SCGrev0 - The Supply Chain Business Game “Distribution...

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Unformatted text preview: The Supply Chain Business Game “Distribution Game” For Power-line Engines plc Management Team Handbook www.supplychaingame.com University of Greenwich November 2005 Version 0.1 Revision 0 Page 1 Power-Line Engines plc Table of Contents Management Team Handbook...................................................................................1 Table of Contents........................................................................................................2 Introduction..................................................................................................................3 Main business units: ....................................................................................................4 Products ........................................................................................................................5 Raw Materials...............................................................................................................6 Availability ................................................................................................................6 General Rules: .............................................................................................................7 Game Length Types...................................................................................................7 Staff deployment.........................................................................................................7 Power-line Management Team ..................................................................................7 Example Procedures...................................................................................................8 External staff ...............................................................................................................9 Alpha & Bravo...........................................................................................................9 Customer ....................................................................................................................9 Supply Chain Management Consultants....................................................................9 Game play...................................................................................................................10 During Play ..............................................................................................................10 After play .................................................................................................................10 Power-Line Management..........................................................................................11 Suggested prices for customers:...............................................................................11 Average order per turn over the last 12 months:......................................................11 Management operations:..........................................................................................11 Fulfilment ...................................................................................................................12 Fulfilment operations:..............................................................................................12 Production Planning & Factory operations ...........................................................13 Production Planning:................................................................................................13 Factory operations:...................................................................................................13 RDC: Regional Distribution Centre .........................................................................14 RDC operations:.......................................................................................................14 LDC: Local Distribution Centre ...............................................................................15 LDC operations:.......................................................................................................15 Alpha Ltd: 3PL Company (Air/Sea) ........................................................................16 Alpha operations: .....................................................................................................16 Bravo Ltd: 3PL Company (Rail/Road) ....................................................................17 Bravo operations: .....................................................................................................17 Page 2 Power-Line Engines plc Introduction Power-line Engines plc You and your team have taken over a business which manufactures engines for a number of international brands. Your new management team are taking over the reigns from the previous management who have all been given generous redundancy packages and have all gone abroad to retire and live in the sun. The core of the business is a production facility with a couple of distribution centres. When you looked at the operation before the takeover, it looked very simple, so although the new management team lacks a little experience, you are confident that everything will work out. You are excited about the new possibilities that this market represents, and the company you have acquired has developed a leading edge product which you believe will be a huge success within the market place. The time approaches when you will take over the operation and to be honest you are a little nervous at the prospect of taking over this moderately successful business. You have been given some order histories and you have a good idea about the new orders that are on the books. Marketing have also produced forecast and budgets for the next few months, and everything is looking quite promising. One problem that you have discovered is that the profit and loss figures that attracted you to the business are all in a consolidated form and you have very little knowledge of the actual costs within the operation itself and don’t really know the impact of the various cost elements. Production, warehouse and distribution are now all under your team’s control and you are expected by your share holders to sustain the profitability over the coming years. The market for engines is mature but changes are on the horizon. Better fuel economy, electric/petrol hybrid engines and alternative fuel engines are gaining market share as the world approaches the end of the fossil fuel economy and it heads into the hydrogen age. Page 3 Power-Line Engines plc Main business units: All business units are handled by power-line management however the two 3PLs are independent companies but both have offices on site at the RDC and LDC. The fulfilment is the only unit that has direct contact with the customers. Diagram key: Business Unit Description Fulfilment: Production Production: RDC: LDC: Alpha Ltd (3PL) Bravo Ltd (3PL) Customers: Order processing and Customer relationship manager Planning: Schedule orders for manufacture within constraints Manufacture of products Regional Distribution Centre Local Distribution Centre Logistics provider company Alpha Logistics provider company Bravo Domestic and Export customers: GML, BMC, TVS, QAS and CMC Page 4 Power-Line Engines plc Products The factory makes 5 products. Description Diagram Cost Model A, Standard Petrol. 1 Red, 2 White and 1 Green. Model B, Standard Petrol, High Performance. €4,000 €5,000 2 Red, 2 White and 1 Green. Model C, Standard Petrol, Eco. 1 Red, 2 White and 2 Green. €5,000 Model D, Hybrid Eco. 2 Red, 2 Grey and 2 Green €6,000 Model E, Fuel Cell. €10,000 4 Grey and 2 Green Page 5 Power-Line Engines plc Raw Materials For production the factory needs three types of raw material: Description Eco components: High Performance: Standard Material Example Colour Green Red White Advanced Material Grey Substitute Material Black Availability • These raw materials are scarce and will be sourced from new and recovered (recycled) supplies. • The green, red and grey materials are always available to the production plant – unlimited supply. • The customer has a recycling plant and recycles end of life engines. Page 6 Power-Line Engines plc General Rules: Game Length Types A Game can be played in 3 ways • Full game is 30 turns (approx 5.5 hours+), • Medium game is 25 turns (approx 4.5 hours+), • Short game is 18 turns (approx 3.5 hours+) Staff deployment Power-line Management Team Within your team, appoint a Chairman. The Chairman must then assign the team to the following business units as they wish: • Fulfilment • Production planning • Factory • RDC (regional distribution centre) • LDC (local distribution centre) Chairman: You can have as many staff as you like in each unit, but you must have at least one staff per unit. You may wish to appoint an accountant to make sure all book keeping is done correctly. Avoiding fines may be the key to beating the other teams. If you want to create extra positions seek advice from the supply chain consultants first: they will happily approve any sensible idea, just make sure you can justify how you wish to use your staff. A few points to consider: • • • • Power-line customer orders are expected to follow pre-takeover levels Order Planning and Forecast are up to date at the start of the game Some completed inventory exists within the RDC and LDC. The business employs a “make to order” (MTO) supply system. Other systems are available to Power-Line (PLE) but may require extra work. Any changes in procedure or workflow need a Supply Chain Management Consultant to approve the changes. Changing procedures without approval will result in unexpected charges. Page 7 Power-Line Engines plc Example Procedures The following sections with in the document out line the operations for the business. As a guide for lead times to deliver a single unit from when the order is received by “fulfilment” would take: Turn 1. Get an order from GML, agree delivery date and pass on to production planning Turn 2. Enter order into production plan Turn 3. Manufacture product Turn 4. Transport to RDC receiving area Turn 5. Make available within RDC for delivery; Transport to LDC Turn 6. Make available within LDC for delivery. Bravo delivers to GML Turn 7. Order arrives at GML The shortest lead time is 7 turns for a new order from GML – however you can always improve on this by using existing stock at the RDC & LDC. Page 8 Power-Line Engines plc External staff Alpha Ltd: at least one member of staff is required Bravo Ltd: at least one member of staff is required Customer: at least one person is required to represent all customers. Supply Chain Management Consultant: This will be the game moderator with additional staff as required. Alpha Ltd & Bravo Ltd (3PL) These two businesses will be competing with one another to win business and deliver a high standard of service. Late deliveries will be fined but good service should be rewarded by more business. Customer As the customer of Power-Line (PLE) you expect the products to be on time and of a high quality. You won’t tolerate late deliveries or inadequate products from PLE, and will seek compensation whenever they fail to deliver on their promise. There is a special customer guide, which will be given to the customer immediately before the game commences. Supply Chain Management Consultants (SCMC) This team will be checking the activities of the management teams. They will be watch for mistakes and problems. They will be available to give advice to any member of staff but will generally only talk to the Chairman. The customers and 3PL will be able to speak to the consultants for general guidance. They will also give notice of fines – their word is final. The Chairman is able to appeal to the consultants but this must be done within 2 turns of the fine being issued. Appeals will be heard between game turns. There is a special guide for all SCMCs. This will outline how to assist the players during the duration of the game. Page 9 Power-Line Engines plc Game play During Play • The first 3 turns will last 20 minutes. • Each turn there-after will last 10 minutes. • Every occurrence of capacity breaking will be cost €20,000 per turn in order to finance the extra resources required. This covers both DCs and the factory. • Any occurrence of deliberate false accounting will be fined €30,000. A new Chairman will have to be appointed immediately. A previous Chairman cannot be re-appointed. • Inspections will be made during the game, profit and loss accounts that are not up to date or are incorrect will result in a fine. The fine will vary between €5,000 and €30,000 depending on the number of errors and the magnitude of the mistakes made. • Mistakes will be accepted as long as they are reported within 2 turns. Any fines will be 50% of the normal amount. After play • Make sure the profit and loss is completed for every turn. Remember poor book keeping will result in fines. • A profit and loss account for each management team is presented to the supply chain consultants. • The winning team shall receive a prize. (If there are outstanding appeals then the winner may not be declared immediately.) Page 10 Power-Line Engines plc Power-Line Management The management are responsible for the day to day decision making within the firm. Each business unit should be generating costs for each turn. It is up to the management to try and co-ordinate and optimise all of the units so that they work together effectively and profitably. If book keeping is not done efficiently and on time then fines will be issued. Suggested prices for customers: Customer/Product GML BMC Model A €7,000 €7,000 Model B €8,000 €8,000 Model C €8,000 €8,000 Model D €10,000 €10,000 Model E €15,000 €15,000 TVS €7,000 €8,000 €8,000 €10,000 €15,000 QAS €7,000 €8,000 €8,000 €10,000 €15,000 CMC €7,000 €8,000 €8,000 €10,000 €15,000 These prices were set by the previous management. You may want to review them after a few turns. Be careful when increasing prices because you may find the customer will find another supplier. If you cut prices you may not be able to fulfil all of the orders that you get. Average order per turn over the last 12 months: Customer/Product GML BMC TVS QAS Model A 1 1 0 0 Model B 1 1 1 0 Model C 1 1 0 0 Model D 0 0 0 2 Model E 0 0 1 0 CMC 0 0 1 1 0 These levels are averages per turn. Customers will order to suit their requirements so don’t expect them to order engines at every turn. Management operations: Procedures per turn: Step 1. Step 2. Step 3. Step 4. Collect all statistics from the business units (but not the 3PLs). Enter information into the Excel spreadsheet Update and inform the unit managers regarding their business unit. Review costs and selling prices, inform the Fulfilment unit if any changes are to be made. As the management, you may want to consider expanding capacities at the factory, RDC or LDC. The management can discuss this with management consultants who will provide lead times and capital costs. Beware of expensive expansion schemes, you may find your business going insolvent. If you can implement a cost effective solution you may find a fast path to growth and profit. Page 11 Power-Line Engines plc Fulfilment Power-line Engines has 5 main customers: GML, BMC, TVS, QAS and CMC. They all produce the full range of automotive vehicles and have engine requirements. All engines should be built to order, but the pressures on lead times mean that “making to stock” (MTS) is a tempting way of delivering standard items quickly. The customers are located a various distance from the main factory and RDC. The following table describes where the customers are and the distance from the RDC. For each customer this table describes the number of turns that it will take for the 3PL to transport the units from the despatch point to the customer site. Name GML BMC TVS QAS CMC Location Domestic Domestic Overseas Overseas Overseas Despatch Distance from point despatch point Air Sea Rail Road LDC 50 n/a n/a 2 1 LDC 100 n/a n/a 2 1 RDC 400 1 3 2 1 RDC 2,000 1 5 4 3 RDC 5,000 1 8 6 n/a Fulfilment operations: Procedures per turn: Step 1. The first task is to collect orders from the customers. Step 2. Delivery dates must be confirmed for each order. Step 3. Pass on all new orders to the production planning. Page 12 Power-Line Engines plc Production Planning & Factory operations You have one main tool for your production planning. You have a production plan, in terms of units ordered per turn for two turns ahead and a forecast period of 3 turns. Your planning horizon is 5 turns ahead. Maximum Production capacity is 12 units per turn. Maximum planning capability is 60 units. Production Planning: Procedures per turn: Step 1. The first task is to pass the production plan for this turn to the factory. (no further orders can be passed to the factory after this step) Step 2. Receive orders from fulfilment and process them through the production planning process. Step 3. Calculate the production cost for next turn. Step 4. If there is a difference between what was planned and what was produced then production cost for that turn must be recalculated. (Do this after step 5 of factory operations) Cost per unit is variable. See production cost table below Product Cost Capacity Engine A €4,000 12 Engine B €5,000 10 Engine C €5,000 10 Engine D €6,000 8 Engine E €10,000 5 Factory operations: Procedures per turn: Step 1. The first task within a turn is to transport all finished units from the previous turn to the RDC. Step 2. Receive raw material delivery Step 3. Receive orders from Production planning Step 4. Make to production plan. If you fail to produce the planned items, production planning must be informed immediately. Do not exceed the capacity limits. Step 5. Order extra raw materials if needed. (Will be delivered in step 2 of next turn) Page 13 Power-Line Engines plc RDC: Regional Distribution Centre Separate Inbound & Outbound operations. Deliveries can only be made from the outbound side of the warehouse. All products are shipped in crates which sit on pallets for easy handling through out the supply chain. Orders can be grouped together in containers to simply handling and shipping. The cost per pallet is fixed for storage. The storage split between inbound and outbound is 30/70. One turn is required for the transition from receiving to storage. The initial total capacity of the RDC is 40 units. Costs & Capacity per unit (pallet) per turn: Area Receiving (Inbound) Storage & Despatch (Outbound) Cost €50 €100 Max Capacity 12 28 Transfer to LDC n/a €50 RDC operations: Procedures per turn: Step 1. Receive inventory from the factory into the receiving area. Step 2. Load out for all despatches (from the storage area only) Step 3. Load out for all deliveries to the LDC (domestic customer orders) Step 4. Take items that were in transit from receiving into storage. Step 5. Plan which items will go from the receiving area to the storage area. These items will be unavailable until they are placed in the storage area. This will be done in Step Three in the next turn. Step 6. Calculate the cost per turn by using the table above and record the totals. Try to find ways to minimise the cost within the RDC Page 14 Power-Line Engines plc LDC: Local Distribution Centre (For domestic customer only) There are separate receiving (inbound) and storage (outbound) operations. Deliveries can only be made from the outbound side of the warehouse. All products are shipped in crates which sit on pallets for easy handling through the supply chain. Orders can be grouped together in containers to simply handling and shipping. The cost per pallet is for storage and handling is stated in the table below. The storage capacity split between receiving and despatch is 30/70. One turn is required for the transition from inbound to outbound. The initial total capacity of the LDC is 40 units. Costs & Capacity per unit (pallet) per turn: Area Receiving (Inbound) Storage & Despatch (Outbound) Cost €50 €100 Max Capacity 12 28 LDC operations: Procedures per turn: Step 1. Receive inventory from the RDC into the receiving area. This uses internal Power-line transport. Step 2. Load out for all despatches Step 3. Choose which 3PL will deliver the units (from the storage area only). You may need to talk to the 3PL to see who has enough capacity. If a 3PL is late you can ask the other 3PL to deliver it instead – just be sure to record who has delivered each order. Step 4. Take items that were in transit from receiving into storage. Step 5. Plan which items will go from the receiving area to the storage area. These items will be unavailable until they are placed in the storage area. This will be done in Step Three in the next turn. Step 6. Calculate the cost per turn by using the table above and record the totals. Try to find ways to minimise the cost within the LDC Page 15 Power-Line Engines plc Alpha Ltd: 3PL Company (Air/Sea) Alpha Logistics specialise in air and sea freight and therefore can offer the best rates on the market for these services. Quite simply you are contracted to supply 4 services to Power-line’s RDC and LDC. In this market poor performance or late deliveries are penalised with a fine system. If you are late for a pick-up then you may loose the order (because your nimble competitor will get it) or your fee will be reduced by 20%. Margins are pretty thin so a fine will turn a profit into a loss, and if you loose too many orders you may loose regular business – either way it will be a disaster for Alpha. You have good air and sea capacity and reasonable rail but a rather small truck fleet. Never mind, you specialise in long distance logistics and your track record is pretty impressive. Power-line is your most important customer and you don’t want to let them down. Mode Air Road Rail Sea Fee Per Pallet /Turn €200 €110 €70 €30 Total Pallets / Turn 10 15 13 31 Distance / Turn 5000 650 500 400 Maximum Fee / Turn €2,000 €1,650 €910 €930 Total capacity for Alpha across all modes of transport is: 69 and the maximum revenue is: €5,490. Alpha has the opportunity to have higher revenues then Bravo but specialising in air and sea may be riskier. All orders are passed to you from the LDC and RDC. Power-line usually tell you which customer and which mode to employ, see you don’t have much choice, but sometimes you will be able to make extra margin by using a cheaper mode then the one prescribed. Just remember the late deliveries are penalised and customers have a nasty habit of remember bad service. Alpha operations: Procedures per turn: Step 1. Deliver all units that are available for final delivery. Step 2. Pick up from the RDC/LDC any units that are designated to Alpha Step 3. Mark all delivery notes with the number of remaining turns before they are available for delivery. Add the current turn number to the “delivery time” to get the delivery due date, Step 4. Calculate the total fee for the current turn and record it. Step 5. Record any penalties for late deliveries. Step 6. Pass invoice to PLE management. Page 16 Power-Line Engines plc Bravo Ltd: 3PL Company (Rail/Road) Bravo Logistics specialise in rail and road freight and therefore can offer the best rates on the market for these services. You are one of many businesses that specialise in logistics and you worked very hard to become a preferred supplier to Power-line. You must work closely with Power-line’s RDC and LDC in order to make sure their customers get the products in time. The automotive industry operates a JIT system and late deliveries are not tolerated. If you are late for a pick-up then you may loose the order or your fee will be reduced by 20%. Margins are pretty thin so a fine will turn a profitable job into a loss, and if you loose too many orders you may loose power-lines business altogether – either way it will be a disaster for Bravo. You have good truck and rail capacity and subcontract all sea and air business out to a competitor of Alpha’s. Power-line knows you do this and you are able to treat your air and sea business as regular work, without any special other arrangements. You really want to grow the business with Power-line and will grab every opportunity that comes your way. Mode Air Road Rail Sea Fee Per Pallet / Turn €270 €70 €50 €50 Total Pallets / Turn 5 25 21 18 Distance / Turn 5000 650 500 400 Maximum Fee / Turn €1,350 €1,750 €1,050 €9,00 Total capacity for Bravo across all modes of transport is: 69 and the maximum revenue is: €5,050. All orders are passed to you from the LDC and RDC. All domestic customers will use rail and road from the LDC. From the RDC you can use any mode, and perhaps in an emergency or if you don’t want to let powerline down you may need to use alternative methods – of course if you do that you may make a loss. Bravo operations: Procedures per turn: Step 1. Deliver all units that are available for final delivery. Step 2. Pick up from the RDC/LDC any units that are designated to Alpha Step 3. Mark all delivery notes with the number of remaining turns before they are available for delivery. Add the current turn number to the “delivery time” to get the delivery due date, Step 4. Calculate the total fee for the current turn and record it. Step 5. Record any penalties for late deliveries. Step 6. Pass invoice to PLE management. Page 17 ...
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This note was uploaded on 02/23/2012 for the course ENGINEERIN 101 taught by Professor Jhon during the Spring '10 term at Punjab Engineering College.

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