Down But Not Out

Posted on June 2, 2013June 2, 2013 by spr1324vvolpe

After a rough couple years, Best Buy is struggling to stay afloat like many other electronic stores. Other stores like Circuit City have closed there doors for good and it seems like Best Buy is struggling to be the company they once was. People like the convenience of shopping online and it is really affecting a lot of Best Buy’s business. To deal with this decrease in sales, Best Buy has had to close a few stores. Despite the decrease in sales this quarter, the company is very optimistic about their future as well as there current forecasts. In this first quarter of 2013, Best Buy announced that their sales were very close to their forecasts. Their stock is up over 126% this year and they rank 3rd on the S&P 500’s best stocks of 2013.

Can Best Buy survive unlike the other failing electronic stores? Online shopping keeps becoming a bigger phenomenon and I think that it is going to affect Best Buy in a negative way. People aren’t reluctant to go the store to buy electronics when it can be just a click away at home. I think that Best Buy’s customer service rating is also another reason why they are struggling. Their profit from continuing operations was down over 54% this past year. That being said, Best Buy is still open and are still doing over 10 billion dollars of sales every year. Best Buy has also been making a lot of operational changes in each one of their stores. They have continued to remove wasteful processes as well as trying to re-position their brand so that they can be more competitive with online shopping. They have also implemented a price-match guarantee so that they can stay competitive with companies like Amazon. Their forecasts have also been very accurate which is definitely a plus for the company. Their sales are down in the past few years but since there forecasts have been so spot on, there aren’t really any surprises in the sales numbers. Best Buy continues to fight and claw its way back up to the top where they sat for many years. I think the only way they will be successful again is if they improve the online shopping aspect of their company.

Is Best Buy a company you would feel comfortable investing in? Their stock price has been doing great so far in 2013, but do you think in the upcoming years they will continue to grow? Many other electronic companies have failed in the past, is Best Buy too big to fail at this point? Is online shopping going to completely take over all electronic stores? The future is very uncertain for Best Buy. However, they do seem like they are headed in the right direction.

http://money.cnn.com/2013/05/21/news/companies/best-buy-sales/index.html?section=money_topstories

Betrayal: Apple’s Ditching Long-Term iPhone Assembler

Posted on June 2, 2013October 26, 2015 by spr1314jschild

During the last several years, your iPhone’s and iPad’s have been assembled and manufactured by Foxconn, a company that has been afflicted by reports of poor labor conditions. Apple and Foxconn have had a strong relationship in the past; with Steve Jobs and Terry Gou, Foxconn’s CEO, being close and Tim Cook also knowing him before starting at Apple. Due to this developed relationship, and being a firm that is constantly in the spot light, Apple has experienced back lash from activists trying to bring the labor rights issue into the public eye.

However, the Wall Street Journal recently published an article highlighting Apple’s change of heart. Pegatron Corporation will take the reins from Foxconn and become the primary assembler of the iPhone that is expected to launch later this year. If this is in fact because of the negative publicity that Apple has been a target of, one can only speculate. In January 2012 though, it is worth noting that “Apple became the first technology company admitted to the Fair Labor Association.” Apple will still contract with both firms to assemble products, but it is a move that could help mitigate the flack that Apple has received regarding labor rights.

Conversely, it could be a move to simply improve their supply chain. Although it is true the fewer assemblers lead to better, stronger relationships, relying on several would increase the competition between assemblers and possibly reduce Apple’s costs. Additionally, greater diversification at this stage in the supply chain would reduce the risk that comes with relying on one or a few companies. For example, Foxconn experienced manufacturing issues last year that resulted in scratches on the casings of the iPhone5. Depending on several firms to assemble your products reduces the number of those with defects; thus, containing the issue to a small number of products.

Regardless of the reasoning behind Apple’s switch to Pegatron, it is obvious that it will have positive effects on the company. Shrinking their business with Foxconn will help separate them from the negative publicity regarding labor conditions, while diversifying their supply chain will help reduce risk and costs. But, could this hurt Apple? Could separating from Foxconn, a global leader in its business, to a smaller company hurt their supply chain in the long term?

Sources:

http://online.wsj.com/article/SB10001424127887323855804578511122734340726.html

http://www.apple.com/pr/library/2012/02/13Fair-Labor-Association-Begins-Inspections-of-Foxconn.html

Sears’ CEO Plan For Turnaround

Posted on June 2, 2013 by spr1324gyang

In February, Edward Lampert became the Chief Executive of Sears Holdings Corporation. Prior to taking this position, he was their longtime chairman and the founder of the large hedge fund, which is the largest investor in the company itself. Over the recent years, the department store, Sears, is one of the many retail stores who have been experiencing a decrease in profits. When Lampert took the position, he mentioned his plans to increase sales and customer visits. He plans included changing the company by accommodating to “hyper-connected shoppers with tablets and mobile phones.”

BearSearsPA_main_0723

The first change included giving iPads to the employees. The company is in the process of developing an app that would allow their customers to ask the employees questions directly through the text or instant messages. The second service added include allowing third parties to sell their products on their online website, otherwise known as Marketplace, which is similar to Amazon. They also reduced the shipping times for online and ship-to-store orders. Lastly, Sears created their “Shop Your Way,” program where they are able to track how their customers’ shopping patterns.

Even with these added services, Sears, unfortunately, still reported a loss of $279 million dollars in the last quarter. This caused their shares to decrease by 14%. Some of the reasons that may relate to this loss include:

In 2012, Sears’s investments in upgrading the company are far less than other retail stores.
Sears is “behind in terms of their technology.”
Sears is unsure of what they can use their available space for.
Lack of interest from consumers.

The article mentioned Warren Tracy, CEO of Almost There! Inc. and his experience with Sears’ technology. He said that it took him about five months trying to become a third party seller on their website. During this process, he faced many complications and delays. Technology is an important part of Operations Management as it impacts performance directly. More importantly, technology is needed and used in all stages of management. Poor technology will lead to poor management, which will lead to poor performance. Therefore, the company will suffer as a whole.

Overall, it seems like Sears’ plan of creating a shopping experience that accommodates hyper-connected shoppers didn’t work out like planned. Even Mr. Lampert said that the company’s results for the first fiscal quarter were unacceptable. On the brighter side, I look forward to the new app Sears is developing in hopes of making my shopping experience faster and easier.

Do you think that Sears is heading in the right direction to repair their lack of sales? What changes will you implement if you were able to decide? Have you shopped at Sears recently? If so, did you notice these changes? If not, did these changes capture your interest and convince you to shop there more often?

Source:

The Wall Street Journal

“At Sears, CEO’s Tech Focus Hasn’t Led to a Turnaround”

Kapner, Suzanne. Wall Street Journal (Online) [New York, N.Y] 28 May 2013

Under Armour looking to be BIGGER and BETTER!

Posted on June 2, 2013 by spr1314bwashington

Under Armour is one of the newer brands of athletic apparel and are well known for their “moisture wicking” shirts. They are adjusting their plans and goals to increase their sales. North America has been their major contributor to their sales. Their toughest competitors are Nike and Adidas, which both generate at least 59 percent of their revenue outside of North America. Under Armour’s sales outside of North America is only 6 percent, with a new strategy they will increase their sales internationally.

Under Armour has noticed the need to improve their sales outside of North America and have hired a market manager to focus on their international sales. Analysts suspect that Under Armour will introduce their new products at the 2016 summer Olympics held in Brazil to gain international awareness and support. Their competitors have also use this strategy in the past with successful results. The Olympics could be the perfect stage for Under Armour to introduce their products because they are different from their competitors’ products. The Under Armour selection of products are known for their moisture wicking and light weightiness.

The strategic importance of location is definitely being recognized by Under Armour. If their products is on trend, the summer Olympics could have great sales. Location, cost, and innovation will be a major factor in deciding where to place their products at the Olympics. The location is great and well tested. Costs of shipping their products to Brazil will be pricy but has greater sale benefits. Innovation is something Under Armour has in abundance since they are such a young company, they have the ability to be creative.

The Under Armor President said that they have focused on their supply chain to ensure they can deliver their product more widely. They are prepared for the influx in sales internationally. This is a good sign because they are prepared to last, in the long run, and deliver their products across the world.

Expansion of the Under Armour brand will include yoga fans, women, and sports bras. Designing new products in many different areas will be tough but if they can produce a new trendy design people will notice. Under Armour has the ability to be a major competitor in the athletic apparel industry. Right now, they are only 2.5 percent of the athletic apparel market. Success of gaining new customers at the Olympics will make Under Armour a major contender in the athletic apparel industry. With such a huge number of people taking notice of their product, their sales have the ability to by far surpass, their current number, 6 percent.

Is Under Armour spreading themselves too thin by focusing on growing too many different products? Will the Summer Olympics be a good stage for Under Armour to reintroduce themselves to the international market?

Source: http://online.wsj.com/article/SB10001424127887324866904578515513925827852.html?mod=WSJ_hp_EditorsPicks

Inventory Management

Posted on June 2, 2013October 26, 2015 by spr1314pthakkar

Nike being such a major, successful company, they have even had their fair shares in facing problems. They had some major inventory management problems and had lost about a total of $100 million in sales. As Nike, and many other companies have learned, inventory control can be a difficult thing to handle.

Due to this occurring, Nike was able to develop a much improved inventory management solution to solve all of their problems promptly:

In 2001, Nike updated their inventory management software which purpose was to help predict which products would sell the most which can therefore help the company prepare the correct amount of supply to meet their demand. The company, like most other major companies, would first figure out a demand quota that they must meet and start manufacturing products.

To come to a number figure for a product’s demand, the company must look at data from historical sales of different products. Based on market growth estimates, Nike, as well as other companies, would be able to forecast a demand number for different products. This figure is next used to determine reorder points, optimal inventory levels, material lead times, etc. The numbers produced by the inventory management software determines the entire manufacturing plan for months at a time.

However, in Nike’s condition, the software program had some major issues, such as: bugs and data error, which ended up in incorrect demand forecast. The figures that were produced by this software were way under-determined, so that made the Nike Company make a shortage of certain products that consumers were very interested in buying. On the other hand, they overproduced other products that consumers were not as interested in. This resulted in a huge loss of sales that added up to the millions.

Nike’s situation shows other companies and the public how critical it is for a company to manage their inventory system, no matter how big or small their business is. When choosing software or an inventory management solution, it is very important to check the quality of the software that their vendor is providing. It is also important for every business owner to double check their data, especially if they cannot endure an enormous loss in sales.

This article talks about the activity we did in class the other day. The activity was called Past Demand for Big Game (cases per week.). In class, we had to estimate demands for that week and then make sure we did not under order or over order because then it was going to cost us a lot of money. That is what Nike had to do in this article; they under ordered their demand dramatically. This shows us that even big companies like Nike have trouble guessing their dammed for particular items.

Hog-wild for Factory Farming: Hot Dogs Made in China

Posted on June 2, 2013 by spr1324rzieman

As the Chinese population and economy continue to grow, safer and more efficient industrialization practices are necessary to keep up with the demands of a hot dog hungry China. This is not an exaggeration as China is “the world’s largest consumer of pork.” A recent takeover of Smithfield Foods by Shuanghui Holdings Ltd., “China’s biggest meat processor,” will provide valuable insight into industry practices that are commonplace in the U.S. Current processing methods in China lack quality control as the majority of meat is produced by small farms that process less than 500 hogs per year.

These “conditions on smaller farms can be squalid, with a lot of physical contact between farmers and animals, which can transmit disease.” This type of environment can become a breeding ground for contamination leading to outbreaks of diseases like swine flu and foot-and-mouth disease, having major health implications on Chinese consumers. Authorities blame irresponsible farming practices and the disjointed meat processing system that is not easy to “regulate and makes it more difficult to avoid bad practices.”

In contrast, the highly sophisticated and streamlined systems of pork production in the U.S. is often viewed negatively by Americans and referred to as “factory farming.” Smithfield’s facilities have the “capacity to slaughter as many as 110,000 hogs a day,” and most U.S. farms are much larger than their Chinese counterparts, raising over 2,000 hogs annually. Ironically, these modern processing techniques are the envy of Chinese authorities who are looking to utilize the “expertise of Smithfield’s management team to enhance its pork-processing facilities.” Skeptics claim that the Shuanghi-Smithfield partnership “will exacerbate such problems as complex supply chains and food-contamination risks.”

Although the trend in U.S. agriculture is to go “back to the start” as expressed in marketing campaigns by environmentally conscious companies like Chipotle Mexican Grill, this is not the reality in China. As health out-breaks are more widespread in this Asian country and regulation lacking, efforts to “control food safety” and create more modernized processing methods are a welcomed site.

In such an industry, operational expertise will prove essential in restructuring the pork processing system in China. They will likely face challenges like determining adequate process and capacity design for farming facilities and distribution channels; forecasting to meet the demands of a growing population; and improving inefficient and broken supply chains. Improved product quality will likely be most prominent and follow a manufacturing-based definition as increased standards will ensure a safer finished product.

On a personal note, I am an advocate for more naturally produced food in smaller farming environments, yet I understand that the demands and current conditions in China are quite different from the U.S. All criticism aside, the majority of the U.S. population relies on the safe meat supply provided by corporations like Smithfield to ensure peace-of-mind at the dinner table. How do you think that the new deal between Shuanghi and Smithfield will impact Chinese and U.S. consumers, respectively. Will the Chinese citizens have a similar sentiment toward industrialized farming practices in future decades?

Article Source

Great Incentives for Great Employees

Posted on June 2, 2013 by spr1334mspilotro

As a business starts out there are a few challenges that CEO’s will have to face. One challenge is hiring the right people for each position needed. The next one is retaining the employees. If you are going to try and expand and compete you have to make sure that your employees are happy. If employees know they are working in an environment that they love, then they will want to stay. By offering incentives to your employees it shows that you care about them and you want to make sure they are getting treated fairly. You do not have to do anything outrageous like Google or Facebook do in their work space. Simply adding free lunch once a week will improve absenteeism and decrease your turnover rate.

For example, Google has been known to offer on-site haircuts, gym memberships, fully stocked lounge areas with billiards and video games, on-site dry-cleaning, and even gave employees 100,000 hours in subsidized massages in 2012. Who would not want to work there? You can get all your errands done for free while you are at work. By offering incentives like these it increases employees productivity. I know if my job offered half of those incentives I would want to make sure I am doing my best at work so I can stay with the company.

Almost everyone has heard about how working for Facebook is great. Not only do they have catered meals and a insane break room, they also offer paid maternity leave for four months. They also give reimbursements for daycare and as a bonus Facebook gives you $4,000 as a gift for the new born. That is crazy to think that they give gifts like this to every single employee that works at Facebook. You would think people would take advantage of it but that is not the case. They have never had a problem that would make them want to take away the gift. They trust their employees with their company, and the employees trust the company with taking care of them.

Yes all this seems outrageous if your a small company, but just by allowing employees to wear jeans one day a week can make a large differnce. You have to find out what works best for your employees and your company. Start by asking some of the employees what they like or what they feel could help them get through a tough day at work. You would be surprised with how easy it could be to ask employees what they want instead of assuming. By making the employees feel like they have a say, they will have more respect for management and the organization as a whole.

If you can pick some incentives at your job what would they be?

Would your productivity increase if you got offered incentives?

Domestic Flight Leaders Only

Posted on June 2, 2013 by spr1313perna

The airline carrier line of business has been a very popular topic in the last few years. Many changes have taken place such as bigger and better planes, new competitors, mergers, and some not so good news. The U.S. carriers have been dropping in their ranking internationally over the last several years. Asian and Middle Eastern competitors have been dominating the international market. However, it was recently noted that the U.S. seems to be switching its gears and is taking a position to head into the international game stronger than it ever has. The bigger U.S. carriers have closed their mergers and have adjusted their managerial approach and are on the rise again.

While all of these mergers were going on with the U.S. carriers, Asia and the Middle-East took advantage of the time to take over the international air traffic. Both Asian and Middle-Eastern airlines dominated the international markets while all of this was going on in the U.S. Also because of all of the mergers that the U.S. carriers have been going through, it has been noted that they have fallen a bit behind on the aircrafts they are using although this may be changing quickly with Boeings new product.

The chart below shows the ranking of airlines done by the World Airline Awards. The first U.S. airline in the ranking was Virgin America ranked 26th.

2012		2011	2012		2011
1	Qatar Airways	1	11	Garuda Indonesia	19
2	Asiana Airlines	3	12	Virgin Australia	32
3	Singapore Airlines	2	13	EVA Air	16
4	Cathay Pacific Airways	4	14	Lufthansa	15
5	ANA All Nippon Airways	11	15	Qantas Airways	8
6	Etihad Airways	6	16	Korean Air	24
7	Turkish Airlines	9	17	Air New Zealand	7
8	Emirates	10	18	Swiss Int’l Air Lines	13
9	Thai Airways International	5	19	Air Canada	21
10	Malaysia Airlines	12	20	Hainan Airlines	23

The issue now is for the U.S. to enter the international market and make its presence known. Latin America and Africa both had an increase in demand for air traffic but the U.S. missed the opportunity to enter the market during that team. It seems that with all of the upgrades to the U.S. carriers, they should be able to hit the international market much more effectively the next time an opportunity like that arises. It would be interesting to see how the U.S. carriers choose to enter the international market considering the different routes they can take to do it. One of their many options is to rush into the situation to try and make an impact as soon as possible. The concern with this is that they may try to cut corners to enter the market quicker. This type of strategy usually comes at the cost of the customer. Another option they have is to upgrade their fleets and then enter the market. The downfall with this is time. While they are upgrading their fleets, other international carriers may be upgrading their own fleets and pulling farther ahead which would make it more difficult for the U.S. to enter later. They would also have to take into consideration the opportunity cost of taking an even longer time than they already have been.

If you were a U.S. carrier, what strategy would you use to enter the international market? This does not have to be one of the methods listed above and can be your own idea.

Would you even consider waiting any longer to enter the market considering the state of carriers currently?

http://www.bloomberg.com/news/2013-06-02/u-s-carriers-ready-to-go-on-attack-after-mergers-iata-predicts.html

http://www.worldairlineawards.com/Awards_2012/Airline2012_top40.htm

Imported from Detroit

Posted on June 2, 2013 by spr1324mszewc

In the last year Chrysler launched TV ads that featured the tagline, “Imported from Detroit.” These ads immediately helped Chrysler’s image, as they were praised for breathing new life into the company and many people were left believing that they were actually producing cars in the US. The ads weren’t too far off, but in fact most Chrysler’s are built just over the border in Canada, with engines coming from Mexico. Although Chrysler may not have actually moved its manufacturing plants to the US it benefited greatly in public relations.

In the last few months we’ve also seen a “Back to U.S.” trend from technology manufacturers. But unlike Chrysler, three technological giants have actually been slowly moving production back into the United States. Apple, Lenovo, and Google’s Motorola have been opening brand new plants within US borders, the latest being Motorola’s brand new smartphone factory in Texas. These decisions come after almost a decade in which the flow was almost exclusively in the other direction – with millions of jobs going to East Asian factories known for low wages and minimal labor protections.

Manufacturing has moved into a highly technical and highly automated environment. This reduces the need for manual labor, which in turn reduces cost. These associated costs are still cheaper in China than they are in the US, but for larger companies, like those mentioned in the technology sector, the costs to produce are far more even between countries. And when we factor in shipping costs and timing, moving manufacturing back to the United States begins to look more appealing, and cost efficient.

But, in fact there are many cost unrelated benefits to relocating production back into the US:

High quality materials are more readily available
A highly skilled and educated workforce
Fast and efficient turnaround
Management is closer to customers, as well as factories and suppliers.
Quicker reaction time

Motorola Mobility was a division that was bought out by Google last year for $12.5 billion. The new smartphone, the Moto X, will be the first designed entirely under Google ownership. It will also be the first smartphone assembled in significant numbers in the United States since the launch of the iPhone.

However, many say that these shifts are motivated less by long-term manufacturing needs than by public-relations strategy. Recently tech firms have been under fire from Washington, D.C. for their tax strategies, privacy policies and, in the case of Motorola parent company Google, allegations of monopolistic behavior. But governors and members of Congress typically are avid protectors of major manufacturing employers, and even more so when they create jobs in lawmakers’ home districts.

…

Do you think that the recent push by technology companies to brings manufacturing jobs back into the United States for positive publicity is underhanded in its intent?

Benefits that can’t be measured in dollars are also really important when considering where to produce products. How can companies justify higher costs to investors who might not be aware of these benefits?

…

Sources:

http://seattletimes.com/html/businesstechnology/2021098211_googlemotorolatexasplantxml.html

http://www.telegraph.co.uk/technology/news/10092271/Forget-China-technology-manufacturing-is-coming-home.html

There’s No Flop In These Fish-Flops

Posted on June 2, 2013 by spr1334rszwejkowska

The understanding of operations management is a vast one, being constantly revisited by companies for ways of improvement and how it can be applied more efficiently to the whole team; but how can a 15-year old encompass this at such a novice level? I’m speechless! Through the data inflow of the customer requirements like community reinvestment and proactive volunteer support, she has maintained that consumer engagement so crucial to ensuring longevity of a product line. She has donated more than 10,000 pairs of her Fish Flops to countless organizations that convinces her customer base that there is more to this startup than profits. With the aid of her senior leadership team (who consists of strong people like her father and family) she was able to drive this business to the success that it has achieved now.

Through the simplicity and perseverance of Madison showing through, customers are willing to commit to that tradeoff price (a whopping $20 per pair) for the quality of the product (no holes in the sole like traditional flip-flops). Some things that it continues to do to distinguish itself apart from its competitors is as follows: ability to invest in good materials and design processes (with a lot of help from her ole’ man that has his own t-shirt company), a strong presence in local retailers (welcome to NORDSTOM!), highly satisfied customer base, and of course innovative shoe technology (who can resist light up shoes?).

With a philanthropist idea set for the future of the company, it’s no wonder why this young entrepreneur has engaged such consumer market and future prospects, all part of her incredible strategic plan. She can still further improve in her business based on what the world of operations management has discovered with a few recommendations.

A closer look at her strategic plan shows that a key function is to ensure that the retail face is keeping up with the quality Fish Flops wants to convey. This can be done through product and service performance measures and working on a lean/six sigma processing. This is done by choosing suppliers overseas that can handle the cost of manufacturing the sandal, while at the same time keeping quality ensured (like making lights last longer than a week in the shoe!). Another recommendation would be to include a key metric dashboard if they haven’t already done so; include a type of information system that can incorporate the preferences of her client base and the designs that are in most popular demand so that she can develop a leaner JIT inventory system to cut her costs down. Also shipping can be improved and updated on her new website to include real time tracking and reports that would provide essential information for customers seeking the latest product line offerings. She should also work to develop measurement of customer satisfaction to increase that metric.

Do you think Madison will face rejection soon, or did she find the goldmine of the shoe industry?

Sources:

http://smallbusiness.yahoo.com/advisor/blogs/profit-minded/15-old-entrepreneur-got-her-product-nordstrom-233738356.html

http://www.keepcalm-o-matic.co.uk/p/keep-calm-and-wear-fish-flops/

http://www.totstoteensmagazine.com/2012/07/10/july-business-of-the-month-fishflops/

Operations and Project Management in Today's Competitive Environment

Extending our classroom to the world!

MGT301- Spring 2013