First, dependency on a single supplier, Shui Fong, may cause the company to face difficulty. Many companies believe that having a single supplier could help them to reduce thier logistic and supplier cost. However, depending on a single have some disadvantages. If there are unexpected event occured, such as plant diseases or natural disasters (earthquake, flooding, or typhoon), the quality of raw materials would be changed or sometimes cannot be delivered. However, the company’s representative said that they have already stocked raw material, tea leaves, that can be produced for 3 months. The company should rethink about if it is last more than 3 months, what will be the problems. As the company’s production process is dependent demand. When one of raw materials cannot be transfered, it will affect all of raw materials that have to be assemble together. In addition, the company might miss other suppliers who can provide better quality of raw materials with a lower cost. Also, they may have less ability to negotiate with the supplier since they know that the company solely has to depend of them (Obinna, n.d.).
The second issue that our group has found that Ichitan company will be facing in the near future is coming from implementing new product catagories, such as coffee and milk. After the company representative said that the company has planned to introduce new products catagories to the markets, their entired supply chain will be impacts.
For supplier, the company has to fine new sources of raw materials, coffee bean, which the company may face difficulty to find them since they have never had this experience. As the representative said that they preferred organic and best raw materials, like tea leaves from Shui Fong company, they may find the coffee bean suppliers more difficult.
For manufacturer, if the company want to introduce new products to the markets, they may have to eject a large amount of money on order cost. Order costs include both variable costs and fixed costs. The company will not be impacted much on their fixed cost, namely company facilities, since they are running current product catagories. However, variable cost can affect the company’s financial statement softly or strongly depending on the number of purchase orders that are processed and other variable costs, like preparing a purchase requisition or creating of new purchase orders. In addition, producing new product catagories may lead to increasing in setting up cost. The company may innitially has enough machines that can produce and be filling drink; however, those current machines may not be compatible for new product catagories (Martin, 2013).
What if some machines, such as filling drinks, can be used together with new products, they still have some problems. The machine has to be stopped operation for greentea filling and turn to fill coffee. They have to clean the machine’s pipeline, and it cause in higher lobor cost and opportunity cost, like probability...