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Research on Improving the Supply Chain Management for Special Customer Requirement

Author: YinXianFeng
Tutor: DongZhu
School: Jilin University
Course: Industrial Engineering
Keywords: Operation management Supply Chain Management (SCM) Inventorymanagement product life-cycle (PLC) EOL/EOP (End of life/End of production)
CLC: F274
Type: Master's thesis
Year: 2012
Downloads: 73
Quote: 0
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With margin profit falls in contract manufacturing industry, enterprisers aretrying to find a way out on how to secure the customer order, but at the same time tomake money, maintain the job opportunities for most of the job seekers and mostimportantly, this is the only way to make the business and enterprise a continuous one.As a matter of fact, nowadays, the competitions among enterprises have become thecompetitions of Supply Chain Management strategy applied by them. Supply ChainManagement (brief as SCM) is a key method to optimize and upgrade China’sindustrial structure, and has become a third source of profit increase for enterprises.As we know, natural resource and labor/human resource are the first two sources ofprofit increase. Nevertheless, with today’s science and technology getting more andmore developed, those two sources have been well-known and applied to most of theenterprises, with less space&room to develop further. In addition, contractmanufacturers in China are facing a serious situation that the labor cost has becomehigher and higher. This has proved that Supply Chain Management should be paidmore and more attention by enterprisers to make profit.The concept of SCM origins at early1980’s and has expanded rapidly at late1990’s. Though existing for only30years from its origin to today, the world-classenterprisers, like IBM, HP, Dell have achieved great performance by applying theSupply Chain Management during their practical operation, which greatly impressedresearchers and professionals that SCM would be an effective method for enterprisersto get themselves used to the globally competitive environment in the21stcentury.Therefore researchers and enterprisers spend a lot of time and effort studying andapplying the SCM concept to the practical operation. H company, main study subjectin this thesis, as the world-class contract manufacturer, has also adopted someup-to-dated SCM concept, for example, VMI, JIT, etc. Those SCM concepts, for sure have enabled H company to gain some profit by doing business with some of itsinternational customers, and also brought forward more business opportunities.However, with the development of science and technology as we all know, customerpersonalized requirement is getting higher and higher. Therefore, enterprisers shouldmake changes and innovations to their SCM method all the time to cater to customerchanging requirements, instead of just adopting the existing concepts and ways ofSCM.This study focuses on the problems occurred in H company during the wholeproduct life cycle of development, proto build, EVT, DVT, PVT, mass production, tillproduct EOL, while doing business with P customer and provides solutions to addressthose problems after detailed analysis and research. The problems include: supplychain organization structure not optimized which leads to the low communicationefficiency; P customer controls and manages the purchase agreement for most of thecomponents with suppliers directly which leads to low or even zero profit on thispartial supply chain, as well make it difficult for H company to control supplierquality; rather high inventory which leads to long turn-over time from the productbeing produced to being sold out, thus capital turn-over time too long; high E&Oinventory after EOL of the1stgeneration product. All above-mentioned problemshave led to just one result: with the revenue increase by doing business with Pcustomer, H company makes less and less profit and money, even can not make anymoney. With this dilemma, the writer, with the knowledge of operation management,SCM, and project management, analyzed the root cause is that H company did notmake any innovations to its current SCM strategy for this special P customer-ratherhigh volume, business revenue occupies50%of the whole company’s revenue, aswell very aggressive with the high market share of its product world-wide. Based onthis, the writer make a breakdown of the current supply chain, separate out the partsthat have problems and set up project upon each problematic part for particularresearch and improvement.Pointing to the real problems explored from H’s company’s operation experience,the writer mainly study and improve from the following parts: Organizationalstructure optimization; procurement strategy improvement; inventory control and management; product EOL process definition. With the above-said study andimprovement, H company gained good performance in areas of: KPI data gettingbetter, inventory turn-over days shortened, cash turn-over rate improved. Also withsome invisible and immeasurable performance: better supplier quality management,more flexibility in delivery and shipment, more customer satisfaction. With all theseachievements by optimizing the SCM-related methodologies and business model, Hcompany finally start to make profit by doing business with P customer.To most of the domestic enterprises, we are still a bit behind after the Americanand European countries. We should not just adopt those advance SCM concepts andmethods already existing, but also need to make changes and innovations to be fit forthe specific requirement based on our own situation, the problems we are facing, aswell different customer requirements.

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