SUPPLY CHAIN MANAGEMENT ACTION SHOES - SPARX

AGENDA

Company Background Scope of the study Manufacturing process Value Stream map Kraljic model Risks associated with sourcing

Factors affecting Vendor Selection

Risk Management

COMPANY BACKGROUND

Sparx : Low end brand of Action shoes Outsources production to contract manufacturers Shoe Manufacturing Firm Leaps & Bounds Pvt. ltd. Based Out of Inderlok , New Delhi Start Up Expanding Manufactures different types of foot wares on contract basis

SCOPE OF THE STUDY

To prepare the Value stream map To study the sourcing of raw material To determine the criticality of different raw material used Investigate the parameters considered for selecting a supplier for raw materials Various risk associated with procuring raw material Risk management strategies

MANUFACTURING PROCESS

Purchase of Raw Material Hiring Contract Labor

Stitching

Sole Fabrication

Production Process

Preparation of the shoe upper

Preparing the die frame for sole fabrication Sole fabrication Quality testing, packaging and delivery

DETAIL PHASES OF PRODUCTION (1/3)

Cutting and stitching the shoe Cloth as per different size & specification. Punching tack holes in the shoe upper. Grinding PUC, the material used for sole creation. Fixing the shoe upper on the die frame. Transferring grinded PUC to the machine.

DETAIL PHASES OF PRODUCTION (2/3)

Affixing the die frame to the machine. Poring molten PUC in the die. Removing the die frame from the machine. Removing shoe from the die. Checking the quality of the shoe.

DETAIL PHASES OF PRODUCTION (3/3)

Addition of accessories to the shoe (like laces). Final finishing & quality checks. Packaging the shoe. Transporting to distributors/ inventory.

PROCESS / VALUE STREAM MAP

View

LIST OF RAW MATERIALS

The primary materials used in production process :

PUC Cloth Laces Adhesives Threads Die Electricity Labour

KRALJIC MODEL

Leverage items
Cloth Die

Strategic items
PUC

Critical

Routine items Laces Threads Adhesives Electricity

Bottleneck items Labour

Value/Cost

RISKS ASSOCIATED WITH THE SOURCING

Various risks associated with sourcing of PUC :

(1/2)

Quality of PUC:

depends upon the quality of scrap high degree of variation in quality Very critical for the overall quality and life of shoe

Number of Suppliers:

Supply demand mismatch : few suppliers in Delhi Higher inventory Suppliers from other states Not Price Competitive No economies of scale bargaining power of supplier is very high

RISKS ASSOCIATED WITH THE SOURCING

(2/2)

Price Fluctuation:

The industry is a price taker and profits are earned by lowering cost of production Change in prices of raw material pulls the margins down Price fluctuation in PUC is high, it is perceived as a risk

On Time Delivery:

long waiting time Increase in the overall cost: to reduce the risk of stock out and production halt

VENDOR SELECTION
Factors considered while selecting a vendor :

Quality of Raw Material Final Product Price Range Past Performance of the Supplier Credit Terms Timely Delivery Size of the supplier

RISK AVERSION/ ACCEPTANCE/ MITIGATION/ TRANSFER (1/3)

Methods for risk management for the sourcing of PUC :

Change in production strategy

Raw material procurement done by manufacturer currently

Sparx can buy the raw material especially PUC in bulk and pass on the same to its contract manufacturer
Better bargain through economies of scale Pricing issues and on time delivery of PUC

RISK AVERSION/ ACCEPTANCE/ MITIGATION/ TRANSFER (2/3)

Vertical Integration:

Start manufacturing PUC If the company has the required resources and a sure series of order to cater to (i.e. future sources of income) risk avoidance strategy: no waiting time

RISK AVERSION/ ACCEPTANCE/ MITIGATION/ TRANSFER (3/3)

Long Term Relationship with Supplier:

Better co ordination, quality assurance, timely deliver, price risk sharing etc.

Fixed Price Contracts

to mitigate fluctuating price risk.

Introduction of GST

Outside PUC suppliers will become price competitive

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