In what areas has the company improved the most with regard to the supply chain?

Question

In what areas has the company improved the most with regard to the supply chain? Explain.

Williams Companv Case Company Information Williams Company has made major changes to its supply chain over the last 3-years, all in an effort to improve its supply chain throughput. Improved throughput means cost savings, improved overall operations from materials acquisitions to inventory control, reduced returns and higher customer satisfaction levels Some (not all) of Williams Company Metrics Related to Their Supply Chain Metrics Over the Last Three Years e Planning: o Average Inventory carrying cost 3-years ago $0.58 per product item . Today = $0.41 per product item o Average percentage of obsolete inventory on hand · 3-years ago = 4.8% of total product sales · Today = 2.2% of total product sales Annual production volume 3-years ago=2.19M units Today2.47M units . Source: o Average material acquisition costs · 3-years ago = $2.98 per unit . Today = $2.46 per unit o Average payment period · 3-years ago = 31 days per supplier/partner ·Today = 22 days per supplier/partner Make: o Average number of defects per thousand units - 3-years ago 98 . Today=88 o Average make cycle time · 3-years ago = 21 days Today 23 days o Average capacity utilization (with no new expansion or capital expenditures) · 3-years ago = 92% . Today=83% Deliver: o Average fill rate 3-years ago=78% . Today = 93% o Average return rate per 1000 units sold 3-years ago=5.6% . Today= 4.1% Additional information Williams Annual Sales Today = $23.9M 3-years ago= $18.3M

Explanation / Answer

By looking at the data given, it is quite clear that the company has improved on majority of Supply Chain metrics. However, to comment on what areas - Planning, Source, Make or Deliver - has improved the most, an objective approach has to be taken. For the given case, let us take weighted average of the percentage improvements to determine what area has improved the most.

Please note that a positive improvement would be taken as + and a degradation will be taken as - in our calculation.

Percentage Improvements Calculations:

Planning:

Inventory Carrying cost decreased by = (0.58-0.41)/0.58 = 29.31% (+)

Inventory obsoleteness decreased by = ((0.048*18.3) - (0.022*23.9))/(0.048*18.3) = 40.14% (+)

Production Volume increased by = (2.47-2.19)/2.19 = 12.78% (+)

Therefore, weighted average improvement in Planning = (29.31+40.14+12.78)/3 = 27.41 %

Source

Average material acquisition cost decreased by =(2.98-2.46)/2.98 = 17.44% (+)

Payment period reduced by = (31-22)/31 = 29.03%(+)

Therefore, weighted average improvement in Source = (17.44+29.03)/2 = 23.25%

Make

Defects reduced by = (98-88)/98 = 10.2% (+)

Cycle time increased by = (23-21)/21 = 9.51% (-)

Capacity utilization reduced by = (92-83)/92 = 9.78 percent points (-)

Therefore, weighted average improvement in Make = (10.2-9.51-9.78)/3 = - 3.03% { Negative percent shows degradation rather than improvement in Make}

Deliver

Fill rate improved by = (93-78)/78 = 19.23 percent points(+)

Returns decreased by = (5.6-4.1)/5.6 = 26.78 percent points(+)

Therefore, weighted average improvement in Deliver = (19.23+26.78)/2 = 23.00%

Thus our analysis shows that the company has improved maximum in Planning, which saw an improvement by 27% followed by Source and Deliver. However the Make area of Williams Company has degraded over time and the company needs to focus and improve upon its cycle time & capacity utilization.

Hope the explanation helps. Thanks

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