supply chain and planning and control systems in practice academic essay assignment -

2009

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[Supply Chain and Planning and Control Systems in Practice] Tait electronics Limited – http://www.taitworld.com

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Table of Contents

Introduction of Tait Electronics: ..................................................................................................... 3

Supply Chain and Planning and Control Systems .......................................................................... 3

Supply Chain Management System: ........................................................................................... 3

Vendor Managed Inventory: ........................................................................................................... 4

Why VMI? ................................................................................................................................... 4

Build-to-forecast: ........................................................................................................................ 5

Enterprise Resource Planning: ........................................................................................................ 5

Why ERP? ................................................................................................................................... 6

Customer Relationship Management: ............................................................................................. 8

Why CRM? ................................................................................................................................. 8

Theory vs. Practice: ..................................................................................................................... 9

Bridge gap between theory and practice: .................................................................................... 9

Reference ...................................................................................................................................... 10



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Introduction of Tait Electronics:

Tait Electronics comes to one’s mind instantly whenever mobile radio equipment is mentioned.

Sir Angus Tait started Tait Electronics in 1969 as a Christchurch company. Tait is now present in

160 countries and employs 160 people throughout the world. Tait has sales of over $150 million

– about 90% of which is exported to over 80 countries. Tait expenditure on Research &

Development ranges from 10-15 percent of sales as opposed to the national average of 1%. Tait

is one of key players in New Zealand’s high-tech market and its name is considered akin to

innovation in the radio communication market. Tait has been one of the pioneers in the analogue

mobile radio technology and has offered a range of P25 products & solutions in order to suffice

the needs of digital radio technology market. Tait is currently fulfilling the needs of many sectors

simultaneously; the sectors include: mining, transport, public service and government, public

safety, utilities and national security. (Tait Electronics, ICT, The Smart Future)

Tait, an MNE, is operating in 160 countries and in order to compete globally, it needs accurate

systems in place to prop up timely decision making. Supply Chain and Planning and Control

Systems are an integral part of an MNE these days and Tait has also deployed these systems in

order to operate effectively and efficiently. I’ll examine these systems one by one – starting with

Supply Chain. (Tait Electronics – CANZ)

Supply Chain and Planning and Control Systems

Supply Chain Management System:

Supply Chain Management is defined as: “A key value chain composed of demand planning,

supply planning, and demand fulfillment” (Stair & Reynolds 2006). The definition of supply

chain management is self-explanatory; it is evident from the definition that supply chain

management consists of three components:



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Demand planning

Supply planning

Demand fulfillment

Vendor Managed Inventory:

Tait Electronics has put Vendor Managed Inventory (VMI) in place as part of their supply chain

management system. VMI is a system in which the supplier of a certain item maintains the

inventory levels for the buyer of that item. The process works as follow:

The manufacturer receives data from distributor (buyer) regarding sales and stock levels using

electronic or traditional means. The manufacturer then analyzes the stock levels and sales data of

various items included in the product range and decides on the level of inventory. The

manufacturer creates and maintains the inventory plan. It should be noted that the manufacturer

is responsible for only creating and maintaining the inventory; the ownership of the item remains

with the distributor of the product. A slight variation of VMI, consignment inventory, is also

available. Under consignment inventory, the manufacturer retains the ownership of the item and

payment is made after the item is sold. The distributor is like a middle-man – working for a

commission.

Why VMI?

Tait has subsidiaries and dealer networks (explained later in the text) across the globe. It

manufacturers inventory at Christchurch and then ships it to various regions when their sales

reach below safety stock levels. What Tait does is that it gathers data regarding sales and stock

levels from geographical regions using its ERP system (also explained later), punches the data

and forecast estimates (arrived using BTF – explained below) and customer response (gathered

using CRM – explained later) into its system and comes up with a MPS (Mass Production

Schedule). Tait is connected to all its geographical regions using the ERP and real-time

information is available; whenever stock level reaches below safety stock, a replenishment order

is triggered and production takes place at Christchurch. The shipment to regions is done from



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stocks maintained at Christchurch and further production takes place simultaneously to replace

inventory levels.

Build-to-forecast:

Besides VMI, Tait has also deployed Build-to-forecast (BTF) system. BTF, as implied by the

name, is a system in which the manufacturer performs a forecast of the future demand from the

distributor. The manufacturer then manufactures a certain quantity of the product before the

distributor places an order with the manufacturer. When the order actually arrives, the

manufacturer sells items from inventory and can update his/her expectations of future orders

(Robinson & Elofsen).

Enterprise Resource Planning:

Tait Electronics is operating in various parts of the globe. It has classified those parts, sales

channels, in two categories:

Subsidiaries

Dealer networks

If annual sales in a particular geographical region exceed $1 billion, then that region is upgraded

to the level of a subsidiary. Else, the geographical region remains at the level of dealer network

and is managed through the regional headquarter of Tait Electronics. Subsidiaries operate in two

directions – they provide distribution services & product services to customers; market

intelligence and customer feedback to Tait’s headquarter. Tait, currently, has subsidiaries in 11

countries and dealer networks in another 70. In order to manage such dispersed geographical

areas, Tait needs a system that has the ability to integrate all the dispersed regions into one. (Tait

Electronics – CANZ)

ERP stands for Enterprise Resource Planning. ERP is a system that integrates all the

vital operations & activities of an organization. ERP can be defined as: “A set of

integrated programs capable of managing a company’s vital business operations for an

entire multisite, global organization” (Stair & Reynolds 2006).



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Why ERP?

Tait has installed an ERP suit that is used to integrate its geographically dispersed regions into

one. The ERP helps regions all across the globe to see what and where Tait has got stock, what

the status of production is and what’s in queue for production. When a region makes sales, the

sold items comes out from the stock levels of Tait and a replenishment order is generated so that

production is apt to maintain minimum stock levels. The correspondent at Tait gave the example

of Europe; he mentioned that tonight when he’ll be going home, Europe will be making sales and

the sold items will come out of the stocks of Tait. The correspondent also mentioned that in case

of items that are sold quickly or on continuous basis, stocks are maintained at regions. When the

sales of a region reach below safety stock levels, it triggers a replenishment order and shipment

is sent from Christchurch. Safety stock review is performed monthly.

Tait electronics, has implemented the ERP system at their workplace around the globe, as they

have been operating in almost all the major regions: Asia, America, and Europe. The main

feature of the ERP implemented, which also proves to be the most crucial one, is the use of

forecasting models built in the system, to support inventory and procurement decisions.

The method of forecasting for the company starts with the identification of relevant attributes

and then inculcating all of them in their best form to the model build in the ERP system, which is

then used to forecast for the next term. For the sake of forecasting, they divide the world in three

major divisions: Asia, America, and Europe. Then for each of the division they find relevant

attributes and multipliers for forecasting (multipliers are relevant number by which the

forecasted figure will be multiplied or divided because this is the factor adjustment of the

holidays, promotions, ad campaigns or other discount offers in a specified region). The

forecasted model will forecast a static figure for all the regions then separate distinguishing

effects with the relevant adjustments will be added to them to come up with the right figure. For

the sake of effective forecasting, the regions are further subdivided in their major retailers and

wholesalers in the relevant division.

The forecasting is the most crucial decision for a company, and most challenging for an

international company, in short. Tait, as being international company has to add multiple varying

factors in the forecasting, there are conditions when in one country there are holidays while other



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countries are having busy weekdays, or in one country some major event going on and in another

one just the routine life on the move. So they have to inculcate the effects of all the factors in the

forecasting to come up with the most reliable figures for divisions and further in terms of the

demand from specific retailer or wholesaler.

They divide initially according to the regions, then they make tiers according to the product line;

each product has its own tiers because a product can be customized in a lot of ways, like mp3

player can have different body or look in terms of color, size and other features. So they also

have to make forecasts for each tier of the product. They also face challenges in this highly

ambiguous future predicting procedure, which in turn can save millions of dollars for a company

in terms of inventory cost savings. The main challenge occurs when ad campaigns or coupons

are on the move, like when these kinds of deals come in, they mostly offer that buy one product

and get accessory of your selection totally free, so they have to come up with the correct figures

of the products taken by choice of public as a free accessory.

After making the forecasts of each product line of each region, they sum up the accessories

needed to order for the mass product line (MPL); the accessories needed to make products, this is

again the most crucial step because here they have to order the accessories which in turn will

prove to be the originally demanded accessories. They claim 85 % of the original forecasting and

15% of the fault in the procedure, to cope with the situation they prefer to hold some form of

inventory. For this purpose they have also applied CRM at their place around the globe, they are

open to the comments, suggestions, and claims of their customers from all over the world. They

believe that customer is a building block of their business. So they cannot afford any claim

which move the claimant away from the company, in terms of future sales, consequently they

have decided to afford some sort of inventory cost to reduce the risk of a claimant appearing or

product shortage. (Interview)

After making the forecasts for years, months or a term (whichever the specified term is), they

have to come up with the right dates of shipments or orders from the retailer or wholesalers. So

they make a schedule with the name of BTO to come up with the right time, the company would

need to supply their products to different regions. The challenge here is, they have to make the

right schedule of products to be shipped to specified regions, because to manufacture those



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products they have to procure the accessories first at the right time without getting any

possibility of shortage.

Customer Relationship Management:

CRM stands for Customer Relationship Management. A CRM is a system that is aimed at

communication with the customer. A CRM system is used to manage all aspects of customer

encounters; namely: marketing and advertising, sales, customer service after sale, and programs

to retain loyal customers. CRM system also allows a firm to collect consumer data, contact

customers, educate customers about new products, sell products and get their feedback (Stair &

Reynolds 2006).

Why CRM?

Tait has also installed a CRM system to ensure effective communication with its customers with

minimal noise. In order to ensure healthy customer relationship, Tait tries to keep some extra

stock so that they don’t have to turn their customer down. Tait uses BTF and builds its inventory

according to the forecast plus some excess reserves just in case the actual demand exceeds the

forecast. Apparently, it may seem as something minor but it in fact is a very major step. Tait

understands the value of customers and understands that it is pertinent to not say that “We are

out of stock” if it wants to retain customers. In today’s global environment, the cost of retaining

customers as opposed to cost of attracting new customers is much lower and the payback period

of investment done to attract new customers is relatively longer; thus, the retention of customers

is essential to the successful survival of an organization. Tait has understood this very basic yet

critical point and implemented a CRM system to facilitate communication with its customers.

Tait’s CRM system has two basic aspects; one aspect of Tait’s CRM has already been mentioned

– keeping surplus level of stocks; the other aspect is communication from customer side.

Customers are encouraged to contact Tait to inform the management about their perception of

the products, quality satisfaction, availability of product, ease of use, need of technical assistance

and alike via telephone or mail. Tait then incorporates the customer feedback into its forecasting

process to come up with better estimates. (Interview)



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Theory vs. Practice:

The management textbooks, journals, periodicals, blogs and other sources contain a lot of

information on the aforementioned systems and their advantages. Those sources explain how to

select a system, how to implement and how to capitalize on it. It wouldn’t be exaggeration if I

say that the systems in place are a result of theory as in all fields of study, a concept is first

presented in theory before it is practiced. Furthermore, with the passage of time and

advancement in research, different scholars modify the existing models and present better

versions of either the same models or new models that are free from pitfalls (or at least have less

number of pitfalls) that were present in earlier models. Now let’s examine what is the situation of

Tait in comparison to the theory.

I’ve explained systems in detail that are in place at Tait; but, the question arises whether these

systems are according with the theory or they deviate from theory? The answer to this question is

that systems at Tait deviate from theory. The reason behind this deviation is that in theory we can

assume Cetrus Paribus or in other words other things being equal; but, in reality things are

dynamic rather than static. The correspondent at Tait explained that when operating globally in

today’s environment, we cannot use static models as presented by theory; we need dynamic

models that can absorb the ground realities so that forecasts actually help.

Bridge gap between theory and practice:

In order to bridge the gap between theory and practice at Tait, the only feasible solution would

be to develop a theoretical model that is capable of being dynamic so that forecasts could be

realistic. It will help Tait to remain competitive and help it to survive in such a global

environment. The world is moving very fast and in order to keep pace with it, we have to keep

our pace up to the mark, so that you do not stay behind the world. The competition is very stiff

and in order to remain on cards, it’s important to implement such dynamic model.



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Reference

Stair and Reynolds. “Principles of Information Systems”, pg 49-50, 489, 421-423, 447-

448

Robinson & Elofsen. “Strategies for E-Commerce”. Pg 156-157

Vendor Managed Inventory. Retrieved from: http://www.vendormanagedinventory.com/.

Retrieved at 21-09-2009

JE Beasley. “Master Production Schedule” Retrieved from:

http://people.brunel.ac.uk/~mastjjb/jeb/or/masprod.html Retrieved at 20-09-2009

Interviews with Tait employee,(Date), Tait Electronic LtD; 175 Roydvale Ave,

Christchurch, NewZealand



http://www.vendormanagedinventory.com/

http://people.brunel.ac.uk/~mastjjb/jeb/or/masprod.html%20Retrieved%20at%2020-09-2009

supply chain and planning and control systems in practice academic essay assignment -

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