Johann Klassen is the Managing Director of Friedland Timbers asa. which makes
specialised wood products for the construction industry. He has recently been
worried by late deliveries to some important customers. The industry is very
competitive, and Johann knows that customers will go to other suppliers if he
cannot guarantee deliveries. The marketing manager is particularly upset because
he has worked with these customers for a long time, and promised deliveries that
were not made.
Johann asked the production manager for an explanation. She told him that
‘Our own suppliers were late in delivering certain types of wood. This shortage of a
key raw material disrupted our production plans. We cannot be blamed for this. Ifanyone in the company is to blame, it is the warehouse manager who does not keep
enough stocks of raw materials to cover for late deliveries.’
Johann then went to the warehouse manager to see what was happening. ‘There
can’t be anything wrong here’, he was told. ‘Stocks have been climbing for the past
year, and last month they were at an all time high. In part, this is a deliberate deci-
sion, as I want to improve service levels to production. In part, though, stocks seem
to have just drifted upwards. Now we have high stocks of most items, but there are
still occasional shortages. These high stocks are causing me problems with space,
and are stretching my budget. I think that the blame lies in purchasing, who do not
order the amounts that we request.’
Johann saw that some stocks were drifting upwards because purchasing were
buying large quantities of some materials. At the same time, they were delaying
some purchases, and this produced the shortages. The purchasing manager
explained to Johann, ‘Let me remind you that eight months ago you instructed me
to reduce materials costs. I am doing this by taking advantage of the discounts
given by suppliers for larger orders. Often I order more than requested under the
assumption that we will need the material at some stage, so I get a discount and the
material is already in stock when we need it. Sometimes keeping things in stock
would take too much space or be too expensive, so then I might delay an order until
I can combine it with others to get bigger discounts.’
Johann thought that he was near the source of his problems, and might ask for
the purchasing policies to be reviewed. Then he talked to the transport manager who
was not so sure. ‘It is much more efficient for me to bring larger quantities into the
company’, he said. ‘If you reduce the average order size, the transport costs will rise.
Our budget is already being squeezed, as we have to pay for expensive express deliv-
eries of materials that production classify as urgent. If you lower the order size,
there will be more shortages, more express deliveries and even higher costs.’
Johann talked to some major suppliers to see if they could somehow improve the
flow of materials into the company. Unhappily, while he was talking to one
company, they raised the question of late payments. This was contrary to Fried-
land’s stated policy of immediate payment of invoices, so he asked the accounting
section for an explanation. He was given the unwelcome news that ‘The company’s
inventory and transport costs are so high that we are short of cash. We are delaying
payments to improve our cash flow. As it is, we had to use a bank overdraft to pay
suppliers for last month.’ Later that day Johann found that the late customer deliveries which had started
his investigation, were actually caused by poor sales forecasts by the marketing
department. They had seriously underestimated demand, and planned production
was too low. All the employees at FT were doing their best, but things seemed to be
going wrong.
1. What do you think are the main factors that encourage logistics to change? How is it
responding to these pressures? What changes do you think there will be in the next
decade?
2. When logistics is divided into separate functions, each is likely to have its own objectives.
Is this necessarily a bad thing, or can there be positive benefits?
3. An integrated supply chain is a convenient notion, but it does not reflect real operations.
An organisation is only really concerned with its own customers and suppliers, and does
not have time to consider other organisations further along the chain. Do you think that
this is true?
54 LOGISTICS: AN INTRODUCTION TO SUPPLY CHAIN MANAGEMENT
4. When Christopher19 says that ‘supply chains compete, not companies’ what exactly does
5. Decker and van Goor36 say that integration in the supply chain can be at the level of:
he mean?
● Physical movement
● Shared information
● Integrated control
● Integrated infrastructure
What do they mean by this?
Johann Klassen is the Managing Director of Friedland Timbers asa. which makesspecialised wood products for the construction industry. He has recently beenworried by late deliveries to some important customers. The industry is verycompetitive, and Johann knows that customers will go to other suppliers if hecannot guarantee deliveries. The marketing manager is particularly upset becausehe has worked with these customers for a long time, and promised deliveries thatwere not made. Johann asked the production manager for an explanation. She told him that‘Our own suppliers were late in delivering certain types of wood. This shortage of akey raw material disrupted our production plans. We cannot be blamed for this. Ifanyone in the company is to blame, it is the warehouse manager who does not keepenough stocks of raw materials to cover for late deliveries.’ Johann then went to the warehouse manager to see what was happening. ‘Therecan’t be anything wrong here’, he was told. ‘Stocks have been climbing for the pastyear, and last month they were at an all time high. In part, this is a deliberate deci-sion, as I want to improve service levels to production. In part, though, stocks seemto have just drifted upwards. Now we have high stocks of most items, but there arestill occasional shortages. These high stocks are causing me problems with space,and are stretching my budget. I think that the blame lies in purchasing, who do notorder the amounts that we request.’Johann saw that some stocks were drifting upwards because purchasing werebuying large quantities of some materials. At the same time, they were delayingsome purchases, and this produced the shortages. The purchasing managerexplained to Johann, ‘Let me remind you that eight months ago you instructed meto reduce materials costs. I am doing this by taking advantage of the discountsgiven by suppliers for larger orders. Often I order more than requested under theassumption that we will need the material at some stage, so I get a discount and thematerial is already in stock when we need it. Sometimes keeping things in stockwould take too much space or be too expensive, so then I might delay an order untilI can combine it with others to get bigger discounts.’ Johann thought that he was near the source of his problems, and might ask forthe purchasing policies to be reviewed. Then he talked to the transport manager whowas not so sure. ‘It is much more efficient for me to bring larger quantities into thecompany’, he said. ‘If you reduce the average order size, the transport costs will rise.Our budget is already being squeezed, as we have to pay for expensive express deliv-eries of materials that production classify as urgent. If you lower the order size,there will be more shortages, more express deliveries and even higher costs.’Johann talked to some major suppliers to see if they could somehow improve theflow of materials into the company. Unhappily, while he was talking to onecompany, they raised the question of late payments. This was contrary to Fried-land’s stated policy of immediate payment of invoices, so he asked the accountingsection for an explanation. He was given the unwelcome news that ‘The company’sinventory and transport costs are so high that we are short of cash. We are delayingpayments to improve our cash flow. As it is, we had to use a bank overdraft to paysuppliers for last month.’ Later that day Johann found that the late customer deliveries which had startedhis investigation, were actually caused by poor sales forecasts by the marketingdepartment. They had seriously underestimated demand, and planned productionwas too low. All the employees at FT were doing their best, but things seemed to begoing wrong.1. What do you think are the main factors that encourage logistics to change? How is itresponding to these pressures? What changes do you think there will be in the nextdecade?2. When logistics is divided into separate functions, each is likely to have its own objectives.Is this necessarily a bad thing, or can there be positive benefits? 3. An integrated supply chain is a convenient notion, but it does not reflect real operations.An organisation is only really concerned with its own customers and suppliers, and doesnot have time to consider other organisations further along the chain. Do you think thatนี้เป็นจริงหรือไม่ โลจิสติกส์ 54: แนะนำการบริหารห่วงโซ่อุปทาน4. เมื่อ Christopher19 กล่าวว่า "ห่วงโซ่อุปทานแข่งขัน บริษัทไม่' ว่าอะไร5. เหล็กสองชั้นและรถตู้ Goor36 บอกว่า รวมในโซ่อุปทานสามารถที่ระดับ:เขาหมายถึงการเคลื่อนไหว●●ข้อมูลใช้ร่วมกัน●ควบคุมรวม●รวมโครงสร้างพื้นฐานพวกเขาหมายความว่า ใช้อะไรทำตามนี้
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