1. Amazon. com, Peapod, Dell, and various furniture manufacturers employ push-pull supply chain strategies and leverage the risk-pooling concept. In order to comprehend the approaches employed by these companies and furniture manufacturers, it is important to first define Push or Pull as follows: Push Strategies – where the manufacturer utilizes its sales force and trade promotion funds to incentivize intermediaries to stock, market, and sell the product to end users.
Pull Strategies – involve the use of advertising and promotion to convince consumers to request a product from intermediaries, thereby encouraging the intermediaries to place orders for it. The figure below demonstrates the boundaries between the push and pull approaches utilized by three furniture manufacturers. As customers’ demands for services and products (pull) move through the pipeline, they are sent (push) to the furniture companies for production. This method is also applicable to Dell’s computer assembly, while Amazon.com and Peapod will serve as distributors.
2. Discuss how the demand for a product such as Television can be influenced. How does this differ from the ways in which demand for a product like Canned Soup can be influenced? The demand for Television and Canned Soup is both dynamic and interconnected. In today’s highly interconnected and technologically-driven world, the Television has become a staple, much like rice, with the added advantage of not expiring. Various factors such as Mass Media, Politics, Health, Sports, Emergency Management, and Education have now become accessible through the Television, making it a ubiquitous presence in households, businesses, and workplaces.
Manufacturers are currently competing for the most advanced technology to create a cost-effective and versatile platform. Televisions are not selective based on race, color, or location; they have become a necessity. The desire for entertainment and information drives the ongoing evolution of televisions—a demand that cannot be ignored. Samsung, LG-Philips, Sharp, Sony, TCL, and JVC are in constant rivalry to produce the widest, thinnest, lightest, and most affordable televisions, transitioning from CRT to Plasma to LED’s.
Canned Soup has a small demand in most parts of Asia, including Japan, Vietnam, China, and even the Philippines where fresh food is usually preferred. In the Philippines, for instance, canned goods are only consumed during emergencies or when there is no time to cook. However, the situation is very different in the US where people are always rushing or juggling multiple jobs, leading to a need for instant solutions. Consequently, the demand for canned soup in the US is influenced by factors such as packaging, cooking process, content, and flavor.
Demand for Canned Soup and Televisions can be generated based on different factors. Beliefs, such as Halal, regional location (Asia or Americas), and specific requirements (such as military) can drive the demand for these products. However, creating demand for Canned Soup is not the same as creating demand for Televisions.
While technical and social research is conducted for both food products and televisions, generating demand for televisions is relatively easier. This is because televisions have specific audio and visual requirements, whereas food products like soup are primarily associated with taste and nutrition.
However, despite their differences, advertising food using television as a medium is more effective compared to radio or print media. Both Canned Soup and Televisions can complement each other in advertising campaigns.
Wouldn’t it be great to see a rich, smoky, and flavorful soup on your TV? 3. As the CEO of a small electronics manufacturing company planning a global strategy, would you prefer a speculative, hedge, or flexible approach? Would your response change if you were the CEO of a large electronics company? 4. Share an example of a recent unknown-unknown risk that caused damage to a supply chain. Explain how the following strategies could have reduced this risk:
a. Investing in redundancy.
b. Increasing the speed of sensing and responding.
c. Creating an adaptive supply chain community.
5. When considering Wal-Mart’s shift in tactics to accommodate international tastes, answer these questions:
a. What are other reasons besides expansion for Wal-Mart to open stores globally? If there was one objective why Sam Walton’s predecessors decided to step out of their comfort zone in the US, it is diversity – diversifying their market is essential for 12 significant reasons: It reduces the risk associated with poor market conditions in the US.
America’s corporate world has experienced a 50% decline in assets over the past few months, possibly indicating a recession. During such times, both consumers and businesses typically reduce their spending, affecting various organizations like Wal-Mart. The key is that if Wal-Mart chooses to focus all its investments in one market, it would face greater risk if that market underperforms in the future. On the other hand, expanding globally across different markets would diversify Wal-Mart’s investments and result in lower risks.
Wal-Mart operates globally to diminish competition by entering markets where it is not the largest retailer. Although Wal-Mart holds this title in the US, other regions have companies that could pose a challenge to its market share. It is vital for Wal-Mart to expand into these markets, as failing to do so may result in facing heightened competition if rivals choose to invest in the same market.
Opening stores globally allows Wal-Mart to reach more customers, increase revenue and bottom line, add value, diversify market base, take advantage of low-cost countries, utilize effective labor sources worldwide, develop a unique logistics network, and establish an efficient global supply chain.
In addition to these benefits, having suppliers in different countries provides two advantages for Wal-Mart. Firstly, it enables the company to buy from low-cost countries and benefit from the associated savings and profits. This is crucial for multinational companies with continuous manufacturing needs and critical services. For example, implementing a strategic sourcing program would allow Wal-Mart to purchase goods from China at a lower cost and import them into industrial countries like the US or Canada.
Having suppliers in different countries provides additional benefits such as increasing the potential source regions which can contribute to the creation of an optimal logistics network. To illustrate, let’s consider ITEM-A, which can be sourced from supplier X in the USA or supplier Y in Canada. Depending on the customer’s location, the logistics team can choose to source ITEM-A from either supplier. It is logical to select the supplier that is geographically closer, as this choice helps minimize freight costs and transit time.
To put it differently, Wal-Mart can streamline its customer offerings by purchasing from suppliers in the same region. Why does Wal-Mart desire strict central control over its stores? Why does Wal-Mart also desire strong local control over its stores? Similar to Toyota, Mitsubishi, and other Japanese car manufacturers, Wal-Mart centralizes control, monitoring, and decision-making for enhanced management. Centralized control over its stores enables Wal-Mart to receive demand forecasts for its warehouse and suppliers, allowing them to adjust production and inventory accordingly to meet this demand.
The point of sale system used by Wal-Mart collects and shares data with its warehouses. This process is known as Data Mining and it helps to monitor and control the flow of materials and resources. The warehouses have the capability to gather and analyze data from every store, including information on inventory, forecasts, demographics, markdowns, returns, and market basket by item and day. In addition to Wal-Mart’s own data, the warehouses also have access to data from competitors. These data are accessible by over 3000 approved suppliers and Wal-Mart employees.
The end outcome is that both Wal-Mart and its suppliers can save millions of dollars on inventory by accurately predicting future needs. The implementation of data mining software has optimized the system, resulting in improved forecasting accuracy for Wal-Mart and providing a competitive edge in the retail industry. Maintaining a consistent level of service across multiple locations is a challenge, as customers have come to expect a certain standard from loyal companies or stores.
Enhancing control of local outlets is crucial for effectively deploying or modifying strategies, acquiring or providing information, and managing employees. However, Wal-Mart will encounter various challenges and opportunities in the future.
A significant challenge for Wal-Mart stems from cost-cutting measures adopted by consumers and organizations, which could impact all its outlets. Given that Wal-Mart contributes approximately 4% to the U.S. gross domestic product (GDP), this trend will significantly affect the company. It may result in store closures, like those in Japan, as well as a reduction in planned new outlets. Additionally, escalating oil prices due to political uncertainties and violence in the Middle East might lead to higher operating costs for Wal-Mart.
On the other hand, there are also growth prospects available to Wal-Mart. The company has the potential to invest in other countries, particularly South America, with the aim of becoming the leading retailer within that region over the next few years. Moreover, considering regions with booming populations such as Europe, Africa, and China could provide another investment opportunity for Wal-Mart.
Wal-Mart must pay closer attention to its market base and international business due to the growing significance of globalization. The management of the supply chain presents challenges because of the abundance of products, models, and options. Managers implement standardization strategies to address demand fluctuations and enhance forecast accuracy. For a CEO of a medium-sized apparel manufacturer considering adopting a mass customization strategy, it is crucial to identify suitable candidates for this approach. Starbucks maximizes profits by leveraging customer knowledge or lack thereof through differentiating between customers based on economic factors. Not all Starbucks visitors are coffee enthusiasts; many rely on recommendations or suggestions from colleagues or baristas because they have limited product knowledge.
Companies employ a tactic of reducing the number of inexpensive products to increase profits from high-value items. Moreover, they treat each customer category differently. An illustration of this is the Short Cappuccino, which only discloses its secret upon ordering. While other companies can adopt this method, there are potential risks involved. Certain companies excel at distinguishing and leveraging the customer’s understanding, mindset, and financial capacity.
The firm can optimize its profitability by making adjustments in packaging and location choices within groceries and supermarkets, while also reducing assembly parts and minimizing advertisement expenses for low-cost products. However, this approach may potentially alienate customers and result in dissatisfaction with the products. Additionally, the firm can explore the opportunity to cater to varying customer price preferences. Furthermore, manufacturers offer rebates in order to attain specific objectives.
If all of the rebates are redeemed, is it still worthwhile for manufacturers to offer them? How about for retailers? How do firms benefit from controlling the price? In what ways does dynamic pricing help firms make better use of their capacity? What can firms learn from the success of airline revenue management? Consider the impact of dynamic pricing strategies on profit and why it provides more profit benefit compared to the best fixed-price strategy when: a. Available capacity decreases. b. Demand uncertainty increases. c. Seasonality in demand pattern increases.
