Supply Chain Management at Regal Marine. Business & Marketing

Case Study 2: Supply Chain Management at Regal Marine (pp. 467–468 and Pearson Video Library in the Introduction & Resources area)
CASE STUDY 2 QUESTIONS
What other techniques might Regal use to improve supply chain management?
What kind of response might members of the supply chain expect from Regal because they’re partnering in the supply chain?
Why is supply chain management important to Regal?
The specifications for these case studies and the grading rubric can found in the Case Study section in the Introduction & Resources area.
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RUBRIC
GSCM206 Case Study
GSCM206 Case Study
Criteria Ratings Pts
This criterion is linked to a Learning OutcomeKey elements
All key elements of the assignment are covered in a substantive way:
Introduction, Problem identification, Analysis (pros and cons), Solution choice and rationale, Conclusion
5.0 pts
Full Marks
0.0 pts
No Marks
5.0 pts
This criterion is linked to a Learning OutcomeContent
The content is comprehensive, accurate, and persuasive. The Case Study is directed toward the appropriate audience.
5.0 pts
Full Marks
0.0 pts
No Marks
5.0 pts
This criterion is linked to a Learning OutcomeLinks theory
The Case Study links theory and relevant material and examples from the course textbook, current experience, and industry practice, and it uses the vocabulary of the theory correctly.
5.0 pts
Full Marks
0.0 pts
No Marks
5.0 pts
This criterion is linked to a Learning OutcomeResponses to key points
Responses to questions address key points correctly. Responses should include the following whenever possible: What is the problem? What options are available? Why was a particular option selected? What conclusion can be drawn from the analysis?
10.0 pts
Full Marks
0.0 pts
No Marks
10.0 pts
This criterion is linked to a Learning OutcomeConclusion
The conclusion is logical, flows from the body of the paper, and reviews the major points.
5.0 pts
Full Marks
0.0 pts
No Marks
5.0 pts
This criterion is linked to a Learning OutcomeParagraph transitions and paper tone
Paragraph transitions are present and logical and maintain the flow throughout the paper. The tone is appropriate to the content and assignment.
2.0 pts
Full Marks
0.0 pts
No Marks
2.0 pts
This criterion is linked to a Learning OutcomeSentence construction and transitions
Sentences are complete, clear and concise. Sentences are well constructed with consistently strong, varied sentences. Sentence transitions are present and maintained the flow of thought.
2.0 pts
Full Marks
0.0 pts
No Marks
2.0 pts
This criterion is linked to a Learning OutcomeFormat and design
The paper, including the title page, follows the APA sixth edition format. The paper is laid out with effective use of headings, font styles, and white space.
2.0 pts
Full Marks
0.0 pts
No Marks
2.0 pts
This criterion is linked to a Learning OutcomeRules of grammar
Rules of grammar, usage, and punctuation are followed.
2.0 pts
Full Marks
0.0 pts
No Marks
2.0 pts
This criterion is linked to a Learning OutcomeSpelling
Minimum to no spelling errors found.
2.0 pts
Full Marks
0.0 pts
No Marks
2.0 pts
Total Points: 40.0
Video Case Supply Chain Management at Regal Marine
Like most other manufacturers, Regal Marine finds that it must spend a huge portion of its revenue on purchases. Regal has also found that the better its suppliers understand its end users, the better are both the supplier’s product and Regal’s final product. As one of the 10 largest U.S. power boat manufacturers, Regal is trying to differentiate its products from the vast number of boats supplied by 300 other companies. Thus, the firm works closely with suppliers to ensure innovation, quality, and timely delivery.
Regal has done a number of things to drive down costs while driving up quality, responsiveness, and innovation. First, working on partnering relationships with suppliers ranging from providers of windshields to providers of instrument panel controls, Regal has brought timely innovation at reasonable cost to its product. Key vendors are so tightly linked with the company that they meet with designers to discuss material changes to be incorporated into new product designs.
Second, the company has joined about 15 other boat manufacturers in a purchasing group, known as American Boat Builders Association, to work with suppliers on reducing the costs of large purchases. Third, Regal is working with a number of local vendors to supply hardware and fasteners directly to the assembly line on a just-in-time basis. In some of these cases, Regal has worked out an arrangement with the vendor so that title does not transfer until parts are used by Regal. In other cases, title transfers when items are delivered to the property. This practice drives down total inventory and the costs associated with large-lot delivery.
Finally, Regal works with a personnel agency to outsource part of the recruiting and screening process for employees. In all these cases, Regal is demonstrating innovative approaches to supply chain management that help the firm and, ultimately, the end user. The Global Company Profile featuring Regal Marine (which opens Chapter 5) provides further background on Regal’s operations.
Discussion Questions *
* You may wish to view the video that accompanies this case before answering the questions.
What other techniques might Regal use to improve supply chain management?
What kind of response might members of the supply chain expect from Regal because of their “partnering” in the supply chain?
Why is supply chain management important to Regal?Competition is no longer between companies but between supply chains. The key to success is to collaborate with members on both the supply side and the distribution side of the supply chain to make decisions that will benefit the whole channel. For many firms, the supply chain determines a substantial portion of product cost and quality, as well as opportunities for responsiveness and differentiation. The challenge of building a great supply chain is significant, but with good sourcing tactics, a thoughtful logistics plan, and active management of the distribution network, each link in the chain can be firmly forged. A number of metrics are available to help managers evaluate their supply chain performance and benchmark against the industry. Skillful supply chain management provides a great strategic opportunity for competitive advantage.
Key Terms
Supply chain management (p. 444)
Make-or-buy decision (p. 447)
Outsourcing (p. 447)
Vertical integration (p. 448)
Keiretsu (p. 448)
Virtual companies (p. 449)
Cross-sourcing (p. 450)
Bullwhip effect (p. 452)
Pull data (p. 452)
Single-stage control of replenishment (p. 452)
Vendor-managed inventory (VMI) (p. 452)
Collaborative planning, forecasting, and replenishment (CPFR) (p. 453)
Blanket order (p. 453)
Postponement (p. 453)
Drop shipping (p. 454)
E-procurement (p. 456)
Logistics management (p. 456)
Channel assembly (p. 457)
Reverse logistics (p. 460)
Closed-loop supply chain (p. 461)
Inventory turnover (p. 462)
Supply Chain Operations Reference (SCOR) model (p. 463)
Ethical Dilemma
As a buyer for a discount retail chain, you find yourself caught in a maelstrom. Just last month, your chain began selling an economy-priced line of clothing endorsed by a famous movie star. To be price competitive, you have followed the rest of the industry and sourced the clothing from a low-wage region of Asia. Initial sales have been brisk; however, the movie star has recently called you screaming and crying because an investigative news outlet has reported that the clothes with her name on them are being made by children.
Outraged, you fly to the outsourcing manufacturing facility only to find that conditions are not quite as clear-cut as the news had reported. You feel uncomfortable riding through the streets. Poverty is everywhere. Children are chasing foreigners and begging for money. When you enter the plant, you observe a very clean facility. The completely female workforce appears to be very industrious, but many of them do appear to be young. You confront the plant manager and explain your firm’s strict international sourcing policies. You demand to know why these girls aren’t in school. The manager provides the following response: “The truth is that some of these workers may be underage. We check IDs, but the use of falsified records is commonplace in this country. Plus, you don’t understand the alternatives. If you shut this plant down, you will literally take food off the table for these families. There are no other opportunities in this town at this time, and there’s no comprehensive welfare system in our country. As for the young women, school is not an option. In this town, only boys receive an education past the sixth grade. If you shut us down, these girls will be out on the street, begging, stealing, or prostituting themselves. Your business offers them a better existence. Please don’t take that away!”
What do you say to your company, the movie star, the media, and the protestors picketing your stores? Is the best option to shut down and try someplace else?
Discussion Questions
Define supply chain management.
What are the objectives of supply chain management?
What is the objective of logistics management?
How do we distinguish between the types of risk in the supply chain?
What is vertical integration? Give examples of backward and forward integration.
What are three basic approaches to negotiations?
How does a traditional adversarial relationship with suppliers change when a firm makes a decision to move to a few suppliers?
What is the difference between postponement and channel assembly?
What is CPFR?
What is the value of online auctions in e-commerce?
Explain how FedEx uses the Internet to meet requirements for quick and accurate delivery.
How does Walmart use drop shipping?
What are blanket orders? How do they differ from invoiceless purchasing?
What can purchasing do to implement just-in-time deliveries?
What is e-procurement?
How does Darden Restaurants, described in the Global Company Profile, find competitive advantage in its supply chain?
What is SCOR, and what purpose does it serve?
Solved Problems
Virtual Office Hours help is available in MyOMLab.
Solved Problem 11.1
Jack’s Pottery Outlet has total end-of-year assets of $5 million. The first-of-the-year inventory was $375,000, with a year-end inventory of $325,000. The annual cost of goods sold was $7 million. The owner, Eric Jack, wants to evaluate his supply chain performance by measuring his percent of assets in inventory, his inventory turnover, and his weeks of supply. We use Equations (11-1), (11-2), and (11-3) to provide these measures.
Solution
First, determine average inventory:
(
$
375
,
000
+
$
325
,
000
)
/
2
=
$
350
,
000
Then, use Equation (11-1) to determine percent invested in inventory:
Percentage
invested
in
inventory
=
(
Average
inventory
investment
/
Total
assets
)
×
100
=
(
350
,
000
/
5
,
000
,
000
)
×
100
=
7
%
Third, determine inventory turnover, using Equation (11-2):
Inventory
turnover
=
Cost
of
goods
sold
/
Average
inventory
investment
=
7
,
000
,
000
/
350
,
000
=
20
Finally, to determine weeks of inventory, use Equation (11-3), adjusted to weeks:
Weeks
of
inventory
=
Average
inventory
investment
/
Weekly
cost
of
goods
sold
=
350
,
000
/
(
7
,
000
,
000
/
52
)
=
350
,
000
/
134
,
615
=
2.6
We conclude that Jack’s Pottery Outlet has 7% of its assets invested in inventory, that the inventory turnover is 20, and that weeks of supply is 2.6.
Problems
Problems 11.1–11.3 relate to The Supply Chain’s Strategic Importance
11.1 Choose a local establishment that is a member of a relatively large chain. From interviews with workers and information from the Internet, identify the elements of the supply chain. Determine whether the supply chain supports a low-cost, rapid response, or differentiation strategy (refer to Chapter 2). Are the supply chain characteristics significantly different from one product to another?
11.2 Hau Lee Furniture, Inc., described in Example 1 of this chapter, finds its current profit of $10,000 inadequate. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Hau would like to improve the profit line to $25,000 so he can obtain the bank’s approval for the loan.
What percentage improvement is needed in the supply chain strategy for profit to improve to $25,000? What is the cost of material with a $25,000 profit?
What percentage improvement is needed in the sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000?
11.3 Kamal Fatehl, production manager of Kennesaw Manufacturing, finds his profit at $15,000 (as shown in the statement below)—inadequate for expanding his business. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Kamal would like to improve the profit line to $25,000 so he can obtain the bank’s approval for the loan.
% Of Sales
Sales $250,000 100%
Cost of supply chain purchases 175,000 70%
Other production costs 30,000 12%
Fixed costs 30,000 12%
Profit 15,000 6%
What percentage improvement is needed in a supply chain strategy for profit to improve to $25,000? What is the cost of material with a $25,000 profit?
What percentage improvement is needed in a sales strategy for profit to improve to $25,000? What must sales be for profit to improve to $25,000? (Hint: See Example 1.)
Problem 11.4 relates to Six Sourcing Strategies
11.4 Using sources from the Internet, identify some of the problems faced by a company of your choosing as it moves toward, or operates as, a virtual organization. Does its operating as a virtual organization simply exacerbate old problems, or does it create new ones?
Problems 11.5–11.8 relate to Measuring Supply Chain Performance
11.5 Baker Mfg. Inc. (see Table 11.9) wishes to compare its inventory turnover to those of industry leaders, who have turnover of about 13 times per year and 8% of their assets invested in inventory.
What is Baker’s inventory turnover?
What is Baker’s percent of assets committed to inventory?
How does Baker’s performance compare to the industry leaders?
Table 11.9  For Problems 11.5 and 11.6
ARROW DISTRIBUTING CORP.
Net revenue $16,500
Cost of sales $13,500
Inventory $ 1,000
Total assets $ 8,600
BAKER MFG. INC.
Net revenue $27,500
Cost of sales $21,500
Inventory $ 1,250
Total assets $16,600
11.6 Arrow Distributing Corp. (see Table 11.9) likes to track inventory by using weeks of supply as well as by inventory turnover.
What is its weeks of supply?
What percent of Arrow’s assets are committed to inventory?
What is Arrow’s inventory turnover?
Is Arrow’s supply chain performance, as measured by these inventory metrics, better than that of Baker in Problem 11.5?
11.7 The grocery industry has an annual inventory turnover of about 14 times. Organic Grocers, Inc. had a cost of goods sold last year of $10.5 million; its average inventory was $1.0 million. What was Organic Grocers’ inventory turnover, and how does that performance compare with that of the industry?
11.8 Mattress Wholesalers, Inc., is constantly trying to reduce inventory in its supply chain. Last year, cost of goods sold was $7.5 million and inventory was $1.5 million. This year, cost of goods sold is $8.6 million and inventory investment is $1.6 million.
What were the weeks of supply last year?
What are the weeks of supply this year?
Is Mattress Wholesalers making progress in its inventory-reduction effort?
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