beside the answer write the number of question.
Karbe is a multinational group leader in braking system production; its headquarters are in New York and, in 2020, it had revenues of $ 3.2 billion by employing 7,000 employees worldwide. The 9 Karbe production plants are all located in North America (the United States and Canada).
Karbe is recognized by the final market as a highly innovative company; the company follows the market technological trends (that are frequent among car manufacturers) and frequently modify their products with up-to-date technologies, functionalities, and superior performance. For these reasons, Karbe is able to offer to the final market 120 different types of brake systems and usually operate with a limited level of inventory, being able to compress the production and delivery lead time to satisfy customer requests. This helps to better manage the market demand that, especially during the last years, has become more difficult to be forecasted, due to the dynamics connected to car market sales.
To produce brakes, Karbe can count on a consolidated supply base. Several suppliers dedicate part of their manufacturing resources to the production of Karbe systems components, and several operational collaboration programs are in place between Karbe and strategic suppliers (e.g., continuous just in time replenishment and vendor management inventory). Suppliers are systematically involved in Karbe product innovation projects, in order to stimulate suppliers contribution to these processes. The purchasing-to-sales ratio of Karbe has not changed too much during the last 10 years, being always around 72%.
For 2021, Karbe had in mind to review several aspects of their global supply chain. They organize an executive meeting involving all the most important supply chain managers and several executives.
During this meeting, the Supply chain Director spoke first, and made the following statement: We operate in a very unstable environment, so we should redesign our supply chain strategy in line with an agile approach.
Q1-Do you agree with the statement of the Supply Chain Director? Carefully justify your answer.
One of the aspects that Karbe wants to review is the structure of the distribution system in Europe.
In Europe, the company distributes the products in two geographical regions:
- West Europe, where the products are transported by sea directly from the Red Hook terminal (the logistic port of New York and New Jersey) to the port of Lisbon, and then transported by road to 8 local warehouses in Spain, Portugal, France, Germany, and Italy;
- East Europe, where the products are transported by sea from the Red Hook terminal to the port of Athens, and then transported by road to 5 local warehouses in Bulgaria, Romania, Ukraine, and Russia
Following the Supply Chain Director statement, the Logistics manager of Karbe took the floor and said: One thing we should not change is the structure of our distribution system. It is currently coherent with the characteristics of the environment where our supply chain operates.
Q2-Classify the distribution system of Karbe. Do you agree with the statement of the Logistics manager? Carefully justify your answer.
The inventory manager had an alternative idea. Currently, the company was keeping safety stock in all 13 local warehouses. The inventory manager proposed to release some of the local warehouses and transform the remaining ones into transit points.
Brake could then introduce a central warehouse, near Berlin, where the inventory should be centralized. This way, Karbe could be able to serve both East and West Europe through this system made of a central warehouse and transit points. This would save Karbe some money that they could reinvest to use a mixed of sea and air transportation from New York.
The inventory manager said: Look at the profile of the aggregate demand in West and East Europe from last year. This solution would be perfect to better serve these two demands.
Q3-Would this logistic system be more suitable according to the characteristics of the environment the supply chain operates in?
Q4-Do you agree with the statement of the Inventory manager? Would the centralization of inventory be the ideal strategy for Karbe? Carefully justify your answer.
One of the key components of a brake system is the booster.
For the supply of this part, Karbe has been working with 4 historical suppliers located in different parts of the United States, that satisfy similar values of the demand.
The total demand for boosters requested by the production plants, and the values of the lead time provided by the suppliers are reported in the following table:
To manage the inventory of boosters, Karbe used the Economic Order Quantity Reorder point model, with a value of safety stock that was extremely low.
In this regard, during the meeting, the purchasing manager expressed some concerns. The plants require a 95% level of service for the availability of this component. The EOQ-ROP model is not suitable, and we need to increase our safety stock at least 2,000 units.
Q5-Do you agree with the statement of the Purchasing manager? Carefully justify your answer.