Chapter 11 Case Problem of Production and Operation Management Subject

SOMERSET FURNITURE COMPANYS GLOBAL SUPPLY CHAIN

(For Fulfilling Group Assignment)

Anggi Gayatri Setiawan (1091001037) Indah faradisah (1091001 Khairurrijal Adhar (1091001 Nessy Diana Kumalla Sari (1091001 Mutiara Hapsari (1091001

UNIVERSITAS BAKRIE DECEMBER 2011

CASE
As the description of Somerset Furniture Company in chapter 10 that has started to contract to outsource several of its furniture product lines to manufacturers in China which simultaneously reducing the size of its own domestic manufacturing facility and labor force.

PROBLEMS 1. Determine the product lead time by developing a timeline from the initiation of purchase order to product delivery. 2. Discuss companys possible transportation modes and channels in China and the likelihood of potential problems. 3. Discuss companys possible transportation modes and channels in United States and the likelihood of potential problems. 4. How international trade specialist might help Somerset reduce its product lead time and variability. 5. How logistic companies and/or internet exchange might help Somerset reduce its product lead time and variability.

ANSWER Number 2 The companys possible transportation modes and channels in China and the likelihood of potential problems As the information mentioned that China was elected to be outsource manufacturing of Somersets product line because of Chinas cheap labor rate and its capability of being a burgeoning global supplier market though there are still potential problems regarding country condition itself. One of China condition lacks is underdeveloped transportation infrastructure which affects to distribution system of Somerset Company. Looking to overall transportation modes in China, rail service is Chinas cheapest distribution mode yet it has routine shortage capacity. While roads are the preferred transportation mode for distributing packaged finished goods, however its demand exceeds capacities remaining Chinas road transport industry is very fragmented with over 5.5 million trucks registered to over 2 million trucking providers. Other is air freight with its high price, besides it also has inadequate capacity, fragmented routes, and limited information exchange between airlines and freight forwarders. The most developed transportation and distribution mode in China is ocean and inland water transport with over 1200 ocean and river ports remaining Chinas shipping companies rank among the worlds largest yet inland water distribution is still underutilized because ports can not process and manage cargo efficiently. Therefore it causes distribution delays and many ports cannot accommodate larger vessels.

Regarding to Somersets distribution system so far, finished furniture products are shipped by container ship from Hong Kong or Shanghai to Norfolk, Virginia. While before the foreign logistics process requires finished furniture items to be transported from the manufacturing plants to the Chinese ports which can take up several weeks depending on trucking availability and schedules. Based on that distribution system and China transportation and distribution condition, the companys possible transportation and modes in China is assumed by below description.
Manufacturing Plant
Chinese Ports /Airports (Hong Kong / Shanghai)

Norfolk, Virginia

TRUCKING, RAIL

SHIPPING CONTAINER, AIR FREIGHT

As explained that Somerset is still suffering from the delays in its distribution, in case distributing from manufacturing plant to Chinese ports might often get delay depending on availability and schedule of trucking, this problem is possible overcome by using rail service for additional distribution to place that possible decrease the distance reached by trucking before going to ports, assuming Somerset is able to handle and set the rail service in China. Moreover the problem comes from the complicated process of loading to shipping container and security checking in port, these might have several days until weeks to be done. Therefore Somerset may consider to use air freight for distributing finished furniture products from Hong Kong or Shanghai to Norfolk, Virginia. For this, Somerset has to manage which products distributed by shipping container or to the Chinese Ports and by air freight. However air freight alternative is rather difficult and high price to be done but it can help to reduce delay for product that has to be distributed in short time.