Question

I really need help answering these 5 questions in a paragraph form for each question please

Soenso’s Furniture Company

THE SITUATION: You’ve recently been hired by a furniture manufacturer in Columbus, Ohio. Your title is “Logistics Manager” and your job, according to the owners, is to help them “…with this ‘logistics’ thing.” The owners, John and Jane Soenso, are industrial designers that met in school due to their love of designing modern furniture. Over the years they built furniture in their garage as a side business, and eventually came to realize they could go into business for themselves. So, they started Soenso’s Furniture Company 10 years ago. At the time is was a small shop and they did custom pieces. As word spread, the business increased. Rapidly. So much so that they transitioned from hand-build furniture to contracting out the manufacturing, any renting their own warehouse for sales, storage and distribution. They hired family and friends to help with the lucrative business. Now the business is growing faster than they can handle. A consultant recommended they hire some outside talent, and start planning to expand beyond Columbus. They hired a Chief Financial Officer, a Sales Manager, an Operations Manager (to coordinate the manufacturing) a Human Resources Manager, to start building a team, and you, the Logistics Manager. “Our consultant said we needed a person to manage our Supply Chain. We know what that is…but we don’t know how to do it.” John tells you in the interview. “Can you do it?” Of course you say yes. He offers you the job. You ask for 24 hours to think about it. You go home and do your research. You find that early Soenso furniture is being bought at auctions for huge sums of money. Some of their pieces are featured in museums, magazines and there was even a few TV news stories. They’ve been routinely called the “Ikea of the Midwest” due to their simple but modern designs. What’s different about their furniture is, it’s just a few individual components, and it’s very simple to manufacture and assemble. You feel like this is a great opportunity. You call John and Jane and accept the job. On your first day Jane tells you “We want to be the next Ikea. We hear they are good at this ‘logistics’ thing and we want to make sure we do it right from the beginning.” John adds “We are planning a store in Indianapolis, one in Chicago and one in Pittsburg in the next year. We’d like to add three more stores per year for the next few years assuming all goes well.” He continues. “We have some questions for you to answer initially. We don’t need detailed specifics or number crunching yet, just some explanation of our options. Jane will email you a list of those questions here in a bit.” “We’re very flexible with our options and furniture designs. Our current store sells assembled furniture, but we’ve been doing a lot of shipping worldwide. We’ve designed most of our more recent furniture to ship disassembled and plan to keep doing that as sales grow.” As the three of you continue to discuss their vision, its apparent Jane and John disagree on a few things. They appear to have gut feelings, but no understanding of Supply Chain Management principals and Inventory Management to back up those opinions with any valid arguments. They disagree on assembling the furniture for the customers in the stores. Jane feels it saves the company money. John is worried about the customer not buying the furniture because they have to do the work. They disagree on how to warehouse their product. John feels a Columbus warehouse is best, Jane thinks a warehouse connected to each store is best. They don’t agree on technology. John feels it’s a waste of money but Jane believes it’s “wonderful.” They can’t seem to agree on how they should ship their product to customers. Jane wants to have a fleet of their own trucks to deliver right to the customer. John wants to “FedEx Everything!” They don’t discuss any other options, but you assume it’s because they don’t know other options exist.

Later in the day you get the promised email from Jane with the following questions:

1. How can we ensure our stores and warehouse(s) have the right amount of inventory?

2. What kind of technology should we invest in to make our facilities more efficient?

3. Should we assemble the furniture to sell in the stores or leave it in the boxes for home assembly? What advantages and disadvantages come from each option?

4. What are our options to deliver furniture to customers?

5. What other areas should we consider to lower our prices?

Answer 1

How can we ensure our stores and warehouse(s) have the right amount of inventory?

We must begin with a forecast. In order to do that, let’s look at the historical figure, try to see if there is any pattern so that we can utilize a specific method of forecast. Then we can apply several method of forecast and determine which will be the best. This can be done quantitatively using metrics such as MAD, MSE, etc. Once we have the demand forecast for each locations we can compare the EOQ method for single distributer (Columbus) or a multi-distributer (warehouse with the store) model and check which one cost the lesser. We should also take into account our inventory cost and backlog costs. Then we can choose the correct option, prepare a lot sizing plan, and identify a reordering point.

What kind of technology should we invest in to make our facilities more efficient?

The best technology for handling inventory in the supply chain system is Enterprise Resource Planning (ERP) system. It can help us streamline the manufacturing to the customer delivery process and keep a track of inventory, shipments, and orders all in one place.

Should we assemble the furniture to sell in the stores or leave it in the boxes for home assembly? What advantages and disadvantages come from each option?

Assembly of the furniture provides a better representation to the customer and may help them make up their mind about the choices. This can reduce reverse logistics such as returns. This is the advantage of assembly. However the disadvantage is that it will be more expensive to ship them and it will definitely take more real estate area to display them. These will be expensive.

Leaving the furniture in the box means that we can easily ship them. In fact we can club multiple shipments in one route and make our logistics more cost effective. This is the advantage. However, there may be challenges if customer wants to return the product because they did not find the product to be as expected. This will increase our cost.

We should look at the historical data and see the risk of each these disadvantages and compare them with the cost benefit of the option.

What are our options to deliver furniture to customers?

We have the option to handle the delivery system ourselves or we can outsource the delivery to another company. Again we need to consider various factors such as cost, quality of service, capital requirement, infrastructure available, etc.

What other areas should we consider to lower our prices?

We should approach the entire supply chain through a point of view of value system. At every step we should attempt to reduce cost and improve quality. Approach such as total quality management or lean system can be applied to reduce waste, improve productivity and thus reduce our overall cost.