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Quality Management Longterm PDCA Circulation Tires Wheels Front Fork Handlebars Power Steel Tubing J C C 2/IMPROVEMENT / Transfer Price Problem 2:Missed scheduled deliveries due to the filled orders If the external orders + JCC’s order doesn’t excess handlebar’s capacity: If orders from external part and JCC excess handlebar’s capacity within 1,000 units: If orders from external part and JCC excess handlebar’s capacity within 2,000 units Numbers of orders excess handlebar’s capacity Transfer Price Lowest price Highest price 0 80 125 0~1000 125 1000~2023 125 Transfer Price ≤ External Market Price $80+$0/33750 ≤ $80+($125$80)*1000 33750 ≤ Transfer Price $80+($125$80)*2023 33750 ≤ Transfer Price ≤ External Market Price ≤ External Market Price HANDLEBARS’ UNIT COST INFORMATION 2023 (Estimated) Selling price to outside customers* $135 Variable Cost* 80 Contribution Margin $45 Based on the industry average level 2/IMPROVEMENT / Transfer Price y = + 80 R178。 = 1 0204060801001201400 500 1000 1500 2023 2500 3000 3500 4000Transfer price Excess Amount Transfer price Transfer price Maximize Price(market price)2/IMPROVEMENT / Transfer Price O E M J C C Problem 3: Price concessions of $200 per unit Feasibility ? Scale effect of one type product ? easy to bargain ? Transfer price within reasonable range JCC‘S UNIT COST INFORMATION( 2023) Materials Steel tubing Front fork Wheel set (front and rear) Tires Handlebars 2, Direct labor Overhead Depreciation (Generally fixed in total) Total unit cost 2, ? After bargaining: ? Steel tubing: $190 = 200 * ( 1 % ) ? Front fork: $600 = 650 * ( 1 % ) Outes Range of unit cost ? Normally $15/ unit (%) ? Bargain $65/unit (%) 2/IMPROVEMENT / Bargain J C C Tires Wheels Front Fork Handlebars Power Steel Tubing O E M EDI Logistics flow Electronic data Overall EDI system EDI EDI EDI EDI 2/IMPROVEMENT / JIT Sharing System OEM JCC SECOND TIRE SUPPLIER THIRD TIRE SUPPLIER Logistics Company JIT Information Sharing Platform Three types of information 1. Estimated order numbers for each season 2/IMPROVEMENT / JIT Sharing System JCC39。S Planned Order Schedule Season 1/2/3/4 Type of frame geometries Planned Orders Steel Tubing Front Fork Handlebar Type Wheel Type Tire Specifications Sport bikes 3800 9375 9375 3800 3800 1500/2023/300 Cruising bikes 2775 2775 2775 1075/700/1000 Retro bikes 2800 2800 2800 1200/700/700 2/IMPROVEMENT / JIT Sharing System OEM JCC SECOND TIRE SUPPLIER THIRD TIRE SUPPLIER Logistics Company 2. Inventory Level for each products 3. OEM’s Actual order number and delivery time 2/IMPROVEMENT / JIT Sharing System Purchase plan achieved Planned purchase orders for each season Inventory management system for each products Actual purchase orders JIT Deliveryintime Safety inventory Purchase order achieved Customer satisfaction Information Synchronization 2/IMPROVEMENT / JIT Sharing System Benefits of such solution: ? Time ↓ ? Efficiency ↑ ? Cost ↓ (Inventory+ Equipment) ? Missed schedule ↓ ? unpunctual delivery ↓ ? Mistakes ↓ Limitation of JIT 1. No buffer inventory 2. Highly rely on the supply chain 3. Potential stock outs at suppliers 4. Flexibility for satisfying incremental orders Solve Solve Solve Get This would certainly solve current 2/IMPROVEMENT / JIT Sharing System Investment in PPE ? Failure in current years. ? Inefficiency! Working Overtime Financial: ? Be paid at 150% ? Direct labor/unit ↑ $ ? Net ine ↓% Nonfinancial: ? Workload + Pressure Improvement of produc