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H.C. Starck, Inc. current supply chain has a significant lead time and increasing inventory. An initial assessment of the cycle time indicates the constraint in the process is the ordering process to production commencement. Management can reduce lead time by developing an optimal solution to minimize lead time and address associated costs.
Lead times
A significant concern for the management team of H.C. Starck, Inc. is the lead times from customer order to customer receipt. Several factors contribute to the time to complete the ordering cycle. The first contributor to the long lag time is the network design. In the supply chain, network design establishes the physical configuration and infrastructure (Simchi-Levi, Kaminsky, Simchi-Levi, 2018). Elements of the network design H.C. Starck, Inc. is having issues with its annual demand for each product by customer location, order processing, and customer service requirements and goals.
Annual demand. H.C. Starck, Inc. does not have an effective and efficient method of predicting customer demand for its products. In a study, van Donk and van Doorne (2016) had indications that predicting customer demand by location is an integral part of the supply chain. Improving its predictions will help the organization reduce its lead times.
Order processing costs. Another part of the network causing H.C. Starck issues is the order processing. The time from receiving the order to start of production is nearly 50 percent of the cycle. This problem is increasing the cost of the process and lead time resulting in dissatisfied customers (Gholami-Qakidolaei, Mirzazadeh, & Tavakkoli-Moghaddam, 2015).
Customer service. The final issue within the organization is not establishing customer service requirements. H.C. Starck Inc. does not collect data on its customers. This information causes the company not to develop any metrics for customer service. By ignoring this part of the process, management is causing H.C. Starck Inc. to fail.
Reduce or affect lead times
Strategies to reduce or affect lead times for H.C. Starck Inc. can improve the business operations of the company. One approach is developing a safety stock inventory. This strategy will help the company reduce the time of production (Simchi-Levi et al., 2008). Another target element of its supply chain to affect lead times is the ordering process. One method to accomplish this goal is material requirement planning (MRP). This strategy aligns the ordering process with production and distribution channels. A benefit of this strategy is reducing lead time in the ordering process (Hung, Huang, & Yeh, 2013). Integrating these two recommendations is the optimal solution for the organization. This strategy could help reduce inventory, which is a concern for some management; while reducing the ordering process (Simchi-Levi et al., 2008).
Lead time reduction
Strategically reducing the lead times for H.C. Starck will cause the company to incur associated costs. One cost is increasing inventory in the supply chain. The increase in stock will require more warehousing and distribution centers. These entities have the following costs: handling, fixed, and storage (Simchi-Levi et al., 2008). If the company establish the optimal solution, these costs will be minimal to helping the company reduce lead time. In the study, Diabat, Deghani, and Jabbarzadeh had implications that placing more inventory in the supply to reduce lead time led to cost savings. The research also indicates the company met customer demand.
Another associated cost is improving the order processing system to reduce lead time. The new intranet system can help the company improve its inventory, shipping, and product tracking. For H.C. Starck, the improvement in the system will help the company meet its objectives. Prokopovi and Prokopovic and Jelic (2016) had implications in a study that integrating information technologies into logistics process can help an organization improve its operations.
References
Diabat, A., Dehghani, E., & Jabbarzadeh, A. (2017, April). Incorporating location and inventory decisions into a supply chain design problem with uncertain demands and lead times. Journal of Manufacturing Systems, 43, 139 – 149.
Gholami-Qadikolaei, A., Mirzazdeh, A., & Tavakkoli-Moghaddam, R. (2015, April). Lead time and ordering cost reductions in budget and storage space restricted probabilistic inventory models with imperfect items. Rairo – Operations Research, 49(2), 215 – 242.
Hung, Y-F., Huang, C-C., & Yeh, Y. (2013, February). Real-time capacity requirement planning for make-to-order manufacturing with variable time-window orders. Computers & Industrial Engineering, 64(2), 641 – 652.
Prokopovic, K., Prokopivic, T. & Jelic, M. (2016). Information technologies in integrated logistics. Ekonomka, 62(1), 175 – 186.
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and managing the supply chain: Concepts, strategies and case studies (3rd ed.). New York, NY: Richard D. Irwin, Inc.
van Donk, D. P., & van Doorne, R. (2016). The impact of the customer order decoupling point on type and level of supply chain integration. International Journal of Production Research, 54(9), 2572 – 2584.
