Johnson Skin Care Supply Chain Management - MyAssignmenthelp.com

Question: Discuss about the Johnson Skin Care Supply Chain Management. Answer: Introduction This report addresses the case study of Johnson skin care. The company has its business cycle dealing with other businesses. Now the company want to improvise and diversify its market and cover the retail sector as well. Researches done on the market gives a green signal to the planned venture, the existing supply chain cost and time of production and procedures are to be reviewed and changed to suit its new venture. The report discusses the probable changes and develops an action plan. Current problems of Johnson skin care Johnson skin care has its business with other businesses. It has been supplying products to the businesses like spa, salons and other such institutions. The sale of its SKUs like the womens foot care, men foot care and body butter contributes the most among the 100 SKUs of the company. Thus the company decided to conduct a market research regarding the probable profit of selling these products in the market the traditional way. The market research regarding entering the traditional market showed that the possible annual sales of WFC, MFC, BB through traditional market is going to generate an annual sale of $15000000, $ 4500000 and $2000000 respectively. Thus the company has decided on appointing a new director of logistic and asked him to develop a plan for the new venture. The transport of the products has been a new expense that is added to the company. The company has 3 staging warehouses in the company. The company distributes to various parts of the country like the North West, south west, and south, mid west and north east. The demand for the products are highest in the north east and the south followed by Midwest, southwest and northwest. The volumes of the products are way too high as a result the truck has 30 per cent of space left when the weight of the truck has reached its optimum level. Optimisation of Operation The optimisation of operation can be achieved through supply chain optimization. The supply chain optimization takes an initiative in minimizing the 3 most important supply chain components that is the manufacturing cost, transportation cost and distribution cost (Papageorgiou, 2009). The aim of the logistic director is to maximise the gross margin return on inventory invested that is to make sure that the cost of inventory is balanced at each of the points to make sure that there is enough availability to the customer. The manufacturing of the company is highly dependent on the sales forecast. The sales forecast of the products are the WFC has a chance of generating a revenue of $15,000,000 selling each of the unit at $ 5.00 so 3000000 units of WFC is going to be sold. The production cost of each of the units of WFC is $ 2.55 making a profit on each unit $ 2.45 and in total a profit of $ 735, 0000 is forecasted. In case of MFC the forecast of the products sold in this category includes sales revenue of $ 4,500,000 by selling each unit at $ 4.50. So the demand for total number of unit that is forecasted is 1000000 units. In that case the forecasted profit is going to be $ 2000000. In case of BB the expected sales revenue is $ 2000,000 by selling each unit at a cost of $ 6.25 thus the units that is forecasted to be sold annually is 320000 and the cost of production of BB is $ 2.8 in each unit thus the total possible profit that the company can make is $ 1104000. There is an optimum level of production that should be done so that maximum profit should be generated in each of the products are WFC should produce 3000000 units, MFC should be 1000000 units and bb should be produced at 320000 units to according to the sales forecast so that each of the units are sold out. This method is used in the classic supply chain management approach. According to this approach the demand is forecasted as accurately as possible and supply is done accordingly. Transportation cost can be regulated by optimum level of loading of the truck and also providing the cheapest means to deliver the product to the customers. The loading of the truck has become an issue in the Johnsons products. The capacity of the truck is 100 cubic metres but the truck is only able to load 70 per cent of its capacity because as soon as 70 per cent of the truck is loaded the weight of the product reaches its upper limit. There is no particular solution to it except some products has more units in lesser volume this can be utilised in case of loading the truck. The MFC, BB and WFC weighs in this order as a result trucks can be loaded with a mix of various volumes of products to generate a balance. The distribution of the products from each of the centre also plays a crucial role in the cost of the product. Table 5 shows the quantity of truck load and its expense to the various parts of the shops and it is also mentioned regarding the expenses of each of the storehouses has to spend in each of the location as a result it can be stated that the storehouse in California should send products to northwest as a priority and rest of the storehouses should only produce back up to California in the northwest zone in case it is needed that too in the order of preference first Kentucky and second new jersey. The south however should be supplied by New Jersey followed by Kentucky and California. Midwest should be supplied by Kentucky followed by New Jersey and California. Southwest should draw its supplies from California followed by Kentucky and New Jersey and finally the northwest should choose supply from California followed by Kentucky and New Jersey. If this order is being followed t here is going to be uniformity in the distribution of the product and thus making the supply chain the most effective. Some common method of reducing time cycle is to perform activities at a parallel time. Changing consecutiveness of actions, interruptions should be minimised, improvisation of timing. Framework for the current cost allocation Cost of buying the manufacturing inputs; such as bottle, Shea butter, Ocean Mist, Fresh Sky, Mountain Air Labour cost, Packing cost Direct Cost Transportation Cost per Truckload Cost of installing hardware and software network for regulation of the whole network Process Cost Technology Cost Allocation of cost in to different categories There are 3 types of cost that is being allocated that is direct cost, process cost and technology cost. The direct costs involve the cost of the products that is the manufacturing costs that is the cost of each of the products and each of its ingredients (Dekker, 2013). The process cost involves the supply chain management costs like the transport, logistics etc. The third is the technological costs which include various software and hardware issues that a company has to deal with. In the case scenario of Johnson skin care the direct cost and the process cost is being mentioned. Recognise pricing point of products (what the market sustain) The pricing point of a product refers to the price of a product with which the product enters in to the market with a view that with the current price the product will be easily able to handle the current competitive situation of the market [as given by the prices of the similar products] and be able to make good sales. However the price of the product may alter with the changing demand condition. However here as the price of the substitute products are not available so we are assuming that the business has decided to enter in to the market with a price that will just cover the manufacturing cost with a 28% mark-up over it [As given by the historical operating profit margin ] Bottle Shea Butter Ocean Mist Scent Fresh Sky Scent Mountain Air Scent Labor cost Packing cost Total cost per unit price point with 28% mark-up over unit cost($) Per unit cost($) 0.6 0.8 0.25 0.2 0.3 0.4 0.5 WFC 0.6 0.8 0.25 0.4 0.5 2.55 3.264 MFC 0.6 0.8 0.2 0.4 0.5 2.5 3.2 BB 0.6 0.8 0.2 0.3 0.4 0.5 2.8 3.584 Here it has been assumed that to produce each units of the product 1 unit of ingredient inputs, 1 unit of labour and 1 unit of packing materials are to be used Vendor rating system (supplier selection) Selection of appropriate vendor or supplier is one of the most prominent functions of the logistics management. In supply chain management the pricing is always considered as the most important factor in deciding the supplier. The lowest bidder is considered as the ideal supplier. In most of the cases the companys focus on the core competencies of the company and the portion that is not possible for them is outsourced by the company. The company has two suppliers one in California and another in New Jersey. The transportation of the from new jersey is most convenient as most of the distribution centres with high demand that is northwest and south DCs are easily accessible from the new jersey centre. The California branches are in advantage only with the southeast and the northwest distribution centres. These two distribution centres has the least demand. Again the New Jersey distribution centre produces MFC and BB and the California is only producing WFC. Thus in all cases it can be considered that the New Jersey suppliers if are able to produce the product WFC than they can be considered as the only supplier of the company. The choosing one supplier is going to reduce various complicacies. There is a single source to whom both of these plants cater to as a result there is no clash but there is possible benefit in making the new jersey plant the single source of supply because this plant has the capacity to provide material to the various distribution centre in lower cost. The various method of vendor rating system includes categorical plan, weighted point plan and cost ratio plan. The categorical plan takes into concern the products type and its supplier but in the case of Johnson similar quality of product is being supplied by both the plants, in this method some weight age is associated with the information that is gathered through the categorical plan and thus an analysis is conducted to select the ideal supplier. The cost ratio analysis considers the cost of the products as the basis of the selection of the ideal supplier of the company. In this process cost ratio is generated and it is compared with each of the suppliers to locate the supplier whose services are most beneficial to the company in terms of cost. Thus the cost ratio technique is considered as the most feasible method in measuring the perfect supplier in modern supply chain management. This method has to be applied in the case of Johnson to decide the supplier who is of more benefit to the company. Inventory control methods to be deployed Inventory control is a key aspect in supply chain management. It can be easily understood that having extra inventory causes extra expense on the part of the company. The inventory carrying cost of the Johnson is approximately 18 per cent based on the average inventory per year. There are 6 established methods of controlling inventory (Melo et al. 2009). Predetermining annual stocking policy: according to this method it is the responsibility of the company to decide the upper and lower limit of inventory that can be stored by a company. Preparation of inventory budget: through this method the company calculates the possible inventory expenditure in the budget of the company and thus the pricing and other such expenses are going to be charged. Enterprise resource planning: according to this method using of enterprise resource planning is done so that a constant track of the inventory can be kept by the company. Inventory turnover ratio: according to this method inventory turnover will be calculated by the company (Tayur et al. 2012). Through this method the company adopts a stock clearing sale of the products that are saved in the inventory. Analysis and classification of inventory: inventory analysis and classification is to be done so that the warehousing of the inventory can be done effectively and thus making room for inventory storage in the most effective way. Optimise purchase pattern: the last method of inventory management is the method of proper production or purchase of inventory so that there is no expenses done on the storage of inventory (Frisk et al. 2010). That is the production or purchase has to be done on the basis of proper forecasting. The optimised purchased pattern has been the policy that should be adopted by Johnson skin care so that there are no expenses that has to be done for the sake of inventory. The inventory storage rate of Johnson skin care is around 18 per cent which is quite high. The company has good forecasting technique and proper forecasting has been done about the possible demand in the market. Thus the production of the products should be regulated accordingly to save expenditure on inventory. Implementation plan for new framework of the distribution system Implementation of plan is done through an action plan. An action plan involves certain steps that should be taken to achieve a specific goal. The actions that are to be taken to reduce the excess expenditure and develop the current improvised scenario are mentioned in the action plan. An action plan has been developed for this current case scenario. Objectives Methods Dealing with high inventory rate Inventory rate is very high for the Johnson skin care. The rate of interest is around 18 per cent. Inventory can be reduced by developing a proper manufacturing pattern following the sales forecast. Improvisation of logistics Logistic can be improvised by developing the logistics from new jersey staging warehouse which has a geographic advantage Maximisation of profit Profit maximisation can be done through developing a sound logistic and purchase plan Developing accuracy in purchasing Purchasing accuracy can be developed by following a optimised purchase pattern. Recommendation regarding the companys policy of offering all its customers for the same service level (three-day fulfilment cycle) The changes that can be introduced by the company are as follows: The company should manufacture according to the forecast The transportation or the logistic can be improved by arranging an improvised logistic plan from making transportations form the new jersey plant which is going to make the transportation least expensive. A three day fulfilment cycle shows the places or aspects of supply chain management that can be improvised to make the entire process that is from the receiving of the order till its delivered to the customer. The order fulfilment cycle that is followed by the company is done every 3 days and thus the cycle is also a 3 day cycle. The 3 day fulfilment is a traditional time period of order fulfilment cycle. This cycle of Johnson skin care depicts the key improvements that are suggested to the company along with the factors that has improvised itself to have a reduced time period. Order receive Manufacturing Transportation Sales forecast Manufacturing Transportation Conclusion In conclusion it can be said that the venture undertaken by the company has possibilities of success. There are certain improvisations that need to be implemented to make sure that the planned profit is realised by the company. Certain recommendations are developed in this report regarding the manufacturing, costing and logistics that are to be followed by the company. It is important for the company to follow the required action plan to earn success in this venture. Reference list Papageorgiou, L.G., 2009. Supply chain optimisation for the process industries: Advances and opportunities.Computers Chemical Engineering,33(12), pp.1931-1938. Dekker, R., Fleischmann, M., Inderfurth, K. and van Wassenhove, L.N. eds., 2013.Reverse logistics: quantitative models for closed-loop supply chains. Springer Science Business Media. Melo, M.T., Nickel, S. and Saldanha-Da-Gama, F., 2009. Facility location and supply chain managementA review.European journal of operational research,196(2), pp.401-412. Tayur, S., Ganeshan, R. and Magazine, M. eds., 2012.Quantitative models for supply chain management(Vol. 17). Springer Science Business Media. Frisk, M., Gthe-Lundgren, M., Jrnsten, K. and Rnnqvist, M., 2010. Cost allocation in collaborative forest transportation.European Journal of Operational Research,205(2), pp.448-458.