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Four Star Industries Singapore- Matching Supply with Demand Case Solution

Solution Id Length Case Author Case Publisher
709 823 Words (3 Pages) S. Viswanathan, D.G. Allampalli ABCC at Nanyang Tech University : NTU001
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Four Star Industries Private Limited (FSI) was founded in 1966 and was one of the first local mattress manufacturing companies in Singapore. The company pride itself in using state of the art equipment to produce top quality product. Increased competition and change in customer preference have led to the company introducing numerous new models instead of a few being produced some years back. This has led to a decline in order fill rate, and inventory is being held up much longer. The executive director of FSI is looking for ways to manage the severe issues that the company is facing.  

Four Star Industries (FSI) company has been in the mattress manufacturing business for more than three decades. Increased competition has been one of the major problems faced by FSI. Due to the increased competition and change in customer preferences, FSI has been forced to deviate from the traditional manufacturing of a few models to customize and many models, which have grown over the past few years.

Four Star Industries Singapore Matching Supply with Demand Case Analysis

Another problem that FSI face is that the retailers have stopped holding stocks and forced FSI to hold stock and provide the finished product as soon as the customer orders one. This has led to FSI holding more stock then necessary of models, which are not being sold as expected. New orders have been hard to process because of diminished storage space. The inventory or supply is unable to match demand.

Starting with just a few models, FSI has increased their models 18 fold over the past years because of increasing demand of exclusive range of products. The first impact of the increase in models resulted in the moving to factory premises to a new location because production now required large space for warehousing. Each model has their unique raw material requirement, which meant a huge amount of raw material has to be bought and stocked. Also, the machines used for production has to produce in large batches, which meant that for every order placed, there would be excess production to be kept at warehouse. This led to a decline in order fill rates, meaning that there was lesser space for new orders. The number of models that have to be kept as inventory rose significantly, which made new demand harder to fulfill since retailers required FSI to deliver the product to the customer within two days.

Reducing the number of models is one option being pondered by Sia Meng, but retailers might move to new manufacturers in order to find a better variety. In order to reduce the inventory of mattresses, retailers might be forced to place a minimum order, but it would mean that dealers are forced to look other places since they are not holding stock, and with there being no place for them to keep the inventory, they cannot order in batches even when the demand is of just a few units. Reduction in safety stock is another option, but there is no simple way to do it since the machinery can only make products in batches, and there is no way that less than minimum unit are produced. Relocating to an overseas location might reduce the cost of production, but this would be to no avail until the production and inventory management are done effectively, which seems to be the major issue with FSI.

FSI can reduce their problems with slight changes in its production and inventory management. FSI can stop producing models with little or no demand since it is only occupying precious storage space, and can sell the existing inventory of those products at a discount and keep only a minimal number for future sales. This would also lower the burden on raw material requirement for those models. Focusing on high demand models should be a priority, while production should be in line with order placement. Products that are high demand on weekends should be produced near to the weekend so that inventory space could be freed up for the rest of the week. Unless every aspect of the business is considered as one and the link between them is understood, there would be problems. Efficient business can only be run when each department stays in line with the other.

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