Part 1: Production Planning and Quality Management
Setting up of a production plant requires elaborate planning in terms of the location, raw material supply, production schedules, inventory, and transport. Creation of proper plans improves the efficiency in supply chain logistics, which in turn lowers the production costs while increasing the profits. In production planning, supply chain decisions involve both the strategic and operational plans. While strategic plans address the overall long-term goals of the firm, operational decisions focus on the routine functions of the firm.
Location decisions determine the geographic positioning of the production plant. It takes into consideration the suitability of the stocking and sourcing points for the firm. It is an important aspect of the production plan and quality management since it provides the structure of accessing final buyers. It also has a huge effect on the overall costs and revenue earnings for the firm. In deciding where to locate a plant, managers should consider the combinations that offer the optimal profits at lower costs while considering taxes, tariffs, environmental conditions, production capacity and distribution costs. Production decisions will cover the necessary strategies needed in determining what to produce, when, how and by whom. Production schedules offer good planning tools in production decision planning. Inventory decisions will determine the level of stock, the reorder quantity, and time in order to reduce stock related costs. Finally, transport decisions offer the most suitable and reliable means of availing raw materials to the factory or the final product to the consumer.
The first option of locating a production plant that produces memory chips in rural southwest United States offers an advantage in terms of tax incentives. This lowers the overall production costs thus high chances of maximizing profits. The exemption from certain environmental restrictions raises ethical environmental concerns. Freedom of action and exemption from accountability may lead the firm into engaging in environmental unfriendly production in order to maximize profits. The firm may decide to observe environmental safety standards even if the state has exempted it from certain restrictions.
The second option in Southeast Asia has an advantage in terms of low labor costs with few tariffs. The availability of underage workforce violates the ethical rules regarding employment conditions and child labor. Engaging child labor in an oversee country may create problems with the foreign country government which will affect international relationships. If the firm is to locate its production facility in this area, then it should consider not employing children. It should seek mature employees and observe the foreign laws regarding employment.
The last option of locating the facility in a major US metropolitan city gives the firm an excellent opportunity to take advantage of the best labor pool available in the city. The lack of tax incentives and presence of many restrictions places the decision makers in an ethical dilemma regarding maximizing profits for the investor. The decision makers should weigh the advantages of having a highly trained labor pool to the overall costs incurred in terms of taxes and restrictions. If it finds that the costs outweigh the benefits then it should not locate the firm in the region since the investor will incur a loss.
Part 2: Supply Chain Management and Purchasing
The Stochastic approach is a supply chain management modeling technique in which decision makers use models that take the uncertain and random variables into account when determining and trying to predict the future using the results from the available data. Examples of the stochastic/probabilistic models include the process, statistical, and Programming models. The major advantage of this type of modeling is that it provides basis for determining the general pattern of behavior in available data. One can work with the little information that is available unlike other models that require certain information. The main draw back in this type of modeling is that it is limited to analyzing the general empirical data without going deeper to determine the cause of the observations that give rise to the empirical data.
Deterministic approach is a modeling technique in which the parameters are fixed, known, and certain. Deterministic models include mathematical models such as hybrid, simulation, optimization and analytical models. This models enable supply chain management to determine with certainty the exact amounts of supply needs for future purposes. The inability to deal with the uncertain demand situations in supply chain management is its main drawback. It does not exhibit the causal relationships in a supply chain in addition to the inability to give a full picture of the chain.
Multi-period modeling technique in supply chain management involves planning for inventory that requires stocking and moving in multiple periods. It provides a solution for supply chain operations in which heuristic algorithms provide efficient means of dealing with multi-period stock decisions. Managing data that describes different situations and modeling of the scenarios is a complex process. Multi-Echelon modeling on the other hand is a process that allows planning for related supply networks. It is an end to an end supplier model that integrates various supply units or echelons.It allows inventory optimization in supply chain management. Just like the multi-period model, it requires a complex procedure to integrate the echelons. To conclude, deterministic models are suitable for SBC and MLD due to the various mathematical functions.
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