COMPANY SCENARIO:</o:p>
You are the Operations Manager for a $50,000,000 (sales) subsidiary of a $750,000,000 </o:p>
Corporation. You report to the Divisional Vice President. Your division produces industrial </o:p>
products that are used in the construction, maintenance, transportation, and equipment </o:p>
manufacturing industries. The other two divisions in your corporation serve the automotive and </o:p>
electronics industries. A few products are cross-marketed. </o:p>
</o:p>
Your division is currently number three in your market place. The number one firm has about </o:p>
60% of the market, the number two firm has about 25% of the market, and you have about 15% </o:p>
of the market. </o:p>
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</o:p>
Your products are often used in human safety applications, so product quality is paramount. </o:p>
Neither you nor your competitors have a competitive quality advantage, nor a distinct production </o:p>
cost advantage. Being number three in the market place has meant that your division must excel </o:p>
in customer service and delivery reliability. </o:p>
</o:p>
Over 90% of your sales come through manufacturing representatives to regional distributors who </o:p>
hold inventory of your most popular products in limited quantities. To keep your distributors loyal, </o:p>
your company works very hard on customer service. </o:p>
</o:p>
Your division currently has about 4,000 products in your catalog. About 1,200 items are “in-stock” </o:p>
(MTS, Make-to-Stock) items. The remaining 2,800 items are “non-stock” items that can be </o:p>
considered to be Make-To-Order (MTO). The MTO items are not stocked but are manufactured </o:p>
if, and only if, an order for them is received. </o:p>
</o:p>
Your division promises to ship all “in-stock” items within 24 hours of receiving the order. If the </o:p>
order is received by noon, the order is shipped that day. Because most of your orders are small </o:p>
and are delivered to diverse addresses, UPS is the preferred shipping mode. </o:p>
</o:p>
In contrast, your two sister divisions operate on a much longer lead-time and ship in </o:p>
comparatively larger quantities. They tend to operate much more in the MTO mode and do not </o:p>
offer the fast 24-hour shipping responses that your division does. </o:p>
</o:p>
The corporate headquarters are in St. Louis, Missouri, where the company was founded in the </o:p>
1910s. You are located in Cape Girardeau, Missouri, where manufacturing operations were </o:p>
moved in the 1950s to exploit the lower labor costs. The corporate North American Warehouse </o:p>
(NAW) is located in a western suburb of St. Louis to be near the St. Louis airport. Virtually all </o:p>
shipments to customers are made from the NAW. Several years ago, to stay competitive, </o:p>
production operations started to shift from the Cape Girardeau location to a plant in Mexico. The </o:p>
shift to Mexico has been successful overall, but the plant does not always deliver what is needed </o:p>
and is sometimes late in delivering parts to the NAW. </o:p>
</o:p>
The corporation installed SAP several years ago. You have been far too busy to thoroughly </o:p>
investigate all of the details, but everyone in the organization seems to be satisfied at some level </o:p>
with the system. </o:p>
</o:p>
Because you are the STO (Senior Technical Officer) of your division, you also manage the client </o:p>
support group (located near the St. Louis airport) which consults with clients on selecting which </o:p>
products to purchase and offers consulting/project management services for installing your </o:p>
products. Your direct reports include the Plant Manager in Cape Girardeau, the Plant Manager in </o:p>
Mexico, the Divisional Supply Chain Manager, the Manager of Product Quality Control, and the </o:p>
Divisional Customer Support Manager. Your chief peers are the Director of Marketing and the </o:p>
Manager of the Divisional Headquarters staff. Order entry reports to the Director of Marketing. </o:p>
Purchasing, Accounting, Finance, HR, and IT functions are handled at the corporate level. The </o:p>
manager of the NAW formally reports to the VP of the automotive division, but he is tasked to </o:p>
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serve all three divisions equitably. </o:p>
Several months ago, a new CEO took the reigns of your parent company. She is looking to </o:p>
improve profits, and is tasking all three divisions to reduce costs. For your division, she is </o:p>
particularly interested in reducing inventory while maintaining (improving) current customer </o:p>
service levels. She also questions whether having the Customer Support staff centrally located in </o:p>
St. Louis is really the best way (in terms of cost and service) to service your customers. </o:p>
</o:p>
Your boss, the Divisional VP, has asked you to put together an analysis of your division’s </o:p>
operations and to produce a plan to improve operations with an eye to reducing costs. </o:p>
</o:p>
QUESTIONS:</o:p>
It is time for you to finalize your findings for your boss. He is expecting your analysis of your division’s operations and to produce a plan to improve operations with an eye for reducing costs.</o:p>
Your boss wants you to summarize your recommendations in no more than 2–3 pages. Include your thoughts on the list below.</o:p>
- Should production remain in Mexico or be brought back to the United States?</o:p>
- If so, where would you recommend?</o:p>
- Is the quality of production a consideration because of cheaper labor in Mexico?</o:p>
- Couldthe quality of production be managed and monitored better if it was in the United States?</o:p>
- Do transportation costs play a big enough factor to consider moving back to the United States?</o:p>
- Should the product distribution network be changed? For example:</o:p>
- Production in Mexico, central warehouse (NAW) in St. Louis, regional distribution centers in Pennsylvania, Georgia, Texas, Colorado, and California.</o:p>
- Close NAW, ship from Mexico directly to regional distribution centers listed in letter "a" above.</o:p>
- Close NAW, create a new central warehouse in Texas near the Mexico plant, ship to regional distribution centers in letter "a" above (with a distribution center in St. Louis/Chicago region).</o:p>
- Close NAW, create a new central warehouse in Texas near the Mexico plant, ship directly to customers.</o:p>
- Hire a professional distribution company to
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