Supply Change Management
Case: WE ARE THE BESTWe are the Best & Co. is a Company located near to Barcelona.They manufacture and distribute computer screens.Theare producing 5 different models (screen sizes).Sales volume of the different sizes during the last 3 years was as follows:SIZE PERCENTAGE OF ANNUAL SALES105%127%1545%1833%2410%In order to assembly any model, 10 different components are required.Six of these components are common two all models whereas the other four are specific for each size.
Profit and loss results of the last three years as well the forecasted one for 2018 are as follows:MILLION EUROS2016201720182019SALES101213,515PURCHASING COMPONENTS56,67,79TRANSPORTATION COSTS0,50,60,91,2SALARIES22,12,12,2OTHER COSTS0,40,40,50,6GROSS PROFIT2,12,32,32,0The behavior of the available cash has been the following:MIO. EUROS2016201720172018CASH10,80,70,5“We are the Best” is selling the screens in Spain, France and Portugal .Customers are big distribution Companies as well as wholesalers.30% of the total sales are concentrated during the Christmas period.Main customers in 2019 were (under brackets central warehouse)•El Corte Inglés (Madrid): 5 Mio €•Carrefour (Paris): 3,5 Mio €•FNAC (Barcelona) : 3 Mio €•The rest are 9 wholesalers/distributors located in Bilbao (2), Valencia (2), Zaragoza, Sevilla, Oporto (Portugal), Vigo and Bordeaux (France).All these customers bought less than 0,5 Mio € each.
There is also a huge potential customer (between 3 and 4 Mio € sales) located in Lisbon (Portugal). Big marketing and sales efforts have been made trying to catch this customer. “We are the best” has 4 warehouses: Barcelona (located in the factory), Madrid, Sevilla and Zaragoza.Inventory of all manufactured products (sizes) is available in all warehouses.Additionally, they always have safety stock of at least 20 days average sales of all products in the central warehouse.The delivery time agreed withcustomers are 4 labor days.Total time for assembly is 2 days.Factory works from Monday to Friday. Organization is as follows.Owner/Managing Director: Joan Soler Sales and Marketing Manager: Sonia GonzálezManufacturing and Purchasing : Raúl LópezLogistics manager (Transportation and Warehousing): Rafael GonzálezFinancial Manager: Pilar Gómez They have a Board of Directors meeting once a month. Everyone explains improvement and results in their area. Raul and Rafaelare very good friends. They work very closely. They think they shouldn ́t need any sales department because “with only 3 main customers, Mr. Soler could take care of them”. “Why do we need marketing if there are no new customers to discover.?”“We give a good service. There are no stockouts and customers are satisfied with our quality.”Although “We are the best” is the only computer screens manufacturer located in Spain, their market share in the Spanish market is 18%. Their competitors are foreign Companies.During last Board of Directors Sonia proposed she would like to work closely with Raúl and Rafael. She thoughtit would be a good idea to show to customers the assembly process as well the warehousing facilities.
Rafael and Raúl considered customers didn ́t need to visit them. “You are responsible for customers. You take care of them and you deal prices with them. But this is not our business”.By the other side, Pilar is really concerned because their cash needs are increasing and, as the working capital has been growing the last 3years (mainly final products inventories), she has problems to fulfill the financial and cash requirements for running the daily activity. Mr. Soler decided he should need a Managing Director with new ideas. Her older daughter, Marta, recently graduatedat the EU Business School at Barcelona, took this position and joined the Company 2 weeks ago and during his first Board of Directors, he said:“We must build an efficient supply chain organization, to improve our customer service and to increase profits”. Sonia is really excited about this proposal but Raúl and Rafael consider things are running good enough. “The only thing we need to increase profits is to increase sales prices!!!! said Rafael”.Marta Solehas appointed you to provide a report assessing the company situation in the following areas/activities. •Transportation strategy•Warehousing location•Supply range optimization•Manufactured components (possible optimization)•Overall marketing/sales strategy•Internal Organization•Any other strategical/functional issue you considerShe is requesting you to specifically evaluate the strengths and weaknesses of the supply chain,and determine the improvements to be applied. These are the main aspects she wants to have elucidated:1.Critical evaluation of the current marketing/sales strategy. 2.Determine if manufactured components could be optimized, and, in such case, what actions would have to be taken, and what would be the resulting optimization.3.Analyze if the current supply range is optimal, and propose changes and/or improvements.
4.Assess warehousing location and its appropriateness.5.Define pros and cons of the current transportation strategy and elaborate recommendations.6.Is internal organization adapted to the main objective stated by M. Sole: “We must build an efficient supply chain organization, to improve our customer service and to increase profits”. Critically discuss this point.7.Provide a summary of the main actions to be undertaking to achieve M. Sole strategic objective