Somerset Furniture Company (sfc) Case
Discuss Somerset’s global supply chain.
Somerset Furniture Company (SFC) was founded in 1957 in Randolph County, Virginia. Traditionally, SFC 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. Somerset prides itself on customer service. They believe that late deliveries to its customers would harm its credibility and result in loss of customers and excessive inventories. Somerset has recently set up new strategies and tactics to meet goals and improve global supply chain. They first found their problems were, and focused on its core capacities that will improve productivities and reduce inefficiency to win in the global market.
In the mid-1990s, SFC was faced with increasing foreign competition, high labor rates, and diminishing profits. SFC decided to outsource several of its furniture product lines to manufacturers in China. This reduced the size of its own domestic manufacturing facility and labor source.
SFC considered quality and time as its core competences. SFC planned to implement and strengthen its core by adopting EDI, RFID, and RTA (ready to assembly) to acquire more competitiveness on time by reducing time, improving the delivery of economic value to customers. Because of supply chain variability, shipments can be off schedule or delayed. Since 9/11, random security checks delay shipments. SFC’s global supply chain was getting lose its competitive edge and even faced shipment delays by as much as 40%.
SFC was initially successful in their idea to outsource their business on a limited basis. SFC has since then discovered that as many companies do this same thing, out sourcing can result in a host of supply chain problems.
Discuss possible remedies for its supply chain problems.
Reduce Variability: Somerset should implement processes and tools that will reduce variability. The current process orders furniture on a weekly and bi-weekly basis. The process takes between 12 and 25 days to develop a purchase order which is then released to the Chinese suppliers. With these kinds of gaps in order creation, it makes it extremely difficult to forecast demand. The supply chain can easily be improved by implementing a real-time internet driven system that allows for direct communication between the retail operations and the supplier. Suppliers then can begin manufacturing new furniture as orders come in.
Additionally, implementing such a system will help ensure that once an order is received, that there is an urgency to deliver that order to the store, versus the current process where it may take from one day to a month before furniture is delivered to a store. Somerset wants as much of the order delivered to a store as possible in order to improve their on hand inventory levels and reduce variability.