Riordan Manufacturing is a leading global manufacturer of plastic containers, parts, and fan parts. It is solely owned by Riordan Industries, Inc. In 1992, Riordan purchased a fan manufacturing plant in Michigan. The company moved it to China in 2000 where it still resides today. Manufacturing strategy
Riordan’s manufacturing uses a level manufacturing strategy. It helps maintain a stable workforce. Employees benefit from the stable work hours. Surpluses and shortages are absorbed by changing inventory levels and lost sales. This choice of manufacturing is based on the number of fans produced from the sales forecast. Riordan Manufacturing operates an electric fan manufacturing facility with a small consortium of Chinese nationals in Hangzhou, China. The manufacturing facility purchases electric fan motors from a third party supplier and assembles them with plastic parts produced in the facility.
Riordan Manufacturing has two primary suppliers, one for the electric fan motors and one for the plastic polymers needed for the injection molding process. In addition smaller suppliers are used for miscellaneous other needs such as cardboard, plastic film, adhesives, ink, solvent cleaners, lubricating oils and mold release agents. These raw materials area all sourced locally and trucked into the receiving area of the facility. When the electric fans are manufactured and packaged the finished goods are typically taken by truck to a port on the Qiantang River and loaded on shipping containers. The containers are barged to Shanghai and place on cargo ships to be sent to their global customers. A flow diagram showing this process can be found below:
The current supply chain is very dependent raw and pre-assembled electric motors that are being sourced by third party vendors. To measure the performance of the vendors Riordan measures the on-time delivery of the electric motors and the safety stock of polymer material needed to maintain production. Currently the electric motors are acquired from a single source, Yin Motor Company, which appear to have some business or family relationship with Riordan’s Chinese business partners. Yin Motor Company is currently providing a 93% on-time delivery of their electric motors and has recently been in the news because of poor working conditions, low wages and not compensating employees for working longer hours in their facility. Yin Motor Company is located in Zhejiang, China with approximately 400-500 employees and based on the recent news is currently not a stable supplier. Riordan has looked for alternate sources to minimize the risk and improve on-time delivery of their motors.
In lean production manufacturing, companies attempt to be more efficient and productive in an attempt to be more effective in their spending, minimize waste and eliminate unnecessary steps within the manufacturing phase. Lean production principals are a “set of activities designed to achieve production using minimal inventories of raw materials, work-in-process, and finished goods. Parts arrive at the next workstation “just-in-time” and are completed and move through the process quickly. Lean is also based on the logic that nothing will be produced until it is needed” (Jacobs & Chase, 2011, p. 419). As it relates to Riordan Manufacturing China plant, components of lean principals can be found for instance all of the fans are manufactured and shipped out of one plant. This is where components are assembled and molded together in a “group technology” setup.
This is to minimize the time and resources used between assembling of the fan components. Although Riordan has lean components integrated in their manufacturing, one are of concern would be the electronic motors that are purchased from a supplier and that they have not been able to meet the demand in some cases. This would interfere with the “JIT” (just-in-time) production where they would have excess components of fan blades and housings but not enough fan motors for assembly. Riordan should work with their motor suppliers to ensure that they are being as lean as possible as to minimize the effectiveness and efficiencies of both firms.
The forecasting technique that Riordan has chosen to implement within their business is based upon a quantitative method as it based upon a mathematic model and not that of heavy input from management or trending. According to the Riordan Intranet, Riordan bases future production upon historical sales data by taking the average sales for the past three years to figure out what production amounts would be needed for the upcoming year. As seen below in the mock sales forecast below, if they sold 6500, 6800 and 7100 units over the past three years, they can predict to sell roughly 6800 units in the upcoming year but to develop at least 7100 units as this would be high sales mark in that period. Although this method is not the most accurate form of forecasting, it is simple to develop.
Aggregate Production Plan, Master Production Schedule & Materials Requirement Plans According to Professor Guillermo Gallego, (Gallego, 2001), “Aggregate production planning is concerned with the determination of production, inventory, and work force levels to meet fluctuating demand requirements over a planning horizon that ranges from six months to one year. In order to successfully develop an aggregate production plan, Riordan must analyze their sales forecast, production levels, workforce, and inventory for their electric fans. Since Riordan’s China plant is a decentralized unit the plant prepares its own forecast and schedules production based only upon their forecasted sales in a mark to stock production strategy.
Current sales forecasts suggest a ten percent increase in sales which based upon the current demand planning strategy is well within their capacity. With an increase in sales forecasted the next piece of the puzzle to review is the production levels and inventory. Based upon Riordan’s inventory levels as of 9/30/05 there are 86,400 fans on hand (See Table 1) which is approximately 126% of the forecasted sales for the first quarter of 2006. With this 26% cushion Riordan will only need to make minor adjustments to current production plans in order to satisfy 2006 forecasted sales.
The last piece in the aggregate production plan is to validate the adequacy of the workforce. Riordan currently operates under the stable work force strategy which enables the plant to maintain their personal, and yield high productivity from its seasoned workforce. Riordan uses a master production schedule to meet the forecasted demand. Since the plant operates on a make-to-stock system, Riordan’s schedulers on a weekly basis review currently inventory levels and forecasted demand and schedule production accordingly to maintain accurate inventory levels based upon demand.
Using the fixed order quantity system and flexible time fence in conjunction with the materials requirement plan (MRP) allows the plant to determine which items need to be ordered to support the production plan. The fixed order quantity system triggers buyers to purchase materials when inventory levels drop below a certain number. Since Riordan was only 93% in on time deliveries due to not having enough fan motors on hand an adjustment has been made to raise the trigger quantity by ten percent to reach the 100% on time delivery goal. The plant will continue to use the flexible fence is provide the scheduler flexibility to react to changes in demand. Conclusion
Riordan’s fan manufacturing organization has a supply chain process which could be improved with stronger supplier relationships. The supply chain management could also be stronger to improve the process. The lean production and performance metrics could be assessed to benefit Riordan. Strict quality control system, business attitude, and innovated solutions are attributes that benefit both the company and its customers.
Gallego, P. G. (2001, October 9). Lecture 5. Retrieved February 21, 2015, from IEOR 4000: Production Management : http://www.columbia.edu/~gmg2/4000/pdf/lect_05.pdf
Jacobs, F. R. & Chase, R. (2011). Operations and Supply Chain Management (13th ed.). Boston, MA: McGraw-Hill/Irwin