MSc Supply Chain & Logistics Management

Business, Operations and Supply Chain Strategy

Date: PRACTICE EXAM

Time: 2:00 4:15 (105 minutes for the exam itself, plus 30 minutes reading time for the case study)

Answer TWO questions: ONE from Section A and ONE from Section B

Business, Operations and Supply Chain Strategy

PRACTICE EXAM

SECTION A: ANSWER ALL PARTS OF THE FOLLOWING QUESTION (worth 60 marks in total)

Q.1

First, please read carefully the attached Case Exercise on Hagen Style. Then answer the following questions: (a) Discuss the business strategy that the company has followed so far. What kind of issues or questions does the company face with respect to the future direction of its business strategy? (18 marks) Discuss the operations strategy that the company has followed so far. What are the current competitive priorities in operations? What is currently the main problem area in operations? (18 marks) Develop a number of strategic options for the company (relating to business to strategy in general, and operations strategy in particular). Explain what strategic decision criteria you consider to be appropriate for evaluating these options. Based on a careful evaluation of these options, give the company advice about its future business and operations strategy. (24 marks)

(b)

(c)

Please turn over for Section B /.

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PRACTICE EXAM

SECTION B: ANSWER ONE OF THE FOLLOWING QUESTIONS (worth 40 marks each)

Q.2

Some articles in the business press advise managers to focus on their companys core competences and to outsource non-core activities as much as possible. Do you think that such general advice is always appropriate? If not, then explain under what conditions outsourcing would be inappropriate. Illustrate your explanation with appropriate examples from real-life business organisations. (40 marks)

Q.3

Explain what is meant by the following two network structures in operations: horizontal networks and vertical networks. Compare the main challenges involved in managing these different network structures. Illustrate your comparison with appropriate examples from real-life business organisations. (40 marks)

END OF THE EXAM PAPER (Examiner: Dr Robert van der Meer, Strathclyde Business School)

Please turn over for the case exercise /...

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Business, Operations and Supply Chain Strategy

PRACTICE EXAM

Hagen Style case exercise

Hagen Style was one of the most successful direct marketing companies in Europe, selling kitchen equipment, tableware, containers, small gadgets, salad bowls and so on. Founded around forty years ago as a manufacturer of plastic kitchenware, it originally sold its products through department stores. However, soon it had evolved into a pioneering direct marketing operation which sold its products (only about half of which were now manufactured by itself) through a network of local representatives. Working from home, they were recruited to service a geographic area, usually within a one-hour drive. In total the company had almost 10,000 representatives although only around 70 per cent of them were active. Representatives would sell from door-to-door or at places of work, community centres, clubs, etc. and consolidate their orders on a weekly basis. Hagen would receive their orders, pack and dispatch them so that the representatives could deliver to their customers in less than one week. Most representatives still mailed their order to Hagen using pre-printed forms and prepaid envelopes, some faxed their orders and a growing number posted their consolidated orders by Internet. Whereas many representatives now used the Internet to place orders, most of their customers were not yet amongst those who would have access to, or be comfortable using, this way of placing orders. Most of Hagen Styles products were value items of reasonable quality with standard rather than innovative design. Orders were received at one of Hagen Styles two distribution centres (staggered through the week so as to smooth demand on the centres). Both centres, one in Dortmund (Germany) near the companys head office, the other, just outside Munich (Germany), used the same processes, perfected over many years. First, the representatives orders were keyed in to the companys information system (or checked if they came through the Internet, as mistakes by representatives were still common using this medium). This information was fed down to the warehouse where each representatives order (usually containing 20 to 50 individual items) was packed. Much of the packing process was standardised and automatic. A standard-sized box was automatically loaded on a moving belt conveyor and, as it proceeded down the belt, automatic dispensers, each loaded with one of the higher selling products, deposited items in the box. At the end of the belt, if an order was complete, as around 45 per cent were, the box would be automatically check weighed (to ensure that no items had missed the box), the delivery note inserted, filler put in the box to prevent damage in transit, sealed, and addressed. Those boxes which needed additional items packing (usually these were less popular or large items which would not fit the automatic dispensers) were automatically routed on to a manual line where operators would complete the packing process. At the end of the packing lines were the loading bays where boxes would be loaded onto the trucks for their journey to the representatives. The packing sequence fed down to the warehouse was calculated so as to ensure that all boxes for a certain area arrived at the correct loading bay just in time for dispatch on the correct truck.

Please turn over for the rest of case exercise /...

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PRACTICE EXAM

Kurt Meyer, Hagen Styles vice president of distribution, was proud of his distribution centres: It is no exaggeration to say that we run one of the slickest order fulfilment operations in the world. Years of investment and improvement have gone into perfecting it. Certainly industry benchmarking studies show that we are significantly superior to similar operations. We have lower costs per order, far fewer packing errors, and faster throughput times from order receipt to dispatch. Our information system, transportation and warehouse people have together created a great system. Our main problem is that the operation was designed for high volumes but the direct marketing business using representatives is, in general, on a slow but steady decline. Kurts anxiety over future business was shared by all the companys management. Direct selling using door-to-door representatives was regarded as an old-fashioned market channel. Traditional customers were moving towards using catalogues, TV shopping channels, or just buying from supermarkets and discount stores, most of which now stocked the type of products in which Hagen Style specialised. Recently even Hagen Style, bowing to the inevitable, had started selling a limited range of its products through selected discount stores and was planning to sell through a catalogue operation. It reckoned that it could maintain, or even improve, its product margins selling through these channels. The problem was how to distribute their products to these new channels. Should they modify their existing fulfilment operation or subcontract the business to specialist carriers? And what would happen to their distribution centres? This posed a problem for Kurt: Although our system is great at what it does, the downside is that it would find it difficult to cope with very different types of order. Moving into the catalogue business will mean dealing with a far greater number of individual customers, each of whom will place relatively small orders for one or two items. Our IT systems, packing lines, and dispatch arrangements are not designed to cope with that kind of order. We would have the opposite problem delivering to discount stores. There, relatively few customers would place large orders for a relatively narrow range of products. As far as I am concerned, it would be better to concentrate on what we know. For example, I have been talking with Lafage Cosmetics who sell their products in a very similar way to our traditional business. They have always been envious of our fulfilment operation and have indicated that they would be willing to subcontract most of their order fulfilment to us. I am sure we could still get profitable business by utilising our distribution skills for the substantial number of companies who still need our kind of service.

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