Customization, Demand Variability & Supply Chain Design - Winter 2024

.docx

School

Grand Rapids Community College *

*We aren’t endorsed by this school

Course

337

Subject

Industrial Engineering

Date

Feb 20, 2024

Type

docx

Pages

3

Uploaded by bfausey3

Customization/Demand Variability & Supply Chain Design You are the purchasing manager for Primo Café Inc. Primo Café is a small-sized manufacturer of stylish coffee makers. The company has three distinct coffee makers that it produces. The Bean Boiler The Family Man The Caffissimo Page 1 of 3 The Bean Boiler is Primo Café’s most basic model. The main materials used in manufacturing the Bean Boiler are aluminum and plastic. There are lots of suppliers for these materials. At present, Primo Café’s total cost for producing a Bean Boiler is $13 and the product is competitively priced at $15 per unit. There are lots of other coffee makers that are very similar to the Bean Boiler on the market. Still, sales of the Bean Boiler are very stable. The company reliably sells 1,500-1,510 units of this product per month. The Family Man is Primo Café’s mid-market offering. Primo Café manufactures most of the Family Man in-house, but buys the glass pot and the electronics that control the on/off function and the timer. At present, final assembly of the in-house manufactured parts and the purchased sub-components occurs at Primo Café’s facility in Grand Rapids. Total cost for producing a Family Man is currently $32 and each unit is sold for $34.99. The Family Man’s sleek, artistic design and range of unique colors helps to distinguish it from a wide selection of similar products offered by competitors. Prices for direct competitors range from $25 to $45. Sales of the Family Man range from 1,000-1,100 units per month. The Caffissimo is Primo Café’s high-end offering. Primo Café produces the external casing for the Caffissimo in-house, but buys all of the important sub-components from external suppliers. The most important sub-components for the Caffissimo are the gauges that regulate the temperature and pressure of the water as it is forced through the coffee grounds. The proper working of these gauges ensure that the Caffissimo produces a perfect cup of coffee at brewing. The Caffissimo’s design is a closely held company secret. The machine has won industry awards both in terms of its coffee making process and its external looks. Currently, the Caffissimo costs $375 to produce and sells for $600. Because of the relatively high price and unique design, demand for the Caffissimo is difficult to predict. Over the past year, demand has ranged from 400-800 units per month.
Customization/Demand Variability & Supply Chain Design Primo Café uses the same supply chain processes for all three of its products. Each month, the company produces 1,505 Bean Boiler units, 1,050 Family Man units, and 600 Caffissimo units. The same number of Bean Boiler, Family Man, and Caffissimo units are sent to the same retailers each month. The goal of this supply chain design is to minimize costs by standardizing the process for all three products, so that the exact same number of units are produced and shipped each month. As the purchasing manager for Primo Café, you have noticed some problems with this supply chain approach. For instance, there have been stock outs of the Caffissimo at some retail locations, while at other locations Caffissimo units have been sent back because the retailer still had inventory from the previous month. You think there’s a better way. You work for Marco, the Chief Operations Officer. Marco is a big proponent of the single supply chain structure because he is convinced that standardizing the process is the most efficient way to run his operations. He also thinks that any issues with the retailers is the Marketing department’s problem. You have decided to make some recommendations to Marco about how Primo Café can improve its supply chain processes. Using the class discussion of customization/demand variability and supply chain design, discuss any changes you would recommend – and why. Be sure to discuss all three product lines and to support your recommendations with details from the case. In the context of Primo Café's supply chain management, there are opportunities for improvement to address issues such as stockouts of the Caffissimo and excess inventory. Below, I analyzed each product line based on the principles of customization/demand variability and supply chain design discussed in the class: 1. Bean Boiler (low customization/low demand variability): The Bean Boiler has stable and predictable demand patterns, and its production process involves commonly available materials with many suppliers. Given its low customization and stable demand, it aligns with the principles of low customization/low demand variability. - Recommendations: - Continue with the standardized supply chain processes for Bean Boiler, as it is cost-effective and meets the basic needs of customers without significant variability. - Regularly review and negotiate with suppliers for aluminum and plastic to ensure cost-effectiveness. 2. Family Man (low to moderate customization/moderate demand variability): The Family Man has some level of customization due to unique design features and a range of colors. The demand for Family Man varies moderately. The current supply chain structure, with final assembly in-house and purchased sub-components, may contribute to the $32 total cost. Page 2 of 3
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help