ROLE: Sales and Distribution Manager
In a few minutes, you will be attending a meeting of a working group chaired by Alex Rheingold (your MD) to discuss the possible adoption of an MRP2 system in Oakland. The initial meeting will be followed by a consultant's presentation and then a final meeting to take a decision.
You are responsible for sales lead times and customer care. You are very worried about the image the company gives to customers. There is total confusion over delivery times at present, partly because Oakland's products are in demand. There are often 1000 telephone calls a day enquiring when orders are going to be delivered. This absorbs a lot of unproductive time just chasing things up. When an irate customer phones to enquire about their order, one of the Sales Clerks has to go down to the assembly shop floor and literally look for the items of furniture, going round all the work benches asking the people there if they had completed that order. Sometimes it is a matter of checking even further back, to see if the piece parts required are available. Meanwhile the customers hanging on the phone are not always too impressed.
Oakland currently are quoting 20 weeks lead time (an improvement on our previous 25 weeks), but it often seems more a matter of luck than planning if we are able to achieve that. This leads to constant interruptions of fabrication work, and ties up a team of 10 people who do little else other than progress chase and expedite crucial orders
However, Oakland are highly regarded for quality, and all of our ranges sell well. Indeed we could probably sell much more if lead times were reduced to a level similar to our competitors, some of whom are quoting 10 weeks.
In this connection, our bespoke and "specials" service is a nice side line (very much Gregory's baby) and certainly gives us market prominence, contributing significantly to our reputation for high quality. But it does add to the confusion on the shop floor, sometimes interrupts other standard batched jobs, and tends to take raw material unpredictably, thus leading to shortages.
Other competitors have similar problems, although some have reduced their lead times to 10 weeks, while others try to offer a guarantee on the lead time they quote. As a result of the lead times problem, you tend to inflate sales order forecasts, so that more piece parts stock is held. Then the final assembly stages can be more quickly carried out. Sales forecasts for the industry can be generated from past and current sales patterns as indicated in the tables provided. Some trends are apparent - e.g., the increase in kitchen sales. These can be simply projected forward (either by straight line or exponential smoothing extrapolation) and Oakland's market share of the relevant divisions (dining and occasional furniture - about 10%) identified. The Managing Director has good knowledge about both the industry and market trends and could be consulted to refine estimates for Oakland's. Given Oakland's quality orientation, they have been increasing their market share gradually since the buyout. Moreover, if lead times could be improved and stock levels reduced the firm would substantially increase both its market share and its profits. And with the introduction of new ranges, market share could improve even further.
In this context, MRP 2 is an intriguing proposition. From talking to sales colleagues in companies that have introduced MRP2, it has both positive and negative possibilities. Speaking positively, the MRP2 system is driven to some extent by 'Demand Management' where forecasts of future sales are important. This may gave you more strategic influence within the company. On the other hand, it becomes more difficult to massage sales forecasts - this limits your room for manoeuvre and the ability to play the role of 'cheerleader' in the management team.