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Supply Network Management: Assignment 3 (20 points)

MATERIALS MANAGEMENT: TRADING COMPANY
Objective

To figure out how big is the saving potential of companys inbound process and inventory management. What kind of activities and strategies
should be used achieving this saving potential?

Starting point:

The idea of this demo material is to give a description about the business and its profitability when all costs of the inbound process and inventory are taken into account and directed to material management
operations. By going through and analyzing the given data, it is possible
to point out what kind of activities should be executed for improving
and developing the demand-supply chain from the companys profitability point of view.

Material:

Demo company operates in the manufacturing industry, but it has

trading business as well. The data is taken from trading business unit,
Kitchen Trading. Concerned business unit (Kitchen Trading) is a part of
the Industrial Partners Sweden group. Kitchen Trading is an independent accountable unit. Sales of Kitchen Trading is 10,1 M and the total
costs of the Inbound process 152,2 k.

Description of the company:

Kitchen Trading operates in Sweden, in the industry area called rebro.
Kitchen Trading unit supports the business of Industrial Partners Sweden by providing trading operations to the group. Kitchen Tradings task
is to supplement the assortment of Industrial Partners Sweden. Customers use Kitchen Tradings products in households and institutional
kitchens for baking and cooking. An assortment contains e.g. different
kinds of cake tins. The products are finished products ready in their sale
packages and the products are delivered by using traditional import and
wholesale principles.
The customers of Kitchen Trading are both national grocery chains and
institutional kitchens. Purchasing orders are executed based on reorder
points. Detailed demand forecasts from customers are difficult to get so

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the demand is forecasted in co-operation with the sales department.

Customers require that the products must be delivered in 24-48 hours.
The suppliers of Kitchen Trading are mainly located in EU-area (Finland,
Germany, UK). Term of delivery in purchasing is mainly DAP (Delivered
at Place / Incoterms 2010). The warehouse of Kitchen Trading is in the
same building as the raw material warehouse of Kitchen Supplies.
Assignment

Analyze the companys Inbound process by using SCM Best Practice

application. During the analysis answer to following questions.
1. Costs of the inbound process and inventory have been entered to
the system. Study the cost structures of inbound process and inventory. (1 point)
Total cost of inbound process?
Total cost of inventory and warehouse space?
Combined costs of above factors? (the current situation
before your analysis)
2. Study ABC / XYZ and ABXY -categories. What kind of decisions and
conclusions can you do about current inventory levels and optimum
inventory levels? (2 points)
3. How big are active stock and passive stock? Why passive stock is
more relevant than active stock? (1 point)
4. How many products (%) have overstock, understock or accepted
stock? (1 point)
5. What is the capital cost of overstock? (1 point)
6. Define five products whose service level is the weakest (understock
items) and propose the needed actions for the development (3
points)
7. Define five products whose overstock is the highest and propose the
needed actions for the development (3 points)
8. Why is it so important that the products must be analyzed within
two dimensions? By spent money (ABC) and by transaction times
(XYZ). (2 points)
9. What kind of products (from purchasing point of view) are categories abxy, abZzz, cdxy, cdZzz and Ezz0? What kind of purchasing
strategies would you recommend (2 points)
10. How big the saving potential is in inbound -process (process costs
and inventory costs)? How this saving potential can be executed in
practice? (4 points)

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Write a report about your findings. Include all your answers into final report. The layout of your report has to follow the project reporting instructions of JAMK University of Applied Sciences. The link
to JAMK reporting instructions is available in your Optima workspace. If the reporting instructions are not followed, 20 % of points
will be reduced.
The return date for this assignment is 13.12.2015.

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