Case Study 3

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CSCMP ACADEMIC CASE STUDY SERIES

Case studies can supplement a course and be used to teach application of supply chain management concepts to real-‐world situations. Others can use the case studies to learn about supply chain challenges and to analyze the situation to develop solutions.

Supply Chain Resilience: A Case of Balancing the Supply Chain for Long-‐term Sustainability An Academic Learning Case Study written for the Council of Supply Chain Management Professionals

By: Lieutenant Colonel Timothy J. Pettit, PhD U.S. Air Force Academy [email protected]

The views expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the Air Force, the Department of Defense, or the U.S. Government.

This document is available from our site and provided for your personal use only and may not be retransmitted or redistribute d without written permission from the Council of Supply Chain Management Professionals (CSCMP). You may not upload any of this site’s material to any public server, online service, network, or bulletin board without written permission from CSCMP.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

CASE OVERVIEW

The i-‐AM Tablet is an evolving gadget in a world of fast-‐paced technological change. Facing

a new partnership with a major customer, the market for the i-‐AM Tablet is about to explode on

the market. Jim MacDonald, CEO of i-‐AM, Inc., and his team have effectively employed traditional

risk management concepts over the past two years and they have yet to face a product recall or

distribution disruption. However, with the growth that Jim envisions for his company, he is turning

to the evolving concept of Supply Chain Resilience to focus his team on proactively managing the

upcoming change.

[Note to readers: Concepts in this case were developed in cooperation with The Dow

Chemical Company and The Ohio State University. Details are described in the 2011 CSCMP

Innovation Award Competition case study1, found on the CSCMP website cscmp.org.]

AUDIENCE

This case incorporates the multiple business aspects of operating a firm as well as the

interactions between supply chain partners. Therefore, this case is most appropriate for advanced

undergraduate business majors and MBA students. The questions in Part B are specifically geared

toward the MBA-‐level student. This case should be considered for capstone courses to take full

advantage of the integration of a variety of business concepts.

LEARNING OBJECTIVES

Participants will:

- understand the concept of resilience and its similarities and differences from

traditional risk management

1 McIntyre J. and Shannon Hemmelgarn ( 2011), “How one business made its supply chain more resilient,” Presentation for the 2011 Supply Chain Innovation Award, Annual Global Conference of the Council of Supply Chain Management Professionals (CSCMP), October 4, 2011, Philadelphia, PA.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

- appreciate the complexity and inter-‐relation of managerial capabilities in

establishing and maintaining a resilient supply chain

- apply the results of a resilience assessment to recommend managerial

improvements, both toward increasing capabilities and to potentially lower other

capabilities

- understand the process of resilience management

CURRENT OPERATIONS OF i-‐AM, INC.

Jim MacDonald is the founder and CEO of the tech start-‐up i-‐AM, Inc. His vision for a new

breed of tablets will directly compete against the evolving multi-‐function e-‐readers, booming

notebooks, and smartphones. Jim’s business model is to find a niche market in which to grow his

sales and continue innovation while leveraging supply chain relationships with major

manufacturers in Asia and retail outlets in North America. Selling at only $199, the first generation

i-‐AM Tablet integrated a very long-‐life battery with an easy-‐to-‐read 8” screen, along with Wi-‐Fi

enabled web browsing and open-‐sourced apps. Since the i-‐AM Tablet was introduced 2 years ago,

sales have grown from an introductory quarter of $128,000 to over $80M last quarter. Mr.

MacDonald projects that with a new partnership with a major cell phone carrier and the inclusion

of 4G communications into the i-‐AM Tablet, sales will greatly increase as customers replace

multiple gadgets with a single multi-‐purpose i-‐AM Tablet device.

However, the road toward success has not been smooth. The i-‐AM has faced multiple, but

minor, supplier disruptions throughout the past two years. Although none have greatly impacted

customer orders, Jim’s plans to expand to “the big leagues” has him worried about being able to

continually maintain customer expectations for product quality and delivery schedules. Meeting

demand without the burden of large inventories in this fast-‐paced, high-‐technology market will be

critical to the financial success of i-‐AM, Inc.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

THE APPROACH FOR SUCCESS

Although the traditional concepts of risk management are firmly embedded in his

engineering, production, and logistics decision processes, Jim wants to be more proactive in

managing his company’s changing environment. Therefore, MacDonald is applying the concept of

Supply Chain Resilience to his operations in hopes of maintaining financial success through these

turbulent times.

Current Strengths – Risk management versus Resilience

Since the 1970s, risk analysis techniques have played a major role in corporate decision

making, especially when combined with financial models2. In practice, risk management entails

examining all possible outcomes of a project or process, then weighing the potential returns

against the potential risks of the investment3. Currently, the leading approach to Enterprise Risk

Management comes from the Committee of Sponsoring Organizations of the Treadway

Commission (COSO 2004)4. A typical view of the traditional risk management process is shown in

Figure 1, depicting a continuous cycle of identification of hazards, assessment of risks, analysis of

controls, choosing controls, implementing controls, and review. In many applications, risks can be

quantified based on historical data, but evaluating risks typically requires assumptions based on

subjective information rather than hard facts.

2 Hertz, David B. and Howard Thomas (1983), “Risk analysis: Important new tool for business planning,” Journal of Business Strategy, Vol. 3, No. 3, pp. 23-‐29. 3 Zsidisin, George A., Lisa M. Ellram, Joseph R. Carter and Joseph L. Cavinato (2004), “An analysis of supply risk assessment techniques,” International Journal of Physical Distribution & Logistics Management, Vol. 34, No. 5, pp. 397-‐413. 4 Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2004), Enterprise risk management: Integrated framework, www.coso.org/Publications/ERM/COSO_ERM_ExecutiveSummary.pdf.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Figure 1: Operational Risk Management Process5

In assessing the risks at i-‐AM, Inc. (Step 2 in Figure 1), Jim has seen great benefits from

sorting each identified risk into 3 distinct categories: 1) Preventable risks, 2) Strategy risks, and 3)

External risks. First, preventable risks arise from within the company and are typically identified by

listing past occurrences and evaluations by expert insights. These risks should be closely

monitored and controlled using strict rules and standard compliance tools. However, strategy risks

and external risks require “distinct processes that encourage managers to openly discuss risks and

find cost-‐effective ways to reduce the likelihood of risk events or mitigate their consequences.”6

During Jim’s recent brainstorming session with his senior managers and front-‐line employees, the

group sorted 32 identified risks into these three categories, which turned out to be very helpful in

completing the risk process steps with a different “risk lens” for each category. It was the final

category, “External Risks,” that really worried Jim MacDonald and got him focusing on his supply

chain.

5 Manuele, Fred A. (2005), “Risk assessment & hierarchies of control,” Professional Safety, Vol. 50, No. 5, pp. 33-‐39. 6 Kaplan, Robert S., and Anette Mikes (2012), “Managing Risks: A New Framework,” Harvard Business Review (June 2012), Vol. 90 No. 6, pp. 48-‐60.

Step 1: Identify Hazards

Step 2: Assess Risks

Step 3: Analyze Controls

Step 4: Determine Controls

Step 5: Implement Controls

Step 6: Supervise and Review

Step 1: Identify Hazards

Step 2: Assess Risks

Step 3: Analyze Controls

Step 4: Determine Controls

Step 5: Implement Controls

Step 6: Supervise and Review

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Figure 2: Risk Categories

Recent research has expanded the internal risk analysis to supply chain opportunities by

integrating risk management techniques into a comprehensive supply chain risk management

program: management of supply, products, demand, and information.7 Mr. MacDonald has been

very impressed with his staff’s implementation of risk management over the past two years. One

example of what has helped him “sleep better at night” was the purchase of an electrical generator

to avoid potentially disastrous effects of an extended power outage. His design manager, Jeanie

Johnston, had come to him last year with data from the local electric company on historical

occurrences of power outages and their durations over the past 10 years, the probably of an

outage lasting more than 24 hours was 0.5% (see example in Figure 3). She had then explained that

the loss of data and process set-‐backs that would occur with an outage lasting more than 24 hours

could reach $1.5M! Jim quickly agreed to invest $35,000 for their new generator.

7 Tang, Christopher S. (2006), “Perspectives in supply chain risk management,” International Journal of Production Economics, Vol. 103, No. 2, pp. 451-‐488.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Figure 3: Example of Historical Electrical Disruption Data

A critical step in the risk management process is the risk assessment (Step 2 in Figure 1),

based on the assessed probability of an event and the estimated severity if the event occurs.

However, the greatest weakness of risk management is its inability to adequately characterize low-‐

probability, high-‐consequence (LP/HC) events, the upper-‐left corner of Figure 4.8 Additionally, the

traditional risk assessment approach cannot deal with unforeseeable events. With the upcoming

changes that Mr. MacDonald will be bringing to his company, he believes that the concept of

supply chain resilience can fill these gaps and supplement existing risk management programs, thus

enabling a supply chain to survive unforeseen disruptions and create a competitive advantage.

8 Camerer, Colin F. and Howard Kunreuther (1989), “Decision processes for low probability events: Policy implications,” Journal of Policy Analysis & Management, Vol. 8, No. 4, pp. 565-‐592.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Figure 4: Traditional Risk Assessment9

Future Initiative for i-‐AM, Inc. – Resilience

Resilience is defined as the capacity to survive, adapt, and grow in the face of turbulent

change.”10 The first wide-‐spread study on supply chain resilience began in the United Kingdom,

following transportation disruptions from fuel protests in 2000 and the outbreak of Foot and

Mouth Disease in early 2001. The study explored the UK’s industrial knowledge base about supply

chain vulnerabilities and found that: 1) supply chain vulnerability is an important business issue, 2)

little research exists into supply chain vulnerability, 3) awareness of the subject is poor, and 4) a

methodology is needed for managing supply chain vulnerability.11

Based on this empirical research, Christopher and Peck12 developed an initial framework for

a resilient supply chain. They asserted that supply chain resilience can be created through four key

principles: 1) resilience can be built into a system in advance of a disruption (i.e., re-‐

9 Manuele, Fred A. (2005), “Risk assessment & hierarchies of control,” Professional Safety, Vol. 50, No. 5, pp. 33-‐39. 10 Fiksel, Joseph (2006), “Sustainability and resilience: Toward a systems approach,” Sustainability: Science, Practice & Policy, Vol. 2, No. 2, pp. 1-‐8. 11 Cranfield University (2003), Creating resilient supply chain: A practical guide, Centre for Logistics and Supply Chain Management, Cranfield University. 12 Christopher, Martin and Helen Peck (2004), “Building the resilient supply chain,” International Journal of Logistics Management, Vol. 15, No. 2, pp. 1-‐13.

Low probability &

High consequence

Probability of Occurrence

Low vulnerability

to risks

High vulnerability

to risks Moderate

vulnerability to risks

Severity of Consequence

Low probability &

High consequence

Probability of Occurrence

Low vulnerability

to risks

High vulnerability

to risks Moderate

vulnerability to risks

Severity of Consequence

Low probability &

High consequence

Probability of Occurrence

Low vulnerability

to risks

High vulnerability

to risks Moderate

vulnerability to risks

Severity of Consequence

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

engineering), 2) a high level of collaboration is required to identify and manage risks, 3) agility is

essential to react quickly to unforeseen events, and 4) the culture of risk management is a necessity.

Characteristics such as agility, availability, efficiency, flexibility, redundancy, velocity, and visibility

were identified.

In parallel to the Cranfield studies, researchers at the Massachusetts Institute of Technology

(MIT) analyzed many case studies of supply chain disruptions with a focus on identifying

vulnerability characteristics and management responses such as flexibility, redundancy, security,

and collaboration.13 It is critical to note that disruptions can also bring unexpected opportunities for

success, as shown by three examples. First, the Los Angles Metrolink transit system increased its

ridership by 20-‐fold immediately following the January 1994 Northridge earthquake. Second, FedEx

seized the opportunity in the aftermath of a strike at UPS in 1997 by filling unmet demand. Third,

Dell took advantage of the West Coast port lockout in 2002 to spur demand for LCD monitors that

they could ship economically via air freight, displacing the bulkier CRT monitors. Such disruptions

“can offer an opportunity to impress customers and win their loyalty,”14 and successful recovery

and adaptation to new market forces can lead to competitive advantage.15

Current methodologies now exist to measure the current state of i-‐AM’s supply chain

resilience, as well as provide Jim MacDonald with recommendations for improvements.16 Expanding

on the concept of supply chain vulnerabilities—“Fundamental factors that make an enterprise

susceptible to disruptions”—vulnerabilities should be managed through i-‐AM’s capabilities, those

“Attributes that enable an enterprise to anticipate and overcome disruptions.” These two

components can be measured to compute the current state of resilience. New research suggests

that by creating a state of Balanced Resilience—not overly or under investing in capabilities based

13 Sheffi, Yossi (2005), The resilient enterprise: Overcoming vulnerability for competitive advantage, Cambridge, MA: MIT Press. 14 Knemeyer, A. Michael, Thomas M. Corsi and Paul R. Murphy (2003), “Logistics outsourcing relationships: Customer perspectives,” Journal of Business Logistics, Vol. 24, No. 1, pp. 77-‐109. 15 Rice Jr., James B. and Federico Caniato (2003), “Building a secure and resilient supply network,” Supply Chain Management Review, Vol. 7, No. 5, pp. 22-‐30. 16 Pettit, Timothy J, Joseph Fiksel and Keely L. Croxton (2010), “Ensuring Supply Chain Resilience: Development of a Conceptual Framework,” Journal of Business Logistics, Vol. 31, No. 1, pp. 1-‐21; and Pettit, Croxton and Fiksel (2013), “Ensuring Supply Chain Resilience: Development and Implementation of an Assessment Tool,” in press.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

on the inherent vulnerabilities—will give a supply chain a competitive advantage (see Figure 5).

Over investment in capabilities will erode profits over time (yellow zone), while not investing in

sufficient capabilities will expose the company to excessive risks (red zone).

Figure 5: Resilience Fitness Space

Therefore, Jim turned to the Supply Chain Management Assessment and Management

(SCRAM) tool and called his management team in for a hard look at their current state of

resilience. After discussing each of the factors, each manager and technician from every division of

i-‐AM, Inc., spent 30 minutes answering an online survey with some very difficult questions about

their supply chain’s vulnerabilities and capabilities. Examples of the questions are:

Vulnerabilities: – Our business is threatened by frequent competitive innovations.

– Our products face strong price competition.

– We outsource a significant portion of our operations.

Capabilities: – Our supply contracts can be easily modified to change specifications, quantities, and terms.

– We are able to delay final production in order to be more responsive to demand.

– We have detailed business continuity plans that cover probable situations.

A full listing of the resilience factors is on the following page, where each factor is clearly

defined.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

SCRAM© 2.0: Variables and Definitions

Resilience: “Resilience is the capacity to survive, adapt, and grow in the face of turbulent change”

Vulnerabilities

“Fundamental factors that make an

enterprise susceptible to disruptions”

Capabilities

“Attributes that enable an enterprise to

anticipate and overcome disruptions”

V1 Turbulence Environment characterized by frequent changes in external factors beyond your control

V2 Deliberate threats

Intentional attacks aimed at disrupting operations or causing human or financial harm

V3 External pressures

Influences, not specifically targeting the firm, that create business constraints or barriers

V4 Resource limits

Constraints on output based on availability of the factors of production

V5 Sensitivity Importance of carefully controlled conditions for product and process integrity

V6 Connectivit y

Degree of interdependence and reliance on outside entities

C1 Flexibility in Sourcing

Ability to quickly change inputs or the mode of receiving inputs

C2 Flexibility in Manufacturing

Ability to quickly change the quantity or type of outputs.

C3 Flexibility in Order Fulfillment

Ability to satisfy customer demands using alternate methods or quickly change the mode of delivery

C4 Capacity Availability of assets to enable sustained production levels

C5 Efficiency Capability to produce outputs with minimum resource requirements

C6 Visibility Knowledge of the status of operating assets and the environment

C7 Adaptability and Innovation

Ability to modify operations and products in response to challenges or opportunities

C8 Anticipation Ability to discern potential future events or situations

C9 Recovery Ability to return to normal operational state rapidly

C10 Dispersion Broad distribution or decentralization of assets

C11 Collaboration Ability to work effectively with other entities for mutual benefit

C12 Organization Human resource structures, policies, skills, and culture

C13 Market position

Status of a company or its products in specific markets

C14 Security Defense against deliberate intrusion or attack

C15 Financial strength

Capacity to absorb fluctuations in cash flow

C16 Product stewardship

Assurance of sustainable business practices throughout the product life cycle

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Once everyone completed the online assessment, Jim called the staff back together at a

full-‐day, off-‐site session to review the results and recommendations. There were several eye-‐

opening moments as the various functional experts discussed their views and potential

recommendations. Computed scores discussed at this meeting are shown below in Tables 1 and 2.

(Note: values are the average of the respondents’ scores which ranged from 1 = strongly disagree

to 5 = strongly agree, so 5 is a very high threat or a very strong capability.)

Table 1: Vulnerability Scores

V1 V2 V3 V4 V5 V6 Turbulence Deliberate Threats External Pressures Resource Limits Sensitivity Connectivity

3.3 3.8 3.3 4.0 4.5 3.5

Table 2: Capability Scores

C1 C2 C3 C4 C5 C6 C7 C8

Flexibility in Sourcing

Flexibility in Manufacturing

Flexibility in Order

Fulfillment Capacity Efficiency Visibility

Adaptability and

Innovation Anticipation 3.2 2.1 3.0 2.9 3.4 3.3 3.6 3.7

C9 C10 C11 C12 C13 C14 C15 C16

Recovery Dispersion Collaboration Organization Market Position Security

Financial Strength

Product stewardship

3.2 3.5 3.5 2.8 3.0 3.0 3.2 4.0

After the team discussed i-‐AM’s vulnerabilities, strong capabilities, and weak capabilities,

Jim then presented the analysis of the firm’s Resilience Gaps. These gaps are the intersection of

related vulnerabilities and capabilities that current research has shown to be critical to resilience.17

Of course, other linkages may exist in certain circumstances; however, these are a starting point for

i-‐AM, Inc. Using the same color coding from Figure 5 (GREEN = Balanced resilience, YELLOW =

Eroding profits, and RED = Excessive Risk), Jim was able to quickly focus his team on his concerns

17 Pettit, Croxton and Fiksel (2013), “Ensuring Supply Chain Resilience: Development and Implementation of an Assessment Tool,” Journal of Business Logistics, in press

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

for the company. First, Jim led a discussion on general themes that were seen on the Resilience

Gaps table. Next, he got everyone’s feedback on the three areas that were causing excessive risks

for the firm. Finally, although many of Jim’s managers were pleased with their strong capabilities,

Jim stressed the importance of Balanced Resilience and the team assigned itself several action

items to look at specific areas where i-‐AM, Inc., was potentially eroding profits.

Table 3: Resilience Gaps

Turbulence Deliberate Threats

External Pressures

Resource Limits Sensitivity Connectivity

V1 V2 V3 V4 V5 V6

Flexibility in Sourcing C1 -‐1.7% 5.3% -‐4.6%

Flexibility in Manufacturing C2 -‐5.7% 1.2% -‐10.0%

Flexibility in Order Fulfillment C3 1.1% 8.0% -‐1.9%

Capacity C4 0.5% 7.4%

Efficiency C5 10.6% -‐0.7%

Visibility C6 4.3% 1.3%

Adaptability and Innovation C7 -‐0.4% 6.1% -‐5.2% 6.6% -‐4.7% -‐3.3% Anticipation C8 0.5% 7.0% -‐4.4% 7.4% -‐2.5%

Recovery C9 7.6% 14.1% 2.8%

Dispersion C10 5.0% 11.9% 0.7%

Collaboration C11 1.6% -‐1.4%

Organization C12 0.1% Market Position C13 10.0% 0.1%

Security C14 14.5%

Financial Strength C15 9.5% -‐0.4%

Product Stewardship C16 14.9% 3.7% 5.1%

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

PUTTING RESILIENCE INTO ACTION

Jim MacDonald closed his off-‐site meeting with a review of the previously identified list of

32 major risks, and the new focus on the three, RED Resilience Gaps. He stressed his secondary

goal of looking into four critical areas where reducing capabilities may actually reduce costs

without impacting the operations. The team returned to the office the next day with a new

understanding of risk management which included the concept of resilience. They also began

embracing Jim MacDonald’s vision of proactively managing their resilience. Jim also looked

forward to extending this concept to i-‐AM, Inc.’s key suppliers and customers to complete his

vision of eventually achieving and maintaining a balanced resilience throughout his supply chain.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

PART A

Questions

1. Evaluate the expected value of the threat from an electric outage. Was Jim’s

investment in a stand-‐by generator a good business decision? Rationalize your

answer.

2. Consider potential risks facing i-‐AM, Inc., that fit into each of the three categories:

Preventable risks, Strategy risks, and External risks.

o Identify a very low-‐probability but very high-‐consequence event that could

impact a manufacturing supply chain like the one that i-‐AM, Inc., is part of.

3. Who did Jim MacDonald call into the SCRAM session? (List by functional expertise

and managerial level)

4. What were the “Top 3” vulnerabilities for i-‐AM, Inc.? Describe an example of a

potential cause for each.

5. What were the “Top 3” capability strengths for i-‐AM, Inc.? “Top 3” weaknesses?

Describe an example of each strength and weakness.

6. Based on the resilience gaps computed by the SCRAM tool, are there any patterns

that i-‐AM, Inc., can use to their advantage?

7. For each of i-‐AM, Inc.’s three RED resilience gaps, briefly discuss a recommendation

to increase an associated capability or capabilities as related to that vulnerability.

Be specific so Jim can take immediate action.

The Final Step

Create a “Resilience Action Plan” for i-‐AM, Inc., based on your analysis above. Be sure to

provide specific details to implement your recommendations, and for each, suggest timelines and

responsible individuals. Clearly justify actions that were included or excluded from the plan.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

PART B

Supply Chain Analysis and Modeling

Although not quite reaching the threshold of RED in the Resilience Gaps shown in Table 3,

the capability of Flexibility in Supply was rated low as compared to Connectivity, at -‐4.6%, and

therefore was marked by the i-‐AM team for further action. The current supply chain plan for

manufacturing the i-‐AM Tablet is presented in Figure B1. When reviewing the details of this

resilience gap, the team realized that their expansion plans could be hampered by the capacity

and reliability of Precision Optics Co., a first-‐tier supplier for all of i-‐AM’s screens—and currently

the critical, sole source for the Tablet’s screen. Jim has looked into the possibility of using a

current non-‐member supplier (Top Quality Screens of California) to provide both a back-‐up supply

of screens as well as to fill the capacity gap as their sales grow in 2013 and beyond. See data

presented in Tables B1-‐B4 on the following pages.

Analysis

1. Compute the recommended safety stock and re-‐order point for a continuous review inventory

system, using actual data from December 2012, given i-‐AM, Inc.’s goal of a 95% service level.

2. Determine which supplier or suppliers should be used for 2013 and beyond. Consider both

financial and resilience aspects of this recommendation.

Modeling

1. Considering the significant amount of variability in demand and supply, Jim MacDonald is

interested in a stochastic model of his supply chain relative to the high-‐risk screen

manufacturing capacity. This model could be used to provide a sensitivity analysis for the key

variables computed earlier, plus it can provide a what-‐if analysis tool for future resilience

concerns. For example, safety stock levels are computed based on historical reliability of

suppliers (variability in lead time), but if the historical data does NOT include one of the

damaging “low-‐probability, high consequence” events, then the computations will not

provide sufficient safety margins.

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

2. Once you have developed and validated a simulation model using the December 2012 data,

extend this model for 2013 demand—don’t forget the supplier recommendation that you

made earlier.

3. After the 2013 model is verified and operating properly, provide Jim MacDonald with the

ability to infuse a major disruption into his screen supplier-‐base. The model must be able

to provide data to Mr. MacDonald as to how important any excess capacity of redundant

suppliers will be to i-‐AM, Inc. In addition, such a model must be able to quantify the

benefits of the disrupted supplier quickly recovering their manufacturing capacity

following a disruption—be it a natural disaster, fire, labor strike, supplier breakdowns, etc.

Such information is critical to making investments in resilience and justifying necessary

capabilities to maintain balanced resilience and therefore long-‐term sustainability.

Figure B1 – Supply Chain Map

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Table B1 – Demand Data for December 2013

Historical sales Units per day

December 1, 2012 593 December 17, 2012 683

December 2, 2012 548 December 18, 2012 629

December 3, 2012 669 December 19, 2012 782

December 4, 2012 649 December 20, 2012 664

December 5, 2012 668 December 21, 2012 782

December 6, 2012 667 December 22, 2012 689

December 7, 2012 642 December 23, 2012 867

December 8, 2012 636 December 24, 2012 758

December 9, 2012 701 December 25, 2012 721

December 10, 2012 624 December 26, 2012 883

December 11, 2012 644 December 27, 2012 853

December 12, 2012 587 December 28, 2012 867

December 13, 2012 733 December 29, 2012 926

December 14, 2012 589 December 30, 2012 808

December 15, 2012 658 December 31, 2012 893

December 16, 2012 684

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Table B2 – Projected Demand for 2013

Forecasted Demand for i-‐AM Tablet Units Daily demand (30 day month) January 2013 22,379 746

February 2013 24,236 808 March 2013 26,004 867 April 2013 27,639 921 May 2013 29,115 971 June 2013 31,038 1,035 July 2013 32,348 1,078

August 2013 33,798 1,127 September 2013 35,574 1,186

October 2013 36,917 1,231 November 2013 38,014 1,267 December 2013 39,286 1,310

Table B3 – Cost and Capacity Study for i-‐AM Tablet Screen Expansion

Precision Optics Co. Current Operations Projected Operations

(and future ops without expansion)

Cost per unit $12.87 per unit $13.54 per unit

Maximum Capacity 1,000 units per day 1,600 units per day

Expansion Costs $600,000 Top-‐Quality Screens of California Current Operations Projected Operations Start-‐Up costs $890,000 Certification cost $100,000

Estimated lead-‐time to reach Full production 6 months

Cost per unit N/A $11.79 per unit Maximum Capacity None 800 units per day

Supply Chain Resilience: Balancing the SC for Long-‐term Sustainability

Table B4 – Shipment Reliability, 4th Quarter 2012

Scheduled Delivery Date Actual Delivery Date Amount of Order

Delivered Friday, October 05, 2012 Friday, October 05, 2012 100% Friday, October 12, 2012 Friday, October 12, 2012 100% Friday, October 19, 2012 Saturday, October 20, 2012 95% Friday, October 26, 2012 Thursday, October 25, 2012 105%

Friday, November 02, 2012 Friday, November 02, 2012 100% Friday, November 09, 2012 Friday, November 09, 2012 97% Friday, November 16, 2012 Friday, November 16, 2012 103% Friday, November 23, 2012 Friday, November 23, 2012 95% Friday, November 30, 2012 Saturday, December 01, 2012 105% Friday, December 07, 2012 Friday, December 07, 2012 100% Friday, December 14, 2012 Friday, December 14, 2012 98% Friday, December 21, 2012 Saturday, December 22, 2012 102% Friday, December 28, 2012 Friday, December 28, 2012 100%