Chopra/Meindl 4/e CHAPTER TWO Discussion Questions 1. Ho ould !ou characteri"e the co#petiti$e strate%!

o& a hi%h'end depart#ent store chain such as (ordstro#) What are the *e! custo#er needs that (ordstro# ai#s to &ill) The (ordstro# e+ site states the &ollo in%. O$er the !ears, the (ordstro# &a#il! o& e#plo!ees +uilt a thri$in% +usiness on the principles o& -ualit!, $alue, selection, and ser$ice. Toda!, (ordstro# is one o& the nation.s leadin% &ashion retailers, o&&erin% a ide $ariet! o& hi%h'-ualit! apparel, shoes, and accessories &or #en, o#en, and children at stores across the countr!. We re#ain co##itted to the si#ple idea our co#pan! as &ounded on, earnin% our custo#ers. trust one at a ti#e. (ordstro# &ills custo#er needs &or hi%h -ualit! &ashion #erchandise and outstandin% le$els o& custo#er ser$ice. Price is no o+/ect &or the t!pical (ordstro# shopper. 0. Where ould !ou place the de#and &aced +! (ordstro# on the i#plied de#and uncertaint! spectru#) Wh!) 1#plied de#and uncertaint! is de#and uncertaint! due to the portion o& de#and that the suppl! chain is targeting, not the entire de#and. A hi%h'end depart#ent store chain such as (ordstro# &alls on the hi%h end o& the i#plied de#and uncertaint! scale. The &ashion ite#s that (ordstro# stoc*s ha$e e2tre#el! hi%h product #ar%in, hi%h &orecast errors and stoc*out rates, and once the season is o$er, these ite#s are sold at deep discounts at their (ordstro# Rac* outlet stores. 3. What le$el o& responsi$eness ould +e #ost appropriate &or (ordstro#.s suppl! chain) What should the suppl! chain +e a+le to do particularl! ell) 4uppl! chain responsi$eness ta*es #an! &or#s, includin% the a+ilit! to respond to a ide ran%e o& -uantities, #eet short lead ti#es, handle a lar%e $ariet! o& products, +uild inno$ati$e products, #eet a hi%h ser$ice le$el, and handle suppl! uncertaint!. The (ordstro# suppl! chain #ust +e hi%hl! responsi$e in the areas o& handlin% hi%hl! inno$ati$e &ashion products, custo#er response, and ser$ice le$el5 the! are e&&ecti$e in suppl!in% ell'heeled custo#ers ith #erchandise and their return polic! is le%endar! in the Paci&ic (orth est. 4. Ho can (ordstro# e2pand the scope o& the strate%ic &it across the suppl! chain) 4cope o& strate%ic &it re&ers to the &unctions ithin the &ir# and sta%es across the suppl! chain that de$ise an inte%rated strate%! ith a shared o+/ecti$e. 6! adoptin% an interco#pan! inter&unctional scope strate%!, (ordstro# ill #a2i#i"e suppl! chain surplus. (ordstro# can #o$e in this direction +! or*in%

Chopra/Meindl 4/e ith their suppliers as i& the! are actuall! o ned +! (ordstro#. Rather than $ie in% the suppl! chain as a "ero'su# %a#e o& in$entor! cost #ini#i"ation and pro&it #a2i#i"ation, (ordstro# #ust reco%ni"e that spreadin% the ealth and occasionall! ta*in% on #ore in$entor! than is opti#al &or the# ill result in i#pro$ed custo#er ser$ice. The interco#pan! inter&unctional scope o& strate%ic &it re-uires #ore e&&ort than the other approaches presented in this section5 (ordstro# #ust e$aluate all aspects o& their suppl! e+. 7. Reconsider the pre$ious &our -uestions &or other co#panies such as A#a"on.co#, a super#ar*et chain, and auto #anu&acturer, and a discount retailer such as Wal' Mart. A#a"on.co# &ocuses on cost and &le2i+ilit! +! pro$idin% +oo*s, #usic and a host o& other household products at lo prices. Custo#ers place orders online and e2pect to recei$e purchases in a nu#+er o& da!s. Custo#er orders are processed at central arehouses or are drop shipped &ro# suppliers +! #ail or co##on carrier. 8or the #ost part, the i#plied de#and uncertaint! &or A#a"on.co# is lo as the! cast such a ide net. A#a"on.co#.s suppl! chain #ust +e responsi$e in ter#s o& &le2i+ilit!5 the! handle an incredi+l! di$erse ran%e o& products. A#a"on.co#.s suppl! chain should +e a+le to pro$ide lo prices ide $ariet! and reasona+le deli$er! schedules &or its custo#ers. 1n e$er! lin* o& the suppl! chain, A#a"on.co# #ust &unction on the cost'responsi$eness e&&icient &rontier in order to support its co#petiti$e strate%!. A super#ar*et chain &ocuses on cost and -ualit!, ith so#e specialt! chains addin% &le2i+ilit! +! carr!in% a +roader ran%e o& products that #a! +e tar%eted to ards custo#ers interested in or%anic products or ethnic cuisine. 1#plied de#and uncertaint! &or a super#ar*et chain tends to +e lo 5 shoppers are t!picall! repeat custo#ers and ha$e a constant de#and le$el. The super#ar*et suppl! chain #ust +e responsi$e +! recei$in% produce -uic*l! to ensure &reshness and ha$e a hi%h ser$ice le$el. 4uper#ar*et suppl! chains tend to +e ell' esta+lished and can i#pro$e strate%ic &it +! e#phasi"in% speed to #aintain &reshness, hence percei$ed -ualit!. Auto #anu&acturers ha$e e2tre#el! co#plicated suppl! chains that are increasin%l! &ocused on &le2i+ilit! and lean operations. 1#plied de#and uncertaint! &or auto #anu&acturers $aries considera+l! +! tar%et #ar*et and #anu&acturer. Auto#oti$e suppl! chains a#on% the +i% three in the 9nited 4tates ha$e #ade %reat pro%ress in the last decade and reco%ni"e that the! #ust +e responsi$e &ro# a ti#e and &le2i+ilit! standpoint. Wal'Mart.s suppl! chain is o+sessed ith cost and is &acilitated +! a lo i#plied de#and uncertaint!, their i#pressi$e lo%istics s!ste# and their #ana%e#ent in&or#ation s!ste#s. Their suppl! chain is a+le to respond -uic*l! to &ill a ide $ariet! o& products to *eep #erchandise on Wal'Mart.s shel$es. Wal'Mart.s le$el o& coordination alon% the suppl! chain is e2cellent5 it ould +e di&&icult to point

Chopra/Meindl 4/e out areas here true interco#pan! inter&unctional scope o& strate%ic &it has not +een achie$ed. The sole suppl! chain criticis# that sur&aces is an occasional report that suppliers &eel as i& suppl! chain surplus is not shared e-uita+l!. :. ;i$e ar%u#ents to support the state#ent that Wal'Mart has achie$ed $er! %ood strate%ic &it +et een its co#petiti$e and suppl! chain strate%ies. The +est ar%u#ent to support the state#ent that Wal'Mart has achie$ed $er! %ood strate%ic &it is their success as a co#pan!. Co#petition toda! is suppl! chain $ersus suppl! chain, not co#pan! $ersus co#pan!, so a co#pan!.s partners in the suppl! chain o&ten deter#ine the co#pan!.s success. Wal'Mart.s strate%ic &ocus on cost is e$ident in their co#petiti$e, product de$elop#ent, suppl! chain, and #ar*etin% strate%!. Their #ar*etin% strate%! o& ad$ertisin% e$er! da! lo prices appeals to consu#ers and does not disrupt the suppl! chain +! causin% sur%es in de#and. <isitin% one o& their +i% +o2 stores re$eals lo 'priced #erchandise, +oth national and store +rands, stac*ed &ro# &loor to ceilin% ithout ela+orate displa!s or decoration. Wal'Mart.s lo%istics and in&or#ation s!ste#s are &a#ous &or coordinatin% their entire suppl! chain and allo in% it to #eet custo#er needs at #ini#al cost. =. What are so#e &actors that in&luence i#plied uncertaint!) Ho does the i#plied uncertaint! di&&er +et een an inte%rated steel #ill that #easures lead ti#es in #onths and re-uires lar%e orders and a steel ser$ice center that pro#ises 04'hour lead ti#es and sells orders o& an! si"e) 8ro# a custo#er perspecti$e, i#plied de#and uncertaint! increases hen the custo#er.s ran%e o& -uantit! re-uired increases, lead ti#es decrease, $ariet! o& product increases, rate o& inno$ation increases and re-uired ser$ice le$els increase. We also see hi%h i#plied uncertaint! attri+uted ith hi%h product #ar%ins, &orecast errors a+o$e 4>?, stoc*out rates a+o$e 1>? and &orced season' end #ar*do ns. On the suppl! side e see increased suppl! uncertaint! hen the suppl! source has &re-uent +rea*do ns, unpredicta+le and lo !ields, poor -ualit!, li#ited suppl! capacit!, and e$ol$in% production processes. 8or the steel #ill that re-uires lar%e orders and has lead ti#es #easured in #onths +oth the i#plied de#and and suppl! uncertaint! is less due to a +etter predicta+le capa+ilit! and a +etter de&ined schedule &or production. Due to the increasin% nu#+er o& si"es and the shorter response ti#e associated ith the steel ser$ice center, i#plied uncertaint! is hi%h. @. What is the di&&erence in i#plied uncertaint! &aced +! a con$enience store chain such as ='Ele$en, a super#ar*et chain, and a discount retailer such as Costco) When custo#ers %o to a con$enience store chain such as ='Ele$en, the! %o there &or the con$enience o& a near+! store and are not necessaril! loo*in% &or the lo est price. 1#plied de#and uncertaint! ould +e hi%h as custo#ers are

Chopra/Meindl 4/e loo*in% &or a $ariet! o& products and con$enience $ersus cost and de#and le$els are hard to predict. A super#ar*et chain &ocuses on cost and -ualit!, ith so#e specialt! chains addin% &le2i+ilit! +! carr!in% a +roader ran%e o& products that #a! +e tar%eted to ards custo#ers interested in or%anic products or ethnic cuisine. 1#plied de#and uncertaint! &or a super#ar*et chain tends to +e lo 5 shoppers are t!picall! repeat custo#ers and ha$e a constant de#and le$el. The super#ar*et suppl! chain #ust +e responsi$e +! recei$in% produce -uic*l! to ensure &reshness and ha$e a hi%h ser$ice le$el. 4uper#ar*et suppl! chains tend to +e ell' esta+lished and can i#pro$e strate%ic &it +! e#phasi"in% speed to #aintain &reshness, hence percei$ed -ualit!. Ao price is $er! i#portant to custo#ers o& discount retailers such as Costco. This custo#er is illin% to tolerate less $ariet! and e$en purchase $er! lar%e pac*a%e si"es as lon% as the price is lo . Custo#er de#and can +e #ore predicta+le and suppl! side needs are lar%e and &airl! sta+le. B. What are so#e pro+le#s that can arise hen each sta%e o& a suppl! chain &ocuses solel! on its o n pro&its hen #a*in% decisions) 1denti&! so#e actions that can help a retailer and a #anu&acturer or* to%ether to e2pand the scope o& strate%ic &it. Hi%h in$entories, poor -ualit!, lo custo#er ser$ice, increased returns are /ust a nu#+er o& pro+le#s that occur hen each sta%e o& a suppl! chain &ocuses solel! on its o n pro&its. The truc*in% co#pan! re-uires &ull truc* loads &or deli$er! &orcin% the retailer to carr! #ore in$entor! than anted or needed. The supplier o&&ers discounts to their +u!ers to #a2i#i"e production +ut &orcin% the +u!ers to purchase in lar%er -uantities than desired. This concept as $er! pre$alent durin% the 1B7>s and 1B:>s as co#panies to #ini#i"e local costs and #a2i#i"e their o n pro&its. Toda!, retailers and #anu&acturers ha$e the opportunit! to plan pro#otions /ointl! such as Wal'Mart and PC;. The! can share sales in&or#ation to deter#ine custo#er trends. Doint product de$elop#ent opportunities are +ein% e2plored throu%hout the suppl! chain +et een retailers, #anu&acturers and ra #aterial suppliers.