CASE OF WEEK 4 IS THE EXAM CASE – THE KELLOGS CASE!

Chapter 3, Customer Relationship Management

Marketing concept; business philosophy that suggest that the focal point of a business’s strategy
must be the customers it intends to serve.
Four economic utilities that add value to customers;
- Form
- Possession
- Time
- Place
Transactional marketing; companies are generally oriented toward short-term interaction with their
customers.
Relationship marketing; focuses on the development of long-term relations with key supply chain
participants such as the consumers, intermediate customers, and suppliers in an effort to develop
and retain long-term preference and loyalty.
The ultimate in market segmentation and relationship marketing is to focus on the individual
customer is referred to as micromarketing/ one-to-one marketing. This recognizes that each
individual customer may indeed have unique requirements.
Discrepancies of companies:
- Space, refers to the location of production activities and the location of consumption are
seldom the same.
- Time, difference in timing between production and consumption.
- Quantity and assortment, refers to the fact that manufacturing firms typically specialize in
producing large quantities of a limited variety of items.
Four generic service outputs to satisfy customer requirements:
- Spatial convenience, refers to the amount of shopping time and effort that is required on the
part of the customer.
- Lot size, refers to the number of units to be purchased in each transaction.
- Waiting or delivery time, the amount of time between ordering and receiving.
- Product variety and assortment.
Availability; the capacity to have inventory when desired by a customer.
Stock-out frequency, the frequency of a product being out of stock.
Fill rate, the impact of stock-outs over time.
Orders shipped complete.
Operational performance; deals with the time required to deliver a customer’s order.
Speed, refers to the elapsed time from when a customer places an order until the product is
delivered and is ready for customer use.
Consistency, is measured by the number of times that actual cycles meet the time planned for
completion. Managers place greater value to consistency, because this directly impacts a customer’s
ability to plan and perform its own activities.
Flexibility, involves a firm’s ability to respond to special situations and unusual or unexpected
customer requests.
Malfunction recovery, regardless of how fine-tuned a firm’s logistical operations, malfunctions will
occur. It is important for all firms to stay in operation, and that these malfunctions will be recovered
asap, to prevent delays.
Service reliability; involves the combined attributes of logistics and concerns a firm’s ability to
perform all order-related activities, as well as provide customers with critical information regarding
logistical operations and status.
The perfect order; everything goes right in the first try.
Basic service platforms; implement a basic platform, it is necessary to specify a commitment level to
all customers in terms of availability, operational performance, and reliability.
Customer satisfaction exists when customers get what they want, but when settle for less, this is
called customer sacrifice.

Chapter 4, Procurement
Procurement involves the process of selecting vendors, establishing payments terms, strategic
vetting, selection, the negotiation of contracts and actual purchasing of goods.
Procurement has an increased importance, due to increased globalization and complexity of today’s
supply chain’s.
Procurement objectives:
Continuous supply, stock-outs of raw materials or component parts can shut down or force a change
in production plans, resulting in unexpected costs. One of the core objectives is to ensure that a
continuous supply of materials, parts, and components is available to certain manufacturing
operations.
Minimize inventory investment, balancing the costs of carrying material against the possibility of a
production stoppage. The most ideal situation is to have the needed materials arrive at the moment
they are actually needed, just-in-time (JIT).
Quality improvement, procurement is critical to the quality requirements of every organization. A
firm and its suppliers need to be likely committed to a continuous quality improvement initiative
(especially a good quality of the raw materials are needed, because good quality of raw materials
means good quality of product).
Supplier development, successful procurement depends on locating or developing suppliers
(including analysing capabilities, selecting and working with those suppliers to achieve continuous
improvement). Developing good supply relationships with firms that are committed to the buying
organization’s success is critical in supplier development.
Access technology and innovation, firms look to suppliers as sources of innovation and new
technology to aid in the design of new products and the improvement of existing ones. The firm uses
its procurement organization as a major source of outreach to suppliers for that innovation.
Lowest total cost of ownership, the difference perspective between a traditional adversarial and
more contemporary collaborative procurement strategy can be summarized as a focus on total cost
of ownership (TCO).
To determine the TCO for purchased requirements is to consider the trade-offs involved in terms of
value added versus cost and price of each service. To do so, the purchase price of an item must be
de-bundled from the price of services under consideration.
To create an effective procurement strategy is a complex process, it requires considerable analysis of
the most appropriate means to accomplish its many different objectives. Decisions must be made
regarding which products and services to produce or perform internally or use outsourcing
strategies.
4 types of Procurement strategies:
- User buy; to allow users in the organization to determine their own purchase needs,
evaluate sources of supply, and execute the purchasing process.
- Volume consolidation; a procurement strategy accomplished through reduction in the
numbers of suppliers.
- Supplier operational integration; occurs when buyers and sellers begin to integrate their
processes and activities in an attempt to achieve substantial performance improvement.
- Value management; is an intense aspect of supplier integration, goes beyond a focus on
buyer-seller operations to a more comprehensive and sustainable relationship.
Outsourcing
Benefits Concerns
Increase focus on core competences Less control
Cost & efficiency savings Supply chain risk
Access to technology & innovation Reputation risk
Pareto analysis, is a spend analysis, in other words the 80/20 rule, 80% of the revenues comes for
20% of the products.

Total cost of Ownership

Pretransaction Transaction Posttransaction

components components components
Identifying needs Price Line fallout
Investigating sources Order placement/ Defective finished goods
Qualifying sources preparation rejected before sale
Adding supplier to Delivery & transport Field falures
internal systems Tariffs/ Duties repair/replacement in
Educating Billing/ Payment field
Supplier in firm's Inspection Customer goodwill
operations Return of parts Cost of repair parts
Firm in supplier's Follow-up & correction Cost of maintenance and
operations repair

Spend analysis is a tool that identifies how much is spent on each type of product or service across
all locations in the firm.
Procurement strategy matrix
Supplier audits; the buying organization
attempts to develop a detailed understanding of
a supplier’
Supplier development – is necessary in the
following cases:
- The firm needs a new product that no
supplier currently provides.
- The firm wants a more convenient and
less costly source of a supply
- The firm wants to avoid overreliance on
a single supplier
- A current supplier lacks sufficient capacity to meet the firm’s demand
- The firm finds a supplier with compatible attitudes toward quality, timeliness, or flexibility
that does not currently make the desired input.
- The firm becomes dissatisfied with continuing poor performance by current suppliers, but no
other potential supplier exists.
The most common technology used in procurement is Electronic Data Interchange (EDI). This
involves the electronic transmission of data between a firm and its suppliers.
Just-in-time (JIT) goal is to time-phase activities so that purchased materials/products arrive just at
the time they are required.
Contemporary procurement outcomes:
- Continuous supply – stock-outs (of raw materials) can shut down operations
- Minimize inventory investment – adapting to contemporary techniques like JIT, Lean
- Lowest Total Cost of Ownership – lowest possible price is no longer key.
- Quality improvement – continuous improvement (Lean, Six Sigma)
- Supplier development – reversed marketing
- Access to technology and innovation – tracking & tracing.
Vendor rating card, general rating of vendors (of 0-100).
Balance scorecard, some factors are weighted, and considered more important to the company.

Chapter 5, Contemporary Manufacturing

Contemporary manufacturing:
- Top-line growth
o Mass customization – is a marketing and manufacturing technique that combines
flexibility and personalization of custom-made with the low unit cost associated with
mass production.
o 3D (designing, printing etc.)
o Flexible manufacturing
- Bottom-line growth
o Mass customization
o (Lean) Six Sigma
o MRP - manufacturing resource planning, DFL – Design for logistics, DFM - design for
manufacturability, etc.
Dimensions of product quality:
Performance, reliability, durability (life expectancy), conformance (does the product meet the firm’s
precise description/specifications as designed), features, aesthetics (style/materials and visual
appearance), serviceability (ease of fixing/repairing), perceived quality (how well does the product
meets the customers’ requirements).
Total quality management (TQM), is a philosophy supported by a managerial system focused on
meeting customer expectations with respect to all needs, from all departments or functions of an
organization.
4 costs associated with total quality management:
- Appraisal costs (result from inspections used to access quality levels)
- Internal failure costs (result from quality failures that are found prior to shipment to customers).
- External failure costs (result from failures that are identified only after products reach customers).
- Prevention costs (result from efforts to prevent failure, and from efforts to reduce failure/appraisal
costs.
International Organization for Standardization (ISO) has gained worldwide acceptance. A series of
quality standards have been issued under the name of ISO 9000. These standards provide basic
definitions for quality assurance and quality management. ISO 14000, deals with guidelines and
procedures for managing a firm’s environmental impact.
The measure of a customer’s purchase preference based on a manufacturer’s reputation, product
quality, and supply chain capabilities is known as Brand power.
The traditional perspective is to treat volume in terms of the well-established principle of economy
of scale (this scale principle defines a relationship wherein the average cost of producing declines as
its volume increases.)
As contrasted to economy of scale, manufacturing processes that can rapidly switch production from
one product to another while retaining efficiency are referred to as having economy of scope. Scope
means that a manufacturing process can use varied combinations of overhead support, materials,
equipment, and labour to produce a variety of different products.
Constraints that influence manufacturing operations are: capacity, equipment, and
setup/changeover.
A measure of manufacturing competency is the speed to which a particular process reaches
demonstrated capacity, given an unplanned change in requirements. Scalability, is achieved by a
combination of manufacturing, procurement, and logistical agility.
Operational time, is the combination of setup/changeover and running or actual production time.
Manufacturing processes also encounter unexpected delays or in operational time.
Job shop, process provides high flexibility to produce a variety of different products, but in limited
volumes.
Batch processes, is essentially a higher-volume job shop, in which the same or similar products are
produced repetitively. The variety of products in a batch process is significantly lower than in a job
shop but is too large for resources to be dedicated to in a single production run before changing over
to produce another item.
Line flow processes, can produce high volumes of relatively standardized products.
Continuous processes, are used for high-volume products where the demand for the product is very
large and can justify the capital investment necessary.
Alternative manufacturing strategies:
- Engineer-to-order (ETO)
- Make-to-order (MTO)
- Assemble-to-order (ATO)
- Make-to-plan (MTP) also common to refer to as make-to-stock (MTS)
The design of a logistics support systems should be based on the total cost of manufacturing (TCM)
(consists of: production/procurement, inventory/warehousing, and transportation).
The desire on the part of many manufacturers is to get the cost advantages of high volume
continuous and line flow processes while increasing variety of customers. Accomplishing this is
known as mass customization.
Lean, is a philosophy of manufacturing that emphasizes the minimization of the amount of all the
resources used in the operations of a company. Objectives of lean are:
Produce only the products that customers want, produce products only as quickly as customers want
to use them, produce products with perfect quality, produce in the minimum possible lead-times,
produce products with features that customers want and no others, produce with no waste of
labour, materials, or equipment, produce with methods that reinforce the occupational
development of workers.
Objectives of lean systems:
- Produce only the products (goods or services) that customers want.
- Produce products only as quickly as customers want to use them
- Produce products with perfect quality
- Produce in the minimum possible lead times
- Produce products with features that customers want, and no others
- Produce with no waste of labour, materials, or equipment; designate a purpose for every
movement to leave zero idle inventory
- Produce with methods that reinforce the occupational development of workers.
Flexible manufacturing; involves the use of automated technologies and robotic systems to adapt
rapidly with the manufacturing processes to different product requirements.
Internal setup, includes any setup procedure that occurs while the equipment sits idle.
External setup, is any setup activity that workers complete while the equipment operates.
Focused factory, is used to achieve flexibility to accomplish mass customization. Focused factories
are essentially adaption of the job and batch process logic where the flexibility of production is
retained but costs are lowered.
Six-sigma, program for quality and process improvements has been adopted by many of the larger
firms in the US and around the world. “Sigma” refers to standard deviation of values for the output
of a process and indicates variability. The goal is to achieve is to design and improve products and
processes so that variability is reduced.
Reduce waste – Lean manufacturing:
- Minimize unnecessary movement of work (External Transportation)
- Minimize waste of labor, materials equipment (zero Inventory)
- Minimize unnecessary movement of work (Motion/movement)
- Produce products as quickly as possible (Waiting)
- Produce only the products that customers want (No Overproduction)
- Produce products with features that customers want (No Over processing)
- Produce with perfect quality (no Defects)
- Produce with methods that reinforce the development (Skills) of workers.
TIMWOODS acronym (capital letters of bold words – the 8 Wastes)
Lean Six Sigma – DMAIC:
- Define the problem
- Measure, map out the current position
- Analyze, identify the cause of the problem.
- Improve, Implement and verify the solution
- Control, maintain the solution.
Materials requirements planning (MRP), is frequently used to aid in the interface between
purchaser and supplier. Gaining the same benefits as JIT, minimizing inventory, maintain high
utilization of manufacturing capacity, and coordinate delivery with procurement and manufacturing
activities.
Design-for-manufacture (DFM), is an umbrella term that describes a set of methods and tools that
focus design activities on improving product manufacturability.
Manufacturability, refers to speed, ease, cost efficiency, and reliability with which a product can be
produced.
Design-for-assembly, focuses on minimizing the number of parts and on easing assembly processes.
Design-for-product-serviceability, focuses on easing the disassembly and reuse of product
components.
Design-for-six-sigma, systematically evaluates the consistency with which a good or service can be
produced or delivered given the capabilities of the processes used.
Just as DFM represents a recent development in manufacturing, the logistics interface with other
functional areas can be greatly enhanced by incorporating a concept known as design-for-logistics
into the early phases of product design.

Chapter 6, Integrated Operations planning

Sales and operations planning (S&OP), this process is discussed from the perspective of effective
from the perspective of effective cross-functional and cross-organizational collaboration.
S&OP process benefits:
- Lift in margin (5%)
- Better planning efficiency (70%)
- Less inventory excess (20%)
- More accurate forecasts (30%)
- Fewer stock-outs (25%)
Retail trends;
- Big data drives retails decisions
- Retailers step-up social media
- Retailers Enable customization
- Healthy life styles remain in focus
- In-home services delivery
- Brick-and-mortar stores continue to flourish
- Retailers curate assortments.
Advanced planning and scheduling (APS)
Collaborative, planning, forecasting, and replenishment (CPFR)
Supply chain visibility:
First driver of planning system development is the need for visibility, regarding location and status
of supply chain inventory and resources. This also implies not only being able to track supply chain
inventory and resources but also that information regarding available resources can be effectively
evaluated and managed.
The second planning system requirement is the need to simultaneously consider supply chain
demand (Resource consideration), capacity, material requirements and constraints. Supply chain
design must consider customer demand for product quantity, delivery timing, and location.
Resources consume a substantial proportion of a typical firm’s fixed and working assets. Functional
management should focus on resource utilization within its scope of responsibility.
Supply chain planning applications
- Demand planning, demand management systems seek to provide capabilities such as
increased accuracy, flexibility and consistency to achieve shorter product life cycles. Demand
management develops the forecast that drives anticipatory supply chain processes.
- Production planning, the forecasts created by the demand management are used to
develop a workable manufacturing plan. The production planning systems match the
requirements plan with the production constraints (such as: facility, equipment, and labour
availability).
- Logistics planning, coordinates transportation, warehousing, and inventory within the firm
and between supply chain partners.
- Inventory deployment, represents one of the major integrators of sales, marketing and
financial goals. The inventory deployment can be completed independently by individual
supply chain functions, in an integrated manner by supply chain overall. (in a coordinated
manner it is called S&OP).
S&OP process, a process that coordinates demand and supply plans across the organization. It
includes, information sharing and accountability to systematically develop a common and consistent
plan. An integrated S&OP process is increasingly necessary for effective supply chain operations. It
collaboratively establishes a coordinated plan for responding to customer requirements within the
resource constraints of the enterprise.
Planning process conflicts
S&OP Process

To have a successful S&OP, there must be a shared responsibility throughout (all departments of)
the organization. And these 8 factors are:
- Executing the process every month
- Process ownership and clarity of roles and responsibilities
- Organizational commitment to achieving high forecast accuracy
- Focus should be on the next 3 – 12 months
- One integrated plan that integrates the actions of the entire organization
- Senior management decision making
- Measuring end-to-end supply chain performance
- S&OP forecast versus operating plan or budget
Other requirements for facilitating the use of S&OP:
- Balanced scorecard integrating both operational and financial performance measures.
- Supply chain visibility and data integration across multiple levels of the firm.
- Performing monitoring and alerting to enable rapid response to unplanned events.
- Collaborative and cross-functional analyses so that the firm can select the most profitable
strategy from the alternatives considered.

Chapter 14, Collaboration

The belief of this functional aggregation would facilitate focus on the total system performance.
Process integration barriers.
Barriers to integration find their origins in traditional functional practices related to: Organization
structure of a business can serve to stifle cross-functional processes. The traditional practice has
been to group all persons involved in performing specific work into departments (purchasing,
manufacturing and transportation). Each of these organisations have an operational responsibility,
which is reflected in its functional goals.
Measurement and reward systems, serve to make cross-functional coordination difficult.
Measurement systems typically mirror organization structure. Most reward systems are based on
functional achievement. To facilitate internal process integration, new measures, increasingly called
balanced scorecards, must be developed.
Inventory leverage, can also serve as a barrier to the process integration because it is a proven fact
that inventory can be leveraged to facilitate functional performance.
Infocratic structure, an early practice of formatting information.
Knowledge hoarding.
ERP = Enterprise Resource Planning
These five barriers that make functional integration difficult are referred to as the Great divide. This
reflects an organizational condition wherein achieved integration is partial but not complete on an
end-to-end basis.
The concept of process organization is envisioned as the result of three factors:
- The development of a highly involved work environment with self-directed work teams as a
vehicle to empower employees to generate maximum performance.
- Improved productivity that results from managing processes rather than functions, a notion
that has always rested at the core of integrated logistics.
- The rapid sharing of accurate information that allows all facets of the organization to be
integrated.
The process organization

The challenges of managing these processes:

- All effort must be focused on value added to the customer, commitment must be motivated
by a belief that customers desire a specific activity to be performed.
- Integrating logistics as part of a process
Chapter 16, Risk and Sustainability
The evolving process of responsibilities of the supply chain professionals:

Functions:
- Procurement
- Manufacturing
- Logistics

Processes and
resource decisions
such as outsourcing
(process) and product
Functions: complexity (resource
- Procurement decision).
Process and
- Manufacturing
resources
- Logistics
 Logistics always had
concerns regarding
demand and cycle
uncertainty. Other risks:
- Financial
- Security
Functions: - Protection
- Procurement Process and Risk and
- Manufacturing resources Security
- Logistics
“Triple bottom line” refers
to sustainability and
includes environmental,
ethical, economic and
education dimensions

Functions:
- Procurement Process and Risk and
Sustainability
- Manufacturing resources Security
- Logistics
Processes and resources:
- Product complexity, refers to the number of product variations that the firm decides to offer
and correspondingly supports. Activities consist of:
o Product development
o Sourcing
o Manufacturing
o Delivery
o Aftermarket support
- Complexity management consists of a collective set of decisions, supporting services, value
systems, and initiatives related to the most effective product portfolio such as the mix of
product variants, feature sets, and component choices.
- Less product complexity  reduces supply chain costs and simplifies product development
(less R&D).
Low product complexity High product complexity
Better product development Increased revenue
Improved product quality and reliability Higher product cost
Improved demand/forecasting/ customer service Lowered ability to change/innovate
Lower sales support costs/ resources Other costs/risks
Increased flexibility and reduced lead time Lost sales
Increased risk to broader range of products if common Lowered service and support
components fail opportunities
- Outsourcing – to third party logistics (3PL) firms  provide supply-chain related activities
such as transportation, warehousing, light manufacturing, information technology, customer
service and returns processing to other firms (based on contracts).
Risk and security management
- Regulation  WTO (World Trade Organization), promotes many policies that try to
simultaneously enhance global trade while limiting widespread impact.
Supply chain security competencies:
- Process strategy, the executive commitment to enhance security and institute a culture of
security within the enterprise.
- Process management, The degree to which specific security provisions have been integrated
into processes managing the flow of materials and products into and out the firm.
- Infrastructure management, Security provisions that have been implemented to secure the
physical infrastructure and products .
- Communication management, the internal information exchange between employees,
managers, and contractors to increase security.
- Management technology, the effectiveness of existing information systems for identifying
and responding to a potential security breach.
- Process technology, specific technology implemented to limit access and trace the
movement of goods.
- Metrics, the availability and use of measures to better identify and manage security threats.
- Relationship management, the information sharing and collaboration between the firm and
its supply chain partners.
- Service provider collaboration management, the information sharing and collaboration
between the firm and its logistics service providers.
- Public interface management, The security-related relationships and exchanges of
information with the government and the public.
 - Dimensions of sustainability:
Environmental
Three firm type categories:
- Proactive green marketers
(strong pursuit of
sustainability within free
market system)
- Traditional consumption
marketers (driven more by
consumer believes regarding
the environment and firm
product/reputation).
- Reactive green marketers
(pursuit of sustainability
within government and
regulatory compliance
framework).

Conservation  by ways to better

manage and minimize reliance on
energy, water, and other natural resources.

Usage reduction  involves reducing waste, increasing recycling, decreasing the release of
greenhouse gasses and managing products at end of life.
- Waste reduction in manufacturing is one of the most visible strategies being implemented
by firms through lean manufacturing processes.
Business management practices  firms can create a more sustainable environmental impact by
implementation of more effective business management practices across the several processes.
Ethical
Employee ethical relations  implementation of code of conducts, with regards to sustainable
measures.
Community involvement
Business management practices
Educational
Aims at ensuring a workforce that is properly trained as well as providing for a new workforce to
replace current employees in the future.
Employee educational relations  workplace safety, employee quality of life issues including work-
life balancing and the explicit encouragement of developing healthy lifestyles.
Talent development  concerns the capabilities and agility of the firms human capital. Firm
capabilities to facilitate development of a workforce having the necessary skills and breadth of
experiences to sustainably deliver the firm’s products/services over time. Beyond the necessary skills
and capabilities, it also includes visible diversity and inclusion practices.
Economic
Focused on a continuous effort to reduce the firm’s total supply chain cost associated with the
manner in which the firm conducts its business, balanced by the other strategic and sustainability
initiatives driving firm investments.
Internal management  strategic sourcing, continuous improvement and lean manufacturing
approaches in operations, and transportation optimization. Focus is on effectively identify, evaluate
and operationalize internal functional or process trade-offs.
External management  initiatives associated with economic sustainability include supplier
management and market generation. Extends the internal management possibilities by considering
outsourcing of processes or activities to reduce overall certain processes/activities.

Trends in Supply Chain Management (SCM) that increase Supply Chain risk
Outsourcing Single Sourcing Globalization
Integration & information Cost reduction (lean, inventory reduction &
sharing JIT)

Supply chain risk management approach:

- Risk identification:
Identify - External risks (PESTLE)
- Internal risks
- Top-down identification – Managers see
the whole picture but don’t know the details
- Bottom-up identification (TPS) – from the
Mitigate
Assess floor, see what’ s wrong or can go wrong but not the
impact in the supply chain. (combination is best).
- Risk assessment:
Risk = Probability X Impact
- Probability – how vulnerable is the SC?
Prioritize - Impact – How resilient is the SC?
- Prioritize:
- Probability – impact matrix used to visualize results.
- ABC classification (Pareto/80-20) tell which risks
have the highest priority.
Risk mitigation:

Responses:
- Ignore or accept the risk
- Reduce probability of risk
- Reduce/limit the consequences
- Transfer, share or deficit the risk (insurance)
- Make contingency plans (Plan B)
- Adapt (Agility VS Lean)