Republic of the Philippines

BATANGAS STATE UNIVERSITY

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND
INTERNATIONAL HOSPITALITY MANAGEMENT
Gov. Pablo Borbon Main Campus I
Rizal Avenue, Batangas City

CAd 102 – Introduction to Supply Chain Management

Second Semester AY 2020-2021
CASE STUDY 1

You are tasked to analyze (in pair) a case study entitled “SOMERSET FURNITURE
COMPANY’S GLOBAL SUPPLY CHAIN”.

Guidelines for Case Analysis

Required Sections Guidelines

I. Executive Summary
● One paragraph in length

● On cover page of the report

● Briefly identify the major problems facing the manager/key person

● Summarize the recommended plan of action and include a brief

justification of the recommended plan.
II. Statement of the
● State the problems facing the manager/key person
Problem
● Identify and link the symptoms and root causes of the problems

● Differentiate short term from long term problems

● Conclude with the decision facing the manager/key person

III. Causes of the Problem
● Provide a detailed analysis of the problems identified in the
Statement of the Problem
● In the analysis, apply theories and models from the text and/or
readings
● Support conclusions and/or assumptions with specific references to
the case and/or readings.
IV. Decision Criteria and
● Identify criteria against which you evaluate alternative solutions
Alternative Solutions
like time for implementation, tangible costs, and acceptability to
management
● Include two to three possible alternative solutions.

● Evaluate the pros and cons of each alternative against the criteria
 listed
● Suggest additional pros/cons if appropriate
V. Recommended
● Identify who, what, when, and how in your recommended plan of
Solutions,
Implementation and action
Justification ● Solution and implementation should address the problems and
causes identified in the previous section
● The recommended plan should include a contingency plan(s) to
back up the “ideal” course of action
● Using models and theories, identify why you chose the
recommended plan of action – why it’s the best and why it would
work.

VI. External Sourcing

● At least 5 external sources should be referenced to backed up your
recommendation or to identify issues. This information should be
ideally sourced in current journals, magazines and newspapers and
should reflect current management thought or practice with respect
to issues identifies.

Your case analysis should:

∙ Include 6 sections listed in the outline

∙ Use 1.5 line spacing and the pages should be numbered

∙ Margin should be 1” all sides, short size

∙ Use the pro-forma template with header

∙ Use Times New Roman, 12 point font size

∙ Use an APA citation format.

∙ Present the executive summary on the first page along with your names, student numbers,
section and date.

The case analysis will be graded according to the following criteria:

Total
Criteria 4 3 2 1
Points
Learnings were Learnings were Learnings were Learnings were
presented presented presented in just presented,
clearly, and clearly and there some points and no claims
Content
claims are are few claims and there are were discussed.
(80%)
congruently are congruently few claims are
discussed. discussed. congruently
discussed.
 Technical The paper is The paper is The paper is The paper is
Correctness written in written in written in not written in
15% prescribed prescribed prescribed prescribed
format, above format, above format, above format, above
80% 70 % 60% 50%
grammatically grammatically grammatically grammatically
correct, and correct, and correct, and correct, and
figures are figures are figures are figures are
consistent with consistent with inconsistent inconsistent
the discussion the discussion with the with the
discussion discussion
Timeliness The paper is The paper is The paper is The paper is
5% submitted 3 or submitted on the submitted 1 submitted 2
more days deadline day after the days after the
before the deadline deadline
deadline

Case
Somerset Furniture Company’s Global Supply Chain

The Somerset Furniture Company was founded in 1957 in Randolph County, Virginia. It
traditionally has manufactured large, medium-priced, ornate residential home wood furniture
such as bedroom cabinets and chests of draws, and dining and living room cabinets, tables, and
chairs, at its primary manufacturing facility in Randolph County. It employed a marketing
strategy of rapidly introducing new product lines every few years. Over time it developed a
reputation for high-quality, affordable furniture for a growing U.S. market of homeowners
during the last half of the twentieth century. The company was generally considered to be an
innovator in furniture manufacturing processes and in applying QM principles to furniture
manufacturing. However, in the mid-1990s, faced with increasing foreign competition, high
labor rates, and diminishing profits, the Somerset Company contracted to outsource several of its
furniture product lines to manufacturers in China, simultaneously reducing the size of its own
domestic manufacturing facility and labor force. This initially proved to be very successful in
reducing costs and increasing profits, and by 2000 Somerset had decided to close its entire
manufacturing facility in the United States and outsource all of its manufacturing to suppliers in
China. The company set up a global supply chain in which it arranges for shipments of wood
from the United States and South America to manufacturing plants in China where the furniture
products are produced by hand by Chinese laborers. The Chinese manufacturers are very good at
copying the Somerset ornate furniture designs by hand without expensive machinery. The
average labor rate for furniture manufacturing in the United States is between $9 and $20 per
hour, whereas the average labor rate for furniture manufacturers in China is $2 per day. Finished
furniture products are shipped by container ship from Hong Kong or Shanghai to Norfolk,
Virginia, where the containers are then transported by truck to Somerset warehouses in Randolph
County. Somerset supplies retail furniture stores from this location. All hardware is installed on
the furniture at the retail stores in order to reduce the possibility of damage during transport.

The order processing and fulfillment system for Somerset includes a great deal of
variability, as does all aspects of the company’s global supply chain. The company processes
order weekly and biweekly. In the United States it takes between 12 and 25 days for the
company to develop a purchase order and release it to their Chinese suppliers. This process
includes developing a demand forecast, which may take from one to two weeks; converting the
forecast to an order fulfillment schedule; and then developing a purchase order. Once the
purchase order is processed overseas by the Chinese manufacturer, which may take 10 to 20 days
depending on the number of changes made, the manufacturing process requires approximately 60
days. The foreign logistics process requires finished furniture items to be transported from the
manufacturing plants to the Chinese ports, which can take up to several weeks depending on
trucking availability and schedules. An additional 5 to 10 days is required to arrange for shipping
containers and prepare the paperwork for shipping. However, shipments can then wait from one
day to a week for enough available containers. There are often too few containers at the ports
because large U.S. importers, like “Big W” discount stores in the United States, reserve all the
available containers for their continual stream of overseas shipments. Once enough containers
are secured, it requires from three to six days to optimally load the containers. The furniture
pieces often have odd dimensions that result in partially filled containers. Since 9/11, random
security checks of containers can delay shipment another one to three weeks, and smaller
companies like Somerset are more likely to be extensively checked than larger shippers like Big
W, who the port authorities don’t want upset with delays. The trip overseas to Norfolk requires
28 days. Once in port, one to two weeks are required for a shipment to clear customs and to be
loaded onto trucks for transport to Somerset’s warehouse in Randolph County, which takes from
one to three days. When a shipment arrives, it can take from one day up to a month to unload a
trailer, depending on the urgency to fill store orders from the shipment.
 Because of supply chain variability, shipments can be off schedule (i.e., delayed) by as
much as 40%. The company prides itself on customer service and fears that late deliveries to its
customers would harm its credibility and result in cancelled orders and lost customers. At the
same time, keeping excess inventories on hand in its warehouses is very costly, and since
Somerset redesigns its product lines so frequently a real problem of product obsolescence arises
if products remain in inventory very long. Somerset has also been experiencing quality problems.
The Chinese suppliers employ quality auditors who rotate among plants every few weeks to
perform quality control tests and monitor the manufacturing process for several days before
visiting another plant. However, store and individual customer complaints have forced Somerset
to inspect virtually every piece of furniture it receives from overseas before forwarding it to
stores. In some instances, customers have complained that tables and chairs creak noisily during
use. Somerset subsequently discovered that the creaking was caused by humidity differences
between the locations of the Chinese plants and the geographic areas in the United States where
their furniture is sold. Replacement parts (like cabinet doors or table legs) are difficult to secure
because the Chinese suppliers will only agree to provide replacement parts for the product lines
currently in production. However, Somerset provides a one-year warranty on its furniture, which
means that they often need parts for a product no longer being produced. Even when replacement
parts were available, it took too long to get them from the supplier in order to provide timely
customer service.

Although Somerset was initially successful at outsourcing its manufacturing process on a

limited basis, it has since discovered, as many companies do, that outsourcing can result in a host
of supply chain problems, as indicated. Discuss Somerset’s global supply chain and possible
remedies for its supply chain problems, including strategic and tactical changes that might
improve the company’s supply chain performance, reduce system variability, and improve
quality and customer service.

Prepared by:

Jullienne Canatuan
Guest Lecturer

Republic of the Philippines

BATANGAS STATE UNIVERSITY
COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND
INTERNATIONAL HOSPITALITY MANAGEMENT
Pablo Borbon
Rizal Avenue, Batangas City

Cad 102 – Introduction to Supply Chain Management

Second Semester AY 2022-2023

CASE STUDY

Names: JOHN KELVIN M. SALVADOR SR codes: 20-52802

ALDRIN S. CASTOR 20-51922
Section: BS ENTREPRENEURSHIP 3201 Date: 04-26-23

“SOMERSET FURNITURE COMPANY’S GLOBAL SUPPLY CHAIN”

I. Executive Summary
The Somerset Furniture Company (SFC) was established in 1957 in the Virginian
county of Randolph. Traditionally, SFC produced substantial, opulent, and expensive
 household wood furniture, including bedroom furniture tables, chairs, cabinets, chests
of drawers, and cabinets for the dining and living rooms.

Before going against its brand and losing clients, Somerset Furniture Company
wants to maintain its reputation for excellent customer service and find solutions to
its problems with the world's supply chain. Fast-growing design modifications or
innovations, overstocks, or an excessive amount of inventory will reduce profits, and
certain products may become outdated even before being delivered to retail outlet
outlets for furniture. The supply chain strategy is one of the operational management
techniques that uses a systematic decision-making process to achieve the goals and
provide tools to effectively compete in the market. The supply chain strategy is one of
the operational management techniques that the company plans and studies the new
operational system to be adopted.

The Somerset Furniture Company's approach to managing its supply chain has led to
unsatisfactory business performance, the anticipated issues, and other detrimental
consequences on its management, including subpar logistics management and inferior
product quality.

II. Statement of the problem

The furniture company Somerset needs to retain its customer service record and
remedy any of its global supply chain issues before it has an adverse effect on the
brand and starts losing customers. With a frequent change in the product catalog,
keeping an excessive inventory will cut its profit and some of the product may
become obsolete even before the furniture hits the retail outlet stores. In order to
achieve profit and success, businesses employ many strategies and the supply chain
strategy is one of the operational management techniques that use analytical decision
making to achieve the company goals and provide tools to effectively compete in the
market.
III. Cause of the problems
We believe that SFC can handle and will adopt the global supply chain because
they employ quality management concepts in their operations and are recognized as a
global innovator in furniture manufacturing techniques. However, due to
unanticipated changes that occurred in the middle of the 1990s, SFC contracted to
outsource some of its furniture product line to producers in China, which at the same
time resulted in a reduction in its own domestic manufacturing facility and labor force
in the United States. Despite managing to reduce costs and boost profits, SFC
recently announced that it would shut down its entire US manufacturing site and
outsource all of its production to Chinese subcontractors.

When implementing a global supply chain, we must consider and carry out a
sound management plan for the best supplier selection, build strong relationships with
distributors, suppliers, and customers, and maintain market competitiveness.
Otherwise, SFC won't improve or survive, if not the company. While SFC had
positive impacts on their operation when it implemented Total Quality Management
(TQM) at some point in the middle of the 20th century. However, the corporation
faced tougher competition, a high labor force, and declining revenues in the middle of
the 1990s. And in order to remedy the situation, SFC has begun to outsource some
furniture products to China, which can result in cost savings or lower operational
costs. The corporation has implemented a new strategy to maintain low costs and
reduce the number of industrial facilities and workers. As a result of the marketing
plan, costs are decreased and an increase in profit is sought after.

Due to the variation in humidity between the sites of Chinese manufacturing plants,
the global supply chain unpredictability is delaying customer deliveries by about 40%
and producing quality issues. Additionally, delivery times are getting significantly
longer and replacement parts are impeding prompt customer assistance. Moving
products requires receiving them at an intermediate point, storing them, repackaging
them, navigating customs, and then transporting them to their final location. Given
 that information moves quickly in the internet era, speed is another factor in supply
chain logistics. The customer is used to receiving information instantly and expects
everything to be speedy. With real-time inventory, customers may anticipate knowing
the product's location, its next planned movement, and its precise delivery date.

IV. Decision Criteria and Alternatives Solutions

A troubled supply chain may lead to outsourcing. Reducing unpredictability is
one of the steps the company, SFC, takes to address this issue and search for potential
solutions. Weekly and biweekly deliveries of furniture ordered by customers. The
purchase order must be created and released to the Chinese vendors within 12 to 25 days.
Making it is challenging, and predicting demand is challenging in this process. By
putting in place a real-time, internet-based system that permits direct contact between the
manufacturer and the supplier, the supply chain can be improved.

As a supply chain grows more global and outsourcing becomes more successful,
complexity increases. Longer distances, demand discrepancies, cultural diversity, and
difficult documentation all contribute to these complications. But businesses will have to
deal with the necessity to expand operations globally more frequently. From exporting
and importing to having a local presence to fully globalizing, there are several ways to
get a piece of the fast growing global market. Success will, in large part, depend on a
company's logistics skills regardless of the strategic focus. Logistics management needs
to be more involved in creating and putting into effect global plans as there is an increase
in worldwide marketing and manufacturing operations.

SFC seeks further business prospects with other international suppliers. China
could not be the greatest supplier for the aforementioned organization due to issues with
production facility quality and the challenges of enhancing transportation and shipping
resources. By choosing a different source, Somerset can enhance both the speed with
which its order goods are delivered and their quality, thereby preserving their reputation.
 The aforementioned change will save money for the organization and lead to better
customer service.
V. Recommendation Solutions, Implementation and Justification