Kuiper Leda

To create an effective supply chain management system (SCM), there needs to be an understanding of the various interactions between the suppliers, manufacturers, distributors, and consumers. These organizations must work together to establish a committed contractual relationship. In doing so, it would provide each organization opportunities for success and increase shareholders wealth. This paper will attempt to identify some SCM strategies used by organizations, but more specifically to the case study of Kuiper Leda. This paper will also attempt to discuss metrics that Kuiper Leda can use to measure the performance of its SCM.

Kuiper Leda Supply Chain Defense

Kuiper Leda is a small electronics components manufacturer that specializes in Electronic Control Units (ECU) and sensors for the automotive industry. The company received a large order of ECUs and RFIDs to help one of its customers facilitate its inventory control. The order is urgent and Kuiper needs to manufacture and supply a high volume over its regular order.

As a result of the increased demand for Kuiper’s products, the company now has to reexamine how it manages its supply chain so that it can meet this increase in demand and ensure customer satisfaction.

Outsourcing

Outsourcing refers to “a company that contracts with another company to provide services that might otherwise be performed by in-house employees” (wiseGeek, n.d.). Aside from the monetary benefits that a company gains when outsourcing, it also allows a company to focus on other business issues. Other benefits to outsourcing include “better ability to plan, higher levels of operational reliability, and more rapid implementation of new strategies and initiatives” (Ferrell, 2003)

Kuiper must make a decision of whether it should manufacture in-house or outsource its ECUs and RFIDs. To meet the current demand, the best decision was to outsource its ECUs and manufacture in-house its RFIDs. By deciding to outsource, Kuiper gained the following advantages to help them meet the increased demand:

• Increased the speed of delivery time – 4 weeks lead time versus 6 weeks if manufactured in-house.

• Freed up some of its resources so that it can manufacture and meet the increased demand for its RFIDs.

• It avoided having to mass reschedule orders from its other customers so that it can accommodate the larger order for its ECUs.

• Contribution margin to outsource the ECUs is higher than if the ECU’s were manufactured in-house.

In addition to the above benefits, Kuiper did not have to accrue an additional expense in

acquiring new technology or purchasing additional equipment to produce the additional ECUs since the decisions and obligations relating to production are transferred to the external company.

Inventory Management

Inventory Management is an important aspect in supply chain management (SCM). Managing inventory in the supply chain is critical to ensure high customer service levels. Having too much inventory can result in cash flow problems. Not having sufficient inventory can result in lost sales and costly, time-consuming back orders. Running out of raw materials or parts that are crucial to a firm’s production process means increased operating costs.

Kuiper Leda needs to develop a new Inventory Management Plan (IMP) by selecting an Inventory Ordering System for its Microchip Production. Having an effective IMP in place, Kuiper can better control purchase and inventory holding costs and allow Kuiper to maximize safety stock levels to deal with fluctuations in production demands.

Using the Materials Requirement Planning (MRP) method was the best decision for Kuiper in handling the requirements for its Microchips. The MRP method is a system that effectively manages material requirements in the manufacturing process.

Some of the benefits for Kuiper in using the MRP include the following:

• Less safety stock and wasted material

• Better knowledge about delivery lead times which results in fewer production delays and less expediting.

• A higher proportion of orders are delivered on time which ensures customer satisfaction. (Saltzman, 2005).

Distribution Strategy and Demand Management

The best demand management for