OMGT1082 - PR Corporation Supply Chain Case Study - Management Assignment Help

Assignment Task

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This assessment task will be based on the Case Study – “PR Corporation supply chain”,  which is available on the Assignment 3 folder of the Canvas course shell. Each student will  work on the supplied case and will answer specific questions and submit the report.  
The case analysis report provides an opportunity for you to demonstrate what you have  learned during the semester in the course. It requires you to analyse the problems and the  likely causes of these problems. To support your answer, you may refer to lecture notes (insert references of Lecture Note - week no.) and other authenticated sources. A  bibliography of all articles and sources of information referenced in the report is mandatory.  Please use the RMIT Business (AGPS) Harvard referencing style 
PR Corporation Supply Chain 
PR Corporation is a Europe-based integrated apparel, footwear, and  accessories manufacturer and retailer. The company started its operation in Spain in  1985 and since then has evolved into a rapidly growing multi-dimensional conglomerate. The  company currently operates and sells its products via online and retail stores in 24  European countries. PR Corporation considers itself as end-to-end apparel, footwear, and  accessories solution provider, starting from sourcing the materials and going all the way to  providing logistical services to its’ clients. It employs over 450 Management staff and  over 15,000 workers. With a vertically integrated setup, the incorporation of advanced  technology, and a proficient management team, PR Corporation is emerging strongly as one  of the highly regarded organisations in Europe. 
Like other companies in the apparel, footwear, and accessories industry, PR Corporation is  dealing with the products which are characterised by short product life cycles, volatile and  unpredictable demand, high in product variety, long and inflexible supply processes, and a  complex supply chain. In PR Corporation supply chain demand uncertainty, lack of historical  data and seasonal trends usually coexist. They experience the variation in demand for the  products they produce. For example, some of the products, such as Jackets and winter boots,  are in high demand during the winter season, while basic t-shirts, sneakers, and loafers are in  high demand during summer. Over the last 10 years, they also have noticed a significant  increased in demand for some products in their portfolio. One of the main reasons for the  increased demand is the escalated popularity of new styles amongst the young population  group in Europe. PR Corporation has some historical data based on which different functional  departments develop their plan; however, quite often they experience disputes among the  departments. In the 2018 winter season, PR Corporation experienced a sharp spike in  demand; hence, suffered a stock-out situation with their newly introduced winter boots  (Product line code: PC203). The marketing and sales department could not anticipate such a demand through its market research. Consequently, the production department did not  prepare extra capacity for producing the product. Moreover, suppliers were unable to provide  the raw materials/components for producing such exclusive winter boots. As a result, the  company could not produce additional products on time and was unable to meet customer  demand. This resulted in customer dissatisfaction and loss of profit. By the time, the company  made the products available in the market, customers were preparing for the spring and the  demand for winter boots dropped. Therefore, PR Corporation had to organise a huge  promotional offer (half price) to sell the excess inventory. This again resulted in a loss  of profit for the company.  
PR Corporation purchases a lot of items to support company operations and has a large  supplier-base for each of the items. They purchase items from both the local and overseas  markets. For example, they source cotton, which is the major item for producing apparel  products, from Uzbekistan and China. Other essential and main materials, such as Polyester,  Rubber, EVA (Ethylene Vinyl Acetate) Foam, Leather, and Synthetic Leather come from  several countries. For instance, the company source leather from tanners and suppliers  in Italy, and Vietnam, synthetic leather from Taiwan, and rubber from Germany, Indonesia,  Thailand, and Malaysia. The company also source supporting materials and supplies such  as buttons, zippers, interlining, fuel for the vehicles, and paper for the employee  newsletter. While the company has multiple suppliers for most of the materials, the company  source synthetic leather from a single supplier in Taiwan. Since the synthetic leather is  cheaper, more breathable, easier to clean and function better than real leather, PR  corporation has been increasingly using this in producing many of their products. This  increases the demand for synthetic leather; however, due to single sourcing and limited  capacities of the supplier, PR corporation is often required to wait for the material. As a result,  the procurement manager, Ms. Jennifer Dillon, is seriously looking for new suppliers to source  synthetic leather. Likewise, PR corporation has a limited number of suppliers for  embellishments such as high-quality print and embroidery. Given that embellishments are important for improving the design and visual appeal of the products and some of the current  suppliers of embellishments are not price competitive, the company is currently looking for  new suppliers. 
PR Corporation has?a large number of?product lines. Due to the increasing demand for the PR  corporation’s products, the company struggles to manage inventory. Therefore, the company  president, Mr. Adam Ciampa, has decided to analyse the company’s inventory requirements  utilising the ABC analysis of the existing product lines, as shown in Table 1. Accordingly,  Mr. Adam Ciampa has asked Ms. Nina Pova, the inventory manager, to perform the ABC analysis based on the previous year’s sales and profit data, as presented in Table 1 and  formulate inventory management strategies for each category.?However, looking into the  information provided in annual sales data, Ms. Nina Pova is in a dilemma whether to conduct  ABC analysis based on annual revenue or profit. 
As mentioned earlier, one of the key components that?PR Corporation?requires for  manufacturing products is the synthetic leather. The current monthly demand for synthetic  leather is 3,000 pallets where each pallet has 50 units. PR Corporation gives orders when  they need and organises a letter of credit and other financial documents. The price per unit  of synthetic leather is $25. The cost to place an order to the supplier  is $600. The annual capital cost related to inventory carrying is 6 percent of the per-unit price  of the materials (such as synthetic leather). The annual costs of storage space of the  materials, inventory insurance and other inventory carrying costs related to weight loss,  damage, and obsolescence are 8 percent, 4 percent, and 2 percent of the per-unit material  price, respectively. PR Corporation doesn’t want to carry a lot of stock of synthetic leather as  it takes up spaces; however, they are also concerned about the frequent stock-outs they have  been experiencing these days.
PR Corporation currently has a central distribution in Madrid in Spain. The centre is  approximately 120,000 square meters in size and serves customers (retailers) from 24  European nations where the company operates. All the products that PR Corporation  produces come to this centre first to get distributed to retailers across Europe.  The centre delivers products to the retail stores at the beginning of the seasons as well as  during the seasons. At the beginning of a season, when the demand is generally high for some  products, PR Corporation employs more staff for ensuring fast and on-time delivery, which is  critical due to the seasonal demand for those products. The company also uses various  strategies for the shipments of the products. For example: 
• The company directly ships to big retailers for fast delivery. As these big retailers  require larger shipments such as full pallets, hence, consolidation with other shipments is  not possible. 
• PR Corporation consolidates the shipments for many small retailers to fully utilise the  capacity and reduce costs. 
• Several value-adding services are performed in the centre for selected retailers. These  value-adding services include sorting, labelling and repacking. 
• In France and Germany, where the demand for PR Corporation products is high,  recently the company opened small satellite distribution centres. This enables PR Corporation to faster replenish some popular items in these markets. 
PR Corporation achieves many benefits for using centralised warehousing and distribution  such as lower inventory storage, lower carrying cost, consolidation of inbound shipments, and  enhanced control to name a few. However, the company has also been experiencing many  challenges in recent times. In particular, retailers are demanding smaller quantities but more  frequent deliveries. Moreover, all retailers demand in-store availability of seasonal products  on day one (the first day) of a new season. Currently, the company is struggling to provide  such services due to its centralised distribution system. Retailers claim that when PR  Corporation delivers the products well before a season, it increases carrying cost for the  retailers. On the other hand, retailers lose sales when PR Corporation is unable to deliver on  time at the beginning of a new season. Moreover, the majority of retailers expects advance  shipping information with RFID tags on the products for enhancing visibility. 

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