Answer

Introduction

            Issues in inventory and supply chain management are frequently experienced in most companies. Unfortunately, these common problems are the main reasons why companies cannot perform as desired. A company may get involved in the right marketing strategies, but as long as there are problems with inventory and supply chains, their productivity will always be low. This is the same problem being experienced by ORUN. It has issues in inventory and supply chain management, which is why there is a need to introduce effective changes in its system. This paper features an identification of the inventory and supply chain problems, suggestions on how goals can be achieved, and also how progress of the issues being solved can be measured.

Inventory and Supply Chain management Problems

            Attempting to reduce inventory and the associated costs usually results in unique advantages and disadvantages. This is why the goal of achieving an optimal inventory level is critical, and requires strict attention and daily action to ensure there is maintenance of the achieved advantages (Diabat & Theodorou, 2015). Supply chains. On the other hand, are increasingly becoming more complex. This is because they feature multiple channels that need to be used together so as to ensure an accurate method of assessing inventories is present. For instance, when a customer makes a purchase through a Smartphone, the data is conveyed back to the physical store front. This is why it is important for each section of the supply chain to be actively included in the larger system. Therefore, to improve the strategies for handling orders and hence reduce waste, a business should have an accurate assessment of the location of all its products, and in what quantities (Fu, Ionescu, Aghezzaf & De Keyser, 2016).

Unfortunately for this ORUN Company, the inventory and supply chain seems to be challenged by various problems. The first problem is due to the lack of communication between various departments of the company (Fu, Ionescu, Aghezzaf & De Keyser, 2016). The headquarters staff reporting is confusing and each remote site develops its own metrics. As a result of this, it is impossible for the company to maintain balanced inventories and meet customer demands. This company cannot integrate multiple resource centers as it does not have a centralized warehouse management system (Diabat & Theodorou, 2015). The fact that each plant features its own procedure for manufacturing, supply chain management, marketing and financial reporting makes it impossible for the company to obtain a summary of this information relating to the whole company (Diabat & Theodorou, 2015). For instance, the varying procedures for financial reporting make it difficult to forecast sales, or even create achievable goals. Furthermore, the fact that there is no agreement within the company on what products and long term contracts are profitable shows that there is indeed a problem that needs to be addressed immediately.

Another problem exists as the company has no way of measuring customer service or even inventory turns. This is impossible as each plant has its own way of doing things. The value contribution of individual vendors is another factor that cannot be determined. A poor reporting system is to blame, as employees are even confused as to what role they play, and where to report in case of anything (Abdul Rahim & Aghezzaf, 2015). There is no way the company will be able to assess its customer service especially since it has no idea which products the customers need (Diabat & Theodorou, 2015). It is quite possible that the increased inventory is due to the fact that the company is stocking on the wrong products, hence consumers are not purchasing as they cannot find products that satisfy their needs.

Lastly, the inventory and supply chain problems can be linked to an outdated inventory planning. The inventory should feature proactive planning so as to ensure the current customer needs are met (Fu, Ionescu, Aghezzaf & De Keyser, 2016). Today, there is a fast paced marketplace whereby customer demands are constantly changing. The inventory of ORUN, however, is not planned appropriately, and thus does not support present customer demands.

These are the major inventory and supply chain problems related to this. These are as a result of various shortcomings present in the system, such as poor communication and unclear hierarchy for reporting.

How to Address the Five Goals

Allow ORUN to minimize costly inventory

To do so, the whole business process must be analyzed. The availability of excess inventory is an indication of an expensive business process, as well as systems problems (Fu, Ionescu, Aghezzaf & De Keyser, 2016). These may include factors such as poor forecasting, inadequate specification of order and product, an ineffective scheduling of production, poor product quality, bottlenecks, extremely long product cycles, product and process problems, as well as the use of inappropriate performance metrics.

            The introduction of a long lead time will fix most of these problems accurately. However, long lead times need accurate and stable forecasts. This can be quite challenging as it is difficult to obtain, and long term forecasts can be inaccurate (Chang, Chang & Chang, 2013). Therefore, the management needs to ensure that it devises a way of coming up with accurate forecasts so as to prevent the occurrence of excess or shortage of products (Diabat & Theodorou, 2015). Also, the presence of unsold inventory soon leads to the accumulation of expensive piles. Expensive expediting is supposed to be used to produce goods that are in high demand, but the supply is short.

            What ORUN needs is a re-engineering of the order-to-delivery cycle. This cycle should be adjusted in such a way that it takes a shorter time. As a result, products will spend lesser time in inventory, thus leading to a better inventory (Fu, Ionescu, Aghezzaf & De Keyser, 2016). The manufacturing system of this company should also be changed such that the production process becomes flexible. This will ensure that more products can be produced when needed, but when there is no demand; the production is reduced.

Improve the overall supply chain management within the company

             To improve the overall supply chain management, a clear understanding of ORUN’s current supply chain system, among many other internal processes must be achieved. It is critical for there to be communication, collaboration, and also the availability of constant feedback (Fu, Ionescu, Aghezzaf & De Keyser, 2016). The integration of supply chain business process will need the collaboration of buyers and suppliers, joint product development, common systems, and the free flow of information. The operation of an integrated supply chain requires the continuous flow of information. However, improving product flow cannot happen unless a process approach is implemented (Chang, Chang & Chang, 2013).

            Therefore, to improve on the company’s overall supply chain, all plants have to share goals in such a way that the manager of one plant will know of the goals of the other plant (Abdul Rahim & Aghezzaf, 2015). Furthermore, collaboration between plants is required. Since they are working towards the same goals, members from various plants should freely work together so as to achieve them. Since supply chains can be complex, ORUN should appoint individuals to make up a cross functional team whose work will be to identify process objectives and performance measures (Diabat & Theodorou, 2015).

Ensure demand requirements are met, avoiding stock outs and reducing overall costs

            A major problem that most companies have with their inventory is balancing it. By keeping few products in stock, the company may face production problems; on the contrary, too much products in inventory leads to the unnecessary use of money and other resources (Abdul Rahim & Aghezzaf, 2015). A company may suffer due to cancelled orders, and the inability to produce goods on time may ruin company reputation. A stock-out occurs when, in the distribution center, orders cannot be fulfilled within the given due date (Fu, Ionescu, Aghezzaf & De Keyser, 2016). This happens because the needed product is not readily available in inventory due to stocking too little. ORUN, therefore, should keep safety stocks which will account for uncertainties and unforeseen future events (Abdul Rahim & Aghezzaf, 2015). This will ensure that the supply chain is flexible.

            Hence, the company needs to find the right balance by taking necessary steps such as; finding the economic order quantity. By finding this amount, ORUN will be able to identify the maximum amount of inventory to keep, which will not lead to excessive extra costs (Abdul Rahim & Aghezzaf, 2015). Another option is to make use of the fixed re-order stock level. This involves the identification of the minimum stock that the company can have in inventory without risking quality customer service (Diabat & Theodorou, 2015). Only when stocks reduce to this level will the company re-order again.

Standardize business practices among plants with a given supplier

            To achieve this goal, ORUN first needs to create a universal supplier management system for all its plants. This should replace the present way which features letting plant purchasing managers to make supplier decisions for themselves. Therefore, there should be changing roles for the purchasing manager; they should be responsible for the purchase and approval of goods and services required by ORUN. They should supervise the process of purchase and ensure the company has all required raw materials (Chang, Chang & Chang, 2013). Therefore, each plant will feature a purchasing manager whose roles and responsibility reflect those of the others in the different plants. Therefore, they will all have a uniform goal, which will be to plan, execute, and oversee purchasing strategies which are required to support the profitability of ORUN (Diabat & Theodorou, 2015).

            Second, all the plants of the company should have universal suppliers. The supplier of a specific product should be responsible for supplying all the other plants. This is important as it will take care of the largely distributed costs (Fu, Ionescu, Aghezzaf & De Keyser, 2016). ORUN will only have to deal with a single company for a specific product or raw material. It is also easier to deal with a universal supplier, compared to having different suppliers, in terms of records, making payments, product quality and so on.

Increase supplier efficiency with real time information on firm/planned orders and forecasts.

            ORUN should introduce the use of bar codes so as to keep track of the stocks through the use of software and Radio Frequency identification. This is important as it will also address the communication gap experienced between headquarters and the plants. Such an automated system will be beneficial as inventory can be tracked across various warehouses from one facility (Diabat & Theodorou, 2015). Therefore, daily operations will be made easier since information will be easily retrieved at a rather fast rate.

             As a result of this real time information, a company can make informed decisions on which products need to be purchased and stored in the inventory and also on which warehouse to send them to (Chang, Chang & Chang, 2013). Therefore, in case of any changes in buying patterns, ORUN will be better placed to react to it as information will be available everywhere.

How to identify and Use Measures of Effectiveness to Assess Progress in Resolving these Issues

            To assess progress in resolving the above issues, an appropriate metrics must first be identified. Just as the goals and objectives of a company evolve with time, so should the set of performance metrics commonly used by management to track progress towards set goals. If a metric is well designed and constantly analyzed to identify its relevance, they can be really useful tools used by management to turn strategic planning into action (Diabat & Theodorou, 2015). These can also guide companywide decision making so as to ensure then set goals are achievable. The best metrics that a company can develop is the one which has been created to specifically meet the long term goals of the company. Generally, performance metrics, such as operating profit percentage are important and useful to most companies, but no combination forms a “one-size-fits-all” measurement (General Electric (GE) Capital, 2015). This is because companies come from various industries and operating environments.

The most effective and appropriate metrics can be identified by their application. Good metrics refer to performance metrics that are included in all buy-in levels in an organization and are not limited to the management but extend from all the activities that require measurement. Performance metrics introduce honesty in all strategic planning that the company is involved in (General Electric (GE) Capital, 2015). The metrics should be able to evolve with the changing goals of an organization that are always dynamic and highly competitive. They have to be well designed and relevant. For example, the case of Rewired Supply Chain that is a manufacturing concern that deals in inventories that have high turnover ratios due to the high demand that has resulted from the revolution in telecommunication and automobile industry hence the information on inventory and sales metrics have to be tracked accurately and in detail concerning the frequency of particular orders and specification of the products that have the highest sales, the retailers in the market and the distributors. Specification metrics may include the exact sizes of finished products, the weight and the quantities per production batch. The success of performance metrics can be achieved if performance is related to compensation and specific activities that can be possibly quantified, controlled, tracked and improved once the feedback has been received.

To calculate the productivity metrics for Rewired Supply Chain the total sales should be adjusted for inflation and other factors that may influence price changes externally and the prior ratios calculated to provide the information whether the organization has experienced a percentage improvement or its performance is declining. The formula is {CY Sales @ $ PY/CY Costs & PY$)} /{(PY Sales)/ (PY Costs)}.

            Therefore, if after making payments to employees, the company notices increasing profits, the progress of solving issues will be considered effective. This is because an improving performance basically means that the issues are being resolved, which is creating room for more productivity.

Conclusion

            ORUN is suffering from problems that have resulted from ineffective internal processes that are critical for the success of any organization. For instance, it lacks good communication and effective reporting networks, the plants operate as if they were individual companies, and some professionals are expected to handle roles and responsibilities that they are not qualified for. To achieve all the set goals, this company needs to improve on these factors and find a new way of operating so as to reduce the misuse of money on inventory.