WGU - Supply Chain - The Entire Course - All 3 Tasks
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Task 1
Supply Chain Management
Simulation Analysis (B):
Utilizing pro-forma balance sheets revealed that I was too conservative in my initial
approach. My market share was 98% in the traveler series but dismal in the workhorse line. My
decision to invest $400,000 into a certificate of deposit was a critical error. I should have opened
an office in Europe sooner to maintain market share.
Pro-forma financial statements are critical to determine the outcome of previous
decisions. After my third quarter my error was to not completely analyze my financial
statements. Earlier, in the second quarter, I had went from a negative $394,000 to a positive
$493,749. This gave me confidence in my traveler line and since I was only at 4% market share
with the workhorse line – I dropped the line completely. I made the decision after reviewing
analysis of my profit and loss statements. I viewed this as a low profit item that was taking away
from our cash assets that could be best used to catapult our traveler line
My initial goal was to gain market share and defend it. I gained market share but did not
keep it. My conservative approach early in the simulation did not allow me time to defend my
98% market share. I analyzed competitors and they were gaining ground against me.
| Competitive Posture | |
| X | build a market position and defend it |
| X | take the lead and keep it |
| | be first to market |
| | be the leader in all things |
| X | be a fast follower, imitate smart competitive moves |
In the 3rd quarter the pro-forma statement guided me with my decisions. I admittedly did not see that although I decided to incur the tremendous expense of opening another office, hired more sales and support people – I did not place them in the new office.
| World Market | ||||||
| | Quarterly Training Costs | |||||
| | | | 3,000 | 2,000 | 4,000 | 3,000 |
| City | Annual Compensation | Total Sales People | Service Support | Workhorse | Mercedes | Traveler |
| NY-NorthAmerica | 53,021 | 6 | 2 | 2 | 1 | 1 |
| Paris-Europe | 53,021 | 0 | 0 | 0 | 0 | 0 |
| Total number of sales people in the prior quarter: | 5 |
My pro-forma cash flow statement indicated that in the 4thquarter we went bankrupt.
Opening Sales Offices:
Tokyo-Asia, Paris-Europe
Sales People:
Tokyo-Asia, Paris-Europe
Sales People:
Top of Form
| World Market | ||||||
| | Quarterly Training Costs | |||||
| | | | 3,000 | 2,000 | 4,000 | 3,000 |
| City | Annual Compensation | Total Sales People | Service Support | Workhorse | Mercedes | Traveler |
| NY-NorthAmerica | 77,497 | 10 | 2 | 0 | 4 | 4 |
Adequacy of funds (B 1):
My initial decision of the investment of $400,000 into a certificate of deposit was too
conservative. In the second quarter I cashed in the certificate of deposit to pay off the emergency
loan. My goal was to ensure adequacy of funds. This decision was critical in my decision to stay
solvent while increasing market share. In lieu of saving cash, I should have invested in other
markets earlier. It takes an entire quarter to set up a new office. If you make an error as I did with
staffing, you need time to correct the error.
In the first quarters my sales people were averaging over 200 sales per quarter and in the
final quarter they were only selling 100. I ended the simulation with nearly $4 million in unsold
computers. If I had realized my error earlier, in the final quarter, I could have decreased
advertising, sales and support people and made a nice return on investment. There would not
have been unsold inventory.
Supply Chain
Task 2
A. As you prepare to respond to prompts 1 to 4 shown below, you should reflect upon and analyze your simulation results. Consider the following in your analysis:
• Your actions during the simulation
• The relationship between your actions and your simulation results
• Your success compared to other competitors
• Alternatives to your actions that could have produced better results in the simulation
With an ambitious goal of having the largest market share, I made conservative lean
decisions early in the simulation that were impossible to overcome later in the simulation. With a
conservative approach, then an aggressive ending, one small error was disastrous for the
company in the final quarter.
My initial actions in the simulation gave me 98% market share of the traveler
line. My indecision about expanding to other markets resulted in a major loss of market share. In
my analysis of my competitors, I made decisions similar to theirs in my quest to defend my
market share because they were increasing and I was losing market share.
One decision I made was directly from analyzing my competitors. I noticed that they
were remunerating their employees greater than me. I compensated my employees greater than
my competitors and the simulation gave me back market share. Utilizing pro-forma balance
sheets was the evidence that I was too conservative initially. I enjoyed a 98% market share in
the traveler series but only 4% in the workhorse line. I decided to drop the workhorse line and
concentrate on the traveler. My success compared to my competitors was excellent until I made
one fatal error of not staffing the offices once I did expand. I learned that heavy investment has
to account for errors and that you need time to recover.
The greatest error in my actions was in retrospect, not expanding sooner.
A1. Explain how you determined your brand design decisions.
My design of all three computer models was based on utilizing all of the information I
was given. I was provided with the profit margin, the cost of adding features, the needs of
each type of user, the price point and the demand. Ultimately, I decided to offer computers with
all available capabilities at a lower price. This decision was critical because I initially
experienced a tremendous market share of 98 % but only on one model line. My gross profit
was tremendous because of my large market share and the profit potential in this particular line.
The simulation offered the option of a rebate. I designed the three computer models with
all available features and capabilities demanded. In a assembly line situation the cost of adding
features and capabilities is not that expensive. I offered the computers and advertised them as
the best available on the market. I had a high price to set a value then added a large rebate that
made the consumers purchase price less than my competitors. The simulation granted me the
largest market share.
My design of the two computer models that were not selling well was loaded with
features and capabilities. It did not sell well, I concluded that my inability to advertise it
effectually. Without additional offices I was limited to my exposure ability. My competitors had
immediately expanded, therefore they could legally advertise more effectually by offering a
feature demanded- service. The simulation obviously liked the service and availability feature
more than my additional features so I lost market share.
I eventually based my brand design decisions on the needs and type of customers I was to
target. However, it was clear in the early stages of the simulation that I did not utilize the
information provided to target a group of users. I made the error of mass producing without
understanding my strengths and developing a target customer base. It was not until the products
were actually used before having the ability to evaluate the value of the merchandise. As the
product group expanded and customers made their choices from the accessible brands, consumer
observations ensued and the comparative functionality of the existing features became more
transparent.
In selecting my brand designs, I felt it would be worthwhile to review the market profile
for each segment. I then took each section of the analysis and went over the individual
characteristics of each segment. I looked for different examples between the segments. I created
three brands initially based on the rank order of the benefits sought and the importance of the
benefit for a particular segment. As previously mentioned, two of my brands performed poorly
in the second quarter. In the third quarter, after comparing my decisions with my competitors, I
decided to revitalize my image by eliminating the two brands that were wasting resources.
Although, I felt this was somewhat risky at this stage, moving forward without this change was
not an option to me as I analyzed my prior approach and compared to the successes of my
competitors sales strategy and marketing.
A2. Discuss whether you would change the target markets you selected.
With the profit margin consideration in the traveler being much higher than the other
models and my high market share, I would never have started with three models as suggested. If
the opportunity to do the simulation again, I would have actually targeted a market. I was
looking for market share and that made me actually not target a market but produce lots of
unsold computers. From this simulation and this question, I learned that a new manufacturer
should not try to be a perfect fit for every consumer. A new business should have a target market,
capture it, retain it and then expand.
Task 3
1. A. supply Chain Strategy
Analyze whether a Keiretsu network, a virtual company, a vertical integration, or a different supply chain strategy should be adopted.
Keiretsu Network: Being forward thinking, and realizing the importance of long term partnering, I am recommending the adoption of a Keiretsu strategy as it is a network defined as part collaboration, part purchasing from few suppliers, and part vertical integration (Heizer & Render). The Keiretsu strategy encompasses four key dimensions of supply chain which are: information integration, workflow coordination, synchronization and new business models. Information integration refers to the degree of sharing of demand information, inventory status, capacity plans, and shipment schedules. Workflow coordination refers to streamlining workflow activities across various members in a supply chain in order to achieve efficiencies from increased order accuracy and timely shipments of our products. Synchronization entails joint design and execution of plans for forecasting and replenishment –also otherwise referred to as collaboration. Finally, new business models show how entire supply networks may jointly create new products, pursue mass customization and successfully compete in new markets.
This type of supply chain integration refers to both internal and external integration (i.e. joining internal company business segments while integrating with outside companies). Internal supply chain integration is the achieves the partnering of otherwise separate activities such as purchasing, warehousing, transportation, distribution, and customer service into a single enterprise. It should be considered to what extent other companies have achieved integration and coordination of internal functions and look at ways to improve those efforts by building on their success in this area. At the same time, it should be noted that decreasing marginal returns have forces some companies to focus outside their companies parameters to find increased value opportunities by collaborating with adjacent supply chain partners.
The other supply chain options include the following:
Vertical Integration. I did not choose this strategy as an appropriate strategy for our project because of the risk associated with it that leads to increased costs. Vertical integration provides the ability to produce goods or services that were formerly purchased and can provide an opportunity for a company to lower its overall costs by producing a product within the company to eliminate a member of the supply chain. Ideally, the fewer members in the supply chain will ultimately leads to better profit margins for the company. For example, when dealing with a supplier, the company has to pay the supplier to cover costs and maintain a profit. This works well if the company has the necessary capital to incur the costs of production. The advantage of vertical integration is that a company produces the product themselves, and does not have to pay the premium associated with buying it from an outside supplier.
Although costs are generally higher for production in the short-term, vertical integration can save the company money in the long-run. However, vertical integration requires that a company to take on extra responsibility. For example, if management does not have the expertise to run new operations, they will eventually fail and therefore this method is associated with a higher degree of risk as the amount of capital tied up in internal expense can greatly increase. So, although vertical integration may seem like a good idea, the potential for management to get overzealous in the estimation of existing capital available for new ventures might occur.
Virtual Company. I did not choose this strategy because although virtual companies are a great idea for smaller organizations, smaller companies generally don’t have the resources to purchase all of the manpower and materials necessary for short-term projects. Additionally, virtual companies must rely on many supplier relationships to provide services on demand which does not support the just-in-time system.
An advantage of virtual companies is that they have fluid organizational boundaries that allow them to create a unique enterprise to meet changing market demands. This is achieved by companies forming networks with other companies resulting in all companies dependent on each other. For example, each member within a network performs essential functions to a project such as technology systems and financial services being major contributors to the network.
Virtual companies work well for short-term projects of a company, however, it does not make sense to fully integrate new operations for just one project. The cost is not worth it for the company because they may need to use many different operations depending on the particular project. (For example, a software system that provides links to consulting services, technology, and integration skills). Information technology is a huge cost for a business and many smaller companies are not ready to incur all of these costs.
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