Supply Chain management

Patagonia & The Footprint Chronicles

Posted on by f1232skrissanov

Early this year, CEO of Patagonia, Casey Sheahan, raised a few eyebrows by introducing a “Don’t Buy This Jacket” campaign. Sheahan explained Patagonia must do the opposite of other businesses today for them to stay in business for a long time, as well as leaving an inhabitable planet for future generations. He goes on to say, “We ask you to buy less and to reflect before you spend a dime on this jacket or anything else.” Not only does this give a subtle hint that Patagonia strives for unparalleled quality, it shows the company highly values humanity and environmental consciousness.

More recently however, Patagonia has gone to new lengths to prove the ingenuity of their values and offer unprecedented transparency concerning their business operations to their customers. Patagonia has introduced The Footprint Chronicles, an interactive map of the world on their website that pinpoints all of the members of its operational supply chain, both textile mills and factories. Clicking on a pinpoint on the map brings up information on the location including what they are, their exact address, what they produce, work force, gender ratio, and how long they have worked with Patagonia.

For most companies, an informational map like this could just be a marketing ploy, but for Patagonia, it is an attempt to take business practices and operations to a new level of transparency for all to see. Patagonia is well known for the labor and working condition standards it surpasses every year, but nowadays it just isn’t enough for a company to have a piece of paper saying it passed regulations. This is due to the fact that sometimes these big manufacturers seemingly meet requirements for issues surrounding labor operations and working conditions, however, they are usually the ones who end up on a negative headline about underage labor practices, poor working conditions, etc.

Patagonia has always been know to champion quality over everything; not only a quality product, but quality operations that put people and the environment over profit. According to Patagonia, there are no private/closed-off managerial offices at their locations, creating a closer link between their corporate, business, and functional levels of the company. Though it may seem Patagonia’s humanity, sustainability, and environment driven business strategy leaves little room for profit, it is not true as the company has actually doubled revenue and tripled profits since 2008 ($540 million in 12 months ending with this past April) accoring to the Los Angeles Times.

Patagonia is definitely proving that not taking the easy short-cut to profits can undoubtedly pay off in the long-run. Could this be a sign that you do not have to be inhumane, greedy, or careless of the environment for your company to turn a profit and be successful?

http://www.patagonia.com/us/footprint/

McDonalds Supply Chain

Posted on by f1231saddison

Over the summer, I had a chance to interview with McDonald’s supply chain department for an internship. In this interview, I gained a vast amount of information about McDonald’s supply chain. McDonald’s focuses on three main concepts in maintaining the supply chain that helps 14,000 restaurants in the United States run smoothly: ethics, environment and economies. This goes hand-in-hand with another philosophy McDonald’s has, called the three-legged stool method. This method is unique to McDonald’s business, incorporating achievement, trust and “personal”.

 

When it comes to McDonald’s supply chain, the main focus is bringing food from cow to plate. This is a short way of saying that the company wants to know every detail about how their ingredients are brought into the restaurants. McDonald’s has such a great relationship with their suppliers that they trust them enough to have no written contracts with them. Of the 14,000 United States restaurants there are, no contracts have been written up to ensure that every restaurant has beef, for example, each day. This is pretty impressive. McDonald’s also tries not to completely knock out a supplier’s entire crop and make it so they cannot work with them again. The company always tries to gain a lasting relationship with all of their suppliers; this is a great thing for the farmers and is also a positive for farmers to keep these long lasting relationships. The relationships between McDonald’s and their suppliers are the center to the three-legged stool method.

 

Another interesting aspect of McDonald’s supply chain is how they decided what menu items are available. For example, over the summer, McDonald’s offered Blueberry Banana Nut Oatmeal as a breakfast choice; however, the oatmeal has been in the works for a long time. Before it could hit the nationwide menu, though, McDonald’s needed to find enough suppliers to grow the blueberries that they would use in restaurants. Since McDonald’s is such a large market, finding some of the fresh ingredients can become a problem. For example, if McDonald’s wanted to create a Pineapple Salad, they would not be able to because the pineapple supply in the world is not large enough to supply all of McDonald’s restaurants.

http://www.aboutmcdonalds.com/mcd/sustainability/our_focus_areas/sustainable_supply_chain.html

 

 

 

 

Wal-Mart and the Successful Supply Chain Management

Posted on by levik301s12

We all know that Wal-Mart is one the most sucessful companies out there with one of the best supply chain’s ever created. The University of San Francisco wrote up an article on the techniques that Wal-Mart uses to become sucessful and they are exactly the same techniques that we learned in class.

http://www.usanfranonline.com/wal-mart-successful-supply-chain-management/

Wal-Marts cost saving methods are always passed down to the customer as the costs associated with their supply chain is minimized.

Their success comes from:

  • Cross Docking
  • Demand Planning
  • Forecasting
  • Inventory Management
  • Strategic Sourcing
  • Distribution Management
I looked up cross docking to get a better understanding of what it is and how Wal-Mart uses it and it is a technique that replenishes inventory. Cross-docking is when inventory comes from the supplier directly to the retailers warehouse and then turned around and shipped out on trucks to the retailers store. This minimizes shelf time and inventory costs that Wal-Mart would of had to pay.
In addition, supply chain managers at Wal-Mart focus heavily on demand planning and forecasting like we did in class in order to acheive “lean inventory”. They focus on historical data, upcoming sales, and trends in the indsustry to predict the inventory levels they need.  They then forecast out their predicitons to make sure distributors have just the right amount of inventory on hand to reduce inventory costs.
One of the best ways Wal-Mart gets the lowest prices though is it vendor partners and the long-term contracts established with them. Since Wal-Mart is a market leader in retail sales, vendors are forced to agree to low margin, high volume sales to Wal-Mart if they want to stay on the retailers shelves.
One of my first accounting jobs was working at a online computers parts retailer/wholesaler. We had a few warehouses connected to an office and this gave me my first insight into supply chain and inventory management as I was involved in purchasing as well. Initially, our inventory system was out of date as we used a periodic system that was time-consuming and expensive. Our inventory mangement became more efficient when we ordered a SKU system to keep a perpetual count of what we had. Our hot-selling or our “A” list items were constantly being re-ordered and our inventory became much more lean to the point where we were restocking huge shelves every week. We used histroical data such as Black Friday sales and upcoming promotions to know how much to stock and also became a volume buyer to achieve the lowest prices.
Have you had experience being in a purchasing department and measure the inventory volume that needs to be purchased?

 

Everything is better with Coke

Posted on by scottc301s12

 

 

 

The Global Fund, which is a decade old government and private partnership dedicated to financing healthcare issues in impoverished areas, has recently revamped it’s supply chain and distribution processes to more closely model those of Coca-Cola.  In thinking about what aspect of discussing supply chain management might be most interesting, I came across a video made by The Global Fund.  http://www.theglobalfund.org/en/blog/29348/   The video explains an interesting solution to a common problem, the final leg of the distribution process.  Global Fund workers in Tanzania needed to find a way to distribute malaria medication to locals, but were having a great deal of difficultly.  It was then that they noticed something… There are Coca-Cola bottles everywhere.  Why can’t we distribute medication, but somehow these people have such immediate access to Coke?  It was then that The Global Fund reached out to Coca-Cola and asked for guidance to improve their supply chain and distribution management.

Coca-Cola then proceeded to improve The Global Fund’s supply chain processes through analyzing, identifying issues, maximizing effectiveness of current processes, and implementing new ones.  I think I enjoyed this article to the extent I did because of the sheer simplicity in The Global Fund’s approach to problem solving.  When thinking about a company like Coca-Cola, I think there is much to be learned.  They have not only existed, but been successful for over 100 years!  That kind of longevity is something you just don’t see much of anymore, but especially when the product remains (relatively) unchanged.  Of course Coca-Cola has introduced new products, advertising designs, and marketing campaigns, but with the exception of removing cocaine, the original formula has remain relatively intact since its inception.  I suppose we could expect a company that has been around as long as Coke to continually improve its supply chain, but I think it’s great that they share this time tested process with other entities for the betterment of others, in this case, people living in remote areas of Africa in need of malaria medication.

What are other examples of improving a supply chain management process having a direct and positive impact on you or someone else’s life?

Source:  “Home – The Global Fund to Fight AIDS, Tuberculosis and Malaria.” The Global Fund to Fight AIDS, Tuberculosis and Malaria. N.p., n.d. Web. 14 July 2012. http://www.theglobalfund.org/en/.

Home Depot Margins Higher Now Than Before Housing Crash – Thanks Logistics!

Posted on by kathrynb301s12
After over 30 years in business Home Depot admitted their supply chain processes were not a priority for many years. The main priority was expanding the business. When the housing market crash began in 2006 they knew they had to shift their focus. As Home Depot CEO Frank Blake explains, “A downturn is a terrible thing to waist.”

Most Home Depot stores are large warehouse stores with ample extra room for inventory and storage, but they began opening smaller stores in smaller markets that could not hold the same amount of inventory. This lead to stock-outs and unhappy customers. They realized it was time they completely changed their supply chain processes starting with centralizing operations by rebuilding their distribution process. Before 2006 only 30% of the orders were store-centric, while managers made 70% of the orders. The transportation model had its own similar shares of changes to be made. They started with the construction of 24 new rapid deployment centers located throughout the country, each would serve about 100 stores. These facilities were to be flow-through facilities for quick cross-docking and little storage. The RDCs allowed their products to be shipped with 24 hours of arrival now. Currently, one third of the RDCs are built and being used. Home Depot is already seeing the benefits.

It seems Home Depot may have chosen the perfect time for their restructuring because now that their new processes are beginning to run the housing improvement and construction markets are growing. Home depot’s margins increased 35%, net income for the fourth quarter increased 32%, and sales rose 6%. Ms. Tome, the chief financial officer of Home Depot, claims the restructuring of their supply chain processes is the reason for these large increases.

Home Depot is not only the leader in the improvement industry, but is the second largest retailer in the country, second to Wal-Mart. Can we expect to see greater growth as the last two thirds of their RDCs are implemented? How can other retailers learn from Home Depot’s changes?

http://topics.nytimes.com/top/news/business/companies/home_depot_inc/index.html

http://www.dcvelocity.com/articles/20090801verticalfocus/

Supply Chain Management

Posted on by jinjinl301s12

Supply chain management is the method for developing the process and the role of the series of enterprises in order to deliver goods and services after production in a manufacturing unit. In relation to the modern day context, a large number of organizations operate their supply chain management independently throughout the same region or beyond the national boundary. There are various functioning areas that have been observed during the process of supply chain management of an enterprise such as, production planning, marketing, manufacturing, sales and distribution to clients or customers along with purchasing activities with other vendors (Chidambaram, Whitman, & Cheraghi, “A Supply Chain Transformation Methodology”). I will provide a brief discussion about supply chain management of Ben & Jerry’s, an American ice-cream manufacturing enterprise along with its transformation methodology of providing their products in the global context.

supply_chain.bmp (420×251)

The organizations in the present day context are highly focused to deliver their offerings according to the desires of the customers due to the immense growth in the communication networks along with changing face of globalization. Therefore, the competition within the enterprises can be considered to be extended globally in the modern business environment (Chidambaram, Whitman, & Cheraghi, “A Supply Chain Transformation Methodology”). The supply chain management system of Ben & Jerry is one of the effective tools for the organization in its endeavor to expand to more than 30 countries of the world. With the concept of effective global supply chain management system, the strategy of Ben & Jerry’s consigns transformation methodology along with making use of appropriate management techniques that help the enterprise to lead among the various competitors around the globe (Ben & Jerry’s, “Company”).

ben-and-jerrys.gif (500×306)

In order to address the transformation related challenges on a global basis, Ben & Jerry’s focuses on various transformation steps for efficient supply chain management around its different units of enterprise. Moreover, the organization sets long-term goals and prepares effective strategies to successfully achieve its objectives along with preparing strategies that result in significant changes in its business environment. The supply chain management of Ben & Jerry’s initiates effective models to be considered as the world class parameters around the different units of the organization in different countries (Ben & Jerry’s, “Company”).

The transformation strategy within the supply chain management system of Ben & Jerry’s has become highly advanced with the usage of technological advancements in their storing and manufacturing process. The organization has already acquired several steps to develop energy efficiency at their various ice-cream processing plants situated in the different countries across the world. Additionally, Ben & Jerry’s had made upgradtion of more than 2 million refrigerated and frozen cases to supply to its retailers and vendors to sell their products. The effective supply chain management strategies and the technological advancements facilitate the company to be regarded as a USD 7.2 billion enterprise by selling ice-cream globally (Environmental Leader LLC, “Ben & Jerry’s May Make Warm Ice Cream to Reduce Emissions’).

Supply chain management of an organization entails the method of delivering the appropriate products to the customers at the right time at the appropriate place. A properly developed supply chain strategy enables to enhance the satisfaction level of the customers, minimize the inventories along with reducing manpower of the enterprises. The appropriate and effective supply chain strategy can assist the organizations such as Ben & Jerry’s to attain the height of helms within the actions of the organization.

WORKS CITED:

Ben & Jerry’s. Company, 2012. Web. 03 Jul. 2012.

Chidambaram Solayappan, Whitman Larry & Cheraghi S. Hossein. A Supply Chain Transformation Methodology. Supply Chain Management, Nov 17-20, 1999. Web. 03 Jul. 2012.

Environmental Leader LLC. Ben & Jerry’s May Make Warm Ice Cream to Reduce Emissions, 2009. Web. 03 Jul. 2012.

 

Apple is Taking Over China

Posted on by jingjingw301s12

 

Throughout this quarter, I have learned how firms keep their OM decision areas in line with their completive strategy. That reminds me a firm from global market and it shows us how they do business in other countries.  This is an example from an IT legend-Apple.

 

 

On September 26th in 2011, Apple opens its first retail stores in Hong Kong and Shanghai. Apple realized that Taiwan, Mainland China and Hong Kong are the great market which has a lot of opportunities to expand Apple businesses. Because in Hong Kong, people have vey high demand of smart phones such as iPhone and most Hong Kong people like the Apple products as much as Americans do. However, there were no any Apple retail stores, so people can only buy the Apple products from other local retailers or online stores. Since Apple has slowed the pace of large-store opening in China because there are too many copycats’ stores in the region. Apple also found some fake retail stores in China, but those stores are still cannot impact the sales of Apple.

However, Apple has competitor such like Sony Ericsson, Samsung are the tough for Apple since they already have large market share in mainland China. Even though Apple is a very large company in the global market; they still struggle to expand their businesses in other countries where have too many competitors. In the economic environment, since the Apple retail stores open in Hong Kong, it affects the resellers businesses. It is because the Apple retail store is too powerful in the market. Therefore, the small businesses may be bankrupt because of the new Apple retail stores opened. Nowadays, Apple is one of the well-known and successful companies in the global market; they created many new products which people would follow their idea to develop their businesses. Apple is an example of licensing strategy. They are using the resources from Hong Kong and China such as human resources; Apple established the factories to produce Apple products in China. Moreover, in the sociocultural environment, Apple has a successful strategy to cater for the Hong Kong culture. Hong Kong people require higher demand of great quality services and problem solving efficiency. Thus, Apple provides fast respond for customers’ problems and quality warranty for any Apple products. The strategy of Apple reflected that they have a great sense of Hong Kong culture. In the economic environment, Hong Kong and Shanghai are the developed cities; there have a lot of opportunities for foreign companies. Since there have intense competitions, foreign companies have to face risks and challenges, but they still stand to reap huge benefits in the future. Apple is the one of the big company that wants to reap the benefits from China market.

If you are an operation manager of a famous firm, how could you expand the business in global market? What issue should you concern about? And what competitive strategy will you apply to the global market but except develops the location/competitive strategy, design of goods and services, supply-chain management and managing the quality of products, what else?

 

Source: The Wall Street Journal by Jason Chow, September 26, 2011
http://online.wsj.com/article/SB10001424053111903703604576588351297817510.html

 

 


 

Who cares about clothes?

Posted on by matthewl301s12

Recently I watched a special on CNBC, called “J.Crew and the Man Who Dressed America.” The special highlights the CEO, Mickey  Drexler, and demonstrates how he transformed the company from a state of free-fall to a booming power-player. In all honesty, fashion doesn’t really catch my eye, but the business of fashion, illustrated through Drexler’s performance, demanded my attention. Drexler took over this company and immediately made quality, supply chain management, and global sourcing critical priorities.

He started diving head first into all of the fine details, even customer complaints, which he sometimes personally takes care of. He takes the mistakes about clothes relayed by the unhappy customers-t-shirts getting holey, sweaters pilling, and actually targets those mistakes and directs his employees to improve upon them. The quality is hand inspected by him, the CEO. He does not just sit in the office somewhere and make decisions about products that he has very little contact with. On the contrary, he is in the store inspecting the product (the merchandise and the store itself) and he knows every single piece of product in each store. He even spends time analyzing with his team on whether to have push or pull doors at the front of the store, before finally settling on the push. Drexler says that 90% of studies show that people prefer a push door to a pull.

Drexler not only works with his suppliers but meets with them in person and inspects their product. He controls the supply chain very tightly and prefers to have the utmost control of both the production and the delivery of the product. J.Crew is a stand alone company that is not sold at department stores, uncommonly at malls and is not conglomerated with other clothes brands, except for its own offshoots. Drexler hand picks the finest fabric from family owned businesses in Italy and then has the fabric shipped to China, where nearly all of the products are assembled before being shipped to the U.S. and Canada. All of the actual design however, is all completely done at J. Crew’s headquarters in Manhattan.

Forever present in all the dimensions of the brand is an attention to detail so strong that it’s difficult not to notice. Not a piece of the company hasn’t been analyzed and rethought and it clearly shows. It’s no surprise that the message that  J. Crew sends does cross industries and it proves that a company must be completely synced with its product, no matter what it is.  As Mickey Drexler says, “Just have huge conviction about what you do…and don’t be afraid.”

 

 

 

 

Do you have a Toyota?

Posted on by Bashayer

Do you remember the Toyota recall in Bahrain? Have you ever thought what really went wrong and why Toyota is recalling those vehicles?

I’ve read an interesting paper What Really Happened to Toyota?  that was analyzing the different recall acts of Toyota which took place in USA due to quality and safety issues. The paper analyzed the main reasons behind such issues as the brand image and sales revenue were severely impacted.

 Toyota and its chain of suppliers had always pioneered quality management methodologies of total quality control since they believed that quality, customer satisfaction and profits are deeply connected. Quality is a major component of Toyota’s strategy and production system, and was always looked at as a role model by other competitors, such as Ford, GE and Honda.

So what really happened that made “Quality” suffer?

The paper states that there are two main reasons behind the quality issues:

  1. Toyota executive management always believed that quality should have a high priority, however, when the new management came in, their focus has changed. The new focus was on rapid growth rather than quality. As Toyota expanded in new markets, from 2003 onward their sales grew faster than the company can manage, and therefore, growth had taken priority over the traditional focus on quality. The decisions were made in favor of meeting sales, cost cutting and profit target while sacrificing product development, supplier management and production.
  2.  The second reason is a result of the increasing complexity of car products due to technological changes. Government regulations on safety, emissions and fuel consumption and the rising customer demands for environment friendly cars with luxury features have all added to the complexity level. This point applies to other car manufacturer as well, but due to the continuous demand and market expansion, Toyota was faced with the challenge of changing its production process to meet the demand of safe, clean, fuel-efficient and comfortable cars.

 

Some of the process change decisions were to compress the lead time between exterior design approval and start of sales to less than 20 months. Another change in process was to introduce an accelerated design cycles that have stressed the development and production systems which have created conditions for quality failure.

 Toyota’s supplier management and its performance were also affected by the above two points. To meet the rapid demand and product complexity, Toyota had to outsource engineers and contract with new suppliers because the current engineers and suppliers were not sufficient. Most of those contract engineers and suppliers were inexperienced with Toyota’s standards and practices, and they were overseas (none Japanese speakers) contacts which had lead to coordination and communication problems.

I think that for any company, risk assessment should be conducted before moving with growth and expansion decision. With Toyota, the quality has suffered because they banded their core values of quality and focused on growth.

In your opinion, what went wrong with Toyota?