Supply chain management - Task 13

CILT UK Professional Diploma in Logistics & Transport
Supply Chain Management Module
Supply Chain Management
Task 13
Internal Audit
Prepared for Samantha Mars

NZ Student: Helen McGinty
Module: Supply Chain Management
Task: 13
07/2014
Page 2
Introduction
An internal audit is a valuable exercise which enables a business to identify risks
and assist in improving processes and functionality within the company. The audit
will provide insight to all relevant stakeholders to ensure the business has
effective controls and procedures in place and assist to improve the supply chain.
This internal audit will not suggest improvements from the results. The data used
in this audit has been obtained from the SCILplc world and from previous tasks
completed by myself. The structure of the audit will follow the layout as provided
in the Supply Chain Management resource material.
There will be six sections to the audit:
Section One  Demand Profile
Section Two  Supply Profile
Section Three  Costs
Section Four  Service
Section Five  Resource Utilisation
Section Six  Planning Processes

Task: 13
07/2014
Page 3
Section 1 – Audit Demand Profile
Customers
Bi-Flo has 30 different customers and four different customer groups. These are
wholesalers, distributors, OEM’s (original equipment manufacturers) and export.
The percentage of demand volume for each group is as below:
Customer Group No. of
Customers
Location of
Customers
% of Demand
Wholesalers 10 C1 – C10 41
Distributors 10 C11 – C20 26
Export 5 C21 – C25 19
OEM’s 5 C26 – C30 14
Each customer places and receives an order everyday (7 days a week). Each
order can contain the entire range of Bi-Flo products. The map below shows the
geographical locations of each customer within Homeland.

Task: 13
07/2014
Page 4
The demand in terms of volume by customer is shown below. The list begins with
the smallest customer by volume (C17) and ends with the largest (C5).
Customer Customer Type Bi-Flo Volume
(units)
C17 Distributor 488,303
C21 Export 631,964
C22 Export 676,399
C23 Export 720,478
C24 Export 765,475
C25 Export 809,774
C26 OEM 851,592
C27 OEM 893,409
C28 OEM 932,219
C10 Wholesaler 955,698
C29 OEM 967,633
C9 Wholesaler 998,335
C30 OEM 998,952
C1 Wholesaler 1,024,738
C3
Wholesaler
1,063,469
C6
Wholesaler
1,068,342
C4
Wholesaler
1,073,008
C5
Wholesaler
1,074,692

Task: 13
07/2014
Page 5
The demand in terms of revenue by customer is shown below. The list begins
with the smallest customer by revenue (C17) and ends with the largest (C4).
Customer Customer Type
Bi-Flo Revenue
($H)
C17 Distributor 7,207,040
C21 Export 8,069,222
C22 Export 8,653,756
C23 Export 9,228,587
C24 Export 9,803,184
C25 Export 10,359,414
C26 OEM 14,503,668
C27 OEM 15,185,606
C28 OEM 15,803,509
C29 OEM 16,362,083
C30 OEM 16,845,921

Task: 13
07/2014
Page 6
Products
Bi-Flo currently has three different products Dependable, Excellent and Favourite.
Each product group consists of a range of colours, styles and qualities as
displayed in the table below. In total there are 1030 SKU’s.
PRODUCT No. of Styles No. of Colours No. of Qualities per Colour No. of Line Items
Dependable 4 7 10 280
Excellent 3 10 10 300
Favourite 5 9 10 450
TOTAL 12 26 30 1030
 Dependable and Excellent are manufactured on site by Bi-Flo and Favourite
is out sourced from Forexland.
 Dependable and Excellent are delivered from the factory on articulated
vehicles with curtain sides containing 24 pallets. Each pallet of Dependable
contains 3600 items and Excellent; 496 items.
 Favourite is delivered from the supplier unpalletised. Once sorted by Bi-Flo,
each pallet contains 1444 items.
 The products all vary in size and weight with Dependable being the heaviest
but also the smallest and Excellent being the lightest but the largest.
Dependable Excellent Favourite
Weight per unit 0.16 0.03 0.12
Cubic m per unit 0.0006 0.0045 0.0015

Task: 13
07/2014
Page 7
Dependable has the highest demand by product:
The graph below shows the demand of the three products over time (by month).
Section Two – Supply Profile
Audit the Supplier Profile
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
Year -2 Year -1 Last year
Historic Volumes in Items
Dependable
Excellent
Favourite
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
1 2 3 4 5 6 7 8 9 10 11 12 13
Period
Demand C24 by Period in Units Dependable
Excellent
Favourite

Task: 13
07/2014
Page 8
 The Favourite product shows as having a stable demand over the 13
months as shown on the graph. Although the demand rate varies over time;
there is no suggestion of an increasing or decreasing trend.
 Excellent represents having a slight seasonal increase in volume demand.
The changes in demand over time are not dramatic and appear to increase
gradually.
 Demand for Dependable over time shows a step seasonality pattern on the
graph. This means the demand pattern has a marked change which occurs
relatively quickly for each season.
 From the graph we can see that demand does spike during the year,
especially with Dependable, which is when Bi-Flo experience availability
issues with their products. Samantha Mars and James Garrick both mention
these availability issues in the Bi-Flo meetings.
 The information collected shows that the core of the business is with the
Wholesalers who generate the highest revenue. The wholesalers are
located at C1 to C10 within Homeland.

Task: 13
07/2014
Page 9
Section Two – Audit Supply Profile
Bi-Flo currently sources its raw materials from Deltaland and Epsilonland for the
manufacture of Dependable and Excellent. Favourite is supplied as a finished
good from Forexland.
Dependable Excellent Favourite
Destination C2 C25 C24
Deltaland Suppliers 6 2 -
Epsilonland suppliers - 4 -
Forexland Suppliers - - 1
All raw materials for Dependable and Excellent are bought on an ex-works basis
from suppliers. The deliveries are made via sea freight and are containerized.
Suppliers in Deltaland and Epsilonland supply raw materials on a make-to-order
basis and are contracted to hold a minimum of two months stock to avoid stock
outs but they are currently not complying with this requirement.
The raw materials purchased are plastic, paper and other synthetic materials
manufactured to make products used in domestic appliances.

Task: 13
07/2014
Page 10
All raw materials for Dependable and Excellent; and the finished product
Favourite are sent from suppliers unpalletised in containers. The boxes must be
unloaded, sorted and palletised before they can be stored.
The factory at C2 received 157 loads in total from Deltaland suppliers. The
average lead time from suppliers in Deltaland is 26 weeks and a maximum of 34
weeks.
Supplier Destination Loads Cost per load Total Cost
Delta1 Factory C2 13 1600 20800
Total 157 251200
The factory at C25 received 353 loads in total from Deltaland and Epsilonland
suppliers. The average lead time from suppliers in Deltaland is 26 weeks and
maximum of 34 weeks. The average lead time from suppliers in Epsilonland is 20
weeks and a maximum of 26.
Supplier Destination Loads Cost per load Total Cost
Epsi1 Factory C25 32 1500 48000
Epsi1 Factory C25 32 1500 48000
Epsi1 Factory C25 32 1500 48000
Epsi1 Factory C25 32 1500 48000
Epsi2 Factory C25 43 1500 64500
Epsi2 Factory C25 43 1500 64500
Epsi3 Factory C25 53 1500 79500
Epsi4 Factory C25 64 1500 96000
Total 353 531700

Task: 13
07/2014
Page 11
0
1
2
3
4
5
6
7
8
9
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Loads
Week
Total loads received by week at C2
0
2
4
6
8
10
12
14
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Loads
Week
Total loads received by week at C25

Task: 13
07/2014
Page 12
The Favourite products are delivered from suppliers in Forexland into the
distribution centre at C24. The orders for Favourite are placed once a year for
delivery in 52 week’s time. Once all the product has been sold, Bi-Flo source a
different product and/or supplier.
0
2
4
6
8
10
12
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51
Week
Loads Received of Favourite C24

Task: 13
07/2014
Page 13
 The audit reveals the long lead times from suppliers and the irregularity of
supply for all three sites.
 Forexland suppliers can offer a low purchase price for Bi-Flo’s commitment
to one year’s worth of product and will only make/ship in large quantities.
This approach to inventory management makes forecasting difficult because
of the yearly ordering and incurs long lead times from suppliers.
 Although the availability with this approach is better than the manufactured
products for majority of the year; product availability for Favourite is affected
when approaching the year-end cycle.
 Phil Garrison and Samantha Mars both mention the issues with Favourite.
Phil Garrison quotes: “…This whole concept is an experimentfor us. The problems we have had with
forecasting have made it difficult to get the levels of availability we need without incurring massive inventory
costs. The nature of the product is very simple with little technical advancements,butthe productcan be
simply slotted into the appliance.Although they are not replenishable,we can substitute alternatives that are
of a similar quality.Coming from the Far East the cost of manufacturing is also lower”.

Task: 13
07/2014
Page 14
Section Three – Audit Costs
Fixed Costs
The table below identifies the fixed costs for Bi-Flo. Fixed costs are identified as
costs that do not vary with the level of supply chain activity which they are
supporting.
Location Description Cost (annually)
C2 Warehouse rent and rates 165,992
Factory building 963,360
Mould Machines 4,800,000
Jigs 19,500
PPT’s 168,480
Counter balance trucks 17,160
C25 Warehouse rent and rates 571,556
Factory building 1,497,300
Mould Machines 4,000,000
Jigs 18,800
PPT’s 137,280
C24 DC rent and rates 321,786
Powered pallet trucks 106,080
Reach trucks 28,860
For fixed costs, insurance and depreciation must be considered. In this instance,
it includes insurance and depreciation for transport costs associated with inbound
transport from C25 and delivery to customer as below:
Inbound from C25
Insurance 3,000
Depreciation 7,824
Depreciation trailer 2,321
Delivery to Customer
Insurance 16,736
Depreciation 77,900
Depreciation trailer 774

Task: 13
07/2014
Page 15
Variable Costs
The table below identifies the variable costs for Bi-Flo. Variable costs are
identified as costs that are related to supply chain resources which are only
incurred when that resource is being used.
C2 Racking spaces 6,348
Pallets 5410
Power (warehouse) 37,218
Power (equipment) 1,800
Power (factory) 432,000
Moulds 62,400,000
Raw materials 49,195,274
Transport (inbound raw materials) 251,200
Pallets 13,035
Power (warehouse) 92,186
Power (factory) 483,000
Moulds 52,000,000
Pallets 11,969
Power (distribution centre) 66,211
Transport (3rd party from C2) 50,990
Transport (inbound from C25)
VED 1,800
Fuel 19,100
Tyres 1,264
Tyres (trailer) 1,388
Maintenance 4,549
Maintenance (trailer) 2,007
Transport (delivery to customer)
VED 2,910
Fuel 171,130
Tyres 10,323
Maintenance 62,351

Task: 13
07/2014
Page 16
Direct Costs
The table below identifies the variable costs for Bi-Flo. Variable costs are
identified as costs which can be directly attributable to a specific area of the
supply chain. Direct costs can be both fixed and variable.
Location/Area Description Cost (annually)
C2
Sourcing Inventory controllers 30,000
Inventory planners 144,000
Inventory assistants 36,000
Transport planning costs (inbound) 235,500
Manufacturing Grade 1 operatives 4,356,000
Grade 2 operatives 5,340,000
Supervisors 744,000
Shift managers 180,000
Quality control 336,000
Maintenance 667,500
Movers 972,000
Shift factory managers 30,000
Shift supervisors 48,000
Factory planners 96,000
Planning assistants 44,500
Warehousing Truck drivers 111,250
Supervisors 72,000
Manager 30,000
C25
Sourcing Inventory controllers 30,000
Transport planning costs (inbound) 235,500
Manufacturing Grade 1 operatives 4,122,000
Grade 2 operatives 4,383,250
Supervisors 432,000
Shift managers 180,000
Quality control 384,000
Maintenance 445,000
Movers 792,000
Shift factory managers 30,000
Shift supervisors 48,000
Factory planners 72,000
Planning assistants 22,250
Warehousing Truck drivers 111,250

Task: 13
07/2014
Page 17
Supervisors 72,000
Manager 30,000
C24
Distribution Senior inventory managers 36,000
Inventory controllers 90,000
Operatives grade 1 540,000
Truck drivers 400,500
Supervisors 216,000
Manager 90,000
Sen manager 36,000
Driver costs (customer delivery) 544,252
Transport (inbound from C25) 103,808
Agency cover 13,156
Overhead Costs
The table below identifies the overhead costs for Bi-Flo. Overhead costs are
identified as costs that cannot be directly attributable to a supply chain function
but relate in part to that function. Overhead costs include management costs
where the manager has responsibility for a number of supply chain areas.
C2 Admin Site manager 50,000
Senior admin mgr 36,000
Admin mgr 30,000
HR mgr 30,000
Finance mgr 30,000
Supervisors 96,000
Assistants L2 22,250
C25 Admin Site manager 50,000
Admin Mgr 30,000
HR mgr 30,000
Finance Mgr 30,000
Supervisors 96,000
Assistant L2 22,250
Assistant L1 144,000
C24 Admin Site Manager 50,000

Task: 13
07/2014
Page 18
Admin mgr 30,000
HR mgr 30,000
Finance mgr 30,000
Assistant L2 22,250
Cost to Serve
Below is a completed cost to serve for the three Bi-Flo products Dependable,
Excellent and Favourite. All costs are in Homeland dollars ($H)
C2 C25 IMPORT
OPERATING COSTS Dependable Excellent Favourite Total
Units of Throughput 16,116,388 7,051,635 1,881,611 25,049,634
Units % 64.33% 28.15% 7.51% 100.00%
Raw materials 49,195,274 61,778,669 9,690,301 120,664,244
Inbound transport 251,200 531,700 90,000 872,900
Material warehouse 447,178 968,501 - 1,415,679
Production 81,378,840 68,874,630 - 150,253,470
Transport to DC 50,990 147,060 - 198,049
DC costs 1,211,659 530,154 141,462 1,883,275
Customer transport 570,274 249,518 66,580 886,372
Total 133,105,415 133,080,232 9,988,343 276,173,989
OVERHEAD Dependable Excellent Favourite Total
Inventory Planning 135,093 59,115 15,771 210,000
Factory Planning 218,500 172,250 - 390,750
Administration 281,926 123,367 32,913 438,250
Transport Planning 151,497 66,293 17,686 235,500
Total 787,016 421,026 66,370 1,274,500
Total Cost 133,892,431 133,501,257 10,054,713 277,448,489
Units 16,116,388 7,051,635 1,881,611 25,049,634
Kgs/unit 0.16 0.03 0.12 0.3100
Cube m/unit 0.0006 0.0045 0.0015 0.0066
Kgs 2,578,622.00 211,549.05 225,793.32 3,015,964
Tonnes 2,578.00 211.00 225.79 -
Cube 9,669.83 31,732.00 2,822.00 44,224
Cost per unit 8.31 18.93 5.34 -
Revenue per unit 14.12 20.54 10.22 -
Profit per unit 5.82 1.61 4.88 -

Task: 13
07/2014
Page 19
Cost per kg 51.92 631.07 44.53 -
Cost per cube m 13,846.41 4,207.10 3,562.45 -
Revenue per kg 88.27 684.74 85.20 -
Revenue per cube m 23,539.14 4,564.90 6,815.75 -
Kgs per cube m 266.67 6.67 80.00 -
Profit Margin % 70.00% 8.50% 91.32% -
***Transport Planning
Analysis C2 C25 C24 Total
C2 Planning 1,363,008 - - 1,363,008
C25 Planning - 596,435 - 596,435
C24 Planning - - 159,120 159,120
Total 1,363,008 596,435 159,120 2,118,563
Analysis of the total data collected shows that the cost to serve for each product
overall is as follows:
 Dependable $8.31
 Excellent $18.93
 Favourite $5.34
The cost per product by weight is:
 Dependable $51.92 per kgs
 Excellent $631.07 per kgs
 Favourite $44.53 per kgs
The cost per cubic metre is:
 Dependable $13846.41 per m3
 Excellent $4207.10 per m3
 Favourite $3562.45 per m3

Task: 13
07/2014
Page 20
 C25 has the highest fixed costs at $6,242,096
 C25 has the highest variable costs at $114,432,887
 C2 has the highest direct costs at $13,472,750
 C24 has the highest overhead costs at $522,250
 In this instance the cost to serve shows us that our three products vary in
weight and cubes and therefore vary in cost per kg/m3. For example,
Dependable is heavier than the other two products but is also the smallest.
Whereas Excellent is the lightest product, it is also the largest.
 The cost of raw materials and inbound transport for Excellent is higher than
that of the other manufactured product Dependable by 26%.
 Whereas Excellent generates the greatest revenue per unit, its associated
costs generate the least amount of profit at 8.5% (Dependable at 70% and
Favourite at 91.32%).
 Favourite is the only purchased finished good and although generates the
highest profit margin, it equates to only 7.5% of the total throughput figures.
 The cost of transportation for Excellent is almost three times higher than
that of Dependable to the distribution centre

Task: 13
07/2014
Page 21
Section Four – Audit Service
Bi-Flo has 30 customers who all submit an order everyday (7 days a week).
These orders are processed by the administration assistants and communicated
to the distribution centre for order picking. The orders are picked and dispatched
for same day delivery if they are received by the supplier before the dispatch cut
off time and if they are available.
Customer Groups
Bi-Flo has 30 different customers and four different customer groups. These are
wholesalers, distributors, OEM’s (original equipment manufacturers) and export.
The percentage of demand volume for each group is as below:
Bi-Flo asked its 30 customers to rank the business from a qualitative point of
view. The information collected in the survey was all a number based ranking
system There are three sections and they results are graphed below.
Wholesalers
41%
Distributors
26%
OEM's
14%
Export
19%

Task: 13
07/2014
Page 22
The below chart shows the results from the data collected from the 30 Bi-Flo
customers based on their needs in terms of the 12 service attributes as displayed.
Customers were asked to rank listed in order of 1 to 12 where 1 is the most
important to them and 12 is the least. To look at this data as overall averages, I
have added the numbers together to get a total figure used in the chart. The
lowest bars represent the most important to our customers. Although in the
survey, Price received the most 1’s being deemed most important by more
customers, overall Product Availability has the lowest number as an average from
all customers.
0
50
100
150
200
250
300
Price
Payment
Terms
Invoice
Accuracy
Product
Quality
Product
Availability
Reliability
ofsupply
Delivery
lead…
Easeof
ordering
Response
toproblems
Sales
support
Errorfree
delivery
Mercandising
support
Service Attribute

Task: 13
07/2014
Page 23
customers based on their rating of importance of the 12 service attributes as
displayed. Customers were asked to rank listed in order of 1 to 5 where 1 is the
least important to them and 5 is the most. The highest bars represent the most
important to the customers. The chart shows that reliability of supply is rated most
important.
0
20
40
60
80
100
120
140
160
Price
Payment
Terms
Invoice
Accuracy
Product
Quality
Product
Availability
Reliability
ofsupply
Delivery
lead…
Easeof
ordering
Response
toproblems
Sales
support
Errorfree
delivery
Mercandising
supportService Attributes

Task: 13
07/2014
Page 24
customers based on their rating of Bi-Flo’s performance of the 12 service
attributes as displayed. Customers were asked to rank listed in order of 1 to 5
where 1 is the worst and 5 is the best. The highest bars represent the best
performance areas to the customers. The chart shows that Delivery lead times
are rated the highest.
0
20
40
60
80
100
120
140
160
Price
Payment
Terms
Invoice
Accuracy
Product
Quality
Product
Availability
Reliability
ofsupply
Delivery
lead…
Easeof
ordering
Response
toproblems
Sales
support
Errorfree
delivery
Mercandising
support
Service Attribute

Task: 13
07/2014
Page 25
 Price received the most 1’s in the first survey being ranked as the highest in
terms of need.
 Bi-Flo performance of sales support has been rated second highest in the
overall average results.
 Product availability has been ranked lowest in terms of performance as an
overall average by all customers.
The chart below shows the forecast error as a percentage by month over the last
13 months:
 Favourite has the highest forecast error as a percentage of demand.
FORECAST ERROR LAST YEAR % of DEMAND
Period Dependable Excellent Favourite
1 6.75% 4.95% 66.58%
2 5.51% 15.01% 60.11%
3 17.19% 0.50% 17.64%
4 0.44% 3.43% 26.37%
5 19.96% 26.88% 18.86%
6 10.09% 2.75% 18.73%
7 5.54% 33.60% 39.30%
8 0.65% 1.48% 11.69%
9 26.23% 9.04% 0.94%
10 9.87% 7.28% 44.85%
11 9.89% 17.83% 8.89%
12 17.65% 30.36% 1.76%
13 34.52% 32.93% 58.40%
Average 12.64% 14.31% 28.78%

Task: 13
07/2014
Page 26
Outbound Transport
The outbound transport is managed by the transport team at C24 distribution
centre. This includes the deliveries to all Bi-Flo customers in Homeland. Each
customer requires a delivery every day, seven days a week. All deliveries are
made using company owned vehicles which have a capacity of 12 pallets.
A vehicle based at C25 services customers at C7 and C19. Orders for customers
at C7 and C19 are picked up and sent as a return load to C25. Orders for
customers at C18 and C25 are delivered as a return load.
 Total annual costs for outbound transport from C24 are $886,374.
 Transport management for C24 totals $537,000 annually but this includes
management of inbound transport from C2, C25 and Forexland.
 Fixed routes are used for the customer deliveries.
 The running cost per kilometre for the 14 curtain sided rigid trucks is 14
cents
 The running cost per kilometre for the 2 artics (used for factory primary
transport) is 31 cents.

Task: 13
07/2014
Page 27
Section Five – Audit Resource Utilisation
To calculate resource utilisation we must first identify our resources and
maximum capacity. The chart below lists Bi-Flo’s current resources by site:
Location Resource Maximum Capacity
C2
Warehouse 1380 pallet spaces – 2500m2
Factory 14400m2
Moulding machine 120 machines at 16 hours per day
Jigs 195 machines at 16 hours per day
Labour 672 employees at 8 hours per day
Forklifts 2 at 16 hours per day
C25 Warehouse 3264 pallet spaces – 6150m2
Factory 16100m2
C24 Warehouse 4400m2
PPT’s 17 forklifts at 104 hours per week
CBT’s 3 forklifts at 104 hours per week
Artic Trucks 2 trucks at 24 pallets per load
Rigid Trucks 14 trucks at 12 pallets per load
Drivers 25 drivers at 50 hours per week

Task: 13
07/2014
Page 28
The chart below identifies the current utilisation of resources within Bi-Flo. All
utilisation is calculated using the following formula:
Capacity Used
Capacity Available
Location Resource Maximum Capacity
Utilisation
 Average 1082 pallets
 Utilisation 78.4%
Factory 14400m2
 10054m2 space currently allocated
excluding walkways
 Utilisation 70%
As per meeting with Colin Farrell
 Utilisation 78%
As per meeting with Colin Farrell
 Current utilisation of labour can only
be calculated if we know how often
employees are absent from work.
But utilisation is affected by annual
leave, sick leave, training and
lunch/dinner breaks
 Current utilisation of forklifts cannot
be calculated but available capacity
is 32 hours per day
 Average 2607 pallets
Factory 16100m2
 8098m2 space currently allocated
excluding walkways
 Utilisation 70%

Task: 13
07/2014
Page 29
As per meeting with Michael Giering
 Utilisation stages 5 & 6 (86 jigs)
85%
 Utilisation stages 4 & 7 (102 jigs)
83%
As per meeting with Michael Giering
lunch/dinner breaks
is 32 hours per day
C24 Warehouse 4400m2
 3674m2 currently allocated including
racking aisles
Forklifts 2 types
for PPT’s is 17 forklifts at 104 hours
per week and CBT’s 3 forklifts at
104 hours per week
Artic Trucks 2 trucks at 24 pallets per load
 Maximum capacity is 48 pallets at
any one time. Average number of
pallets collected from C25 is 264 per
week. One truck works one shift
(assume 8 hour) and the other
works double shift (16 hours).
 Current Utilisation cannot be
calculated as there is no information
regarding time taken per trip.
Rigid Trucks 14 trucks at 12 pallets per load
 Maximum capacity is 168 pallets at
any one time.

Task: 13
07/2014
Page 30
 Current Utilisation cannot be
calculated as there is no information
regarding time taken per trip.
lunch/dinner breaks
Drivers 3 artic drivers, 22 delivery drivers
 Current utilisation of drivers can only
be calculated if we know how much
down time drivers have during their
week

Task: 13
07/2014
Page 31
Section Six – Audit Planning Processes
Supply chain response time (also referred to as flow time) is the time a product is
present in the supply chain from procurement to stock to delivery to the customer.
The diagrams below show the supply chain response time for the three Bi-Flo
products – Dependable, Excellent and Favourite.
Dependable
Deltaland Suppliers (6) C2 Factory/Warehouse C24 Distribution Centre Customer
26 weeks
+ - 8 weeks
4 weeks
+ - 2 weeks
1 day
+ - 1 day

Task: 13
07/2014
Page 32
Excellent
Favourite
C24 Distribution Centre Customer
52 weeks
+ - 0 weeks
1 day
+ - 1 day
365 days
+ - 1 day
Forexland Suppliers
Deltaland Suppliers (6)
C2 Factory/Warehouse C24 Distribution Centre Customer
26 weeks
+ - 8 weeks
4 weeks
+ - 2 weeks
1 day
+ - 1 day
211 days
+ - 71 days
Epsilonland Suppliers (3)
20 weeks
+ - 6 weeks

Task: 13
07/2014
Page 33
 Forecasts are made for each line item every 4-week period. The forecast
accuracy is measured as a percentage of actual demand and Favourite has
the highest average error rate at 28.78%
 The orders for Dependable and Excellent are placed every 4 weeks. The
average lead time from both factories is 4 weeks with a maximum of 6
weeks
 The safety stock levels for these two items are set at 6 weeks average
demand which equates to:
- Dependable 1,855,986 units
- Excellent 813,648 units
 Despite the current high levels of inventory, Dependable and Excellent still
have availability issues during the middle of the year due to capacity
problems in manufacturing.
 Product availability issues for both Dependable and Excellent are possibly
occurring due to:
a) The demand for both items in the peak period during the year is higher
than the 6 weeks average demand of safety stock. Because the
demand fluctuates during the year; this type of calculation for safety
stock is inaccurate.
b) Both items have a higher demand than total receipts (quantity
manufactured).
 The Favourite products are delivered from suppliers in Forexland into the
distribution centre at C24.
 The orders for Favourite are placed once a year for delivery in 52 week’s
time. Once all the product has been sold, Bi-Flo source a different product
and/or supplier.
 Forexland suppliers can offer a low purchase price for Bi-Flo’s commitment
to one year’s worth of product and will only make/ship in large quantities.
 This approach to inventory management makes forecasting difficult because
of the yearly ordering and incurs long lead times from suppliers.

Task: 13
07/2014
Page 34
 Although the availability with this approach is better than the manufactured
products for majority of the year; product availability for Favourite is affected
when approaching the year-end cycle.
Bi-Flo currently uses the following information systems:
 JMI – Just Make It
o Controls a production and inventory system which operates the
processes of manufacturing including forecasting, production
planning, inbound deliveries and inventory management. JMI is
used in all three Bi-Flo sites.
 JSI – Just Sell It
o Operates the processes of sales orders to the customers. This
includes receiving and approving orders and invoicing. JSI is used
only at the distribution centre at C24.
 JDI – Just Deliver It
o Controls a warehouse and transport system which operates the
processes of customer deliveries including generating picking lists,
delivery notes and POD’s. JDI is used only at the distribution centre
at C24.
Below is a diagram showing how the information flows through the three systems:

Task: 13
07/2014
Page 35
Management
Currently the management of information technology is carried out by the
directors of finance (one at Bi-Flo and one at Air-Flo) and the finance director for
SCILplc. They have only recently implemented the JMI system into Bi-Flo from
Air-Flo to align the information systems within the two companies.
Interfacing
There is currently an overnight interface between JSI and JMI. The interface
communicates an update on the stock situation from sales to manufacturing.
Although not specified, it is noted that there are problems with this interface.
There is also an interface between JDI and JSI (frequency is not specified). The
interface provides confirmation of an order delivery from the JDI system to the JSI
system so the customer invoice can be generated. There are also problems with
this interface.
Ordering
The orders for raw materials suppliers are placed manually every four weeks and
are entered into the JMI system. Customer sales orders are phoned through and
manually entered into the JSI system.
 The three systems for manufacturing, selling and delivering are working as
individual structures rather than being operated as one system specialised
for a large manufacturing environment.
 There are currently problems with the interfacing between systems. The
problems of interface between JSI and JMI will cause inaccurate and
untimely information regarding to stock levels. The problems of interface
between JDI and JSI will cause issues with timely customer invoicing.
 The information in the current systems does not supply ‘live’ or real time
data.
 There is no system visibility for suppliers or customers. The orders for
suppliers and from customers are currently ordered and keyed manually.

Task: 13
07/2014
Page 36
 There is no specialised department or expertise within Bi-Flo to oversee the
management and on-going support of information technology. This includes
system training as it is noted that the JMI system is new to Bi-Flo.

Supply chain management - Task 13

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (10)

Similar to Supply chain management - Task 13

Similar to Supply chain management - Task 13 (20)

Supply chain management - Task 13