Tag: Supply Chain

Guest Post: Food Processing Ingredients

Prof. Howard Weiss shares his insights monthly. Howard created the Excel OM and POM software that we provide free with our book.

A recent Philadelphia Inquirer article (February 19, 2026) reports that “The grandson of the inventor of Reese’s Peanut Butter Cups has lashed out at the Hershey Co., accusing the candy company of hurting the Reese’s brand by shifting to cheaper ingredients in many products.” 

In prior years consumers expressed dissatisfaction when Nutella reduced the amount of cocoa in its product. One reason for the change in the recipes for these two products is the high cost of cocoa. Clearly, a change in a recipe will affect inventory, material (ingredient) costs, and the supply chain.

The most infamous recipe change is probably “New Coke” which was introduced in 1985. Consumer backlash forced Coke to revert to its original recipe. Recently, Coke announced it will add a new product made with cane sugar rather than corn syrup.

Food taste and recipes can vary for a number of legitimate reasons. The recipe for Twinkies was changed in order to extend its shelf life from 25 days to 45 days. Butterfinger took an alternative approach and double-wrapped its candy. Several food processors have changed recipes in order to eliminate certain food dyes or additives or reduce sodium, including Kraft Macaroni and Cheese and Turkey Hill ice cream.

The same product may have a different recipe for sales at bulk stores rather than supermarkets. Colas may have a different amount of corn syrup in bulk stores.

Sometimes recipe changes are inadvertent. In one case consumers complained about the taste of meals they cooked using 4C Italian Bread Crumbs. 4C investigated and found that trace amounts of cinnamon were in the bread crumbs and should not have been. There are many examples of bacteria being in processed food which would affect the health of the person eating the food. This is different. There is a processing problem but it will NOT cause health issues just taste issues.

The repercussions of food quality are different than the repercussions of food safety. Food safety problems can lead to recalls, liabilities, brand damage and penalties. Failure to maintain taste can result in brand damage and product returns.

Classroom discussion questions:
1. Identify other products in which change resulted in complaints or safety issues.

2. What are the main changes these days to food products?

 

Guest Post: Bees in Supply Chains

Professor Howard Weiss, retired from Temple U., is the developer of the POM and Excel OM software that we provide free with our text.

In late May, a truck carrying beehives crashed and overturned in Washington state near the Canadian border. The crash resulted in the unintended release of 14 million bees. The truck was transporting roughly 450 hives with bee colonies in them with a collective value of roughly $160,000.

Following the accident, two dozen master beekeepers were employed in a coordinated effort to help with the recovery by reconstructing roughly 300 beehives one by one and capturing many of the honeybees. There was not a total loss of the $160,000 but there were significant losses due to the costs of labor for cleanup, restoration of the beehives and capture of the bees.

There was a loss of income for the bees’ services because the accident caused a delay in the supply chain for several different industries. The good news is that the bees that were not recaptured will form hives in the area and re- pollinate in northern Washington. In addition, the accident prompted authorities to create a bee response plan to be written into emergency management protocols.

The Food Supply Chain.  Bees are essential for several reasons. The obvious use of bees is in making honey. All the bees on this truck were to be used in the supply chains for food. Some of the bees on the truck were to be used to produce honey and some hives were to be rented out to farmers to be used to fertilize crops.
Bees are critical for pollinating over 90% of the world’s top crops including nuts, coffee, cocoa, tomatoes and almonds. Without bees, crops would not grow as well, which would mean lower yields and less availability. Crops that feed livestock would also be affected. Without bees, food availability and prices would rise.

The Medical/Pharmaceutical Supply Chain.  Bees and bee-related products have also been used medically for antioxidant, antimicrobial, and anti-inflammatory properties. Some of these uses have documented scientific support whereas others do not.

The Clothing Supply Chain. The textile industry would be affected since bees help with cotton production.

Other Supply Chains.  Beeswax, the wax bees secrete to build honeycombs, has been used for waterproofing, fuel, cosmetics, kitchen wrap, cooking, furniture polish, lubricant, sealing envelopes, bug bite balm and candles.

MyOMLab: Simulation Updates for Fall 2024

We want to let you know that our five simulations, which students really enjoy, have gotten these valuable enhancements. If you are not using them, checkout the features. The five are: supply chain management, quality management, forecasting, inventory management, and project management.

OM in the News: GE Appliances’ Supply Chain Overhaul

GE Appliances, one of the largest home-appliances manufacturers in the U.S., says a $2 billion effort to remake its supply chain has helped it double revenue since 2017. The Louisville-based company, now a subsidiary of China’s Haier Smart Home, has added manufacturing capacity, opened seven new distribution centers and implemented digital tools to knit together operations from production through to delivery. It is an example of how companies are resetting their supply chains to be more flexible, moves that come after retailers and household goods companies navigated disruptions, shipping delays and dramatic shifts in consumer demand during a chaotic period marked by waves of stockouts and overstocking.

“A lot of companies are really striving to create increased visibility in their supply chains and also to build greater resilience in their supply chains,” said an N.C. State professor. That includes efforts to “improve coordination and integration and scheduling, and at the same time, try to reduce their inventory.”

One of the biggest changes has been to bring more manufacturing into the U.S. from Asia, reports The Wall Street Journal (July 8, 2024). GE has added 4,000 manufacturing jobs across its nine U.S. plants over the past seven years. Shifting production from overseas has cut shipping costs by reducing the number of bulky appliances that are sent across the Pacific Ocean and has given GE more control over production. When you have something that’s in a container on a boat for six weeks, it’s difficult to change your orders and be able to adjust to shifts in demand.

GE also measures inventory differently today than before the pandemic. The appliance company previously tracked “weeks on hand,” which measures finished products relative to how many units typically sell in a given week. It now tracks customer orders delivered on-time and in-full, a measure that prioritizes existing orders so the company doesn’t spend time manufacturing items that aren’t in demand. To accommodate that change, GE installed digital tools that allow factories to see upcoming customer orders. The plants can then manage production schedules to ensure orders are ready on time, but not too early. Storing bulky, fragile appliances in a warehouse for a long time eats up space, adds storage costs and increases the risk of damage.

Classroom discussion questions:

  1. What is the difference between “weeks on-time” and “on-time and in-full”? Hint: See our Feb, 25, 2024 blog
  2. What major OM moves ae described in this piece on GE Appliance?

Guest Post: Shoe Capital of the World

Our Guest Post comes from Prof. Howard Weiss, who created the ExcelOM and POM software that we provide free to our readers.

Lynn Massachusetts In colonial days shoemakers had a capacity of roughly 5 shoes–not pairs–per day. The industrial revolution moved shoe manufacturing to factories, increasing capacity to 50 pairs per day. In 1883, Jan Matzeliger of Lynn, Massachusetts patented a machine that would use a wooden mold to form the leather top of the shoe and then attach it to the bottom. The new machine replaced this step (called lasting) which was performed by hand by skilled shoemakers. And it increased the capacity to 750 pairs per day while reducing the price of shoes by 50%.

 Figure 8.1 of your Heizer/Render/Munson textbook mentions several factors for a successful location which we examine now with respect to shoe manufacturing.

Labor talent Due to the continuous flow of skilled shoemakers into the state, 234 shoe manufacturers chose Lynn as their location and manufactured over 1,000,000 pairs per day. This made Lynn the Shoe Manufacturing Capital of the World. The state of Massachusetts produced more shoes than anywhere else in the U.S. through World War I. 

Matzeliger’s lasting machine

Leon, Mexico Today, however, over 90% of shoes bought in the U.S. are not manufactured here. One of the major manufacturing locations is Leon, in the state of Guanajuato, Mexico which currently has over 3,000 shoe manufacturers including Nike, Converse, Crocs, Skechers and New Balance. This makes Leon the current Shoe Manufacturing Capital of the World. There are several reasons for this:

Location of markets Leon is located roughly 250 miles northwest of Mexico City and has easy highway access to other cities in Mexico and to the U.S. through the 45 U.S.-Mexico border crossings. Mexico’s infrastructure is in excellent shape as are its highways. Shipments by truck to the U.S. take no more than 3 days, and to Latin America no more than 7 days. Guanajuato has an international airport with flights to cities in Mexico and L.A., Houston, Chicago and Dallas. Shipments to Europe take less than 2 weeks.

Labor talent again Mexico has had large influx of skilled leatherworkers from Europe.

Proximity to raw materials/supply chain One of the key materials needed to manufacture shoes is leather and there are nearly 700 leather tanneries in Guanajuato providing this raw material.

Classroom discussion questions: 

  1. What major manufacturer or service organization is located near your home or school and what were the factors for selecting that location?
  2. What is the effect of NAFTA in selling shoes manufactured in Mexico in the United States?

Guest Post: Superbowl Footballs

Our Guest Post comes from Professor Howard Weiss who is the developer of the ExcelOM and POM software that we provide free with your text.

Superbowl LVI is quickly approaching so this is an opportune time to discuss the footballs that will be used. All NFL footballs are manufactured by the Wilson Sporting Goods Company at its factory in Ada, Ohio. Wilson is a Chinese-owned subsidiary that has been manufacturing footballs for over 60 years and currently makes 700,000 footballs per year. Wilson has continuously improved its manufacturing process over that time leading to the current five step manufacturing process followed, of course, by quality control. 

While there is a straightforward sequence when manufacturing a football, Wilson does not use an assembly line. One advantage of its process layout is that it allows Wilson to pay its workers by piece.

Cutting: Each football consists of four equal ellipsoid parts that Wilson cuts from a large piece of leather using a cookie-cutter style mold. The Horween Leather Company has been supplying leather to Wilson, its largest customer, since 1941 for both footballs and basketballs. One of the four pieces is stamped with the appropriate Logo for the organization that will use the footballs.  Each seamstress has a capacity of roughly 150 footballs per day.

Sewing: Wilson applies a backing and then sews the top two panels together and the bottom two panels together using sewing machines that seem to be the same as those used when Wilson first started manufacturing footballs for the NFL in 1941. After sewing, the seamstress punches the holes for the laces.

Turning: Wilson then softens the leather and turns the footballs rightside out with the help of a steel bar.

Lacing: Following turning, Wilson inserts a bladder into the football and then laces the football.

Molding: The last step is to mold the footballs into their shape and to inflate to 13 pounds per square inch. This is the standard PSI for NFL footballs (unless you are Tom Brady).

Quality Control: The quality control inspector checks that the seams are perfect and that the footballs are consistent and feel the same to every player

The footballs with their special Superbowl stamp are then ready for the big game.

Classroom discussion questions: 

  1. Given the information above, how many seamstresses need to be employed to meet the annual production rate?
  2. What are other advantages, aside from paying by the piece, are there in using a process layout rather than a product layout?

OM in the News: Boeing’s Supply Chain Takes a Hit

Grounder 737 MAX planes

Boeing sits atop a chain of more than 16,000 suppliers. These companies, making parts for Boeing jets, are shrinking rapidly in the wake of the travel downturn, writes The Wall Street Journal (Aug. 13, 2020). U.S. aerospace manufacturers have already shed more than 100,000 jobs since the start of the year, with the pandemic adding to existing pressures from the sharply reduced production of the still-grounded 737 MAX jet. The biggest supplier on the MAX program, Spirit AeroSystems (which makes fuselages), is cutting 8,000 jobs, around 40% of its commercial aerospace workforce. GE is shedding 13,000 from its aviation unit.

In addition to the MAX, the Boeing supply chain is taking other hits. The overall production of new jets has declined, and the big drop in flying—a 1/3 of the global fleet remains grounded—has reduced demand for spares and improvements such as new seats. The reduced workload comes as companies had invested in new equipment and hiring to support higher jet production and the steady rise in airline passengers, only for the pandemic to render their business plans irrelevant.

Boeing forecast that it would produce 240 planes this year, 2/3 lower than in 2019, and has had to twice reduce that forecast downward. It delivered just 4 jets in July and is producing only a dozen MAX a month, down 36 from a year ago. Before the pandemic, Boeing was supporting suppliers by ordering more parts than it needed and stockpiling them ahead of a planned increase in MAX production. That acceleration has failed to materialize so it has slowed orders.

Raytheon won’t start shipping parts for new MAX jets until the second half of next year. Safran, which also makes Boeing engines, said its commercial sales fell 66% last quarter. “We have a concern regarding the future of some of our suppliers and subcontractors because they are in crisis, too,” Safran’s CEO stated.

Classroom discussion questions:

  1. What supply chain dangers is Boeing facing?
  2. What can it do at this point?

 

OM in the News: Is Tesla’s Supply Chain Overhaul Running Out of Juice?

Teslas awaiting transport after arriving at the port in Norway,

“Tesla’s first-quarter deliveries plummet as the electric car maker faces challenges shipping Model 3 overseas for the first time,” writes The Wall Street Journal (April 4, 2019). Tesla said new-vehicle deliveries in the first quarter fell 31% from the previous three months as it struggled to ship its Model 3 compact car to customers in Europe and China for the first time. The auto maker delivered about 63,000 vehicles in the latest period, worse than analysts’ already-lowered expectations of 73,500 units.

Concerns of a slow start to deliveries in 2019 have raised questions about the company’s ability to meet ambitious sales targets after it struggled for 2 years to increase production of the Model 3, its lowest-price vehicle. Tesla had slashed the Model 3’s starting price three times during the quarter, finally reaching its long-promised base of $35,000. (The phaseout of U.S. tax credits went into effect recently, dropping to $3,750 from $7,500. Credits end at the beginning of 2020). Tesla delivered 50,900 Model 3 cars in the first quarter. Sales of the more-expensive Model S car and Model X SUV fell to 12,100 from 27,602 during the fourth quarter.

Getting the Model 3 to customers has bedeviled the company ever since it cranked up production. As Tesla’s U.S. sales approach those of BMW and Mercedes, the company has encountered a host of logistical issues, from delivery and servicing of a growing fleet to balancing supply and demand. The delivery challenge was especially pronounced when Tesla began delivering the Model 3 overseas. Tesla has one assembly factory, located in Calif. It traditionally dedicates the early parts of each quarter to shipping vehicles overseas to account for travel time.

The company has begun construction on a factory in China to build the Model 3 and future Model Y compact-SUV for that market, and intends to open an assembly plant in Europe. The challenge for Tesla is balancing the costs of ambitious growth plans with maintaining profitability. Shortages of Europe-specific parts and a printing error were making it harder to get vehicles to customers.

Classroom discussion questions:

  1. What are the major OM problems Tesla faces?
  2. Why are sales falling?

Guest Post: A Case for Supply Chain Simulation in Your OM Class

Our Guest Post today comes from Chuck Nemer, who has taught operations management for 16 years at Metropolitan State University in Minneapolis. He is also a SCM trainer and can be reached at http://www.theguruofbiz.com

Here is what I often hear about supply chain management simulations from colleagues teaching OM:

• I want to provide a hands-on approach rather than get lost in theory
• I need to get more engagement from my students
• I need to present real-world challenges and the associated complexities

Using simulations, such as the ones that come free with the Heizer/Render/Munson text, in your classroom gives you all the above, as well as the opportunity to see for yourself that students “get it.” Students get to see not only how vital supply chain is to organizations today, but they can build a career where they touch all aspects of the organization and develop the ability to lead organizations successfully.

My experience has been simulation in the classroom aligns with and supports both the textbook and the body of knowledge for supply chain quite easily and successfully. Exciting to me, is that students walk away from the experience with confidence, and the ability to demonstrate to prospective employers they understand not just what supply chain is. But they also see what needs to be done to make a supply chain improve, grow, and compete successfully at a level greater than just from a textbook and lecture alone. Together, your knowledge, your class content, and the use of a simulation make a very powerful combination that you just have to consider these days where learners live and exist in a technology rich world and thirst for “an experience.” I really hope you will investigate the use of supply chain simulations and consider making them part of your classroom.

OM in the News: Apple Suppliers Suffer With Uncertainty

Apple CEO Tim Cook at an Apple store in Italy,

Lower-than-expected demand for Apple’s new iPhones and the company’s decision to offer more models have created turmoil along its supply chain and made it harder for Apple to predict the number of components and phones it needs, writes The Wall Street Journal (Nov. 20, 2018).

Recently, Apple slashed production orders for all 3 of the iPhone models it unveiled in September, frustrating Apple suppliers and workers who assemble the phones and their components. The slowdown has ripped throughout Apple’s supply chain.

Big suppliers of iPhone components, including Qorvo, Lumentum, and Japan Display, cut their quarterly profit estimates, implying a reduction in previously placed orders from Apple, which accounts for 1/3-1/2 of their revenue. At Foxconn , Apple’s largest iPhone assembler, thousands of workers have voluntarily left its Chinese plants earlier than they intended after Foxconn cut overtime hours that typically are available. (Many workers rely on overtime as a major source of income).

Hundreds of suppliers built their businesses on the back of smartphones, and none benefited more than those providing components for Apple. But the iPhone production cuts have reignited frustration among suppliers and raised worries about Apple’s ability to forecast demand since it started releasing 3 flagship models instead of 2 last year. Apple also continues to sell some older models in its stores, further complicating forecasting.

The company’s suppliers have been rattled before. The iPhone 6, introduced in 2014, sold better than Apple’s expectations, and suppliers scrambled to meet increased orders. The following year, demand for the iPhone 6s fell short of forecasts, leaving suppliers to grapple with excess inventories and underused production capacity. Last year, many suppliers were hurt by Apple’s excessively optimistic production forecast for the iPhone X, which it later slashed by some 20 million units for the 2018 first quarter.

While making components for 200 million-plus iPhones remains a tremendous business for suppliers, most relied on the growth in iPhones sold to boost their profits and pay for huge capital expenditures. “The freeway of Apple suppliers is littered with roadkill,” said one industry analyst.

Classroom discussion questions:

  1. What forecasting techniques can be used by Apple to predict demand for a new phone?
  2. What are the advantages and disadvantages of being an iPhone supplier?

OM in the News: Boeing 737s Piling Up at the Factory

Boeing is facing a problem as it races to meet demand for single-aisle, fuel-efficient jets: where to store unfinished 737s piling up at a factory near Seattle, reports The Wall Street Journal (Sept. 4, 2018). One answer is the taxiway of the small airport in Renton, Wash., next to its Boeing factory there. “Boeing is running out of space,” said a Renton administrator. “They have encountered an emergency production challenge that threatens to interfere with their ability to keep their airplane production lines running.” Boeing said the request for parking space was part of a “recovery plan” to get deliveries to match production rates.

Boeing delivered just 29 of the 737s in July, though more than 50 mostly-finished jets roll off the production line each month. The 737 is Boeing’s most popular commercial aircraft and a top moneymaker. The delays are due largely to two suppliers: engine maker CFM International and fuselage manufacturer Spirit AeroSystems. Both companies have said some of their own small suppliers are struggling to meet demand.

The engine shortage is “severely hampering production needs as we now have aircrafts ready to go but no engines,” a Renton airport official wrote to Federal Aviation Administration recently. The airport has about 35 spaces for 737s. The FAA in late July approved a plan under which large planes taking off from and landing at the Renton airport provide 2 hours’ notice to give Boeing time to move planes on the taxiway. It is also tucking planes between airport buildings and parking them on employee parking lots at its factory– and it is outfitting some 737s with temporary engines so pilots can fly them to nearby King County Airport. The temporary engines are removed there and trucked back to Renton to fly more 737s to King County.

Classroom discussion questions:

  1. What, if anything, can Boeing do to solve this problem?
  2. Why is it critical to get these planes finished and delivered?

OM in the News: Home Depot’s $1.2 Billion Supply-Chain Overhaul

Home Depot plans to spend $1.2 billion over the next five years to speed up delivery of goods to homes and job sites as the rise of online shopping resets consumer expectations, reports The Wall Street Journal (June 12, 2018). The home improvement retailer will add 170 distribution facilities across the U.S. so that it can reach 90% of the U.S. population in one day or less. The new sites will include dozens of direct fulfillment centers for next-day or same-day delivery of commonly ordered products, as well as 100 local hubs where bulky items like patio furniture and appliances will be consolidated for direct shipment to customers.

The retailer is realigning its supply chain to a changing retail landscape. Customers “expect delivery to be free, they expect it to be timely,” said a company exec. “Sometimes they want it fast, and are willing to pay for that. Sometimes they want it free, and they’re willing to wait for it. We need to have the right options there.”

The push comes as Home Depot is trying to tamp down transportation costs and improve inventory management as it tries to more closely integrate its growing online business with its network of about 2,280 brick-and-mortar stores. Online orders accounted for 6.7% of the retailer’s $100 billion in sales last year, but the digital revenues expanded 21% from the year before. About 45% of online orders are picked up inside stores, and the company is rolling out self-service lockers at the front of some stores to speed up order retrieval.

Shoppers accustomed to 2-day delivery from online retailers like Amazon are increasingly making buying decisions based on convenience factors. That’s pushing retailers to reshape distribution networks that were originally designed to ship pallet-loads of goods from warehouses to stores. They are turning to tactics such as drop-shipping, where suppliers ship online orders directly to customers, and opening warehouses closer to customers. The company is also testing the use of cars and vans for lower-cost delivery of smaller orders, and expanding its network of flatbed trucks that can deliver loads of concrete and other building materials to professional customers..

Classroom discussion questions:
1. What are the key OM issues Home Depot is facing in this article?

2. How does Home Depot’s approach to customer delivery and pickup compare to that of Amazon?

OM in the News: Retailers Scramble to Ship From Stores As Web Sales Soar

 

A Black Friday shopper at Toys R Us in Fairfax,VA
A Black Friday shopper at Toys ‘R’ Us in Fairfax, VA

I was meandering the aisles of our local Toys ‘R’ Us store yesterday, and I noticed that not only were the shelves full, but the aisles were stacked with toys as well. Why? It turns out they are trying to avoid a repeat of last Xmas, when online promotions fueled a surge of web orders twice the company’s forecast and beyond what its e-commerce fulfillment centers could handle. Afraid that items wouldn’t arrive by Xmas, management halted some online deals to deter shoppers—a drastic measure during that peak sales period.

To address the issue this year, the company has prepared nearly its entire chain of 870 stores to help ship web orders during the holidays, reports The Wall Street Journal (Dec. 1, 2016). It started cramming its stores with as many goods as possible weeks earlier than last year, and is offering bonuses and better wages to recruit seasonal warehouse workers. Larger items also were shipped to stores earlier to free up its supply chain so it has maximum flexibility during peak times. The $11.8 billion company says it has built in capacity to ship twice as many units from its stores this holiday season, while transporting nearly 25% more from fulfillment centers.

Two decades after Amazon.com was founded, traditional retailers are still struggling to manage hundreds of brick-and-mortar stores, while trying to maximize online sales. The difficulty is amplified during the holidays because online sales spike to 4 times normal volume at peak times.

Across the industry, traditional retailers are taking similar steps. Kohl’s is raising wages and offering bonuses to ensure fulfillment-center employees stick around. Target has more than doubled the number of stores shipping online orders this year to 1,000. Target said enlisting its brick-and-mortar footprint allows inventory in stores to be used for web orders, freeing up online distribution centers to focus on shipping products that stores don’t carry.

Classroom discussion questions:

  1. What OM issues are being addressed by Toys ‘R’ Us and others this season?
  2. How does Amazon differ from traditional stores with regard to distribution?

OM in the News: Amazon’s Relations With UPS Are Showing Strain

ups-amazonAs the clock counts down to Christmas, workers at United Parcel Service are busy hustling packages along loading docks and conveyor belts at its Louisville, Ky., hub—part of a costly, intricate system built in part to cater to Amazon.com, its biggest customer. “But the symbiotic relationship between the two giants has come under increasing strain,” writes The Wall Street Journal (Dec. 23, 2015).  Rising package volumes and costs have Amazon seeking alternative delivery routes—shifting the online retailer’s role from key ally to a potentially disruptive competitor.

Amazon has held talks with air-cargo companies to lease airplanes and build its own onfreight operation. The company is already using its own trucks, drivers and a fleet of couriers for the final and most-expensive leg of an order’s trip. It has been making its own deliveries in certain high-density regions and relying more heavily on the U.S. Postal Service. Eventually, it hopes to get drones to drop packages into backyards. “Amazon’s interest is not in doing what may be good for UPS,” said an industry expert. “Their interest is in getting control over logistics.”  This year, Amazon spent over $1 billion with UPS, a 5-fold increase in the past decade. The average cost to handle a parcel was about $8 last year, up from $6.50 in 2000.

Amazon was a factor in UPS’s last two back-to-back Xmas snafus—each of which cost UPS an unexpected $200 million. Two years ago, Amazon overwhelmed UPS with hundreds of trailers of last-minute Xmas orders– and then pushed UPS to help underwrite millions in customer refunds. At Amazon, plans to handle more of its own parcels have recently accelerated, as it fears that UPS’s hub-and-spoke system is growing obsolete. Amazon has poached more than 40 UPS supervisors, managers and executives in the last 3 years.

Classroom discussion questions:

  1. What are the advantages of Amazon building its own logistics system?
  2. The disadvantages?

OM in the News: Eight Things Supply Chain Managers Worry About

When a group supply chain managers was recently surveyed about their concerns, Material Handling & Logistics (Aug. 27, 2014) reports that they came up with the following eight:

Talent: Having the right people in the right positions. All companies need better processes to assess, identify, recruit, develop and retain top talent, especially since supply chain talent is increasingly scarce.

The customer: The executives felt the urgency to better understand the current and future needs of their customers. They understand that their customers should lead their supply chain strategies, and they know that their customers should be better educated on the cost-service tradeoffs.

Agility: Given the increasing volatility in the global environment, the group understood the urgent need to plan and prepare for increased supply chain agility. Postponement is one of many enablers of supply chain agility.

Technology: The executives know they need to stay current with technology on many fronts, from warehouse and transportation management systems to network optimization tools and inventory planning systems.

Cost: Cost reduction will always be a priority and supply chain executives know their companies expect them to take the lead in that area. They must reduce cost while simultaneously redesigning their supply chains and leveraging the global environment.

Regulations and Infrastructure: Executives know they need to find efficient ways to comply with the growing list of regulations, as well as the crumbling transportation infrastructure.

Risk: Executives understand they should have a better process to identify, prioritize and mitigate supply chain risks that can seriously damage their companies. Even weather must be considered.

Sustainability: They think it’s time to develop a serious supply chain sustainability strategy. A growing number of companies have already begun that effort.

Classroom discussion questions:

1. Which of these eight do you think is the highest priority?

2. How can supply chain managers mitigate risk?