Ask Operation Management Expert

The Somerset Furniture Company was founded in 1957 in Randolph County, Virginia. It traditionally has manufactured large, medium-priced, ornate residential wood furniture such as bedroom cabinets and chests of draws, and dining and living room cabinets, tables, and chairs, at its primary manufacturing facility in Randolph County. It employed a marketing strategy of rapidly introducing new product lines every few years. Over time it developed a reputation for high-quality, affordable furniture for a growing U.S. market of homeowners during the last half of the twentieth century. The company was generally considered to be an innovator in furniture manufacturing processes and in applying QM principles to furniture manufacturing. However, in the mid-1990s, faced with increasing foreign competition, high labor rates, and diminishing profits, the Somerset Company contracted to outsource several of its furniture product lines to manufacturers in China, simultaneously reducing the size of its own domestic manufacturing facility and labor force. This initially proved to be very successful in reducing costs and increasing profits, and by 2000 Somerset had decided to close its entire manufacturing facility in the United States and outsource all of its manufacturing to suppliers in China. The company set up a global supply chain in which it arranges for shipments of wood from the United States and South America to manufacturing plants in China where the furniture products are produced by hand by Chinese laborers. The Chinese manufacturers are very good at copying the Somerset ornate furniture designs by hand without expensive machinery. The average labor rate for furniture manufacturing in the United States is between $9 and $20 per hour, whereas the average labor rate for furniture manufacturers in China is $2 per day. Finished furniture products are shipped by container ship from Hong Kong or Shanghai to Norfolk, Virginia, where the containers are then transported by truck to Somerset warehouses in Randolph County. Somerset supplies retail furniture stores from this location. All hardware is installed on the furniture at the retail stores in order to reduce the possibility of damage during transport.

The order processing and fulfillment system for Somerset includes a great deal of variability, as do all aspects of the company's global supply chain. The company processes orders weekly and biweekly. In the United States it takes between 12 and 25 days for the company to develop a purchase order and release it to its Chinese suppliers. This process includes developing a demand forecast, which may take from one to two weeks; converting the forecast to an order fulfillment schedule; and then developing a purchase order. Once the purchase order is processed overseas by the Chinese manufacturer, which may take 10 to 20 days depending on the number of changes made, the manufacturing process requires approximately 60 days. The foreign logistics process requires finished furniture items to be transported from the manufacturing plants to the Chinese ports, which can take up to several weeks depending on trucking availability and schedules. An additional 5 to 10 days are required to arrange for shipping containers and prepare the paperwork for shipping. However, shipments can then wait from one day to a week for enough available containers. There are often too few containers at the ports because large U.S. importers, like “Big W” discount stores in the United States, reserve all the available containers for their continual stream of overseas shipments. Once enough containers are secured, it requires three to six days to optimally load the containers. The furniture pieces often have odd dimensions that result in partially filled containers. Since 9/11, random security checks of containers can delay shipment another one to three weeks, and smaller companies like Somerset are more likely to be extensively checked than larger shippers like Big W, whom the port authorities don't want upset with delays. The trip overseas to Norfolk requires 28 days. Once in port, one to two weeks are required for a shipment to clear customs and to be loaded onto trucks for transport to Somerset's warehouse in Randolph County, which takes from one to three days. When a shipment arrives, it can take from one day up to a month to unload a trailer, depending on the urgency to fill store orders from the shipment.

Because of supply chain variability, shipments can be off schedule (i.e., delayed) by as much as 40%. The company prides itself on customer service and fears that late deliveries to its customers would harm its credibility and result in cancelled orders and lost customers. At the same time, keeping excess inventories on hand in its warehouses is very costly, and since Somerset redesigns its product lines so frequently a real problem of product obsolescence arises if products remain in inventory very long. Somerset has also been experiencing quality problems. The Chinese suppliers employ quality auditors who rotate among plants every few weeks to perform quality control tests and monitor the manufacturing process for several days before visiting another plant. However, store and individual customer complaints have forced Somerset to inspect virtually every piece of furniture it receives from overseas before forwarding it to stores. In some instances, customers have complained that tables and chairs creak noisily during use. Somerset subsequently discovered that the creaking was caused by humidity differences between the locations of the Chinese plants and the geographic areas in the United States where their furniture is sold. Replacement parts (like cabinet doors or table legs) are difficult to secure because the Chinese suppliers will only agree to provide replacement parts for the product lines currently in production. However, Somerset provides a one-year warranty on its furniture, which means that they often need parts for a product no longer being produced. Even when replacement parts were available, it took too long to get them from the supplier in order to provide timely customer service.

1. Provide a clear flowchart of all activities included in one complete purchase “cycle”. The graphical representation must be self-explanatory. In other words, you must use symbols and their labels/identification in the flowchart, so that NO ADDITIONAL wording/explanations be necessary outside the flowchart. The time or time-range for each step of the purchase cycle must also be found on the flowchart.

2. Calculate the range of days (minimum to maximum) of the variable timeline for product lead time in this case. Start with the initiation and development of the purchase order and end when the product is received and warehoused. Itemize activities with their variable times, and provide the range for the total lead time.

3. Out of the activities identified above, mark with an asterisk, or by using special font (e.g., bold) those activities whose durations might be reduced with help from international trade specialists, or trade logistics companies (please do not use any coloured highlights)

4. Pinpoint at least 7 problems that are prevalent (typical, characteristic) when manufacturing is outsourced to other countries and appear to be present in this company’s global supply chain.

5. Highlight two issues that you found of special interest in this case and are not directly related to the discussion questions above. In other words, DO NOT just repeat a “problem” stated in the mini-case, but share the “insights” that you may have gained from examining this real business story.

Operation Management, Management Studies

  • Category:- Operation Management
  • Reference No.:- M93129552

Have any Question?


Related Questions in Operation Management

Conflictdefine functional versus dysfunctional conflict in

Conflict Define functional versus dysfunctional conflict in a work group and explain how you can increase functional conflict and decrease dysfunctional conflict. Develop a response that includes examples and evidence to ...

For this assignment you will need to find 2 articles in

For this assignment, you will need to find 2 articles in business that can help describe what are IT strategic initiative being undertaken by an organization are like. Choose a different organization for each of the arti ...

Coping with problems joe is a little nervous he has just

Coping With Problems Joe is a little nervous. He has just been transferred from another plant to take over a production line. Production is down and there is a serious problem with absenteeism. To make matters worse, the ...

Over 30 years ago michael porter identified a holistic

Over 30 years ago Michael Porter identified a holistic approach to understanding how competitive forces shape strategy. He posited that the only way to truly insulate an organization from underlying economic volatility i ...

You are the contracting officer for an air-to-ground

You are the contracting officer for an air-to-ground missile development program. A contract for pre-production models of the missile was awarded by your predecessor and the contractor is behind schedule. In a program me ...

The ikea case provides an excellent opportunity to apply

The IKEA case provides an excellent opportunity to apply strategic management concepts to a large privately-held company that is expanding into India. IKEA is a Netherlands-based Swedish company with a presence in 44 cou ...

Can you answer for me the following questions about social

Can you answer for me the following questions about social loafing and the three main causes of free-riding. 1. Give a description of the phenomenon of social loafing. 2. Give a description of the phenomenon of free-ridi ...

1 analyzing the bridgestonefirestone and ford motor company

1. Analyzing the Bridgestone/Firestone and Ford motor company, is it sufficient to use the ISO/QS 9000 standards as the main basis of vendor/product selection? 2. What position to these cars company ( 1. Volkswagen, 2. F ...

Research the effect of primary and secondary seat belt laws

Research the effect of primary and secondary seat belt laws on the occurrence of motor-vehicle injuries and fatalities. Explain how epidemiologic studies influenced the development of current seat belt laws. Describe how ...

Please provide a brief paragrap of the key takaways from

Please provide a brief paragrap of the key takaways from each of the following topics: Designing Clear Visuals in business reports Designing Successful Documents and Websites Writing Winning Proposals

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As