In this part of
the report, a new innovation process regarding supply chain management will be
introduced and the impact of this change towards the other areas of the
business. By innovating the supply chain of the company, the company is aiming
to achieve a superior level of customer service at minimum costs.
In addition, the
company wants to provide the market with high quality tents, against the lowest
costs possible, so customers are able to enjoy the benefits of high-quality
tents without spending too much money.
with years of experience in producing tents and interacting closely with
customers, the business became a reliable, trusted and flexible player in the outdoor
market and who is able to meet all clients’ needs. Therefore, the Business
introduced the all-in-one tent and to change some processes.
expenses of the business are pressing on the financial performance. Over the
last five years, the business has spent over 135,000 Euros on yearly base for
holding units and production materials in stock. The average inventory carrying costs makes up 34% of the
total logistics costs. Interest expenses, taxes, obsolescence, depreciation,
insurance and warehousing are part of those costs (Coyle, et al., 2013, p.
However, the main
reason for holding this much inventory is to anticipate for customer demand and
the cover of demand uncertainty. This could be seen as an advantage, but
against high costs. In addition, for the business it was financial appealing to
purchase large quantities, to obtain more discount. For example, in period 5
the suppliers of the production materials offered a discount of 5 euros for
purchasing more than 2500 units and an additional 5 euro discount for
purchasing more than 4000 units. At that time, the management decided to accept
the discount offers and to hold more inventory.