Supply chain management - Task 13

CILT UK Professional Diploma in Logistics & Transport Supply Chain Management Module

Supply Chain Management

Task 13Internal Audit

Prepared for Samantha Mars

Introduction

An internal audit is a valuable exercise which enables a business to identify risks and assist in improving processes and functionality within the company. The audit will provide insight to all relevant stakeholders to ensure the business has effective controls and procedures in place and assist to improve the supply chain.

This internal audit will not suggest improvements from the results. The data used in this audit has been obtained from the SCILplc world and from previous tasks completed by myself. The structure of the audit will follow the layout as provided in the Supply Chain Management resource material.

There will be six sections to the audit:

Section One Demand Profile

Section Two Supply Profile

Section Three Costs

Section Four Service

Section Five Resource Utilisation

Section Six Planning Processes

Section 1 – Audit Demand Profile

NZ Student: Helen McGintyModule: Supply Chain Management

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Customers

Bi-Flo has 30 different customers and four different customer groups. These are wholesalers, distributors, OEM’s (original equipment manufacturers) and export. The percentage of demand volume for each group is as below:

Customer Group No. of Customers

Location of Customers

% of Demand

Wholesalers 10 C1 – C10 41Distributors 10 C11 – C20 26Export 5 C21 – C25 19OEM’s 5 C26 – C30 14

Each customer places and receives an order everyday (7 days a week). Each order can contain the entire range of Bi-Flo products. The map below shows the geographical locations of each customer within Homeland.


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The demand in terms of volume by customer is shown below. The list begins with the smallest customer by volume (C17) and ends with the largest (C5).


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Customer Customer Type Bi-Flo Volume(units)

C17 Distributor 488,303






C21 Export 631,964


C22 Export 676,399

C23 Export 720,478


C24 Export 765,475

C25 Export 809,774


C26 OEM 851,592

C27 OEM 893,409


C28 OEM 932,219

C10 Wholesaler 955,698

C29 OEM 967,633

C9 Wholesaler 998,335

C30 OEM 998,952

C1 Wholesaler 1,024,738








The demand in terms of revenue by customer is shown below. The list begins with the smallest customer by revenue (C17) and ends with the largest (C4).

Customer Customer Type Bi-Flo Revenue($H)

C17 Distributor 7,207,040



C21 Export 8,069,222



C22 Export 8,653,756


C23 Export 9,228,587


C24 Export 9,803,184

C25 Export 10,359,414




C26 OEM 14,503,668

C27 OEM 15,185,606


C28 OEM 15,803,509

C29 OEM 16,362,083


C30 OEM 16,845,921










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ProductsBi-Flo currently has three different products Dependable, Excellent and Favourite. Each product group consists of a range of colours, styles and qualities as displayed in the table below. In total there are 1030 SKU’s.

PRODUCT No. of Styles No. of Colours No. of Qualities per Colour No. of Line Items

Dependable 4 7 10 280

Excellent 3 10 10 300

Favourite 5 9 10 450

TOTAL 12 26 30 1030

Dependable and Excellent are manufactured on site by Bi-Flo and Favourite is out sourced from Forexland.

Dependable and Excellent are delivered from the factory on articulated vehicles with curtain sides containing 24 pallets. Each pallet of Dependable contains 3600 items and Excellent; 496 items.

Favourite is delivered from the supplier unpalletised. Once sorted by Bi-Flo, each pallet contains 1444 items.

The products all vary in size and weight with Dependable being the heaviest but also the smallest and Excellent being the lightest but the largest.

Dependable Excellent FavouriteWeight per unit 0.16 0.03 0.12

Cubic m per unit 0.0006 0.0045 0.0015

Dependable has the highest demand by product:


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Year -2 Year -1 Last year -

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000 Historic Volumes in Items

Dependable

Excellent

Favourite

The graph below shows the demand of the three products over time (by month).

Section Two – Supply Profile

Audit the Supplier Profile

The Favourite product shows as having a stable demand over the 13 months as shown on the graph. Although the demand rate varies over time; there is no suggestion of an increasing or decreasing trend.


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1 2 3 4 5 6 7 8 9 10 11 12 130

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Demand C24 by Period in Units Dependable

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Excellent represents having a slight seasonal increase in volume demand. The changes in demand over time are not dramatic and appear to increase gradually.

Demand for Dependable over time shows a step seasonality pattern on the graph. This means the demand pattern has a marked change which occurs relatively quickly for each season.

From the graph we can see that demand does spike during the year, especially with Dependable, which is when Bi-Flo experience availability issues with their products. Samantha Mars and James Garrick both mention these availability issues in the Bi-Flo meetings.

The information collected shows that the core of the business is with the Wholesalers who generate the highest revenue. The wholesalers are located at C1 to C10 within Homeland.


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Section Two – Audit Supply ProfileBi-Flo currently sources its raw materials from Deltaland and Epsilonland for the manufacture of Dependable and Excellent. Favourite is supplied as a finished good from Forexland.

Dependable Excellent FavouriteDestination C2 C25 C24Deltaland Suppliers 6 2 -Epsilonland suppliers - 4 -Forexland Suppliers - - 1

All raw materials for Dependable and Excellent are bought on an ex-works basis from suppliers. The deliveries are made via sea freight and are containerized. Suppliers in Deltaland and Epsilonland supply raw materials on a make-to-order basis and are contracted to hold a minimum of two months stock to avoid stock outs but they are currently not complying with this requirement.

The raw materials purchased are plastic, paper and other synthetic materials manufactured to make products used in domestic appliances.


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All raw materials for Dependable and Excellent; and the finished product Favourite are sent from suppliers unpalletised in containers. The boxes must be unloaded, sorted and palletised before they can be stored.

The factory at C2 received 157 loads in total from Deltaland suppliers. The average lead time from suppliers in Deltaland is 26 weeks and a maximum of 34 weeks.

Supplier Destination Loads Cost per load Total Cost

Delta1 Factory C2 13 1600 20800Delta1 Factory C2 13 1600 20800Delta1 Factory C2 13 1600 20800Delta2 Factory C2 13 1600 20800Delta3 Factory C2 13 1600 20800Delta4 Factory C2 25 1600 40000Delta5 Factory C2 25 1600 40000Delta6 Factory C2 14 1600 22400Delta6 Factory C2 14 1600 22400Delta6 Factory C2 14 1600 22400Total 157 251200

The factory at C25 received 353 loads in total from Deltaland and Epsilonland suppliers. The average lead time from suppliers in Deltaland is 26 weeks and maximum of 34 weeks. The average lead time from suppliers in Epsilonland is 20 weeks and a maximum of 26.

Supplier Destination Loads Cost per load Total CostDelta4 Factory C25 11 1600 17600Delta5 Factory C25 11 1600 17600Epsi1 Factory C25 32 1500 48000Epsi1 Factory C25 32 1500 48000Epsi1 Factory C25 32 1500 48000Epsi1 Factory C25 32 1500 48000Epsi2 Factory C25 43 1500 64500Epsi2 Factory C25 43 1500 64500Epsi3 Factory C25 53 1500 79500Epsi4 Factory C25 64 1500 96000Total 353 531700


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Total loads received by week at C2

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The Favourite products are delivered from suppliers in Forexland into the distribution centre at C24. The orders for Favourite are placed once a year for delivery in 52 week’s time. Once all the product has been sold, Bi-Flo source a different product and/or supplier.

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Loads Received of Favourite C24

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The audit reveals the long lead times from suppliers and the irregularity of supply for all three sites.

Forexland suppliers can offer a low purchase price for Bi-Flo’s commitment to one year’s worth of product and will only make/ship in large quantities.


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This approach to inventory management makes forecasting difficult because of the yearly ordering and incurs long lead times from suppliers.

Although the availability with this approach is better than the manufactured products for majority of the year; product availability for Favourite is affected when approaching the year-end cycle.

Phil Garrison and Samantha Mars both mention the issues with Favourite.

Phil Garrison quotes: “…This whole concept is an experiment for us. The problems we have had with forecasting have made it difficult to get the levels of availability we need without incurring massive inventory costs. The nature of the product is very simple with little technical advancements, but the product can be simply slotted into the appliance. Although they are not replenishable, we can substitute alternatives that are of a similar quality. Coming from the Far East the cost of manufacturing is also lower”.

Section Three – Audit Costs

Fixed Costs


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The table below identifies the fixed costs for Bi-Flo. Fixed costs are identified as costs that do not vary with the level of supply chain activity which they are supporting.

Location Description Cost (annually)C2 Warehouse rent and rates 165,992

Factory building 963,360Mould Machines 4,800,000Jigs 19,500PPT’s 168,480Counter balance trucks 17,160

C25 Warehouse rent and rates 571,556Factory building 1,497,300Mould Machines 4,000,000Jigs 18,800PPT’s 137,280Counter balance trucks 17,160

C24 DC rent and rates 321,786Powered pallet trucks 106,080Counter balance trucks 25,740Reach trucks 28,860

For fixed costs, insurance and depreciation must be considered. In this instance, it includes insurance and depreciation for transport costs associated with inbound transport from C25 and delivery to customer as below:

Inbound from C25Insurance 3,000Depreciation 7,824Depreciation trailer 2,321

Delivery to CustomerInsurance 16,736Depreciation 77,900Depreciation trailer 774

Variable Costs

The table below identifies the variable costs for Bi-Flo. Variable costs are identified as costs that are related to supply chain resources which are only incurred when that resource is being used.


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Location Description Cost (annually)C2 Racking spaces 6,348

Pallets 5410Power (warehouse) 37,218Power (equipment) 1,800Power (factory) 432,000Moulds 62,400,000Raw materials 49,195,274Transport (inbound raw materials) 251,200

C25 Racking spaces 15,014Pallets 13,035Power (warehouse) 92,186Power (equipment) 1,800Power (factory) 483,000Moulds 52,000,000Raw materials 61,778,669Transport (inbound raw materials) 531,700

C24 Racking spaces 19,430Pallets 11,969Power (distribution centre) 66,211Power (equipment) 20,700Raw materials 9,690,302Transport (inbound raw materials) 90,000Transport (3rd party from C2) 50,990Transport (inbound from C25)

VED 1,800Fuel 19,100Tyres 1,264Tyres (trailer) 1,388Maintenance 4,549Maintenance (trailer) 2,007

Transport (delivery to customer)VED 2,910Fuel 171,130Tyres 10,323Maintenance 62,351

Direct Costs

The table below identifies the variable costs for Bi-Flo. Variable costs are identified as costs which can be directly attributable to a specific area of the supply chain. Direct costs can be both fixed and variable.


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Location/Area Description Cost (annually)C2Sourcing Inventory controllers 30,000

Inventory planners 144,000Inventory assistants 36,000Transport planning costs (inbound) 235,500

Manufacturing Grade 1 operatives 4,356,000Grade 2 operatives 5,340,000Supervisors 744,000Shift managers 180,000Quality control 336,000Maintenance 667,500Movers 972,000Shift factory managers 30,000Shift supervisors 48,000Factory planners 96,000Planning assistants 44,500

Warehousing Truck drivers 111,250Supervisors 72,000Manager 30,000

C25Sourcing Inventory controllers 30,000

Inventory planners 144,000Inventory assistants 36,000Transport planning costs (inbound) 235,500

Manufacturing Grade 1 operatives 4,122,000Grade 2 operatives 4,383,250Supervisors 432,000Shift managers 180,000Quality control 384,000Maintenance 445,000Movers 792,000Shift factory managers 30,000Shift supervisors 48,000Factory planners 72,000Planning assistants 22,250

Warehousing Truck drivers 111,250Supervisors 72,000Manager 30,000

C24Distribution Senior inventory managers 36,000

Inventory controllers 90,000


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Inventory planners 288,000Inventory assistants 72,000Operatives grade 1 540,000Truck drivers 400,500Supervisors 216,000Manager 90,000Sen manager 36,000Driver costs (customer delivery) 544,252Transport (inbound from C25) 103,808Agency cover 13,156

Overhead Costs

The table below identifies the overhead costs for Bi-Flo. Overhead costs are identified as costs that cannot be directly attributable to a supply chain function but relate in part to that function. Overhead costs include management costs where the manager has responsibility for a number of supply chain areas.

Location Description Cost (annually)C2 Admin Site manager 50,000

Senior admin mgr 36,000Admin mgr 30,000HR mgr 30,000Finance mgr 30,000Supervisors 96,000Assistants L2 22,250Assistants L1 144,000

C25 Admin Site manager 50,000Senior admin mgr 36,000Admin Mgr 30,000HR mgr 30,000Finance Mgr 30,000Supervisors 96,000Assistant L2 22,250Assistant L1 144,000

C24 Admin Site Manager 50,000Senior admin mgr 36,000Admin mgr 30,000HR mgr 30,000Finance mgr 30,000Assistant L2 22,250Assistants L1 324,000


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Cost to Serve

Below is a completed cost to serve for the three Bi-Flo products Dependable, Excellent and Favourite. All costs are in Homeland dollars ($H)

C2 C25 IMPORTOPERATING COSTS Dependable Excellent Favourite TotalUnits of Throughput 16,116,388 7,051,635 1,881,611 25,049,634Units % 64.33% 28.15% 7.51% 100.00%Raw materials 49,195,274 61,778,669 9,690,301 120,664,244Inbound transport 251,200 531,700 90,000 872,900Material warehouse 447,178 968,501 - 1,415,679Production 81,378,840 68,874,630 - 150,253,470Transport to DC 50,990 147,060 - 198,049DC costs 1,211,659 530,154 141,462 1,883,275Customer transport 570,274 249,518 66,580 886,372Total 133,105,415 133,080,232 9,988,343 276,173,989

OVERHEAD Dependable Excellent Favourite TotalInventory Planning 135,093 59,115 15,771 210,000Factory Planning 218,500 172,250 - 390,750Administration 281,926 123,367 32,913 438,250Transport Planning 151,497 66,293 17,686 235,500Total 787,016 421,026 66,370 1,274,500

Total Cost 133,892,431 133,501,257 10,054,713 277,448,489

Units 16,116,388 7,051,635 1,881,611 25,049,634Kgs/unit 0.16 0.03 0.12 0.3100Cube m/unit 0.0006 0.0045 0.0015 0.0066Kgs 2,578,622.00 211,549.05 225,793.32 3,015,964Tonnes 2,578.00 211.00 225.79 -Cube 9,669.83 31,732.00 2,822.00 44,224Cost per unit 8.31 18.93 5.34 -Revenue per unit 14.12 20.54 10.22 -Profit per unit 5.82 1.61 4.88 -Cost per kg 51.92 631.07 44.53 -Cost per cube m 13,846.41 4,207.10 3,562.45 -Revenue per kg 88.27 684.74 85.20 -Revenue per cube m 23,539.14 4,564.90 6,815.75 -Kgs per cube m 266.67 6.67 80.00 -Profit Margin % 70.00% 8.50% 91.32% -


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***Transport Planning Analysis C2 C25 C24 Total

C2 Planning 1,363,008 - - 1,363,008C25 Planning - 596,435 - 596,435C24 Planning - - 159,120 159,120Total 1,363,008 596,435 159,120 2,118,563

Analysis of the total data collected shows that the cost to serve for each product overall is as follows:

Dependable $8.31 Excellent $18.93 Favourite $5.34

The cost per product by weight is:

Dependable $51.92 per kgs Excellent $631.07 per kgs Favourite $44.53 per kgs

The cost per cubic metre is:

Dependable $13846.41 per m3

Excellent $4207.10 per m3

Favourite $3562.45 per m3


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C25 has the highest fixed costs at $6,242,096

C25 has the highest variable costs at $114,432,887

C2 has the highest direct costs at $13,472,750

C24 has the highest overhead costs at $522,250

In this instance the cost to serve shows us that our three products vary in weight and cubes and therefore vary in cost per kg/m3. For example, Dependable is heavier than the other two products but is also the smallest. Whereas Excellent is the lightest product, it is also the largest.

The cost of raw materials and inbound transport for Excellent is higher than that of the other manufactured product Dependable by 26%.

Whereas Excellent generates the greatest revenue per unit, its associated costs generate the least amount of profit at 8.5% (Dependable at 70% and Favourite at 91.32%).

Favourite is the only purchased finished good and although generates the highest profit margin, it equates to only 7.5% of the total throughput figures.

The cost of transportation for Excellent is almost three times higher than that of Dependable to the distribution centre

Section Four – Audit Service


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Bi-Flo has 30 customers who all submit an order everyday (7 days a week). These orders are processed by the administration assistants and communicated to the distribution centre for order picking. The orders are picked and dispatched for same day delivery if they are received by the supplier before the dispatch cut off time and if they are available.

Customer Groups

Bi-Flo has 30 different customers and four different customer groups. These are wholesalers, distributors, OEM’s (original equipment manufacturers) and export. The percentage of demand volume for each group is as below:

Wholesalers41%

Distributors26%

OEM's14%

Export19%

Bi-Flo asked its 30 customers to rank the business from a qualitative point of view. The information collected in the survey was all a number based ranking system There are three sections and they results are graphed below.

The below chart shows the results from the data collected from the 30 Bi-Flo customers based on their needs in terms of the 12 service attributes as displayed. Customers were asked to rank listed in order of 1 to 12 where 1 is the most


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important to them and 12 is the least. To look at this data as overall averages, I have added the numbers together to get a total figure used in the chart. The lowest bars represent the most important to our customers. Although in the survey, Price received the most 1’s being deemed most important by more customers, overall Product Availability has the lowest number as an average from all customers.

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Service Attribute

The below chart shows the results from the data collected from the 30 Bi-Flo customers based on their rating of importance of the 12 service attributes as displayed. Customers were asked to rank listed in order of 1 to 5 where 1 is the least important to them and 5 is the most. The highest bars represent the most


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important to the customers. The chart shows that reliability of supply is rated most important.

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Service Attributes

The below chart shows the results from the data collected from the 30 Bi-Flo customers based on their rating of Bi-Flo’s performance of the 12 service attributes as displayed. Customers were asked to rank listed in order of 1 to 5


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where 1 is the worst and 5 is the best. The highest bars represent the best performance areas to the customers. The chart shows that Delivery lead times are rated the highest.

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Price received the most 1’s in the first survey being ranked as the highest in terms of need.

Bi-Flo performance of sales support has been rated second highest in the overall average results.


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Product availability has been ranked lowest in terms of performance as an overall average by all customers.

The chart below shows the forecast error as a percentage by month over the last 13 months:

Favourite has the highest forecast error as a percentage of demand.

Outbound Transport

The outbound transport is managed by the transport team at C24 distribution centre. This includes the deliveries to all Bi-Flo customers in Homeland. Each customer requires a delivery every day, seven days a week. All deliveries are made using company owned vehicles which have a capacity of 12 pallets.

A vehicle based at C25 services customers at C7 and C19. Orders for customers at C7 and C19 are picked up and sent as a return load to C25. Orders for customers at C18 and C25 are delivered as a return load.

Total annual costs for outbound transport from C24 are $886,374.


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FORECAST ERROR LAST YEAR % of DEMAND

Period Dependable Excellent Favourite1 6.75% 4.95% 66.58%2 5.51% 15.01% 60.11%3 17.19% 0.50% 17.64%4 0.44% 3.43% 26.37%5 19.96% 26.88% 18.86%6 10.09% 2.75% 18.73%7 5.54% 33.60% 39.30%8 0.65% 1.48% 11.69%9 26.23% 9.04% 0.94%

10 9.87% 7.28% 44.85%11 9.89% 17.83% 8.89%12 17.65% 30.36% 1.76%13 34.52% 32.93% 58.40%

Average 12.64% 14.31% 28.78%

Transport management for C24 totals $537,000 annually but this includes management of inbound transport from C2, C25 and Forexland.

Fixed routes are used for the customer deliveries.

The running cost per kilometre for the 14 curtain sided rigid trucks is 14 cents

The running cost per kilometre for the 2 artics (used for factory primary transport) is 31 cents.

Section Five – Audit Resource Utilisation

To calculate resource utilisation we must first identify our resources and maximum capacity. The chart below lists Bi-Flo’s current resources by site:

Location Resource Maximum Capacity

C2Warehouse 1380 pallet spaces – 2500m2

Factory 14400m2


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Moulding machine 120 machines at 16 hours per dayJigs 195 machines at 16 hours per dayLabour 672 employees at 8 hours per dayForklifts 2 at 16 hours per day

C25 Warehouse 3264 pallet spaces – 6150m2

Factory 16100m2

Moulding machine 100 machines at 16 hours per dayJigs 188 machines at 16 hours per dayLabour 585 employees at 8 hours per dayForklifts 2 at 16 hours per day

C24 Warehouse 4400m2

PPT’s 17 forklifts at 104 hours per weekCBT’s 3 forklifts at 104 hours per weekArtic Trucks 2 trucks at 24 pallets per loadRigid Trucks 14 trucks at 12 pallets per loadLabour 127 employees at 8 hours per dayDrivers 25 drivers at 50 hours per week

The chart below identifies the current utilisation of resources within Bi-Flo. All utilisation is calculated using the following formula:

Capacity UsedCapacity Available

Location Resource Maximum CapacityUtilisation


Average 1082 pallets Utilisation 78.4%

Factory 14400m2

10054m2 space currently allocated


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excluding walkways Utilisation 69.8%

Moulding machine 120 machines at 16 hours per day Utilisation 70%As per meeting with Colin Farrell

Jigs 195 machines at 16 hours per day Utilisation 78%As per meeting with Colin Farrell

Labour 672 employees at 8 hours per day Current utilisation of labour can only

be calculated if we know how often employees are absent from work. But utilisation is affected by annual leave, sick leave, training and lunch/dinner breaks

Forklifts 2 at 16 hours per day Current utilisation of forklifts cannot

be calculated but available capacity is 32 hours per day


Average 2607 pallets Utilisation 79.9%

Factory 16100m2

8098m2 space currently allocated excluding walkways

Utilisation 50.30%

Moulding machine 100 machines at 16 hours per day Utilisation 70%As per meeting with Michael Giering

Jigs 188 machines at 16 hours per day Utilisation stages 5 & 6 (86 jigs)

85% Utilisation stages 4 & 7 (102 jigs)

83%As per meeting with Michael Giering



Forklifts 2 at 16 hours per day


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Current utilisation of forklifts cannot be calculated but available capacity is 32 hours per day

C24 Warehouse 4400m2

3674m2 currently allocated including racking aisles

Utilisation 83.5%

Forklifts 2 types Current utilisation of forklifts cannot

be calculated but available capacity for PPT’s is 17 forklifts at 104 hours per week and CBT’s 3 forklifts at 104 hours per week

Artic Trucks 2 trucks at 24 pallets per load Maximum capacity is 48 pallets at

any one time. Average number of pallets collected from C25 is 264 per week. One truck works one shift (assume 8 hour) and the other works double shift (16 hours).

Current Utilisation cannot be calculated as there is no information regarding time taken per trip.

Rigid Trucks 14 trucks at 12 pallets per load Maximum capacity is 168 pallets at

any one time. Current Utilisation cannot be

calculated as there is no information regarding time taken per trip.



Drivers 3 artic drivers, 22 delivery drivers

Current utilisation of drivers can only be calculated if we know how much


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down time drivers have during their week

Section Six – Audit Planning Processes

Supply chain response time (also referred to as flow time) is the time a product is present in the supply chain from procurement to stock to delivery to the customer. The diagrams below show the supply chain response time for the three Bi-Flo products – Dependable, Excellent and Favourite.

Dependable


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Excellent


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Favourite

Forecasts are made for each line item every 4-week period. The forecast accuracy is measured as a percentage of actual demand and Favourite has the highest average error rate at 28.78%

The orders for Dependable and Excellent are placed every 4 weeks. The average lead time from both factories is 4 weeks with a maximum of 6 weeks

The safety stock levels for these two items are set at 6 weeks average demand which equates to:

- Dependable 1,855,986 units- Excellent 813,648 units

Despite the current high levels of inventory, Dependable and Excellent still have availability issues during the middle of the year due to capacity problems in manufacturing.

Product availability issues for both Dependable and Excellent are possibly occurring due to:


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a) The demand for both items in the peak period during the year is higher than the 6 weeks average demand of safety stock. Because the demand fluctuates during the year; this type of calculation for safety stock is inaccurate.

b) Both items have a higher demand than total receipts (quantity manufactured).

The Favourite products are delivered from suppliers in Forexland into the distribution centre at C24.

The orders for Favourite are placed once a year for delivery in 52 week’s time. Once all the product has been sold, Bi-Flo source a different product and/or supplier.

Forexland suppliers can offer a low purchase price for Bi-Flo’s commitment to one year’s worth of product and will only make/ship in large quantities.

This approach to inventory management makes forecasting difficult because of the yearly ordering and incurs long lead times from suppliers.

Although the availability with this approach is better than the manufactured products for majority of the year; product availability for Favourite is affected when approaching the year-end cycle.

Bi-Flo currently uses the following information systems:

JMI – Just Make Ito Controls a production and inventory system which operates the

processes of manufacturing including forecasting, production planning, inbound deliveries and inventory management. JMI is used in all three Bi-Flo sites.

JSI – Just Sell Ito Operates the processes of sales orders to the customers. This

includes receiving and approving orders and invoicing. JSI is used only at the distribution centre at C24.

JDI – Just Deliver Ito Controls a warehouse and transport system which operates the

processes of customer deliveries including generating picking lists, delivery notes and POD’s. JDI is used only at the distribution centre at C24.


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Below is a diagram showing how the information flows through the three systems:

Management

Currently the management of information technology is carried out by the directors of finance (one at Bi-Flo and one at Air-Flo) and the finance director for SCILplc. They have only recently implemented the JMI system into Bi-Flo from Air-Flo to align the information systems within the two companies.

Interfacing

There is currently an overnight interface between JSI and JMI. The interface communicates an update on the stock situation from sales to manufacturing. Although not specified, it is noted that there are problems with this interface.

There is also an interface between JDI and JSI (frequency is not specified). The interface provides confirmation of an order delivery from the JDI system to the JSI system so the customer invoice can be generated. There are also problems with this interface.

Ordering


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The orders for raw materials suppliers are placed manually every four weeks and are entered into the JMI system. Customer sales orders are phoned through and manually entered into the JSI system.

The three systems for manufacturing, selling and delivering are working as individual structures rather than being operated as one system specialised for a large manufacturing environment.

There are currently problems with the interfacing between systems. The problems of interface between JSI and JMI will cause inaccurate and untimely information regarding to stock levels. The problems of interface between JDI and JSI will cause issues with timely customer invoicing.

The information in the current systems does not supply ‘live’ or real time data.

There is no system visibility for suppliers or customers. The orders for suppliers and from customers are currently ordered and keyed manually.

There is no specialised department or expertise within Bi-Flo to oversee the management and on-going support of information technology. This includes system training as it is noted that the JMI system is new to Bi-Flo.


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Supply chain management - Task 13

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