Running head: PROBLEM SOLUTION: KUIPER LEDA
Problem Solution: Kuiper Leda
University of Phoenix
Problem Solution: Kuiper Leda
Inventory management involves planning and controlling inventory from the raw material stage to the final delivery. Businesses rely on input from suppliers, which are required to manufacture their products. Managing a business’ productions schedule efficiently in order to keep their commitments to their customers is vital. At a minimum, businesses need an adequate supply, but they also need to be able to handle an excess or shortage of inventory. This is where capacity planning and management also comes into play. Kuiper Leda ...view middle of the document...
The new line has been in operation for 6 months and has enabled KL to make progress in the international market. However, with KL’s capabilities come issues and opportunities.
One of the issues that KL is facing is its capacity limit. Midland Motors, an American Original Equipment Manufacturer (OEM), has placed an annual order of 250,000 ECUs and 35,000 RFID tags to facilitate inventory control in their factory. This order is urgent to Midland and KL, by whatever means possible, will need to manufacture and supply higher volumes over its regular orders. This issue is also known as a bottleneck, which is defined as “any resource whose capacity is less than the demand placed upon it. A bottleneck is a constraint within the system that limits throughput… it is that point in the manufacturing process where flow thins to a narrow system” (Chase, Jacobs & Aquilano, 2005, p. 725). With this capacity constraint come opportunities. KL now has the opportunity to foster a closer relationship with Midland Motors through this large order. Because Midland has had unprecedented business and is a large auto company, KL could benefit from their business and relationship.
The next issue KL faces is the need for a better process of dealing with excess stock and production; especially KL’s microchips, which are partly outsourced and partly going to be manufactured in-house. Inventory control and supply chain management is crucial with mitigating such an issue. “It is important for managers to realize that how they run items using inventory control logic related directly to the financial performance of the firm” (Chase et. al, 2005, p. 605). If KL does not come up with an efficient inventory management plan they will be causing themselves unnecessary lost revenue. KL’s opportunity comes from the development of a new inventory management plan. The plan should consider the forecast errors, service levels required by KL’s clients, an increasing lead time for manufacturing each device or a batch, and priority of demand.
The fluctuating demand patterns are another issue KL is facing. These fluctuations are due to a substantial growth and demand over the past two years for ECUs, mainly because of the increase of new car models introduced into the automotive industry. This has led to KL expediting many orders, which in turn has eaten into KL’s ECU margin. When uncertainty is relevant in demand safety stock is needed. “…Safety stock is needed to manage the risk created by demand variability” (Chase et. al, 2005, p.605). KL must overhaul its current distribution system. Until the present, KL’s distribution system has been served from central supply at the plant, but KL expects to capture a larger portion of the market for ECUs in the US . With a new distribution strategy, KL will be able to supply the increasing demand for new orders in the US and internationally.
KL has been successful with its new and existing product lines and their customer base has been steadily...