Problem Solution

Inventory management is crucial to the bottom line of an organization. The purpose of this paper is to explore issues and opportunities of supply chain management for the Kuiper Leda Inc., a supplier of electrical components for automotive manufacturers.

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Gap Analysis: Kuiper Leda

Introduction

In operation for 10 years, Kuiper Leda Inc., is an organization that specializes in the manufacturing of Electronic Control Units (ECUs).and recently, Radio Frequency Identification Devices (RFID). Kuiper's client base is comprised of small automobile manufacturers and Original Equipment Manufacturers (OEM) for the automotive industry. The Kuiper's organization has built its reputation on high quality products and delivery responsiveness.

The purpose of this paper is to identify the challenges faced by the Kuiper's leaders ability manage cost effectively manage the inventory for current productions, increased customer demand and new products. The leaders must consider manpower, cost associated with warehousing, outsourcing versus the use of eBusiness portals as well as distribution.

This task includes a) identifying the issues created by new and changing demands for products, b) identifying the stake holders affected by the inventory management, c) defining the gap between the current state and the end state vision and d) developing a SMART (Specific, Measurable, Attainable, Realistic, Timely) approach for the end state vision.

Situation Analysis

Issue and Opportunity Identification

Economies of scale have been created for the leadership team at Kuiper Leda due to increased demand for the ECUs by and existing client, Midland Motors. Midland a supplier of power trains, has determined the inventory needs for their company to be 250,000 ECUs and 35,000 RFID. This demand provides an opportunity for supply chain collaboration. "A supply chain collaboration connects trading partners so intimately that their respective supply chains are indistinguishable." (Cottrill, 2002, p. 16). Kuiper leaders have the opportunity to solidify the relationship with Midland by developing a web-based inventory management system. An eBusiness portal is created to handle the demand for the ECUs and the RFIDs are manufactured in house in order for the Kuiper organization to acquire a suitable margin. The cost of the RFIDs are falling which will lead to higher margins.

The large order placed by Midland requires a new inventory management plan. The microchips are partially outsourced and partially manufactured in-house. The new inventory management plan will have an impact on down line suppliers as well has in-house stock. Kuiper executives carefully evaluate the service level agreements, costs and lot sizes that must be warehoused and the logistics of production flow for their inventory management plan. Key to the success of Kuiper logistical plan is the strategic use of safety stock. Safety stock helps to protect against uncertainty in demand and supply. In the Kuiper scenario the team must maintain a high safety factor due to high service levels respected by the clients.

Use of the fixed order quantity model will help the organization respond to customer demands based triggered events. A fixed amount of microchips and ECUs are produced based on the customer demand. This new approach will help the organization's leaders to adjust inventory as new clients and larger orders are acquired. Kuiper's leaders are able to achieve this because their core business is controlled in-house. Thus the leaders are able to invoke a "shift in strategy, from sales people's dollar-based forecasts to forecasts of the volumes that customers would buyÐ'..." (Sangupta, 2004, p. 44).

Stakeholder Perspectives/Ethical Dilemmas

Fortunately, Kuiper Leda's leaders constantly seek and evaluate technology based "options to optimize key elements of the company's supply chain." (Kuiper Leda Scenario, 2007, University Of Phoenix . There are three major stakeholders in this scenario.

First, the front line employees are responsible for producing ECUs and RFIDs. This resource is challenged when demand is increased and the raw materials are unavailable to produce the end product. Employees require consistent pay whether demand is high or low. Thus the leaders must ensure they focus on costs involved with production and warehousing inventory. Under stocking the plant will cause bottlenecks and overstocking the plant will increase holding costs. The inventory management's plan for the new Microchips dictate an order fill rate not to exceed 80% because of the safety stock. Orders need to be planned in advance and there are time constraints for lead time. However, planning accordingly will prevent layoffs and steady production.

Second, the Board of Directors for Kuiper Leda is responsible for the continued success of the organization. Increased stock value is linked to successful capacity planning. Minimizing hidden costs by decreasing holding costs affect the bottom line. However, without increasing revenue, seeking new technology is to no avail. Thus, the leaders must prove to the Board of Directors that their efforts in managing the supply chain is effective, timely and benefits the bottom line.

The third and final stakeholders to consider are the customers. Kuiper supplies major automotive companies with ECUs, RFIDs and microchips. This is a competitive market, but the Kuiper organization is know for high quality products and responsiveness. The organization's revenues have grown as a result of these qualities. Kuiper's high performance teams have secured repeat business and are attracting new business with increased demands. The supply chain must support the needs of new customers whose business is demanding. Without a steady supply of raw materials to produce the automotive components, Kuiper, as a supplier would slow their customer's productions, which in turn would affect their bottom line.

Ethical dilemmas occur if inventory is mismanaged because an organizations bottom line is diminished, manpower is either over or under utilized and suppliers and clients businesses are affected.

End-State Vision

Kuiper Leda leaders have positioned the warehouse and production team to meet