1. LOG 408: Global Logistics Management
Lecture 13: Cases on Supply Chain Design

2. Key Points of Lessons in Session 3
Various supply chain security initiatives
Supply chain risk management: various concepts, risk classifications
Common approaches to supply chain risks (controllable versus uncontrollable)
Various terms on the sustainability in global SCM
Three approaches to improve the sustainability of logistics: supply chain redesign, promoting scale, and enhancing efficiency

3. Case Presentation 6: Wal-Mart International (1)
Overview:
Wal-Mart is very successful in the US, but going to overseas are not so easy
It faces different customer behaviors and perspectives
Q1: Other than a need to expand, what other reasons would Wal-Mart have for opening stores globally?
Domestic revenues do not increase as expected. Wal-Mart intends to achieve a high growth rate by expansion
Carrefour SA has already a strong presence in the South American market. Wal-Mart had to respond
Foreign operations would also help Wal-Mart identify potential new low-cost suppliers

4. Case Presentation 6: Wal-Mart International (2)
Q2: Why would it be beneficial for Wal-Mart to have suppliers in different countries?
Having many suppliers in different countries would help Wal-Mart to hedge against cost increases due to economic and/or political conditions in a given country
Q3a: Why would Wal-Mart want strong centralized control of its stores?
Strong centralized control is helpful for aligning local operations with the overall corporate objectives as well as leveraging Wal-Mart’s domestic expertise

5. Case Presentation 6: Wal-Mart International (3)
Q3b: Why would Wal-Mart want strong local control of stores?
Local control can help in the analyzing customer preferences and understanding cultural differences
Q4: What pitfalls and opportunities will Wal-Mart face over the next few years?
Political instability is a major concern in South American countries
Local currency depreciation, may causing American exports less competitive compared to their local competitors

6. Case Presentation 7: Contamination in agricultural SC (1)
Overview:
A food contamination event in 2002 that created a great disturbance to Western Australia grain industry , almost lost the Japanese market
Q1: What factors led to the breakdown of relationship between SC members?
Operational factor: cleaning/hygiene
Communication factors: importance of customer demands (markets to grain handlers to port operators)
Cultural factor: bulk handlers were insensitive to Japanese customers’ needs

7. Case Presentation 7: Contamination in agricultural SC (2)
Q2: What SCM processes can be implemented to avoid the second contamination?
Collaboration among all members
Resilient SC after the disturbance, having better collaboration afterwards
Q3: Importance of collaboration in food SC
Not underestimate the value of the chain
Safety is particularly important
No single player can manage the whole chain
Q4: Robust quality of the grain SC
Grain storage system
IT and better physical storage facilities

8. Case Presentation 8: Great Inventory Correction (1)
Overview:
Various IT companies learned lessons from the burst of the “dot.com” bubble in late 2000
Q1:
Altera is moving from a push-based supply chain strategy to push-pull or pull strategies to reduce inventories and better to match demand and supply
Q2:
The benefits should offset the disadvantages
It makes use of risk pooling for mainstream products, which would reduce safety stock levels and inventory holding costs.
For other products, Altera plans to build-to-order, and avoid inventories altogether

9. Case Presentation 8: Great Inventory Correction (2)
Q2 (Cont.):
The cost would be the lost of the benefits of economies of scale to some extent
Q3:
Altera's customers should be happy in general.
For most products, lead times will decrease, and service levels will increase
Some customers may experience longer lead times for products that were usually in stock before
Q4:
Flextronics sees the aggregate demand over a large customer base. It can use its position for VMI

10. In class quiz: Sudan Red 1 Crisis
How would you classify the risk of food contamination, known-unknown or unknown-unknown? Why?
Known-unknown as it is a known threat though the scale and impact are unknown.
What supply chain risk control strategy is used in the Sudan red 1 crisis? Is it effective?
Sense and responding, very effective.
What requisites are necessary for the food supply chain to respond effectively to such a crisis?
Close collaboration, high visibility along the chain, trust in information sharing, sharing the culture for high food safety standard
The food recall in this case is very costly. Do you think it is a proper response or a bit over-reaction?
A proper response as reputation is essential in food SC

11. Makeup quiz: The Medical Devices Company (MDC)
Please explain the relationship between service level and inventory cost for single product. Why did MDC experience both poor service and high inventory cost?
What supply chain strategy at firm level would you suggest to MDC to improve service level while could reduce its inventory cost at the same time? What are main implementation difficulties for this strategy?
What operational solution would you suggest to MDC to maintain certain service level while reducing its inventory cost? What are main implementation difficulties for this solution?

12. Review of the class
Three sections of the class, lesson 1-5, lesson 7-9, lesson
For each lesson, a good means for review is to study the first and last slides in each lesson
The first one (key points of last week) is a summary of previous week lesson
The last one (questions to think) is review questions for the week lesson
Among all lessons, Lesson 3-5, 7-9, and 11 are more important than the rest
Please also pay attention to quantitative questions in Lesson 8 and 9
Four main questions (one quantitative and three qualitative) in addition to five multiple-choice questions

13. Questions to think (L3)
What are the most frequently reported problems in outsourcing? How would you argue with the youtube video on “outsourcing is bad”?
Use the framework to explain
Discuss the appropriate sourcing strategy for a component with low customer importance, fast clockspeed, and no competitive advantage. Should it be made in-house or outsourced?
Outsourced

14. Questions to think (L4)
What leads to the prisoner’s dilemma in supply chain collaboration? How could a firm manage to solve the dilemma to reap the collaboration fruits?
See the related slides in Lesson 4
Recall the story of Spartan Stores’ failed VMI effort (slides 22 to 23). Discuss how Spartan might have done things differently in order to help the program succeed.
Do it in a smaller scale for solving differences and building trust

15. Questions to think (L5)
What is an example of a product with a primarily push-based (lean) supply chain? A product with a primarily pull-based (agile) supply chain?
Answer may vary.
Is it possible for the appropriate supply chain (lean, agile, or leagile) to change during a product’s life cycle? If not, explain why? If it is possible, what are some specific examples of products for which the appropriate supply chain changed?
Yes, early product life agile, mature lean.
Linking supply chain with product types, which supply chain is more suitable for functional products? Which for innovative products?
Lean for functional products and agile for innovative products.

16. Questions to think (L7)
What are economy of distance and economy of scale? Which factor affects their marginal benefits? Do all transportation modes have the same marginal benefits? Why or why not?
See the related slides in Lesson 7, fixed cost for various modes, no.
Why do we say transportation is a derived demand? How does it have impact on transportation infrastructure projects?
See the related slides in Lesson 7
What is factory gate pricing? What are its benefits? Which types of supplier—retailer power structure would make it easier to work out? How is it different from VMI?
See the related slides in Lesson 7. Good visibility & optimization potential. Strong retailer power. VMI ,ore applicable for strong supplier power.

17. Questions to think(L8)
What does the transportation problem involve finding: a) highest cost-plan b) lowest cost-plan c) closest destinations d) farthest destinations e) none if the above B)
What is logistics service providers (LSPs)? What is third-party logistics (3PLs)? What is 1PL, 2PL, and 4PL?
See the related slides in Lesson 8
Why is the third-party logistics industry growing so rapidly?
Similar to the trend of outsourcing in general, focusing, cutting cost, & flexibility

18. Questions to think (L9)
Explain how a reduction in lead time can help a supply chain reduce its inventory buffer without hurting customer service.
Help to reduce cycle stock (directly) and safety stock (indirectly through better forecast accuracy)
Why is Amazon.com able to provide a large variety of books and music with less safety inventory than a similar bookstore chain selling through retail stores?
Centralization of the inventory, pooling effect
How does part commonality or delayed product differentiation reduce inventory holding?
Reduce the parts variety.
In the context of postponement, how might downstream distribution centres be viewed as value-adding?
Assembling or repackaging at DCs supports postponement

19. Questions to think (L11)
Why is a robust supply chain not necessarily a resilient supply chain?
See the related slides in Lesson 11
You are the CEO of a small electronics manufacturing firm that is about to develop a global strategy. Would you prefer a speculative strategy, a hedge strategy, or a flexible strategy? Would your answer to this question change if you were the CEO of a large electronics firm?
Hedge for a small firm, and flexible for a large one.
Outline how risk might be dealt with in levels 1, 2 and 3 of Peck’s model of the supply chain.