Shaun Hutchings Professional Blog

Negotiation Analysis

2010-03-29T10:14:00.000-07:00

CASE STUDY: Negotiation Analysis: An Introduction by Michael Wheeler

In your own words, what is BATNA?

BATNA is an acronym for Better Alternative To a Negotiated Agreement. In my own term that means the choice that an individual has to make during a negotiation to either accept the terms of the agreement or to ‘walk away’ or in other words pursue a different course. You can also call it plan B, your back up plan, or what you can do if things go sour. Sometimes your BATNA can be really good but you’re trying to get the best out of your current negotiation and sometimes your BATNA can be really bad and you’re hoping negotiations will go well so you don’t have to resort back to your BATNA.

In your own words, what is ZOPA?

ZOPA stands for the Zone of Possible Agreement. In my own words that means that in regards to money negotiations there is a range whereas if the contract is negotiated within that range then they will walk away with a benefit. Anything higher or lower than that then the contract is better off null and void. Usually the lower number is the lowest number the supplier or I should said the seller is willing to set the contract at without walking away. On the other end the higher number is the highest the buyer is willing to pay before they are willing to walk away. In the ZOPA range there is no correct answer but usually the contract falls within that range and both parties walk away with some benefit. Usually when the ZOPA does not exist (meaning the lower number is higher than the higher number) is when both parties are not willing to budge and they both walk away from the contract and it is never finalized.

How will you become a better negotiator after reading this article?

After reading this article I am aware of several different aspects of a negotiation and the more you understand about the negotiation process the better negotiator you can become. Some of the aspects covered in the document that where important to understand was:

1. BATNAs and ZOPA and other terminology and acronyms of negotiation

2. Parties and what different parties are within a negotiation

3. Interests or fundamental needs of both parties

4. Value creation within a negotiation and who will likely get the value

5. Barriers within a negotiation that may prevent an agreement or conclusion and how to overcome such situations

6. Power within a negotiation and the influence that different parties control during the process

7. Ethics of a negotiation and what is the right thing that should be done.

All these things are vital in a negotiation and in this article or case study it describes all of these core components of a negotiation. With that knowledge you can better understand a negotiation and so you can be on top of the negotiation process and not be taken advantage of or leaving with benefits and understandings.

Lead Time Stretch Issue

2010-03-09T09:02:00.000-08:00

How can you PROACTIVELY prevent lead times from stretching in a situation like the one experienced in the SC Planning Game? This question should require much more time thinking and pondering than it does writing. Be sure to include in your response a discussion of WHY you your solution(s) would actually prevent lead time stretches in a real-life scenario like this.

I think that one of the best ways to insure that lead times do not stretch to an unhealthy amount for company is to work out a deal with the supplier before something like this happens. When I say work out a deal it could be in many forms from supplier management with report cards and a grading system to make sure the supplier is keeping it end of the bargain. Also things such as review meetings especially with executives to make sure they are both on the same page. And other resources we learned in class how to manage and work with a supplier. One of the biggest things I feel that will prevent this elasticity in lead times is within the contract that is drawn up with the supplier in the very beginning. Contracts legally bind a supplier and your company to keep their end of the bargain. With this legal bind this causes extra motivation to fulfill and complete their portion of the contract.

A good contract will contain the following:

· Agreed lead times for the delivery of specific orders

· Supplier bearing the cost of late/delayed shipments

· Supplier bearing the cost of goods damaged en route

· Advance notice of product shortages

· Advance notice of discontinued items

· Advance notice of product upgrades

· Advance notice of price changes

In a contract the biggest thing is to guarantee delivery time. Sometimes suppliers will make up unrealistic promises with their lead time to get your business, others may be hesitant and not want to close the deal with you because of the fear of not being able to fulfill the quoted delivery times. But I feel it may be important to pay a little extra to ensure that the lead times do not stretch because in the long run it may save thousands, even millions of dollars.

The reason why this would protect the system from lead time elasticity is because in a contract you can state that a supplier must be able to deliver their product within a certain period. You can be reasonable so they would be more likely to work with you but at the same time you need to calculate when the lead times start to be detrimental to the company. And when the supplier promises (in writing in the contract) to complete orders within that time they are more likely to push your orders through. Especially if you have something in the contract (like stated above) that the supplier would bear the cost of late/delayed shipment or products. This means if the lead time stretches above the contracted time allotment and demand plummets and during that time, the supplier would eat that cost of goods because of the late delivery times. This will protect you from having too much inventory like in the supply chain game. That entire inventory would then be the suppliers issue rather than yours. And suppliers do not want to end up with a ton of extra inventory or a ton of extra cost for longer lead times so they will do everything in their power to complete those lead times. This may fix the problem in the long run (meaning having too much inventory at the end) but this may not fix the problem that if demand is increasing and your supplier can not keep up with the demand then you just loose demand. You may place something in the contract too in regards to this issue but you have to choose your battles. You may not be able to win everything when you’re dealing with contract negotiations. So figure out what is more important to you and stick to your guns saying that you will not budge on this for lead time guarantee.

Freqon-NorduAlu Case

2010-03-09T09:00:00.000-08:00

What is the root cause problem between Freqon and NorduAlu? Please be specific and thoughtful.
The root cause of the problem between Freqon and NorduAlu was the supplier relationship deteriorated between the two. When they first started their relationship they had to develop a strong relationship to develop working products together. They had joint projects running where both companies worked together in Kaizen projects which would benefit both companies and find ways to cut cost. They had an open channel where the flow of information flowed freely and openly so that both companies could benefit from this. The engineers work with the engineers at the other company to share ideas and problem solve together. They had meetings constantly where they reviewed what was good and what needed improvement, but it was a very relaxed atmosphere where both companies felt comfortable with each other. Freqon was aiding NorduAlu in developing new machinery and technical capabilities to improve their manufacturing. Freqon was able to supervise NorduAlu without hostility but they where there monitoring and helping them to make sure they were achieving. And overall they had such a good relationship that they knew how each other worked and where they stood with each other, they had great communication. When one aspect of this equation failed for faulted by whatever reason another one was affected, and then another and another until the entire structure caved in on itself. The main thing was Freqon working with NorduAlu. Freqon did a couple mistakes where they found a new supplier without consulting NorduAlu, or developing new products without any Kaizen efforts with them as well. This kind of started the spark or the wedge between the two. If Freqon worked with NorduAlu, like it was proven in the past and worked, they could have developed new working products with NorduAlu and consulted them about cost reduction. But Freqon decided to pursue other avenues which caused NorduAlu to pursue other avenues until they both got to a point where they did not want to fix the relationship they had because both had other options.
If you were in charge of managing NorduAlu for Freqon, and discontinuing business with NorduAlu is not a short-term viable option, what supplier management tools would you utilize to manage NorduAlu and why? Think back on the tools we've discussed in class.
I would try and start back at square one. Yes the relationship may be damaged and it may take some time to repair but it’s never too late to start. We could use some of the same tactics that worked in the past. Such as join Kaizen projects and collaboration between the companies again to develop a new product that would benefit both companies. Here is a list of things I would try and accomplish to repair the relationship and fix the issue.
·         Joint Kaizen project of the FOQ 300 or 350 that included aluminum that NorduAlu could product and provide.
·         We could use a SCAR (supplier corrective action request) in the aspect of correcting the relationship between the two.
·         Make a supplier report card to show what is important to Freqon so it may improve communication between them.
·         Review meetings at all levels. Review meeting at the executive level is the most important at this stage but then a Review meeting at the engineer level, at the purchasing level, and etc. I think the meetings have become hostile and little more relaxed type of meeting needs to occur.
·         Awards need to be exchanged between the two companies. Especially to NorduAlu to show that Freqon still cares and they do recognize the good efforts that they are doing. This will make them feel good about themselves and what they are doing with Freqon.
·         Freqon can set up some training or knowledge sharing seminars again like they use to, to share ideas and concepts that may benefit NorduAlu. And that may result in NorduAlu sharing what they are doing with their other suppliers to help Freqon out in the long run.
I think if some or even all of these practices are implemented with NorduAlu then the relationship would eventually repair itself. That over time the relationship would develop like it use to be. It is good to have a good steady relationship with NorduAlu because they have shown in the past that they are willing to cut cost, work with Freqon’s problems and issues in a timely manner, develop new product with Freqon engineers for better products. If NorduAlu has not shown this it may be difficult to trust in these developmental management tools. It is shown that they have and it has been proven in the past so I think it can and will work in the future.

Intercon Case

2010-03-08T10:07:00.000-08:00

Describe Intercon's organization structure for procurement. Be very detailed. Bob is responsible for....

Procurement was divided up by domestic and international, where they both operated completely independent of each other. In the domestic procurement department they divided up the process into metals, plastic, and tooling. Domestic also tried to increase the amount of overseas suppliers. They purchased copper from Europe and they purchased wire from Japan because of cost reduction practices. Domestic was trying very hard to find suppliers outside the United States. Even though they did secure several international suppliers they had a rule that it could only incorporate for 50% of total purchases of a certain material. They wanted to keep their current suppliers in the United States because of the willingness those companies have in working with Intercon for technical support and development aide.
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Because of bad or small than ordered shipments from their international suppliers they decided to create an IPO (International Procurement Officer) to check shipments before they were sent to see if they are good product and to work with suppliers directly to make sure they are doing what they say they will do. International also has suppliers local their country and usually likes dealing with their suppliers. They want to incorporate Global sourcing for the entire company but they are experiencing some different draw backs for each country. But they want to standardize the sourcing in materials and the machinery.

How would you change Intercon's purchasing structure to be more effective?

I feel they could invest a lot more in their Global Sourcing department. I feel that it is ok to keep each country with its own personal flexibility. But when it comes to saving $12 million dollars (stated in the case) to globalize their sourcing it could benefit all the countries. Yes I feel there should be a need to keep local suppliers in case you need a rush shipment or need that flexibility in delivery time the availability to work with your supplier. They need to find a way to maintain local suppliers (like they did in the U.S. where they kept 50% of all orders from their local suppliers) but to increase global suppliers for all the divisions of Intercon. This definitely can work for the machinery. All the machines are the same, and if you keep all the machines the same throughout the entire company than its easier to support and help each other when needed. For example if a machine breaks down in one country and there is an extra machine in another country they can send it over without any adjustment cost. Also if they in-source their tooling and dies they can also be universal for the entire company because the machines are the same. As far a materials go, I feel the company can benefit greatly from global suppliers that can make good deals. As well is if you are going to implement IPO’s then you can make the most out of that position. Meaning that IPO is helping not only the Domestic division but he is making sure that globally the supplier is keeping up with company. I feel they can be more effective if they try these things.

What is a letter of credit as described in the case?

Letter of credit was against their company’s policy. Usually the company only paid for a shipment or product after it has been arrived and inspected, to make sure the product it good and up on its specs. But a letter of credit basically said that the suppliers could pull money out of the account the moment the product is shipped. Meaning if the product never arrives, or if the product is bad they supplier still got their money. Intercon felt uncomfortable about this but they said it was the only way to deal with Korea and the Philippians.

What is consignment inventory as described in the case?

Consignment inventory is described as inventory that can be used with other companies. Meaning that if they have too much inventory due to overproduction or a canceled order they can share with another company and they can take that inventory off their hands. That also goes the other way, if they are low for whatever reason they can share with other companies to satisfy demand. They stated in the case that the European Company saved $250,000 annually because they used consignment inventory. It basically removes some of the risk involved with purchasing inventory.

What is a trading company as described in the case?

A trading company is basically a middle man between a buyer and seller, or in this case between Intercon and a supplier. They are the people that have access to hundreds of suppliers in foreign countries such as Taiwan. They basically set up a meeting between the buyer and seller to close a deal. They are easy to work with, and they are not very hard to find or to use their services. Trading companies sometimes introduced them to suppliers that were in direct competition to their international branches which caused conflict and they did not go with them because of this.

Should tooling purchases at Intercon be outsourced or in-sourced? Why?

I think it would be more beneficial for Intercon to in-source tooling and dies for the entire company. What sets Intercon apart from its competitors is the ability to create custom orders/products. And the way they do this is by creating the tooling and dies needed to make that product. If they outsource this process, as it is stated in the case, then it gives access to their competitors to the molds of the tooling and dies. If they could increase their tooling and die in house division I feel that it could greatly benefit the entire company. They would be able to create new molds for the tooling faster because they already have a process set in place and they would be able to make the tooling and dies for both the domestic and international divisions I feel for cheaper. Plus it still gives that competitive advantage to Intercon.

What is interdivisional sourcing as described in the case?

It is a division within Intercon which manages and helps the selling of products between Domestic and International. They gave an example in the case where Japan has a mini conductor that is popular in the United States they will make sure that Japan has the capability and the resources to satisfy the demand in the United States as well for those mini conductors. It’s basically the glue that holds Domestic and international branches/divisions together.

L.L. Bean Case

2010-03-02T19:34:00.000-08:00

Here is several questions we answered in regards to a case we studied. The case the L.L. Bean case and how they handled forecast and inventory management/ordering. This was my class preparation answers before we discussed these topics in detail in class. So they may not be right but they were my initial response when analyzing the case.

How does L.L. Bean use past demand data AND a specific item forecast to decide how many units of that item to stock? Hint: this is not a simple question...it requires thorough study and understanding.

There are a couple of things that go into the decision on how many units of an item to stock. The first thing is the ‘frozen forecast’ which is the forecast for that specific item for that upcoming season. This forecast comes from the forecasting department. After the frozen forecast is received they analyze it by comparing past data. They take the actual demand and the forecast for that year and divide it. A/F (actual divided by forecast). They use this to find a range of inventory that the new product would be the following year. For example if last year new products had this ration between .7 and 1.6 then using that data if the frozen forecast is 1000 that means the new product could have an actual demand for the upcoming year of 700 to 1600 units. Finally they use the profit margin calculation to see how much profit each unit brought in compared to how much the unit would lose if it was liquidated. For instance, if a unit was purchased at $15 each and sold for $30 the profit for that item would be $15 dollars per unit. When liquidated it could be sold for $10 then it would lose $5 per unit. These are then used to calculate a fractile which is then used to determine the actual order size as long as it falls in the range of the past data.

What item costs and revenues are relevant to the decision of how many units of that item to stock?

The cost to make the item, the price the item sells for, and the price of the liquidated item. Then you use this information to find the profit generated by each item (Price of item minus cost). Then you can use this find the loss per item when liquidated (Cost of item minus the liquidated price).

How would you address Mark Fasold's concern that the number of items purchased usually exceeds the number forecast?

This is so because the margin or the loss of benefits from losing demand is much higher than that of money lost when liquidated. This means that it’s more beneficial to have too much inventory so that you don’t stock out of an item than it is to have too much an item. For instance if the profit margin is $15 dollars per item then for 1000 items over the actual forecast that would result in a $15,000 loss. You could have made that money. Then let’s say you would lose $5 dollars on every item that is liquidated, for a 1000 unit overstock you would lose $5,000. You can show that it would be better to get the $15,000 dollars of profit you could have received if you have enough inventory compared to the $5,000 loss of money of having too much inventory.

Hurricane Forecast Case

2010-03-02T19:23:00.000-08:00

We answered several questions about forecast analysis dealing with flexibility for the Nation Weather Service. We used a simulation they created for their forecast they had for Hurricane Katrina. Here is the link:

National Weather Service Katrina Forecast Simulation

In the Cone/Warning simulation, what does the white "Potential Track Area" mean? How do you suppose the NWS develops such an area when forecasting?

The ‘Potential Track Area’ is the area where the hurricane could possibly end up. They guess or estimated an exact data point where the hurricane can go but because the forecast is not right they give you that area to show you that hurricane may possible end up anywhere in that area. I think they developed this forecast from past data, or previous hurricanes.

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They have been able to see where the paths of past hurricanes have gone when they were in that exact same spot. They can also see surrounding weather conditions and use their weather knowledge to forecast the location of where the hurricane may go.

How accurate was this "Potential Track Area" as Katrina progressed along its path?

I feel the Track Area was pretty accurate given that the hurricane at one point was headed straight west but they forecasted the hurricane to turn north and head towards land. The hurricane could go anywhere and they forecasted pretty accurate considering that the hurricane could have gone straight or anywhere in a 360 radius. There was some error in the fact that for most of the forecast it predicted that the hurricane was going to hit the pan handle of Florida, but then in one forecast it moved all the way over to New Orleans area. This was a drastic change in forecast but if you think about it, it was only several hundred miles off when it could have been thousands and thousands of miles off in its forecast.

In the "Strike Probability" simulation, describe in your own words what each of the colors represent. Make your explanation simple enough for a child to understand.

The red shows that the hurricane WILL hit that location. This is so because there is a 100% chance or there is no doubt that the center, or the eye of the hurricane will be within 75 miles of red. Basically that states that the hurricane will pass over that spot. Orange is the next color and that color shows that there is above a 50% chance that the hurricane will be within 75 miles of that location. That means that there is more than 50/50 chance that the hurricane will hit that location. Green says that there is 20% to 49% chance that the hurricane will come within 75 miles. Or in simpler terms the hurricane has less than 50/50 chance of hitting that location. And finally the yellow is showing that there is less than a 20% chance that the hurricane can come within 75 miles. Or stating that there is not a very likely chance that hurricane will hit there but there still is a chance to be somewhat prepared if it does.

Why would the NWS develop strike probability forecasts? What benefit would such a forecast provide?

They developed it because it shows the likelihood of the hurricane to strike, hit, and pass over or whatever term you would like to use to show that the hurricane will cover a certain location. This predicts or forecast with a probability (percentage of probability) put into it to show this. The benefit of this would be so that they could warn the people or the residents living in certain locations if they are in danger or not. Let’s say you are in the orange level meaning that there is a good possibility that the hurricane would strike there, you can start evacuations or other preparations to survive the hurricane. That also goes with the other colors; if you are in yellow you still need to be cautious and prepared but different levels of emergency are needed for the different colors. This means you do not need to evacuate all of yellow because that is not effective and may cost a lot. If you can forecast like they did with a probability built into it they know better where to focus their attention before and during the emergency.

As you step through each period of the Strike Probability simulation, how accurate were those strike probability projections? Give detailed explanation.

The strike Probability simulation was really accurate. The orange was almost dead on the entire time. This shows that the hurricane was almost definitely going to hit that location. The green was not as accurate but it still showed a pretty accurate display of where the hurricane was headed and it pretty much showed the path of the hurricane. The only color that was way off was the yellow. The yellow just basically covered their entire basis and showed that the hurricane could move or change at any time so just be prepared. The yellow was not accurate as much as the other colors but it still showed a pretty good representation the path of the hurricane.

In the "Wind Speeds" simulation, why is NWS providing information other than their expected forecast (shown by the blue line labeled NHC)?

Because there is error in any forecast, so the other information shows that there is possibility that the wind speeds may fall within the other data points. And it also gives the percentile of that range. Towards the NOW part on the graph the other data lines are pretty close because that shows they are better at forecasting the wind speeds in the near future and then as time went on the other data lines got farther and farther away from the forecast. Showing that as time goes on they are not as accurate in their forecast so that there is a larger and higher chance that the wind speed may fall into that range.

In the "Wind Speed" simulation, describe in your own words what each of the colors represent (yellow and orange). Make your explanation simple enough for a teenager to understand. Hint: The probability shown on the lines do NOT mean that there is that probability that wind speeds will reach that particular level. For example, is it possible for the wind speeds to be somewhere in the black region? (The answer is yes). Explain what the graph is telling us.

The graph shows the forecast which in blue. Then the first color orange shows the probability that the wind speeds may fall in that color with the number listed on it. For instance you have a line above the blue line for the orange and a line below the blue line for the orange and they both have a label of percentages, so you can see for instance a 30%. That means that there is 30% possibility that the speed may lie below the forecast and then another 30% that it could be higher than the forecast. That means 60% chance that the actual speed may lie in the orange. So in simple terms you can say that about a 50/50 chance that the actual speed will lay in the orange. The yellow is very similar with another number and lets say for instance 10%. That means another 10% above and another below adds on to the 60% so it 80% chance that the actual speed will be between the orange and yellow. But just in the yellow there is a 20% probability. In simple terms that means that is a small chance that the actual speed can be in the yellow and then another small chance that it could be in the black.

How accurate were NWS' "Wind Speed" range projections over time?

The projections were not very good. The speed was actually a lot higher than it was expected. The forecast was way low. It sometimes was within the orange and yellow but some of the time the actual speed was in the black. That means their forecast for the speed was not all too accurate.

How can a range forecast for hurricanes be helpful in making decisions? For example, if you were the mayor of any city along the gulf coast, would you want range/probability information? How would that influence your decisions about what to do for your city?

If you have a range of forecast for hurricanes it can help you make better decisions on what to do in times of emergency. Like I stated above in one of the questions it’s good to know where to put your focus. For instance it would not be very beneficial to evacuate the entire coast but if you lay within one of the high probability areas then it would be wise to make larger preventive actions than if you are within one of the smaller probability areas or not in one at all. It could make all the decision in the world to either prepare for the worse or be on alert.

LinkedIn Account

2010-03-02T11:06:00.000-08:00

Here is a link to my LinkedIn account, check it out and add me if you have a LinkedIn account as well.

Shaun Hutchings - LinkedIn

Dynamic Bidding: SunMicro Systems

2010-03-02T08:39:00.000-08:00

This is a Case Study

If you were Sonia, which dynamic bidding software applications would you recommend? By what criteria (think selection matrix) would you make your decision?

I would actually choose eXcellent Company because of the wide range of full-service to self-service that the product provides. There is flexability there which may be useful. Market Owner like Sonia said is a small company that may have been ranked high might not be able to provide everything they need. Also because
Market Owner is only a full-service product it may not be beneficial in times where full-service is not required in the bidding. Or let’s say as time goes Sun become proficient in using the dynamic system would they always need to full-service that Market Owner provides. I feel that if they go with eXcellent they can use its full-service benefits towards the beginning of the implementation and during several of the first auctions but after time I feel that because eXcellent also provides some self-service features that Sun can take over and do a lot of the primary things themselves. I also feel that eXcellent was still ranked pretty high in its software attributes which is one of the reasons why they went with Market Owner in the first place. I just feel that the flexibility that eXcellent provides with prove to be beneficial in the long-run.

What concerns do you think the Global Commodity Directors would have and how would you resolve their concerns?
One of the concerns that GCD’s may have is that their job may be threatened. With new software which helps in the selection of suppliers there is less need for the aid of human influence in the supplier selection. Sonia also talked about how critical it was to get all the GCD’s on board with this so they could aid the suppliers they currently have to the new system. I feel to resolve this concern they can guarantee that the GCD’s would not lose their job even after the new product is implemented that would make them feel more at ease. They could say that their job description may change and may be different but neither wage decreases, nor loss of job would be a result of the new dynamic system. Another concern that GCD’s may have is their relationship with the suppliers may be strained and may cause them a lot of more work and trouble. Their relationships were already ‘complex’ and so by throwing a wrench in a complex relationship to them may be a bad thing. But if they can show that throwing a wrench into the relationship actually may build a stronger, less complex relationship they GCD’s would feel more at ease. Also to show that by using a competitive structure to help the suppliers achieve higher the suppliers may turn to the GCD’s more for help and advice in how they can be better than the other suppliers so they may win the auction.

If you were to move ahead with dynamic bidding, what concerns would your suppliers likely have and how would you resolve those concerns?
The suppliers may have several concerns. The first concern they may have is the thought that they may lose their contract and bid with Sun. This is true and could occur but if the GCD’s and if the Sun’s Supplier Relationship department works with current suppliers to help reduce cost, increase production, and maybe achieve a niche in the market they could hold and maintain their status with Sun and be better off because of it. The suppliers just feel comfortable right now and no one is pushing the suppliers for better, even some of them are generating a 70% profit margin. To show that this new dynamic system actually may benefit them can resolve this concern, and to show them that they still may retain the contract with Sun if they can produce. Also another concern may be that Sun may choose only on the bid price. Sun can meet with all the current suppliers and show them and teach them the new system and show that they will not make their decision entirely off of the bid price (which will play a large role) but they would also compare off of their requirements Sun has to the RFQs that the companies submitted before the auction. And if the suppliers know what Sun is looking for it would be easier for the current suppliers to satisfy those needs that maybe a new supplier. Also Sun could explain the structure of the selection process which means that a supplier may maintain 50% of the business even if they do not entirely win the auction. All this does is it creates an environment of competition that may prove beneficial to Sun and for its suppliers. Also suppliers may have a concern that the reason why Sun is doing this dynamic selection process is because Sun does not want to work with them anymore and Sun wants new blood, better blood and may be seen as a slap in the face to the suppliers. Something that can be done to resolve this is that Sun can explain with the GCD’s they really value the relationship that they have with them and they can put the Supplier Relationship department to work with aiding and helping the current suppliers in winning the auction. This will show that Sun is committed to them and shows that Sun really wants them to success and do well.

©2010, Shaun Hutchings, All Rights Reserved.

Polaroid Case

2010-02-25T10:53:00.000-08:00

This is the material that we had in our Power Point Presentation for the Polaroid Case, which consisted of deciding if they should centralize the European distribution and/or keep any of the satellite warehouses in Europe. Here is the outline of that presentation:

How should Polaroid centralize its European distribution?

One centralized distribution center with a satellite warehouse in UK

Ideal location for the central DC should be located in Netherlands- Enschede

Ideal Coordinates: 48˚ 72.97 N 7˚ 99.82 E

Why Netherlands?

We used a Center of Gravity chart to determine the ideal location for the centralized DC for Polaroid

Italy- issues with mail strikes, loss/stolen inventory, less concerned about incomplete/late shipments

France- Labor laws are horrible

Still Close to Germany (largest orders)

Already own a DC there, only need to upgrade facility and higher more employees

Why UK?

Satellite warehouse in UK

Very demanding in timing and delivery

Shipment cost for individual shipments are high because it’s over seas

If they have their own satellite warehouse they can manage their own inventory better and shipments can be sent in larger orders to cut down on cost from the Central DC to the UK warehouse

Which country should be the first to receive all shipments from your redesigned DC network?

UK- Larger shipments to their warehouse (no individual shipments), better to fill up the large shipment first so smaller shipments later on are not needed

Germany- Largest Demand

Italy- Farther away than France and they have some mailing issues

France- should be last because it’s the closest and easiest to fill orders

How would you sequence the remaining countries?

Sweden- farthest away with highest demand

Spain- Pretty far away with decent demand

Austria- Farther away then Denmark, Swiss

Denmark- Farther away than Swiss

Switzerland- Farther away than Belgium

Netherlands- Decent demand, closest

Belgium-Close

Norway- Lowest demand

SC Planning Game

2010-02-25T10:09:00.000-08:00

1) 1) Should you follow the advice of a general manager in the situation you encountered when playing the SC Planning Game in class a while ago? Why or why not?

I say a little of both. I would look over my numbers and see that may not be the wisest decision and show him in a presentation or meeting that it would not be wise to order more. I would present all the data to him and show him that by purchasing more and trying to ‘never miss an order’ again might be more detrimental to the company than actually helping it. After this data is presented to the general manager I would let him make the decision. And if he still decides to place the large orders then I would do it because he is my boss and I do answer to him. So in reality yes I would take more of the orders of my general manager than just his advice. If it is really him just giving advice I probably would not if the decision came down to me and me alone.

2) What is the underlying problem that you faced in the simulation? Why?

Not having enough inventory when needed – Forecasting was a little low a little off – Place the wrong orders – lead time is sooo long that orders could not be changed – lead time is long because that is what the suppliers where offering – choosing the wrong suppliers or not having a good relationship with them where they can produce in a timely manner for your company – not putting an emphasis in your supply chain management division in your company to run analysis and choose the correct supplier

3) Are you sure about your response to Question #2???

YES

4) To be sure that you are sure, use Vensim to create your own system dynamics model that analyzes the underlying problem(s) you faced in the SC Planning Game. Attach the system dynamics model to this blog and be prepared to show it in class.

“Building Deep Supplier Relationships”

2010-02-22T17:26:00.000-08:00

“Building Deep Supplier Relationships”

By Jeffery K. Liker and Thomas Y. Choi

Summarize the six-step process that the authors of 'Building Deep Supplier Relationships' advocate as the best way to building effective supplier relationships.

Conduct joint improvement activities:

-Start and run kaizen (continuous improvement) projects at the suppliers’ facilities

-Set up Supplier Study Groups

-Open up a channel where you can exchange best practices with suppliers

Share information intensively but selectively:

-Share information in a structured fashion

-Set specific times, places, and agendas for meetings

-Use rigid formats for sharing information

-Insist on accurate data collection

Develop suppliers’ technical capabilities

-Develop a common lexicon

-Build suppliers’ problem-solving skills

-Prefect core suppliers’ innovation capabilities

Supervise your suppliers

-Get all the senior managers involved in the problem solving process

-Make and send monthly report cards to important suppliers

-Always provide immediate and constant feedback

Turn supplier rivalry into opportunity

-Source each component from two or three vendors

Create compatible production philosophies and systems

-Set up joint ventures with existing suppliers to transfer knowledge and maintain control

Understand how your suppliers work

-Go and see for yourself how suppliers work

-It is good to respect suppliers’ capabilities

-Commit to co-prosperity

-Learn about suppliers’ business

BDM Consulting

2010-02-17T10:16:00.000-08:00

BDM Consulting -

Damon De La Pena MBA, Co-founder and Managing Director came to class and shared with us several concepts that he learned throughout his career:

Surround yourself with older people and younger people for mentoring
Do not try to take on the world, do something specific and get good at it
BDM Consulting focuses on several aspects

Supply Chain Lean Assessment
Strategic Sourcing
Supplier Management
Inventory Optimization
Supply Chain Training

Tagline for BDM Consulting is: "Lean the Supply Chain and Return Cash to Flow"
Change Management must be addressed and applied in every situation
Personal Networking Skills- Four mind sets (Generosity, Vulnerability, Candor, Accountability)
Social Media Techniques- its the way of the future

Supplier Report Card

2010-02-16T08:58:00.000-08:00

What is a supplier report card and how are they used?

Is a critical component of our overall Supplier Relationship Management strategy as more and more companies rely on their suppliers to provide an ever-increasing portion of the value delivered to customers.

Is to measure / provide accurate supplier performance information based on input from various functional areas.

This in-turn leads to healthy competitive supplier behavior in the areas of:

Product Cost
Product Leadership
Quality
Operational Excellence
Service and Customer Intimacy

All suppliers are rated according to quality and delivery data. Core and critical suppliers will be rated based on both quantitative and qualitative information when data becomes available. Qualitative measures include cost management, technology, general management, and responsiveness. In addition, operational data is obtained from our systems relating to areas of procurement, receiving, and quality/inspection.

They show how good a supplier is doing so they can constantly compare them with other suppliers when a decision is to be made to get a new supplier or stick with the one they currently have they can easily make a decision. Also with the report card it gives the supplier a little extra incentive to perform better because they are being graded. Just like students perform better because the grade on the report card is a bit more motivating to do better.

Should a Report card track many elements such as on-time delivery or just a few? What are the advantages / disadvantages of both?

I feel they should track what is important to them but at the same time track many aspects of the supplier. Such as on-time delivery I feel it should be summarized but it should not include in the report card every single delivery and shows how well that person is performing on each delivery. But I do feel if you summarize it, saying 60% of all deliveries were on time then you can see the overall grade in that area for that subject.

The advantages of tracking many elements are good because then it shows you are paying attention to all aspects of the suppliers business. This will motivate them to stay on top of their game in many elements not just a few aspects. Also the supplier will know what you’re grading on. When I go to class and the teacher does not set up a syllabus and just tells us he/she will give us a grade on what they feel we deserve it is so vague that it causes internal conflict and I am unsure what the teacher is looking for and it causes a little panic. But let’s say the teachers says 20% of your grade is on participation, 30% on homework, 20% on project, and then 30% on tests then you know exactly what the teacher is grading on and you know what the teacher expects and how well you should perform in those areas.

Some disadvantages to this are that the supplier loses focus of what is really important. They get too tied up with the grade or getting a good report card that they lose understanding what they need to be doing. Such as a teacher is teaching a concept and then gives a homework assignment on the material covered in class. A person that has lost focus only does what needs to be done to get a good grade on the assignment. That individual does not really care as much if they understand the material or not they just want to good grade. What really is important is that the student can learn and apply that principle that the teacher taught. So if a supplier can just focus on ‘getting a good grade’ on their report card by trying to please their purchaser and not really do what is needed to be done. They may perform, they may do well, but they may just do what is needed to get a good grade and that’s it.

I personally think that there are certain individuals including suppliers that need something to compare their work too, and a report card is perfect for that. It gives them a goal and aim so that they know where to head and what to do. Suppliers can use the report card as something to achieve and do well in. On a personal level I feel that supplier report cards are good, if they are used correctly. I also feel that having many elements that are being graded are good so that suppliers know what is important and what is not.

Mini Excel Project 2

2010-02-10T10:46:00.000-08:00

Mini Excel Project 2

This is my second Excel Model that I created after learning several excel concepts. Please check this excel model out. This excel model that I created includes macrcos, they are safe so please allow the macro when you open the file. But if you do not feel comfortable then you can decline the macro. The spreadsheet should still function properly but a couple of the buttons will fail to work. Enjoy and feel free to contact me if you have any questions.

Mini Excel Project 2

©2010, Shaun Hutchings, All Rights Reserved.

Mini Excel Project 1

2010-02-10T10:39:00.000-08:00

Mini Excel Project 1

This is my first Mini Excel Project that I created for my Analysis & Modeling class. Check it out to see a lot of concepts I have learned in practice. If you have questions feel free to ask.

Mini Excel Project 1

©2010, Shaun Hutchings, All Rights Reserved.

Supplier Diversity

2010-02-09T18:58:00.000-08:00

The authors of 'Supplier Diversity and Supply Chain Management: A Strategic Approach,' advocate a step-process for promoting diversity within the supply-chain. Please describe the process they advocate.

In order to promote diversity within supply chain you must first identify what it means for supplier diversity. Supplier diversity means acquiring suppliers that are diversified, that are not the huge suppliers that control the supply chain industry. Supplier diversity can be know by several different groups but are not restricted to these groups. The groups are: Minority Business Enterprises (MBEs), Women Business Enterprises (WBEs) and Disabled Veteran Business Enterprises (DVBEs). MBEs represent the majority of the diversified supply chain realm.

Leveraging supplier – buyer relationships in regards to supplier diversity is pretty difficult and is facing several huge obstacles in order to promote diversity. Some of the issues are:

Supply chain rationalization has resulted in downsizing of the supply base and number of suppliers which often effects MBEs the most
Because there are fewer suppliers the average contract size are increasing and this makes it difficult for MBEs to compete.
Just In Time (JIT) delivery systems make it so corporations become even more dependent on a few preferred suppliers.
Electronic ordering may pose a threat to smaller MBEs that are competing with large suppliers
Higher quality standards means that MBEs need to invest in upgrading their operational capabilities.

Even with those obstacles there is a way for corporations to diversify their supply chain. Here are several steps that corporations may take in order to implement this diversity:

1. Supplier diversity and competitive advantage

a. There is a need for integrating supplier diversity into business goals to build competitive advantage. It can contribute to a firm’s profitability and performance

b. Formulate a clear vision of what supplier diversity is suppose to accomplish

c. Have a plan for implementing its supplier diversity initiative

d. Supplier program must be monitored and evaluated periodically

Top management commitment

a. Top management commitment can be the acceptance of supplier diversity as an operational and strategic option, providing visible leadership on the issue, and provide resources and provision to accomplish it

b. Will confer upon the supplier diversity program a term called legitimacy- gain support of internal stakeholders

c. Management should affect the availability of resources and provide a way to accomplish the change and program

3. Supplier diversity champions

a. In order for a corporation to promote diversity in supply chain it needs a certain individual known as a ‘champion’ to take off and run with it, even at the expense of his position and title

b. Posse leadership qualities- ability to engage in influence activities, transformational leadership qualities

4. Organization culture and supplier diversity

a. Develop a culture where supplier diversity is accepted and can thrive

b. Cross-functional cooperation within a firm

c. Collaboration

5. Channel power and relationship building

a. Usually relationships between MBEs and large corporations there is unequal power- it shouldn’t be that way, the buyer should not have more power over the seller

b. Downplay power in large corporations for long-term interest

c. Social Exchange Theory (SET)

d. Build up power of trust rather than control

e. Help build up MBEs operational capabilities

6. Recruitment strategy

a. Place advertisements- in supplier diversity publications

b. Use of web site promotion for diversity suppliers

c. Higher a credible third-party or intermediary organization to identify qualifies MBEs

In order to develop successful supplier partnerships there are several things that the minority suppliers need to accomplish. Here are a couple guidelines:

1. Building core capabilities

a. Develop capabilities- operational and client-specific

b. Use the value chain to develop operational capabilities

2. Learning competency

a. Adaption of new behaviors

b. Absorptive capacity

i. Acquisition- ability to recognize, value and acquire knowledge that is critical to a firm’s operations

ii. Assimilation- ability to absorb external knowledge

iii. Transformation- develop routines that combine old and new knowledge

iv. Exploitation- ability to apply new knowledge to achieve objectives

3. Collaborative mindset as a capability

a. Join consortia or build strategic alliances to pool resources

b. Alliance-building capabilities – clear common goals, trust, frequent and open communication

4. Intermediary organizations

a. Get their foot in the door through intermediary organizations

b. State and regional supplier councils

If both follow these guidelines and more it can prove to be a very beneficial process for both the MBE and the large corporation and they both can get a competitive advantage in supply chain.

Should companies concern themselves with MBE's, WBE's, DVBE's, etc or is this an unwise use of resources?

Some may say that it is unwise to concern themselves with MBEs, WBEs, DVBEs, and etc. because many may think they are giving up quality in both the product and performance by choosing to diversify their supply chain. In this article it shows that ideas such as that one are wrong and it is wise to invest your resources in supplier diversity. The article states that there are economic benefits to incorporating supplier diversity. Supplier diversity can act as a way to increase or expand their customer base, and with more customers means more sales, which means more revenue. It is wise to match your supplier base with your customer base so you can attract more people of that culture. Firms may also use supplier diversity as a part of their overall corporate social responsibility (‘reaching out and building stronger communities, which is good for PR of a company and the public view of your company). Also it can create a competitive advantage. How it can create this is because those that have competitive advantage are those that can do something well compared to its rivals. They can transform their capabilities into core competences so that such capabilities serve as a source of competitive advantage. As we can see there are many advantages to supplier diversity and they all can benefit both the MBEs and the large corporations once the road bumps and obstacles are shot down and understood.

Negotiation

2010-02-09T12:19:00.000-08:00

Negotiation concepts when it comes to contracts and agency law. This is different than Business Law. I took a business law course where I went into much more detail when it comes to business law. But these are some basic principles that we went over in our Global Sourcing Supply Chain Management Class. Negotiators can often fall into trouble if they do not have an awareness of governing legal laws. Here are couple 'rules of the road':

The Mirror-Image Rule

Every deal must have an offer, an acceptance, and consideration. Basically the mirror-image rule states that what is offered must match what the offeree is accepting. This means that the offeree must understand and be fully aware what the offeror is offering and visa versa.

Offer Revocation

Every contract need to have an offer and then followed by an acceptance. It is important to know and understand when they are making an offer and when to accept it. The offeror can revoke the offer at any time before the offeree accepts it, also if an offeree rejects it the offer is terminated.

Negotiator Authority

It is recommended to clarify your counterpart's authority to make a commitment before negotiating the substance of the contract. Many times people will make a contract or negotiation and they do not have the authority to do so. They have to check 'up-stairs' to see if it would be OK. This causes issues. Its always good to deal with someone that has the power to make the final decision to avoid the "get back to you'.

Negotiator Intention

Courts have adopted an objective theory of assent. Which examines the outward manifestations of conduct of both the offeror and offeree. So if someone signs a contract of any sort means that person has shown with physical actions that person agrees to that contract.

The Consideration Requirement

Something of value must be given in return to the offeror to make the contract valid. Meaning if you give a car to someone and then the person accepts it, it is not considered a contract because something of value was not given or offered in return.

Forecasting Methods

2010-02-09T08:59:00.000-08:00

Here are a couple forecasting methods that we learned that we can and will be able to use throughout my career. There is MANY more forecasting methods but here are a few of the them.

Moving average (it can be 2, 3, 4, 5, etc. month moving average)

This is basically averaging up the last several months/days sales or demand to forecast next months sales or demand

Weighted Moving Average

It is similar to the moving average but instead of just taking the average of the last several months or days you place weights to each one. This tells us that one month/day should effect the forecast more than the other ones and etc.

Exponential Smoothing

This is when you use an alpha to smooth out the averages to adjust to variation and fluctuation. The alpha has not boundaries and it can be set high or set low. The only way to find out if alpha is at a good level or not is by testing your forecast which we will talk about in a future blog.

Trend Function

Usually you can find this by using the trend function in excel. There are other methods to figure out the trend function. But to find out if the trend function is appropriate for your data you much test the regression and correlation between the demand/sales with another variable (if it be time or other set of data associated with the data)

Seasonal Variation

Usually sales especially retail can be seasonal with higher demands at certain times a year. You can use a seasonal index to build a forecast for different seasons and times throughout the year.

Forecast Including Trend

This is a little more complex way of calculating forecast but this includes smoothing the forecast and then including a trend that is also smoothed.

Like I stated before there are many more different types of forecasting methods. These are just a few that we learned and went over in great detail where I feel that I have a firm understanding of. If you would like to see some of my work and understanding of these principles please click on the link below and you will be able to see some Excel Spreadsheets with these principles in action that I worked on and completed.

Shaun's Forecasting Exercise

Inventory Management

2010-02-08T10:16:00.000-08:00

There are several concepts that we have learned and I feel that I have a firm understanding of. Here is the concepts we covered:

EOQ- Economic Order Quantity
ROP- Reorder Point
ABC Analysis- prioritization of different inventory aspects

Buy Blu Store

2010-01-28T13:21:00.001-08:00

www.buyblustore.com

This website is no longer on the web. But I created a website where you could buy Blu-Ray movies. It was a basic website that I created for a Web Business class at BYU-Idaho but I learned a lot. We really went into detail of:

Google Adwords
Google Analytics
Google Adsense
Internet Marketing
ROI and other terms
Web Site Creation
Internet Sales
Web Site Business models
Etc.

I feel like I learned a lot dealing with the Business Realm on the internet. Above is a picture of what my website use to look like. I used Weebly when I created the website but I also learned a lot of behind the scenes in relation to web businesses.

System Dynamics

2010-01-28T12:44:00.000-08:00

System Dynamics

System dynamics is an approach to understanding the behaviour of complex systems over time. It deals with internal feedback loops and time delays that affect the behaviour of the entire system.^[1] What make

s using system dynamics different from other approaches to studying complex systems is the use of feedback loops and stocks and flows. These elements help describe how even seemingly simple systems display baffling nonlinearity.

We learned about System Dynamics and used a prog

ram called: Vensim

http://www.vensim.com/freedownload.html

Here is my first diagram of my

understanding of System Dynamics