Trento Analysis - Case Study Example

Name : xxxxxx Tutor : xxxxxxx Title : Academic Report Institution : xxxxxxx @2011 Executive summary This report sets out to the discuss the logistics for instance, procurement, transportation and warehousing problems faced by Trento company as they tries to meet the expectations of Elle sport and their other consumers and how this the problems are to be resolved. The report further explains the step to be taken by Elle sport since Trento is not meeting the needs they had agreed on when signing the contract. The report also sets out to outline the initiatives that Elle sport should put in place so as to continue with the contract they had agreed on with Trento. Table of Contents Executive summary 0 Table of Contents 1 Background information 1 Introduction 2 Procurement problems faced by Trento and how to solve them 5 Transportation problems faced by Trento and how to solve them 6 Warehousing problems faced by Trento and how to solve them 8 Inventory control problems faced by Trento and how to solve them 9 Order processing problems faced by Trento and how to solve them 10 Figure 1. Supply chain concept 14 Bibliography 15 Background information Trento is a sport shoe manufacturing corporation. It supplies its supplies to diverse sport outlets and other retails among them Elle sport on a weekly basis. At present Trento have approximately fifteen local supplier and twenty abroad suppliers. In Trento the order process is done by procurement staffs that are also charged with the task of ordering other items range from office equipments to parts for mechanized equipment and machines. Currently the system used by Trento to make their orders is not computerized despite a lot of pressure from most of its major clientele. The order taking process is done by oral calls which are later trailed by written procurement orders. Sometimes the procurement staff writes the orders erroneously or the orders are debarred which means that the order process has to be redone thus wasting a lot of time. There is also a logistic group which is charged with the tasks of allotment, warehousing and inward freights. This group works separately from the other departments which include: procurement and the marketing department. Trento is finding it difficult to cater for the requirements of Elle which requires them to delivery the goods ten days from the date of order. This is because manufacturing of the shoes including the supply of the shoe parts, resources and accessories takes along time for them to be able to delivery the shoes within the ten days period. The earliest time that Trento could deliver to Elle sport is between fifteen to twenty days from the date of order. While sometimes the type of shoes specified by Elle could not be supplied on time for manufacturing schedule since some of its suppliers are from overseas. Currently Trento is evaluating its entire logistics and distribution channels in order to effectively conform to the customers needs and ensure that quality is adhered to. Introduction The concept of logistics is not new. The role of the allocation function (logistics), linked together with manufacturing function, has always been a vital factor to resolving many problems which take place in the business. Logistics can be defined as the streaming of supplies and services form the original place to the place where they will be used in order to comply with the requirements precisely stated by the consumer or the ordering association. It involves joining up of information, transportation, stock, warehousing, substance management, casing, and often security. Logistics services, information systems and infrastructure/ resources are the three components of this system and closely linked. Logistics is a canal of the supply chain which adds the value of time and place utility (Cooper et al 1997). The supply chain concept consists of several steps which include: demand and supply planning, data integrity, order and query management, stock management, POS and display, whousing and delivery and the last process is invoicing and cash collection. This concept is best illustrated in figure 1.To make this happen; haulage of goods, circulation, warehousing, procurement and order management must be executed together. This is a major task, particularly in a surroundings that is becoming more and more demanding, with customers expecting their products to be distributed as quickly as possible and according to their exact specifications. Companies must drastically adapt their logistics management strategy in order to compete in today’s turbulent marketplace, noticeable with ever-decreasing spinning times, increased rivalry and lower level of profit (Drucker 2001). In today’s world logistic is among the main functions in a company. Rationally the main targets of logistics can be subdivided into major parts that are performance and cost related. They have high due date dependability, short delivery time interval, and low stock level and high capacity consumption (Council of Logistics Management 1991). In cases where choices have to be made there is typically a substitution between these targets. Inbound logistics is concerned with the procurement and arrangement of equipments and parts or the finished stock from the sellers to the assembly plants, warehouses or retail stores. Outbound logistics is the process that is related to the keeping and movement of the end product and information from the end of the production line to the consumer. In today’s world the intricacy of production logistics can be mocked-up, evaluated, envisioned and optimized by plant replication software, but is constantly changing. In the business environment today logistics is becoming a vital element in winning and retaining customers. And also most companies view logistics as a major cost saving element. With the improved technology in today’s business world technology has created improved and enhanced chances for them to gain most in distributing the product to the customer. Successful logistics management perks up the advertising endeavor of a company, which can create benefit in the market place, by providing proficient transfer of goods to the consumer, and time and place value of products. Logistics must also work directly with manufacturing department as it provides the necessary materials and services to the manufacturing function, runs the flow of work in progress inside the organization, and make certain that the manufactured objects are amassed, shipped and received on time (stock & Lambert, 2001). Furthermore, with the growth and increasingly significant role of logistic in today’s business world, the distribution function no longer encompasses a small number of activities and roles that were seen as individual in their nature and were mainly taken care of by the departmental managers (Gattorna & Walters 1996). Logistic management gradually involves the management of the activities of conventional distribution together with the bridging of purchasing, material planning, casing, information technology and even research and development. Therefore logistic managers should be more and more concerned with the supply markets and in customer’s logistic matters. Logistics problems Bearing in mind the rising forces on companies to increase earnings and reduce cost, the growing role which logistic can play in making these accomplishments a reality, is getting increasing attention. Companies are mainly engrossed in the approach of reducing a company’s costs of doing business. Companies have looked inwardly and are trying to identify areas within the organizations for cost saving and yield increases, most organizations have found logistics to be an area with the most potential for the noteworthy cost savings (Philip 1999). Logistics has various functions. They include procurement, inventory control, warehousing, material handling, facility location, transportation, customer service and order processing. In this report we will look at the procurement, transportation, inventory control, order processing and warehousing problems that Trento is facing and ways in which these problems can be solved. Procurement problems faced by Trento and how to solve them Procurement can be termed as the attainment of products. Goods and services procured should be appropriate in terms of cost and in meeting the needs of the buyer. For this to be achieved goods need to be at the right location and be of the predetermined quality and quantity and at the right time. The procurement problem faced by Trento is incorrect information which is gathered at the time of ordering. This happens when ordering is done orally and the person receiving the orders may give erroneous information which at times causes the ordering process to be repeated all over again. This problem can be solved by replacing the current ordering system with a computerized ordering system due to the many benefits which are associated with it. The benefits which are associated with the computerized ordering system they include: long term cost savings for the organization, because labor-intensive duties of order captivation are replaced by the computer system, quicker order processing time, since the company placing the order may opt to order using the online system or through a computer system, Increased accuracy of order details, since the company ordering is entering all the data, JIT (just in time) can be useful, since the company can set up their ordering system to routinely place an order once items reach a definite limit in the warehouse this will in turn avoid "out of stock" items and make the flow of items be obtainable on time. Another benefit of the system is the decline of turnaround time in making phone calls to suppliers, placing orders and delivery which is involuntarily condensed as buyers can place the order instantaneously. This ensures purchases; in particular the critical ones are made on time, thus contributing to the general process competence. Transportation problems faced by Trento and how to solve them One of the major noticeable manifestos of logistic activities is the enlargement in freight transport due to the universal expansion of businesses. In particular globalization of industry, including arrangement, sourcing, manufacturing and marketing activities which have resulted in more intricate trading and much more developed transport arrangements (OECD 1992). The development of trade networks generates various needs for value added logistic management and gives rise to a large amount of individual drifts in logistics. In reference to this report transportation can be defined as the movement of goods or commodities used to make the finished product from one location to another. The modes of transport can be either by rail, air, road and sea. Transport is an important element in a business setting since enables trade to take place between the businesses involved. For industries, Logistics helps to optimize the accessible production and distribution processes founded on the same resources through management methods for promoting the effectiveness and competitiveness of endeavors. The key element in a logistics sequence is the transportation system, which joins the alienated activities. Transportation occupies one-third of the quantity in the logistics costs and transportation systems manipulate the performance of logistics system immensely. Transportation is required in the whole production procedures, from manufacturing to delivery to the final customers (Fair & Williams 1981). Only a good harmonization between each constituent would bring the benefits to a maximum. With poorly developed transportation systems, logistics might not bring its returns into full play. Besides, a good transport system in logistics actions could offer better logistics competence, reduce process cost, and encourage service quality. The upgrading of transportation systems needs the effort from both public and private sectors. A well-operated logistics system could boost both the competitiveness of the government and other individual enterprises. The transportation problem faced by Trento is that it takes a lot of time for them to deliver the required goods and also for the supplies to reach them. This mostly happens due to the order taking method which is currently been used. The transportation problem faced by Trento can be solved by restructuring the current logistical systems this can be done by concentrating production and stock capacity in fewer sites. Absorbed production capability will allow companies to take full advantage of economies of scale in manufacturing at the expense of making their logistic system more transport concentrated and broadening lead-time to customers. The transportation problems can also be solved by repositioning of their current supply chains. Another common way of solving the problem is by alteration of transport and warehousing management. This is done by most favorable use of dissimilar transport modes and by the increasing use of ICT. Items which are attributed with low added value are carried by sea while those with high added value are carried by air some few hours prior to their use based on the location where they are required. Warehousing problems faced by Trento and how to solve them Warehousing in the modern day organization is termed as the storage of goods for commercial purposes. Warehouses are essentially used by manufacturers, importers and exports. Warehouses are usually large plain buildings which are situated at major manufacturing area of major cities and towns. In a traditional warehouse goods are received from vendors and stored when a consumer requests for the items the item is selected and sent to the target customer. In some businesses they are planned in such a way that loading and unloading of goods is done directly from the medium which transported it. There exist common warehousing processes which include: getting of goods, examination, proper storage, order selection and send off of goods. Warehousing can be done on a daily, weekly or monthly basis. The problem of warehousing can be solved by computerization. This will only require skillful workers to work and handle the tasks. For the warehousing function to function competently, the facility must be niche correctly. Slotting address the issue of which storage medium manufactured goods is picked from, how it will be picked. With proper slotting plan a warehouse can develop its stock requirements such that those supplies which came in first will be the first to be consumed which will in turn manage labor cost and boost productivity. The warehousing problem in Trento can be solved by using bonded warehouses. These are warehouses in which goods are stored without custom duties being paid until they are removed from the warehouse. Such warehouses are used for the storage of import merchandise, subject to duty, until the duties are paid or the goods reshipped without entry. The problems in warehousing can also be solved by placing the warehouses in the right place so as to meet the service of obligation of the customers and any internal cost requirements. Another way to solve the problem is looking at how your current warehousing network is this will help you in organizing your warehouses in such a way that the delivery of goods is done at the right time without any delays. Another common way of reducing the warehousing problems is cross docking. This can be termed as a logistic activity that attempts to cut on cost and total lead time. Cross docking essentially eradicates the stock holding function of a warehouse while still allowing the warehouse to serve its consolidation and shipping functions. In cross docking the main idea is to transfer external shipments unswervingly to departing trailers without storing them in between. Another way of solving the warehousing problems is by implementing a warehouse management system and a warehouse control system. These systems will assist in planning a weekly activity estimate based on factors such as statics and drifts. The system will also work on real time to get the work done in the most effectual means. Inventory control problems faced by Trento and how to solve them This can be termed as the administration of supply, storage and ease of access of items in order to guarantee an ample supply without extreme flood. Inventory control is concerned with diminishing the total cost of inventory. Another term that is commonly used to refer to this is stock control. when one is making decisions on inventory control several factors need to considered they include: the cost of holding the stock based on the interest rate, the cost of placing an order for row material stocks) or the set-up cost of manufacturing and the cost of shortage what is lost if the stock is scarce to meet all demand. The inventory control problems of Trento could be solved by implementing an inventory control system which will aid in the process of administration and assigning of materials been used. This system mostly relies on barcodes so as to offer repeated recognition of inventory objects. Studies have shown that organizations who have already applied this system have been able to lessen the rate of out stock by a certain percentage. An inventory control system could be used to computerize a sales order completion process. The inventory systems may also be real time. In such a way that inventory dealings are traced at the moment at which they occur. One of the advantages attributed to using the inventory management software is that it is cost saving. The inventory management software helps the company to cut on its expenses by reducing the amount of redundant parts and products in storage it also helps companies keep lost sales to a minimum by having sufficient stock on hand to meet the current customer demand. Another advantage of the system is that it helps distributors, manufacturers and retailers to optimize their warehouse in such a way that if certain products are often sold together or are more popular than others, those products can be grouped together or placed near the delivery area to speed up the process of picking packing and shipping to the customers. other benefits of the system is that it keeps an up to date data on the inventory situation and level and can be viewed by administration for them to know about their current stock levels. And lastly the system is time saving. Company managers can allow may workers to aid in inventory management. This can speed up the inventory management process and save managers time. Order processing problems faced by Trento and how to solve them Order processing starts with the acceptance of an order from a customer. It may be obtained by a seller, be telephoned in, or arrive by mail. Regular buyers and sellers are often linked by electronic means. As the buyer’s stock become low, an electronic purchase order is created. It is conversed to the seller, whose computers will establish whether the goods are currently available, and the seller will notify the buyer, still using electronic methods, that the order will be packed and transported by a certain date. An ordering system has several objectives which must be met. This objective includes: it should process the data produced by and about dealings. It should also preserve a high degree of accurateness, ensure data and information reliability and accurateness are achieved, it should assist the management in generating timely credentials and reports, increase labor effectiveness, help provide augmented and superior service and thus the company gains a competitive advantage over its competitor. There exist certain factors that determine the specific process flow of the ordering process they are: nature of shipped product, nature of orders made, nature of shipping casing, transportation costs, accessibility and cost of work workforce and the value of shipped products. The problem of ordering process can be solved by implementing a computerized order processing system. This system will make sure that ordering is done at the stipulated time and the right quantity. The ordering system will replace the manual order processing which is been used currently in the organization. With the process been computerized they are due to attract more customers because of better service delivery. Steps to be taken by Elle sport Elle sport is large Australians retail shop with about fifty outlets and is currently seeking amore efficient distribution system from suppliers. Elle sport has made a contract with Trento but it seems that Trento is not fulfilling the requirements they had stated in the contract. Some the requirements that are not been met are despite pressuring the company so much to change their current ordering system Trento seems not to be changing. They propose that Trento should replace their current ordering system with a computerized one. Another requirement that Trento has defaulted is the ten day delivery time for ordered items. Trento seems to be taking more than the ten days since the manufacturing of shoes which include supply into Trento shoe parts, materials and accessories is too short of a lead time for the finished shoes to be delivered with the ten days predetermined time and on average the earliest that Trento could deliver to Elle sport was between fifteen to twenty days from the day the shoes were ordered. Elle sport could take several actions due to Trento falling to meet their demands one of which could be to cancel the contract and another option will be to cooperate with Trento and resolve the issues. This would be the best suited alternative since it may take time for them to get another company to supply it with shoes. Conclusion Facing the worldwide competition, the development of logistics system should be advanced by both private companies and government, distinguishing three revolutions in business that have considerable impacts on the purchasing and supply approaches of the manufacturing sectors. These three revolutions are: globalization of trade, the coming of the information era and more challenging consumer needs and constantly changing customer tastes. Any movement of goods from the organization largely relies on logistics. Logistics play a major part in, and have a significant impact on, well being of a company. The aim of logistics is to continuously provide the correct amount of the correct product to the consumer, in the right form and at the required place, time and price (Chang 1998). The usefulness and competence with which the company and its logistic function attain this has a major impact on the competitiveness and achievement of a company. For logistics the main goal will be to the upgrading of overall competence by means of incorporated logistics management and reverberated logistic decisions. The various logistics activities, and the integrative management thereof, will play a continuous and significant role in determining whether a customer gets the right product, at the right place, in the right condition, at the right cost, and at the right time. Administrating the various activities as an incorporated system must not only lead to the maximization of customer satisfaction, but also to the lowest achievable cost of doing business. In this way logistic management can contribute appreciably to the company’s effectiveness, competitive advantage and productivity. Logistics should have high visibility in companies. Increased acknowledgment is being given to the involvement that logistics activities and the management can make towards the flourishing and competent functioning of an organization. Logistics is therefore a definite asset to a company. Adopted From: http://www.authorstream.com/Presentation/Wajih-174265-supply-chain-management-ami-business-finance-ppt-powerpoint/ Figure 1. Supply chain concept Bibliography Chang, Y 1998, Logistical Management, Hwa-Tai Bookstore Ltd., Taiwan. Christopher, M 1999, Logistics and Supply Chain Management, Financial Times Pitman Cooper, M, Lambert, D & Pagh, J 1997, Supply chain management: more than a Council of Logistics Management 1991, Definition of Logistics, viewed 3rd September 2011, . Drucker, P 2001, Management Challenges for the 21st Century, Harper Business, New York. Fair, M & Williams, E 1981, Transportation and Logistics, Business Publication Inc., USA Gattorna, J & Walters D 1996, managing the supply chain, Macmillan, London. new name for logistics, International Journal of Logistics Management, Vol. 8, No. 1, 1-13. OECD 1992, Advanced Logistics and Road Freight Transport, OECD Transport, Paris Philip, B 1999, “Changing Scope and Direction: Managing Supply Chain” in Donald Publishing, London. Stock, J & Lambert, D 2001, “Strategic Logistics Management”, McGraw-Hill International. Waters (Ed.) Global Logistics Distribution Planning: Strategic Management, London, Kogan. Read More