SUPPLY

CHAIN MANAGEMENT
Exam Questions
&
Case Updates
6.Feb.2020

From Quants to Content & Context
Tutorial Questions (Formative Feedback)
These examples are for you to work through – I will post example answers
after you have had an opportunity to answer these yourselves.

Define competitiveness and competitive advantage?

Define Operations in the context of Operations and Supply Chain
Management

What is a firm's value chain?

Describe the triangle of conflicts in design of operations.

How are operations different from each other?

What is Supply Chain Management (SCM)?

What is the main objective of Supply Chain Management (SCM)?

How is it possible that SCM achieves the goal of satisfying end-customers at
competitive costs?

How does a company decide on the type of its supply chain?
From Quants to Content & Context
For which group of products and services do Lean Supply Chain Management
Strategies work better and for which group of products and services do Agile
Supply Chain Management Strategies work better?
[Questions in exams are often preceded by context:]
"Scores of children were disappointed last Christmas as demand for Robo-
sapiens, the must- have toy of 20XX, outstripped supply. Many of their
parents had their own moment of disappointment, too, as the fashionable
iPod mini flew off the shelves faster than it could be replaced.
Given the sophistication of modern-day supply chains, such stories are
surprisingly common. Yet the central task of the supply chain manager has
always been a formidable one: to provide parts and products in the right
quantity at the right place and time at the lowest possible cost. Too little,
and customers will walk away empty-handed; too much, and discounting
and disposal costs mount." Yossi Sheffi, Financial Times

Although WowWee who provided Robo-sapiens and Apple who provided
iPod mini had demand forecast for these products, discuss what the main
problem is with demand forecasting practice and how the associated risk
with demand forecasting can be reduced.
- but still recruiting!


5 Feb 2019
5 Feb 2019
5 Feb 2019
Globally, Toyota currently uses more than 100 uniquely
modified platforms and sub-platforms, and 800 powertrains,
including engines modified to fit those different platforms.
But, with TNGA, just five layouts will be needed for the whole
range, from compact sports cars to SUVs.








The new TNGA powertrains will increase fuel-efficiency by up
to 15 per cent. The size and position of other key
components will be standardised, too.
As TNGA-built cars will be able to use many uniform parts,
fewer components will need to be designed, produced and
shipped. The cars will also need 20 per cent less manpower
to build – freeing up a significant amount of time that can be
devoted to designing new cars.
Fewer components and less manpower will make factories
greener too, which is obviously better for the environment.

Looking to the
future, TNGA will
be the
foundation for
all Toyota’s
powertrain and
vehicle
development.

ISSUES?
What is the new locus of competition
in the Supply Chain?
It's no exaggeration to say
that the role of the chief
engineer is to make each
model more attractive:
•  chief engineers to focus on
refining each model.
•  lower hood profile allows
greater design flexibility.
These advantages let chief
engineers and designers focus
on creating highly appealing
exterior styling.
ISSUES?
What is the new locus of competition
in the Supply Chain?
How distinctive are the new models?
Is ‘planning for 10 years’ safe?
How does the link with Lexus work?
GA-C 2015–present Toyota Prius (XW50)
2016–present Toyota Prius Plug-in Hybrid (XW50)
2016–present Toyota C-HR
2018–present Toyota Auris/Corolla/Levin
2018–present Toyota Corolla
2018–present Lexus UX
GA-K 2015–present Lexus RX (AL20)
2018–present Toyota Avalon (XX50)
2018–present Toyota RAV4 (XA50)
2017–present Toyota Camry (XV70)
2018–present Lexus ES (XV70)
GA-L The rear-wheel drive Global Architecture for
Luxury vehicles is used on Lexus vehicles.
2017–present Lexus LC (Z100)
2017–present Lexus LS (XF50)
GA-C 2015–present Toyota Prius (XW50)
2016–present Toyota Prius Plug-in Hybrid (XW50)
2016–present Toyota C-HR
2018–present Toyota Auris/Corolla/Levin
2018–present Toyota Corolla
2018–present Lexus UX
GA-K 2015–present Lexus RX (AL20)
2018–present Toyota Avalon (XX50)
2018–present Toyota RAV4 (XA50)
2017–present Toyota Camry ( )
2018–present Lexus ES ( )
GA-L The rear-wheel drive Global Architecture for
Luxury vehicles is used on Lexus vehicles.
2017–present Lexus LC (Z100)
2017–present Lexus LS (XF50)
ISSUES?
What is the new locus of competition
in the Supply Chain?
How distinctive are the new models?
Is ‘planning for 10 years’ safe?
How does the link with Lexus work?
How might you ‘beat’ Toyota?
Volkswagen Phaeton Bentley Continental Flying Spur
< €100,000 > €200,000
Tesco SCM Issues
Tesco SCM Issues
Tesco SCM Update
Tesco SCM Update
Tesco SCM Update
 This story is complicated. Tesco might
Tesco SCM Update
have abandoned its new
supermarket, but it still owns the
lion’s share of Kirkby’s town centre,
which it bought for £65m and was
going to redevelop as part of its
plans.

.. paving stones are being ripped up as part of what the borough

council calls Tesco’s “ongoing work to transform public spaces”. ..
abandoned playing fields, a demolished former hotel and nursing
home, and the closed-down former home of the local Council for
Voluntary Service. The biggest source of fury, though, is the 72
homes whose occupants were moved to brand new houses
elsewhere in the town in preparation for Tesco’s arrival – all
structurally sound, but still destined for demolition.
Tesco SCM Update
St Modwen Plans for Kirkby – Feb 2017
St Modwen Plans for Kirkby – Feb 2017
http://www.kirkbytowncentre.com
“These are key sites in the heart of the
town centre and removing unused,
unattractive buildings allows us to
identify developers who can really
enhance what Kirkby has to offer.
“I’m delighted that we already have plans
in the pipeline for St. Modwen to deliver a
cinema, bars and restaurants on the
former library site and I look forward to
seeing proposals for more high quality
developments on the other two sites.”
After 20 years of failed attempts at retail-led redevelopment, GMI Construction has
started work to create a 45,000 sq ft Morrisons, petrol station, car park, 20,000 sq
ft Home Bargains and a KFC.

St Modwen bought the town centre site covering 12 acres and containing 87 shop
units from Tesco in 2015 for £36m. The council bought the land from St Modwen
for £43.8m in November 2019 after the developer had drawn up detailed plans and
secured planning permission.

The council said the development will create 500 jobs alongside 278 jobs during
the construction phase, helping to create a £15.3m boost to the local economy
each year.

Progress is being made on plans to deliver a cinema and associated food and
drink outlets.
 September 2014, Tesco admitted that it had
identified a £250m overstatement of first-
half profits for that year. The UK’s
25 January 2017 supermarket watchdog later found that
Tesco deliberately and repeatedly withheld
money owed to suppliers to boost its sales
performance artificially, in a serious breach
of supermarket regulations.

Scores of investors sued the company as a

result, alleging they lost millions because
they bought shares on the basis of
misleading accounts.

Tesco shares lost almost half of their value

in the months after the scandal broke and
have struggled to recover properly since.
Tesco SCM Opportunities
 Tesco SCM Opportunities

Shares in Tesco shot up close to 10 per cent on Friday after

Britain's biggest retailer announced that it was merging with
Booker, the UK's top food wholesaler, in a £3.7bn deal.

In a joint statement, the two companies said that the combined
group would bring benefits for consumers, independent
retailers, caterers, small businesses, suppliers, and colleagues,
and deliver “significant value to shareholders”.
 Tesco SCM Opportunities

"This merger [..]. will further enhance Tesco's growth prospects

by creating the UK's leading food business with combined
expertise in retail, wholesale, supply chain and digital," the chief
executive of Tesco, Dave Lewis, said.
 Tesco SCM Opportunities

Booker was revitalised as a business under its chief executive

Charles Wilson, and has thrived over the last decade. Since
Booker re-listed on the stock market in June 2007, Tesco’s
market value has more than halved to around £16bn, while
Booker’s value has increased from below £500m to £3.7bn,
including the benefits of acquisitions. Proportionately, Booker
has grown from under 1.5 per cent of Tesco’s value to almost a
quarter of the size.
 Tesco SCM Opportunities
“This morning, Tesco announced it would be making the biggest supermarket merger in
UK history and would be gobbling up wholesaler Booker Group.

- The deal has valued Booker at £3.7bn

- Neil Shah, director of research at Edison Group, said "With Booker onside, Tesco will
have smart first mover advantage in tying up the food supply chain in the brave new
world of online shopping, with Amazon the main disrupter and a pricing race to the
bottom within the core grocery stores market catalysed by Lidl and Aldi, all of which
makes shopper loyalty increasingly fickle."

- £200m = estimated cost savings from procurement and distribution costs.

- 9% = how far Tesco's share price has climbed today on the back of the merger

10 January 2019: Tesco - Booker delivers the goods

Tesco SCM Opportunities

•  Tesco has announced its twelfth consecutive quarter of UK like-for-like sales growth.
•  The shares rose 2.5% in early trading.
•  Aldi and Lidl remain a threat, and Sainsbury's potential merger with Asda could bring
a new challenge too. If that deal goes ahead, Sainsbury says it will use the increased
scale to lower prices by up to 10%. That raises the prospect of another price war.
•  A shared supply deal with Carrefour went live in October. That sees two European
superpowers joining forces to squeeze suppliers




11 January 2019: Booker claims Tesco benefits for customers 'coming soon’

•  A number of Booker-supplied retailers have said that promised benefits have largely
yet to materialise ….
The latest wave of job cuts are part of a plan to slash £1.5bn
from Tesco’s cost base. It comes after up to 1,200 head office
jobs were cut last summer. The supermarket’s Cardiff call
centre closes this month, with a loss of 1,100 jobs.

Speaking about the latest round of cuts, Matt Davies, chief
executive of Tesco’s UK and Ireland business, said: “These
changes remove complexity and will deliver a simpler, more
helpful experience for colleagues and customers.
The cuts are part of a plan to slash £1.5bn from Tesco’s cost base as the chief executive,
Dave Lewis, tries to rebuild profits, which have never recovered from an accounting
scandal in 2014.

The company is also trying to simplify and cut costs to help it fight back against the
discounters Aldi and Lidl

Since Lewis took over 5 years ago, he has cut 1000s of jobs. Last winter, 1,700
employees when Tesco stripped out a layer of middle management. It has also closed
its Cardiff call centre, with the loss of 1,100 jobs.

The retail sector as a whole shed 70,000 jobs in the final three months of 2018
•  Sainsbury’s shares currently trade at a 36% discount to their net asset value of
357p per share. This is unusual for a profitable retailer.
•  Tesco stock, for example, trades at a 76% premium to its net asset value of
143p per share.
Sainsbury’s valuation means that its shares trade below the breakup value that
might be achieved if its property portfolio and banking business were sold.
I can only see one reason for this, which is that the group’s trading business is not
currently profitable enough to justify its existence.
•  Sainsbury’s reported a 2019 operating margin of 1.9% and a return on capital
employed of 3.3%.
•  In contrast, the equivalent figures for Tesco were 4.0% and 6.4%.
City analysts expect Sainsbury’s to deliver earnings growth of about 2% in 2020/21.
Forecasts for Tesco suggest that its earnings will rise by about 8% over the same
period.
 Problem session

CASE STUDY: PROCUREMENT TRANSFORMATION FOR

AN $8 BILLION AGROCHEMICAL BUSINESS

-  merger: 200 sites, 90 countries, 19,000 employees!
-  ‘purchasing’ to “act entrepreneurially”
-  funding for best in class principles and technologies!
 CASE STUDY: PROCUREMENT TRANSFORMATION
FOR AN $8 BILLION AGROCHEMICAL BUSINESS

-  Data, data, data .. and users!
-  ‘purchasing’ to “act entrepreneurially”
-  funding for best in class principles and technologies!
 CASE STUDY: PROCUREMENT TRANSFORMATION
FOR AN $8 BILLION AGROCHEMICAL BUSINESS

•  Launch project
•  Define spend model
•  Data collection and assessment
•  Data staging
•  Internal quality assurance cycle
•  Reports
•  Training and communications
•  Define users and roles
•  Production preparation
•  Publish process for feedback cycle
•  Launch customer feedback
•  Publish process
 CASE STUDY: PROCUREMENT TRANSFORMATION
FOR AN $8 BILLION AGROCHEMICAL BUSINESS
Essential principles of supply
management employed:
•  Taking a global, holistic view of
spend
•  Making information both easy to
find and insightful
•  Transforming raw data into
actionable information
•  Creating and using a closed-loop
supply management process
•  Understanding the supply markets
and cost drivers within each
category of spend
 CASE STUDY: PROCUREMENT TRANSFORMATION
FOR AN $8 BILLION AGROCHEMICAL BUSINESS

OK, so what:
-  Are you trying to achieve, pull or push?
-  How are you going to achieve it?
-  What role does ‘scale’ play in determining logical
organisational structure (would you always come to the same
conclusion)?
-  Are all data equal?
 CASE STUDY: PROCUREMENT TRANSFORMATION
FOR AN $8 BILLION AGROCHEMICAL BUSINESS

[2004 start]
- delivered a year early
- billion dollars in spend across 45,000 suppliers and 6 continents

Success hinged on three factors:
-  internal recognition and support of the sourcing program;
-  a focus on change management and adoption; and
-  selection of the right solution partner.

In terms of evaluating solution providers, the final vendor was
selected because of their track record of success with other
leading global organization. [Best or as good as?]