Problem: CASE STUDY CONCEPT: Managing Supply Chain Risk and Resiliency for Business Continuity.
Global supply chains can suddenly present you with unexpected challenges. They are more unpredictable than local or regional supply chains because there are so many more players involved. And because they are exposed to natural as well as man-made events happening in different parts of the globe.
Fantastic Corporation designs and makes a fantastic new home entertainment center that performs to demanding specifications, and it delivers impressive results. While you are focused on supporting Fantastic Corp's expansion into Europe (or just trying to keep up with demand in North America), something unexpected happens on the other side of the world. An earthquake and tsunami strike suddenly, and production of a critical component is halted because of damage done to the factory of one of your key suppliers in Japan.
The Fukushima Factory is now out of commission. It is expected to take up to eight months to repair damage and resume production. You have some inventory of this critical part already in your supply chain at various locations. You need to make best use of the inventory you have available, and find a new supplier as quickly as you can. Otherwise a grim scenario will play out for your company. For lack of this part, production will come to a halt. For lack of production, stores will run out of inventory. And for lack of inventory, customers will be turned away. Sales will plummet. If Fantastic can't meet customer demand, then a competitor will.
You need to find a new supplier for this critical component - the Fantastic CPU. When you do find a new supplier, you need to reconfigure your supply chain to incorporate that new supplier and minimize disruptions to the product assembly operation in the Los Angeles factory. As much as possible, you need to avoid reductions in product amounts delivered to stores selling the company's home entertainment center. That is the only way to keep sales up, and keep competitors from taking away customers that would otherwise buy your product.
This case study is an introduction to business continuity and supply chain risk management. It shows what can happen to global supply chains when an unexpected event occurs. It picks up where the "Fantastic Corporation - Business Expansion" case study ends. It uses the expanded supply chain model you created while working on that case study and takes it forward. There is also an option for using this case study if you did not work through the previous Business Expansion case.
If you created a supply chain model during your work on the Business Expansion case for Fantastic Corp, then use that model as you work through this case study. If you did not work on the Business Expansion case, or do not have a supply chain model that runs for 30 days, there is a supply chain model in the library that you can use. It is labeled "Fantastic Corp V2 30-Day". It does not have the expansion needed to support Europe, but it will run the existing business in North America for 33 days.
This is a case where extra inventory (or planned safety stock) that may have built up in your global supply chain will come in handy. Inventory often builds up in spite of people's best efforts. You may not have exactly planned to let that happen but sometimes things work out, and because of this extra inventory you may have a bit more time to do what needs to be done to handle this disruption.
As you work through this case you will come to appreciate that "extra inventory" and "planned safety stock" are the same thing, but viewed from different perspectives. When conditions are stable and predictable, then it makes sense to reduce extra inventory through use of just-in-time (JIT) product delivery and smaller order sizes. But when conditions suddenly become unstable and unpredictable, then companies need to be prepared for disruptions by maintaining planned safety stocks of critical products. The question is always to determine what are appropriate levels of safety stock. And also, to determine which products are most critical and thus needing higher levels of safety stock. Answers to those questions keep changing as the world itself changes.
A process for on-going supply chain risk management using supply chain simulations is presented at the bottom of this case study. Also presented are thoughts and comments on this case from a professional supply chain risk manager. Scroll down to "Business Continuity and Supply Chain Risk Management".
You need to find a new supplier to replace the component part that you can no longer get from the crippled factory in Japan. Your company has decided to look for a new supplier in Malaysia. Malaysia is not as stable a country as Japan, and there are new risks involved in doing business with a supplier in Malaysia. This new supplier may be only an interim supplier while your Japanese supplier makes repairs to their factory, or it may become a long-term supplier for your company. You will decide based on the research and simulation results you observe.
Do the best research you can with the time available. Do web searches on key words and phrases; scan the websites and information that comes up. Now answer the questions below-
1. Fantastic Corporation has serious issues when it comes to unexpected disruptions. These disruptions have made production come to a halt. You are to state how you are going to find a new critical part supplier to further minimize business operations.
2. Explain your main objectives and recommendations on how to achieve the objectives in ensuring no more stoppages happen.
3. Explain how you are going to have a buffer stock to ensure production continues and ensure there are safety reorder points available.
4. The issues have made Fantastic Cooperation to turn customers away, how can they make sure they do not need to do-this seeing that if they turn customers away they will go elsewhere forever.
5. "You need to find a new supplier for this critical component". Why limits the search? How can you find a new supplier for the entire package? Take this as an opportunity and use the marketing department to sell a "new and improved" version etc.
6. What is your new risk and contingency plan?