Discuss below questions based on attached case study PART A 1) What ?were ?the ?Top ?3? ?capability ?strengths ?for ?i-??AM, ?Inc.? ?Top ?3? ?weaknesses? ?Describe ?an ?example ?of
Discuss below questions based on attached case study
PART A
1) What were the “Top 3” capability strengths for i-‐AM, Inc.? “Top 3” weaknesses? Describe an example of each strength and weakness.
2) Based on the resilience gaps computed by the SCRAM tool, are there any patterns that i-‐AM, Inc., can use to their advantage?
PART B
1) Compute the recommended safety stock and re-‐order point for a continuous review inventory system, using actual data from December 2012, given i-‐AM, Inc.’s goal of a 95% service level.
2) Determine which supplier or suppliers should be used for 2013 and beyond. Consider both financial and resilience aspects of this recommendation.
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CSCMP ACADEMIC CASE STUDY SERIES
Case studies can supplement a course and be used to teach application of supply chain management concepts to real-‐world situations. Others can use the case studies to learn about supply chain challenges and to analyze the situation to develop solutions.
Supply Chain Resilience: A Case of Balancing the Supply Chain for Long-‐term Sustainability An Academic Learning Case Study written for the Council of Supply Chain Management Professionals
By: Lieutenant Colonel Timothy J. Pettit, PhD U.S. Air Force Academy [email protected]
The views expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the Air Force, the Department of Defense, or the U.S. Government.
This document is available from our site and provided for your personal use only and may not be retransmitted or redistribute d without written permission from the Council of Supply Chain Management Professionals (CSCMP). You may not upload any of this site’s material to any public server, online service, network, or bulletin board without written permission from CSCMP.
Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability
2
CASE OVERVIEW
The i-‐AM Tablet is an evolving gadget in a world of fast-‐paced technological change. Facing
a new partnership with a major customer, the market for the i-‐AM Tablet is about to explode on
the market. Jim MacDonald, CEO of i-‐AM, Inc., and his team have effectively employed traditional
risk management concepts over the past two years and they have yet to face a product recall or
distribution disruption. However, with the growth that Jim envisions for his company, he is turning
to the evolving concept of Supply Chain Resilience to focus his team on proactively managing the
upcoming change.
[Note to readers: Concepts in this case were developed in cooperation with The Dow
Chemical Company and The Ohio State University. Details are described in the 2011 CSCMP
Innovation Award Competition case study1, found on the CSCMP website cscmp.org.]
AUDIENCE
This case incorporates the multiple business aspects of operating a firm as well as the
interactions between supply chain partners. Therefore, this case is most appropriate for advanced
undergraduate business majors and MBA students. The questions in Part B are specifically geared
toward the MBA-‐level student. This case should be considered for capstone courses to take full
advantage of the integration of a variety of business concepts.
LEARNING OBJECTIVES
Participants will:
- understand the concept of resilience and its similarities and differences from
traditional risk management
1 McIntyre J. and Shannon Hemmelgarn ( 2011), “How one business made its supply chain more resilient,” Presentation for the 2011 Supply Chain Innovation Award, Annual Global Conference of the Council of Supply Chain Management Professionals (CSCMP), October 4, 2011, Philadelphia, PA.
This document is available from our site and provided for your personal use only and may not be retransmitted or redistribute d without written permission from the Council of Supply Chain Management Professionals (CSCMP). You may not upload any of this site’s material to any public server, online service, network, or bulletin board without written permission from CSCMP.
Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability
3
- appreciate the complexity and inter-‐relation of managerial capabilities in
establishing and maintaining a resilient supply chain
- apply the results of a resilience assessment to recommend managerial
improvements, both toward increasing capabilities and to potentially lower other
capabilities
- understand the process of resilience management
CURRENT OPERATIONS OF i-‐AM, INC.
Jim MacDonald is the founder and CEO of the tech start-‐up i-‐AM, Inc. His vision for a new
breed of tablets will directly compete against the evolving multi-‐function e-‐readers, booming
notebooks, and smartphones. Jim’s business model is to find a niche market in which to grow his
sales and continue innovation while leveraging supply chain relationships with major
manufacturers in Asia and retail outlets in North America. Selling at only $199, the first generation
i-‐AM Tablet integrated a very long-‐life battery with an easy-‐to-‐read 8” screen, along with Wi-‐Fi
enabled web browsing and open-‐sourced apps. Since the i-‐AM Tablet was introduced 2 years ago,
sales have grown from an introductory quarter of $128,000 to over $80M last quarter. Mr.
MacDonald projects that with a new partnership with a major cell phone carrier and the inclusion
of 4G communications into the i-‐AM Tablet, sales will greatly increase as customers replace
multiple gadgets with a single multi-‐purpose i-‐AM Tablet device.
However, the road toward success has not been smooth. The i-‐AM has faced multiple, but
minor, supplier disruptions throughout the past two years. Although none have greatly impacted
customer orders, Jim’s plans to expand to “the big leagues” has him worried about being able to
continually maintain customer expectations for product quality and delivery schedules. Meeting
demand without the burden of large inventories in this fast-‐paced, high-‐technology market will be
critical to the financial success of i-‐AM, Inc.
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Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability
4
THE APPROACH FOR SUCCESS
Although the traditional concepts of risk management are firmly embedded in his
engineering, production, and logistics decision processes, Jim wants to be more proactive in
managing his company’s changing environment. Therefore, MacDonald is applying the concept of
Supply Chain Resilience to his operations in hopes of maintaining financial success through these
turbulent times.
Current Strengths – Risk management versus Resilience
Since the 1970s, risk analysis techniques have played a major role in corporate decision
making, especially when combined with financial models2. In practice, risk management entails
examining all possible outcomes of a project or process, then weighing the potential returns
against the potential risks of the investment3. Currently, the leading approach to Enterprise Risk
Management comes from the Committee of Sponsoring Organizations of the Treadway
Commission (COSO 2004)4. A typical view of the traditional risk management process is shown in
Figure 1, depicting a continuous cycle of identification of hazards, assessment of risks, analysis of
controls, choosing controls, implementing controls, and review. In many applications, risks can be
quantified based on historical data, but evaluating risks typically requires assumptions based on
subjective information rather than hard facts.
2 Hertz, David B. and Howard Thomas (1983), “Risk analysis: Important new tool for business planning,” Journal of Business Strategy, Vol. 3, No. 3, pp. 23-‐29. 3 Zsidisin, George A., Lisa M. Ellram, Joseph R. Carter and Joseph L. Cavinato (2004), “An analysis of supply risk assessment techniques,” International Journal of Physical Distribution & Logistics Management, Vol. 34, No. 5, pp. 397-‐413. 4 Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2004), Enterprise risk management: Integrated framework, www.coso.org/Publications/ERM/COSO_ERM_ExecutiveSummary.pdf.
This document is available from our site and provided for your personal use only and may not be retransmitted or redistribute d without written permission from the Council of Supply Chain Management Professionals (CSCMP). You may not upload any of this site’s material to any public server, online service, network, or bulletin board without written permission from CSCMP.
Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability
5
Figure 1: Operational Risk Management Process5
In assessing the risks at i-‐AM, Inc. (Step 2 in Figure 1), Jim has seen great benefits from
sorting each identified risk into 3 distinct categories: 1) Preventable risks, 2) Strategy risks, and 3)
External risks. First, preventable risks arise from within the company and are typically identified by
listing past occurrences and evaluations by expert insights. These risks should be closely
monitored and controlled using strict rules and standard compliance tools. However, strategy risks
and external risks require “distinct processes that encourage managers to openly discuss risks and
find cost-‐effective ways to reduce the likelihood of risk events or mitigate their consequences.”6
During Jim’s recent brainstorming session with his senior managers and front-‐line employees, the
group sorted 32 identified risks into these three categories, which turned out to be very helpful in
completing the risk process steps with a different “risk lens” for each category. It was the final
category, “External Risks,” that really worried Jim MacDonald and got him focusing on his supply
chain.
5 Manuele, Fred A. (2005), “Risk assessment & hierarchies of control,” Professional Safety, Vol. 50, No. 5, pp. 33-‐39. 6 Kaplan, Robert S., and Anette Mikes (2012), “Managing Risks: A New Framework,” Harvard Business Review (June 2012), Vol. 90 No. 6, pp. 48-‐60.
Step 1: Identify Hazards
Step 2: Assess Risks
Step 3: Analyze Controls
Step 4: Determine Controls
Step 5: Implement Controls
Step 6: Supervise and Review
Step 1: Identify Hazards
Step 2: Assess Risks
Step 3: Analyze Controls
Step 4: Determine Controls
Step 5: Implement Controls
Step 6: Supervise and Review
This document is available from our site and provided for your personal use only and may not be retransmitted or redistribute d without written permission from the Council of Supply Chain Management Professionals (CSCMP). You may not upload any of this site’s material to any public server, online service, network, or bulletin board without written permission from CSCMP.
Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability
6
Figure 2: Risk Categories
Recent research has expanded the internal risk analysis to supply chain opportunities by
integrating risk management techniques into a comprehensive supply chain risk management
program: management of supply, products, demand, and information.7 Mr. MacDonald has been
very impressed with his staff’s implementation of risk management over the past two years. One
example of what has helped him “sleep better at night” was the purchase of an electrical generator
to avoid potentially disastrous effects of an extended power outage. His design manager, Jeanie
Johnston, had come to him last year with data from the local electric company on historical
occurrences of power outages and their durations over the past 10 years, the probably of an
outage lasting more than 24 hours was 0.5% (see example in Figure 3). She had then explained that
the loss of data and process set-‐backs that would occur with an outage lasting more than 24 hours
could reach $1.5M! Jim quickly agreed to invest $35,000 for their new generator.
7 Tang, Christopher S. (2006), “Perspectives in supply chain risk management,” International Journal of Production Economics, Vol. 103, No. 2, pp. 451-‐488.
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