1. Amazon. com, Peapod, Dell, and many furniture manufacturers use push-pull supply chain strategies. Describe how each of these companies takes advantage of the risk-pooling concept. To better understand the strategies used by the three (3) companies and furniture manufacturers, the definition of Push or Pull is established below: Push Strategies – when the manufacturer uses its sales force and trade promotion money to induce intermediaries to carry, promote, and sell the product to end users.
Pull Strategies – when a manufacturer uses advertising and promotion to persuade consumers to ask intermediaries for the product thus inducing the intermediaries to order it. The Figure below illustrates the Push-Pull bounderies of the three (3) companies and furniture manufacturers: As the services and products needed by the Customers (Pull) flow along the pipeline, they will be sent (Push) to the Furniture Comapanies for Production. This process will be the same for Dell in assemblying their Computers, Amazon. com and Peapod will act as distributors using the
2. Explain how demand for a product like Television can be shaped? How does this compare to ways in which demand for a product like Canned Soup can be shaped? The demand difference between the Television and Canned Soup is both variable and complimentary. Televisions, in a very global and technology based environment, the Television had become a commodity comparable to rice, best thing is – television don’t expire. Mass Media, Politics, Health, Sports, Emergency Management and Education can now be done using the Television – almost all household, commercial and work place has one.
Manufacturers are now fighting for the most advanced technology available to produce the most economical and wide platform. The television does not choose race, color or location – it basically became a requirement. The need of man for Entertainment and Information is what fuels the continuous development of television – he must have one, man demands it. From CRT to Plasma to LED’s – Samsung, LG-Philips, Sharp, Sony, TCL and JVC are in constant competition for the widest, thinnest, lightest and cheap television.
Canned Soup, in most part of Asia just like Japan, Vietnam or China and even in the Philippines where food is cooked and eaten fresh most often, the demand for canned goods such as soups are small. In the Philippines, as an example, canned goods are only eaten during emergencies (i. e. in evacuation sites) or during rush hours (no time to cook) – but, it’s very different in the US, where everyone is rushing or working double jobs, everything must be instant. Because of this reason, the demand must be developed based on type of packaging, cooking process, content and flavor.
Demand can be based on Beliefs (i. e. Halal), Regional Location (i. e. Asia or Americas) and Specifics Requirement (i. e. Military). Creating the demand for Canned Soup is different than creating the demand for Televisions. Although, there are also technical and social researches made for food products, creating the demand for television is easier. The audio and visual requirements are different compared to taste and nutrition. BUT – both can complement one another, when advertising food, television is better compared to radio or paper.
Isn’t it delicious to see a smoking, thick and flavored soup in your television? 3. You are the CEO of a small electronics manufacturing firm that is about to develop a global strategy. Would you prefer a speculative strategy, hedge strategy, or a flexible strategy? Would your answer to this question change if you were the CEO of a large electronics firm? 4. Discuss a recent example of an unknown-unknown risk that proved damaging to a supply chain. Explain especially how each of following strategies might have mitigated this risk; a. Invest in Redundancy. b. Increase velocity in sensing and responding. . Create an adaptive supply chain community. 5. In the case of Wal-Mart Changes Tactics to Meet International Tastes answer the following questions: a. Other than need to expand, what other reasons would Wal-Mart have for opening stores globally? If there’s an objective why the predecessors of Sam Walton (founder of Wal-Mart) decided to go out of its comfort zone in the US is diversity – to diversify its market. This strategy is important because of 12 very important reasons: This strategy is important because it (1) Reduces risk against poor market conditions in the US.
For example, over the past few months America’s corporate world has lost half of its assets due to poor economy which can be a sign of recession. In condition like this, many consumers and business will cut down on spending. The effect of cutting spending can be felt by many organizations, including big retail giant Wal-Mart. The point is that if the Wal-Mart invest everything in to one market, then it would have greater risk should that market were to perform poorly in years to come. On the other hand, if Wal-Mart chooses to operate globally in to different markets, than the investment is more diversified and so the risks are far less.
Another reason Wal-Mart have for operating globally is to (2) Decrease if not eliminate competitions. Wal-Mart is the biggest retailer in US. However, it is not the largest in other part of the world. This would mean that there are other companies that are operating in other part of world which Wal-Mart could penetrate that market and gain more market share. This is important because, if Wal-Mart does not penetrate other markets, it will have to face even tougher competition if that competitor were to start investing in market in which Wal-Mart operates.
Some of the other reasons Wal-Mart may have in opening stores globally is to reach out to more (3) Customers, (4) Increase Revenue, (5) Increase Operating Expenditure, (6) Increase Bottom Line, (7) Add More Values, (8) Diversify Market Base, (9) Take Advantage of Low Cost Countries, (10) Utilize Effective Labor Sources from Around the World, (11) Develop Unique Logistics Network, and (12) Develop Optimal and Efficient Supply Chain Across Global. b. Why would it be beneficial for Wal-Mart to have suppliers in different countries? There are two (2) obvious advantages. 1) A company or firm must always be creative in improving their bottom line – to have supplier base across different countries can allow Wal-Mart to buy from low cost country and to take advantage of savings/profits that come out of it. This strategy is almost a requirement for multi-national companies that requires 24/7 manufacturing and critical services. For example, Wal-Mart could implement strategic sourcing program where it would buy goods from low cost country such as China then import them to Industrial country such as US or Canada.
Another benefit for having suppliers in different countries is (2) to increase potential source region which can play important role in creating optimal logistics network. For example, if the particular ITEM-A can be source from supplier X located in USA and same ITEM-A can also be source from supplier Y located in Canada. Depending on where customer is located, logistic team can select the ITEM-A from either supplier. Obvious choice would be the one that is closest to the supplier. This way the freight cost, and transit time are at optimal.
In other word, Wal-Mart can simplify its offering to customer my buying from supplier in same region. c. Why would Wal-Mart want strong centralized control of its stores? Why would Wal-Mart want strong local control of stores? A company or firm like Toyota, Mitsubishi and other Japanese car manufacturers centralized controls, monitoring and decision making fro better management – Wal-Mart is in the same boat. Centralized control of its stores allow Wal-Mart to obtain demand forecast to its warehouse and to its suppliers giving ability adjust production and inventory to meet the demand.
For example, the point of sale system Wal-Mart uses collects and provides data to its warehouses – this is also know as Data Mining method (used to better monitor and control flow of materials and other resources). The warehouse then has ability to collect and extract data from each store on its entire inventory, forecasts, demographic, markdown, returns and market basket by item and day. The warehouse not only contains data of Wal-Mart but its competitor as well. One of the key elements here is that these data are accessible by Wal-Mart employees and over 3000 and growing approved suppliers.
End result is that both Wal-Mart and its suppliers are able to save million of dollars on inventory and reduce cost by forecasting accurately. As a result of the system optimization using data mining software, Wal-Mart has achieved increased accuracy in forecasting process and competitive advantage in the retail industry. One challenge of multiple sites is to maintain the standard of service where customers are accustomed and used to. This is the cookie cutter of the loyal patrons to the we-can-do-that companies or stores.
Strategies can easily be deployed or modified; information can be acquired or provided; and employees can be managed well if there is better control of local outlets. d. What pitfalls and opportunities, other than those mentioned in this case, will Wal-Mart face over the next few years? On the next few years, Wal-Mart will face a tremendous challenge on all of its outlets. Many consumers and organizations are cutting cost to meet the budget and improve their bottom line. This will have a big impact on Wal-Mart as it makes up roughly 4% of U. S. gross domestic product. In coming years, Wal-Mart may end up closing some of its tores (i. e. Japan) and it may even decrease number of planned new outlets. In addition, Wal-Mart may even face higher operating cost due to increase of oil prices due to the political uncertainties and violence in the Middle East. On the bright side, Wal-Mart could possibly invest in other countries such as in South America. In the next few years, Wal-Mart could turn thing around and become the largest retailer in South America. In addition, Wal-Mart could also invest in other regions of world such as Europe, Africa and even Asia (China in particular) where the population is all time high.
As the globalization becomes important, Wal-Mart must pay closer attention to its market base and its international business. 6. How does the proliferation of products, models, and options make the supply chain more difficult to manage? 7. How do standardization strategies help managers deal with demand variability and the difficulty of making accurate forecasts? 8. You are the CEO of a medium-sized apparel manufacturer, and you are considering a mass customization strategy for some of your products. How will you decide which, if any, of your products are appropriate candidates for mass customization? . In the case of Starbucks Economics: Solving the Mystery of the Illusive Short Cappuccino, answer the following questions: a. Why do companies like Starbucks try to differentiate between different customers? Economy. Starbucks had to maximize its profit; it can only do this by taking advantage of the customers knowledge or the lack of it. Not all those who enter the doors of Starbucks is a coffee lover, not all those who goes to Starbucks knew the products they offered – they only rely on what’s written or suggested to them by colleagues or by the baristas.
Cheap products are less offered so that high profit can be gained on high value items. Different treatment is done to every type of customers. For the Short Cappuccino, one will not be able to see and taste its secret until you look or in this case order for it. b. How can other companies do this? What are the dangers of doing this? Some companies are creative in differentiating and taking advantage of the customer’s knowledge, attitude and financial capability.
They change packaging or chose less inviting locations in the groceries or supermarkets, reduced assembly parts and minimize advertisement of product that have less cost and front lined only those that can provide high profit margin. This method may alienate buyers or customers – dissatisfaction on the products may also arise. c. How can a firm take advantage of the fact that different customers are willing to pay different amounts for the same products? d. What are manufacturers trying to achieve by offering rebates?
If all of the rebates are redeemed, is it still worthwhile to manufacturers to offer them? To retailers? e. What are the firms trying to achieve by controlling the price? f. How can dynamic pricing help firms to efficiently utilize capacity? g. What lessons can firms draw from the success of airline revenue management? 10. Consider dynamic pricing strategies and their impact on profit. Explain why dynamic pricing provides significant profit benefit over (the best) fixed-price strategy as: a. Available capacity decreases. b. Demand uncertainty increases. c. Seasonality in demand pattern increases.