Principles of supply chain management Q1A.

From the retailers perspective, what are the dangers of understoacking a video game during the holiday season? 1. A. From the retailers perspective one of the dangers of under stocking a videogame during the holiday season are loss of earnings from the sae of the videogame if that videogame was in stock and available to the customer. Another danger of under stocking a videogame during the holiday season is that consumers may lose interest in the product which will result in a loss of saes for manufacturer and retailer. As George Harrison, senior vice president of marketing for Nintendo America says If it goes out of stock for a while, customers tend to lose interest in it. Another danger is the loss of customer satisfaction that the videogame was unavailable at the time they wanted to purchase it and with that potential loss of a customers future business as the customer takes his business to a competitor who has made the videogame available to their customers. Today in the FCMG (Fast moving consumer goods) environment consumers have a range of choice and with that range of choice brings the very real possibility of consumers taking their custom to a competitor if a business cannot provide them with the product they want at the right time. Q1B. What are the dangers of overstocking? 1B. One of the dangers of overstocking a product is the issue of tying up capital in stock which could have been put to better use. This capital that has been tied up in stock could have possibly been used to invest in capital equipment or to purchase another range of products that could have been sod at a higher profit margin. Also in the FMCG industry some products have a short shelf life and many products can be superseded by a better product which will result in a company needing to reduce their price in order to se the product and in turn reducing their profit margin. At worse the products could become obsolete and may need to be scrapped which will result in a loss. This will affect stock turnover which could have a negative impact on a prospective investors decision to invest in the company. If the investor looked at the high cost of stock held which could possibly not be sod and the low stock turnover this would imply bad management practices and as such may affect their decision to invest in the company.

Principles of supply chain management Q1C. How do direct shipments like those described for Nintendos products hep retailers deal with these dangers? A1C. One of the ways these direct shipments hep retailers is firstly by having the products there at the right time which means that there will be no loss of customer satisfaction because they can purchase the product when they wish to. It also minimises stakeouts because the products will be available quicker than normally possible reducing the time a product is received by a retailer by up to 6 weeks. Overstocking of a product is aso kept to a minimum due to these direct shipments as ony the exact amount of a product is delivered as requested. These direct shipments can virtually guarantee future earning as any stockout costs and inventory costs are kept to a minimum thus ensuring a good profit margin. Q1D. Are the retailers simply trading inventory costs for transportation costs? Explain. A1D.In my opinion I do not believe that retailers are trading inventory costs for transportation costs. In the retail environment the cost of holding inventory can be quite high while transportation costs are significantly lower at 2% of the sales price. Also the actual cost of holding stock in a warehouse or stores is greatly reduced by these direct shipments being delivered to direct to the retail store and being almost instantaneously sod and turned into a profit. This reducing of storage space needed means that the associated costs of a large storage facility such as staff, light heat and capita equipment can also be reduced thus saving an additional outgoing cost. These direct to retail shipments also minimise overstocking a product because due to these direct shipments only the exact amount of a product that is forecasted to sell large quantities are delivered as requested. This in turn reduces the associated costs of overstocking such as the minimisation of obsolescence, pilferage and damage or deterioration. These costs savings can be of a great benefit to a company and can offset any additional transportation costs incurred.

Principles of supply chain management Q2A. In addition to supporting tighter delivery schedules how ese are ogistics service providers supporting their customers? In addition to supporting tighter delivery schedules logistics service providers are also supporting their customers in a multitude of different ways. One of these logistics service providers such as UPS and Fedex who not ony delivering packages on a tight schedule but they are also handing customs or packing goods exactly how the retailers request. For example UPS go as far as to inspect goods for retailers and put clothes on hangers before delivering to retail outlets. Schneider national inc are an American transport company that in the words of vice president of marketing Tom Nightingale see themselves as a roing warehouse delivering goods to retai store as they are needed. Schneiders strength as a retail goods carrier has been that its shipments can change destination without having to be reloaded on different equipment due to them uses the same equipment to oad goods on trains or tracks. Another ogistics service provider who is going the extra mie for its customers is crowey ogistics service who in addition to providing the above service aso offers a compete project management service incuding subcontractor vetting, selection and management, web-enabled material tracking, comprehensive marine transportation for single pallet up to a 6,000-ton module, and beach/job site landing design. The group also provides heavy lift discharge and delivery, inland transportation and logistics and air freight services.

Principles of supply chain management Q2B.In your opinion is this good for the ong term competitive position of the ogistics providers? Why or why not? A2B. In my opinion this is not good for the ong term competitive position of the ogistics providers due to the increased costs of maintaining a competitive edge over a riva. A company coud incur a great amount of expense in trying to compete with each other and the costs associated with trying to provide these extra services such as increased staff eves and new integrated IT systems, coud outweigh the voume of expected customers who wish to avai of this service. This woud mean a potential oss of expected profit and arge employment osses. Aso smaer ogistics service providers coud find it even more difficut to compete against the arger corporations such as UPS and Fedex due to these extra costs. In my own company I recenty reviewd a ogistics company due to a request from a customer for paets of goods to be shipped to the united kingdom. The ogistics company coud provide a reasonably priced paet service to the united kingdom in a good timescae and they aso provided a web tracking service that woud aow our accounts departments to print off PODs for any potential customer invoice querys. When I enquired about deiverys to mainand Europe and to the United states I was tod that they did not provide this service because the arger companies such as Fedex and UPS coud provide a more cost effective service than they coud to these other destinations. This company had been effectivey priced out of the market due to the increased costs and the competitive pricing of the arge monopoy of ogistics service providers. This has been happening to many sma ogistics service providers who cannot compete with the arger and more powerful ogistics companies. This in my opinion is detrimenta to competition as whie smear comies find it imposibe to compete, the arge companies try to maintain a competitive edge over their competitors by spending arge amounts of money on customer orientated processes that makes it impossible for sma companies with sma budgets to compete.

Principles of supply chain management Q3A. What role will information systems pay as retailers seek to reduce inventories by receiving smaller more frequent and accurate shipments? A3A. Information technology systems are set to pay a pivito roe as retaiers seek to reduce inventories by receiving smear more frequent and accurate shipments. Aier, manufacturer and ogistics service provider wi have to be inked in rea time ib order to hep a aong the suppy chain to know what a reati needs as soon as possible. Information techhnology systems such as the IT system used by Andrew Krainin, co-founder and senior vice president of marketing at Sameday.com which helps retailers and b2b companies improve their distribution networks to support rapid deliveries expains that in-store inventories are difficult to pin down on a real-time basis. Inventory is sitting in customers shopping carts. Items get stolen and sales are recorded with the wrong SKUs. Even if they have an integrated point-of-sale system, its not going to be 99% accurate, This is an issue that wi require aborious effort in improving for the future requirements of a aong the suppy chain. Q3B. What are the implications for the manufacturers and ogistics providers who serve the retaiers? A3A. There wi be a need for more accurate forecasting from the panning departments of retaiers and manufacturers and I believe the suppy chain wi be given an even more prominent roe as it interacts more with customers and the ogistics service providers. It wi mean better communication wi be needed between everybody in the suppy chain and purchasing wi aso be given a more prominent roe as costs rise, manufacturing and ogistics service providers wi have to work to tight schedule whie manufacturers must make sma batches and ship the products exacty how the customer requires. This wi require strategic purchasing and a constanty improved suppy chain in order to compete against competitors. There wi have to bemore fexibiity from manufacturers and ogistics service providers and a customer orientated attitude wi be needed by a invoved in the suppy chain. Q4. Currenty Nintendo is abe to pass on some of the costs of the faster shipment to the retaiers. In the ong term what do you think wi happen? Q.4. In my opinion ife cyce costing wi pay a arge roe on the descision for retaiers to contineue to pay these additiona premiums. Ife cye costing is defined by the Chartered Institute of Management Accountants (CIMA) as the practice of obtaining over their ifetime the best use of the physica assets at the owest cost to the entity. If it is feasible for suppiers not to pay premium and if they think that it wi ony mean a oss of a handful of customers they may decide against paying the extra costs associated with faster shipments. One example woud be the saes of the Nintendo DS at Christmas 2007. The Nintendo DS proved to be an incredibly fast seing items, often with ques of a mie ong outside shops to buy one. As a resut the shops sod out fast and many customers were not

abe to get a DS for Christmas. I aso tried to obtain one for a Christmas present and I coud not find one in any shops. But in some instances retaiers promised me that it woud be in stock the week before Christmas other retaiers who I am assuming didnt wish to pay for the addidtiona cost of shipping tod me that it woud not be avaiabe in their shops unti March 2008. It is cear that when both of these different reatiers employed ife cyce costing they both came to two very different concusions and ony time wit e which retaier has made the right choice for their profitability.