Under Armour Logistics

Under Armour is a large-scale manufacturing company, specializing in the production of t-shirts especially for sportspersons. These t-shirts enable athletes to have s sweat-free experience during their sports and work-out sessions. In the course of production, however, business statistics determined that the company was experiencing logistical challenges such as not being able to meet its daily quota, thereby affecting the subsequent business processes. This paper looks at the financial metrics and internal processes to determine where the problem could be and seeks to prescribe a potential solution to this problem. Advantages of the implementation of this solution are also discussed.

Financial Metrics 

To determine how best this business would improve its future efficiency, different financial metrics will be measured. Specifically, cash flow metrics will be used to evaluate the streaming of cash with regards to the various aspects required. Therefore, the effectiveness of cash flow events will be determined, thereby giving reasoning behind why there was ineffectiveness and how to cure this in future.

Net Present Value

Considering the net present value at first, we consider the revenues without the costs over the 35 day period. In this case, the excel formula is applied to the provided figures in the initial investment to provide this value. The federal discount rate of 1.5% is used for the NPV calculation. The table below shows a summary of this information:

From the table above, NPV has been considered from the initial investment of the company for the unit bale. As seen above, the NPV is at over $70,000, representing a very good return on investment after the first month of operation. It can therefore be established in good time that the business the company is engaging in is very good business, as revenue outdo costs significantly.

Return on Investment

Again, an efficiency measure of the return on investment is going to be utilized to further cement the finding above. The table below gives a summary of total costs, as operated by the company, enabling this paper to find the return on investment:

Return on investment is important as it determines the net income per unit time for the invested amount. As can be seen above, the total investment amount for this product is $26,620.80 daily with an additional running cost of $7,584.93, while the daily revenue stands at $63,897.00. Therefore, the return on investment can be determined.

This shows that for every $1 of investment, there is $1.87 in returns obtained. Considering these two cash flow metrics wholesomely, they seem to suggest that with regards to the expected cash flows of the business, there would be high profitability. However, inefficiencies within the system would results in lower earnings.

Working on Inefficiencies 

A consideration of the final delivery goods sent to the various destinations, there appears to be a lag in that the expected goods to be distributed do not get to their destinations in their desired quantities. Consider the table below showing expected items as opposed to delivered items:

In this table, factor to POL, POL to POD and POD to DC are all experiencing lower delivery quantities as opposed to those earlier projected at the initial delivery point. As a result, this means that the company is experiencing challenges with its logistical from the very initial point of manufacturing, with an apparent lack of knowledge on the required amounts, or a failure to achieve desired production requirements. As a result, the company is not able to deliver its daily quota to the distribution points. This underlines the important relationship between manufacturing and logistics, requiring that the two phenomena go hand-in-hand for the ultimate delivery of its manufacturing needs.

Among some of the reasons why manufacturing and logistics efficiency is required is to cut costs associated with inefficiencies in this area (Krumeich, Weis, Werth, & Loos, 2014). For example, under-production in this case affects transportation costs. This is because the under-produced goods under-utilize their transport and increase transport costs for the additional goods produced and transported after the material day. Furthermore, this efficiency process would improve the business process, customer service, supply chain visibility and managing inventory (Ramos, Gomes, & Barbosa-Póvoa, 2014). Therefore, this addition could readily enable Under Armour to cut the costs associated with logistical issues.

Technological solutions for this option are available, with a large number of companies switching to a technologically-enabled manufacturing environment, thereby determining their production capacity, providing timelines for delivery, improving labour utilization and other issues of concern at the manufacturing process (Pawlewski & Greenwood, 2014). As a result, the process would be streamlined, thereby improving customer satisfaction and business process within the company. Moreover, addressing this concern is critical as it ensures that, with the growing shipment industry, Under Armour will remain ahead, considering additional challenges in the picture such as increased regulations, rising transportation costs, growing scrutiny in logistical processes and driver shortages (Robinson, 2016). Research in the necessary areas within the company requiring urgent action is needed to provide sustainable solutions to the company’s logistical challenges (Bonney & Jaber, 2014).

Conclusively, therefore, the implementation of a logistical system that serves the manufacturing as well as forward and reverse logistical systems, is required to adequately deal with inefficiency challenges within Under Armour. Furthermore, implementing this system will have foreseen future problems the company would face if it continued with its current trends. In the process, customer satisfaction would be lost, labour costs would increase as daily quota is not met, transport costs would also sky-rocket; this would be made worse by a driver shortage. However, implementing a technological solution and proper systems within its manufacturing for its implementation would avert the above foreseen challenges and improve business processes within the company at the same time. As a result, it is necessary to implement a change within the company soon, to avoid the use of its profits in dealing with avoidable challenges.

References

Bonney, M., & Jaber, M. Y. (2014). Deriving research agendas for manufacturing and logistics systems: A methodology. International Journal of Production Economics, 157 , 49-61. 

Krumeich, J., Weis, B., Werth, D., & Loos, P. (2014). Event-driven business process management: where are we now? A comprehensive synthesis and analysis of literature. Business Process Management Journal, 20(4) , 615-633. 

Pawlewski, P., & Greenwood, A. (2014). Process Simulation and Optimization in Sustainable Logistics and Manufacturing. . New York: Springer. 

Ramos, T. R., Gomes, M. I., & Barbosa-Póvoa, A. P. (2014). Planning a sustainable reverse logistics system: Balancing costs with environmental and social concerns. Omega, 48 , 60-74. 

Robinson, A. (2016). Manufacturing and Logistics: Manufacturers Look towards Logistics Efficiency to Stay Competitive . Retrieved from Cerasis: http://cerasis.com/2016/02/03/manufacturing-and-logistics/ 

References