Bright Potential

Course CodeBG III-G2
Course NameOperations Management
Section CodeBU3044-G2
Winter 2019
Type of EvaluationAssignment #2
Percentage Weight of TotalEvaluation15%
Course InstructorGus Lazopoulos
Due DateWeek 10 (March 14, 2019)
Total Marks: /20
Student Name: ____________________________________Student ID #: ________________Student Name: ____________________________________Student ID #: ________________Student Name: ____________________________________Student ID #: ________________Student Name: ____________________________________Student ID #: ________________Student Name: ____________________________________Student ID #: ________________
Global Value Chain Management and Inventory Management
Bright PotentialVonkel Enterprises recently purchased Thembeka, a company that designs,manufactures and markets fine gold and diamond jewelry throughout South Africa. Ithad previously been a family-run business, but following the death of the founder andCEO, family members decided to sell the enterprise. Vonkel saw the potential for thisbusiness and purchased it, intending to improve supply chain performance.The domestic supply chain involves inbound shipments of raw materials from multiplesmall suppliers to a manufacturing location in Pretoria. Once the jewelry has beencreated, shipments are sent through a transportation intermediary to retail stores inCape Town, Durban and Johannesburg. The challenges Thembeka faces are commonto the fashion industry: rapidly changing styles and preferences require the company toreact quickly and adapt designs to suit consumer demands. The peak demand periodsoccur throughout December and in mid-February, with a smaller one in the spring. TheThembeka brand and style is well established throughout South Africa, and Vonkeldecides that it will keep the name to maintain brand loyalty.In addition to making supply chain improvements, Vonkel Enterprises is planning toexport the products to the U.K. The jewelry market has experienced a steady increaseover the past ten years, and has continued to grow over the past year despitepredictions for an overall industry slow-down. South Africa’s participation in theKimberley Process should help accelerate Vonkel’s move to the British market. TheKimberley Process is an international certification scheme designed to regulate andprevent the trade in conflict diamonds. Although a certificate is needed in the export ofrough diamonds, Vonkel can provide a warranty on its polished diamond jewelry, statingthe gems have been purchased from legitimate sources compliant with the UnitedNations resolutions. Vonkel is in the process of contacting multiple U.K. wholesalers totry and broker an export arrangement.Investigating LossesDespite Vonkel’s desire for expansion and growth, Thembeka has experienced anoverall profit loss for the past five years. An initial investigation into the company’sfinances revealed an overall business turnover of about USD 63 million, and the cost ofinventory alone is USD 27 million. Over 80 percent of the company’s total inventoryconsists of finished product. Inventory is inconsistently categorized, which also leads toa longer lead time for the organization to fulfill orders. Most of the inventory is held invarious retail outlets that Thembeka owns and in franchises where Thembeka owns thestock.Losses in sales were primarily due to the inability to deliver timely orders because thestock could not be located efficiently in its inventory. This resulted in frequent stock-outsduring peak demand periods. In addition, designs were not well aligned to customerpreferences, which meant that there were higher volumes of product left in inventory.There was very poor visibility of stock in relation to overall sales and no integrated andefficient method to track shipments, delivery and items in stock. In addition, Vonkelidentified over USD 1 million in stock that Thembeka had accumulated over the pasttwelve months.Developing StrategiesVonkel executives have decided to investigate potential distributors and retailers in theU.K. while working on the supply chain improvements. A strategy is being developed toaddress the critical supply chain problems, while an exporting plan is being created toinitiate the company’s international growth strategy.Learning OutcomesThis case study relates to the following learning outcomes from the module InventoryManagement in the course Global Value Chain and the module Implementation of Market EntryStrategies in the course International Market Entry Strategies:• Build inventory systems through a strategic approach to control inventory levels andfinancial risks when exporting and/or importing on a global basis.• Examine current business model and supply chain practices to identify the potentialvalue of transitioning to a circular economy business model.• Implement an indirect exporting strategy by finding and choosing an appropriatedomestic intermediary, such as a trading house or confirming house.Case Study Questions (Please type 12 Times in New Roman, 1.5Space)1. Which activities should Vonkel undertake to efficiently manage its inventory? (5Marks)2. What would be the most appropriate strategy for Vonkel to adopt to maintainoptimal inventory levels? Explain your choice. (5 Marks)3. Which supply chain information system would help Vonkel address its immediateissues? Why? (5 Marks)4. Would indirect exporting be a strategy that would benefit Vonkel? (5 Marks)