INTEGRATING THE SUPPLY CHAIN
Case Study - Friedland Timbers co.
Johann Klassen is the Managing Director of Friedland Timbers co. which makes specialised wood products for the construction industry. He has recently been worried by late deliveries to some important customers. The industry is very competitive, and Johann knows that customers will go to other suppliers if he cannot guarantee deliveries. The marketing manager is particularly upset because he has worked with these customers for a long time, and promised deliveries that were not made. Johann asked the production manager for an explanation. She told him that ‘Our own suppliers were late in delivering certain types of wood. This shortage of a key raw material disrupted our production plans. We cannot be blamed for this. If anyone in the company is to blame, it is the warehouse manager who does not keep enough stocks of raw materials to cover for late deliveries.’
Johann then went to the warehouse manager to see what was happening. ‘There can’t be anything wrong here’, he was told. ‘Stocks have been climbing for the past year, and last month they were at an all time high. In part, this is a deliberate decision, as I want to improve service levels to production. In part, though, stocks seem to have just drifted upwards. Now we have high stocks of most items, but there are still occasional shortages. These high stocks are causing me problems with space, and are stretching my budget. I think that the blame lies in purchasing, who do not order the amounts that we request.’ Johann saw that some stocks were going upwards because purchasing were buying large quantities of some materials. At the same time, they were delaying some purchases, and this produced the shortages. The purchasing manager explained to Johann, ‘Let me remind you that eight months ago you instructed me to reduce materials costs. I am doing this by taking advantage of the discounts given by suppliers for larger orders. Often I order...
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