Demand Planning and Inventory Management

8/8/2019 Demand Planning and Inventory Management

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Our project will analyze how the strategic role of Order Management of a

Japanese subsidiary enhancing its competitiveness in the Hong Kong markets.

We will focus on how the change in Logistics management gave the company new

ways to improve customer service, control costs and make the most of opportunities

in emerging markets. As a result, the logistics based on advanced information

technologies the company enhances its customer services, profitability and hence it

competitiveness.

We are going to use a company called Sharp Roxy HK LTd, which is the subsidiary

of Sharp Corporation. Sharp Corporation is one of the leading Electric Appliances

manufacturers in Japan. It employs about 57,000 staffs and owns over 30 subsidiaries

in Europe, USA, Asia and etc.

Sharp Roxy HK is responsible for sales, distribution, advertising/promotion and after-

sales services of full range Sharp products to customers in Hong Kong. Its Service

Centre was established on 1987 to provide after-sales repair and maintenance services

for a wide variety of Sharp products.

Two of the main elements of Competitiveness of a company are Cost and

Product / Service differentiation. Since the Brand image of Sharp Products is not

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very differentiate from other Japanese brands like SANYO, HITACHI in the Hong

Kong Market, the Service differentiation plays a critical role in enhancing its

competitiveness.

We would like to study the company based on different activities in the Logistics

Process such as Proceurement, Order Processing, Customer Service, Inventory

management and etc., and study how these activities carry different significance to

customer services and profitability.

SALES ORDER PROCESSING

We would like to analyze the sales order processing by splitting it into Inventory

inquiry stage and sales order processing stage.

Inventory inquiry stage

In the past, if the customer inquire about the availability of prompt stock, the sales

staffs should have to telephone to the warehouse and ask the warehouse staff to check

the availability. If there is no stock in the warehouse, the sales staff should then ask

the shipping department to check the status of next shipment with Head office by the

means of fax or e-mail. The result may come one or two days later.

Theres plenty of truth in the old saw time is money. The dealer may then choose to

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stocks to Hong Kong branch. For example, if they found that Singapore subsidiary

has some stocks, the head office will ask them to sell some to Sharp Roxy HK in

order to meet the urgent demand by customer.

Sales Order processing stage

The customer who placed Purchase Order would like to know the status of their

goods. Through the SAP management system linked with Head office, the sales staffs

can check the real time status of the goods and report to the customer anytime.

As the Sharp factories input all the shipment details into the SAP systems once the

shipment was effected, the shipping department of Sharp Roxy HK is able to get the

shipment details (such as ETD and ETA date, Vessel name as well as B/L number)

through the system directly. As a result, the custom clearance procedure as well as the

delivery can be speeded up.

Also, as the Sales staff can get the real time information about the status of shipment,

the sales staffs is able to issue Sales Order and Delivery Order and arrange delivery to

customers within the same minute of the goods arrived Sharp Roxy HKs warehouse.

The time of transferring can be shortened.

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TRANSPORTATION

Sharp Roxy HK used to own their own delivery team to delivery the goods from their

warehouse to customers directly. However, this operation is lack of flexibility since

the number of delivery staffs cannot be increased and decreased immediately to meet

the fluctuation of demand.

We would like to take the air-conditioner as an example. Although the demand of air-

conditioner is extremely low and there is almost no air-conditioners needed to be

delivered and be installed in winter, the company should keep sufficient number of

technicians and delivery staffs in order to meet the high demand of coming summer.

Most of staffs of the air-conditioner term may really got nothing to do in winter.

Also, as the number of staffs is fixed, the customers may have to wait for a long time

if there is some sudden increase in market demand. E.g. the weather became very hot

suddenly and etc.

In order to solve this problem, the company decided to outsource the delivery and

installation service to a logistics company from 1999.

By outsourcing the delivery and installation services, Sharp Roxy HK saved a lot of

labour cost. Moreover, as that logistics company has enough manpower to meet huge

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demand, they are able to deliver the goods to customers on time even during the high

seasons or facing some sudden increase in demand.

CUSTOMER SERVICE MANAGEMENT

As we mentioned, the Service differentiation plays an important role in the

competitiveness of Sharp Roxy HK.

The operation of Service Centre and subcentres mainly cover services of repair order

taking or reception, Collection of repaired products , Repair status inquires , Repair

charge inquiries , Technical support inquiries , Warranty / Maintenance Scheme

inquiries , Issue of Warranty Certificate and International Limited Warranty Card ,

Consumable Sales and Ordering , Counter sales service of Spare Parts , Technical

support and parts supply to China , Miscellaneous Inquiries

In the past, the companies employed over 30 hotline staffs to handle calls from

general hotlines in 3 centers located in Shatin, Kwai Hing and Admiralty. All of

customers with different needs had to be answered by those 30 staffs first. Then, the

hotline staff will transfer their lines to the responsible department according to their

needs. For instance, if the customer who want to ask a technician to go to his home to

repair his Television, the hotline officer will transfer their line to Repair department to

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WAREHOUSE MANAGEMENT

The effectiveness of managing Warehouse business processes is also very important

for the companys profitability. If the warehouse operation do not support company

development, it will affect the efficiency in flow of goods, confidence of customer,

loss and wastage of goods.

When the company is fast growth up in past year, but the traditional manual

warehouse operation can not handle the Sales Order fast growth. Also, the stock

record was not reliable and caused wastage and lost of goods sometimes. Let us take

the returned goods as example. In the past, the goods returned from users were sent

back to warehouse, then the warehouse staffs will make a record in their Excel record

file. Some of the returned goods still have value as they can be sold to internal staffs

as under-grade goods at a cheap price, or sell to dealers as Display Sample shown at

their shops.

However, as the record is only kept in the warehouse staffs computer and under least

supervision, those returned goods could be took by any staff easily.

Now, as mentioned, Sharp Roxy has started using the SAP system as well as for

warehouse management, and now other departments can access the real time

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inventory data. The supervision thus can be enhanced and the sales department can

get the accurate normal goods information as well as under-grade goods.

DEMAND PLANNING AND INVENTORY MANAGEMENT

Although Sharp Roxy is only playing the role of selling agent and therefore it does

not need to involve most of the procurement activities such as vendor

management,

the demand planning and inventory management is still an playing critical roles on the

companys profitability. The company should make a right decision on demand

planning and inventory level, otherwise, they may suffer from losing business chances

due to keeping insufficient stock to meet Market need, or may bear financial burden

or risk of keeping excessive inventory.

On the other hand, Sharp Corporation is playing the role of suppliers for all its

subsidiaries. In order to ensure the material acquisition for production, Sharp

Corporation Japan requests all subsidiaries including Sharp Roxy HK to report their

PSI plan (Purchase / Sales / Inventory plan) to headquarter every month.

PSI system is widely used by famous Japanese companies (such as Sony Corporation)

for budget planning and global management. All subsidiaries have to report their

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forecast of purchasing quantity, sales quantity, and inventory level for the coming few

months.

However, the PSI management system is not for Headquarters own merit. It also

helps its subsidiaries such as Sharp Roxy to make its Demand and Inventory planning

much efficiently.

The PSI plan, always made by a meeting called PSI meeting, which is being held once

a month. Sales managers, marketing managers and logistics managers are required

joining the meeting.

Firstly, sales and marketing managers have to report the sales forecast data such as

reserved orders by major dealers, market trend, competitors products. Then they will

decide the sales forecast quantity of the coming 4 months based on the above data.

After that, the logistics managers have to decide the inventory level they want to keep,

and finally decide the quantity purchase from Headquarter in the coming 3 months.

As shown the attached sample of PSI plan, the lead time for MD-1234 is 3 months, so

the sales managers have to report how many orders they expect to receive from the

customers in the coming 4-5 months. After inputting the sales quantity, the logistics

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managers can decide the inventory to be kept and thus the necessary quantity to order.

This PSI system enable betters planning and decision making in purchasing and

inventory management and enable to achieve Just in Time inventory management

easily. Also, the demand of dealers can be satisfied as scheduled because the

Headquarter can get the PSI forecast and thus arrange material acquisition effectively.

However, this PSI system also has some disadvantages. It is very useful for the

products in slow changing market such as microwave oven, rice cooker, washer as the

demand is very stable. However, for those products in rapid changing market such as

Personal Computer and LCD monitor, this PSI system seems not flexible enough to

meet the sudden and rapid change of market price and demand.

For instance, the market price for LCD panel (the main component for LCD monitor)

was very fluctuates last year. After Sharp Roxy reported the PSI of purchasing a

certain quantity for the coming 3 months, the LCD panel price decreased a lot

suddenly. The competitors LCD monitor especially some Taiwan manufacturers

decreased their products prices a lot immediately. However, as Sharp Roxy

committed the purchase quantity at an agreed price, they are not easy to neither

change the purchase price nor the quantity.

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Since their purchase cost was too high that, if the company keep the original profit

margin, no one willing to buy their goods since it is much expensive than other

brands goods. Finally, they had to reduce the selling price even lower than Purchase

cost in order to clear the stock.

SYSTEM INTEGRATION: IT MIGRATION AND LOGISTICS MANAGEMENT

The rapid development of IT (Information Technology) and global information

network has put the global economy and culture together. Many useful IT tools as

Multi-media, Internet and WWW are integrated into logistics management, especially

in reducing cost and improving corporations services. Sharp Roxy also established

its website in 2000 in order to improve the efficiency in logistic process, customer

service activities, customer relationship, dealer relationship, as well as lower the

operation cost.

For instance, in the past, if the customers lost their user Manuals, they have to give a

call to service center to order a manual, then come to pick it up and pay $30 for a

copy of manual. Also, when a potential customer wants to get the product

information such as product specification, they have to contact with the sales staff and

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ask them to send the catalogue to them by mail.

Now, the customer can easily obtain the information of the products or services and

even download the desired software/manuals of a particular product from Sharp Roxy

s website free of charge anytime and anywhere through the internet connection.

Therefore, internet facilitates the two-way communication between the enterprise and

the customers, which shorten the response time to customers inquiry and improve the

customers satisfaction, resulting in establishing the royalty of the customers to the

Sharp Brand products and services.

Also, with the newly employed Video conference system, the customers and the

sales staffs are no need to waste time to travel for meeting. Also, it allows some of

the local major dealers such as Fortress to have videoconference with Japan

headquarter directly to discuss on some production issue such as informing Sharp

Japan about the local market trend and thus make some request on future product

development for the expected market demand.

In conclusion, with the efficient logistics management, enterprise can achieve

efficient management of procurement, transportation, sales order processing,

and customer services, response time to the rapid changes of market. In result,

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the company is able maintain and enhance its competitiveness in the Market.

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Demand Planning and Inventory Management

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