Supply Chain Management Capstone Course ODPG - Mini Case: Making Sense of Inventory

Brenda Kim threw her hands up in the air and said "they lost another one"! She quickly typed a message to Michael Makinda on her iphone: "Mike, lost stock again in Oshawa DC...customer upset and Barry screaming...heads up"! This was going to be a long day and it was only Monday...Barry Silverberg, was the Director of Sales and he was going to lose it if another customer order could not be filled. She knew he would be calling her directly, even though he should be speaking to Mike or even Carver. Brenda Kim was the Logistics Supervisor for the facility in Winnipeg, Manitoba. Her job was to oversee the distribution centre which included both inventory and dispatching shipments to clients. She reported directly to Michael Makinda, the Director of Supply Chain Management. Although each Distribution Centre was important, Winnipeg informally acted as a hub for all other centres. The Distribution Centre in Calgary was primarily for the oil and gas sector; therefore their product lines were standard for the most part. They dealt mostly in what was called replenishment parts and were provided manufactured products directly from their Lloydminster manufacturing plant. Any overflow of parts seemed to end up in Winnipeg. The Distribution Centre in Oshawa, Ontario supports the automotive and industrial market primarily and received product direct from their manufacturing plant in Sarnia, Ontario. Unlike the Calgary Distribution Centre, the Oshawa Distribution Centre dealt with all three product lines, including Customs, Replenishment and General Inventory. The Winnipeg Distribution Centre, dealt with all product lines and supported the out of country distribution centres in Mexico, Trinidad and Brazil. However, anytime there was a problem, things trickled back to head office and Brenda found herself in the middle of issues despite it stemming from the Winnipeg Distribution Centre or not. Brenda was new to the role. Having graduated with her SCMP, she was able to a term position and was then hired on permanently by Michael Makinda in March of 2017. At the time, being quite new she was anxious to get involved to help wherever she could. Unfortunately, that ended up meaning she would assist others with any issues they had, which for her was usually inventory problem or upset clients. It was not uncommon for the other facilities to contact her by text to either complain or place orders. She often wondered why no one used the integrated platform they used which they all had access to? Brenda recalled her meeting with ODPG's latest whiz kid, Carver Parks. Maybe he could help make some changes that would create less chaos in the future.

Transcript of Zoom Meeting with Carver Parks, Michael Makinda & Brenda Kim (April 2020):

Carver: Hi everyone thanks for accepting this meeting. We are certainly living in a new reality now, aren't we? Michael: You can say that again! Have you driven outside lately; it's like a ghost town - Brenda: Hey guys, sorry I might have to leave and come back. Ronan is down, but when he gets up...let's just say he need "mom's attention"! Carver: No problem, I have to tell you Brenda, I miss those days! Enjoy while you can - when they get older the only attention you get is when you open your wallet! Michael: Ha ha, Ok Carver how can we help you? Carver: Thanks Everyone. Look you have probably heard about our poor performance in 2019 right? Michael: Yes, I was speaking to Barry about it, and he filled me in. I gave Brenda and update as well. Carver: Great, then why don't we get started? Basically, I just want an exploratory session and find out some of the macro issues from your perspective, ok? Brenda: Sounds good, where should we start? Carver: Well, why don't you give me a list of the some of the issues that impact your day to day to reach your objectives? Brenda: Ok, sure. I think for me, my biggest issue is the hectic nature that everyone is communicating with each other. I mean, if we didn't have our phones, I'm not sure how we would talk as everything seems to be on text messages and it's always urgent so it feels like we keep jumping from issue to issue. I mean if Barry texts me, I must drop everything we are doing because a customer is upset, right? Michael: Carver, just to give you some background here, we actually do have a system which integrates everything, but it doesn't seem to be used to its full extent. Carver: Thanks Mike. Ok, when you say integrates everything what do you mean? Michael: Well, unlike most of our systems, the inventory system ties all the DC's together including the out of country ones. Believe it or not, we could tap into Sao Paulo's inventory right now for Custom, Replenishment or General. Carver: Sure Mike, I did hear that. But is it accurate? Michael: It's accurate but not updated; I think that is the problem. You know right now, we have at least 12 - 15 days of backlog of getting inventory on the shelves, right? That seems to be consistent with all DC's so usually what happens is at the end of every month we pay OT to get the stock off the floor. So usually at the beginning of each month we are caught up, but then as the month goes on, we fall back again. Bren, is that accurate?

Brenda: Yep, but I think it's more than that as well. We don't know when we are supposed to get inventory or how much, it just "appears" so we never have time to react. I mean there is a schedule, but it does not seem to be correct, so only when Kristin comes down from planning and changes our white board do, we really know what to expect. Then there are the customer shipments. I can't tell you how many times we are ready to ship something out, because Barry is screaming, and we are stalled because the shipping information is missing or incorrect. Sales and planning never care about shipping information, it's like they think it will magically appear on the Job Pocket. International shipping is a nightmare, no one truly understands it. But if the customer gets a late shipment, everyone hit's the roof. The other issue is... Carver: Ok, thanks Brenda. Let's try to take these one at time. Michael what do you think of what Brenda is describing? Michael: I hear it Carver, every day from Bren. We do well at cross checking specs for the product, so our quality control is good there, but related to information it's the last thing anyone thinks about, especially related to Logistics. In fact, that is why we purchased the inventory platform to begin with, in hopes that we could have some improvement. We are so customer focused, which of course I understand, but the integrity of inventory is always compromised. Carver: Thanks team. Ok do you think the other DC's are similar to what you are experiencing? Brenda: Not really, Carver. You see Calgary is basically supporting the oil and gas sector and they deal primarily with the Lloydminster plant. Many times, we don't even get involved in their orders or even pay attention to those. To be honest, the most time we hear from Calgary is when there is a part issue in Lloydminster and purchasing needs something ASAP. Oshawa is similar with anything automotive, so they deal directly with Sarnia. However, outside of automotive, they are a mess. Sorry, not trying to criticize, just being honest. Michael: No worries, Bren, you need to be honest here. Everyone has the same goal, and you are the ground floor so we appreciate your insight. Carver: Mike, I thought Suhani had each plant report profit? How does the DC manage this? Michael: Yeah, that is how it's supposed to happen. Each plant sells to another. In theory we all support each other and then the customer. For example, if we have a large custom order for an agriculture customer in Winnipeg, they place an order with the Barry's team. He puts it in the system and then planning decides what manufacturing plant will produce it and what DC will eventually get it or if goes direct to the client. Let's say it's produced in Sarnia, ok? They sell it to us and then in turn we sell it to the customer. Makes sense right, but with this model it means that the manufacturing plants always makes money because they internally sell to either the customer or to us directly. The DC's sometimes get to sell high margin product but we hold on to a crap load of inventory. There's no accountability with manufacturing Carver, if they over produce, they end up selling it to us so they always look good and we look bad.

Carver: Would Barry agree Mike? Michael: Barry's biggest issue is the customer. He's said that in today's world the loyalty is gone and it's all about price, delivery and value added. The pressure he has from offshore competitors is intense. You can get injection mold products cheaper and quicker than we can do here from either China or India? Tell me how that makes sense? Everyone holds inventory now, that is an expectation of a customer not value added so he constantly must throw that in as a freebie and the client doesn't pay. Barry feels we need to really redefine our value proposition to the customer if we want to grow the business. Carver: For sure, and I think Barry makes some good points. But when I speak to him, he tells me there are some issues related to just getting general information? Brenda: That's true Carver. Our system provides data, but we don't interpret it well. Can you let me share my screen so I can show you this? Carver: Sure Bren, what are you showing us? Brenda: This is a data dump basically pulling information from our 3 DCs in Canada. This only represents a fraction of inventory, but it's for a few product lines. I understand it, but if I give a report to Barry, do you think he would? Michael: Carver, to try and help this problem we created a few trend graphs. We sent them to Barry but have not heard back. Brenda: I think Barry is to upset with getting things out the door to worry about graphs, Mike. Michael: Sure, I understand that Bren, he's the face of the customer, right? Carver: It's strange when I speak to production, they don't seem to feel there is a lead-time issue, and do you think there is? Michael: Carver, the issue is we get dumped on. Stock is coming in and out all the time, that's why our WIP area is filled with inventory to be shelved. You know, WIP is supposed to be product ready to go out the door. However, because we get so much inventory in, we cram it into the WIP area and then the product going on the door sits all over the place. Usually, we can't ship it because we don't have the information. Carver: Ok, lots to think about here. Let me get back to you on next steps.

a) Identification of a main Issue b) What are the key specific Issues identified c) What does the spreadsheet analysis identify to you? That is stock out problem in Winnipeg warehouse, Excess number of inventory on hand in Winnipeg warehouse. d) What are the impacts of above issues - Impact on company strategy - Impact on internal customers - Impact on external customers e) What options do you have to solve the issues f) Do the options align with the strategy of the company g) Implementation h) ROI (Return on Investment) How to solve all this issues impact on increase the Return on Investment.