Inventory Management

Nike_Air_Jordan_shoe_drawing_by_rontu_arrow

 

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

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.

From Hog to HotdogThese “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; Slaughter Pigs in Chinaand 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

 

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

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

8446515678_08867c39f9_z

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

 

Six Sigma, gone Bad.

SixSigma

“What do weight-loss plans and process-improvement programs such as Six Sigma and “lean manufacturing” have in common?” They article starts off with this quote, referring that diet plans and six sigma plans do indeed fail at one point or another. The companies that use Six Sigma normally start of with huge goals and aspirations of putting these plans into operation, but just like a failing diet these companies tend to go back to their old ways. Many companies around the world embrace this business management such as Six Sigma; however, a recent study shows “that nearly 60% of all corporate Six Sigma initiatives fail to yield the desired results.”  This is where we begin to ask ourselves if it’s actually worth investing in a plan if 60% of the companies who do it aren’t coming up with the results that they wanted. The articles diagnosis this problem into three stages, “stretching, yielding, and failing.”

So let’s start off by talking about what they call the “stretching phase.” The process can be defined similarly to a metal spring analogy. “When a metal spring is pulled initially, the material stretches to accommodate the increase in pressure.” They compare these metal spring to people in a business process. Initially people at any process in the business will bend and stretch to make things happen. I also agree with this because when you are new to a job or trying a new process you are initially willing to do whatever it takes to try and make it work. Most teams in any business are generally excited and willing to learn the new process, such as Six Sigma. Normally at this stage in the process managers will implement a “to-do” list will let employees know what is exactly expected out of them. When the employees reached all of their goals on the “to-do” list they were rewarded and the project is normally ruled a success. I believe this is where we can see one downfall. Rewarding employees can be successful, but if you keep doing it over and over and don’t increase the expectations or continue to manage you teams, I believe failure is inevitable.

The second phase the article is called the “yielding phase.” The phase can be defined as, “If a metal spring continues to be pulled, there will come a point when the material yields as it struggles to support the increase in pressure. Though still intact, the spring becomes permanently deformed, stretched out.” They compare this to management at a company switching from one project to another. When management switches to another project more times than none the team that lost the management from the Six Sigma managers slowly begins to lose site of their goals and begin to slip back into their old ways. At this point in the phase teams begin to loose sight of the end goal and being to focus to much on their individuals efforts. The teams that lost the Six Sigma management slowly began to crack under the pressure.

The third and final phase in this article is the failing stage. Using the metal example this stage is defined as, “Over time, pulling will cause the material in one area of the metal spring to narrow, creating a neck that becomes smaller and smaller until it is unable to sustain any pressure at all. At this point breaks into pieces.” When the Six Sigma management team leaves, employees at company’s becomes discouraged and eventually begin performing poorly and than fail returning into their own ways.

After reading this article, I begin to wonder if the Six Sigma program is actually worth it? What do you think?

Should a company invest money into this program, if 60% of the companies end up returning to normal ways?

How could companies prevent this program from failing?

http://online.wsj.com/article/SB10001424052748703298004574457471313938130.html

http://www.isixsigma.com/new-to-six-sigma/getting-started/what-six-sigma/

The Pinky and the Brain Couldn’t Do It, But Android Has… Over the World of Technology That Is!

As the title of the referred article suggests, Android really is everywhere… you just don’t realize it. Not only is Google’s Android the number one mobile operating system currently out there, but Android is in just about anything with a computer chip and is becoming the standard for operating systems in smart devices. As more devices with the Android operating system hit the market, Google is continually widening the gap between its competitors, Microsoft and Apple, and is making its home as the dominant software player in the tech device world.

So how does Google’s Android tie into quality?

source: www.giantbomb.com

One of the things that we learned in class is how important quality is to consumers. In the end, your product does not really matter. It all comes down to customer satisfaction and delivering on the fulfillment of their needs. In a sense, this is what Google has done through Android. This open source software can easily be manipulated by virtually anyone to get just about anything to do whatever they want it to. Users are not limited to certain functionalities already pre-decided by the makers of the operating system, but instead allow consumers to keep their freedom of choice and allow them to act upon them. In the end, consumers fulfill their own needs and end up with their own unique, customized product.

This not only allows for Google to keep its current customers from switching to competitors, but Google is also benefiting from expanding its consumer base to include individuals who like to experiment with technology. As more consumers join the Android community and take the operating system into their own hands by modifying its uses and capabilities, Google is getting developers to make their product better and its application vast. And it is all done free.

Android isn’t just popular with consumers, but also with hardware and software companies. As its popularity has increased and its dominance established in the market, Android is becoming a standard for devices. More and more hardware and software companies are becoming “Android experts” to ensure that their products are compatible with the software.

By allowing its software to be easily accessible and modified by anyone, it is no wonder that Google’s Android has risen in popularity so quickly and widespread.  Although many companies, such as Apple and Microsoft, strive to keep their product’s formulas secret in order stay ahead of the competition, Google has proven that doing the exact opposite can be done. Not only that, but that one can benefit from it as well.

Personally, I think that what Google allows to be done with Android should be applicable to other devices. As an Android user who took advantage of making my phone better to suit my preferences, I am a big fan. On the other hand, Apple’s I-phone has left me wondering why I ever made the switch.

What do you think? How will Android affect the future of technology and the way products are being deployed?

 

Source:

Vance, Ashlee. “Behind the ‘Internet of Things’ Is Android—and It’s Everywhere.” Bloomberg Businessweek. 30 May 2013. http://www.businessweek.com/articles/2013-05-29/behind-the-internet-of-things-is-android-and-its-everywhere#p1

There’s No Flop In These Fish-Flops

Madi-18-700x466The 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.keep-calm-and-wear-fish-flops

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/

 

It’s Amazing What Soup Can Do!

 

CAMPBELLCampbell’s Soup Co. is the leading maker and marketer of soup. But for two straight years, the soup business was struggling, alerting the stakeholders about the possibility of its fate to collapse. However, this past year, Campbell has featured its new skillet sauces line in hopes that it can expand out the dinner segment in 2014.  Denise Morrison, the president and chief executive officer explained that even though it is difficult to create new market segments, she is confident that Campbell’s Skillet Sauces is a “break-through” concept that has a “high potential for reward.” As a result, Campbell Soup Co. has seen the U.S soup business stabilize after the sales dramatically increased by 14%.

Campbell is currently collaborating with its customer base to create an entirely new category of “unique, convenient and versatile” dinner sauces, while experimenting with existing soups to improve taste. This would be an example of product design. Furthermore, Campbell took the process a step further and came up with an innovated product featuring soup in pouches that attract younger and more affluent consumers. Campbell’s competitive advantage over its competitors is its brand name which consumers keep coming back for more. The soup giant has built its brand name upon its Simple Meals platform featuring the popular Go Soup. In addition to the new dinner sauces, Campbell has announced it would be launching the Campbell’s Slow Cooker Sauces.

Despite its recent success, Campbell faced a problem with the product’s location placement and shelving; but the company said it has found the best way to shelve. However, Campbell continues to struggle in two categories which are U.S. beverages and North America Food service.  The self stable juice category sales have been declining due to overwhelming competition against Campbell’s V8 V-Fusion line and decreasing demand from restaurants. Ms. Morrison proposed a solution to this dilemma, by planning to apply the exact business model for its soup business to its beverage business. The plan consists of improving the taste of its existing vegetable juice while adding new products such as V8 energy drinks to attract a more diverse consumer base.

Most importantly, Campbell’s optimistic future is emphasized on management’s attention to the basics and expansion in faster-growing segments. For example, the V8 is considered a strong brand with high benefits such as promoting health, so Campbell’s management team is figuring out ways to improve its product. Campbell has invested in a new manufacturing line to increase the capacity of creating fresh soup to tackle the issue of structural changes in the food service sector. Campbell’s simple business strategy which is to keep costs low while improving its quality has proven to be successful in achieving its short term goals as well as laying a foundation for its long term goals.

If you have ever bought a Campbell product or is an avid consumer of Campbell, what made you choose their products?

Do you think that Campbell’s expansion of new products will maintain or increase its sales and revenue?

Sources:

http://www.foodbusinessnews.net/articles/news_home/Business_News/2013/05/Campbell_to_build_out_dinner_s.aspx?ID={E6E89D05-6287-40A8-9DD9-22D9C80168FF}

http://online.wsj.com/article/SB10001424127887324102604578494890895484784.html

Saving the Planet One Aisle at a Time: Tesco’s Sustainability Movement

Many companies want to promote sustainability within their markets since it attracts more customers, however competition and living within specific limits are stopping them from achieving this goal. Sustainability, which includes sustainable design, building and operations, is the collection of strategies and policies employed by companies in order to reduce their overall impact on the future generations. By taking waste from one part of the production process and using that waste to generate new product is a great way to minimize the consumption of limited natural resources and maintain their availability for the future.

800px-Bradley_Stoke_Tesco_2It is very important for management to set goals and develop a strategy when searching for improvement opportunities in order to implement a sustainability program within their company. I think it is much easier being sustainable than going green and many other companies are following in such footsteps.

For instance, Tesco, a British multinational grocery store and third-largest general merchandise retailer in the world measured by revenues and second-largest measured by profits, has recently planned out new business strategies and goals in three various areas, one of which is to reduce food waste globally and become a more sustainable company.

Tesco-1024x468

Research by Tesco shows that about one third of the world’s food is never eaten and instead it is thrown out or left to rot. Therefore, Tesco is planning to pursue this food waste issue in three crucial areas which are: its own operations, the supply chain and agriculture, as well as the customers. The company has the ability to track down waste and find where it happens as it leaves the farmer’s field and reaches the customers’ home, and everything that happens in between.

According to the article, Tesco claims that around 32 percent of food is wasted across its value chain, of which 16 percent comes from the supply chain and agriculture, the other 16 percent coming from customers and less than 1 percent is from the retailer.

Because of the large amount of food waste across all markets, the company is working to develop an advanced measurement for the amount of food ruined in its operations. This will permit Tesco to track progress through a period of time which can significantly minimize the waste as well as achieve its goal of sustainability. Since the food waste is much lower in the UK than in other markets, it plans to follow in their specific operational practices and more precise forecasting so that food does not rot or is thrown out with the high supply rate.

Being more transparent and sustainable for a company with a global marketplace is tough, however, Tesco hopes that by keeping a strong track record of its waste management will lead to a decrease in the food waste levels throughout its value chain, attract more customers, and keep increasing its profits.

Do you think the tracking record will achieve greater sustainability for Tesco or should they examine other ways to manage their inventory and to minimize the overall food waste?

Source: http://www.environmentalleader.com/2013/05/29/tesco-announces-goal-to-reduce-food-waste-globally/