Supply For A Continuous Supply - 1134 Words

cannot ensure a continuous supply for the product UV4 from its sourcing country, China, because the Chinese governmental ban on the use of UV4’s raw material. He has to make a plan by the next day to address the short-term shortage of supply. Associated Issue The higher level of issues that should be taken into account are: global sourcing; strategic sourcing; supplier management; cost analysis; supplier relations and risk management. Issue Analysis Major of facts †¢ The company had annual sales of $140 million, employed 400 people in offices around the world †¢ The crystal quartz sleeve that acted as an ultratransparent barrier between the water and the UV lamp are very expensive and difficult to procure †¢ The company had traditionally†¦show more content†¦- Because this purchase from AMS is 30% of total sleeve cost, the total spend for this commodity was approximately $1.7 million (510,000/0.3) - Trojan’s piece price cost from Juntao was 30% of its cost from AMS, which is approximately $15.30 per sleeve or $153,000 per year. - After the ban rule, is Juntao import raw material will lead to a cost of $28 per sleeves, and $280,000 per year. - The $77 cost from AMS is approximately at 50% premium. According to the 80/20 allocation plan, the annual cost would be $154,000(2000*77). Purchases from Juntao would be $122,400 for 8,000 units, which is a total cost of $276,400 – a net reduction of 46% in costs. - If Trojan buy 100% from AMS, its costs would be $770,000, a premium of $260,000. - Based on annual revenues of $140 million and unit sales of 500 to 600, the average unit sold has a value of $233,000 to $280,000. Alternative solutions 1. First, Juntao imports raw materials. The costs would increase by approximately $127,000(28-15.3=12.7, 12.7*10000). Pros: It might be a long-term solution, because Trojan want to keep its LCS and global sourcing strategy. Cons: It will not address the short-term supply shortage problem because import material is available in next month. This option is somehow risky, because we don’t know if Juntao has ability to secure appropriateShow MoreRelatedSupply Chain Of A Continuous Replenishment System Essay1712 Words   |  7 PagesReorder point control is part of a continuous replenishment system that orders stock when a pre-determined level of inventory is reached. This system determines when to order not how much. Pre-determined levels are calculated using a forecast amount and safety stock margin and set as minimums and maximum quantities. The theory behind this hybrid or push-pull strategy is that a pull system is used in the first instance to achieve economies of scale and a pull system is used secondary in order toRead MoreCustomer Service and Online Delivery Systems1122 Words   |  5 Pagesmay have a great product, but if it is not delivered to the customer when they need it, the customer will move to the competitor and the product will fail. 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