prior to delivery. • Raw materials inventory is very high because of the infrequent delivery and the need to have large safety stock • The production process is disjointed. The plant suffers 2 hours per day breakdowns and is shut down for 8 weeks each year for maintenance and cleaning. The plant was acquired many years ago and is fully paid for. A new pant would be able to operate 24 hours a day on a 5% reduction in running costs, and only require 2 weeks annual shut down. It would also reduce the curing period to 2 weeks. However it would require $40 Million over 9 months to implement. • Production staff complain it is difficult to get realistic demands from the sales staff and therefore production is often mismatched with demand. They claim the forward contracts for farmers are not very useful since they are generally not accurate. • Sales staff complains that product is often not available when customers require it, and this requires rescheduling of pick-ups and unhappy customers. • Customers complain that deliveries are often rescheduled. They also find that not being able to get a straight price is inconvenient but they like the idea of being able to obtain significant discounts without having to commit to purchases on specific dates. • Many managers complain that the whole business revolves around the production process. Production point out that this is because they make the product and without them there would be nothing to sell. • The CEO is concerned with falling market share and attributes this to improving quality from competitors, and a higher cost base for ABC. • The CEO is concerned that his team aren’t working collaboratively. They all seem to be self-centred. • All managers are concerned about the information systems, which are only linked by monthly reports. Spreadsheets are very wide spread and seen as vital to allow each part of the business to function. • Dispatch is unhappy about the new distribution network. Delivery times are long and stock needs to be moved too often. • The current information system is considered obsolete and is not supported by the manufacturer any more. • Hardware and communications infrastructure is out of date