FKN1: Operations and Supply Chain Disruption D472 Task 1 Case Study
D472 Task 1 Case Study
Op eration and Supply Chain Disruption a t Autojor
Manufacturing
Background
Autojor Manufacturing (AJM), based in Louisville, Kentucky, is a company that produces
high-dollar electronic components for the automotive industry. The company has been in
operation for over 25 years and has a reputation for providing high-quality products at
competitive prices. The company has a current partnership with a supplier in Houston,
Texas, that provides 100% of key components (small metal gears). The company has
recently experienced an operation and supply chain disruption that threatened to impact its
ability to deliver products to customers.
Disruption
This disruption occurred when AJM's supplier in Houston experienced a f ire at their
manufacturing facility, resulting in a complete shutdown and a shortage of critical
components. This incident disrupted AJM's supply chain and ability to deliver products to
their customers, resulting in lost sales and potential loss of business. The company had to
incur expedited freight costs during the plant start-up after the f ire.
To tackle the disruption, AJM quickly formed a team to evaluate options and determine the
risk factor based on various start-up time frames. AJM held internal meetings to assess their
inventory positions and determine the next steps to take. A team was quickly assembled
two days later to evaluate various options and assess the risk factor based on different time
frames scheduled for the supplier's start-up. During the interviews, AJM discovered that
their employees were concerned about the potential long-term effects of the disruption,
including fears of layoffs, employee reductions, and loss of business. Multiple news sources
and social media outlets added to the uncertainty with a range of opinions, many of which
were based more on emotions than on facts. From a customer perspective, AJM avoided
major outages with the three large automotive companies—Cadallia (CD), Lexiplus (LP), and
Elecktore (ET)—with only one disruption caused to Cadallia and potential penalties
forthcoming. The extensive communication with the three companies throughout the
disruption was key to ensuring that all options could be explored.
Resilience
Despite the disruption, AJM demonstrated short-term resilience by immediately contacting
other potential sources, engaging expedited carrier services, and reviewing potential
substitutions. They also increased communication with their customers to manage their
expectations regarding potential inventory outages. However, the disruption had a
, FKN1: Operations and Supply Chain Disruption D472 Task 1 Case Study
significant impact on the company's operations and supply chain, with production levels
decreasing by 100% three weeks after the disruption.
Data Analysis
The disruption had a significant impact on AJM's operations and supply chain, leading to a
100% decrease in production levels three weeks after the supplier's facility f ire. However,
the company was able to avoid stock outages with Cadallia, Lexiplus, and Elecktore thanks
to on-hand inventory at the supplier site and maintaining min-max levels for f inished goods.
Unfortunately, production for the OEM market (where AJM's name is not directly on the
products) was stopped immediately, and subassembly materials were reassigned. While the
company was fortunate to avoid stock outages, the data showed that the current recovery
plan could be more robust.
During discussions with key executives, it became clear that there were concerns about
some of the processes or lack of processes in the current operation. The executives noted
that it took two days to assemble a team to respond to the disruption, there was no clear-
cut leader for the response, and the procurement process had only one supplier for a key
item.
In addition, the leadership team felt that the min-max inventory level carried at the
organization was tying up capital. Long-term options were needed to allow the leadership
team to feel comfortable reducing inventory to free up capital. They also felt that the
recovery time to a secure inventory level was too long and wanted to explore long-term
options for sourcing.
A positive factor highlighted in the f indings was the effectiveness of the ERP system, with
barcode scanning at the point of production and within the warehouse operations. The
internal resources combined with EDI communication for demand from the customer base
provided AJM with real-time data to formulate a plan. One point expressed by leadership
was the barcoding technology and whether an RFID system would enhance the ability to
capture data. In addition, the leadership team wanted to have a better understanding of the
analysis capabilities of big data and the potential for improved forecasting.
The AJM's leadership team identified concerns with the procurement process, the lack of a
clear-cut leader for a disruption response, and the min-max level tying up capital. To
mitigate future disruptions, they evaluated three long-term solutions:
Solution 1: Multisource Supply Chain
The AJM leadership team is evaluating the implementation of a multisource supply chain
strategy. This strategy is being considered as a strategic option to increase the resilience
and viability of the company's supply chain and reduce the risk of supply chain disruptions
that would negatively impact their ability to meet the needs of their customer base
(Cadallia, Lexiplus, and Elecktore).
Implementing a multiple-sourcing strategy will provide AJM with the f lexibility to manage
any future supply chain disruptions without significant interruption to its business
operations. Multisourcing offers several attractive advantages:
D472 Task 1 Case Study
Op eration and Supply Chain Disruption a t Autojor
Manufacturing
Background
Autojor Manufacturing (AJM), based in Louisville, Kentucky, is a company that produces
high-dollar electronic components for the automotive industry. The company has been in
operation for over 25 years and has a reputation for providing high-quality products at
competitive prices. The company has a current partnership with a supplier in Houston,
Texas, that provides 100% of key components (small metal gears). The company has
recently experienced an operation and supply chain disruption that threatened to impact its
ability to deliver products to customers.
Disruption
This disruption occurred when AJM's supplier in Houston experienced a f ire at their
manufacturing facility, resulting in a complete shutdown and a shortage of critical
components. This incident disrupted AJM's supply chain and ability to deliver products to
their customers, resulting in lost sales and potential loss of business. The company had to
incur expedited freight costs during the plant start-up after the f ire.
To tackle the disruption, AJM quickly formed a team to evaluate options and determine the
risk factor based on various start-up time frames. AJM held internal meetings to assess their
inventory positions and determine the next steps to take. A team was quickly assembled
two days later to evaluate various options and assess the risk factor based on different time
frames scheduled for the supplier's start-up. During the interviews, AJM discovered that
their employees were concerned about the potential long-term effects of the disruption,
including fears of layoffs, employee reductions, and loss of business. Multiple news sources
and social media outlets added to the uncertainty with a range of opinions, many of which
were based more on emotions than on facts. From a customer perspective, AJM avoided
major outages with the three large automotive companies—Cadallia (CD), Lexiplus (LP), and
Elecktore (ET)—with only one disruption caused to Cadallia and potential penalties
forthcoming. The extensive communication with the three companies throughout the
disruption was key to ensuring that all options could be explored.
Resilience
Despite the disruption, AJM demonstrated short-term resilience by immediately contacting
other potential sources, engaging expedited carrier services, and reviewing potential
substitutions. They also increased communication with their customers to manage their
expectations regarding potential inventory outages. However, the disruption had a
, FKN1: Operations and Supply Chain Disruption D472 Task 1 Case Study
significant impact on the company's operations and supply chain, with production levels
decreasing by 100% three weeks after the disruption.
Data Analysis
The disruption had a significant impact on AJM's operations and supply chain, leading to a
100% decrease in production levels three weeks after the supplier's facility f ire. However,
the company was able to avoid stock outages with Cadallia, Lexiplus, and Elecktore thanks
to on-hand inventory at the supplier site and maintaining min-max levels for f inished goods.
Unfortunately, production for the OEM market (where AJM's name is not directly on the
products) was stopped immediately, and subassembly materials were reassigned. While the
company was fortunate to avoid stock outages, the data showed that the current recovery
plan could be more robust.
During discussions with key executives, it became clear that there were concerns about
some of the processes or lack of processes in the current operation. The executives noted
that it took two days to assemble a team to respond to the disruption, there was no clear-
cut leader for the response, and the procurement process had only one supplier for a key
item.
In addition, the leadership team felt that the min-max inventory level carried at the
organization was tying up capital. Long-term options were needed to allow the leadership
team to feel comfortable reducing inventory to free up capital. They also felt that the
recovery time to a secure inventory level was too long and wanted to explore long-term
options for sourcing.
A positive factor highlighted in the f indings was the effectiveness of the ERP system, with
barcode scanning at the point of production and within the warehouse operations. The
internal resources combined with EDI communication for demand from the customer base
provided AJM with real-time data to formulate a plan. One point expressed by leadership
was the barcoding technology and whether an RFID system would enhance the ability to
capture data. In addition, the leadership team wanted to have a better understanding of the
analysis capabilities of big data and the potential for improved forecasting.
The AJM's leadership team identified concerns with the procurement process, the lack of a
clear-cut leader for a disruption response, and the min-max level tying up capital. To
mitigate future disruptions, they evaluated three long-term solutions:
Solution 1: Multisource Supply Chain
The AJM leadership team is evaluating the implementation of a multisource supply chain
strategy. This strategy is being considered as a strategic option to increase the resilience
and viability of the company's supply chain and reduce the risk of supply chain disruptions
that would negatively impact their ability to meet the needs of their customer base
(Cadallia, Lexiplus, and Elecktore).
Implementing a multiple-sourcing strategy will provide AJM with the f lexibility to manage
any future supply chain disruptions without significant interruption to its business
operations. Multisourcing offers several attractive advantages:
