Year 1: Manufacturing Locally in Calgary
Key Performance Indicator(s):
- Back Order Rate - Stock-outs cannot last for more than 4 hours
- Average Days on Hand - Given that our initial strategy will take on a JIT model, products will be received and moved as products are finished. Products must be completed and shipped in 5 days.
- Forecast Accuracy & Seasonality Changes - Forecasting will be less important initially with our JIT model; however, when we move into retail stores our forecast must be 99.9444%
- Perfect Order Rate - Orders must be fulfilled with a 99.4% accuracy rate
- Labor Productivity - Employees must punch in codes for each step in the manufacturing process. This will measure the efficiency at each of the 7 steps in the our manufacturing process. Annual average value added time must be 38 minutes or less.
- Return on Assets - ROA should remain at 24% or greater annually
- Cash flow - Cash flow must always remain 30% above quarterly forecasts. Receivables must be collected 10 days prior to payment of payables.
- Average Time From Placing the Order to its Completion - We will be shooting to achieve on average a 17 day turnover rate from the consumers purchase to delivery.
Supply Chain SWOT Analysis:
Strengths:
Our business is hinged on quick asset turnover. Given that our shirts are sold online, our customers will want our product shipped immediately. For this reason we have developed a supply chain management system that turns over inventory in JIT system. Using this system minimizes holding costs and wasted raw materials.
The raw materials required for our product are supplied by various different suppliers thus given a supplier falling out, we would not be in a significant constraint. Initially we will be doing our manufacturing in Canada; however, we will look to potentially manufacture overseas in the future.
With our initial manufacturing system using a JIT model, we will be able to easily adjust for seasonality and pivot our manufacturing model in the future.
Finally, given the nature of our offering, it will not require skilled laborers to produce our product thus we can keep our labors costs down and assign higher costs to better quality materials.
Weaknesses:
If there is a malfunction or a breakdown in one of the steps, our entire manufacturing process will be temperately disabled and could impact many of our KPI's.
Given the importance of a smooth manufacturing process, keeping the machines maintained on a regular basis will prevent losses in revenue, unsatisfied customers, and prevent product defects; however, maintaining the machines will cost a significant amount to keep functioning without glitches.
Finally, managing quality control and labor performance is always a concern when your dealing with products that are priced at a premium. Athletes that spend $250 - $300 for a shirt are expecting a high quality product without defects. With our product being the first on the market, there is a higher risk of product defects when with procedures still under development.
Opportunities:
As demand grows, we will likely move manufacturing overseas to further reduce costs and increase production. Additionally, there is an opportunity for our company to in the future pursue further vertical integration by owning our suppliers (this would only be the case if we patented our own fabric).
Additionally, if we choose not to move manufacturing overseas, we could potentially manufacture other companies products with available capacity.
Finally, we could potentially expand our supply chain to include third party retailers rather than simply focusing on on getting our product to consumers through boutiques and online.
Threats:
Although there are many suppliers we can go to, with initially a low economies of scale, we are subject to buying in lower quantities thus giving our suppliers higher selling power.
If we do so choose to go with an overseas manufacturer, the likelihood of our product being counter-fitted is significantly greater. Additionally, with global uncertainty the price of oil will have a significant impact on shipping costs.
Finally, there has been talk of new taxation and tariff laws being implemented depending on the size of the overseas shipment. This could impact our overall manufacturing and supply chain strategy depending on how high demand for our product becomes.