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[Supply Chain and Planning and Control Systems in Practice]
Tait electronics Limited – http://www.taitworld.com



Table of Contents

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Introduction of Tait Electronics: ..................................................................................................... 3

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Supply Chain and Planning and Control Systems .......................................................................... 3

Supply Chain Management System: ........................................................................................... 3

Vendor Managed Inventory: ........................................................................................................... 4

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Why VMI?................................................................................................................................... 4

Build-to-forecast: ........................................................................................................................ 5

Enterprise Resource Planning: ........................................................................................................ 5
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Why ERP? ................................................................................................................................... 6

Customer Relationship Management: ............................................................................................. 8

Why CRM? ................................................................................................................................. 8
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Theory vs. Practice: ..................................................................................................................... 9

Bridge gap between theory and practice: .................................................................................... 9
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Reference ...................................................................................................................................... 10
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Introduction of Tait Electronics:

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Tait Electronics comes to one’s mind instantly whenever mobile radio equipment is mentioned.
Sir Angus Tait started Tait Electronics in 1969 as a Christchurch company. Tait is now present in

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160 countries and employs 160 people throughout the world. Tait has sales of over $150 million
– about 90% of which is exported to over 80 countries. Tait expenditure on Research &
Development ranges from 10-15 percent of sales as opposed to the national average of 1%. Tait
is one of key players in New Zealand’s high-tech market and its name is considered akin to

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innovation in the radio communication market. Tait has been one of the pioneers in the analogue
mobile radio technology and has offered a range of P25 products & solutions in order to suffice
the needs of digital radio technology market. Tait is currently fulfilling the needs of many sectors
simultaneously; the sectors include: mining, transport, public service and government, public
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safety, utilities and national security. (Tait Electronics, ICT, The Smart Future)

Tait, an MNE, is operating in 160 countries and in order to compete globally, it needs accurate
systems in place to prop up timely decision making. Supply Chain and Planning and Control
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Systems are an integral part of an MNE these days and Tait has also deployed these systems in
order to operate effectively and efficiently. I’ll examine these systems one by one – starting with
Supply Chain. (Tait Electronics – CANZ)
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Supply Chain and Planning and Control Systems
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Supply Chain Management System:

Supply Chain Management is defined as: “A key value chain composed of demand planning,
supply planning, and demand fulfillment” (Stair & Reynolds 2006). The definition of supply
chain management is self-explanatory; it is evident from the definition that supply chain
management consists of three components:

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 Demand planning
 Supply planning
 Demand fulfillment

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Vendor Managed Inventory:

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Tait Electronics has put Vendor Managed Inventory (VMI) in place as part of their supply chain
management system. VMI is a system in which the supplier of a certain item maintains the
inventory levels for the buyer of that item. The process works as follow:

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The manufacturer receives data from distributor (buyer) regarding sales and stock levels using
electronic or traditional means. The manufacturer then analyzes the stock levels and sales data of
various items included in the product range and decides on the level of inventory. The
manufacturer creates and maintains the inventory plan. It should be noted that the manufacturer
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is responsible for only creating and maintaining the inventory; the ownership of the item remains
with the distributor of the product. A slight variation of VMI, consignment inventory, is also
available. Under consignment inventory, the manufacturer retains the ownership of the item and
payment is made after the item is sold. The distributor is like a middle-man – working for a
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commission.

Why VMI?
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Tait has subsidiaries and dealer networks (explained later in the text) across the globe. It
manufacturers inventory at Christchurch and then ships it to various regions when their sales
reach below safety stock levels. What Tait does is that it gathers data regarding sales and stock
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levels from geographical regions using its ERP system (also explained later), punches the data
and forecast estimates (arrived using BTF – explained below) and customer response (gathered
using CRM – explained later) into its system and comes up with a MPS (Mass Production
Schedule). Tait is connected to all its geographical regions using the ERP and real-time
information is available; whenever stock level reaches below safety stock, a replenishment order
is triggered and production takes place at Christchurch. The shipment to regions is done from

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stocks maintained at Christchurch and further production takes place simultaneously to replace
inventory levels.

Build-to-forecast:

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Besides VMI, Tait has also deployed Build-to-forecast (BTF) system. BTF, as implied by the
name, is a system in which the manufacturer performs a forecast of the future demand from the

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distributor. The manufacturer then manufactures a certain quantity of the product before the
distributor places an order with the manufacturer. When the order actually arrives, the
manufacturer sells items from inventory and can update his/her expectations of future orders

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(Robinson & Elofsen).

Enterprise Resource Planning:
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Tait Electronics is operating in various parts of the globe. It has classified those parts, sales
channels, in two categories:

 Subsidiaries
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 Dealer networks

If annual sales in a particular geographical region exceed $1 billion, then that region is upgraded
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to the level of a subsidiary. Else, the geographical region remains at the level of dealer network
and is managed through the regional headquarter of Tait Electronics. Subsidiaries operate in two
directions – they provide distribution services & product services to customers; market
intelligence and customer feedback to Tait’s headquarter. Tait, currently, has subsidiaries in 11
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countries and dealer networks in another 70. In order to manage such dispersed geographical
areas, Tait needs a system that has the ability to integrate all the dispersed regions into one. (Tait
Electronics – CANZ)

ERP stands for Enterprise Resource Planning. ERP is a system that integrates all the
vital operations & activities of an organization. ERP can be defined as: “A set of
integrated programs capable of managing a company’s vital business operations for an
entire multisite, global organization” (Stair & Reynolds 2006).

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Why ERP?

Tait has installed an ERP suit that is used to integrate its geographically dispersed regions into
one. The ERP helps regions all across the globe to see what and where Tait has got stock, what

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the status of production is and what’s in queue for production. When a region makes sales, the
sold items comes out from the stock levels of Tait and a replenishment order is generated so that
production is apt to maintain minimum stock levels. The correspondent at Tait gave the example

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of Europe; he mentioned that tonight when he’ll be going home, Europe will be making sales and
the sold items will come out of the stocks of Tait. The correspondent also mentioned that in case
of items that are sold quickly or on continuous basis, stocks are maintained at regions. When the

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sales of a region reach below safety stock levels, it triggers a replenishment order and shipment
is sent from Christchurch. Safety stock review is performed monthly.

Tait electronics, has implemented the ERP system at their workplace around the globe, as they
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have been operating in almost all the major regions: Asia, America, and Europe. The main
feature of the ERP implemented, which also proves to be the most crucial one, is the use of
forecasting models built in the system, to support inventory and procurement decisions.
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The method of forecasting for the company starts with the identification of relevant attributes
and then inculcating all of them in their best form to the model build in the ERP system, which is
then used to forecast for the next term. For the sake of forecasting, they divide the world in three
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major divisions: Asia, America, and Europe. Then for each of the division they find relevant
attributes and multipliers for forecasting (multipliers are relevant number by which the
forecasted figure will be multiplied or divided because this is the factor adjustment of the
holidays, promotions, ad campaigns or other discount offers in a specified region). The
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forecasted model will forecast a static figure for all the regions then separate distinguishing
effects with the relevant adjustments will be added to them to come up with the right figure. For
the sake of effective forecasting, the regions are further subdivided in their major retailers and
wholesalers in the relevant division.

The forecasting is the most crucial decision for a company, and most challenging for an
international company, in short. Tait, as being international company has to add multiple varying
factors in the forecasting, there are conditions when in one country there are holidays while other

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countries are having busy weekdays, or in one country some major event going on and in another
one just the routine life on the move. So they have to inculcate the effects of all the factors in the
forecasting to come up with the most reliable figures for divisions and further in terms of the
demand from specific retailer or wholesaler.

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They divide initially according to the regions, then they make tiers according to the product line;
each product has its own tiers because a product can be customized in a lot of ways, like mp3

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player can have different body or look in terms of color, size and other features. So they also
have to make forecasts for each tier of the product. They also face challenges in this highly
ambiguous future predicting procedure, which in turn can save millions of dollars for a company
in terms of inventory cost savings. The main challenge occurs when ad campaigns or coupons

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are on the move, like when these kinds of deals come in, they mostly offer that buy one product
and get accessory of your selection totally free, so they have to come up with the correct figures
of the products taken by choice of public as a free accessory.
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After making the forecasts of each product line of each region, they sum up the accessories
needed to order for the mass product line (MPL); the accessories needed to make products, this is
again the most crucial step because here they have to order the accessories which in turn will
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prove to be the originally demanded accessories. They claim 85 % of the original forecasting and
15% of the fault in the procedure, to cope with the situation they prefer to hold some form of
inventory. For this purpose they have also applied CRM at their place around the globe, they are
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open to the comments, suggestions, and claims of their customers from all over the world. They
believe that customer is a building block of their business. So they cannot afford any claim
which move the claimant away from the company, in terms of future sales, consequently they
have decided to afford some sort of inventory cost to reduce the risk of a claimant appearing or
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product shortage. (Interview)

After making the forecasts for years, months or a term (whichever the specified term is), they
have to come up with the right dates of shipments or orders from the retailer or wholesalers. So
they make a schedule with the name of BTO to come up with the right time, the company would
need to supply their products to different regions. The challenge here is, they have to make the
right schedule of products to be shipped to specified regions, because to manufacture those

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products they have to procure the accessories first at the right time without getting any
possibility of shortage.

Customer Relationship Management:

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CRM stands for Customer Relationship Management. A CRM is a system that is aimed at

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communication with the customer. A CRM system is used to manage all aspects of customer
encounters; namely: marketing and advertising, sales, customer service after sale, and programs
to retain loyal customers. CRM system also allows a firm to collect consumer data, contact
customers, educate customers about new products, sell products and get their feedback (Stair &

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Reynolds 2006).

Why CRM?
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Tait has also installed a CRM system to ensure effective communication with its customers with
minimal noise. In order to ensure healthy customer relationship, Tait tries to keep some extra
stock so that they don’t have to turn their customer down. Tait uses BTF and builds its inventory
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according to the forecast plus some excess reserves just in case the actual demand exceeds the
forecast. Apparently, it may seem as something minor but it in fact is a very major step. Tait
understands the value of customers and understands that it is pertinent to not say that “We are
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out of stock” if it wants to retain customers. In today’s global environment, the cost of retaining
customers as opposed to cost of attracting new customers is much lower and the payback period
of investment done to attract new customers is relatively longer; thus, the retention of customers
is essential to the successful survival of an organization. Tait has understood this very basic yet
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critical point and implemented a CRM system to facilitate communication with its customers.
Tait’s CRM system has two basic aspects; one aspect of Tait’s CRM has already been mentioned
– keeping surplus level of stocks; the other aspect is communication from customer side.
Customers are encouraged to contact Tait to inform the management about their perception of
the products, quality satisfaction, availability of product, ease of use, need of technical assistance
and alike via telephone or mail. Tait then incorporates the customer feedback into its forecasting
process to come up with better estimates. (Interview)

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Theory vs. Practice:

The management textbooks, journals, periodicals, blogs and other sources contain a lot of
information on the aforementioned systems and their advantages. Those sources explain how to

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select a system, how to implement and how to capitalize on it. It wouldn’t be exaggeration if I
say that the systems in place are a result of theory as in all fields of study, a concept is first
presented in theory before it is practiced. Furthermore, with the passage of time and

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advancement in research, different scholars modify the existing models and present better
versions of either the same models or new models that are free from pitfalls (or at least have less
number of pitfalls) that were present in earlier models. Now let’s examine what is the situation of

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Tait in comparison to the theory.

I’ve explained systems in detail that are in place at Tait; but, the question arises whether these
systems are according with the theory or they deviate from theory? The answer to this question is
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that systems at Tait deviate from theory. The reason behind this deviation is that in theory we can
assume Cetrus Paribus or in other words other things being equal; but, in reality things are
dynamic rather than static. The correspondent at Tait explained that when operating globally in
today’s environment, we cannot use static models as presented by theory; we need dynamic
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models that can absorb the ground realities so that forecasts actually help.
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Bridge gap between theory and practice:

In order to bridge the gap between theory and practice at Tait, the only feasible solution would
be to develop a theoretical model that is capable of being dynamic so that forecasts could be
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realistic. It will help Tait to remain competitive and help it to survive in such a global
environment. The world is moving very fast and in order to keep pace with it, we have to keep
our pace up to the mark, so that you do not stay behind the world. The competition is very stiff
and in order to remain on cards, it’s important to implement such dynamic model.

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Reference

 Stair and Reynolds. “Principles of Information Systems”, pg 49-50, 489, 421-423, 447-
448

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 Robinson & Elofsen. “Strategies for E-Commerce”. Pg 156-157

 Vendor Managed Inventory. Retrieved from: http://www.vendormanagedinventory.com/.
Retrieved at 21-09-2009

 JE Beasley.
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“Master Production Schedule” Retrieved
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from:
http://people.brunel.ac.uk/~mastjjb/jeb/or/masprod.html Retrieved at 20-09-2009
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 Interviews with Tait employee,(Date), Tait Electronic LtD; 175 Roydvale Ave,
Christchurch, NewZealand
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