MSc Procurement Logistics and Supply Chain Management Assignment

Assignment Task

Background

ZoomSheep are an online printing and personalized gifts manufacturer. The company was born in 1999 out of two separate projects, one based in the UK and the second in France, the companies formally merged in 2006. Business for ZoomSheep has gone from strength to strength and the group now counts around 700 employees across four countries with one million customers across Europe, Australia, Canada and New Zealand. With 200 million photographs shipped a year plus a wide range of personalised gifts this is a substantial make to order business.

The company has three facilities in France, Guernsey and London. This case study will focus on the personalised gifts operation in the London facility. The London facility produces about 1000 products divided into three main categories:

• Prints – including photos and posters.
• Bluemoon – which includes cards and calendars.
• Personalised Gifts – representing a large range of products, including: mugs, canvas framings, tshirts, phone cases and tablet cases.

Each product can be personalised with a picture and a specific design. Products are then shipped from the facility to customers all over the world though local postal services. The UK facility sells to end customers through its website and to other businesses through its marketing department.

Customers place orders through the company website. During the ordering process the customer can choose between a number of different options for each basic product (e.g. t-shirts in different colours and sizes). They then have the opportunity to personalise the product with a personal picture. This means that the production process can only begin once the order has been placed. ZoomSheep stock standard components which are customised to customer requirements at the last moment.

In order to meet demand and guarantee high service levels the company holds stock at two locations, in a warehouse located next to the production plant and in multiple dedicated areas next to the production lines. These areas act as a buffer in order to directly feed the production process.

Each component has an allocated area in the production facility. Currently lineside components are replenished regularly throughout the day by a dedicated team that operates between the warehouse and the production area. The whole process is managed manually and has proven successful for a long time. However, the growth of the company has made it necessary to expand the production operation into the area which currently houses the warehouse. The main warehouse will be moved to a separate building some distance from the factory. This will make replenishment more complex due to the physical distance. An efficient mechanism to control and coordinate replenishment will be required.

Since inventories in production play a vital role in helping to meet customer demand and maintain high service levels it is imperative that stock levels are maintained at an appropriate level. However, keeping inventory has both a space and a cost implication and a balance between these two factors is required. The company needs to determine suitable levels of inventory which will allow them to maintain appropriate customer service levels and to investigate suitable replenishment policies.

The study

Your task is to make a proposal for how ZoomSheep should stock and replenish their lineside inventory going forward. You will carry out a pilot study on an important product group – T-shirts (such as those shown if Figure 1). This study will use Monte Carlo simulation to investigate:

• How much stock to carry
• How to manage and control stock replenishment

Analysis of current operations shows that the production information system releases customer orders to production operators who then translate the demand for finished products into demand for standard components manually according to the quantities indicated in the BOM as described in Figure2:

You will simulate the operation of this system. In order to help you do this you have been provided with an Excel deterministic base case model, this is given in the “ZoomSheep deterministic model.xlsx” on the “Simulation” worksheet.

Demand

The t-shirt group contains 78 products across a range of types (men, women, and children), colours and sizes. Demand for the t-shirt product group has already been analysed and the products classified into 5 groups based on their demand, these are given in Table 1.

The deterministic model presents each end product, with its average daily demand and demand classification along with the associated bill of material. Each product has the following components:

• A plain uncustomised t-shirt
• Ink for customisation
• A size label
• An envelope for delivery
• A packaging label

Task

• Using the information provided, convert the deterministic model to a Monte Carlo simulation using Risk.
• Run the model for an appropriate number of iterations – remember to consider the accuracy and validity of your results.
• Collect a set of relevant model outputs and carry out a comparative analysis of your results.

Your overall aim is to make the following recommendations

• How much stock of each component (or group of components if appropriate) should be kept at lineside?
• How should replenishment of the lineside stock be managed and replenished going forward in the context that immediate replenishment from the warehouse is no longer possible (i.e. how often should stock be replenished and how big should each replenishment be?)?

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