UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ---------------------------- NGUYEN THI THUY LATE PO DELIVERY CONFIRMATION IN GROUP INTELLECT POWER TECHNOLOGY LIMITED MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – 2018 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ---------------------------- NGUYEN THI THUY LATE PO DELIVERY CONFIRMATION IN GROUP INTELLECT POWER TECHNOLOGY LIMITED MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: TRAN HA MINH QUAN Ho Chi Minh City – 2018 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Executive summary Recognizing that communication is more important than ever, organizations have invested in new information technologies and raised the profile of their communication professionals. Despite these efforts, however, an array of factors continues to hinder effective communication in many companies. Although this topic has received considerable attention in the literature, most of the articles are restricted by their limited approach concerned primarily with the effect of various methods.
Manufacturing is an integrated system covering everything from order receipt through to the product shipment (Hitomi 1991). It covers a wide range of activities in many functional areas including planning and design, purchasing, production, inventory, distribution, marketing and sales. Realising the importance of such an approach, this study proposes a model to improve on-time response to customer through business process model integrating two common processes involved in manufacturing planning, control and execution cycle for MTO situations and a database for supporting various functional applications through basic and transaction data. The proposed model was implemented through Group Intellect Power Technology Ltd.
The rest of the paper is organised as follows. First, a review of the company background as well as current problems that company is facing. Next, the proposed improvement solutions are presented, followed by a section on a systematic investigation of the on time response problems and implementation of the solutions to overcome the problems in Group Intellect Power Technology Ltd. Finally, research findings and conclusions are drawn.
1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Acknowledgements I would especially like to show my gratefulness and special thanks to my supervisor – Dr. Tran Ha Minh Quan for all his continuous supports, advices and instructions through the process of researching and writing this thesis. Without his enthusiastic help, this thesis could not have been accomplished.
I also would like to show my gratitude to ISB lecturers, my colleagues at work, my classmates at ISB for their valuable knowledge and continuous support. I also send my sincere thankfulness to my family for their support and encouragement throughout my years of study. 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS 1. Organization Structures of GIPT and FRIWO.
13 Production control related. 16 PO handling flow. Initial cause effect map. Potential Root Cause.
20 Communication within GIPT. 20 Communication between GIP and FRIWO. Cause-effect map. Improve communication within GIPT.
23 Weekly report from GIPT purchasing and engineering team. 23 Weekly production schedule meeting. 23 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Added KPI for percentage for POs without delivery dates. Improve communication between GIPT and FRIWO.
24 To define standard leadtime. 24 Weekly critical materials list. 25 Improvement on POT. Appendix I : In-Depth Interview Information.
49 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Company Background My company name is called GIPT, Group Intellect Power Technology Ltd. With over two decades of experience in electronic product design and manufacturing, GIPT has become a professional provider of a wide range of power conversion products. GIPT is also expertise in providing OEM and ODM electronics contract manufacturing services to global customers.
With headquarters located in Hong Kong, we have three manufacturing facilities located in Shenzhen and Dongguan, China as well as Ho Chi Minh City, Vietnam. GIPT today has over 3,000 employees and over 43,000 square meters of production space in Asia. Our fully competent manufacturing and R&D teams help us face the challenge of rapid market changes. As a specialist in power conversion products, our R&D team is capable of developing a wide range of products including adaptors and switching power supplies with power ranging from 1 to 3000 Watts, and transformers from low power to industrial grade.
Furthermore, our team has developed a patented transformer, which features small size but high energy. We also produce a wide range of consumer products, including radio frequency, consumer electronic products, and electromechanical products. Our missions are - Quality is the essence of our organization with the goal of Zero defect, and - Continuously pursuing the highest quality goals with the most cost effective and flexible solutions. Our major customers come from all around the world, with about 50% coming from Europe, 30% coming from America and 20% from Asia.
FRIWO is our major customer located in Germany, who contributes to about 40% of the sales revenue in 2017. 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Organization Structures of GIPT and FRIWO Table 1: GIPT’s Organization Structure GIPT Marketing Purchasing Factory Department (MD) Department (PUR) Production Control Materials Control Production Engineer (PC) (MC) (PE) Table 2: Friwo’s Organization Structure FRIWO Procurement Order Planning Project Manager Manager Before March 2017, FRIWO’s has a local China procurement team to communicate with China suppliers, including GIPT. After March 2017, the organization was changed to global commodity management, where one procurement manager will handle the same type(s) of components.
Some procurement managers are located in China, and some in Germany. 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Situation Analysis The business between GIPT and FRIWO started from year 2007. GIPT acts as a contract manufacturing company for FRIWO.
FRIWO owns the design of the products and provides Approved Vendor List (AVL) with specific prices, minimum order quantity, delivery leadtime and shipment terms. GIPT needs to order components based on FRIWO’s AVLs, put the components together, perform testing, packing and ship the finished product according to FRIWO’s shipping instruction. During the initial period, majority business came from a few products with stable demand. FRIWO also provides 16 weeks rolling forecast to GIPT and updates weekly.
GIPT used to be able to provide the target shipment dates for the POs quickly before. In the last few years, FRIWO starts to consolidate orders they placed to their Poland factory and another China’s contract manufacturing suppliers, then place to GIPT. As a result, FRIWO starts to put more products with smaller order quantity and irregular demand at GIPT for production. As of 2017, there are more than 100 active products produced in GIPT.
For every new products to be run in GIPT production, FRIWO will arrange engineer pilot run (EPR) to confirm the design has no problem before starting mass production. From time to time, FRIWO engineer team will modify the design of the products also, and an engineering change notice (ECN) will be issued to GIPT. After receiving the ECNs, GIPT also needs to perform EPR to confirm the design changes has no problem, then to update the bill of materials (BOM) and / or the production process. FRIWO’s order planning team places POs to GIPT in any date of the week, and the order status are communicated between GIPT and FRIWO through a 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com weekly updated Excel summary called PO tracker (POT).
FRIWO’s order planning team will based on GIPT’s feedback to confirm her customer. 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Symptoms In 2017, customer starts to complaint GIPT’s marketing department taking too long to provide feedback on when the products can be shipped. Customer is asking for delivery confirmation within 2 week but due to various reasons, GIPT cannot provide confirmed delivery dates for many POs.
This complaint was considerred as the big trouble when customer escalated to GIPT General Manager and impacted on GIPT image if we cannot keep shipment confirmation to customer and cannot adapt with any changes and requirements from customer. We took the PO trackers of the first week of May, Jun and July of 2017 from the planning department for analysis. There are 43%, 31% and 37% of unconfirmed POs in these weeks respectively. This confirms with customer’s complaint and the percentage of unconfirmed POs are so significant that impacts to our service performance to our customer.
So we decided to go into details and find out the root cause and to improve the situation. Table 3: all opened POs from May 2017 to July 2017 May'17 Jun'17 Jul'17 Total POs 195 187 191 No. not confirmed POs 84 58 70 % not confirmed POs. 43% 31% 37% (Source:GIPT) From the PO tracker data for May, June and July, 2017, we tried to identify the reasons which causing us unable to provide delivery confirmation to customer.
The reasons can be classified as materials related, engineering related, production control related and others. 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Table 4: Reasons for shipment confirmation late from May 2017 to July 2017 May'17 Jun'17 Jul'17 Total POs 195 187 191 No. not confirmed POs 84 58 70 % not confirmed POs. 43% 31% 37% New POs within 2 weeks 4 12 23 Materials related (AVL, quality etc) 38 25 33 Engineering related (BOM, EPR etc) 22 16 10 Production control (capacity, on hold etc) 5 2 1 Others 15 3 3 (Source: Marketing Team-GIPT) Materials related Since GIPT has factories at both China and Vietnam but there is only one AVL price setup.
Previously all suppliers deliver the components to GIPT’s China factory, GIPT consolidate materials from different suppliers and then deliver to GIPT’s Vietnam factory. As more and more products are producing in GIPT’s Vietnam factory, FRIWO would like to save the logistic cost by changing the delivery terms from FOB GIPT’s China factory to EXW for all components. Due to this changing of shipment terms, prices for all components need to be revised and it take long time to communicate between FRIWO and supplier to finalize all the updated prices. From the graph below, we can see that over 55% of the AVL related problems cannot be resolved within 14 days from it is reported.
This explain why there 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com are high percentage of POs not confirmed within 2 weeks after POs are placed because of the AVL problems Table 5: AVL related issues (Source: GIPT) Another issue is about quality. Major problems happened to customized components like plastic housing, AC or DC wires. These suppliers are all China suppliers as of this moment. Since these components are not standardized and it is harder to control the dimensions and etc, and the problem will be identified when the components are received at our factory during incoming quality check (IQC) only, it takes long time to send back samples to China suppliers for verification.
Starting near mid of 2017, there is a world-wide supply crisis for MLCC capacitors and resistors. Most of the suppliers cannot deliver according to AVL’s leadtime. Some suppliers will not commit a delivery date to GIPT. GIPT will generally keep chasing suppliers until the components are really needed about 2 weeks before production, then GIPT’s purchasing will discuss with customer if they agree to spot buy from the market.
By comparing FRIWO’s requested delivery date between Jul-2016 and Jul- 2017, we also found that FRIWO is asking shorter and shorter delivery 11 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. In Jul-2016, most of the orders are requesting for 28 weeks leadtime. However in Jul-2017, most of the orders requested leadtime was shorten to 20 weeks only. Table 6: GIPT Lead time report (Source: GIPT) At the same time, the number of POs to buffer long leadtime materials is reducing from 2016 to 2017 also.