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Problem analysis

Discuss About the Management Is Importance to the Business?

The report shows a clear assessment of ABC Fertilizer Company. The company has operated for the last 80 years in the production of fertilizers. The report clearly looks into the problem that the firm is facing from various managerial sectors. The structure of the company has Chief Executive Officer who is the in charge of the businesses and other four managers in different departments. All the executive management needs to address issues in their department for active operations. The report also looks into the strategies put in place on how to deal with stated problems. The major benefit that the company will enjoy is increased profits, coordination of department and effective and efficient supply chain process. Implementation of the strategies will attract a higher cost that will save in the long run.

ABC Company has faced various problems in the supply chain management that minimize on the company profits (Christopher, 2016). Planning on the supply chain management is the key determinant for the firm's business since a lot of resources are invested in the chain. Significant investment in the planning of the supply and production of fertilizer is the most consideration for the ABC Company. The biggest problems facing the company in the procurement and production management are discussed below.

First, production of 100,000 tonnes of fertilizer that stays in the stores before they are delivered to the customers. The time for the good remain in the warehouse is long and attracts a lot of resources to maintain products in the store. Therefore, the company set aside finance to pay for inventory managements. It is recommendable for the management to consider the issue of time to deliver the already manufactured product. ABC fertilizers are being stored for nine months before being delivered to the customers (Tayur, Ganeshan & Magazine, 2012).  Purchase always has it peak time where fertilizers are highly demanded, and after which goods left stay almost for one year without being sold. This may not be effective or work well for farmers in their production.

Secondly, the level of raw materials is held high not because of the increased production activities but the problem of infrequent delivery. (Mabert & Venkataramanan 2008)The primary raw material is Ammonium Nitrate transported by sea to the plant. Smaller plants of ABC Company situated in other countries get the raw material by seas that come from the main plant. The cost of the accumulated raw material is as a result of transport problems (Seuring & Müller 2009). The ship can only carry 25000 tonnes of raw material, but the plant requires 350,000tonnes. This leads to the accumulated raw materials in the stores. More so, the procurement department opts to buy major suppliers' production capacity because it takes a long time after placing an order and time for delivery. The plan by the procurement department takes a period of 6months while for suppliers to attend to the order and transportation takes three months. In most cases due to the extended period of acquiring the raw materials the company has to hold a significant amount of safety stock to avoid disruptions in the production process.


Another key problem that ABC Company is facing is disjointed production process. It has been observed the breakdown of the plants and machinery is high, and this disrupts the whole process. A two-hour breakdown every day leads to 8 weeks plant shut to repair. This leads the company able to finish the production process in the planned time. Breakdown of plants need high-cost investment for maintenance and repairing the plant.

Communication and hardware infrastructure is out-dated, and this mismatches the demand of fertilizers and what the production sector ought to produce. (Mabert & Venkataramanan, 2008).  The sales department is unable to present accurate data on demand for the products; therefore, they can produce high or fewer products. The claims from farmers are not real and to rely on it’s hard.

There is a conflict between the production management and sales staffs. The sales teams argue that customers do not get fertilizers when they need them and on the other side the production department claim that the sales staffs do not provide the accurate date on demand (Christopher, 2016). The company can install hardware that passes the correct data to the unit of production to ensure that production is directly related to demand. Through the mismatch in the manufacturing process, it makes customers complain about their deliveries after being rescheduled. The customers also complain about that there are no straight prices but go for discount offered without committing to specific dates of delivery. This requires the company to use more money than the one that could be employed if the production was based on the level of demands.

Another noticeable problem that affects the production chain in the company is the lack of Management Corporation. The rest of managerial department thinks that the firm revolves around the production unit. (Spekman, Kamauff  & Myhr 2010).  This makes other administrative units to be reluctant in their daily operations which according to an efficient supply chain every department has a role to play in the overall achievement of the goals. The CEO mainly is concerned with market share rather than improving the quality of the product to beat their competitors. Diverting of attention on the core activities of the business is the greatest problem that leads to loss of the market share.

Managers are concerned with the monthly reports from the information systems. The information may not be reliable as or give enough facts that can be used to plan for the company. The main work of the management is to set strategic goals, and this requires accurate and correct data ( Chen & Paulraj 2014).  Use of the data in the spreadsheets results to poor planning that leads to failure to meet the set goals. The sales people should consider the data on the ground and the one they get from their customers in their daily operations. This data is more reliable as it can give enough reasons why farmers opt for competitor's product. The management should ever consider the raw data from salesperson to set right and achievable goals (Prud’homme, 2015).

The introduction of new distribution network did not work well in the point of dispatching (In Kahraman & In O?ztays?i, 2014).  The new distribution network is designed to ensure that customers arrange their trucks through private contractors where they are loaded using the conveyer belt. On the other hand, if fertilizers shipped to the distributors then ABC Company outsource transport services. The new network does not address the changing local needs.

An information system is another drawback in the company since it deemed obsolete by the manufacturers. It is clear that the information gotten from the system is not sufficient for the manufacturers to use (Burritt, Schaltegge, Bennet, Pohjola  & Csutora, 2011). This has been witnessed by complaints from customers unable to buy fertilizer in the time of need. In other instances, their orders have to be rescheduled because of low production.

In recent times it has come to the realization of a substantial room for improvement in the supply chain area of the ABC Company. The stock levels are high, but the service level is insufficient and the general operation across the supply chain is limited. As the company lacks in the internal competencies, the company will require to hire a consulting company that has a broad experience and features on supply chain management. The consultancy firm will be engaged to analyze the problems arising in the supply chain and to help in the implementation of the needed changes.

The major point of address to be handled by the firm is on ensuring timely flow of stocks from Bunbury, Geraldton, Albany and Esperance to the depots located all over the country(Lee,2012). It will also look into the manufacturing units to ensure that the bulk raw materials are delivered in time. They will also be responsible for the forward planning of the shipping process and will also help in the management of the central distribution center.

The strategy will be based on the concept customer relations management and order (Gunasekaran, 2013). The primary focus of the concept is to ensure by utilizing reduced waiting time for customers and reducing on the rescheduling of delivery dates, ABC will be separated from other competitors in the market through the standardization of customer offerings through better service levels (Beamon, 2012). Both of these will be made possible through the introduction of much reliable internal lead times.

  • To maximize on the service offered to the customers
  • To minimize the existing inventory costs through better service delivery.

The lead time to the end customers (Frohlich, 2012)- Delivery of the fertilizers will be delivered within the end of two working days, those distributed over a longer distance will take 14 working days, and if delays occurs, the products will be distributed within six weeks from the date of the customer order.

The response time (Cooper, 2010); any fertilizer that needs shipping will be shipped within the span of a working day, in case of delays, the shipping period should not take more than 4 weeks after an order has been received from the ABC Company.

In addition to improve on the customer delivery service, ABC should include special offerings with direct customers who have remained loyal to the company (Lambert, 2012). The offerings will be limited to only a certain number of customers of a strategic importance. However, for such offerings additional charges may be included. Before any of the special offering is implemented, an internal agreement from all the company’s department will be needed.

A make to order strategy will be implemented which will include the production of stock, the assembling to order, and the produce to order mini strategies (Lambert, 2012). There will be fertilizers produced with the aim of stocking and other fertilizers that will be either produced or assembled upon an order. This has the implication that upon the reception of an order, the fertilizer will be produced from the stock of raw materials that is already stocked. Alternatively, if the order is urgent, it will be met from the production of the semi-finished products to reduce the throughput time (Beamon, 2012).

In addition to meeting the delivery time, a five day lead-time will be implemented. It will be based on a principle where on the first of five days, the order will be received from the customer and immediately entered in to the system of production. On the second day, the raw materials will be entered into production and assembling process, on day three the production process will take place, on day four the materials will be in stock for packing, on the last day, the final product will be ready for distribution (Power, 2015).

 Outsourcing of the tactical and operation activities will enable the ABC Company to focus the activities that are really focused on meeting the needs of the customers.  The main ideas for outsourcing in manufacturing, procurement and logistics departments; the outsourcing criteria will be organized into either make or buy possibilities, the core competencies of the outside partners, the existing collaborations and the available skills with other companies (Mentzer, 2013).

The strategy will ensure optimum management of the base of supply, in a way that will ensure control, reallocation, and follow up of the suppliers whenever needed.  The purpose of the developments will be to avoid;

 Much dependence on given suppliers

Unavailability sufficient raw materials as a results of changes in the supplier market.

As the company finds the management of the supply base quite a daunting task a methodical technique for the right variety of the suitable plans for given arrangements of suppliers and materials are needed.  The major risk factors affecting the supply of the product will be considered the factors will include the time needed to change the supplier, the available capacities on the market, the lead time (Ming et al., 2014).

The use of advanced supply chain management system will be greater where the partnership with other departments will be under the implementation of suppliers. As the system becomes more complex, the cost of supply in terms of managing suppliers as well as the logistics cost will be likely to increase. The strategy will allow a decrease in supplying base of the cost effective areas (Ming et al., 2014).

The company’s infrastructure is divided into the manufacturing infrastructure, the information system infrastructure and the logistics infrastructure. The manufacturing infrastructure including the manufacturing plant that is used in production of the fertilizers, an addition of the plant will be required in order to reduce on the downtime. Both of the plants will be used to produce the necessary goods for distribution (Ming et al., 2014).

The logistics infrastructure is the main distribution centre which is located in the offices this is where the consolidation of the units takes place. It is from here that distribution to the other local stocks takes place.

The information technology infrastructure- the different departments that make the ABC Company current operate on different technological systems and are only brought together by the monthly reports. They are also considered obsolete and no longer supported by the manufacturer anymore.

An improvement on the company’s infrastructure through a migration to an integrated information system will be crucial to achieving the goals of the company through the synchronized supply chain system. The information system infrastructure should ensure a better flow of ideas, and an enhanced connection between the various departments of the Company’s departments.

Other solutions such as the use of advanced planning and scheduling systems will ensure a better communication between the different departments and improve on the use of the different tools such as dynamic stock,  improved accuracy of the data, capacity planning can improve on the efficiency of the process.

Benefits expected from the strategies

The strategies will ensure that the lead and response times are reduced therefore resulting into better delivery of goods to the customer.

Will increase the competitive advantage of the company

The implementation of the strategies for the ABC Company will be possible in different phases.  Different network streams will be required to effectively join the people from the different departments. In each of the phases, major sub projects will be defined, each of the sub projects will have pilot implementation for other smaller areas of the supply chain to reduce on the risk and complexity of the implementation.

The purpose of the integrated information system is to make ensure that the company operate as a single item rather than the fragmented different departments. The main purpose of the integration is the reduction of the lead time to utmost five days.  The key initiatives in the process include;

Merging the supply and production departments through a common system and to introduce new functions

  • Introduction of new inventory policies
  • Reduction of the lead time from operation to the daily replenishments
  • Redefinition of the key concepts to make clear distinction between all the key supply chain processes to create focus and transparency.
  • Definition of the measurement system on the basis of the critical success criteria.
  • The lack of a functional management system
  • Lack of an operational measurement system
  • Lack of qualified managers
  • Shallow understanding of the company’s vision.

After the integration of the different departments, the systems will then be merged with the new supply chain consultancy firm. The new firm will be responsible for managing the logistics and demand planning.

The procurement will be integrated to recap the benefits of the new purchasing processes. The main barrier towards the implementation of this phase is the people’s resistance to change.

The synchronization of the supply chain will incorporate an implementation of Advanced Planning and working with trusted suppliers and other service providers.

The costs of implementation will include the total information system change costs, the stocking costs, costs to be utilised in procurement, and the cost of attainment of equipment. The costs will be analysed, the results will then be used to attain a funding source.

The time component will include the internal cycle time, it was drilled down to the lead time of production to the lead time of suppliers. The average lead time for each of the phases is expected to be ten working days.


As a precondition remains dominant in the market, companies are being forced to compete in global markets and defend their domestic share from the international competitors.  The result has been an increase in the complexity of their supply chains, an increase in the pressure to cut on costs and improve on the service levels.


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