Supply Chain management

Be GREEN, or be SQUARE!

Posted on by suhanip301s12

More and more customers now are looking for companies to be transparent, but it’s kind of hard to be competitive and sustainable at the same time.  Companies are now using value chain processes to get the job done fast.  They are not only focusing on suppliers but also taking into account By-Product-Synergy, which is “taking waste from one part of the production process and using that waste in order to generate a new product.” But how can companies become more sustainable if only “80 percent of management uses just 20% of the available opportunities?!”  The remaining 80 percent is where management needs to focus the rest of their energy.

It’s crucial for management to set goals and assess their risks, thereafter they can easily seek out opportunities for future improvement.  The first step to become a transparent company is to implement a sustainability program, and of course to develop a strategy.  The next step is to identify the companies “main processes and map data throughout the value chain.”  By using life-cycle-assessment software, the companies will have a more clear idea of how to lower their costs.

A similar approach was taken by ThyssenKrupp (FWB: TKA), a German elevator company.  Since ThyssenKrupp uses a considerable amount of steel in the manufacturing process, they thought the operational aspect had the greatest environmental impact. To their surprise,  the “company’s elevators themselves left a greater carbon footprint then their manufacture or any of the company’s other operations.”

As a result, ThyssenKrupp dramatically changed their product line after implementing a sustainability program.  They made the following changes to their products and services:

  • Elevators use LED lights which reduce energy consumption by 80%, and automatic fan and light shutoff which reduces CO2 emissions by 193,000 tons per year.
  • Getting rid of harmful chemicals used to manufacture the elevator.
  • Using petroleum based biodegradable fluid, with a vegetable-based option called “enviromax.”
  • Elevators are equipped with regenerative technology, meaning that the energy generated from the braking system is put back into the building.

In a way the article gives motivation to other companies who are taking their first steps towards becoming a transparent company.  It gives them few ideas and pointers on “unlocking supply-chain opportunities.” It’s important for different industries to decipher various ways to be more environmental friendly.  After all, there is more to being sustainable than just showing off your environmental initiatives.

Do you think ThyssenKrupp can take additional measures to make their company more sustainable?  Or better yet, are there any companies that you want to see become transparent in the near future? How would they need to change there operations?

Links:

http://www.thyssenkruppelevator.com/Sustainability/products-services

http://www.greenbiz.com/blog/2013/04/26/whirlpool-thyssenkrupp-supply-chain-transparency?page=0%2C1

https://opsmgt.edublogs.org/2012/06/28/transforming-waste-into-profit/

 

It’s Not Easy Growing Green

Posted on by spr1313aperrotin

They call it weed because it can grow anywhere but it requires rigorous effort.

 

Making a legitimate business out of marijuana requires high labor costs and extreme costly maintenance. Hundreds of Medicinal Marijuana Entrepreneurs have gone under because of competition or cost. The CEO of Pink House Blooms, Elliot Klug (pictured above) explains, “In order to survive in any business, you’ve got to be cost effective, so that was one of our drivers.”

Pink house and other commercial growers are required to document the life of each plant from the time it’s a cutting to the time its flowers are sold and the state of Colorado requires cameras in every room that has plants to prevent marijuana from entering the black market. These extra requirement are not comparable to any other industry or cheap either.

The Marijuana flower is trimmed by hand because the machine would damage their Trichomes, the part of the plant that is rich in the high-inducing THC. This results in high labor costs.  Payroll can make up more than a third of production costs. Retaining employees who learned their trade by growing clandestinely, is also a challenge because “they aren’t used to being part of a regular society”, says Jason Katz, chief operating officer of Local Product of Colorado.

Growing space can cost $100 or more per square foot and Pink House Blooms has a 6000 square foot warehouse. To have operation costs as inexpensive as possible they use every inch of their warehouse. To save on air conditioning costs, Pink house developed a system that uses water to cool the powerful lights that make marijuana grow.  Those lights, causing a $14,000-a-month electric bill, are on 24/7 making their electricity bill a huge portion of their expenses and preventing the company from paying back the borrowed money.

The employees may have gauges and there are Pink Floyd posters covering the walls but it is not as mellow as one would think, It is a tough business. They have supplier issues because many companies do not want to be associated with a pot-growing business.

Is this still a touchy subject or is there something  operations managers do to convince suppliers to work with them?

Operations Management for this industry is not typical at all. They have to create new equipment specialized for their product because it cannot be found on the shelf. This business could have high costs because it is relatively new.

Is it possible that over time, operation managers will find better ways to lower their costs? Any specific ideas?

Colorado and Washington has approved the use of Marijuana for Medicinal use and recreational use effect by next year. Will a higher demand leading to higher profits  make it possible for these companies to increase production efficiency?

What methods might this industry use to forecast. Why might the naive approach lead to too much forecasting error?

Source: http://online.wsj.com/article/SB10001424127887324345804578426963236807452.html?KEYWORDS=marijuana

Nissan Weighs it’s Options: New Infiniti Plant in North America?

Posted on by spr1321dangelov

Nissan Motor Company is considering opening a new Infiniti manufacturing plant to produce it’s vehicles in North America. Nissan’s  Infiniti production, with the exception of one model, is done entirely in Japan. However, it seems the company has a lot to gain from expanding it’s manufacturing facilities into North America.

One of the key reasons for this expansion is to avoid losing money from the cost of changing currency. According to the article, “A strong yen hurts the price competitiveness of Japanese exports and reduces the value of profits earned abroad when they are returned home.” The additional revenues generated could be used to provide a lower price on Infiniti vehicles or fund the investment of the new factory.

Another reason a new plant would be beneficial is because it would allow the sharing of resources with existing Nissan operations in North America. This would shorten the supply chain for many essential components including core vehicle parts. A shorter supply chain can increase the speed of production as well as decrease costs of shipping parts.

Lastly, producing Infiniti vehicles close to where they will be sold will decrease transportation costs. The article didn’t state any information regarding the amount of these transportation costs. However, they are likely quite expensive due to the large distance between the United States and China. Although shipping by water is relatively inexpensive, it is also the slowest form of transportation. A plant in North America would allow many alternatives such as railroads and trucks.

Because of these reasons, Infiniti Motor Co. President Johan de Nysschen is currently debating the possibility of opening a plant in the United States, Canada, or Mexico. The new plant is expected to produce over 100,000 Infiniti vehicles per year. According to the article, the cost of a new plant will be approximately 2 billion dollars. It is also possible to add Infiniti capacity to an existing Nissan plant for approximately half the price. Alternatively, an investment into Chinese Nissan plant  to add Infiniti capacity will only cost 323 million.

Although the Chinese plant would be a much cheaper investment, it probably isn’t the best option. Last year, Infiniti only sold about 11,000 to 12,000 cars in China, while 119,877 cars were sold in the United States. Although sales in China are expected to rise to 15,000 to 16,000 vehicles this year, this amount is nothing compared to the sales in the U.S. Since nearly 70% of last years sales were in the U.S., it seems North America would be an ideal location for the new factory.

What do you think is the best investment for Nissan to pursue? Should they open a new factory to increase productivity? If not, what would you suggest they invest their money in?

http://online.wsj.com/article/SB10001424127887324345804578422702383132078.html?mod=WSJ_business_whatsNews

“What about this? Experts 2 cents”

Posted on by f1233rpfeil

Companies are competing significantly more on supply chain management. There are many technologies that aid COOs and managers to gain a competitive edge to make their business more efficient, cost-conscious, and enhancing strategic operations. Modern businesses must transform the way suppliers, manufacturers, distributors, and customers interact globally. The developments of technology compensate for these challenges to help maximize operational efficiency to satisfy consumer expectations in immediate (‘want it now’) delivery. Before this course, I did not realize the big picture and that company’s survival depends significantly on supply chains. I thought competition was primarily based on their strategy (low-cost, response, differentiation) and how desirable their products are in the market.

 

In class, we learned how different supply chain decisions impact strategy—such as low-cost, response, and differentiation. It is imperative for companies to adjust their approach on how they mitigate risk and react to disruptions of the factors in Process, Controls, and Environment appropriately. With technology and analytic tools, managers have the capability to plan, monitor, and forecast more concisely than ever before.

 

There was a featured panel discussion of supply chain Industry Experts that shared their opinion on the ‘Trends and Insights’ in SupplyChainDigest website article. The VP of Marketing at Logility, Karin Bursa, mentioned that companies want to improve their forecast accuracy. She said analysts discussed how a “5% improvement in forecast accuracy can drive double digit improvements in service levels virtually for free.”

 

Building value throughout the supply chain is vital to sustain successful relationships between suppliers, manufacturers, and consumers. Companies are now adopting a more complex and detailed supply chain by creating “multiple virtual supply chains to develop tailored end-to-end processes to support distinctly different segments of the business.”

 

This reminds me of when we discussed how supply chain decisions impact strategy. If the two concepts compliment each other, it can avoid setbacks and expedite the process activities to maximize strategic operations. The four basic process strategies we covered were process focus, repetitive focus, product focus, and mass customization. The type of product, volume produced, and variety of products must be taken into consideration when deciding which process to implement and how it will affect the strategic operations of the company.

 

Process and supply chain activities affect the main strategies, low-cost, response, and differentiation. For example, operating a differentiation strategy, process characteristics are modular—process that lend themselves to mass customization. Or operating a low-cost strategy, the process characteristics will be to maintain high average utilization. It is evident from our class discussions that the interaction between supply chain management and strategy can determine how competitive a company is in the market.

http://www.scdigest.com/assets/on_target/12-11-06-1.php?cid=6406&ctype=content

Black Friday shopping… minus the shopping??

Posted on by f1234csaucedo
Boats and Cargo Containers on the NJ Transit Cheesequake Creek Draw Bridge

 

There is no questioning the importance of supply chain management to a successful business.  A supply chain disruption causes production to come to a screeching halt and has negative effects on business performance and shareholder value.  When we discussed this topic in class, I could not help but think about the magnitude of issues that results from a disruption to the system.  Especially with the pressure to improve efficiency and reduce operating costs, supply chain systems are becoming increasingly more complex and involved that one major disruption could end up costing a company a significant amount of money.  Not long after discussing OM in the News examples in class of disruptions to supply chain management did we experience a devastating hurricane that not only affected the lives of those on the East Coast but also affected businesses everywhere.

Hurricane Sandy was unforgiving as she tore through the East Coast.  Articles such as Holiday Shopping Is Being Threatened By Crippled Supply Chains are surfacing everywhere speaking about the devastating consequences that came from damages to supply chains.  Retailers suffered a huge blow because of all the damages to ports and rail lines, along with destroyed warehouses full of merchandise.  The effects of Hurricane Sandy may carry over into the holiday season and affect forecasted sales for countless businesses.

Although these situations are less than desirable, they occur.  I was curious about what businesses could do to soften the blow and be more prepared for these situations.  I came across an article in the Wall Street Journal that tackled these very questions and had some insightful suggestions.  Command and Control: Managing Supply Chain Risk interviewed Kelly Marchese, a principal with Deloitte Consulting LLP who specializes is supply chain management, regarding potential threats and risks the affect the supply chain and how business can be more prepared to sufficiently handle the situation.

Kelly’s response was that companies need to make updating their technology a priority.  Too many companies are attempting to manage global supply chains with technology that dates back 5+ years.  The most important tool is to use technologies that provide simulation, visualization, and analytical capabilities.  These new technologies have different benefits such as allowing managers to simulate different improvement initiatives and their impacts before actually implementing them.  Kelly also stresses the importance of updating information management architecture to better connect all of the facilities and sites in the supply chain, especially since critical supply chain data from specific locations or regions is often overlooked since it isn’t available.  However, these technologies do come at a cost and these costs may be difficult to justify, especially in our struggling economy.

Do you think that improving technology is enough to solve a problem that has severe consequences to businesses?  Is there anything else that supply chain managers should focus on to be better prepared for these moments of crisis?

 

 

 

Preventing Supply Chain Disruption Like Hurricane Sandy

Posted on by f1234swatch

Hurricane Sandy in the East Coast resulted in roads to be closed and shortages of gasoline and groceries in some areas of New York and New Jersey. The damages cost approximately $50 billion. Moreover, the storm also impacted the supply chain of products, which can determine success or failure of retailers during the upcoming holiday shopping season.

A high transparency of supply chain management system from procurement to warehouse to transportation is very important, for the reason that it allows businesses to quickly respond to the unexpected or disaster. According to The New York Times, before the Hurricane Sandy, economists expected 1-2 percent growth of the fourth quarter. After Sandy, they expect that the growth will be reduced by half a percentage point, and this may cause “ripples throughout the holiday season” (Knotts).

However, the storm is no longer an outlier of the supply chain disruption it caused based on a study by the Business Continuity Institute. This is because 85 percent of respondents worldwide experienced at least one disruption mainly associated with weather. The disruption becomes worse and worse “with the increase in megastroms worldwide and the growing complexity of international supply chains and E-procurement” (Knotts).

It is interesting that one third of the respondents do not know where disruptions occur due to the fact that the full supply chain is not being analyzed. A half of respondents said productivity is decreased due to the disruption, and a third said that they lost revenue. Fortunately, automating command and controlling of supply chains can mitigate losses.

The following lists are what companies need to take into account to create an effective supply chain management.

  • Inventory: Businesses need to focus on stock quantity, location, shelf life and expiration, which will help businesses avoid costly mistakes.
  • Asset: Businesses can use software to “accurately account for all assets across each facility from procurement to retirement with real time data available anywhere you have access to a browser or mobile device” (Knotts).
  • Transportation: Transportation process should be automated including route planning and status notifications.
  • Work orders: Businesses can use software to track all details of goods and services. Good work orders help businesses enforce accountability, timely response and work quality.
  • Warehouse management: It should be automated for full transparency. By using software, it helps businesses “map the warehouse for maximum storage effectiveness and schedule enough workers to receive shipments, among many other capabilities” (Knotts).

This article relates to supply chain management topic from our class lecture. As we know, supply chain management is very important in today’s competitive market place since competition is among supply chains not companies.  Therefore, it is crucial that companies have a good understanding and manage their supply chains effectively to avoid risks and costly mistakes that may happen.

Question:

What other factors other than those listed above do you think that companies should consider when it comes to effective supply chain management?

Source:

view?url=http%3A%2F%2Fblog.apptricity.com%2Fbid%2F241154%2FSupply-Chain-Disruptions-Like-Hurricane-Sandy-Are-No-Longer-Outliers

 

Hungry? Serving up the Supply Chain

Posted on by f1224hpham

 

Last week, my family and I went to Red Lobster for dinner. I was struck at how efficient they were with everyone playing a different role in the restaurant. I noticed that after every order the servers would go to a computer section to input in the orders at the different tables. I have never given it much thought, but I realized then that that was how the restaurant uses to keep track of its inventories (food or drinks). My sister ordered a lobster, which she asked the server if she could pick it. This got me thinking that the restaurant needed to have an excellent inventory management system and supply chain in order to keep up with orders such as my little sister (you cannot have lobster fresh all year round–and live ones too). So what keep Red Lobster going?

Red lobster is one of the chains of the largest casual-dining company, Darden Restaurants Inc. (“Darden”), in the United States. In the article, the management team at Darden is working to continue its competitive advantage by implementing an automation system on the supply chain. I don’t know how extensive this system is, but Darden believes that the benefits will justify the cost for it. And I think they have a reason to be since they have been an innovator in its industry by having a competitive in its supply chain. The article also mentions that Darden has plans to open a lobster farm in Malaysia among its fish farms throughout the world. This would mean that the company would have more control on the quantity as well as the quality of the lobsters coming in to its restaurants. Furthermore, with the inventory management system at its restaurants, the company would be able to measure how much inventory (food like fishes or lobsters) to each location just as demanded.

Questions to consider: Have you ever been to one of Darden’s chain restaurants? How do you feel? Does the supply chain system that Darden has in place surprise you? How do you feel about Darden being the “McDonald’s” in casual dining? Does Darden have a comparative advantage over its competitors? How so?

 

http://nrn.com/article/darden-making-progress-supply-chain-overhaul

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

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/