Contents

1. Introduction ................................................................................................................... 2

2. The layout of the production facility to produce the product ....................................... 2

3. The supply management and logistics issues on the organization and supply chain ... 3

4. Quality issues on the organization ................................................................................ 5

5. Production capacity issues on the organization and supply chain ................................ 6

6. Inventory management issues throughout the supply chain for the organization ........ 7

7. Supply chain information system issues on the organization and supply chain ........... 9

8. Potential impacts of disruptive change, artificial intelligence (AI), technology

development....................................................................................................................... 10

9. Changes with justification to the original design in Assessment 1 ............................ 11

Conclusion ......................................................................................................................... 12

References ......................................................................................................................... 12
 1. Introduction

The business is specialized in manufacturing furniture and conducts its production based
on customers’ unique requirements. As a result, in order to meet customer’s satisfaction, it
is necessary to implement an effective supply chain to ensure the quality of product and
timely delivery to customers. The essay will focus on some aspects of supply chain such
as the layout of production facility, logistics management, inventory management,
information system’s impact on supply chain.

2. The layout of the production facility to produce the product

The fact remains that manufacturing and service processes play a vital role in a business’
operations and success. Business would, without doubt, have to spend various resources in
terms of money, human beings and time on developing manufacturing and service
processes which definitely are costly and expensive and have far-reaching effects on the
business’s operations. As a result, it is necessary for business’s management to focus on
types of layout and process to decide the most appropriate and suitable process for not only
business’ operations but also other aspects of business such as finance resources, human
resources, business goals and strategies, target customers, to name but a few since each
type of process has different strengths and weaknesses (Sharma and Singhal, 2016). For
examples, some manufacturing and service processes are specialized in standardizing
products or services with lower or affordable costs whereas other processes supports the
business in producing a wide range of products or services. An effective production facility
layout would be capable to generate an ideal relationship between raw materials, tools and
supplies, machinery and equipment, manpower and finished goods and ensure a steady and
smooth production flow, focusing on physical allocation of different aspects located in
space of the plant to ensure economic efficient activities.

The production facility layout could be divided into two main categories, including
product-based layout and functional layout. The production facility layout would, without
doubt, play a crucial role in operation management of the enterprise since it implies group
of facilities or systematic organization used to produce products. Product-based layout is
highly likely to focus on arranging resources sequentially, which follows required steps in
order to create a product. Functional layout offers the business to group and allocate
resource physically by functions. The two layouts have both advantages and disadvantages
that the management is required to determine the best layout for business operations. While
functional layout requires employees’ professional skills, product-based layout could be
able to rely on automation (Jia and Huang, 2013). The organization would select the
functional layout and job shops manufacturing process due to the specialization of
manufacturing furniture based on customer’s unique requirement. This many mean that,
requirements for products would change remarkably from one job to another job, leading
to great degree of flexibility and skillful workers. Thus, the products have a high level of
customization. The organization would conduct its production in accordance with
customers’ order, and thus the production volume is quite low. As a result, the workflow
of the production is relatively variable, which is dependent on the nature of production
process and each order. The functional layout of production facility requires inspection to
be conducted in many times during the sequence of operations since the production time
could be comparatively high due to unique requirements of the product manufactured. This
kind of layout offers the organization relatively low fixed cost but considerably high
variable cost as a consequence of high level of customization. However, it is likely that the
‘domino effect’ seems not to have a detrimental effect on the smooth operation of the
organization when machineries and equipment break down because homogeneous
functions or processes are grouped in the same location in the factory.

3. The supply management and logistics issues on the organization and supply chain

Logistics management is part of supply chain management, which includes planning,

implementation and control of the efficient and effective flow of forward and reverse as
well as storage of goods, services and other relevant information from the point of origin
to the point of consumption to meet customers’ needs and requirements. Logistics
management consists of a wide range of activities such as inbound and outbound
transportation management, warehousing, fleet management, materials handling, inventory
management, order fulfillment, supply and demand planning, design of logistics network,
as well as management of third party logistics service providers (Fantazy, Mukerji and
Kumar, 2012). In fact, the logistics management is engaged in strategic, operational, and
tactical production planning and execution. In an abundant number of business recently,
logistics function is integrating with other functions or departments such as production,
sales, marketing, finance and information technology.

In the past, the business managed logistics manually; however, over the past few years in
line with the proliferation of technological innovation, the enterprise is required to adopt
advanced information system in logistics management (Ślaski, 2017). Currently part of
logistics process has relied on advanced information system, and thus reducing the human
error in the management process. In addition, the business has expanded its market to
various foreign markets all over the world. In other words, the market has globalized,
resulting in the issues the global transport to a wide range of countries in terms of time and
expenses. For examples, the enterprise uses two main means of transportation, including
highway and sea. Highway seems to be the most popular means in many companies’
logistics infrastructure because this kind of transport means offers a flexible and speedy
delivery to a wide range of geography. The modern world is experiencing the best practice
and solution of logistics management with the appearance of innovative logistics
management application developed by various technology companies, such as better
schedule, lower costs, shorter distance within vehicle capacity (Hingley, 2001). Businesses
could be able to take advantage of technological advancements to obtain the optimal
logistics management. As a result, usage of highway for transportation has been becoming
more cost effective over time. In the initial stage of using service of logistics solution
provider, it is undeniable that the business could spend more expenditure on purchasing its
own customized solution. Notwithstanding, in the long term view, it would, without doubt,
save much cost of logistics management for business. The business could make shipment
with no stops or transit (direct truck) or less than truckload (shipment with other loads).
Apart from that, sea could be considered another effective modes for business. This mode
is normally used for exporting furniture products to other nations with high weight-to-value
ratio in the case of not considering delivery time and speed, leading to assistance of
lowering costs for business. These two has both advantages and disadvantages;
notwithstanding, based on specific requirements of customers about products, time
delivery, physical information of products, or even monetary flow of the business, the
organization should consider the most effective efficient mode for each order. Even though
the two modes of transportation seem to lower costs, monthly transportation costs of the
business makes up a huge proportion in total cost. This issue would result from the fact
that the enterprise manufactures and delivers based on customers’ order rather than mass
production. Each order has specific delivery time and geographic location.

4. Quality issues on the organization

Quality management means an ongoing inspection from raw materials, work in progress to
finished goods should be conducted to ensure the high level of quality according to the
business’s standards before finished goods are shipped and delivered to customers (Jacobs
and Mafini, 2019). Quality would, without doubt, play a key role in determining,
developing and expanding the business’ image and reputation. Quality would be seen as
the quality of supply chain management, and thus impacting significantly the quality of
product. When it comes to quality of the supply chain management, it would be said that
all aspects of the supply chain should be improved in order to enhance competitive
advantage and customer satisfaction. In terms of product quality, quality would be the main
contributor to identify whether products meet or exceed customer expectation. In general,
quality is likely to be defined as features or characteristics of a product or services that
satisfies or meets customer’s need. It seems to be difficult to measure the quality since it is
dependent on subjective points of specific person or business (Nehzat, 2015). Particularly,
the business conducts its manufacturing and productions based on customer’s unique
requirements, and thus the quality of products would be assessed upon customer’s
subjective view. Therefore, the concept of supply chain quality management would be
given with details of two sub concept, including quality management and supply chain
management. While the total quality management focuses on internal factors, the supply
chain management concentrates on external participation. Thus, the supply chain quality
management would be a system-based approach to enhance and improve a set of activities
in supply chain on an organizational level. It would, without doubt, cooperate and integrate
different functions and process of the supply network within the business to create value
which satisfies customers. The output of the supply chain quality management could be
affordable or low prices, higher quality, shorter time of delivery, better quality of customer
service, to name but a few.

In case of the business, when products do not meet customer’s expectation, the return and
fixing process would lead to more costs of delivery, labour and materials and even time.
This may mean that, the business has to spend more financial and human resources on
reworking. This issue would arise from the stage of receiving and accepting customer’s
order in sales department, or the stage of ordering materials from procurement department,
or the stage of analyzing customers’ requirements of technical department, and even the
stage of manufacturing of production department. This could be explained the need of the
business for supply chain quality management. Due to this issue, even though the business
is expanding its operations into foreign countries in the world, only simple products are
manufactured for these market, leading to the slow global expansion.

5. Production capacity issues on the organization and supply chain

Capacity of an organization could be seen as capability of workers, equipment and

machineries, plants, work center, or even capability that the organization to produce
products or services in a given period of time. Capacity might be determined by the
organization in order to accomplish its purposes or objectives during a specific time period.
As a result, capacity would be measured in rated capacity or theoretical capacity in both
short term and long term. The theoretical capacity refers to the maximum output capability
that the organization is able to produce in the case other production conditions remains
unchanged such as downtime or preventive maintenance, to name but a few. The rated
capacity mentions the expected output capability of a specific system or resource (Stewart,
1997). Types used to measure capacity would be based on the type of organization. In
addition, there are various factors affecting the organization’s capacity such as number of
temporary or seasonal employees used, number of shifts operating, number of production
lines used, not to mention quality improvement. Furthermore, in achievement of optimal
production management, the business would adopt the most effective capacity strategy
among three capacity strategies including the lead capacity strategy, the lag capacity
strategy and the match capacity strategy in order to maximize its available capacity
(Korpela et al., 2002). The lead capacity strategy refer to the addition of capacity in line
with the anticipation of demand before the demand actually incurs. In fact this strategy is
preferred by an abundant number of businesses since it would, without doubt, ensure
customers’ satisfactions in terms of delivery due date, reducing and minimizing the risk of
not meet customer’s demand on a timely basis. Apart from that, this strategy would bring
benefits of competitive advantage for business in seasonal sales. For example, in most
countries in Asia, the wedding season usually happens at the end of the year, which
increases sales for the business. As a result, adoption of lead capacity would assist the
business in projecting customer’s demand and preparing capacity in advance.
Notwithstanding, issues would occur in the case the demand does not materialized. In
contrast with the lead capacity strategy, the lag capacity strategy require the organization
to ramp up capacity after the demand occurs. This strategy would reduce the risk that the
lead capacity strategy has to face. However, the fact remains that the business is likely to
suffer from unavailable product during a period of time until the capacity is increased and
full. With the feature of business’ operations, this strategy only could be able to adopt in
non-peak season (Li, Hendry and Teunter, 2009). The match capacity strategy is the
balance and combination between the lead and lag capacity strategies to reduce the
disadvantages of the two strategies. In the context of the business, the match capacity
strategy is the most effective tool to adopt since the business is operating and
manufacturing based on customer’ orders and seasonal sales.

6. Inventory management issues throughout the supply chain for the organization
Inventory management is another area that any manufacturing business should pay a
serious attention since it would boost the balancing of demand and supply, enhancing the
relationship between customer and supplier. In other words, the business as to deal with its
ability of fulfilling customer’s demand (Botha, Grobler and Yadavalli, 2017). Issues incur
when orders from customers increase whereas suppliers are not able to provide enough raw
materials and supplies for the business. As a result, it is necessary to create an accurate
forecast to maintain sufficient materials for production. The business focuses on sales and
operations planning process which cooperate demand functions such as sales and
marketing departments and operations functions such as production, procurement or
purchasing departments to assess the level of on-hand inventory, goods in transit, work in
progress, so that demand functions including sales and marketing functions would create
an adequate plan of materials to meet the production’s demand. Since the business
performs its productions based on customer’s orders, it may seem to be easier for the
business to manage finished goods and the level of finished goods in warehouse is small.
In other words, just-in-time methodology would be used in the business operations which
customer’s demand would be met regardless of the need of keeping raw materials, tools
and supplies, as well as finished goods available in warehouse. This method is completely
suitable for the business model. Notwithstanding, the level of raw materials, tools and
supplies could be seen a huge problem for the business in case of out-of-stock (Pasupuleti,
2015). The fact remains that manufacturing upon unique requirements of customers often
puts the business in the case of lacking specific raw materials which might cause the
business long time to order its suppliers, resulting in the inability of delivering products to
customers on a timely basis. Therefore, the cooperation between demand and operations
functions would give a realistic fully picture of the current inventory levels which available
for production and sales purposes. Besides, operations functions would get updated from
sales plan as the basis to generate proper inventory plan to meet the demands of customer
in short term and long term. Nowadays, the inventory level is managed through software
or information technology system to meet the increasingly complex management purpose
of the business. In the past, the term of inventory management could refer to the track of
inventory quantities in warehouse. However, the modern inventory management is
integrated with accounting system for costing purpose. Costing would be seen as the most
difficult and important of the accounting department since the business need to calculate
the value of goods accurately and all data in the financial statements need to be precise.

7. Supply chain information system issues on the organization and supply chain

It is undeniable that information system has a significant impact on supply chain

management process from the stage of planning, sourcing to the stage of delivering in all
strategic level of the business. In line with the Industry 4.0, the technology-driven era has
assisted the business all aspects of supply chain management. As a result, it is necessary to
integrate information system and technological innovation in supply chain management
since it could be the main contributor to effective supply chain management. It is likely
that information connects all activities and operations in the supply chain (Ganguly and
Padhy, 2018). Information would be shared in different functions of the supply chain within
the business in order to reduce costs and enhance productivity. The fact remains that
information technology would create competitive advantage for the business in the process
of data collection, data processing, data analysis, leading to effective decision-making
process. As a result, the business is required to invest more financial and human resources
in information system to create an effective and efficient tools for ongoing daily operations.
Currently, there are a wide range of system that businesses could take advantage such as
ERP system. This would assist the business in reducing costs and human error.
Notwithstanding, it is likely that the initial investment of ERP system could be too
expensive that it is necessary to consider cost and benefit in using information system.
Without information system, all functions or departments in the supply chain, including
sales and marketing, procurement, logistics, productions which operate separately within
the organization could be able to share information on a timely basis. In other words,
activities operated in the business are not used effectively and efficiently to meet
customers’ satisfaction (Chalotra, 2011).
Currently the business are using ERP system to connect different functions in the supply
chain. The business is able to develop specific management reports for the supply chain in
order to detect any error in the process of inputting raw materials to delivering products to
customers. However, these reports only are under the simple and standard form of the ERP
system and do not have more effective information for the management of supply chain.
This may result from the huge costs of developing and customizing management reports
based on standard reports. As a result, the business is unable to take full advantage of
innovative information system for the purpose of effective supply chain management.

8. Potential impacts of disruptive change, artificial intelligence (AI), technology

development

It is undeniable that the booming of the Industry 4.0 has been becoming concern for all
aspects of the economy in relation to applying technology. People are exposed with
different modern terms such as digital workplace, digital manufacturing, digital supply
chain, digital customers and channel management, not mention to artificial intelligence or
the internet of things. On the one hand, distributed manufacturing, which has emerged in
line with the industrial revolution, has generated mutual relationship between customers
and production in order to reduce lead time costs for the business. The distributed
manufacturing includes the internet of things, additive manufacturing, and cloud
computing. This would, without doubt, assist business to promote a decentralized network
of 3D printing through cloud computing. The distributed manufacturing also encourages
production facilities in a wide range of location to be closer with sales market on a global
manner, especially in the automotive industry (www.weforum.org, 2019). Therefore,
distributed manufacturing will gradually replace the prominence of centralized mass
production by decentralization. In the modern technology world, the position of agile
networks would be stronger to encourage the interaction between parties, where customers
will get involved in the production process, and thus shortening the planning cycle. It is
undeniable that shorter planning cycle will reduce the emission of means of transportation,
resulting in promoting sustainable development which remains huge concern of the whole
world currently.

On the other hand, it is undeniable that the Industry 4.0 has forecasted a future of supply
chain without human beings. In this era, technology would, without doubt, play a vital role
in the supply chain and replace the role of people. As a result, the lack of available
employment would be a huge concern in the future which the population remains increased
drastically in the upcoming time. The economy would not be able to create more jobs
whereas the demand of employment is in high level. Apart from that, when systemic error
occurs, it will definitely create the ‘domino effect’ to the whole system within the business,
leading to fatal impacts on business’s operations. It could be seen that the operations might
be delayed until the system is fixed which costs much financial and human resources of
the business. In addition, the business has to afford idle time of the breakdown system
(Akkermans, Voss and Oers, 2019). As a result, even though application of innovative
technology and artificial intelligence would bring countless benefits, the business could
pay a serious attention on the negative side in order to have a backup plan in emergency
cases.

9. Changes with justification to the original design in Assessment 1

In general, the supply chain design could be seen as the process from inputting of materials
from supplier network, then delivering to enterprise and integrating different functions
within the business such as sourcing, logistics and operations to the distributing to end
consumer. The design of supply chain of the business currently is comparatively simple,
being suitable with the size of the business. However, the business has gradually developed
and expanded into foreign markets. As a result, a simple supply chain design could not be
able to fit with the business strategies in the long term. For example, the business currently
does not have warehouse in specific location. It completely finishes manufacturing,
generates products and then distributes immediately to customers through sea or highway
modes. This lead to huge cost of delivery and distribution. It is necessary to widen
warehouse and create warehouse in specific location which is suitable for gather finished
goods which will be delivered to the same location or locations which close with each other
to reduce the delivery costs. The current practice does not contain warehouse and
warehouse management. As a result, it is necessary to establish warehouse and perform
warehouse management in order to lower distribution costs. Notwithstanding, it is likely
that when the business conducts its manufacture based on customers’ requirements, using
warehouse in different location will incur warehouse costs. In this case, the business should
consider the opportunity costs of whether establishing warehouse or not.

Conclusion

In conclusion, each type of business specializing in manufacturing or service is required to

determine and consider all aspects of the business such as size, business strategies and
objectives, manufacturing volume, financial resource and human being resource in order
to select the most optimal supply chain for the business’s status. Each type of supply chain
would remain advantages and disadvantages; as a result, considerations of opportunity
costs would assist the business in giving better decision. Moreover, in line with the fourth
industrial revolution, adoption of technological advancement is not optional but
compulsory for any business to secure its long term survival. Adoption of innovative
technology will reduce costs for business through getting customer involved in the
production, and shortening the planning cycle as well as promoting sustainable
development.

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