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IBA-C03
Thi Ky Duyen Nguyen, Saman Hannani, Quinten Van den bosch,
Daffa Fahrelza Hedian
Table of Contents
Management Summary ...........................................................................................................................2
Introduction .............................................................................................................................................3
Overview of situation...............................................................................................................................4
Supply Chain Mapping .........................................................................................................................4
Geographical Flow Diagram .............................................................................................................4
Network Flow Diagram ....................................................................................................................7
Review of Previous Management Decisions and The Strategy into actions .......................................8
Key Decisions ...........................................................................................................................................9
Round 1 ................................................................................................................................................9
Round 2 ................................................................................................................................................9
Round 3 ................................................................................................................................................9
Round 4 ..............................................................................................................................................10
Round 5 ..............................................................................................................................................10
Round 6 ..............................................................................................................................................10
Team Reflection and Collaboration. ......................................................................................................11
Results and conclusions. ........................................................................................................................12
References .............................................................................................................................................15
Appendix A .............................................................................................................................................16
Table A1 .............................................................................................................................................16
Table A2 .............................................................................................................................................17
Table A3 .............................................................................................................................................18
Table A4 .............................................................................................................................................19
Table A5 .............................................................................................................................................20
Table A6 .............................................................................................................................................21
Appendix B .............................................................................................................................................23
Table B1 .............................................................................................................................................23
Table B2 .............................................................................................................................................24
Table B3 .............................................................................................................................................25
Table B4 .............................................................................................................................................26
Table B5 .............................................................................................................................................27
Table B6 .............................................................................................................................................29
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Management Summary
The previous management team on The Fresh Connection had made some decisions that were not
beneficial for the company. For the past couple of years before a new management team stepped in,
The Fresh Connection was incurring a loss of -3.9% in ROI, caused by bad supply chain performance.
The new management team Team2victory has been gradually gaining ROI in the past 3 years with a
final weighted ROI of 4.31%, because of an optimized supply chain and good management decisions.
Also, the new management team had formulated a strategy based on analyzing the decisions of the
past management team and produced a list of poor decisions. And a further analysis was made to
find out ways to fix the problems and put forward a better strategy in the supply chain planning. An
observation of the whole supply chain’s process from the suppliers to the customers was done, and
a better process is created for the components of the supply chain process. Along the way,
team2victory faces some challenges, such as bad decision making, and false predictions that had an
impact on the ROI growth. But the team actively discusses solutions to find a way out of problems.
In this report an evaluation of key decisions will be the most important finding, these decisions will
then be used for future references which will be beneficial for the company. In every 6 months (1
round) an evaluation will be made on which decisions have the most impact.
An overview of the management team’s dynamic and decision-making process to reach a common
objective from the management role will also be discussed. Furthermore, an evaluation of the team
is important to understand inefficiencies in the team’s processes, which then can be discussed for
further improvements.
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Introduction
The Fresh Connection has 4 management roles, and each role is responsible to make decisions that
align with the strategy chosen, that will ensure a positive ROI. The management team is responsible
for making the best supply chain strategy. And to have a good strategy a deep understanding of the
supply chain process needs to be achieved.
Firstly, to understand the flow of components from the suppliers to the customer a diagram is used
to illustrate the supply chain process:
Starting from the suppliers, the component will then be delivered to the inbound warehouse. An
inbound warehouse is a storage facility for the components before it is being used in the production
process. If the inbound warehouse cannot hold the inflow of components, then an external space
will be used to store those components. The mixing process will be used to mix the components
required for each of the products, which will then be packaged in the bottling process. The flavors
are then divided into two categories: 1-liter pack and pet bottle. These finished products will then be
stored in the outbound warehouse before delivering it to the respective customers. If the outbound
warehouse overflow from the production, an external space will then be used to store the products.
Also, it is important to realize the responsibility of each role which can be described in the table
below:
(Weenk, 2019)
The sales manager will be responsible for ensuring the service level agreement is met with the actual
service level. Also making sure the number of obsolete products is low and a high gross margin is
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achieved. Communication for the sales department is very important as they need to discuss with
the other departments how to do better and fulfill demand.
The Head of purchase is responsible for the supplier that delivers the products to the fresh
connection. The head of purchasing must make sure the component order are from reliable
suppliers and deliver good quality components. This department must try to keep the costs as low as
possible. During the game, the head of purchasing had more and more opportunities to change its
strategy to become more successful and increase ROI.
The head of operation is responsible for ensuring a high cube utilization is met, by making sure the
capacity provided in the inbound and outbound pallet locations matches with the usage. Also,
ensuring the production plan adherence is high in the mixing and bottling part of the production
process.
The responsibility of the head of supply chain management is to ensure the stock of components
and products is met with the demand. And aligning their decision to other departments is also an
important part of a supply chain manager.
Overview of situation
Supply Chain Mapping
Geographical Flow Diagram
The Fresh Connection is located in The Netherlands. They have 2 warehouses, raw material inbound
warehouse, and a finished product outbound warehouse. The suppliers will then supply the
component to the inbound warehouse and The Fresh Connection will transport the finished
products from their outbound warehouses to each of the sellers.
The Fresh Connection supply consists of pack & PET which is the packaging of the products, and
orange, mango, and vitamin C. Each of these components came from different suppliers.
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For Pack, it is supplied from France. France and The Netherlands have an approximate distance of
854.1 km with a lead time of 15 days. The quality provided by this supplier is proven to be high, also
pack supplier has high delivery reliability of 95%.
PET is delivered from Spain, despite the fact of relatively close distance the products that they
provided has been shown to be poor. The distance from Spain to The Netherlands is 1745.8 km with
a lead time of 10 days. Mango is also sourced from another company called NO8DO Mango in Spain.
The mango has a high-quality index, and its delivery reliability is relatively high with the same lead
time as PET.
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Orange is sourced from the United States by The Fresh Connection. By using a boat, orange is
transported to The Netherlands with a lead time of 30 days. The quality from Miami Oranges is
proven to be high and they have very high delivery reliability. The approximate distance from Miami
to the Netherlands is 7,474 km.
Vitamin C is projected to cause some problems as it has the lowest delivery reliability of 90%. China
to the Netherlands has an approximate distance of 7,482 km. The quality of the vitamin C provided
by Seitan Vitamins is high and the trade unit in drums might cause higher costs as the inbound
storage facility will be outsourced. Lead time is also a problem as it is as high as 60 days.
As for the customers, the locations to deliver the warehouse are all in The Netherlands. With some
order more products than the others. Therefore, the logistical challenge is to determine the priority
of the customers and the management of the order for each customer.
In conclusion, some changes need to be made as some suppliers have a low-quality index and low
reliability will cause components to not be available when needed. High lead time will also cause
problems as the time required to finish a delivery is crucial in ensuring all delivery is available,
combining a high lead time with low reliability will cause unavailable components in the warehouse.
Therefore, these problems need to be integrated into the decisions making of The Fresh Connection.
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Network Flow Diagram
This is the data gathered from the supply chain network flow from the previous management team.
An analysis from this flow was used to determine the possible problem created by the decision-
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making of the previous management. The first thing to highlight is the low percentage of delivery
reliability for the component of PET and Vitamin C, as PET have delivery reliability of 84.1% and
vitamin C have delivery reliability of 81.5%. Vitamin C component availability is also low as it is only
84.3%. In the outbound warehouse. A high obsolete percentage can also be observed, as the
products have an average obsolete percentage of 7.6%
Based on the previous management decisions, the group decided on having a cost leadership
strategy. So that each of the heads of departments can align the decisions to a common goal. With
cost leadership, the goal was to cut production costs as low as possible, while still producing an
acceptable production number that meets the demand of the customer. The previous management
decision was making a loss in ROI (return on investment). Therefore, the group decides on making
the cost as low as possible, and with the same amount of sales a good profit would be achieved.
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Key Decisions
Round 1
In round 1, team2victory analyzed the problems created from previous management decisions. From
the analysis, the team discovers that vitamin c has low availability for production and a high obsolete
percentage was also discovered in finished products. These are the main problems that are going to
be solved in round 1, as it makes the production process inefficient and does not align with the cost
leadership strategy.
An increase of safety stock was decided as a countermeasure for the low availability of vitamin C for
production. To further reduce the chance of low component availability the purchasing department
also increases the agreed delivery reliability for the vitamin c component. The team expectation is to
have an increase in the component availability for the vitamin c component. The result of this
decision is an increase in component availability for vitamin c from 84.3% to 96.2% a significant
increase that makes the production process more effective.
To reduce the high obsolete percentage, the team also decided on reducing the shelf life of each
product. This decision reduces the average obsolete percentage from 7.6% to 1.28%. Obsolete
products increase inefficiency as many products being produced are being thrown out. Therefore,
reducing the number of obsolete make the supply chain system more efficient.
In conclusion, this round we manage to increase to increase component availability for vitamin c and
reduce the obsolete percentage which results in a positive ROI from -3.9% to 0.2%.
Round 2
In round 2, the purchasing manager notices a high number of rejections for PET components, this is
caused by the PET supplier that provides low-quality products. Therefore, the purchasing manager
bring it up for discussion and agreed on changing the suppliers to a more reliable and higher quality
PET provider. This decision also decreases the transport cost which in line with the cost leadership
strategy.
Additionally, PET stock was high, as a result, the supply chain manager decided to decrease the
safety stock of the component to increase the efficiency of the availability to the demand of PET in
production. The lot size for components on most of the components is also decreased. This resulted
in lower stock components from 4.3 to 3.3 which impact lower inventory handling cost, which can be
fully utilized by also decreasing the pallet locations in the inbound warehouse. However, since the
lack of knowledge of the relationship between lot size and safety stock of the supply chain to the
pallet location of operation, the operation manager reduces the pallet location by a fine margin,
causing the cube utilization to drop from 91% to 68%.
In conclusion, despite the lack of synchronized decision-making between supply chain and operation,
other decisions have increased the ROI from 0.2% to 2.3% this round.
Round 3
In round 3 an analysis was done on how to improve the results of the team. The main goal was to
keep the costs as low as possible, because of the cost leadership strategy. This should lead us to an
increase in ROI. In round 2 our ROI was 2.30% and we were in 4th place in the ranking.
The key decisions in round 3 were made in the supply chain and operations. In the supply chain, a
decrease in the safety stock of the components and the lot size was made. Also, a decrease in the
safety stock of finished products was needed because there were too many products on the stock
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that were not sold and got obsolete. The aim was to achieve a more efficient supply chain which led
to lower costs, and the result proves the decision made was positive, as the ROI increases to 4.69%
from 2.3%.
Decisions in operation are also made with the expectation to improve the efficiency of cube
utilization. In the raw material warehouse, a decrease of pallet locations from 900 to 600, and in the
finished goods warehouse the pallet location is also decreased from 1400 to 1000. The cube
utilization for the outbound warehouse increases to 106% despite overflow it is near 100%.
However, despite lowering the number of pallet locations in the inbound warehouse, the cube
utilization is 69%. A low cube utilization means there is an inefficiency in the warehouse, as the
usage of the pallet location is lower than the capacity we provided. The goal was to match the pallet
location in a way that matches the actual usage of the pallets. As unused pallet location is costly for
the business a further analysis on finding the best number for pallet locations need to be done.
Round 4
The key decision of round 4 was to change the mixer type to Megachurn 20. The team expected the
production to be more efficient, as it can handle more lot size. This change will increase the
maximum lot size from 12,000 to 20,000 liters, however, the yearly cost will increase to an
additional 12,500 euro and 15-euro additional mixer cost per hour compared to the default Fruitmix
MQ mixer. The expected return from this investment is a higher production interval in the product
part of the supply chain management.
The result of this investment is not significant, and the team realized that further decisions need to
be done to align with the higher lot size. As the team analyzes this round, it was discovered that the
production interval needs to be changed, as, for some products, an increase in the production
interval will lead to a decrease in total cost. Therefore, in the next round, a change in production
interval to fit the new mixer will be done to achieve a lower cost.
Round 5
In round 4 the ROI was slightly lower than the previous rounds. Therefore, a discussion was made to
figure out ways on what can be done to improve ROI. The ROI in round 4 was 4,35%
for the sales department, a business case to make use of the VMI was proposed. By making pros and
cons list we decided that the VMI would be useful for us. VMI provides insights into the stock levels
of the customers in its distribution centers. With this information, there is an improvement in the
quality of forecasts. Furthermore, there were difficulties in meeting the promised service level and
that create penalties. The decision for a longer promotion horizon was made because it gave the
company more time to anticipate upcoming promotions.
Based on the previous round, the team decided to change the production interval for all the
products. Using the production interval calculator, the team discovered the best production interval
for each of the products to have the lowest average costs. Also, the supply chain manager increased
the safety stock of Fressie orange C power 1 liter and PET to align with sales department decisions
on increasing demand.
At the end of the round, the team managed to get an ROI of 5,02%
Round 6
In round 6, the team tried to keep the progress of round 5. The team decided that new decisions
were not required to be made. As the ROI in round 5 was 5,02%
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A key decision was made, that no changes in the supply chain will be made. Therefore, a huge cube
utilization in operations was easily met. Since nothing changed in the supply chain, the operations
manager could easily meet the usage with the capacity of pallet locations. The cube utilization in raw
materials warehouse increase to 94,8% and for finished goods warehouse to 105.9%.
As the number of breakdowns was increasing, the group decide on doing a training on the
employees to solve breakdown themselves in the bottling line. With this training, the operators
could resolve the breakdowns themselves. And the expectation is a reduction in breakdown will
reduce by 40%, and the cost incurred as the result of training will increase.
Unfortunately, it is not the right choice as the ROI dropped to 3.90%. Furthermore, making no
changes in the supply chain had a bad impact. An increase in stock level impact on the increase in
cost, and sales an increase of obsolete percentage for Fressie orange C-power 1 litre and PET caused
further inefficiencies in the supply chain. Also, the production plan adherence on the Swiss fill 2 was
low. Low production plan adherence leads to a situation in which not all production orders can be
fulfilled in accordance with the planning. This means that the finished product will only be available
later than planned, and the service level was placed under pressure. There was too much overtime
on the bottling line.
In this round, the team learns that despite good performance in the previous round, an observation
every round on what can happen needs to always be evaluated per round and the team cannot rely
on the decisions made in the previous round.
By getting to know each other the team also learned more about different cultures and the way of
thinking of the individual group members. We got a better understanding of how to show respect
and work together most efficiently as a team.
For example, we have been thinking about increasing the production and therefore increase the
revenue of the company. However, we had a good discussion with all the team members and
concluded that this idea would not fit our strategy. So, we tried to keep the production
volume aligned with the company's strategy. We concluded that for our strategy we would be better
off to just keep reducing the cost. By following this strategy, the ROI had been increasing round by
round until round 6. With this strategy, we ended up in second place what made us happy with our
result.
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Based on the Belbin role, our team consists of two people-oriented and two action-oriented. The
theory suggests that we will be lacking in a thinking-oriented role. This is proven
in previous activities that we sometimes find it hard to brainstorm innovative ideas. However, with
the Belbin role suggestion in mind, we were able to invent ideas by analyzing previous situations in
the supply chain process and thoroughly discuss the possible scenarios with each of the team
members in deciding on a specific strategy. By knowing what our weakness was we can mitigate
it. Most of the time we were able to reach a group decision backed up with the analysis of the
scenario. However, there were times where a single decision cannot be made, in this case, we will
arrange a vote to reach a group consensus.
According to the Belbin test, we are on average a people-oriented group. Although Tina and Daffa
have some high points in the action part, an extra person who is a plant would be a good added
value to our group. We have a lack of creativity and a plant can bring us that value.
For example, a more creative team member in our group could have stimulated us to think about
other decisions that we as a team would maybe not directly think of. We as a group decided to
always follow our cost leadership strategy but maybe a more creative team member could have
shown us more risky but well-calculated decisions that might have worked next to our strategy.
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As shown in the table below we have made a steady increase in our ROI. Only in between rounds 3
and 4 we had a little fallback of 0,34%. The reason for this decrease in ROI was because of the pallet
location left in our outbound warehouse that was not in use. Those empty pallet locations will lead
to a higher inventory cost, and this is something that won’t fit with our strategy either. We also had
a decrease in ROI between our 5th and 6th rounds. We had a decrease of 1,12% this was because of
our decrease in gross margin and the extra stock cost we had this round.
We have managed to get our increase in ROI by increasing our gross margin
from €1,057,741 in round 0 to €1,255,621 in round 6. Our ROI has increased because our total
indirect cost has decreased as well from €1,214,936 in round 0 to €1,099,946 in round 6 as is shown
in the table below.
As a conclusion from our results and our group work, we also have been thinking about the
recommendation regarding our strategy for the company based on the results we got. We would
recommend our, team 2 victory, fresh connection team, to keep their focus on the cost leadership
strategy.
In general, everyone in the team has been working very hard to gain the ROI as high as possible.
Even though we could not complete our promise of being the first rank, It was great to physically
work on a problem and see the results as it all came together. We have more insight into how a
company’s supply chain management works after participating in this simulation game. The key
element in this simulation game is communication between the departments.
At the start of the simulation, we noticed that we were all a little bit confused about what strategy
to take but also how we are going to play this game. As we are missing a leader in our group
dynamics which was also shown in the Belbin roles this was difficult for our group because no one
took the lead to divide tasks and to make sure everyone knew what was needed to be done. We
were all pretty much in the background to start with but after things got clearer, in the second week,
and after we started opening up and discussing more and more decisions, we were doing a lot better
as a group. Everyone felt that they were free to speak their opinion.
For example, in round 5 our sales department came with a great idea to increase revenue. by
producing more and by increasing promotion. We also talked about if we would do that, we might
want to put quality up as well so that we could have higher prices and what would lead to more
revenue. But after discussing this matter in the group we all agreed that it would be better for us to
stay with our strategy and not change everything around in the last round. We think we did well with
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this decision, and we were happy we could openly speak our opinions in this meeting about this
decision.
We think we made the right decision by choosing our strategy as cost leadership. The benefit of this
strategy is that when you make decisions to lower costs you will directly see results, especially in the
short term. We managed to lower indirect and direct costs and keep our sales almost the same. This
has led to a higher ROI for our team.
When you have chosen a strategy as a group you have to make sure everyone follows this strategy
because otherwise, your company can’t be profitable. For example, you put the prices of your
products very high, but the quality is very low because you wanted to save money on quality. No one
will buy your products anymore because they can get them somewhere else at a lower price and
probably better quality.
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References
Weenk, E. (2019). Mastering The Supply Chain. In E. Weenk, Mastering The Supply Chain (p. 111).
London: Kogan Page Limited.
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Appendix A
Close The Loop per Round
Table A1
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An increase in the number of shifts
leads to an increase in salary costs
because the operation department
doesn't utilize the labor source.
Table A2
Sale: Increase service level that Have the pallet locations in inbound and
increases revenue outbound as close to the usage
Do not repeat
Not taking into account
supply chain activities
when deciding the
number of pallet locations
The supply chain decreases the
Do not extend the order
stock level
deadline to after 14.00
pm
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Change for reliable suppliers and
also high-quality products
Table A3
Increase the payment terms from 4 The payment terms were increased that Do not repeat
to 5 weeks gave more time for customers to purchase. Payment terms should
not be extended, because
we will receive late
Decrease order deadline from payment that effects the
20PM to 14PM. total revenue.
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Despite decreasing the
inbound warehouse, a lot
of unused stock location
still exist
supply chain increased frozen period from
3 weeks to 4 weeks to give more time to
purchasing department for ordering
components. Aslo, Lot size for
components are decreased
Table A4
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Change mixer to to megachurn 20
Table A5
Using VMI that increase sale and using VMI for Food&Groceries will meet Do not repeat
meet the service level customer service level
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Table A6
Do not repeat
Deciding to do
breakdown training
without considering
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production plan
adherence
Not alligning the
production interval with
demand
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Appendix B
Strategy into account per Round
Table B1
SIA round 1.
The Fresh Connection Company Mission Your Teams objectives
Cost Leadership
Strategic
Sales Supply Chain Operations Purchasing
Pillars
Increase Gross margin as much as Keep the stock level for Efficiency in cube Negotiate with with
possible by increase Sale. components & products as utilization in the inbound other supplier for
Reduce the obsolete products as low as possible. be aligned warehouse Trio pet PLC, Smaller
low as possible. with operations and bashes and high
Try not to gain bonus or purchasing department. Reducing the high
reliability.
penalties. utilization rate of the
Strategic Increase availability for bottling line to increase
Objectives vitamin C for production. the production
Availability was too low. plan adherance
Production
interval fressie orange C
power 1 liter, Fressie orange
PET and fressie orange c
power PET increased from 10
days to 13 days.
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I
Table B2
Sia round 2
The Fresh Connection Company Mission Your Teams objectives
Strategic
Sales Supply Chain Operations Purchasing
Pillars
Strategic
Objective
s Get different
suppliers with
certificates
for better
reliability.
Actions
Ref Details Ref Details Ref Details Ref Details
- Increase Service level Stock management Decrease number Pack certificate
to Food&Groceries from components of raw material Pet certificate
95% to 97% to increase the Decreased PET safety stock 3 -- pallet Vitamin c
price, other markets are > 2 and decreased lot size 2 --> location from certificate
not changed. 1,5 920 to 900
Increase
- Change to Order Deadline reliability level
from 20.00 PM to 17.00 Decreased lot size pack from 95
to Food&Groceries. orange, mango and vitamin c. to 98%
4-->2.
Increase
reliability pet
from 96% to
98%
Increase
mango
reliability from
94% to 96%
Stock management finished Decrease number
goods. of outbound
pallet location
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Production from 1500 to
interval fressie orange C power 1400
1 liter decreased 13-->10.
Strategic
Sales Supply Chain Operations Purchasing
Pillars
Actions
Ref Details Ref Details Ref Details Ref Details
Change to Order Deadline Stock management Decrease inbound Vitamin c
from 20.00 PM to 14.00 to components pallet location supplier
all markets manage the from 900 to 600 Pet supplier
stock and nobody work after Pack 1 liter and PET safety
14.00 PM stock decreased 2->1.
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Pack 1 liter lot
size decreased 2->1,5.
Stock management
finished goods
KPIs
ROI, Gross Margin, Roi Roi ROI
Obsolete product % Availability components. Cube utilization raw Rejection components
and Service level Stock components(weeks) materials warehouse. Raw material cost
outbound order lines Stock products ( weeks) Cube utilization finished Delivery reliability.
good warehouse.
Table B4
Sia round 4.
The Fresh Connection Company Mission Your Teams objectives
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Increase revenue Be aligned with Efficient cube Oranges from tank
Minimize bonus purchasing and utilization rate to IBC
Be aligned with Supply chain operations. More efficient mixer
Strategic and Operations
Objectives Thinking about
decreasing quality to
safe cost.
Fressie orange C-
power PET safety
stock increased 2-
>3.
Cost
leadership
Strategic
Sales Supply Chain Operations Purchasing
Pillars
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Increase Revenue Be aligned with Discussing the Changing
Minimize penalties purchasing and opportunity to safe drum vitamin
Optimize the use of VMI operations. cost with other C to IBC
Be aligned with Supply Chain Discussing about a departments
and Operations new bottling line decisions.
Trying to
Discussing about decrease
Strategic taking VMI contract index
Objectiv without
es Making the bothering any
production interval other
aligned with the departments.
bottling line and cost
efficient.
Looking for a
solution for
lower
transport cost
Actions Ref Details Ref Details Ref Details Ref Details
• Using VMI Discussed about No changes were Changing the
program taking VMI with sales made on this vitamin c
in Food&Groceries manager, purchase department this trade unit
market to manager manager. round. from drum to
better the IBC to safe
inventory in the Made Pros and Cons cost.
customer’s for VMI and decided
distribution center. with
the management to Couldn’t find
take it. Action was a supplier
taken by the with a better
sales manager. way of
transporting
to safe cost.
• Adjust Discussed about a
Promotion pressure new bottling line with
to middle for LAND the operations
market manager. Change is in
and Food&Grocerie consideration, but no
s, and light for actions taken yet.
Dominick’s.
• Promotion
horizon is short for
every market.
Stock management I
finished goods
Production interval
Fressie orange C
power
1 liter increased 10-
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>14 and safety stock
increased 2 ->2,5.
Production interval
mango PET increased
8->11.
Production interval C
power PET increased
8->13, safety stock
decreased 3->2,5
Table B6
SIA round 6
The Fresh Connection Company Mission Your Teams objectives
Strategi
c Sales Supply Chain Operations Purchasing
Pillars
Strategi
c
Objecti Considering any
ves changes regarding the
VMI system as a new
decision.
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Action Ref Details
s Ref Details Ref Details Ref Details
No change Decreased the frozen Utilizing Solve Decided to not make
period from 4 to 2 breakdown in any changes regarding
weeks to be more training. With this the mixer.
flexible in changes. function Decided not to make
any changes regarding
VMI system as this
would be an extra cost
against our cost
leadership strategy.
No changes anymore
adherance
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