12 Chapter 13 ♦ Supply Chain Management
VIDEO ASSIGNMENT: Geoffrey B. Small
Geoffrey B. Small, a super-luxury fashion designer, discusses how he sources the materials needed to develop his
clothing lines. He also discusses how he makes distribution decisions based on his micro production process and global
distribution channels.
1. By moving to Italy to work closely with fabric creators, Geoffrey B. Small is working to achieve
a. planning integration.
b. supply chain integration.
c. strong product development processes.
d. integrated logistics.
2. Which type of external integration does Geoffrey B. Small have with Piacenza and Luigi Parisotto?
a. Relationship Integration
b. Measurement Integration
c. Technology and Planning Integration
d. Customer Integration
3. Which trend in supply chain management is Geoffrey B. Small most interested in?
a. Outsourcing logistics Functions
b. Supply Chain Security
c. Electronic Distribution
d. Sustainable Supply Chain Management
4. What type of production schedule does Geoffrey B. Small use?
a. Build-to-stock
b. Build-to-order
c. Postponement
d. Leagile production
5. By making products highly exclusive and “less available” Geoffrey B. Small is focusing on which of the business
processes in supply chain management?
a. Customer relationship management
b. Customer service management
c. Demand management
d. Manufacturing flow management
6. When Geoffrey B. Small takes into consideration the customers at stores that sell his clothing, he is using customer
Chapter 13 ♦ Supply Chain Management and Marketing Channels 13
service management.
a. True
b. False
7. Which type of external supply chain integration reflects Small’s ability to offer long-lasting, distinctive, value
through his clothing?
a. Customer integration
b. Material and service integration
c. Planning integration
d. Measurement integration
8. Based on what you know about Geoffrey B. Small’s work, which of the following transportation criteria do you
think would be most important to him?
a. Cost
b. Transit Time
c. Capability
d. Reliability
CASE ASSIGNMENT: Lululemon
Luxury athletics and yoga apparel retailer Lululemon Athletica has had great success in its less than 20 years of
operation. With more than 200 retail locations, the company netted a 51.4 percent growth in revenue from fiscal year
2010 to 2011 and projected a more than 10 percent growth in the first quarter of fiscal year 2012. While the
company has made its name on high quality, high-cost apparel for fitness enthusiasts—a pair of yoga pants can cost
as much as $100—a recent manufacturing error shook consumer confidence and gave rise to quality control
problems in the company’s supply chain. In March 2013, Lululemon was forced to recall its signature “Luon” yoga
pants after finding they were so sheer that they were practically see-through. The recall of the nylon and Lycra-blend
Luon pants followed a similar event in 2012, when several of the company’s swimsuits and light-colored pants were
found to be too sheer. According to RBC Capital Markets analyst Howard Tubin, Lululemon’s fabric errors may
simply represent a growing pain for the rapidly expanding company. “They tried to get in front of this by not letting
the merchandise stay on store shelves and they’re working with vendors to try to figure out how this happened,” said
Tubin. “They’re probably handling it the best way they can.” Citing Lululemon’s fourth manufacturing snafu in one
year, Credit Suisse analyst Christian Buss strikes a slightly less forgiving tone: “Their supply chain hasn’t kept up
with the demand that they have for their product, and their quality control processes have been proven inadequate.”
“Lululemon Athletica Inc. Announces Fourth Quarter and Full Year Fiscal 2011 Results,” Lululemon, March 22,
2012, www.lululemon.com/media/index.php?id=219 (Accessed March 27, 2013); “Lululemon: Yoga Demonstration
Not Required for Returns,” CBS, March 27, 2013, www.cbsnews.com/8301-201_162-57576590/lululemon-yoga-
demonstration–not-required-for-returns (Accessed March 27, 2013); Wendy Kaufman, “Lululemon‘s Too-sheer
Yoga Pants Reveal Problems in Company’s Supply Chain,” NPR, March 20, 2013,
www.npr.org/2013/03/20/174867737/lululemons-too-sheer-yoga-pants-reveal-problems-in-companys-supply-chain
(Accessed March 27, 2013).
TRUE/FALSE
1. Lululemon’s problems with faulty products could be prevented through better supply chain management.
2. Lululemon’s development, distribution, sale, and recall of the sheer Luon yoga pants affects each of the eight critical
business processes.
3. Because the Luon yoga pants recall was caused by the sourcing and procurement of unsuitable fabric, the error occured
primarily at the materials requirement planning step.
4. Developed to reduce supply chain costs while at the same time offering better service, sustainable supply chain
management delivers improved products at better prices to customers.
5. Lululemon could improve its supply chain management by using electronic distribution to deliver its products.
Chapter 13 ♦ Supply Chain Management and Marketing Channels 15
MULTIPLE CHOICE
1. Suppose that, in the wake of Luon yoga pant recall, Lululemon instituted a policy requiring its manufacturing plants and
materials suppliers to streamline work processes and thereby provide smooth, high-quality customer experiences. Which
of the five types of external integration would such a policy represent?
a.
Relationship integration.
b.
Measurement integration.
c.
Technology and planning integration.
d.
Material and service supplier integration.
e.
Customer integration.
2. Which of the following should Lululemon not do to mend its relationship with its fabric supplier in the wake of the Luon
yoga pant recall?
a.
Launch an investigation into where exactly the error occurred.
b.
Monitor the state of the relationship as it evolves.
c.
Implement a new quality control system to test products’ sheerness as they leave the manufacturing
plant.
d.
Acknowledge that the manufacturers demanded too much too quickly.
e.
Take everything the supplier says with a grain of salt henceforth.
3. Especially important in the event of a recall, this process creates additional marketing and customer service touch points
that can be leveraged for added customer value and promotion-driven encounters:
a.
Demand management.
b.
Order fulfillment.
c.
Supplier relationship.
d.
Product development.
e.
Returns management.
4. Which of the following would be an example of Lululemon embracing sustainable supply chain management?
a.
Putting employees at every level through training to reduce supply chain costs and offer better service.
b.
Investing in a new fleet of durable diesel-based delivery trucks.
c.
Holding a sale on “as is” sheer Luon yoga pants.
d.
Developing a new variety of yoga pant that utilizes environmentally friendly hemp-based fabric.
e.
Launching an advertising campaign apologizing for its Luon yoga pant recall.
5. Suppose that, frustrated by a series of fabric defects and recalls, Lululemon contracted a consultant to assess its logistical
service needs and provide solutions that prevented such errors from occurring. This would exemplify the use of:
a.
A fourth-party logistics company.
b.
Outsourcing.
c.
Offshoring.
d.
A third-party logistics company.
e.
Nearshoring.
Chapter 13 ♦ Supply Chain Management and Marketing Channels 17
GREAT IDEAS FOR TEACHING CHAPTER 13
Debra Decelles, Anthony Rossi, Susan Sunderline, and John Gardner, State Univ. of New York
College – Brockport
EGG-SPRESS DISTRIBUTION: A SIMULATED DISTRIBUTION EXERCISE
Introduction
Active learning by students allows for better understanding and memory. The activity in this exercise helps students to
internalize the difficulty of developing a distribution system for a new product.
Goal
In the discussion of physical distribution management, the object is to achieve a high level of customer service while
minimizing costs. In order to accomplish this, the anticipation of obstacles and reaction to those obstacles is critical. In
this exercise, the goal is to get the product from the point of origin to the point of sale while maintaining a high level of
customer service. However, the task is to accomplish this as efficiently as possible, minimizing costs.
Activity
To teach this concept to a class, the idea of “egg-spress” distribution is introduced. This exercise involves sending groups
formed within a class through an obstacle course (distribution channel), carrying Eggman (the product). The task set
forth is to deliver Eggman to the finish line fully assembled, undamaged, and as efficiently as possible. After explaining
the task, an example of Eggman and the distribution course are given to the students. The Eggman is a hard-boiled egg
with a drawn–on face and four push pins inserted as arms and legs. The distribution course can vary—ours is one
example. We began with a piece of four-inch diameter PVC tubing that was held out our second-story classroom
window. The Eggman had to be dropped through this launch to ground level. At ground level, six cones were set up for
the Eggman to be carried through. The third leg of the race involved getting the Eggman over a wooden dowel held five
to six feet high. Next, the Eggman had to travel under a second wooden dowel placed just 10 inches above ground. The
final leg was a simple hopscotch to the finish line. Though the course was fairly easy, the challenge was in the rules
placed upon the students.
Rules
1. The Eggman can never touch the ground.
2. No one is allowed to touch the Eggman with their bare hands, except to release him into the launch tube.
3. A different form of transportation must be used for each leg of the course.
If either of the first two rules were broken, the students had to return to the bottom of the launch and begin the course
again. Example forms of transportation include a softball mitt, a ladle, a plastic bowl, a paper baggy, a lacrosse stick, and
a small hand towel. By giving more choices of transportation than there were legs to the course, the students were made
to contemplate the benefits and disadvantages of each. Further, the students had to strategically plan out the best path
through the course given the resources available.
Operations
Once the instructions were understood, the students were given a few minutes to design their approach. In this time no
further rule clarification was given, thus allowing the students to be innovative and creative around the basic three rules.
Each team was then timed as they went through the course. It is important that later teams be kept from watching and
copying strategies.
18 Chapter 13 ♦ Supply Chain Management
Learning Objectives
The student should better understand:
• The importance and implications of forming proper distribution channels.
• The importance of managing of communication relationships throughout the distribution processes (e.g.,
team conferences prior to attempting the course).
• Transportation choices (e.g., using the ladle versus the bowl at the high wooden dowel).
• The use of new logistics tactics such as postponed assembly and the coordination of marketing and logistics
through packaging (e.g., inserting the push pins at the end or the course).
• To continually challenge corporate channel cultures that need reassessment in order to react to internal and
external environmental changes (i.e., creative thinking).
Variations to the original are possible, such as:
• Alternative channel choices (e.g., offering the choice of two courses where the student must decide which to
attempt. One course may have more difficult obstacles but be shorter, while the other would be longer but
uncomplicated).
• Product packaging decision making (e.g., requiring that the product be packaged either prior to distribution
for added strategic planning or after).
• Allowing for a trial run to test ideas.
• Including market research (e.g., only allowing one student to see the course and report back to their team
prior to the attempt).
Evaluation
The exercise was tested by a Marketing Management class. Teams were formed and briefed, and ran the course with
varied strategies. The strategies lead to a relevant debriefing using distribution terms and tactics. The class evaluated the
exercise on an eight-item, seven-point scale evaluation form, giving an overall excellent rating to the presentation.
Overall, our class had a great time with the exercise.
Monica Perry, University of North Carolina at Charlotte
Thomas Stevenson, University of North Carolina at Charlotte
MARKETING CHANNEL FUNCTIONS:
A LOW-TECH KINESTHETIC SIMULATION
Why?
Undergraduate students often have only a slight appreciation for the functions provided by intermediaries in marketing
channels. Advertising messages that tout “we keep prices low by cutting out the middleman” merely exacerbate the
problem.
What?
To enhance students’ appreciation of intermediary functions, students participate in a low-tech simulated channel. The
simulation consists of two steps:
1. Manufacturers and consumers conduct transactions directly, and then
2. A retailer is introduced with the manufacturers and retailer interacting while the consumers and retailer interact.
It is a very physical exercise that shows the value of intermediaries in addressing quantity, assortment and
spatial discrepancies.
Chapter 13 ♦ Supply Chain Management and Marketing Channels 19
How?
1. Prior to conducting the simulation, make signs on different color cardstock for various positions, lists, and products:
• Four different manufacturers (e.g., Proctor & Gamble, Kraft, etc.)
✓ Pallets of products for each manufacturer (print 100 brand names on each piece of cardstock and get four pairs
of scissors, one for each manufacturer)
• Five different consumers
✓ Five shopping lists, one for each consumer. Each list should have at least one branded item from each of the
four manufacturers (e.g,. one box of Tide laundry detergent, two packages of Kraft cheese, etc.)
• One retailer
✓ Four purchase orders for the retailer, corresponding to products from each manufacturer in sufficient quantity
to supply consumer demand (e.g., one case of Tide laundry detergent)
Use products that students are reasonably familiar with, such as grocery products.
2. Conduct the simulation in class:
• Obtain 3 student volunteers and assign them manufacturer (two students per) and consumer (one student per)
positions. Give manufacturers signs, product pallets, and scissors. Give consumers signs and shopping lists.
• Have the consumers stand on one side of the classroom while the manufacturers stand on the opposite side.
• Part I:
✓ Begin the simulation by having each consumer fill their shopping list by going to each of the manufacturers.
Each manufacturer will have to select and provide an individual product from their pallets (make sure each
manufacturer has a pair of scissors to “select” an individual product for consumers to buy).
✓ Track the time that it takes to complete all the transactions (4 manufacturers x 5 consumers = 20 transactions
in total). Be prepared because chaos will ensue!
If you have a large class, run multiple channels so that more students are involved.
• Part II:
✓ Obtain four more volunteers to be the retailers and give them the purchase orders. Place the retailers in the
middle of the classroom between the manufacturers and consumers.
✓ Start the simulation by first allowing the retailers to obtain the products from the manufacturers and then let
consumers fill their shopping lists from the retailers. Log the time that it takes to complete all the transactions
(nine transactions in total).
It is virtually impossible for the 20 transactions to take less time than the 9 transactions! Some students may suggest that
the 9 transactions take less time because there was a practice round without the retailer. You can rerun another round
with no retailer to show that it is not the effect of practice.
20 Chapter 13 ♦ Supply Chain Management
Katryna Johnson, Concordia University
LOGISTICS AND RELAY RACES
Most students at some point in their lives have completed a relay race. The purpose of this relay race is to help students
understand how different forms of transportation are used for different materials and how strategic planning is important
to working out the logistics.
Materials
1. Items to be transported (CARGO): big wad of chewed gum, cotton balls, sugar, cheerios, water, eggs (or anything
else you want)
2. Transportation Devices (MODES): different size measuring cups, tongs, bowls, toothpicks, spoons (various kitchen
utensils)
Activity
1. Before class, set up a room for the race. At one end of the room you will have all of the cargo and all of the modes
of transportation; at the other end of the room will be the finish line.
2. Divide the students into teams (the number of teams will depend on the size of your class). Assign a few students to
observe the teams. Tell the students that you have measured the cargo in advance to see which items work best in
which modes of transportation (for instance, you know that the sugar best fits in a 1/2-cup measuring cup and the
cheerios best fit in a 1/3–cup measuring cup). Instruct the class that you will give them a few minutes to develop a
strategy to most efficiently and effectively transport all of the items from one end of the room to another.
3. Tell students that they can reuse any of the transportation devices. Inform students that spilling any of the cargo or
having any leftover cargo in a transportation device will count against them. For instance, if someone transports
water in a bowl and then uses the same bowl to transport sugar, there will be sugar left over in the bowl.
4. Notify students that someone from each team needs to write down how all of the items are being transported. You
will use this information and the group times for completing the relay to determine which group wins.
5. Have the students complete the relay race. The observers should be watching the teams to make sure they are not
spilling anything or cheating, and should be recording information accurately.
6. Use information from the observers to determine your winner. If the teams finish close in time, use their recordings
to determine who was most effective and efficient. For instance, the last time I did this, one team used a toothpick to
transport the wad of gum, and another stuck it in a large bowl. While the second team’s method was effective, it was
not efficient.
Object Lesson
Students learn about the importance of planning in logistics to increase efficiency and effectiveness. As an example, if
you put sugar in a bowl that had water in it previously, some of the sugar will stick to the bowl. It does work to use the
bowl for transportation, but the end product is not in the same form (wet sugar) as it was originally and the quantity is
less (some sugar will stick to the bowl). I also point out to my students how different modes of transportation are needed
for different forms of cargo. For instance, the wad of gum represents a sensitive product such as flammable material that
needs to be handled carefully. I have had students ask if they can throw the items across the room (to represent air
transportation). I have said no to this to avoid possible problems, but it’s up to you what you want to do!
Chapter 13 ♦ Supply Chain Management and Marketing Channels 21
Douglas K. Ross, Franklin University
THE CHOCOLATE CANDY BRANDING EXERCISE
I have used this exercise in classes ranging from Principles of Marketing to MBA-level Marketing Management. This is
a fun small-group exercise that fits will when discussing brands and branding or when discussing the marketing mix
variables. I use this after discussing what constitutes a good brand name and how the target market, packaging, and so
forth, must be considered. It usually takes approximately 40–45 minutes but can be accomplished in as little as 30
minutes.
Break the class into small groups (three or four students per group works best). On an overhead or PowerPoint I have a
small paragraph explaining that each group is a marketing team who works for a company that has developed a new
chocolate. The chocolate is different in that it contains a large (really extreme) amount of caffeine. The team must:
• Determine the most appropriate target market(s).
• Develop a brand name for the product.
• Develop the packaging, including colors that will be used.
• Determine the price.
• Determine the distribution/outlets.
The groups have 20–30 minutes to accomplish this. Divide the whiteboard (or have them use computers if available,
PowerPoint works fine for this) and have them draw their product including the brand name on the board. They should
also indicate the colors used on the package. This part of the activity takes approximately 5–10 minutes. A member from
each group then talks about their brand. They should discuss:
• Why they chose the target market(s) they did.
• How they came up with the brand name.
• Why they used the colors they did and aspects of the lettering.
• How they determined the price.
• How their distribution fits with their target market.
After the students’ discussion, I talk about the similarities and differences in the brands, such as the various target
markets or the various forms they used. Students have used regular bars, bite size, various shapes (lightning bolts and
coffee cups) liquid chocolate, etc. This exercise allows the students to be creative and reinforces the discussion on brands
and branding.
Variations of this exercise can include chocolate that contains all of the daily requirements of vitamins plus fiber. You
can also assign half of the groups the chocolate with caffeine and the other half the chocolate with vitamins and fiber.