Institute of Rural Management Anand

PGDM-RM40 – Term IV – End Term Examination

SCM
05-11-2020
Rashi Shah, p40036
A.

1.

The diagram below shows the process view of supply chain of the book manufacturer. The
processes are classified into different cycles which considers of various actors.

a. Procurement Cycle: the supplier procures raw materials which are required to manufacture
the books.
b. Replenishment and Manufacturing Cycle: the supplier manufactures the books which is in
anticipation of the demand for books (PUSH).
c. Order Cycle: Mr. Mehta places order and receives it from the manufacturer. The retailer
provides the books after this as per the demand (PULL).

The push and pull processes are separated by the Push-pull boundary. Push process here involves
sourcing the raw materials and manufacturing. The pull process is when the products are supplied
to fulfil the demand of Mr. Mehta.

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 Institute of Rural Management Anand
PGDM-RM40 – Term IV – End Term Examination
SCM
05-11-2020
Rashi Shah, p40036
2.

The implied uncertainty for a steel mill which measures lead time in months and requires large
orders is very low. This is because the inventory is converted into sales as soon as it is
manufactured. Therefore, they don’t require very high amounts of investment. Also, since there
will be large-scale manufacturing, the production cost would also be low. This keeps the steel mill
in a safe position.

The implied uncertainty for a steel service centre which promises 24-hour lead time and sells orders
of any size is very high. This is due to the fact that to provide the orders in such a short time, they
have to either manufacture predicting the sales in advance or have to manufacture lots of varying
batch sizes. This creates a risk as there has to be high investment as well as inventory cost will be
high.

The factors that influence implied uncertainty are:

a.

3.

India has large number of small stores. In order to reach them, large number of distributors are
required.

4.

Distributor storage with last mile delivery is the distribution network which should be utilized if it
is a sales operation. And if the expansion involves manufacturing capability, then manufacturer
storage with direct shipping can be the option.

5.

Distributor storage with last mile delivery and distributor storage with package carrier delivery are
the supply networks which the distributor can offer to the manufacturer. They provide high
visibility to the orders. They also have a simple infrastructure of information. The customer
experience is also better than the direct model. The response time is also better. Increased costs of
transportation and high level of inventory may be accepted if the focus is on providing efficient
customer service.

6.

Improper incentives may lead to decrease in profit of the whole supply chain. This is due to the fact
that each actor will try to increase his own profit. If proper incentives are not provided to the
retailer by the manufacturer, he will sell at higher price than the price decided. This will lead to a
decrease in the demand of the product and overall surplus. To remove this, proper incentives have

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 Institute of Rural Management Anand
PGDM-RM40 – Term IV – End Term Examination
SCM
05-11-2020
Rashi Shah, p40036
to be provided keeping in view all the actors of the supply chain. The price has to be set
accordingly. The retailer’s incentive from increased price should be the same as margin which he
gets from the manufacturer. More benefits and discounts based on the sales volume or value can be
given to the retailer.

B.

1.

Diamond is a high-end business. Before taking a decision related to purchase, those people having
huge sums of money and high standards have to be considered. While making the purchases like
these which are of high value, various factors come into effect. Goodwill or reputation of the firm
which determines the market share is the most important factor. Quality of the product is another
important factor. When customers pay a high price, they expect the product of highest quality in
return. There are other factors also which have an effect.

Factor Blue Nile Zales Tiffany

Reputation Lower price due to Lack of brand image Loyal and rich
low inventory cost because of which less customers because of
customers high brand value
Product quality High High, but no effect on Very high, also high
sales because of high value which shows in
price the sales
Target Customers Men preferring low Teenagers, upscale High income
pressure sales Gordon’s and customers
working-class mall
shoppers
Mode of selling Online Offline stores earlier, Online and offline
but omnichannel later stores
Inventory Low High High
Product offerings Customized like Diamond jewellery High end products
engagement rings, and rings
necklace, gift
accessories, etc

The inventory to sales ratio of Blue Nile is around 6% while that of Tiffany and Zales are about
40%. Blue Nile has advantage in operating costs and fixed costs. Its property and equipment to net
sales ratio was 2.37%, while Tiffany’s reduced from 35% to around 35% and Zales’s was about
14%. Blue Nile also had the highest transportation costs because of online selling.

2.

Blue Nile has savings in inventory holding cost because of lower safety stocks. It also offers high
product variety with their availability. Stones priced higher are unique with low demand and high
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 Institute of Rural Management Anand
PGDM-RM40 – Term IV – End Term Examination
SCM
05-11-2020
Rashi Shah, p40036
variability of demand which requires larger safety stocks. Thus, higher holding cost is there.
Aggregation of inventory reduce the amount of safety stock. It widens the product availability and
variety.

Tiffany is a high-end brand with lower cost and smaller facilities. It is beneficial to position these
products at the stores. They are able to provide good customer service and offers for the lower-end
items.

Blue Nile is better suited for online channel because their major focus is offering variety of
products while reducing cost. Tiffany has cost disadvantage because it has decentralized high value
products and centralized lower value items.

3.

Tiffany doesn’t sell online to prevent brand dilution. Going online reduces price, Tiffany wants to
sustain its margins. It has high investments in retail stores. If high value products will be sold
online, the lower ones will lose on.

Blue Nile’s growth increases its target customers. It can capture higher market share if margins are
low. Sales can be increased by providing bundled items.

4.

Zales being found in 1924 had Middle America as its target market. A big chunk of the revenues
for the company were incurred from the customers who were regular visitors of the malls and were
associated with higher-value. Zales had positioned itself in the minds of customers as a brand
which offers value for money. Zales was known as an inexpensive brand.

Zale after it had begun to enter into a niche market which was focused on highly fashionable
products. Zale was looking forward to capture the segment of the market that was to do with the
higher-priced jewellery segment. Whereas the existing companies had their grip very firm on the
upper market segment that preferred the costly jewellery and constituted the brand favoured by the
high-class society. Tiffany’s growth graph was increasing exponentially which gave a tough
competition to other small companies or any new entrant in the market. This was yet another
challenge for Zales to deal with the customer base that was inclined towards Tiffany and the brand
reputation that Tiffany had made it difficult for Zale to struggle for their existence.

The reason behind Zales failure was because the firm frantically shifted from its product range to a
new one. Hence, they failed in the sense it was a struggle for them to attract the new customers and
also they lost out on their loyal-customer base who were with Zales because of the product range
Zales offered which were in the affordable price range for the middle income customers.

The supply chain also witnessed a hike of 15% new supply chain networks posing even more
challenges for Zales and hence contributed to its failure. The process of giving shelf space to highly
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 Institute of Rural Management Anand
PGDM-RM40 – Term IV – End Term Examination
SCM
05-11-2020
Rashi Shah, p40036
priced jewellery also increased the inventory overheads. The strategy that was centred around less
margins did not prove to be successful and did not yield satisfactory profits.

Also, Zales came with up with the strategy when the economy was severely hit by recession as a
result there was a shift in the buying behaviour of people from jewels to other necessities needed by
them. As a result, sales dropped.

Zales entire attention and strategy should be to focus on the segment of customers who have a mind
set to choose the less priced jewellery because the competition in this category is less for less
priced jewels. This way they can come up with strategies solely focusing on a set of customers and
can acquire a large chunk of the customer base.

5.

Blue Nile is best suited. It has the lowest fixed costs. Zales and Tiffany are tied in long term leases.
It also has very low investment and a low-cost structure. Zales is weakest to handle because its high
end strategy failed.

6.

Blue Nile:
Blue Nile is functioning very well in the supply chain and it’s cost of inventory and operations are
much lower. Its strategies are centered around offering lower prices offered to a high variety of
high-end stores. It uses the four Cs as its core strategy to acquire a large market chunk.
The suggestions for Blue Nile:
 Improvise Supply chain practices and adopt brick and mortar to compete with the existing
players
 Improving on the Brand Image that Blue Nile has in the market which should focus on
placing Blue Nile in the minds of people as a reputed Brand of jewelry.
 Plans to make the products available for the customers to see and feel it before purchase and
hence the stores should be a mix of both brick and mortar and offline stores where the
customer can decide after examining the product.
 Establishing connect with high end diamond retailers and selling its product as superior
quality with lesser price as compared to other highly priced diamonds.
.

Zales:
Zales have existed for a long time though but has its share of struggle. It is frantically changing
strategies and hence is not able to acquire stability. As a result, it is losing the existing customer
base and finding it difficult to capture the new customers in a short span of time.

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 Institute of Rural Management Anand
PGDM-RM40 – Term IV – End Term Examination
SCM
05-11-2020
Rashi Shah, p40036
Suggestions for Zales:
 Consistency and continuation of any new strategy it adopts for quite some time and
improvising on the existing strategy.
 Zales should try and capture the online space by coming up with ads and methods to attract
the customers who buy online
 Continuous analysis of other competitors like Walmart and Costco (discounters) and
upscales jewelry such as Tiffany. and their strategies and thereafter coming up with new
strategies to make themselves competent enough in the market space.
 Zales is trying to be all things to all people/customers which is not possible and hence it
should narrow down its focus.
Tiffany:
Tiffany has earned a good market image and share since its inception. It’s name is linked with
quality, luxury and exclusivity.
Suggestions for Tiffany:
 Making efforts to sustain it’s brand image in the market and making sure that the existing
customer base remains intact by coming up with strategies and offers to tempt them.
 Expanding through online space to serve the customers who demand a little less priced
product. This should not be done while compromising the brand image and reputation in the
market.
 Product/Brand Differentiation to place it differently in the minds of the customers for it’s
superior quality, and the quality should not be compromised even for the products which are
at a little lesser price range.

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