SKS Manufacturing has recently hired Deloitte & Touche as they are in a critical cash position with various internal inefficiencies in their procurement and production processes. Deloitte & Touche and SKS Manufacturing will need to work together in order to solve the issues present at SKS Manufacturing so they can be successful within the automotive parts industry.
Issues & Analysis
There are three key issues that are present at SKS Manufacturing that need to be systematically tackled in order for stabilization of the business to occur and the long-term redesigning process to be effective. The key issues facing SKS Manufacturing are: (1) cash flow shortage (2) weak alignment and integration within the value chain and (3) …show more content…
Inadequate procurement decisions are being made because of a lack of resources to provide adequate forecasting of orders. SKS Manufacturing has 3 types of customers which are as follows: 3 major customers (65%), International customers (3%) and other (32%). The 3 major customers of SKS Manufacturing account for majority of their revenues and are stable customers, thus forecasting their needs would be easily evaluated due to their yearly buying patterns. However, this information is
not being shared throughout the organization and ineffective buying decisions are being made. Additionally due to weak forecasting and poor procurement decisions, production is not synchronized adequately causing overflow of products (A3). This is increasing their inventory levels and they are being forced to utilize storage space that they should not have such as the “extra” warehouse location that is not at an optimal location, increasing further costs. Looking in to the procurement and production process is a key long-term issue that needs to be streamlined as much as possible (A2).
The following recommendations need to be implemented systematically in order for SKS Manufacturing to be able to survive and grow in the future within the automotive industry.
One of the immediate actions that SKS Manufacturing needs to take is to free up cash by reducing inventory