The Application Of Consignment Stock In SC

With the globalization of world economy and development of information technology in21st century, global sourcing and supply has turned to be a key point to world economy growth. People are realizing that the competition today is no longer the competition among companies. It has becoming the competition among the supply chains. As a result, supply chain management (SCM) becomes the focus of academic and industrial field. Inventory management, as an important element of value-added, has drawn the attention of companies in order to meet the variable demand and shorten production lead time. It is obviously that the traditional inventory management mode can not meet the requirement of global economy. Consequently, there comes out a new inventory management mode, that is Vendor Managed Inventory (abbreviated as VMI), which embodies the integration idea of Supply Chain Management, abbreviated as SCM).The successful deployment of this SCM concept depends on the reasonable procedure design of VMI. It has become an important research topic in the SCM field that how to nominate the proper VMI mode and how to guarantee its fulfillment successfully.Since China joined WTO in2001, China has becoming the centre of international sourcing and global manufacturing.’Made in China’ can be found all over the world. In order to process the import and export procedure more efficiently and conveniently, Chinese Customs sets up several free trade zone in China, such as the Shanghai Waigaoqiao Bonded Zone, Tianjin Bonded Port, Shenzhen Futian Bond Zone, Xiamen Bonded Zone, and etc. Besides, there sets up some more free trade zone in the internal city of China, such as Suzhou Industrial Park Bonded Zone, Xi’an Bonded Zone and Chengdu Comprehensive Bonded Zone. For the companied in the bonded zone, the logistics is somewhat different to those companies out of boned area due to the special boned requirement of Chinese Customs. SC is a limited company located in the Chengdu Comprehensive Bonded Zone B (previous Chengdu Export Processing Zone), it engages in the manufacturing of aerospace precision components. The main raw material of SC company are stainless steel bar, aluminum alloy bar and copper alloy bar, which have to be imported from overseas suppliers in order to meet the material specification called out in the drawing from the customers. As a characteristic of aerospace industry, SC leads the multi-variety and low-volume production. In the past three years from start of production (abbreviated as SOP), more than400kinds of parts has got the first article approval from the customers, which totals almost100raw material type of different specification and size. Taking the capital cost of inventory into account, it is difficult for SC to set up safety stock for all kinds of raw material used. Consequently, it is buyer’s responsibility to arrange the logistics for raw material ordered accordingly to its requisition and weight. Normally the raw material will be collected and transported once a month, which weights from hundreds kilograms to several tons as a result of low-volume production. Even though the normal shipping lead time by ocean will be70days to80days due to the bonded requirement of Customs, which is almost double comparing to that of30to45days in port cities. Raw material buyer would choose the ocean shipment if the cargo weight is over800kg and the transportation lead time permits in order to saving the shipping cost. Unfortunately, the proportion of ocean shipment is no more than20%among all the shipping records. SC has suffering from the high shipping cost results from the air shipment in the past three years. And this situation gets worse since the bonded train from Shenzhen to Chengdu is cancelled, because the transportation cost by bonded truck from Shanghai to Chengdu is extremely high and beyond what SC could bear.I launched the study from the difficult logistic situation of raw material SC company faces and propose to solve this difficult by deploying VMI inside the company. Considering the geographic distance, it is reasonable to perform the consignment stock as a mode of VMI. In this thesis, I proposed the frame scheme of consignment stock based on the case of SC firstly. Secondly, the feasibility study of consignment stock in SC was studied from qualitative and quantitative aspects separately. Finally, the detailed procedure and experience was shared based on the trial run of consignment stock in SC. Organization of this thesis is as follows,Chapter1:Preface. Introduce the content and method of VMI study as well as the background and contribution of VMI study.Chapter2:Previous study review. Introduce the previous study as below,(1) Concept of supply chain and supply chain management,(2) Concept and evolution of VMI,(3) Supply risk and supply cost.Chapter3:Introduce the major difficulty on raw material supply of SC, which is the balance among high logistic cost, out-of-stock risk and tight cash flow.Chapter4:Feasibility study on the consignment stock, including the frame scheme, qualitative and quantitative analysis on the benefit brought by consignment stock.Chapter5:Study the trial run of consignment stock in SC.Chapter6:Summarize the study of thesis and share the experience of consignment stock in SC.