UNG Juliana – MA2N0239
GMBA 2ND SEMESTER
SUPPLY CHAIN MANAGEMENT
ASSIGNMENT #3 – 2014.10.24
CASE STUDY : H. C. STARCK, INC.
1. Why are the lead times so long?
It seems that majority of the longest orders are actually “blanket orders”. It was initially thought that the long lead times
may be related to a possibility of shortage over materials. But truth is that the problem is located way above in the order
flow: in theory, the information flow related to incoming order is supposed to be controlled by the ERP SAPR/3, but in
reality, the employee ignored the use of the ERP system, and a manual paper-based process is instead used for the
transmission of the order from Sales service to Operations department. Indeed, it appears that there is a substantial waste of
time during the SO-GI phase. That is the phase from the moment the sales entered the order in to SAP until the one the plant
actually started manufacturing the goods. The long time used to treat the orders may be explained on the one hand by the
slow manual process of transmitting process, and on the other hand by the current production policy, a make-to-order policy.
It results as this: first, since the production routing used a make-to-order policy, it puts an important binding over the
production process. Indeed, the customers get more flexibility over the order (style, shape…), but then, the production
depends on what and when the order is decided. And thus, the lead times takes longer. And then, the lead times is even
more increased with the fact that basically before getting the final product, the manufacturing goes through 3 steps. And,
because then problems also occur when the sales department decides on creating hard orders while orders are not confirmed
for sure. Consequently, inexact date over orders may appear and some waste over production might occur since the
manufacturing was set but if any modification came up over requirements, thus it just increases the inventory with too much
various on-going goods that may not be of use for other orders. Finally, the third reason to the long lead times is related to
the ‘drumbeat meeting’ organization: if not on the daily list, orders are postponed until it reaches close to the deadline. So,
orders which could have been manufactured and delivered earlier are delay as far as possible. The reasons above may be
considered as the main factors that affect et explain the long lead times.
2. How might Starck reduce or affect the lead times?
Starck may consider on finding a solution to solve the long delay between the reception of the orders and the starting of
operations to manufacture the goods, and to set stocks of some of the standard intermediate sizes. In the first case, the
solution may allow the company to fasten the input of the orders, and then gain some more time over the lead times. In the
second case, it may also help to fasten the manufacturing process, if the company manages to set up stocks for intermediate
size materials. But to successfully accomplish that, the company may forecast as accurately as possible the market demand
and the customers’ needs. Thus, the company has to look into the kind of items that are the one most asked for. But then, it
is supposed that the company manage to forecast the level of material needed in order to answer as well as possible the
different kind of orders requested. Besides, it would also be interesting to improve the ERP system so it may be more
flexible and of better use for the company’s employees, so it may results in getting rid of the long lead times because of the
uncertainty related to the specific and final orders and to improve the management of the shipment of the orders; that could
be resumed shortly as developing and improving the efficiency and productivity of the whole manufacturing process.
3. What are the costs from reducing the lead times? What are the benefits from reducing the lead times?
In order to reduce the lead times, and considered the possible solution developed above, the company may come across the
cost of improving the skills of employees (so they can handle better the use of ERP to input orders) as well as the ERP
system itself (so it may be easier to take into account the various possibilities related to orders: forecast, anticipation, final
decisions over the orders…); to complete this, the company may need to recruit new professionals to take care of both
computer-related field (recruit new employee or to subcontract the management of the system to an external company).
Beside this, the company need to considered potential high costs to block a stock of standard intermediate size materials. As
for the benefits that the company might gain from reducing the lead times is that, it may increase the efficiency of the
manufacturing operations, shortened the usual lead times by any waste generate by lacks of the internal management.
Consequently, it may improve the company’s image before customers and secure them so they do not turn towards others
competitors (Chinese companies), in order to ensure the sustainability of the company’s activity on long term period.