SUPPLY CHAIN AMELIORATION

Case Study: TECHSOFT

Team ID number :2117920
EXECUTIVE SUMMARY
Current situation
A non optimized Order lead
time
Techsoft uses air and see to deliver
products, and mostly through air
expedited which costs more money
Techsoft dealt currently with 4
suppliers
Supply chain costs are now
proportionally a much larger percentage
of the overall graphics card selling price
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Deliberate solutions
Desired situation
Establishment of new US warehouse
Based on the given data, the
main mission was to try to The elimination of the expensive
assess the current supply air transportation
chain costs and find the
savings potential for the
Singapore unit. From that Reducing the suppliers to just 2
point we can act on the
different aspects of the
supply chain in order to Storage management through data extraction
reduce the costs while
maintaining a high level of Reducing the overall supply chain
overall satisfaction. costs
 INDUSTRY ASSESSMENT

. OPPORTUNITIES CHALLENGES
 An increased need for faster and more affordable graphic cards  Rapidly changing products in the market and intense
in the market. competition.
 Unsold cards lose value.
 Free importation tariffs between Singapore and the US.
 Supply chain costs and the graphic cards selling price are not
 Multiple choices regarding suppliers. proportionate as before.

 The luxury of being autonomous in transportation.  The dilemma of suppliers choices.

THE BIG PICTURE In order to reduce the overall supply chain costs, the aim would be to
use the relevant data points in order to produce decisions.These
decisions is based on this relevant data points:
Situation Problem Goal
Supplier information  Choosing the right ones.
Shipping and transportation  choosing the proper transportation.
Customer Survey and Sales data
Warehouse and production data  Inventory and storage
Old card New card Higher supply Reduce supply Service level data decisions
3 chain costs
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COMPETITIVE POSITION WITHIN THE SUPPLY CHAIN
Company’s place in SCM
-Techsoft is OEM (original equipment manufacturer) and sells to other manufacturers and distributors.
-Products are not to be sold directly to consumers.
-Techsoft manages all of its own transportation and warehousing from pre-production to final storage.
-Techsoft has two manufacturing units: The south Germany unit that supplies Europe and the Singapore unit that
supplies the north American market. Our study will focus entirely on the Singapore to the US chain, which goes
from the manufacturing unit to the Singapore warehouse and ending up at the docking location in the US where
the product goes to distribution.

Suppliers
Techsoft deals simultaneously with 4
suppliers. Each one of them offers
something rather different than the
other. After a Data supported study, the
company has to choose to keep two
suppliers.
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Customers
One of Techsoft’s strong points is its high-level customer service
level. In order to reduce the supply chain costs, Techsoft decided to
decrease its service from 98% to 95% for Category A who seem to
favor service and delivery, and 90% for Category B who prefer
performance and price as influencing factors.
 THE SUPPLIERS DILEMMA
Table : suppliers fulfillment

Supplier N pourcentage Techsoftexpectseach of the suppliers to have a

fulfillementtarget of 98%. Duringthis transition,
Flexit N=8/12=0,6666 66,66%
weshould note that the companywillkeep the
MaxoInc N=5/12=,4166 41,66% sameoveralldemand:
Worldcomm N=6/120,5 50%

Nanotech N=4/12=0,3333 33,33% 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑖𝑒𝑠 𝑓𝑢𝑙𝑓𝑖𝑙𝑙𝑚𝑒𝑛𝑡 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 98% 𝑎𝑛𝑑100%

𝑁=
𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑖𝑒𝑠
Table: major factor to evaluate suppliers
factor A B Flexit MaxoInc Worldcomm Nanotech
ratio ratio
R A B R A B R A B R A B Suppliersrank in respect of theirfulfillmentpourcentage:
Quality 1 1 5 5 5 3 3 3 3 3 3 4 4 4 Flexit , worldcomm, MaxoInc, Nanotech
Price 1 2 3 3 6 4 4 8 5 5 10 3 3 6
Service 2 2 5 10 10 4 8 8 5 10 10 4 8 8
R: The ranking
Delivery 2 1 4 8 4 4 8 4 3 6 3 4 8 4 A: Category A
Total 26 25 23 23 24 26 23 22 B: Category B

The most convenient supplier for category A would be : Flexit

The most convenient supplier for category B would be : Worldcomm
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 NETWORK DESIGN & GEO CONSIDERATIONS

SUPPLIERS TECHSOFT CUSTOMERS

In this section, we well describe and analyse the company’s supply chain network.

 SUPPLIERS  TECHSOFT  CUSTOMERS

- FLEXIT: Oldest partner + High Manufacturing: Transportation: The opportunity that presents
quality standards. Opportunity: Being able Opportunity: No import itself is being able to reduce the
WORLDCOMM: Best prices + to change the order lead tarriff from Singapore to service level from 98% to 95% and
High flexibility in services. time. the US. 90% ( positive response from
customers).
- TECHSOFT has a fulfillment Constraints: Constraints:
target of 98%, also TECHSOFT 1. No changes in 1. In every flaw in supply
expects the uncertainty to be production capacity or chain procurement,
similar to the past set up costs and Techsoft is obliged to
performances. transportation practices. send products via air
2. TECHSOFT doesn’t expedited.
have Warehouses to 2. In what comes to
store finished inventory transport, less
in North America. transportation time
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means more costs.
INVENTORY AND FLOW PLANNING

Based on the data we have, and in order to reduce the

supply chain overall costs we have decided to open a
new warehouse in the US. It will be beneficial for
New these particular reasons:
warehouse  Generating profits
 Keeping the wanted service level
 Avoiding the stock out condition
 Reducing transportation costs

TRANSPORTATIONS
SEA
AIR
SEA
EXPEDITED
AIR CARGO
Figure 1 : Geographic card after the plant of the new warehouse

Figure 2 : transportation changes after the new warehouse

plant

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 STORAGE MANAGEMENT
Storage management :
 Werecommand the reorder point strategy for storage
2×𝐷𝑞𝑢𝑎𝑟𝑡𝑒𝑟 ×𝐶𝐶
management in the new warehouse: Reorder level (optimal quantity Q) 𝑄=
𝐶𝑠
σ(𝑥−𝑥𝑎𝑣𝑒𝑟𝑎𝑔𝑒 )2  𝐷𝑄𝑢𝑎𝑟𝑡𝑒𝑟 :the total demand of quarter, depands on the caregory
 Standard deviation: δ=
𝑛 (2000 for A and 1737 for B).
 𝐶𝐶 : ordercosts per item, in our case it’s the transportation costs
 Standard deviation of demand in the lead time δ𝑑𝑙𝑡
(domestic route and sea) 2,19+2,3=4,49.
𝑙𝑒𝑎𝑑 𝑡𝑖𝑚𝑒  𝐶𝑠 : warehousingcosts per item for the new warehouse.
δ𝑑𝑙𝑡 =δ ×
𝑡𝑖𝑚𝑒 𝑜𝑓 δ

o Lead time isdelivery time fromsingapore to the US

using the cheapest transportation whichis 1week for
domestic route and 2 weeks for sea, 3weeksin total.
o Time of δ is12 weeks
Category A Category B
Standard devation: δ 18,58 33,74
Standard deviation of demand in the lead time δ𝑑𝑙𝑡 9,29 16,87
Safety stock (z*δ𝑑𝑙𝑡 ) 16 (15,23) 22 (21,59)
3
Reorder point (𝐷𝑞𝑢𝑎𝑟𝑡𝑒𝑟 ×
12
+ 𝑠𝑠) 516 457
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ANALYSIS OF COSTUMER SERVICE TRADEOFFS
 Based on the customer survey data :

6 weeks 4 weeks 2 weeks

CATEGORY A 98,7 % 98,06 % 32 %

CATEGORY B 97,7 % 93,3 % 93,3 %

Figure 3 : acceptance rates for every order lead time proposal by costumers of the two categories

 As Techsoft,in order to satisfy the big majority of clients , save the service level required to the
two categories and take the best decision vis-à-vis the optimal order time, the right choice would
be : Decreasing the order lead time to 4 weeks.

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TECHNOLOGY CONSIDERATIONS & INNOVATION
Investing in technology can bring good results in long term, and here we recommend two solutions :

 Establish an ERP to manage and control the inventory and the supply chain, which contribute to
reduce overall costs.

 Use RFID systems in supply chain.

 Use a tracking software like FlashTrac.

RFID is a technology that makes it possible to identify from distance. Radio Frequency Identification
(RFID) chips, barcodes and scanners are vital pieces of equipment that can provide innumerable
benefits to TECHSOFT. For example, RFID chips or barcodes can be placed on every product, which gives
the company a way to easily track inventory.

Software like FlashTrac enables the company to consolidate all aspects of their supply chain in one
place. It can digitally organize inventory data, monitor and manage shipping and tracking information,
and create electronic invoices with ease.

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CONCLUSION

The company had originally multiple problems on its supply chain . So after a deep analysis assessment of our
proposed solutions, it appeared to be optimal.

 We managed to reduce the total suppliers from 4 to 2.

 We reduced the submit/freeze time before receipt to 4 weeks using data.

 We established a new warehouse in the US that will reduce costs in a remarkable way and nullify the air
transportation.

 We managed to keep the same level service for customers.

 We elaborated a new stock management strategy by defining the optimal quantity to pre-order and the
safety stock.

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THANK YOU