FINAL SCM 300 EXAM 2 STUDY GUIDE BEST EXAM SOLUTION WITH POSITIVE RESULTS GRADED A+, Lecture notes of Business Systems

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FINAL SCM 300 EXAM 2 STUDY GUIDE BEST EXAM SOLUTION WITH POSITIVE RESULTS GRADED A+ Module 5: Concepts: • Waiting Line Theory: o Applies to service as well as manufacturing firms, relating customer arrival and service- system processing characteristics to service-system output characteristics o Service means the act of doing work for a customer o Service system might be hair cutting at a hair salon, satisfying customer complaints, or processing a production order of parts on a certain machine ▪ Tickets, trucks waiting to be unloaded at a warehouse are other examples Terms and Lists: • 4 Elements of Waiting Lines: o Customer Population: An input that generates potential customers ▪ If the potential number of new customers for the service system is appreciably affected by the number of customers already in the system, the input source is said to be finite. • Ex: Boeing ▪ A customer population is one in which the number of customers in the system does not affect the rate at which the population generates new customers is infinite. • Ex: McDonalds • Ex: Mail order operation o Because costumer population is so large and only a small fraction of the shoppers place orders at one time, the number of new orders it generates is not affected by the number of orders waiting for service ▪ Balking: One who decides not to enter the system • So slow, you want it but don’t want to wait in line ▪ Reneging: Leaves the system before being served • Trying to wait in line but realize it’s not worth it and you leave o A waiting line of Customers o Service Facility: A person (or crew), a machine (or group of machines), or both necessary to perform the service for the customer ▪ Number of Lines: Waiting lines be designed to be a : • Single Line: Utilized at airline counters, inside banks, and at some fast food restaurants o When multiple servers are available and each one can handle general transactions, single line arrangement keeps servers uniformly busy and gives them a sense of fairness • Multiple Lines: Utilized in grocery stores, at drive in bank operations, and in discount stores o Best when some of the servers provide a limited set of services o In this arrangement, customers select the services they need and wait in the line where that service is provided ▪ Arrangement of Service Facilities: Service facility arrangement is described by the number of: • Channels: One or more facilities required to perform a given service • Phases: A single step in providing the service o Examples of all the phases/channels combinations o Single Channel, Single Phase: All services demanded by a customer can be performed by a single facility ▪ Preemptive discipline—special rules (VIP) o Finite Populations: Few potential customers. Every customer in the store significantly decreases the chance of another customer arriving o Infinite Populations: Many potential customers. Odds barely affected by new arrivals. o Balking: so slow you want it but don’t want to wait o Reneging: trying to wait in line but realize its not worth it and you leave o Jockeying: “Line jumping”, one line to another if it looks shorter Puzzle Terms and Lists • Online Considerations: Like stores, first impression is important o Consumers spend less than 5 seconds at a web site first time visiting it o Online “rules” are constantly changing ▪ Keep content current: important to continually update information • Merchandise presentation • Merchandise description ▪ Make the site easy and enjoyable: users with little or no experience either online or with your product should be able to move around the site ▪ Structure an online community where consumers can interact with one another or contribute to the site’s content • Space Productivity: Represents how effectively the retailer utilizes its space and is usually measured by sales per square foot for selling space or gross margin dollars per square foot of selling space • Figure 13.1: o Visual Communications ▪ Retail identity, graphics, POS Signage o Store Planning ▪ Space allocation, layout, circulation o Store Design ▪ Exterior design, ambiance, lighting o Merchandising ▪ Fixture selection, merchandise presentation, visual merchandising o All lead to STORE IMAGE AND PRODUCTIVITY • Consumer Behavior: Supermarkets: o Place higher grossing/store products on right o Right is the most valuable area for the store with produce, deli, bakery o Grocers use most recognizable brand to lead off the prouct category Coke leads soft drinks o Dump displays, deliberately arranged mess so items look cheap o Deals • Increasing Space Productivity: The more merchandise customers are exposed to that is presented in an orderly manner, the more they tend to buy o Careful planning, the retailer can encourage customers to flow through the entire store o In store advertising and displays will let the customer know what’s happening in other departments o Retailers must incorporate planning, merchandise presentation, and design strategies that minimize shrinkage by avoiding hidden areas of the store • Floor Plan: A schematic that shows where merchandise and customer service departments are located, how customers circulate through the store, and how much space is dedicated to each department o Based around the predicted demands of stores targeted customer • Microretailing: Occurs when a chain store retailer operating over a wide geographic area, usually nationally, tailors its merchandise and services in each store to the needs of the immediate trading area o It is not uncommon for two Targets in the same city to be different both in merchandise carried and its presentation • Merchandise Placement: key strategic locations o Toys and movies are kid magnets and thus display snacks right next to them o Think of the age of the consumer ▪ Retailer should never put a child’s toy on top shelf or denture cream on bottom o Warehouse club is the exception o Toothpaste next to golf clubs and cereals next to computer tables not only increases impulse purchasing • Robert Kahn’s Theories o Ensure that in every aisle, a customer with a cart can comfortably pass another customer with a car without having to ask that customer to move o Make the restrooms the best in town so that a customer will never leave the store and rush ome to use the bathroom o Put at least one bench in each store, in the alcove ate the front door o In all large stores, install a coffee stand catty-corner from the snack bar so that customers can recharge themselves in order to spend more time and money shopping • Layout Types o Free Flow Layouts: a type of store layout in which fixtures and merchandise are grouped into free-flowing patterns on the sales floor ▪ Simplest type ▪ Encouraged to flow freely through all fixtures ▪ Small stores ▪ Provides cues as to where one department stops and another starts o Grid Layout: a type of store layout in which counters and fixtures are placed in long rows or “runs”, usually at right angles, throughout the store ▪ Supermarkets/drugstores ▪ True shopping layout, retail environments o Loop Layout: Is a type of store layout in which a major customer aisle begins at the entrance, loops through the store—usually in the shape of a circle, square, or rectangle—and then returns the customer to the front of the stoor ▪ Simple, powerful space productivity tool ▪ Benefit is that it exposes shoppers to the greatest possible amount of merchandise ▪ Easily see merchandise on left and right o Spine Layout: A type of store layout in which a single main aisle runs from the front to the back of the store, transporting customers in both directions, and where on either side of this spine, merchandise departments using either a free flow or grid pattern branch off toward the bck or side walls ▪ Based on a single main aisle ▪ Heavily used by medium sized specialty stores 2,000-10,000 SF ▪ Fashion stores • Interior Design: Finishes applied to surfaces and architectural shapes o All elements from floor to ceiling o Unpainted concrete floor conveys a low cost, no frills environment o Coor stained floor can convey a rustic yet sophisticated look and feel o Vinyl floor covering makes quality statement o Walls can be paint, wallpaper, or paneling o Moldings and ceinling must be considered too • Lighting Design: o Can greatly enhance store sales o Brighter lighting in a wine store also influences shoppers to examine and handle more merchandise o Raising lighting levels can actually discourage sales in fashion departments o Many retailers use too much outdoor lighting today Slides • A sales organization that wants to maximize sales now and into the future should consider… in other words, what are the ingredients/goals of a sales environment? o SELL, SELL, SELL, and then continue selling o Consider the customer/customer comfort level o Be well organized o Use the 5 senses, convenience factor, brand image, consistency, avoid shrinkage o Value—price, quality, speed, flexibility • How are these issues related to the supply chain and/or operations? o Product availability, logistics outputs, displays, layouts, services o Human resources, facility design, process design, information systems/technology o Efficiency, effectiveness, adaptability o Organizational concerns—materials management, logistics • Why are most grocery stores organized like the grocery store depicted in slide 41? What is the strategic plan behind the location of each item in the grocery store in slide 41? o Put the product/meat on the outsides—most expensive items o Dairy/bakery in the back so that customers walk all through the store to get daily foods o Smaller profit items in the aisle • How does restaurant layout impact nearly every aspect of the service experience? Consider the examples discussed in the lecture. o Restaurant layouts—Bar area in the front to order drinks while waiting o Smaller tables, easier to maneuver around the layout o Large, noisy, young groups in the back/sides of restaurant, out of the way o Typical time actually sitting at the table around 45 minutes in American chain restaurant • What’s the difference between revenue and non-revenue generating space? o Revenue generating space—generates as much profit as possible, how much money you make PSF o Non-revenue generating space—all places try to minimize this space- waiting space at front of restaurant is often very small • What are facilitating goods? Why are they important to the company and the customer? o Items that need to be kept in inventory to maintain operations—important to customer experience o Dry cleaners need hangers, plastic covers, cleaning supplies o Nice restaurants need nice plates, glasses, silverware, etc. • What is VMI? How can it benefit customers, retailers, and suppliers? o VMI: Vendor managed inventory—inventory planning and replenishment system where supplier accepts negotiated responsibilities that typically include monitoring and restocking o Value to vendor—customer is end priority, better understanding of partners needs o Retailer--fewer responsibilities, decreases costs o Vendor—better understanding of demand rates, fewer errors, responsive • Explain some of the challenges that companies that enter into VMI agreements must beware of? o Goal alignment o Process related, schedule related, people related o Performance and quality related metrics, motivation, reliability, consistency o IT compatibility, sharing concerns • What are the challenges of operating a global retail supply chain? o Module 6 Earth Book Concepts: • Lean Systems: Operations systems that maximize the value added by each of a company’s activities by removing waste and delays from them o UPMC used the CDI methodology to speed up turnaround time in the pathology lab o TO move to a system based on line flows, equipment was moved around the labe to create a cellular layout Earth “What is the Value of Each?” • Close Supplier Ties: Because lean systems operate with low levels of capacity slack or inventory, firms that use them need to have close relationship with their suppliers o Close supplier relations cannot be established and maintained if companies view their suppliers as adversaries whenever contracts are negotiated o Should consider suppliers to be partners in a venture, wherein both parties have an interest in maintaining a long-term, profitable relationship o A particularly close form of supplier partnerships through lean systems is the JIT II, which was conceived and implemented by Bose. o The in-plant representative is on site full time at the supplier’s expense and is empowered to plan and schedule the replenishment of materials from the supplier o JIT II fosters extremely close interaction with suppliers • Small Lot Sizes: Have the advantage of reducing the average level of inventory relative to large lots o Small lots pass through the system faster than large lots since they do not keep materials waiting o Small lots achieve a uniform workload on the system and prevent overproduction o Small lots can be juggled more effectively, enabling schedulers to efficiently utilize capacities • Quality at the Source/Jidoka: One way to achieve consistently meeting the customer’s expectations, is by adhering to a practice called quality at the source, which is a philosophy whereby defects are caught and corrected where they are created o The goal for woerks is to act as their own quality inspectors and never pass on defective units to the next process o Jidoka: Automatically stopping the process when something is wrong and then fixing the problems on the line itself as they occur o Separates worker and machine activities by freeing workers from tending to machines all the time, thus allowing them to staff multiple operations simultaneously • Uniform Workstation Loads: o Rationale behind airlines promoting weekend travel or red-eye flights that begin late in the day and end in the morning o Lean system works best if workstations are relatively uniform o Hospitals schedule surgeries in advance of the actual service so that the facilities and facilitating goods can be ready when the time comes o Can be achieved by assembling the same type and number of units each day, thus creating a uniform at all workstations o Takt Time: Cycle time needed to match the rate of production to the rate of sales or consumption • Standardized Components o UPS consistently monitors work methods, from sorting packages to delivering them, and revises them as necessary to improve service o Standardization of components increases the total quantity that must be produced for that component o Panasonic did this o Workers performer their tasks or work method more often each day o Help a firm achieve high productivity, low inventory objectives of a lean system • Flexible Workforce o Ability to shift workers among workstations to help relieve bottlenecks as they arise without the need for inventory buffers o Workers can step in and do the job for those who are on vacation or out sick o Relieves boredom and refreshes workers o More customized the service or product is, the great the firm’s need for a multiskilled workforce • Automation o Key to low cost operations o Money is freed up because of inventory reductions o Greater profits/market share o Provides big role for lean services o More is not always better Puzzle Concepts • Process Integration: Sharing information and coordinating resources to jointly manage a process o Key processes must be coordinated, shared, or integrated among the supply chain o Remains a significant problem for many organizations o Can be extremely difficult because it requires proper training and preparedness, willing and competent partners o Benefits are reduced supply chain costs, greater flexibility, less safety stock, higher quality, reduced time to market, better utilization Puzzle Examples • ViewSonic o They say the company’s adoption of the Gentran Integration Suite helps keep close relationships, as well as ViewSonic’s balance sheet, intact o Key feature if GIS is the centralized partner-management capability, which delivers a single interface for ViewSonic employees to monitor business processes and navigate reports and statistics in near real time o ViewSonic, rather than focus on the underlying technology, it can tie different systems together, model processes, and focus on refining business issues o GIS enabled ViewSonic to establish a fully automated order to cash process o Allows near real time purchase order modification, shipment notification, and electronic invoicing • Solectron o The Kinaxis supply chain visibility capability, called RapidResponse, is dubbed a “glass pipline” by Kinaxis CTO o Essentially an ERP diagnostic series of data feeds from along the supply chain—drawing together information such as inventory levels, work in progress, forecasts, outstanding orders, and backlogs o The collaborative relationship that RapidResponse enables between Solectron and its customers is a close one o The greater the scope of solution—in terms of the customer-supplier linkages that Solectron embraces—the greater the resilience to supply chain stocks • Wal-Mart o Partnered with Carbon Disclosure Project on a new program to audity the energy consumption and carbon emissions of seven product categories throughout their supply chains, including the manufacturing and distribution of consumer goods o Companies are interested in the green supply chain and sustainability is that they realize it is an expense o Companies reduce their packaging by 5% and Wal-Mart saved $3.4B o Wal-Mart is doubling the fuel economy of its trucks to save 60 million gallons by year 2015 and has pledged to make its stores more energy efficient by cutting electricity use by 20% Puzzle Terms and Lists • 8 Supply Chain Business Processes o Customer Relationship Management: Provides the firm with structure for developing and managing customer relationships ▪ Over time, relationships with key customers are solidified through the sharing of information, the formation of cross company teams to improve product design, delivery, quality, and cost, the development of shared goals, and improved performance and profitability for the trading partners o Customer Service Management: Provides information to customers while also providing ongoing management of any product and service agreements between the firm and its customers ▪ Adequately respond to product delivery failures and complaints, and to utilize the most effective means of communication to coordinate successful product, service, and information ▪ Shipping dates, order status, administering product/service agreements o Demand Management: Balances customer demand and the firm’s output capabilities ▪ Forecasting demand, and then utilizing techniques to vary capacity and demand within the purchasing, production, and distribution functions ▪ Determine how to synchronize demand and productive capacity ▪ Contingency plans must also be ready for use when demand management techniques fail o Order Fulfillment: Set of activities that allows the firm to fill customer orders while providing the required levels of customer service at the lowest possible delivered cost ▪ Meeting customer requirements by synchronizing the firm’s marketing, production, and distribution plans o Manufacturing Flow Management: Set of activities responsible for making the actual product, establishing the manufacturing flexibility required to adequately serve the markets, and designing the production system to meet cycle time requirements ▪ Determining manufacturing process requirements to enable the right mix of flexibility and velocity to satisfy demand ▪ To be effective, manufacturing flow management activities must be interfaced with the demand management and CRM processes o Supplier Relationship Management: Defines how the firm manages its relationships with suppliers ▪ Activities in this process include screening and selecting suppliers, negotiating product and service agreements, managing suppliers, and then monitoring supplier performance and improvement ▪ Managing product and service agreements with suppliers; developing close working relationships with suppliers o Product Development and Commercialization: Responsible for developing new products to meet changing customer requirements and then getting these products to market quickly and efficiently ▪ Activities include, customer feedback mechanisms, the formation of new product development teams, assessing and selecting new product ideas based on financial impact ▪ Developing new products frequently and getting them to market effectively; integrating suppliers and customers into the process o Returns Management: Beneficial for the supply chain management in terms of maintaining acceptable levels of customer service and identifying product improvement opportunities ▪ One goals of this is to reduce returns accomplished by communicating return and repair information to product development • Obstacles to Integration: o The Silo Mentality: “I win, you lose” can be evidenced when using the cheapest suppliers, paying little attention to the needs of customers, and assigning few resources to new product and service design ▪ Car company Rover used this ▪ Lack of internal or external collaboration will create quality, cost, delivery timing, and other customer service problems that are detrimental to supply chains ▪ This is the most significant obstacle to overcome ▪ “Best Practice” for one company not ideal for another…tends to be a Pull oriented (Demming created it) o Primary Goals of JIT: ▪ Minimize inventory ▪ Eliminate all types of waste: Quality control, 7 types of waste o Essential Elements of JIT ▪ Open communication flows required ▪ Intelligent and flexible human resources required ▪ Continuous improvement culture • Why is “traditional” JIT such a good fit for Japan? Why does JIT need to change for each location? o Japan is always working together (teammates—even in American teams, we split up the work and do it ourselves o Not a lot of space to hold inventory in their country • How are the drawings used in lecture helpful in understanding the trade-offs of each strategy depicted? o The drawings show the order in which manufacturing happens based on each system • Understand how Time, Flexibility, Quality, and Cost are traded in any supply chain strategy. Understand how you can positively impact either Time, Flexibility, Quality, or Cost in designing/managing a supply chain. o Time: amount of automation, maximum output/capacity required, line balancing, bottlenecks, lead times o Flexibility: Volume flexibility vs customization flexibility, ▪ Automation and/or workforce capabilities… POSTPONEMENT o Quality: consistency and high performance—training, automation ▪ Jidoka: everyone is responsible for quality o Cost: Inventory, defects, loss, damage, labor, facilities, packaging… ▪ Product, service, support system • Postponement o Delays the final assembly of the end item, allows some degree of customization speed and customization o Relationship to the: ▪ Push system: it’s a push system through the standardized portions of manufacturing • Work in Progress ▪ Pull system: it’s a pull system only the customization options offered to customers • Components o Costs: inventory, defects, loss, damage, labor, facilities • How can shrinkage and other operational shortcomings cause inefficiencies? o Shrinkage inefficiencies start at the front of the supply chain and move back progressively, losses carry through rest of the supply chain • Be able to calculate the number of items required to account for losses throughout the supply chain? o Slides 22-24 • Pros and Cons of centralizing warehouses o Pros: ▪ Lower required stock levels, less likely to stock out, warehouse operating costs decrease o Cons: ▪ Distance/responsiveness, transportation costs • Understand the square root rule • Bullwhip Effect—Define/explain. Causes. How can it be minimized? o Very high and very low supply levels despite fairly constant demand levels Module 7 Concepts: o Causes ▪ Poor forecasting, analysis, communication ▪ Order batching—trying to place large orders ▪ Price fluctuations—promotions, quantity discounts, special pricing/payment options ▪ Rationing—demand higher than supply, promotes rationing on part of “distributor”, “retailers” may get less than ordered ▪ Shortage Gaming—retailers inflate order sizes to counteract rationing o Beer Game example • Global Sourcing: The procurement of products or services from independent suppliers or company- owned subsidiaries located abroad for consumption in the home country or a third country o Entry strategy that involves a contractual relationship between the buyer and a foreign source of supply o Low control strategy in which the focal firm sources from independent suppliers through contractual agreements o Four key drivers responsible for global sourcing growth ▪ Technological advances, internet connectivity ▪ Declining communication and transport costs ▪ Widespread access to vast information between suppliers and customers ▪ Entrepreneurship and rapid economic transformation in emerging markets Examples: • Drug Trials: Nearly 40% of clinical trials for new drugs are now conducted in emerging markets such as China and Russia o Pfizer increasingly prefer emerging markets because of these advantages ▪ Lower costs for recruitment of physicians and patients ▪ Large potential patient populations ▪ Diversity of patient populations ▪ Less likelihood of patients taking other medicines that would interact with their study o Testing in emerging markets greatly reduces the costs o In a poor country with a bad medical system, patients consider the trials a way to medical treatment o Offshoring of clinical trials raises questions about ethics and oversight o Emerging markets lack the resources the FDA normally requires o Some drug trials do not receive adequate attention from ethics review committees o Pharmaceutical firms are increasing their outsourcing of drug trials • Global Trend: China: India is the world’s leading offshoring destination o India is popular for software development and back office services o China’s history as a supplier to the world is longer o China is the center of manufacturing for many Western firms o China aims to surpass India in services outsourcing and the Chinese govt is making huge investments to upgrade worker training and the quality of its facilities o China’s three major advantages: ▪ Home to a large amount of skilled, low cost labor, graduates 350,000 engineers every year ▪ China has a huge domestic market with rapid and sustainable economic growth ▪ The attitude of the government, long an obstacle to foreign firms, is increasingly pro- business o Pitfalls are: ▪ Weak in intellectual property protection ▪ Language and culture that firms find challenging ▪ Lacks quality infrastructure Terms and Lists: • Outsourcing: The procurement of selected value-adding activities, including production of intermediate goods or finished products, from independent suppliers o Outsource those products that are peripheral to the firm’s main offerings o Outsource because firms are generally not superior at performing all primary and support activities o Outsource when offerings can be obtained at a lower cost, or can be provided by suppliers specialized in providing the specific offerings • Business Process Outsourcing: The outsourcing of business functions to independent suppliers, such as accounting, payroll, human resource functions, IT services, customer service, and technical support o BPO can be divided into two categories: ▪ Back office activities: internal, upstream business functions such as payroll and billing ▪ Front office activities: downstream, customer related services such as marketing or technical support • Captive Sourcing: Sourcing from the firm’s own production facilities located abroad o Production is carried out at a foreign facility that the focal firm owns through direct investment • Exhibit 2 Value-adding activity is internalized Vallue-adding activity is outsourced Value-adding activity kept in home country A Keep production in house, in home country B Outsource production to third party provider at home Value adding activity conducted abroad (global sourcing) C Delegate production to foreign subsidiary or affiliate D Outsource production to a third- party provider abroad (contract manufacturing or global sourcing) • Contract Manufacturing: AN arrangement in which the focal firm contracts with an independent supplier to manufacture products according to well-defined specifications o In a typical scenario, the focal firm approaches several suppliers with product designs or specifications and asks for quotations on the cost to product the merchandise, accounting for cost of labor, processes, tooling, and materials o Especially common in the apparel, shoe, furniture, aerospace, defense, computer, semiconductor, energy, medical, pharmaceutical, personal care, and automotive industries. o Allows firms to enter target countries quickly o Advantage is focal firm can concentrate on product design and marketing while transferring manufacturing responsibility to and independent contractor o Drawback is limited control over supplier • Offshoring: The relocation of a business process or entire manufacturing facility to a foreign country o Especially common in the service sector, such as, banking, software cod writing, legal services, and customer service activities o Indian firms cut legal bills b y75% o Wages are a huge advantage o HR, accounting, finance, marketing, customer service are candidates for offshoring, as long as their performance by independent suppliers does not threaten the firm’s core competencies • Jobs easy/difficult to offshore o Easy ways to offshore: ▪ Large-scale manufacturing industries whose primary competitive advantage is efficiency and low cost ▪ Industries such as automobiles that have uniform customer needs and highly standardized processes ▪ Service industries that are highly labor intensive, call centers ▪ Information based industries that can be transmitted via internet (accounting) ▪ Industries such as software preparation, whose outputs are easy to codify and transmit over internet or telephone, (customer service) • Dynamic markets, foreign market vulnerabilities • Contractual obligations • Aligning corporate goals—Supply Chain Vision o External Partners ▪ Focus on core competencies ▪ Resource utilization ▪ Lack of Expertise • What are some of the complications with procuring services? o Buying intangibles—what to outsource? o Risks—customer, quality, technology, legal o Supplier selection-Who? Where o Different from procuring tangibles? • What are the SCM related positives and negatives associated with choosing different expansion strategies? o Understanding the customer, understanding market trends ▪ Product and service needs ▪ Culture—shopping preferences, advertising and marketing preferences o Expansion ▪ Export, acquisitions, wholly owned ▪ Partnerships—by choice? Forced? o Management structure—hierarchy, control, motivation o Design ▪ Global design-one product for everyone (not likely, countries have different standards) ▪ Local product design—designed altered for market • What companies gain/save or lost by designing products in other countries? o Gain/save: specific designs for market, local designers understand the market/culture, cheaper o Lose: some control, intellectual property/trade secrets • What are some of the challenges of procuring products and services at the global level? o Understanding the risks/trade-offs o Certifying suppliers, maintenance providers o Certified 2nd tier suppliers o Developing/maintaining partnerships o Understanding legal/financial issues o Difference between purchasing materials and services • What were some of the general lessons learned from the procurement perceptions study discussed in class? o Information about companies importing goods is necessary • What is CPAT? Based on lecture—discuss value of program to companies and US Government, their 3 tier system, what are the difficulties associated with volunteering for program: o CTPAT=Customers Trade Partnership Against Terrorism—Security ▪ Corporations assume responsibility for their supply chains ▪ Voluntary program with benefits for participants ▪ Date mining program with 100+ data elements ▪ Low cost + Low security=Late shipment + Higher cost o Three Tier System ▪ Tier 1-Must perform risk analysis-take steps to control/improve weakness ▪ Tier 2—Validated Tier 1 findings by US Customs ▪ Tier 3—Green Lane—Follow supply chain best practices o Challenges/Considerations ▪ Attest to SC members’ security ▪ IT Issues—Cost to integrate IT System, sharing info with govt. ▪ HR Issues—Background checks, training, education • What types of companies are most likely to be hurt by increases in the cost of oil? o Retailers—Wal-Mart, Target o Heavy and bulk items—higher shipping costs, capital investments cost o Fresh produce o Companies using JIT/lots of small shipments o American retailers trying to capitalize on weak dollar • Why are American companies considering importing products via Mexican ports? Challenges using a Mexican port strategy? o Lazaro Cardenas Port ▪ Containers nonstop, always backed up ▪ Cheaper/faster through Mexico o More affordable and dependable workforce o US Govt working on “no hassle” imports from Mexico o NAFTA o Saves almost 2 days o Challenges—port is small, cannot accommodate/process many TEU’s • Some of the logistical Challenges in China and India o China ▪ Provincial differences • 23 Chinese provinces fiercely competing for work • Complicated web or paperwork, laws • On the spot Ex Post Facto Laws • Trucks blocked from entry ▪ LTL shortage • DHL/UPS companies are rare • Online/catalog companies difficult to operate • JIT operations challenging, overnight shipments challenging o India ▪ Growth of Retail • At least 25% of India is middle-class buying class is entire size of US • Demand for consumer goods increasing ▪ Logistical challenges • Insufficient distribution channels • Limited physical infrastructure, over burdened ports • Traffic • What are the challenges to managing a global supply chain? How can you beat or meet these challenges? o Challenges—disruptions, quality, financial, forecasting, responsiveness, sustainability, expansion, corruption o Conquering challenges—communication, monitoring, good fundamentals Cases: CASE: Mattel and the Toy Recalls Earth: 163-171 1. Discuss Mattel’s Global Manufacturing Principles. a. “designs, manufactures, and markets a broad variety of toy products worldwide through sales to its customers and directly to consumers” b. Mattel Girls and Boys Brands (Barbie) c. Fisher Price Brands ( Dora, Sesame Street, etc) d. American Girl Brands e. Buy rights and contracts with Core Brands- Disney, CARS, etc f. POS-point of sale data to forecast demand for toys 2. Briefly describe the US toy industry/market. a. 35% of global market concentrated in North America b. About 880 toy companies operating in 2002, going down since 1997 c. Dominated by Mattel, Hasbro, RC2, JAAKS, Pacific, Marvel, Lego d. Wal-Mart and Target take over as largest place to buy toys, Toys R Us steady decline, sell their own brands e. Toys categorized in many different segments- puzzles, infant toys, action figures, crafts, building sets, sports, etc f. KGOY-kids getting old younger g. Major growth in youth electronics h. Production concentrated in Asia, China- 86% of toy imports from China i. Safety of toys managed by: Consumer Product Safety Commission- consumer products, from microwaves to cribs to lawn mowers i. CPSC collects information about safety of products 3. Be able to discuss Mattel’s basic supply chain structure from design to retail. In general, who was responsible for what? Core brand vs. non-core brands. a. Core Brands produced in company-owned facilities b. Non-Core Brands- used 3rd party manufacturers to c. Supply Chain for Toys i. Design team created bid package with new products blueprint/physical model ii. Mattel assumes responsibility for cost of tooling iii. Vendor produces units iv. Engineering Pilot v. Final Engineering Pilot vi. Production Pilot vii. Production Start-begins if toys meet all other requirements 4. How did the lead paint incident occur? Who were the primary parties involved? a. Company that usually supplies paint was out that time, so an order was placed with a supplier not on Mattel’s approved list, paint was contaminated b. June 2007- report from consumer that home test kit found excessive lead c. July 6- Mattel does its own sample, finds 3/5 lead positive-manufactured by Lee Der d. July 12-Notify corporate headquarters e. Bad yellow paint came from different supplier than normal f. Mattel normally requires contracts with vendors that the suppliers must meet safety standards-list of qualified vendors g. Aug 2- issue recall h. Toys pulled off shelves 5. Why are recalls so problematic for companies? a. Major logistic challenges b. Regulators tend to push company to ensure that recall is issued, but products actually IN consumers hands are returned c. Often viewed as admission f guilt and open company to litigation d. Damage reputation of company and result in increased costs, lost sales, bad stock price CASE: Rapid Fire Fulfillment o Preferential buying, incentives o Companies had to beet certain requirements • What are some of the challenges Starbucks face in implementing Café practices? o Poor information systems in poor countries—hard to effectively communicate information to them once it is updated Slides • While the definition of social responsibilities differs from person to person, according to SCM 300 what might constitute a SR firm? o Legal and ethical—practices and attitude toward customers/associated o Community—committed to programs and practices that benefit society o Environmental sustainability—earth friendly business practices • Arguments for behaving in a SR manner? o Responsibility as a local citizen o Avoid legal issues, government regulations o Public relations o Unstable political situations could pose risk to company o Impending resource shortages—population/growth market o Increased profits, lower costs • Ties between SR and SCM? o Socially responsible supply chains ▪ Eliminate waste ▪ Proliferation of legal and ethical business practices ▪ Improve quality of life save lives o Socially irresponsible supply chains ▪ Customer related issues ▪ Business partner related issues-buyer/seller ▪ Labor, culture, country, environmental issues • Barriers to/arguments against companies acting in a SR manner? o Lack of knowledge and education o Lack of effective/accepted measurements o Perception vs. Reality o Scrutiny by media/special interest groups o Long and complex chains of partners/suppliers • Ethical issues that global supply chains confront? o Legal/Ethical issues ▪ Product and customer related—quality, safety, environmental impact • Mattel, Firestone, Dog food, cars, airplanes, batteries ▪ Supplier • Relationships-treatment of partners/suppliers • Partners labor and other business practices • Prices paid for materials • Corruption, bribery, collusion • Processes used to develop, acquire materials • DeBeers, Microsoft, Wal-Mart, Nike ▪ Logistics—environmental issues—pollution, landscape ▪ Manufacturing and Labor related issues • Hiring practices, illegal works, children, wages, religion • Work conditions—safety, health, hours, labor unions • Environmental impact—toxic emissions • Closing and relocating facilities • Nike, Wal-Mart, car manufacturers • Issues faced by developing countries that SCM can help improve? o Issues and problems: ▪ Corruption, black market, counterfeit drugs ▪ Procurement—purchasing drugs at lower prices ▪ Distribution—lack of infrastructure ▪ Lack of supply chain consistency o SCM solutions ▪ Procurement and distribution expertise ▪ Relationship management ▪ Logistical coordination ▪ Develop infrastructure—channels of distribution ▪ Security expertise • Supply chain challenges faced by humanitarian organizations? o Stakeholders—victims, organizations, governments, volunteers, donors, businesses, media • Why is the supply chain a logical place to look to when trying to “green up” a company? o Supply chains want to eliminate waste, be more effective o Minimize noise pollution, radioactive waste o Employee and customer safety o Goals of sustainability and supply chain are very similar • Define sustainable development/design. o Sustainable development: development that meets the needs of the present without compromising the ability of future generations to meet their own needs • Basic definitions for the environmental terminology discussed in lecture. o Renewable Energy Sources: ▪ Solar—photovoltaic, wind, hydraulic ▪ Bio-fuel plants, vegetables ▪ Landfill Gas Energy—anaerobic digestion—sold as energy o Triple Bottom Line: attempt to balance economic, social, and environmental concerns o End of Pip Solutions: Solutions geared at dealing with the outputs of traditional supply chain—disposal, recovery, recycling, conservation—what to do with product at the end o Cradle to Grave: Design products and services with only the useful life of the product/service and its materials in mind o Cradle to Cradle: ecologically intelligent design that considers not only useful life of product but also recovery, disposal, and refuse of materials and components that make up the product • Why should companies consider developing sustainable supply chains? o Common Business practices ▪ Traditional supply chains and products are not sustainable ▪ Risk of litigation, fines, penalties ▪ Impending regulation ▪ Profitability, productivity, minimizing waste o Global Trends ▪ Population trends and energy consumption trends ▪ Resource related trends ▪ Global political issues that might affect business ▪ Environmental idealism—pollution ▪ Economic opportunities in renewable energies • Be able to discuss the shortcomings of traditional environmental programs. o Reduce—conservation of electricity, water, fuel ▪ California electricity example o Reuse- use, recover, use again ▪ Packaging, materials, products o Recycle- use, process, reuse ▪ What can be recycled o Landfill- use and dispose o Wait for Government Act-legislation and regulation o SRP example, Wal-Mart Sustainability Index • Discuss how each supply chain function has a stake in defining the sustainability of the organization: Materials management, operations, logistics, reverse logistics, human resources… o Supply Management ▪ Purchasing—buy only what you need ▪ Efficiency during production—be resourceful, use everything you buy o Operations and production management ▪ Eliminate waste ▪ Minimize emissions ▪ Human resources—job safety, satisfaction o Logistics, shipping, distribution ▪ Fuel consumption, avoid traffic congestion ▪ Storage requirements—real estate, energy to maintain building ▪ Reverse logistics—packaging disposal, pickup o Packaging-design and planning ▪ Materials used, minimize storage ▪ Size, shape, weight—fuel and storage o Develop unbiased system of metrics ▪ Comprehensive but easy to use ▪ Managerial guides, point to corrective actions ▪ Aligned with corporate goals ▪ Comprehensive life cycle and SC analysis o Improved Accounting Systems ▪ Accounting department has financial proof of waste, how profits go up from eliminating waste • What are some options for companies seeking to become green? Be able to discuss how that program can help companies develop a more successful and sustainable supply chain. o Rethink design and strategy ▪ Integrate values of customers, organization, partners ▪ Green design should mean profits, cost controls ▪ Waste elimination—consider disassembly, recycling, reuse ▪ Triple bottom line thinking—build good things