COATS Supply Chain Challenges
a) Production and Inventory Planning
• Scale Economies:
o Large dye machines reduce cost per kg significantly for high-volume SKUs.
o Use for make-to-stock (MTS) to handle predictable demand efficiently.
• Lead Time vs Production Cycles:
o Short customer lead times are best managed with hybrid production.
o MTS for forecastable items, and make-to-order (MTO) for unpredictable ones with smaller dye
machines.
• Inventory Strategy:
o MTS for high-demand SKUs to ensure availability.
o MTO for volatile SKUs to reduce inventory holding and obsolescence risk.
b) Inventory for 90% Fill Rate
• AA SKUs:
o Calculate safety stock with the formula based on the standard deviation of demand.
o Maintain safety stock for 90% fill rate, using 1.28 as the Z-value in the formula.
• B SKUs:
o Higher demand variability requires more safety stock.
o Focus on higher-value or critical SKUs to avoid overstocking and balance costs.
c) Move AA Production to Indonesia?
• Cost Savings:
o 30% lower dyehouse conversion costs in Indonesia.
o Shipping costs manageable, with savings offsetting transport fees.
• Recommendation:
o Shift AA SKUs to Indonesia for cost efficiency.
o Allow Bangladesh to handle smaller, unpredictable orders with quick turnaround.
d) Assessment of Coats’ Inventory Policies
Strengths: Weaknesses:
Efficient MTS for forecastable SKUs using large High inventory carrying costs for less predictable
machines at low cost. SKUs.
Flexible MTO model for fast response to Risk of obsolescence for B and C categories with
unpredictable demand. excess stock.
• Improvements:
o Shift more B and C SKUs to MTO to reduce excess inventory.
o Fine-tune safety stock levels based on actual demand patterns to optimize inventory
management.
