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AGENDA Company Background Scope of the study Manufacturing process Value Stream map Kraljic model Risks associated with sourcing Factors affecting Vendor Selection Risk Management .
ltd.COMPANY BACKGROUND Sparx : Low end brand of Action shoes Outsources production to contract manufacturers Shoe Manufacturing Firm – Leaps & Bounds Pvt. New Delhi Start Up – Expanding Manufactures different types of foot wares on contract basis . Based Out of Inderlok .
SCOPE OF THE STUDY To prepare the Value stream map To study the sourcing of raw material To determine the criticality of different raw material used Investigate the parameters considered for selecting a supplier for raw materials Various risk associated with procuring raw material Risk management strategies .
packaging and delivery .MANUFACTURING PROCESS Purchase of Raw Material Hiring Contract Labor Stitching Sole Fabrication Production Process Preparation of the shoe upper Preparing the die frame for sole fabrication Sole fabrication Quality testing.
Fixing the shoe upper on the die frame. Transferring grinded PUC to the machine. .DETAIL PHASES OF PRODUCTION (1/3) Cutting and stitching the shoe Cloth as per different size & specification. Grinding PUC. Punching tack holes in the shoe upper. the material used for sole creation.
Checking the quality of the shoe.DETAIL PHASES OF PRODUCTION (2/3) Affixing the die frame to the machine. . Removing the die frame from the machine. Poring molten PUC in the die. Removing shoe from the die.
Packaging the shoe. Final finishing & quality checks. . Transporting to distributors/ inventory.DETAIL PHASES OF PRODUCTION (3/3) Addition of accessories to the shoe (like laces).
PROCESS / VALUE STREAM MAP View .
LIST OF RAW MATERIALS The primary materials used in production process : PUC Cloth Laces Adhesives Threads Die Electricity Labour .
KRALJIC MODEL Leverage items Cloth Die Strategic items PUC Critical Routine items Laces Threads Adhesives Electricity Bottleneck items Labour Value/Cost .
RISKS ASSOCIATED WITH THE SOURCING Various risks associated with sourcing of PUC : (1/2) Quality of PUC: depends upon the quality of scrap high degree of variation in quality Very critical for the overall quality and life of shoe Number of Suppliers: Supply demand mismatch : few suppliers in Delhi Higher inventory Suppliers from other states – Not Price Competitive No economies of scale bargaining power of supplier is very high .
it is perceived as a risk On Time Delivery: long waiting time Increase in the overall cost: to reduce the risk of stock out and production halt .RISKS ASSOCIATED WITH THE SOURCING (2/2) Price Fluctuation: The industry is a price taker and profits are earned by lowering cost of production Change in prices of raw material pulls the margins down Price fluctuation in PUC is high.
VENDOR SELECTION Factors considered while selecting a vendor : Quality of Raw Material Final Product Price Range Past Performance of the Supplier Credit Terms Timely Delivery Size of the supplier .
RISK AVERSION/ ACCEPTANCE/ MITIGATION/ TRANSFER (1/3) Methods for risk management for the sourcing of PUC : Change in production strategy Raw material procurement done by manufacturer currently Sparx can buy the raw material especially PUC in bulk and pass on the same to its contract manufacturer Better bargain through economies of scale Pricing issues and on time delivery of PUC .
e.RISK AVERSION/ ACCEPTANCE/ MITIGATION/ TRANSFER (2/3) Vertical Integration: Start manufacturing PUC If the company has the required resources and a sure series of order to cater to (i. future sources of income) risk avoidance strategy: no waiting time .
Introduction of GST Outside PUC suppliers will become price competitive . timely deliver. price risk sharing etc. quality assurance.RISK AVERSION/ ACCEPTANCE/ MITIGATION/ TRANSFER (3/3) Long Term Relationship with Supplier: Better co ordination. Fixed Price Contracts to mitigate fluctuating price risk.
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