Implied demand uncertainty in supply chain management

Ronald Morris

Tim 105 Group 9

Subhas Desa

Due January 26 2017

Assignment # 2

Schedule: Today’s Date: January 19 2017

· Friday: Do problem 1 (1hours)

· Saturday: Do problem 2 (1 hours)

· Sunday: Do Problem 4 (4 hours)

· Monday: Do Problem 3 (1 hours)

· Tuesday: review (1 hours)

· Wednesday: Review (1 hour)

· Thursday: Turn in

Problem1

1. Define the problem

· Questions for number one are the following:

A. What is Amazon.com’s supply chain?

B. How would you characterize the competitive strategy of Amazon.com? What are the key customer needs that Amazon aims to fill? Where would you place the demand faced by Amazon on the implied demand uncertainty spectrum? Why?

C. What level of responsiveness would be most appropriate for Amazon’s supply chain? What should this supply chain be able to do particularly well? (Visit the amazon web-site and perform “experiments” when solving this problem.)

D. How can Amazon expand the scope of strategic fit across the entire supply chain?

2. Plan the treatment of the problem, i.e., the way in which you going to structure your analysis of the given information in order to solve the problem. Define the process (logical set of steps) for solving the problem by carefully addressing the following questions:

· What information is available for solving the problem?

· Pervious Hw number one, Lecture Notes and the Internet

· What assumptions need to be made to make the solution process manageable?

· I am assuming that paragraphs withs bulleted key points are acceptable ways to show my work.

· What is the issue tree, if any, for the problem?

· I will put all of my answers within a table with each row being a Sub Problem (Lettered Question)

· What analysis needs to be performed to resolve the issues defined in Step 1?

SP1.) What is Amazon.com’s supply chain?

SP2.) i. How would you characterize the competitive strategy of Amazon.com?

Ii. What are the key customer needs that Amazon aims to fill?

Iii. Where would you place the demand faced by Amazon on the implied demand uncertainty spectrum? Why?

SP3.) i. What level of responsiveness would be most appropriate for Amazon’s supply chain?

Ii. What should this supply chain be able to do particularly well? (Visit the amazon web-site and perform “experiments” when solving this problem.)

SPS4.)How can Amazon expand the scope of strategic fit across the entire supply chain?

SP/i

i

ii

iii

SP1

SP2

SP3

SP4

3. Execute the plan:

SP/i

i

ii

iii

SP1

What is Amazon.com’s supply chain?

· Amazon’s supply chain is a an efficient and rapid paced supply chain achieved through buying inventory straight from the supplier rather than from the distributor.

· Acquisition companies that created and stored the desired product to sell.

SP2

How would you characterize the competitive strategy of Amazon.com?

Amazon’s competitive strategy is Cost Leadership for the following reasons:

· It seeks to be the cheapest online retailer

· Aims to capture the entire market segment

What are the key customer needs that Amazon aims to fill?

· Wide Selection

· Excellent Customer Service

· Best Price

· Convenience

Where would you place the demand faced by Amazon on the implied demand uncertainty spectrum? Why?

I would place Amazon in the middle of the IDU Spectrum because:

· It is high due to the supply chains need to be very responsive to customer needs

· But low because it must be very efficient to maintain convenience and quick delivery.

SP3

What level of responsiveness would be most appropriate for Amazon’s supply chain?

Medium or Medium to High

What should this supply chain be able to do particularly well?

· Quickly Access the Databases

· Quickly Sort through inventory

· Easy Checkout Process

· Provide Accurate Reviews and Questions

· Descriptions of products

· Pictures of products

· 3rd party sellers

· Be able to sell products through Amazon hasselessly

SP4

How can Amazon expand the scope of strategic fit across the entire supply chain?

Amazon could improve its supply chain through the following ways:

· Incorporate its own delivery system rather than depend on third party companies

· SC more efficient

· Eliminate region based websites

· More responsive

· Allow customers to wider variety of inventory

· Not become involved in too many businesses as it might hurt reputation as a retail store

· Eliminate shipping costs to customers.

4. Check your work

· Is the work correct in every detail?

· I believe my work to be correct, upon further review from the book and online sources it confirmed my assumption regarding Amazon’s IDU placement on the Spectrum.

· Are my assumptions reasonable?

· Yes I believe my assumptions to be reasonable.

· In terms of the things I know, do the results make sense?

· On the basis of what I know and intuition I believe my results to make sense.

·

Problem 2

1. Define the problem

· I need to answer the same questions asked of Amazon above but for the company Toyota.

· Plus the question: How can the full set of six drivers be used to create strategic fit with Toyota’s competitive strategy?

2. Plan the treatment of the problem, i.e., the way in which you going to structure your analysis of the given information in order to solve the problem. Define the process (logical set of steps) for solving the problem by carefully addressing the following questions:

· What information is available for solving the problem?

· Lecture notes, past hws, internet, and class textbook.

· What assumptions need to be made to make the solution process manageable?

· I need to assume that the knowledge I know about Toyota is applicable to this problem.

· What is the issue tree, if any, for the problem?

· I will keep the table from number one (A) and add the additional question at the bottom afterwords (B).

· What analysis needs to be performed to resolve the issues defined in Step 1?

(A)

SP/i

i

ii

iii

SP1

SP2

SP3

SP4

(B)

3. Execute the plan:

(A)

SP/i

i

ii

iii

SP1

What is Toyota’s supply chain?

· Toyota’s supply chain begins with the engineers and the splits into two branches

1. Quality, Procurement, Customers.

2. Managers, Suppliers, Manufacturing, Customers.

· “Lean Manufacturing” - removing non-value actions from processes.

SP2

How would you characterize the competitive strategy of Toyota?

Toyota’s competitive strategy on a Porter analysis would be placed just inside differentiated for the following reasons.

· Aims to capture a larger market segment

· Brand name recognized with quality and longevity

· (otherwise would be Cost Leadership)

What are the key customer needs that Toyota to fill?

· Wide Selection

· Excellent Customer Service

· Competitive prices

· Excellent quality control

Where would you place the demand faced by Toyota on the implied demand uncertainty spectrum? Why?

I would place Toyota on the low end of the IDU Spectrum because:

· The company has been established for a long time

· The products have plenty of lead time

· Product cycles are about 4-6 years.

SP3

What level of responsiveness would be most appropriate for Toyota’s supply chain?

· It would have a low responsiveness.

What should this supply chain be able to do particularly well?

· Ship cars to nearest dealership quickly

· Provide cars of all variety

· Be monitored and tracked by the customer

· Closed loop of information with all links in the supply chain

SP4

How can Toyota expand the scope of strategic fit across the entire supply chain?

Toyota could improve its supply chain through the following ways:

· Increase the responsiveness of the SC by using IS to connect all segments of SC

· Provide customer feedback directly to the engineering to also increase responsiveness.

(B) How can the full set of six drivers be used to create strategic fit with Toyota’s competitive strategy?

Information - Using cutting edge IS will link the entire SC together creating a closed loop of information between each and every single supply chain segments.

Sourcing - This closed loop will inform executive managers when a new supplier is necessary thus improving sourcing by finding the most affordable supplier.

Facilities - Facilities will run more efficiently cutting back on fixed costs and saving money.

Inventory - Inventory will be pre-scheduled and prepared before it needs to be shipped, reducing risk, improving ship times, and reducing costs.

Transportation - Transportation will be able to provide the customer their product faster making the SCM more responsive to customer needs.

Pricing - Costs avoided in the supply chain will allow for cheaper prices for the customers.

· These drivers will have to work together to achieve the right level of responsiveness at the lowest costs.

4. Check your work

· Is the work correct in every detail?

· Yes, I have double checked my work (responsiveness vs efficiency and IDU) in my lecture notes and information of the companies from online sources.

· Are my assumptions reasonable?

· Yes I believe my assumptions to be reasonable.

· In terms of the things I know, do the results make sense?

· Based of my intuition and knowledge of the subjects I believe my work to make sense.

Problem 3

1. Define the problem

I need to read: “Apple's Supply-Chain Secret? Hoard Lasers" article and then:

· Extract five (5) key lessons from this article, with respect to Apple’s SCM strategy.

· Use these lessons and discuss how Apple achieves strategic fit.

2. Plan the treatment of the problem, i.e., the way in which you going to structure your analysis of the given information in order to solve the problem. Define the process (logical set of steps) for solving the problem by carefully addressing the following questions:

· What information is available for solving the problem?

· All information needed is in the article

· What assumptions need to be made to make the solution process manageable?

· I need to assume that the article uploaded is the one the professor refers to.

· What is the issue tree, if any, for the problem?

· None, I am going to answer the questions with paragraphs and bullet points.

· What analysis needs to be performed to resolve the issues defined in Step 1?

· SP1) Extract five (5) key lessons from this article, with respect to Apple’s SCM strategy.

· SP2.) Use these lessons and discuss how Apple achieves strategic fit.

3. Execute the plan:

SP1) Extract five (5) key lessons from this article, with respect to Apple’s SCM strategy.

1. Apple is in charge of every single aspect of its supply chain. For example: It acquisitioned a company to make lasers and cornered that source from its competitors.

2. Because of its total control of it SC, Apple can handle many product launches without having to maintain inventories. This also explains why they can sell at high prices, because no one else can beat them

3. Operational expertise allowed Apple to expand into the TV industry with Apple TV.

4. Buys out necessities from competitors like all cargo air space during christmas holiday or even pre-pays suppliers; taking up availability and ensuring a source

5. Tracks the demand of each store by the hour and adjust forecast as needed. This also halts excessive inventory and ensures the product has availability to the customer.

SP2.) Use these lessons and discuss how Apple achieves strategic fit.

EFFICIENCY

· Total control of its SC allows Apple to maintain an efficient supply chain by determining which materials to use, which suppliers to contract, and how and when to ship products. In turn, this allows Apple to make products very very cheap and sell them at a high price which cannot be beat.

· On the Push side, the SC is very versatile as the company will spend million to reroute the system around a bottleneck in order to maintain desired performance.

· Apple has a very high efficiency.

RESPONSIVENESS

· Tracking the demand by the hour in every store as well as the vast quantity of products allow Apple to respond well to customer needs.

· On the Pull side of the SC, the closed informational loop that tracks the product from China to the customer (for the customer) is a perfect example of this responsiveness.

· Apple also has a very high responsiveness

APPLE: high efficiency and not as high responsiveness. A combination not possible without the complete domination of the Supply Chain.

4. Check your work

· Is the work correct in every detail?

· Based on my intuition and what I know about Apple, and through my critical reading skills, I believe this to be correct.

· Are my assumptions reasonable?

· Yes I believe my assumptions to be reasonable.

· In terms of the things I know, do the results make sense?

· In terms of things that I know yes I believe the results to make sense.

Problem 4

1. Define the problem

· I need to follow and complete the Tahoe Salt Salt problem in the class textbook.

2. Plan the treatment of the problem, i.e., the way in which you going to structure your analysis of the given information in order to solve the problem. Define the process (logical set of steps) for solving the problem by carefully addressing the following questions:

· What information is available for solving the problem?

· All information needed is in the textbook

· What assumptions need to be made to make the solution process manageable?

· The professor stated that we were to only compute static forecast. There is no static option in the book (I have 6th edition not 7th) so I will use both the book and lecture notes from Tuesday’s class.

· What is the issue tree, if any, for the problem?

· Just screenshots of computed graphs and tables.

· What analysis needs to be performed to resolve the issues defined in Step 1?

3. Execute the plan:

NOTATION: DATA TABLE:

t : Period

Dt: Demand Data

Ðt/: De- Seasonalized Data

Ðt: Linear Regressed Data

P: Periods in a cycle

St: Seasonal Factor

_______STEP 1 De-seasonalize the Data_____

· Since there are an even number of period, I will have to find the average of two averages corresponding with periods 1-4 and 2-5.

Example De-seasonalized Data Period 3:

D1

D2

D5

D4

D3

D3.5

D2.5

D3

Ð2.5/= (8000+13000+23000+34000)/4 = 19500

Ð3.5/=(13000+23000+34000+10000)/4= 80000

Ð3/= (80000+19500)= 49750

The formula for this methodology is the following:

Ðt/= [Dt-(p/2)+Dt+(p/2)+2]/2P

· In excel I used the following formulas to calculate the de-seasonalized data

=(((SUM(Dt-2:Dt+1)/4)+(SUM(Dt-1:Dt+2)/4))/2)

· For Example: for period 8

=(((SUM(D7:D10)/4)+(SUM(D8:D11)/4))/2) NOTE: there is a chart offset by one

RESULTS COLUMN 5:

_______STEP 2 Regress the Data_____

-Running the Regression provided by EXCEL Solver I came up with the following Data

T: Trend = 524: Level = 18348.99

Regressed Equation: Regressed Demand = 18348.99+524t

· Plugging =18439+A2*524 into Excel and copying down the “Regressed Data” coulomb to apply the regression equation to all actual demand points resulted in the following::

RESULTS COLUMN 6:

_______STEP 3 Determine the Seasonal Factors_____

FORMULA: St = Dt/Ðt/

· I then apply this formula to Excel by dividing columns D/F to derive to the seasonal factor.

RESULTS:

_______STEP 4 Calculate the Average Seasonal Factors_____

· Each seasonal factor is summed up with it’s corresponding factor in each season cycle. For example:

Since there cycles are divided up into quarter the formula will result:

Savg1 = (S1+S2+S3)/4

Savg3 = (S3+S7+S11)/4

· Applying this method to excel provides the seasonal average for each period.

_______STEP 5 Forecasting_____

· Finally I forecast by multiplying the regressed factor and the seasonal factor

_______STEP 6 Error Analysis____

Note: Considering the type of data and seasonality I have decided to use MAPE as my error analysis. I will do the appropriate analysis for the fifth demand data and then apply the methodology to the rest of the data points on Excel to check my work.

Mean Absolute Percent Error = [Sum(|Error|/Demand)/n]*100%

Firstly, the Error

Error5 = Forecast5 - Demand5 ----> 10090.69756 - 10000 = 90.69756

Then, MAPE. NOTE: This equation is typically for the complete set of points as it is averaged out over n=12. However I will only average out the single point only to exemplify this method mathematically

MAPE5= [Sum(|Error|/Demand)/n]*100% = [Sum(|90.69756|/10000)/1*100% = (90.69756/10000)*100% = 0.91%

A number that does not mean much until its average is added with the rest

Applying this formula to the rest of the data points I find:

· I say that this analysis yields a result that is that is unacceptable and that more data points are required to get a functional analysis.

4. Check your work

· Is the work correct in every detail?

· I believe so, again I can't check since I dont have the book however my intuition tells me that the change in data from actual to forecasted (no matter how hard it is to see when graphed) is a realistic amount of change from one cycle to the next.

· Are my assumptions reasonable?

· I believe my assumption to be reasonable as I have shown my process of completing this HW problem

· In terms of the things I know, do the results make sense?

· The results do make sense from what I know of actual demand cycles.