Module Paper A: ALPHAPLUS Summer 2022 Master International Management Semester: 2 International Operations Management Due to the recent downturn in the oil and gas industry, ALPHAPLUS faces financial pressure

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Module Paper A: ALPHAPLUS

Summer 2022

Master International Management

Semester: 2

International Operations Management
Due to the recent downturn in the oil and gas industry, ALPHAPLUS faces financial pressure. Currently, the business unit “Lighting” is performing quite badly and the GBU  manager is forced to improve the profitability by cost reductions as soon as possible. The

CEO asked you, as Supply Chain Expert and COO, for your support.

The Lighting GBU produces the following light systems:

Apparently, Germany as main manufacturing location for the EMEA products is key of the problem. In addition, the Lighting-GBU has a factory in India, which manufactures similar products than EMEA, but only for the Asian market.

Having analysed the product portfolio of the Lighting GBU, you decided jointly with the

Managing Director of the GBU to focus on the emergency luminaires, as they are the

bestsellers of the GBU.

Emergency luminaire

An emergency lighting system provides reliable illumination for up to 3 hours when powered

by batteries. It is also available as emergency exit lighting with the escape signs of a  customer’s choice. Possible choices are: Emergency lighting unit or emergency exit light,

1,5- or 3-hour battery life, wall-mounted, ceiling-mounted, pendant or pole-mounted light.

Some models automatically perform a functionality test, use intelligent charging technology  to extend the battery life, and shut themselves down when opened so you can safely replace

the battery or bulb without disconnecting it from the mains.

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To get to know the products of the Lighting Business, you schedule meetings with people of  the following functions within the GBU:

? Development Engineer

? Head of Sales

? Chief Procurement Officer

? Head of Manufacturing

? Logistics Manager

Development Engineer: He explains to you that the following options are feasible for

emergency luminaires on a global scale:

? Scope: ATEX (BVS), ATEX (IBE), ATEX (PTB), Brazil (ULB), China (CQST), EAC

(STV), EAC (Sortium), IECCx (BVS), IECEx (IBE), IECEx (PTB), India (PESO), and

Poland (CNBOP)

? Type of protection: IP54, IP55, IP56, IP64, IP65, IP65/66, and IP66

? Zones: Zone 1, Zone 2, Zone 21, and Zone 22

? Minimum ambient temperature: -20 C and - 30 C

? Maximum ambient temperature: + 50 C and + 55 C

? Emergency light output: 100% 1,5h, 21% - 3,0h, 30% - 3,0h, 31% - 1,5h, 31% - 3,0h,

58% - 1,5h, 60% - 1,5h, and 60% - 3,0h

? Disconnection of the light: neutral white

? Description: compact sheet steel light fitting, compact stainless-steel light fitting,

emergency luminaire for fluorescent lamps, emergency luminaire with LED, light

fitting for liquescent lamps for central battery units, and linear luminaire for fluorescent

lamps for central battery units

? Rated operational voltage AC: 110 – 127 V, 110 – 240 V, and 220 – 240 V

You are quite shocked by the variance, which this product can have. In addition to these

enormous variances, it seems that the engineers are very open to create additional new

product variances of as a result a new product number for each customer, if a single item

changes – and this happens quite frequently as well.

Head of Sales: To get a better understanding about the Lighting business, you meet also

with the Head of Sales, who directly reports to the Lighting General Manager. He mentions

that globally the BU have a quite diverse group of customers:

? Customers with centralized buying departments: Customers who believe that

centralized buying and product standardization can help to decrease their

procurement spend. In addition, they are concerned about long-term supply

continuity and reliability.

? Customers with decentralized buying: These customers would like to have the

maximum adaptability of their products to their local needs and therefore apply a

decentralized buying approach. Their orders are placed with short-term notice and

they demand fast delivery, but accept to pay also reasonably good prices for this

service.

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? A few customers of the BU are OEMs (original equipment manufacturers) and they

use the lighting product to manufacture complete modules for the oil industry. These

customers are very demanding and require special treatment and an engineering

team to individually develop their lightening solution.

? Long-term small and medium-sized customers: Some of them have already started

their business relationship in the founding phase of ALPHAPLUS (more then 40 years

ago). Their individual order volumes are small, but in sum they generate a relevant

sales volume. They are sharing their business plans well in advance and appreciate

ALPHAPLUS advise for selecting the most suitable product and how to best use it.

In return they are not only accepting fair prices, but also provide valuable input for

quality improvements or small (but valuable) product enhancements (often in joint

small project teams).

He explains that the Lighting BU has more than 8,000 customers and that ALPHAPLUS in

total has more than 20,000 customers globally. You are impressed by this high number of

customers. The sales manager proudly mentions that they dismissed all intermediate

dealers during the last years as they believe this provides a better customer insight and

consequently a higher margin.

Chief Procurement Officer: Your next interview partner is the CPO. She had started as an

engineer within ALPHAPLUS and has been within different procurement functions for more

than 20 years. On one hand, she knows the different sourcing markets very well; on the

other hand, she seems to be quite frustrated since manufacturing pushes for a high degree

of internal vertical integration, i.e. only buying the minimum from external partners, even if

they are more cost effective. It seems that nobody is hearing her speak when she is offering

opportunities to improve the cost structure or service.

On the other hand, she explained you very detailed that many categories can be sourced

outside the company for much better conditions (commercially and quality); especially

categories for which ALPHAPLUS has not a proven track record. This is particularly true for

the Printed Circuit Boards (PCB) and the Electronic Manufacturing Service (EMS) providers.

Based on her explanations it is with to know that there are different market positions of the

companies within the industry. In relation to the need of ALPHAPLUS the interesting market

segment is the segment for industrial electronics (IE) and not the service providers for

consumer electronics (CE), like Flex Ltd (https://flex.com/). She had already established first

contacts to some IE industry participants, like Enics (https://enics.com/) or Zollner

(https://www.zollner-electronics.com/en/).

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PCB EMS service provider

Based on a detailed analysis with the company Enics she was able to analyse the current

products and provided a cost breakdown which is clearly showing a case for external

sourcing of EMS services.

Logistics Manager: The interview with the logistics manager generated also conflicting

information. On one hand, the delivery performance of the Indian factory does not appear to

be bad – an audit revealed a delivery performance of 90%. On the other hand, the baseline

for this measure is unclear. Is it the required customer date, the confirmed date, or any other

date? Looking at the inbound information of the German location, the pictures becomes

worse: They measure only 50% delivery performance. Since almost all goods are shipped

via air freight (EXW – ex works), nobody really cares about the supply chain from India to

Germany.

Another concern of the manager is the fact that he has the feeling that their logistics cost

and performance – especially in Central Europe – is not in accordance with their customer

expectations. The actual system is based on fully owned trucks and management of the

routing by ALPHAPLUS.

Head of Manufacturing: Your last interview partner is the Head of Manufacturing. He

confirms that they are very much pushing for a high internal value creation as they would

like to load their factory and achieve a high utilization rate of their staff. He also explains the

manufacturing and assembly process of the lighting products. Basically, a few components

8

2

58

23

4

Material

(% of total)

Assembly

Testing

Conclusion

• Electronic material is most

important cost driver (~60%),

hence selection of appropriate

electronic components is key to

manage total costs

• Assembly and testing represents

the next biggest cost element; it

might be worth to consider split[1]ting the value chain and assemble

in a low-cost country

• A well-designed development

process with the involvement of

design experts, development

supplier(s) and the production

supplier(s) is essential to manage

product quality, service and cost • Key to manage TCO is

standardization, especially with

PCBs and metal works as well as

pre-manufactured cables

86%

10%

4%

Labour

(% of total)

Overhead

(% of total)

PCBA

(printed circuit

boards

assembled)

relays,

cables

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of the final lamps are produced in Germany. The major part is made in the Indian factory

and then shipped to Germany. The final assembly is then customized.

Depending on the protection level and type, different cable glands will be installed into the

housing first. As next step, the appropriate power transformer is installed, as final step, the

reflector, the lamp, and the cover.

The cable glands are used for safe cable entry into Ex

enclosures and can be used in a very wide

temperature range. Cable glands are designed to meet

the special requirements of explosion-protected

enclosures.

Due to this installation process, the plant is not able to react flexible to different customer

requirements. As the cable glands defined the customer specific configuration and is done

first, they realized high stock amounts of finished product at their warehouse.

After the interviews and getting to know the Lighting Business, you start preparing a

management presentation and report together with the GBU manager. You jointly decide

that the following areas should be covered in the report. To have a robust report you agreed

to justify all analysis and recommendations based on appropriate theoretical/academic

models.

Tasks:

Production & Supply Chain Management

1. You conduct an overall assessment of the operations functions of the Lighting GBU (at

least of the overall supply chain, planning process, sourcing, production, storing, and

delivery). To do so, you apply theoretical SCM/operations models & tools to audit the

GBU. Based on the audit, you justify your recommendations for improvement, both on

the structural and operational level (16 points).

2. To get a better view about your business environment you consider also do provide a

behaviour-based segmentation of the BU lightening customer basis. In parallel you work

out a global supply chain mapping to define the AS-IS status much better. Based on the  analysis of your customers and the AS-IS you define an appropriate supply chain set up

(TO-BE). You also prepare recommendations for improvement based on your

assessments (17 points).

Global Sourcing

3. To follow the recommendation of the CPO you ask procurement to establish a detailed  material group strategy for EMS. The CPO and you decided that a strategic procurement

manager should lead the effort to lead the internal x-functional team to establish a full  flashed sourcing strategy for EMS. (20 points)

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4. In supply chain management much attention is paid to improvement of the vertical  processes in a supply chain. However, Alphaplus may outsource part of production (they buy PCBs and EMS service from partners) which means that horizontal processes and  horizontal cooperation are of importance. What advantages are there for Alphaplus in  outsourcing part of their production to other partners? What advantages are there for these partners? What are the measures to establish a long-lasting partnership? (14  points).

Logistics Management

5. As mentioned, for the distribution to its European customers ALPHAPLUS is using mainly  own trucks. But they are considering outsourcing a substantial part of the volume to a  logistics service provider. As a consultant to the logistics manager, layout the advantages  and disadvantages of logistics outsourcing, describe processual steps in doing so and  layout the options he has with respect to provider categories. (15 points)

6. After talking to the India factory, you find out that their data for production planning is very  rudiment and that they do not have access to forecasts. Given the sales for lightning  systems of one year (see table below) establish a forecast using various methods (total:

8 points):

? Naïve method (1 Point)

? 3-months moving average (1 Points)

? 3-months weighted average, using 0.2, 0.3, and 0.5 with the heaviest weights

applied to the most recent months (1 Points)

? Exponential smoothing using an Alpha = 0.2 (2 Points)

Please fill in your results in the table below (round your results to two decimal places).

Please calculate in addition the Mean Absolute Deviation (MAD) (2 Points) of each  method. Which method do you recommend and why (1 Points)?

7. You are helping the Logistics manager to establish a tour planning method for outbound  transports. Exemplifying the method based on the SWEEP ALGORYTHM determine the  best vehicle routing for 7 customers served from one distribution centre with a delivery  van capable of loading max. 10 pal. The demand of each customer as well as the  distances between customers’/distribution centre can be taken from the matrix below.

(10 points)

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Formal Requirements

? This essay is supposed to be an academic document. Therefore, academic

standards apply to this document as well. Provide sufficient references of

academic models and theories for answering the questions.

? In addition to the essay, you may submit additional documents in other file

formats. All appendices are part of the final mark. Therefore, please assure that

all files can be opened without problems using Office and in addition Adobe

Acrobat. Faulty files that cannot be opened are regarded as not submitted.

? For the sourcing strategy, you may provide a management presentation to the

companies C-level suite as a PowerPoint file. You might use PowerPoint pages

in the final essay enriched with additional information (insert Power Point as

picture).

? For the supply Chain Mapping experience, you should provide appropriate

figures/drawings to visualize the supply chain (AS-IS and TO-BE). If you used

any other program than within Office, please make sure that they are readable

with Adobe Acrobat.

? While you do not have to give a detailed introduction into the models and

methods used in your analyses it should be argued why a specific model or

method is selected or which assumptions and requirements are underlying the

respective method. If you make changes to your models argue where and why.

? The ISM formal requirements for term papers and theses need to be observed.

Please ensure proper referencing, for any model you use, but also for additional

information you trace. In addition, please indicate any assumption you take and

give some justification.

- All references should be in APA style and presented inside the main body of article.

- You should attach at least 10 references for each section of the term paper; means in

total 30 citations!

- Every in-text citation should be hyperlinked to reference.

- The use of primary source for the references is strongly recommended.

- Using the application/software for referencing such as Mendeley, EndNote, and etc. is

strongly recommended.

- All references should be mentioned inside the article in the form of In-text reference.

- Reference list entries should be alphabetized by the last names of the first author of

each work.

- Journal names and book titles should be italicized.

- Eg. Li, S., & Seale, C. (2007). Learning to do qualitative data analysis: An observational

study of doctoral work. Qualitative Health Research, 17(10), 1442-1452.

https://doi.org/10.1177/1049732307306924

Required Volumes 2 3 5 2 2 7 1

(in Pal.)

Distance Matrix (km)Distr. Center Customer 1 Customer 2 Customer 3 Customer 4 Customer 5 Customer 6 Customer 7

Distr. Center 29 62 32 68 62 79 27

Customer 1 41 50 84 92 101 42

Customer 2 52 72 106 132 80

Customer 3 36 53 90 60

Customer 4 60 113 95

Customer 5 58 75

Customer 6 64

Customer 7

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? Some additional suggestions:

- Use free or payment model of https://grammarly.com to improve English correctness of

the manuscript.

- Use good quality image and give caption below image Figure 1: ……

- Caption for table should be above the table. Like Table 1.: