The Culture of Quality at Arnold Palmer Hospital Analysis

Discussion Questions

  1. Supply-chain management is the management of the activities that procure raw materials, transform them into intermediate goods and final products, and deliver the products to customers through a distribution system.
  2. The supply-chain function’s role is to help identify the products and services that can best be obtained externally; develop, evaluate, and determine the best supplier, price, and delivery for them.
  3. The objective of logistics is to obtain the efficiency of operations through the integration of all material acquisition, movement, and storage activities in the firm.
  4. Identifies types of supply-chain risk: Supplier failure Logistics and distribution failures Political/regulatory changes Economic/legal changes Natural catastrophes Theft, vandalism, and terrorism
  5. Vertical integration implies that a manufacturer moves backward into purchasing raw materials for components and forward into packaging and distribution. An example would be a coffee blender moving backward by buying coffee plantations and moving forward to develop retail coffee shops.
  6. The three basic approaches to negotiation are The cost-based model. The market-based model Competitive bidding
  7. The adversarial relationship must be changed dramatically to one of trust and the establishment of long-term relationships. To im­plement long-term relationships, purchasers must move to com­municating the broad objective of the firm and the end customer. This usually requires sharing product information and schedules.
  8. There are differences between postponement and channel assembly. Postponement implies that the final product is not assembled until it is shipped, usually with some modular features such as the power system for a printer. However, channel assembly actually moves assembly to the wholesale level where parts are received and assembly takes place. They are related but different.
  9. CPFR, which stands for collaborative planning, forecasting, and replenishment, is another effort to manage/coordinate inventory with members of the supply chain to improve efficiency.
  10. Online auctions lower entry barriers for buyers and sellers, increasing the number of people in the market, typically reducing cost.
  11.  FedEx, UPS, and DHL use the Internet to track and coordinate pickup and delivery. This can facilitate delivery of combined orders at opportune times, improving efficiency for both supplier and customer.
  12. 12 Walmart often uses drop shipping to remove itself completely from the distribution process so that orders from various stores are received by the manufacturer and shipped directly to the store.
  13. Blanket orders are orders that cover an extended order period, say a year, and against which releases are issued against that purchase order. Invoices purchasing merely implies that some other information flow has been developed besides a formal invoice.
  14. Blanket orders can be invoice less purchasing can be part of the blanket order, but they can also be done separately.
  15. An organization moving to JIT deliveries must ensure that the supplier is capable of delivering quality products on time, provide production schedules for their suppliers, examine its layout to ensure that deliveries can move quickly to where they are needed, and train and empower employees to evaluate quality as the product is produced.
  16. E-procurement is electronic purchasing—i. e. , the use of the Internet to buy or sell goods.
  17. Darden finds competitive advantage in the supply chain through a very proactive evaluation, development, and auditing of suppliers. Darden has adequate volume to find and develop suppliers on a worldwide basis and work with those suppliers to provide the quality and timing of deliveries necessary for its customers. Additionally, Darden is large enough that it has developed four different supply chains: one for seafood; one for dairy/produce/other refrigerated foods; one for other food items, such as baked goods; and one for restaurant supplies.
  18. The Supply Chain Council had developed a model, the Supply-Chain Operations Reference (SCOR) model, that is an effort to identify the best practices, process, and metrics in the supply chain. Ethical Dilemma There may be no easy solutions to this dilemma that will satisfy all parties involved. Several points seem particularly relevant:? Framing the issues in terms of short-run cost vs. long-run reputation may add focus to the discussion. Even if the firm is convinced that continuing to offer work for these underaged girls provides the best alternative for them, it may be impossible to effectively relay that message to the general public.
  19. Moreover, can one company affect what it deems to be positive change in another culture halfway around the world? Or will the firm simply lose out to the rest of the competition that is cutting corners and following local practices? Should the firm make a distinction between how it treats boys vs. girls vs. adults? Facing a similar situation in Bangladesh, Levi Strauss part-nered with contractors to continue paying the kids but let them attend school, with the promise of a job upon reaching age 14.

Such tactics would likely be costly in the short run, but if publicized correctly, the public relations impact might provide significant revenue benefits in the long run. Students might generate other creative responses, such as providing onsite educational opportunities.? This may also be great time to discuss and recognize ethnocentric perspective among both students and the public and, in the process, recognize the cultural variables:

  • Some cultures (many of the poor farmers of the world) have children so they can work and help the family.
  • Some cultures (such as America) encourage teenagers to work even to the detriment of schoolwork.
  • Some cultures (such as Germany) think teenagers should be in school or training and not in the regular workforce? This case brings up broader issues regarding any sort of standards of conduct (e. g. , labor, safety, environmental) that a firm attempts to implement worldwide: What should the standards include, how should they be enforced, etc.? End-of-Chapter Problems 11. 1?

This problem provides a good way to:

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  1. get students involved with the real world,
  2. have them interact with members of the existing workforce, and
  3. get them to take a relatively detailed look at supply chains and their relation to corporate strategy. You might consider having students study different stores (Sears, Pizza Hut, and Benetton, for example) in different industries and then compare the results in a class session. Students should identify a number of problems from simple communication, through product valuation, to the selection of virtual partners.

In most cases, similar problems existed in the single-site operation, but operating in a virtual world has at least modified the characteristics of the problem and the environment within which one must work to develop a solution. Baker Mfg. Inc. Net revenue $27,500 Cost of sales 21,500 Merchandise inventory 1,250 Total assets 16,600 (a) (b) Baker is doing better than the industry. It has a turnover of 17.2 versus 13 for the industry and only 7.5% of its assets invested in inventory versus 8% for the industry. Arrow Distributing Corp. Net revenue $16,500

Cost of sales 13,500 Merchandise inventory 1,000 Total assets 8,600 (a) (b) (c) (d)Arrow’s Inventory investment at 11. 6% is not as good as Baker’s, 7. 5%. Arrow’s inventory turnover is only 13. 5 times versus Baker’s 17.2 times.

Note, however, that they are two different industries, and this may be a good place to discuss different performance/standards in different industries. 11. 7 Organic Grocers, Inc. Not as good as industry average of 14.11.8 Mattress Wholesalers, Inc. (a)Weeks of supply last year (b)Weeks of supply this year (c)Yes, Mattress Wholesalers is making progress.

It has reduced inventory from over 10 weeks to less than 10 weeks. Video Case Studies DARDEN’S GLOBAL SUPPLY CHAINS This 11-minute video available from Pearson Prentice Hall is designed to supplement this case and was filmed specifically for this text.

Advantage of the four supply chains: “Smallware” supply chain: Linens, dishes, table and kitchenware, and silverware are purchased, with Darden taking title as they are received at the Darden Direct Distribution (DDD) warehouse in Orlando, Florida. Darden buys in economical bulk quantities and manages the warehouse as well as others might.

From this single warehouse, smallware items are shipped via common carrier (trucking companies) to individual restaurants. The 11 distribution centers in North America are managed by major professional U. S. food distributors, such as MBM, Maines, and Sygma. Frozen, dry, and canned food products are handled economically by these strategically located professional distributors. Darden has sought out and found professional independent suppliers with expertise in the fresh food supply chain (not frozen and not canned), where life is measured in days, not weeks.

This includes dairy products, produce, and meat. This supply chain is B2B. The local restaurant manager directly places orders with these preselected and constantly evaluates suppliers. Darden has developed independent suppliers of salmon, shrimp, tilapia, scallops, and other fresh fish. These suppliers are source inspected by Darden’s overseas representatives to ensure quality. These fresh products are flown to the U. S. and shipped to 16 distributors, with 22 locations, for quick delivery to the restaurants. This supply chain is critical to Darden’s core competence of economical fresh seafood.

Managing four distinct supply chains is a demanding manage- ment task that requires specialized talents, organization, budget- ing, and career paths. Darden has proven that it is up to the task.  Title changes: In the smallware supply chain, ownership changes at delivery to the Darden warehouse in Orlando. The second chain is mixed: For some specialty items, Darden owns them even when stored at the distributor and Darden pays a management fee. For more standard items, title changes at delivery to the restaurant. For fresh food, title typically changes at delivery to the restaurant. In the fresh food supply chain, title typically changes at delivery at the U. S. dock.

There are lots of opportunity for discussion here. For example, the automobile industry develops new and innovative supply chains such as vendor-managed inventory, with suppliers holding title to major subcomponents (modules) until delivery to the assembly line, etc. The major distinction is that the diverse and often perishable nature of Darden’s raw material makes four very different and unique supply chains an economical approach.

Arnold Palmer  Supply Chain

The 8-minute video available from Pearson Prentice Hall is designed to supplement this case and was filmed specifically for this text.

  1.  How does this supply chain differ from that in a manu­facturing firm? At APH, most of the purchases are for supplies (MRO items: maintenance, repair, and operating supplies) rather than for items for resale. Many decisions are made on criteria that put emphasis on factors other than economics—medical outcomes, nurse preference, doctor preference, etc. as they participate in the Medical Economic Outcome Committee.
  2. What are the constraints on making decisions based on economics alone at APH?APH’s Medical Economic Outcome Committee consists of users who evaluate purchases option. However, internal specifi­cations are in part dependent upon nurse and doctor preference that may be hard to quantify in specifications. APH is also a member of the Health Care Purchasing Alliance (HPA), buying at the prices set by the alliance.
  3.  What role do doctors and nurses play in supply chain decisions in a hospital? How is this handled at APH? Doctors can be viewed as the customer or as a member of the decision-making Medical Economic Outcome Committee, with a disproportionate voice in the decision.
  4. Doctor Smith just returned from the Annual Physicians’ Orthopedic Conference, where she saw a new hip joint replace-ment demonstrated. She decides she wants to start using the replacement joint at APH. What process will Dr. Smith have to go through at the hospital to introduce this new product into the supply chain for future surgical use? All such requests go through the Medical Economic Outcome Committee for evaluation of options. SUPPLY-CHAIN MANAGEMENT AT REGAL MARINE The 7-minute video available from Pearson Prentice Hall is designed to supplement this case and was filmed specifically for this text.

An additional technique that might use Regal Marine to improve supply-chain management is to work with personnel agencies as part of the outsourcing, recruiting, and screening process for employees. Additionally, Regal can begin to incorpo-rate suppliers into its schedule to reduce on-hand inventory and related costs. The typical response by members of the supply chain through partnering is to further the understanding of end users’ needs as the suppliers become increasingly integrated through the pur-chaser’s (in this case, Regal’s) customer base.

As they learn more about the end-user, suppliers improve the products in accordance with the needs of those end users. Regal can be expected to develop long-term contracts and integrate suppliers into their strategy, aggregate scheduling, and detail scheduling so they understand Regal Marine’s requirements. Supply chain management is as important to Regal as it is to virtually all manufacturers because a huge amount of Regal Marine’s dollars are spent on purchases. Additionally, the quality of those purchases has significant impact on the quality of Regal’s end product.

Consequently, enhancements in terms of quality, delivery, and price have substantial impact on Regal Marine’s market and bottom line. Regal selects suppliers whose strategy of innovation and quality matches its own.

He benefits of using the Internet for book sales are significantly larger now that books can be downloaded online. Amazon is able to ship some products over the Internet, saving the final shipping cost but changing the nature of its business.

Amazon will be software-intensive rather than book and warehouse intensive. Other downloadable products are software and music. In both instances, Amazon increases the benefits of e-commerce if it either creates CDs or DVDs in response to customer orders or allows customers to download these products. For other products, like toys and hand tools, limited possibilities exist for postponement. The advantages of the Internet for Amazon in those product categories will continue to be smaller compared to physical retail outlets. The Internet can bring several advantages to traditional bookstore chains: Going online allows a bookstore chain to offer the same convenience and variety as its existing operation and at the same time exploit the advantages of e-commerce. Chains can structure themselves so retail outlets carry many copies of best sellers for customers and few copies of low-volume books to encourage customers to browse and make impulse purchases. Terminals or Internet kiosks can be available so customers can order any low-volume book online.

This allows the aggregation of low-volume books at the warehouse. Bookstore chains may also reduce inventory costs by using technology that allows a book to be printed in a few minutes on demand. Traditional bookstores can offer more delivery options: cash and carry, order and pick up at the store, mail from the store, or drop ship from the warehouse or publisher. For those books that the store does not have, but the customer wants to pick up at the store, the chain can ship economically to the store with normal store replenishment shipments.

  1. Dell has used direct sales and build-to-order to: Sell new products and customized PC configurations whose demand is hard to forecast. Increase forecasting accuracy and volume while driving down cost through the use of component standard modules.
  2. Dell has exploited direct sales to speed customer orders, which allows Dell to postpone assembly until the customer has placed the order (build-to-order).
  3. The main disadvantages of the direct sales model are: Dell loses customers who are unwilling to wait 5 to 10 days to receive a PC. Dell does not attract customers who need a lot of education or help. (Dell may be better off letting these “high-mainte­nance” customers go elsewhere. )
  4. Dell does not successfully compete with the retailer who Prentice-Halled PC in stock. But the customer has to go to the store, while Dell customers can order from home via phone or Internet. For customized PCs, Dell is the leader in response time. Many of Dell’s sales are to corporate accounts, where a 5- to 10-day delay is not critical.
  5.  E-commerce allows Dell to improve forecasting and reduce inventories by sharing information throughout the supply chain. This dampens the bullwhip effect. This information sharing reduces costs and improves performances in the Dell supply chain by a significant amount.


  1. Adapted from S. Chopra and P. Meindl, Supply Chain Management, Upper Saddle River, NJ: Prentice-Hall, 2001; 403–406; New York Times (January 21, 2002): C-3; and APICS—The Performance Advantage (May 2001): 34–38. DELL’S VALUE CHAIN

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