Four Star Supply Chain Case

1123 Words Feb 19th, 2013 5 Pages
Four Star Supply Chain Case Analysis

Executive Summary
Four Star Industries is facing a number of problems. Their sales have fallen from $9 million to $6 million, their customer service fill rate has fallen from 70% to 60%, and their employees are leaving the company and becoming increasingly disgruntled. The root cause of these issues is demand variability driven by SKU proliferation. Four Star has gone from offering 13 SKUs in 1996 to 230 SKUs in 2002. The market for mattresses has become much more competitive at the retail level, so retailers are in turn demanding customized products to distinguish themselves from competitors.
Mattress manufacturers such as Four Star rely on the retailers to sell their products, so
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Implementing a segmentation plan like this would allow Four Star to limit SKU proliferation while also incentivizing smaller retailers to increase sales in order to gain a higher status with Four Star. The tier system could also be used to differentiate other factors of overall customer service, such as fill rate expectations, lead time, and promotional support.
Transparency: Finally, Four Star must work with their retailers to gain better visibility to upcoming promotions. There is no reason for Four Star to be blindsided by huge spikes in demand generated by retailers who host deep-discount sales without informing Four Star. Simple communication regarding details of the upcoming promotions (timing, products, and volume) will allow Four Star to build inventory in anticipation of demand spikes. We recommend that Four Star request retailers to give at least 8-weeks’ notice before a promotion, as the longest lead time for raw materials is 7 weeks. Even if retailers can’t always give that much lead time, any advanced notice would help Four Star adjust the production schedule and prepare for spikes in demand. This will help both Four Star and their retailers sell product.
We do not feel that Four Star can reduce the current SKU offerings because they cannot afford to lose their existing retailers. Also, because retailers are not

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