11-Supply-Chain Management

Save Money. Live Better…and Greener

Posted on by f1221gcontreras

           The largest retailer in the world, Walmart, has a track record that displays their commitment to sustainability.  It is now aiming to improve this track record and in doing so may be the catalyst that the industry needs to shift towards sustainability as a whole.

As we all know, one of Walmart’s strengths is their supply chain management.  The multinational corporation has 100,000 suppliers and it has enough clout in the industry to pressure them into following their directives and initiatives.  This has been evident and will now be put to the test.  Walmart is beginning to include sustainability in its merchants’ performance reviews, which will be used to determine pay raises and potential promotions.

When put into perspective, these merchants are responsible for multibillion dollar buying decisions and are responsible for what stores have on their shelves.  Therefore, the inclusion of sustainability scores in performance reviews will undoubtedly shift some of the emphasis on price to sustainability when making buying decisions.

An example of this concerns the laptops that are carried at Walmart stores.  An estimated 30% of laptops sold at Walmart have advanced energy saving settings.  Walmart does not find this adequate.  Therefore the company’s laptop buyer set a goal to increase the percentage of laptops sold with advanced power settings from 30% to 100%.  Company research indicates this shift alone will reduce CO2 emissions by hundreds of thousands of metric tons and save the consumers money on electric bills.

Because Walmart’s buyers are now going to put a greater emphasis on sustainability, it will behoove the suppliers, in order to retain Walmart’s business, to do the same. The suppliers in order to meet the stricter criteria must find new methods to reduce waste in their own operations.  This will encourage leaner competition both among competing suppliers and the buyers of other companies as well.

Walmart’s Sustainability director, Jeff Rice, believes that although sustainability will not be all that is looked at when evaluating merchants, it will have enough weight to effect behavior.

It will be interesting to see the effects of this initiative not only on the company but the industry as a whole.  When the industry leader makes a dramatic change in operations it will most likely be emulated by the other players in the industry in order to keep up and compete.

I believe that Walmart must be commended for its efforts.  This is because sustainability is not always the most profitable route to take in the short run.  At times it may not even be economically feasible.  However, taking Walmart’s success in managing its supply chain into consideration, I believe that Walmart will be able to reduce waste and make its supply chain “greener.”

Any thoughts on this? Do you believe that this initiative is risky? If so, is it worth the risk?

The Downward Spiral of American Beer

Posted on by f1233pmazurek

 

As many people know Annheuser-Busch merged with a Brazilian company named In-BEV, now known as AB InBev and people are starting to question the beer industry. AB InBev now controls 48% of the beer market and 68% in Brazil alone. So what is the issue? The distinct taste of American beer is now being produced with many foreign beers. Since the merger Ab InBev has moved production of many beer plants to right here in the U.S. That is good for workers here in the states but not necessarily for the avid Budweiser drinkers. Many people have complained that the beers are becoming more bland and not as tasty. In the article a Beck drinker for 25 years went and bought a 12 pack and said the beer just didn’t taste the same. After further inspection the German beer “Becks” was now manufactured in St. Louis, Mo. AB InBev has seen beer sales drop for many of their beers but they are still profiting as a company. The new manager of the firm, Brito, is making all sorts of cut backs in the company and as well as in the production of Budweiser. Budweiser has always boasted about using whole grains of rice in their beer and now the quality in the rice is the most important part and it doesn’t matter if it is whole or broken grains. He is also cutting off suppliers which have been used for over 25 years. These cutbacks are shutting down businesses and changing the beer industry as well as the beer itself. I understand making cuts to make a profit but is it truly ok to modify the beer which has been loved by the public for decades?

I do not believe it is ok, unless the public is made aware of the changes taking place in many of these breweries. If the customers continue to buy Ab InBev’s products and taste a difference should they not be informed?  These modifications may not be noticeable to the once in awhile drinker… but it definitely will be to the loyal consumers of Budweiser. Modifications to this beer will also mean modifications to other American beers will occur as well, eventually altering the American beer market forever. Brito, the managing director of the company, will not comment on any of the changes and refuses to give any interviews.

To add insult to injury Brito has also raised the price of Budweiser and Bud Light, seeing how they are the most popular American beers right now. The price increase has slowed sales in 2011 by 3% and Bud slipped by 13%. Many researchers said it is not unconstitutional to make a profit in any company and Brito has done a great job of doing that, but it maybe un-american to modify a beer that has been iconic in the American culture for years now.

McTurnover Rate

Posted on by f1231saddison

All companies are responsible for some type of inventory management. The inventory turnover rate and amount of inventory simply varies by the company and its’ industry. Also, most companies have different ways of keeping track of their inventory and how often they do so.

In this tough economy, McDonald’s is one of the only restaurants that have strived in profitability and success. The company has been doing many things right in the past few years, including handling their inventory. This article compares McDonald’s inventory to Wendy’s, their biggest competitor.

Inventory in the food industry is much different than inventory in a clothing store, for example. McDonald’s, along with any other restaurant, cannot have food sticking around in the store for too long. This is due to the fact that the food can spoil and the last thing any restaurant owner wants is for a customer to become sick from their food. Also, McDonald’s does not want to waste money. Any ingredients in the store that are not being used before their expiration date are a lost cost to the business. These two factors make it very important for McDonald’s to correctly calculate how much inventory they should keep in the store at all times.

Between the years of 1999 and 2000, “McDonald’s had an inventory turnover rate of 96.15”. This is compared to Wendy’s inventory turnover rate of 40.073. This means that the average item at McDonald’s stayed in inventory for approximately four days before being sold. For Wendy’s, it took about ten days for a product to leave the shelves.

In this situation, McDonald’s inventory turnover rate was obviously better than Wendy’s. This means that it took less time for McDonald’s to turn a profit compared to their competitor. Also, it means that customers were getting fresher food than those who opted to visit Wendy’s.

With such a great inventory turnover rate, there is little that McDonald’s can do to improve in this department. However, in the years to come, it would not surprise me if the fast food giant set a new high standard.

http://beginnersinvest.about.com/od/analyzingabalancesheet/a/mcdonalds-vs-wendys.htm

Boeing’s Great Supply Chain Mismanagement

Posted on by f1232jkelly

Boeing gets grip on 787 supply chain with upsized jumbos

Read more: http://www.foxbusiness.com/news/2012/10/10/boeing-gets-grip-on-787-supply-chain-with-upsized-jumbos/#ixzz2AHUOY5Jd

According to Boeing officials and reports, they have begun to take back into organization their supply chain management. Their new hook on their global supply chain will increase production of their new, “Dreamliner” jets. On there other hand, there are many people who believe that this increase in production from new supply chain management will, “expose new supply bottlenecks” (Kelly, 1). Boeing has had past trouble with their deadlines on production. They have numerously delayed their scheduling because of management issues. Boeing has had, “difficulties managing 325 suppliers building parts for the 787 at 5000 factories worldwide” (Kelly, 3). Boeing plans to raise their carbon-composite jets per month by one and a half. This target increase in production is expected to be very difficult to achieve, but they believe it is possible. Jeffery Luckey, a supply chain management executive at Boeing, said, “We are currently on a path to achieve ten [per] month” (Kelly, 7). This jet’s production is the most outsourced in Boeing history. One company outside the US working on the jet is the Fuji Heavy Plant in Nagoyia. This plant is the sole supplier of a one-of-a-kind fuselage needed for the Boeing jet. Boeing’s planned production increases will increase strains on suppliers such as these creating new bottlenecks in the supply chain (Kelly, 8-9).

As we have learned from chapter 11, bottlenecks can be created when there is one process in the production that is essential to the product and can take a long period of time. Boeing is seeing new bottlenecks appear because of their increases in production scheduling. It is interesting to see how new supply chain management problems occur and what implications they can have on outsourcing and global supply. Boeing, if their production process is going to fit their production schedule, needs to manage the new bottlenecks that are going to occur because of their increased demand. They will have to take into account the abilities and capacities of their suppliers when making there forecasts, and release work orders at the adjusted rate from the bottleneck. One idea Boeing could look into would possibly be searching for methods to increase the capacity of their bottlenecks so that overall system capacity can increase. Moreover, changing production forecasts and changing supply chain management strategies will always require adaptations to resulting problems such as new bottlenecks, starving, or blockings.

Boeing has been increasing their production schedules because of increased demand for their 787 Dreamliner Jets. They are forecasting higher production rates despite possible bottleneck problems and other supply chain management issues. Do you believe that Boeing should take outsourcing needed for these increases in production into account? When using supply chain management to maximize shareholder value, should the ethics of outsourcing always been taken into account by managers? Do you believe Boeing will be able to effectively manage their vast supply chain in filling the 824 orders for Dreamliners and Dreamlifters?

Boeing Dreamliner Jet

GNC and Vitamin Shoppe: Controversy of Bodybuilding drugs

Posted on by f1232ggmitrovic

http://online.wsj.com/article/SB10001424052702303644004577525201570340094.html

As we all know, GNC (General Nutrition Center) and Vitamin Shoppe are two of the largest over the counter supplemental manufacturers and carriers; but some of us may not know that they are being targeted by the FDA (Food and Drug Administration) since they began carrying something called DMAA (DMAA is found in Geranium oil, which is found in flowers). (Lahart) The bodybuilding world is always looking for new and improved products to create high adrenaline, intensity, and energy. Most people that come to GNC are searching for something to either get them bigger with muscle mass or smaller to look more chiseled and defined. The DMAA ingredient can do both of those, its that type of uniqueness that will separate it from other drugs by spiking up the energy and adrenaline through the roof whilst narrowing your blood vessels and increasing the blood flow to the muscles. And it has helped GNC and Vitamin Shoppes stocks skyrocket.

The issue comes in the fact of natural occurrence. GNC and Vitamin Shoppe are claiming that DMAA  (1,3-Dimethylamylamine- also meaning Geranamine) is a naturally occurring substance that is found in a Geranium oil in a flower base. (Lahart) The FDA is cracking down on GNC and Vitamin Shoppe for carrying the suppliers (such as USPlabs, Muscletech, Cellucor, and etc.) that have no evidence that it is a safe product and that it is actually found in flowers. (Lahart) USPlabs went out of there way to create a website saying that DMAA is safe and naturally made (the website can be found at http://usplabsdirect.com/dmaa-research) I know that it might not sound like a big deal, but you need to understand that if a dietary supplemental is not found to be created naturally, the FDA can say that it needs their approval since it is a ‘pre-market product’ and not a dietary ingredient. Once that takes place they can take over that product and recall it from all shelves in the nation since it is a ‘pre-market product.’

The FDA did research in four different labs (3- domestic and 1-international) and found no traces of DMAA in multiple samples of Geranium oil. (Lahart) A lot of the suppliers that GNC and Vitamin Shoppe are carrying have rebelled against the FDA by providing their own research taken from their labs.  But for now, the FDA is just frowning on the product (which I have to say to most of my customers at GNC if there hesitant on getting one of the awesome products that carry DMAA).  Unfortunately, I feel that most products that still carry DMAA at GNC or Vitamin Shoppe (Especially at my GNC store) are in the decline period of of the product life cycle. I don’t believe that it’s in its decline because it can’t offer the organization anything anymore, but the FDA is pressing down so hard on any DMAA products that it’s getting harder to carry them with all the rules and regulations.(Operation’s Management textbook, CH. 5 Figure 2.5) (PPT Ch.5 Slide 11)

Do you think the FDA is doing right by pressing down on an active ingredient just because they suppliers cant claim that it is naturally made? Would you take a product that wasn’t naturally made? Even if it is not naturally made, do you think it should still be on the market and not taken off like ephedrine and steroids were? Do you agree with the fact that it should be kept on the market and that it should be left up to the people to take it or not? Is GNC, Vitamin Shoppe and the FDA being ethical and moral about this issue?

Going Eco-Friendly Worldwide

Posted on by f1224grodriguez

Honda is expanding its environmental purchasing guidelines to cover all its suppliers around the world, the company has announced.

Honda is has continuously tried to improve their supply management strategies not only in North America, but they have recently tried to change their global strategy. Many car companies are now trying to go-green and become more eco-friendly. Honda said the change reflects the globalization of its purchasing practices, which are part of their expanding supply chain. The company has also added “environment” to the list of evaluation items for suppliers, alongside quality, cost, delivery and development.

Furthermore, Honda is not only bringing their environmentally friendly supply chain to where and how they manufacture cars, but they are going cross functional divisions. This is much better than focusing only on one sector of the company instead of making this same effort in different departments.

“With the new guidelines, Honda will strive to better track and reduce the environmental footprint of Honda products throughout the supply chain beyond primary suppliers,” the company said in a statement.

A Honda North American environmental report stated that the North American Purchasing Division launched a supply chain sustainability initiative to reduce CO2.

Honda has had a eco-friendly strategy, but now they are expanding it now to their new cars, put to their supply chain management.

What’s in your Coffee Cup this Morning?

Posted on by f1224ltaylor

Intelligentsia is a coffee and tea company that directly sources coffee from coffee bean farmers, such process can also be referred to as direct trade. Direct trade is completely different from what most companies do, which normally consists of buying coffee through brokers at the lowest market prices unaware of the coffee beans exact source. The direct trade label is also regarded as more effective than labels like fair trade, in which a 3rd party is involved to determine quality,  a process that has received a lot criticism. In an article about direct trade in the New York Times it was stated that, “Direct trade coffee companies…see ecologically sound agriculture and prices above even the Fair Trade premium both as sound business practices and as a route to better-tasting coffee.” On Intelligentsia’s website it explains their buying philosophy as believing in the quality of coffee and doing so by working closely with actual producers. Intelligentsia explains that in order to manage such exceptional quality they must follow the direct trade criteria. The direct trade criterion not only defines Intelligentsia’s quality but it also shows who is responsible for it, which demonstrates managing quality. The 6 points of criteria, as listed on their website, are as follows. 1. Coffee quality must be exceptional. 2. The grower must be committed to healthy environmental practices. 3. The verifiable price to the grower or the local coop not simply the exporter, must be at least 25% above Fair Trade price. 4. The grower must be committed to sustainable social practices. 5. All the trade participants must be open to transparent disclosure of financial deliveries back to the individual farmers. 6. Intelligentsia representatives must visit the farm or cooperative village at least once per harvest season, understanding that we will most often visit three times per year: pre-harvest to craft strategy, during harvest to monitor quality, and post-harvest to review and celebrate the successes. As we’ve learned in class it’s important to globalize companies for many reasons, a few include reducing costs and improving supply chain management which will naturally overlap with the critical decisions, like management quality and again supply chain management. Not all companies who globalize, manage the quality of their source and instead look for the cheapest prices, inter this can result in sourcing from places with unethical practices. In my personal opinion to reduce costs by sourcing from a source that under pays their employees or doesn’t ensure a safe a work environment, is not a justifiable or ethical trade-off. I believe examples of company’s operations like Intelligentsia can demonstrate ethical and responsible globalization, not only in quality but also within the supply chain. Of course the price of their coffee doesn’t come cheap, it is more of a luxury, but in perspective not more of a luxury than buying Starbucks daily.

 

 

Sources

http://www.nytimes.com/2007/09/12/dining/12coff.html?pagewanted=1&_r=0

http://www.intelligentsiacoffee.com/

 

 

 

A weak link in the chain

Posted on by f1224drogala

Companies all of the world have created enormous supply chains to meet the ever increasing demand of the public. These supply chains are global and consist of manufacturers from many parts of the world. As we have learned in Chapter 2, Globalization is a big part of the operations strategy for many companies as it is a great way to increase profits and grow your whole company. Improving a supply chain is usually done by locating facilities closer to unique resources which in turn lowers the costs of production and allows for more profits. Steve Culp, the author of the article “Supply Chain Risk a Hidden Liability for Many Companies”, explains that  global supply chains have a risk factor involved that companies should pay attention to. This risk factor is what creates the weak link in the chain.

The risk factor is created by the possibility of disastrous events. Whether it be an earthquake, a flood, or a tsunami, the results are devastating. As an example, the article states that the flooding in Thai created shortages in hard drives that lead to millions of dollars worth of losses for electronics manufacturers. Surely this can null any previous savings that are established by outsourcing part of the production process, but at the same time this risk needs to be looked at face value. Companies need to balance the efficiency and low cost that they desire with the risk that they are willing to take. The article gives a couple of suggestions on how to assess this supply chain risk. Out of all of the points, one stands out the most. Companies should integrate risk management into operations planning and management. This would allow risk to flow into key supply chain decisions. If supply chain risk is accounted for, companies could even set some of their profit aside as a way of dealing with the potential loss in the future.

It is all seemingly  based on luck. Take two hypothetical companies, Company A and Company B. Company A only focuses on low cost and chooses suppliers based on that factor while Company B chooses suppliers based on cost and risk. If no tragic events happen, Company A will be in the better position in the marketplace and make more profit. However if tragic event halt the production of Company A’s suppliers, Company A could possibly lose millions of dollars which could result in a net loss during the current period. Because of the random factor of these events, I think that many companies will opt to just ignore the risk involved and focus on making as much profit as they can. In my opinion, ignoring this risk would be a big mistake.

What do you think, should companies incorporate supply chain risk into their key decisions on which suppliers to use?

Source: http://www.forbes.com/sites/steveculp/2012/10/08/supply-chain-risk-a-hidden-liability-for-many-companies/

Harley Davidson vs. Glabailization

Posted on by f1221pdemaio


While most manufacturing corporations are following the global trend of outsourcing elements of the production process where cost are cheaper, Harley Davidson has accomplished cost reductions, improved productivity, and ultimately fulfilling a customer need without having to outsource. The reason why a company cannot produce motorcycles abroad is based on the target market of Harley’s. Most of their customers buy these handcrafted motorcycles because they are made in America, if they were to outsource, Harley could see a potential loss in production. This creates a unique situation for Harley on how to find a way to still stay competitive.

Instead of focusing on lower product cost, a Harley plant based in Kansas City decided to focus on labor management, and its unions. In this case, some things that boosted employee morale were factory teams and worker empowerment programs. This however was not Harley’s saving grace; it would take a innovated way of thinking about the production process, one that focuses on trusting the judgment and decision-making of the union work forces instead of simply controlling them. They’re employees are expected to do more than what the job descriptions sets out. Instead of just effecting manufacturing, employees must also take on task in actually running and maintaining the plant, while making their opinions valuable. As a result the unions can effect cost reduction as well as other things that normally plant managers would consider. Employee’s are not the only one’s with extended job descriptions, plant managers split task between each other and effect all parts of the business. This teamwork, has taken this specific plant from creating only one model, to about 4 in record time. According to the article, “Team building is not a benefit in it of itself and would not create great results. Instead, the key was setting up non-negotiable processes to define the context of decision making and to provide scorecards to keep track of performance”(Michael O’Neal). This suggest that giving employee’s the ability to effect management was not enough to make the business run better, it needed intensive structure to ensure that it worked. Thus, the planted created Natural Working Groups.

This meant that employees in a team could not spend more than 2 hours on one specific task and then had to rotate. This gave employee’s flexible schedules and the ability to cover each other’s shifts if an extraneous circumstance inhibited an employee from coming into work. The work forces were also giving the jobs a salaried plant manager would have taken on creating only one level of management between the floor and upper level management. An example that shows just how much impact the unions had on the plant was when an upper level manager wanted to install and $80,000 stainless steel floor for the plant, and asked the floors opinion on if it was necessary for the plant. The unions told them that it was not going to help productivity but simply make the plant look more appealing which ultimately would not affect productivity. With their input, management decided not to buy the floor and instead put it to something else that could benefit the company. Even when the plant was not performing, instead of laying off employees the took advantage of their rotational work groups and had employees train while others worked on production and then they would switch.

These changes and management innovations are a huge part in bringing Harley Davidson from near bankruptcy in the 80’s to a strong competitive force in the motorcycle industry today, while most of its competitors have reduced cost by outsourcing. They have decided to perfect internal operations to reduce cost at home. One of the most important things to understand about Harley’s structure is that it is under constant monitoring and structure to be successful. “Partnership requires care and maintenance”(O’Neal).

Source:

http://articles.chicagotribune.com/2006-05-14/business/0605140123_1_unions-united-steelworkers-united-auto-workers

 

Question:

Do you think that is method can be successful in all industries?

Metal Mesh Mini-Wheats

Posted on by f1234ascott

This past week Kellogg put a recall on Frosted Mini-Wheats because of a contamination of mesh metal pieces mixed in with the cereal.  This quality control mishap could cost the company up towards $30 million for the 2.8 million boxes of frosted and unfrosted bite size original Mini-Wheats  that is being recalled from stores.  The supply-chain glitch was attributed to a “faulty manufacturing part” and will cost the company an additional $100 million for the year to fix and improve on their system. The company claims that the expenses associated with the recall this year is offset by the strong performance of the new addition to the Kellogg family, Pringles, which will be seen when the company reports their earning on November 1st.

 However, this is the Battle Creek, Michigan factory’s second quality control slip in the last two years.  In 2010, Kellogg recalled multiple cereals for an odd smell and color.  The cause of this quality issue was the improper packaging the cereal was in.   After that recall, the company spent a similar amount to fix their supply chain which meant less supervision for the operations and overworked employees in the factories.  In my opinion the less supervision and overworked employees seems it would be more  liability for faulty products.

 

I was surprised how many ways this article related to the paper puppets activity in class and how the faulty paper made it’s way through the assembly line until the quality control department.  Somehow the cereal with the metal mesh bits, and also odd smells and colors were able to not only make it past all of the workers in the factory but also through the quality control department with approval to be put on the shelves in grocery stores everywhere.   Not only are the costs of these recalls expensive, but eventually if these recalls continue occurring, it will start to effect Kellog’s reputation and the quality of their products.  It is unfortunate that the quality control department did not catch these errors because it makes consumers doubt the department’s ability.  I am not exactly sure what is the right amount of time is between glitches and recalls such as these for manufacturers, ideally an infinite of time with no mistakes, but two years with two recalls and now almost a $200 million investment into their supply chain, hopefully Kellogg will not have these problems again in another two years.  Thoughts also arise if whether the cost cuts related to the first recall, overworking employees and lessening supervision, had an affect on this mistake and if the contamination could have been caught before the boxes were shipped out.  Luckily, no injuries have been reported for ingesting the metal pieces, because not only would that not be fun start for anyone’s morning, metal pieces are definitely not apart of a balanced breakfast.

Do you feel the problems in the supply chain should have been resolved two years ago with the first recall and large investment into their system? After the second fix in the supply chain as a consumer would you feel confident in the products going forward?

 

Source: http://online.wsj.com/article/SB10000872396390444799904578048752257118008.html