Matching Supply and Demand in Online Markets
Executive MBA ProgramDiscussion Leader:Friday, April 22Raj RajagopalanSession 3Supply Chain ManagementSupply Chain Innovation and Quick ResponseWe begin the module on supply chain management (SCM) with some basic concepts on SCM and provide a framework for discussion and analysis. We then consider a firm, Zara Inc. that has thrived in a highly competitive industry by being innovative and different from most competitors. Zara is a large apparel manufacturer and retailer headquartered in Spain with global operations. We will explore Zara’s business strategy and identify the linkages between its business and marketing strategy with its operational strategies. We will also explore the elements of Zara’s unique supply chain and logistics strategy. In the process, we look at some operational innovations adopted by Zara to achieve quick response to the market and compare Zara to its competitors. ReadingsRapid-Fire Fulfillment (HBR article)Note “Introduction to Supply Chain Management” (HBSP – UVA5138)Class Preparation and Discussion Questions1. What are the basic elements of a supply chain? What are possible challenges that can arise in managing a complex supply chain? What are the criteria one might use to evaluate the performance of a supply chain?2. What are the differences in operating strategy between Zara and its competitors? How does it translate into differences in typical operating and financial measures? Specifically, compare Zara with some typical competitors, say Gap and Limited, on measures such as Inventory (days), Gross Margin and Operating Margin for a recent period and try to explore the drivers behind differences in their performance on these measures.3. What are the sources of operating advantage, if any, for Zara? Are there any disadvantages to Zara’s operating model?Executive MBA ProgramDiscussion Leader:Fri, April 22Raj RajagopalanSession 4Supply Chain AnalyticsIn this session, we will explore key concepts in supply chain management such as supply chain structure, inventories, fill rates and customer service. Also, we explore the basic decisions to be made in a supply chain and the tradeoffs that arise between minimizing costs and achieving high service levels. We will also discuss the impact of factors such as variety, variability, replenishment policies, etc. on supply chains.ReadingsNote on Inventory Models (If you don’t follow all the math, its okay but try to get the intuition!)Class Preparation and Discussion Questions 1. If you work in a manufacturing or distribution company, find out the inventory, expressed as a multiple of the average monthly demand, at your company. This can be computed as: 12*End-of- quarter or end-of-year inventory/Annual cost of goods sold.Otherwise, identify any firm that you are familiar with and compute this ratio. The inverse of this ratio is termed as inventory turns. 2. What do you believe are the factors that determine the inventory levels at the firm you have chosen? What are the tradeoffs between having high versus low inventories?3. What is the impact of variety and variability (in demand, supply and internal processes) on inventories, distribution costs and customer service levels?Executive MBA ProgramDiscussion Leader:Sat, April 23Raj RajagopalanSessions 3 and 4Supply Chain Network Design and LogisticsWe will continue our exploration of key concepts in supply chain management. We consider the issue of supply chain network design and logistics and explore the tradeoffs between centralized and decentralized supply chain networks and the nature of these networks in different industries. For example, think of the factors that influence how many warehouses (or distribution centers) that Amazon will want to establish to store and ship products. We use the case study CrystalView to better understand these tradeoffs. The case will also help in understanding the concepts and tools learned in the previous two sessions.ReadingsCase Study: CrystalView Inc.Class Preparation and Discussion Questions on CrystalView Inc.Consider the issues in the “Conclusion” section of the case:What are the issues Kendricks is faced with?What alternatives are available to him? What is your evaluation of the major alternatives? Specifically, what are the pros and cons of centralized versus decentralized distribution?What strategies can they follow to reduce inventories in the current or proposed distribution network?What should Kendricks do?Executive MBA ProgramDiscussion Leader:Friday, May 6Raj RajagopalanSession 1Supply Chain Dynamics: The (Root) Beer GameCoordination and Information Sharing in a Supply ChainReadingsClarity Is Missing Link in Supply Chain (WSJ)In this session, we will play the “beer game” to better understand the effects of actions of members of a supply chain on each other. This is a computer-based online game played individually. Please make sure you bring your laptops. We explore how information sharing and coordination between different channel members in a supply chain can help a supply chain perform better. The (Root) Beer Game is a role-playing simulation developed at MIT which simulates the flow of material and information in a simplified supply chain. There are four channel participants in this simplified beer supply chain: a single retailer (who sells to the final customer), a single wholesaler who supplies the retailer, a single distributor who supplies the wholesaler, and a single factory with unlimited raw materials who makes (brews) the beer and supplies the distributor. Each participant takes on one of these roles. Each participant places an order with the upstream participant and ships material to the downstream participant (retailer ships to the final customer). There is a two-week shipment delay from each stage to the next (except from retailer to customer); for example, material shipped this week by a wholesaler arrives two weeks later at the retailer. Similarly, there is a one-week order-processing delay from each stage to the previous one. The factory schedules production by generating a "production request." Pallets of beer to satisfy that request arrive three weeks after the order is placed. Each week, each participant in the supply chain tries to meet the demand of the downstream participant. Any orders that cannot be met are recorded as backorders or backlogs, and met as soon as possible. No orders will be ignored, and all orders must eventually be met. Carrying too much inventory is not a good idea but neither is having backlogs.The goal of the retailer, wholesaler, distributor, and factory, is to minimize total channel inventory and backlog costs. The objective of the game is to understand the impact of factors such as demand variability, order delays, transportation delays and the ordering policies at each stage or each player on the entire supply chain.Executive MBA ProgramDiscussion Leader:Friday, May 6Raj RajagopalanSession 2Make or Buy (Vertical Integration and Outsourcing)In this session, we will explore the factors that impact a firm’s “make or buy” decisions, which is an important operational decision made by a firm. While low labor costs are often cited as a reason for outsourcing, we will explore other factors that influence this decision.ReadingsStrategic Sourcing: From Periphery to the Core (HBR)How US lost out on iPhone work (New York Times) (optional reading – posted online in folder entitled "Interesting Articles" under Themes 4 & 5 -Raj)Class Preparation and Discussion QuestionsWhat are the benefits of producing an item or performing a process in-house versus outsourcing? What are the risks?What criteria should a firm use in determining which activities/processes of a firm’s operations should be produced in-house or outsourced? Which of these factors are internal to a firm and which ones are external to a firm?In your firm or industry, which activities are produced in-house and outsourced? What appear to be the fundamental factors underlying this decision? Have the outsourcing decisions and relationships been successful in your firm/industry? Why or Why not?What steps should a firm take to mitigate the risks in outsourcing?Executive MBA ProgramDiscussion Leader:Saturday, May 7Raj RajagopalanSession 1Revenue ManagementIn this session, we explore the topic of revenue management, also referred to as yield management or dynamic pricing. Revenue management deals with the issue of how to maximize revenues in environments where capacity is limited and cannot be changed in the short run and no inventories can be held to deal with demand fluctuations. Specific tools have been developed for revenue management and are used in industries such as airlines, hotels, and cruise lines. We will also explore the challenges and drawbacks of revenue management.ReadingsRevenue Management Systems: “Must-Have” or Luxury? Jon Inge (Hotel Online Report)“You Paid What for That Flight?” WSJ (Optional reading: posted online in folder entitled "Interesting Articles" under Themes 4 & 5 -Raj)Class Preparation and Discussion Questions What are the differences between the revenue management (RM) applications at hotels, cruise ships, etc. versus its application in typical industries (e.g., airlines) with respect to aspects such as pricing and customer segmentation?What are industry conditions when yield or revenue management is applicable?What are the basic tradeoffs in making yield or revenue management decisions?What are the challenges in implementing yield management systems?Executive MBA ProgramDiscussion Leader:Saturday, May 7Raj RajagopalanSession 2Matching Supply and Demand in Online MarketsIn this session, we will discuss online markets for various goods and services and how they help match supply and demand. Numerous firms have entered this space over the past decade – some examples are eBay, Uber, AirBNB, TaskRabbit, Liveops and Cargomatic. The objective of this session is two-fold: (i) to better understand the unique challenges in each type of market in matching supply and demand, (ii) identify similar opportunities for matching supply and demand in other markets for goods and services. ReadingsThe Future of Work (The Economist) Preparation and Discussion QuestionsWhat is the firm’s business model and relationship with its providers? Who sets the price—provider or marketplace? What is the nature of pricing and how are revenues divided between the provider and the platform (e.g. Uber)? Is this a commodity product or service or something more specialized where pricing depends on quality, experience, reliability, timing, etc.? Can customers wait for the product/service (e.g. oDesk) or is it needed immediately (e.g. Uber)?How does the firm ensure quality, timeliness and reliability from its provider base? Do customers select suppliers from a directory, do suppliers “bid” on jobs like an RFP process, or does the marketplace itself facilitate matching?What are the challenges in setting prices at a firm such as Uber? What are the fundamental principles laid out in the article on Uber’s dynamic pricing?What are some new industries and markets where similar ideas can be implemented successfully? What will be the unique challenges?Executive MBA ProgramDiscussion Leader:Friday, May 20Raj RajagopalanSession 3Analyzing and Improving Operational ProcessesIn this module, we explore how any operation can be seen as a set of processes and sub-processes. In this session, we discuss issues such as how to map a process and the elements of a process such as activities, resources, delays, inefficiencies, etc. In particular, we will review the rudiments of process and capacity analysis: determining the capacity and bottlenecks in a process, utilization of various resources, lead time, cycle time, etc. Also, we will explore the impact of variability and flexibility on operations, especially in complex processes.ReadingsChapter 5 (Process Analysis) Jacobs and Chase text, 13th editionClass Preparation and Discussion QuestionsWhat are the main elements of a process? What performance measures would you use to evaluate a process? What are the factors that determine the performance and efficiency of a process?What are some elements of a process that are similar and dissimilar in different industries? What is a bottleneck? Which resource in a production system should be the bottleneck? How does one determine the utilization of a resource? What is the impact of variability on operations? How do these affect performance measures like cost, cycle time, and quality?What is the impact of a variety of products on a production system? What happens when there are changeovers in a production process?What is the value of flexibility in a production process? How can greater flexibility be achieved in a process?Executive MBA ProgramDiscussion Leader:Fri, May 20Raj RajagopalanSession 4Analyzing and Improving Operational ProcessesThis session explores a unique operation (Shouldice Hospital) to better understand an operation as a set of process flows. We also explore what makes a process successful and how an organization such as Shouldice Hospital is able to achieve high operational efficiency without compromising customer satisfaction. We also discuss the concept of focus and explore the benefits and drawbacks of focused strategies and operations. ReadingsShouldice Hospital Case (Abridged)“The Doctor Will See You Eventually” (WSJ) (optional reading: posted online in folder entitled "Interesting Articles" under Themes 4 & 5 -Raj)Class Preparation and Discussion QuestionsModel Shouldice hospital as a processing operation with inputs, outputs and resources.What are Shouldices’s competitive priorities? What kind of market have they chosen to focus on?How successful is Shouldice Hospital? How do you account for its performance?What is your estimate of the hospital's current capacity? Which resource limits the capacity?What actions, if any, would you take to expand the hospital's capacity? How would you implement the changes you propose? Try to anticipate the various staff reactions and problems and what steps you would take to mitigate them.Executive MBA ProgramDiscussion Leader:Sat, May 21Raj RajagopalanSession 3Lean OperationsIn this session, we look at the key concepts in lean production which were pioneered at Toyota and have been since adopted in numerous industries across the world. We will also look at the application of lean production ideas in healthcare and other service operations to improve efficiency. We will then compare the operational processes in manufacturing and services and draw some key insights and lessons for improving processes in different types of environments.Readings"Decoding the DNA of the Toyota Production System" (HBS)The Checklist by A. Gawande (New Yorker) Class Preparation and Discussion QuestionsWhat are the basic tenets of lean production? How do service operations differ from manufacturing operations?How can we improve processes in service organizations such as hospitals, restaurants, rental cars, etc. that you experience on a daily basis?How are hospitals using the ideas to improve operations? What are the challenges in applying the ideas? How can technology be combined with streamlined processes to improve efficiency in healthcare and other service industries?Executive MBA ProgramDiscussion Leader:Sat, May 21Raj RajagopalanSession 4Lean OperationsIn this session, we will take a detailed look at how a healthcare organization tries to implement the principles of the Toyota Production System to deliver medical care with higher quality, lower cost, and greater accessibility. Please read the Deaconess-Glover Hospital case carefully and attempt to answer the questions listed below.ReadingsCase study: Deaconess-Glover Hospital (A) (HBS)Class Preparation and Discussion QuestionsFrom what you have read in the case and learned from the article “Decoding the DNA of the Toyota Production System”, answer the following questionsWhat has Carter been doing and why at Deaconess Glover Hospital?What problems has he discovered?If you were in Carter’s position, what solutions would you propose to John Dalton, president of the hospital and to Julie Bonenfant, the hospital’s vice president? Executive MBA ProgramDiscussion Leader:Friday, June 3Raj RajagopalanSession 1Lean and Sustainable OperationsIn this session, we will discuss sustainable operations and in particular we discuss a case study that highlights important quality issues as well as the cost and environmental impact of waste generation. The case considers a firm manufacturing gel coatings that has exhausted cost-effective opportunities to minimize hazardous waste and is considering the option of by-product synergy to dispose of waste. The case provides an opportunity to explore concepts in process analysis as well as financial and environmental analysis of waste management alternatives. ReadingsCase study: Cook Composites and Polymer Co (HBS)A group report that addresses the questions below is due Thu, June 2 midnight.Class Preparation and Discussion QuestionsCCP faces three options for addressing its rinse styrene waste stream:Continue with business-as-usual, sending its rinse styrene to cement kilns;Sell it as rinse styrene on a waste exchange;Proceed with developing the concrete coating that uses the rinse styrene (BPS)Compute the expected net profit per batch of the above three alternatives for the different levels of rinse styrene that could be used per batch listed in Exhibit 5 in the production process. Use the data in the case as appropriate for your analysis.Draw a simple process flow diagram of gel coat manufacturing and determine the annual capacity of the pared to business-as-usual, how would you evaluate the relative environmental impact of producing the concrete coating by-product? For this question, consider the impact on CO2 emissions. Consider the impact system-wide: at CCP’s plant, at cement kilns and concrete coating. Estimate the total impact on CO2 emissions if styrene is diverted from cement kilns to create concrete coatings. Assume: (i) they are operating at full capacity; (ii) CCP’s sales of concrete coatings would not alter the total sales quantity in the concrete coatings market.Based on financial, environmental and other considerations, what would you recommend to management?Executive MBA ProgramDiscussion Leader:Friday, June 3Raj RajagopalanSession 2Lean Operations: Quality Management and Six SigmaIn this session, we will discuss key concepts and tools in Quality Management and the revolution that has taken place using quality control and six sigma methods and the opportunities for improving quality in many processes. We will also explore how lean production approaches not only improve productivity but also quality. ReadingsChapter 9 (Six-sigma quality) Jacobs and Chase text, Operations and Supply Management 13th editionClass Preparation and Discussion QuestionsAs you read the key ideas discussed in the readings, think about how they apply to your organization. Does your firm use such quality improvement tools? If yes, what problems do you face in implementing them and what benefits have you derived? If not, can they be possibly be used? What are the reasons such tools have not been used? What might be potential difficulties in the use of such tools in your firm? Can techniques such as acceptance sampling and process control be used in services? Executive MBA ProgramDiscussion Leader:Saturday, June 4Raj RajagopalanSession 1Operations and Competitive AdvantageSouthwest AirlinesIn this session, we will discuss how Southwest manages to achieve superior performance in an intensely competitive industry and specifically, how some of its operational innovations and strengths enable it to outdo the competition. The case also serves to illustrate the linkages between Southwest’s operational and business strategies. ReadingsCase Study: Southwest Airlines in BaltimoreCase Class Preparation and Discussion QuestionsHow does Southwest Airlines (SWA) compete? What are its advantages and disadvantages relative to other airlines? What is Southwest’s business model at the time of the case and how does it differ from that of other airlines?How would you compare Southwest’s performance with that of other airlines based on the data in Exhibit 3? Specifically, how does Southwest’s revenue per RPM and cost per ASM in Exhibit 3 compare with those of its competitors (compute average for the industry) and what factors may explain Southwest’s numbers relative to its peers? What metrics in Exhibit 3 or other possible metrics based on the data in Exhibit 3 would you use to make this comparison? Notes: RPM is revenue passenger miles and is simply the total number of miles flown by all passengers in that year. “On-flight passenger trip length (miles)” in Exhibit 3 is the average miles flown by a passenger in a year. “Overall flight stage length (miles)” is the average miles flown by a plane in the airline’s fleet. “ASM's per aircraft mile” in Exhibit 3 is the average number of seats per plane for that airline’s fleet.Why is the operational performance at Baltimore eroding? What issues do you identify that require action? What would you recommend Matt Hafner do?Executive MBA ProgramDiscussion Leader:Saturday, June 4Raj RajagopalanSession 2Operations and Competitive AdvantageTrends and Opportunities in Operations and Supply ChainsIn this final session, we look at how operational innovation combined with continuous improvement can provide sustainable competitive advantage. The article by Michael Hammer provides several examples of firms in both manufacturing and services that have used operational innovations to reinvent themselves and achieve excellent business performance that positively impact both revenues and costs. Finally, we identify emerging trends and opportunities for improving operations with a focus on creative and novel solutions. Readings“Deep Change: How Operational Innovation Can Transform Your Company” (HBR)Class Preparation and Discussion QuestionsWhat are the main hypotheses of Hammer’s article? Do you agree with his hypotheses? What is the role of the operations function in a firm? Can better operations provide a competitive advantage? In which industries and under what conditions? What are some examples of firms that have been able to achieve superior performance due to superior operations?What are some examples of companies that have introduced operational innovations that have provided substantial competitive advantage? How long did these advantages last? What prevents competitors from adopting these innovations quickly? When is a competitive advantage sustainable for a long period of time?Think about some of the operational innovations that your firm or your competitors have developed and implemented and their impact on firm performance. ................
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