September 19, 2014
Riordan Manufacturing Supply Chain
Riordan Manufacturing operates a decentralized electric fan plant in Hangzhou China. The company manufactures standard electric fan products in a make-to-stock operation where China customers can pick up products at the plan or have the shipped directly in China; international customers are also served by international shipping services. Customized electric fans are produced for global customers under individual contracts.
This paper describes the mixed chase and level manufacturing strategies used, a supply chain flow chart, and metrics used to evaluate performance of the electric fan supply chain. The supplier relationships and effects on Riordan’s fan supply chain are also examined.
In the spirt of continuous improvement of manufacturing efficiencies and effectiveness we propose how lean production principles can be used. We explore direct lean applications to Riordan’s existing manufacturing process.
To drive competitive business forecasting, the Qualitative Research “Action Research Method” is explained and how it applies to Riordan’s electric fan supply chain.
Throughout the discussion Riordan’s problem statement of on-time delivery is addressed and recommendations are made to improve finished electric fan on-time delivery commitments.
Riordan’s Manufacturing Strategy
Riordan can choose a manufacturing strategy from among the Chase, Stable workforce – variable work hours, and Level strategies. The chase strategy attempts to match the manufacturing rate to the order rate by adjusting the number of workers needed as the orders fluctuate. The chase method has a labor cost advantage by constantly right sizing the workforce, but constantly training new workers and keeping a pool of qualified workers available has indirect manufacturing costs. The stable workforce – variable work hour’s strategy relies on having workers willing support flexible work schedules and overtime when orders increase. A variable work hour approach also allows for variable production output by varying the number of hours worked. This strategy provides continuity in the workforce, reduces emotional costs, and costs of hiring and laying off. However a stable supply of flexible workers is always needed. A third approach, the level strategy emphasizes a stable work force that produces at a predictable rate. The fluctuating demand rates are absorbed by fluctuating inventory levels, backlogs and sometimes lost sales (Jacobs & Chase, 2011).
Riordan’s current most important problem is on-time delivery of electric fan products. The supply chain process depends on a local Chinese company supplying complete assembled electric motors which only averaged ninety three percent on-time deliveries last year. Riordan needs to improve supplier on-time delivery to ninety five percent, to enable ninety eight percent on-time deliveries of finished fan products and to compete effectively in the global market. The on-time process improvement is consistent with Riordan’s mission statement which advocates Riordan to be a solution provider for our customers (Riordan Manufacturing, 2013).
In light of Riordan’s problem statement, we recommend Riordan use a combination of chase and level work force strategies. The foundation of stable production output can be achieved with the level strategy to maintain minimum levels of production, maintain core production skills and knowledge with in the company, and by following historical order trends to forecast make-to-stock quantities. In times of increased demand, Riordan can use a chase strategy to augment the existing level workforce strategy by contracting additional workers until the increased demand orders are caught up. The company can leverage the stable workforce to train the temporary workers and benefit from reduced long term labor costs by releasing the temporary workers once increased demand and make-to-stock quantities are met (Jacobs &