Supply Chain Game 2 Write-Ups (1) University of San Francisco BUS 308

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Jacob Industries Supply Chain Game #2 Write-up Problem ID Jacobs Industries produces a unique chemical which they sell to manufacturers, however over the past two years the company has not manage... d their supply chain operation efficiently, which has resulted in lost demand. Jacobs has seen a loss of demand of about 2,100 units which has resulted in a loss of revenue of about $3,000,000. Jacobs began marketing to manufacturers on day 1 and started marketing to other markets (Sorange, Tyran, Entworpe, and Fardo) on day 640. Unfortunately, a new foam technology is in development that will cause Jacobs industries current technology to become obsolete. Therefore demand in each region will start decreasing from day 1430 until it reaches zero on day 1460. Our team has been hired to manage Jacobs Industries supply chain for the remaining 730 days in order to maximize their cash balance at the end of day 1460. Increasing Revenue There are two ways to increase profits, either by decreasing costs or increasing revenue. The best way for Jacobs Industry to increase their revenue is to encapsulate all lost demand. In order to do that, the company will have to increase its capacity and/or add additional warehouses and factories in other regions to produce enough units to keep up with demand. The easiest thing Jacobs Industry can do to increase profits is to decrease costs. Currently the company has been mailing their products out to their warehouses, which costs $150 per drum. Instead, we recommend the company ship the product, which would only cost $75 per drum. Which is half the cost of their original method and would haved saved them over 2 million dollars the past two years (shown in the top left diagram). In the next 2 years we expect higher demand, which is why we if Jacobs Industries sticks with our recommendation they should see a savings of over 7 million dollars in the next two years. The table on the right shows how shipping to the other regions is more cost efficient based upon one truckload versus mailing one unit. A truck load can fit 200 units in it, which means it would cost $75 per drum to ship to the same region, $100 per drum to ship to other regions on continent, and $225 per drum between the continent and fardo. All of which would be cheaper than mailing to each region. For the next two years of production we want to maximize Jacobs Industries profits, so we must also look at how much it will cost and how long it will take us to build warehouses and factories in order to match our lost demand. As we can see it will take Jacobs Industries 60 days to build a new warehouse and 90 days to build both a warehouse and a factory. This is an important factor to consider when we are looking at profitability analysis for each region because if it costs too much to build and takes too long to build each factory/warehouse it will cause Jacobs Industries to not only lose demand, but also cost us profit. However, it is also important to remember at the end of these two years the product will become obsolete so demand will end up linearly decreasing until it hits zero. So at about 90 days before the end-of-product life, the company should forecast remaining demand of the regions it is servicing, look at inventory levels, and decide when to shut down the factories to ensure zero inventory left. Assuming no other products are being made in the last 30 days, Jacobs Industries really only has 700 days of production because any excess inventory will be worthless. Calopeia Forecasting: The region of Calopeia’s demand from day 1 to day 730 (two years) was highly seasonal. Therefore, we believe the the forecasted demand from day 731 to 1430 will also be seasonal as well. Our team found that 39 units is the daily demand for Calopeia. Since the original capacity of the current factory located in this region is 70 units, the industry has an extra 30 units capacity to satisfy demands from other regions. Our team suggests that although we have 40 extra capacity than needed in this region, Jacobs Industries should also add another 25 units of capacity to encapsulate the los [Show More]

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