Weatherhead School of Management, Case Western Reserve University

OPMT / MKMR 476

Supply Management in the Supply Chain
Spring 2006
Classes: PBLB 501, Mondays, 6:00 – 8:00 pm.

Instructor: Professor Yunzeng Wang

Telephone: (216) 368-3811 E-mail: yxw36@case.edu Office: PBLB 324
Office Hours: Wednesdays, 3:15-4:30 PM, or by appointment
Teaching Assistants: Prahalad Venkateshan, tel: 368-5374 e-mail: pxv28@case.edu
Secretary: Elaine Iannicelli, tel: 368-4141 e-amil:eri@case.edu

Course Description and Objectives

The function of supply chain management is to design and manage the processes, assets, and flows of
material and information required to satisfy customers’ demands. Supply logistics related costs account
for 20-25% of a typical firm’s total cost. On the revenue side the supply chain decisions have a direct
impact on the market penetration and customer service. Globalization of economy and electronic
commerce has heightened the strategic importance of supply chain management and created new
opportunities for using supply chain strategy and planning as a competitive tool. Electronic commerce has
not only created new distribution channels for consumers but also revolutionized the industrial
marketplace by facilitating inter-firm communication and by creating efficient markets through trading
communities. Moreover combination of enterprise information infrastructure and the Internet has paved
the way for a variety of supply chain optimization technologies. In line with these developments, this
course focuses on management and improvement of supply chain processes. The primary objectives of
the course are:
1. To develop an understanding of key drivers of supply chain performance and their inter-relationships
with strategy and other functions of the company such as marketing, manufacturing and accounting.
2. To impart analytical and problem solving skills necessary to develop solutions for a variety of supply
chain management and design problems and develop an understanding of the use of information
technology in supply chain optimization.
3. To understand the complexity of inter-firm and intra-firm coordination in implementing programs
such as e-collaboration, quick response, jointly managed inventories and strategic alliances.
4. To develop the ability to design logistics systems and formulate integrated supply chain strategy, so
that all components are not only internally synchronized but also tuned to fit corporate strategy,
competitive realities and market needs.

Required Course Materials

1. C&M: Supply Chain Management – Strategy, Planning, and Operation, 2nd edition by Sunil
Chopra and Peter Meindl, Prentice Hall, Upper Saddle River, New Jersey.
ISBN 0-13-101028-X
2. C-P: A Course Pack containing cases and reading materials.

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Course Schedule and Assignments
(I reserve the right to make necessary adjustments during the semester.)

Session Date Contents and Readings Submission

A Strategic Framework for Supply Chain Design, Planning and Operation
1 Jan. 23 • Course Syllabus
• C&M: Chapters 1 – 3.
Facility Decision: Designing the Supply Chain Network
2 Jan. 30 • C&M: Chapters 4 - 5
3 Feb. 6 • C&M: Chapter 5 (continued)
Planning Demand and Supply in the Supply Chain
4 Feb. 13 • C&M: Chapter 8 Case report #1: Applichem(A)
• C-P Case: Applichem(A)
5 Feb. 20 • C&M: Chapter 8 (continued)
• C&M: Chapter 9
Managing Inventory and Uncertainty in the Supply Chain
6 Feb. 27 • C&M: Chapter 10 Case report #2: Mintendo Game
• C&M: Chapter 9 Case - Mintendo Game Girl Girl
•
7 Mar. 6 • C&M: Chapter 10 Case - Delivery Strategy at Case report #3: Delivery Strategy
MoonChem at MoonChem
• Take-home Mid-Term Exam: Problems to be
distributed
8 Mar. 20 • C&M: Chapter 11
• C-P: Teaching Note: Postponement
9 Mar. 27 • C&M: Chapter 11 -12
• C-P: Vendor Managed Inventories
•
10 Apr. 3 • C&M: Chapter 12 Case report #4: Managing
• C&M: Chapter 11 Case - Managing Inventories at Inventories at AlKO Inc.
AlKO Inc.
Sourcing/Purchasing Decisions and Revenue Management in the Supply Chain
11 Apr. 10 • C&M: Chapter 12 - 13
• C-P: Third Party Logistics: Current Issues and
World Wide Web Resources

12 Apr. 17 • C-P: Case - Sport Obermeyer Case report #5: Sport Obermeyer
• C&M: Chapter 15
• Course Review
• Review for Final Exam
13 Apr. 24 In-Class Final Exam Final Exam

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Course Requirements and Grading
The course involves a combination of lectures and class discussions of cases and readings. Lectures will
mostly follow the textbook. However, some new materials or technical details will be added in class,
while some other materials from the textbook may not be discussed in class. You are expected to read
thoroughly, before each class, the chapters and other readings assigned to the class, in order to be ready to
discuss and ask questions about the materials during the class. You should also review again the materials
after each lecture to reinforce the concepts discussed and to practice the technical details.

Your final grade for the course will be determined based on the following five components:
Class Participation (10%)
Group Case Reports (35%)
Peer Evaluation (5%)
Individual Mid-Term Exam (20%)
Individual Final Exam (30%)

1. Class Participation (10%)

Your grade will depend on your preparation of the assignments and the quality of your contributions.
Quality contributions are determined by the relevance, originality, insights and soundness of your
comments, questions and answers during a class. There will be enough opportunities for you to
participate. To increase opportunities of effective participation, I will occasionally cold call students.
Please keep the same seat and leave your name-tag up during the entire semester.
You are expected to attend all classes during the semester. I understand that there are situations, like
job interviews, that will prevent you from coming to a class. Since we have only 12 class meetings,
however, skipping more than two classes during the semester will surely affect adversely your
performance in this course.
Your in-class behavior is a factor that can affect your grade. Generally, you are expected to
contribute to the creation of a positive learning environment. On the other hand, disruptive behaviors of
any sorts are strongly discouraged.

2. Group Case Analysis Reports (35%)

There will be five (5) case analysis reports due during the semester. Groups of no more than 4 students
may work together and hand-in joint reports on these assignments. Due to the amount of work involved,
the two reports on the first case (i.e., Applichem (A) ) and last case (i.e., Sport Obermeyer) will each
weigh twice of each of the rest three cases.
The reports are graded for both content and presentation. A good paper should clearly and
succinctly state the recommendations in the first paragraph to provide the reader with a framework. (If a
lengthy description of the recommendation seems necessary, append it to the report.) The remaining
paragraphs should each present a major part of the rationale for the recommendation in terms of the
desirable and undesirable consequences of adopting it. The rationale must consider capabilities that the
logistics system under study needs to excel at, and how the current system either provides these
capabilities or fails to provide them. Reports should be typed with 1.5 line-spacing and should not exceed
3 pages, not including appendices and exhibits. Exhibits appended to the reports need not be typed, but
should be neat and easy to understand. As per the honor code, an individual should include his/her name
on a report only if they have contributed to the analysis.
Some common problems in preparing reports:

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• Presentation related: A good report is NOT a chronology of analysis (i.e., answering the
questions listed in sequence), but a clearly articulated statement of recommendation and
support. If there are options under consideration in the case that are rejected by you, a clear rationale
for your decision should be provided. Facts stated in the case need not be restated unless used to make
a point. I will assume that the most important issues are raised in the report and that all else is less
important to the writer. Both desirable and undesirable consequences should be factually stated and
supported. In the overall evaluation of a report the discussion of all consequences of the
recommendation is of the greatest importance. You must clearly discuss how your recommendations
aid in the development of capabilities that are important for the logistics system under study. Finally,
you should clearly explain the logic of any analysis.
• Analysis related: Other reports suffer from inadequate analysis. Analysis for a report is a time
consuming and intellectually challenging task. Each case has a set of questions which are essentially a
guide to help you with the analysis. However, you should not limit your analysis to narrowly finding
answers to these questions, nor your report should be a list of answers to these questions. The
objective is to evaluate a complete range of alternatives and anticipate and discuss the full
consequences of your recommendation.

> See some further Tips For Case Write Up listed in the Appendix of this Syllabus.
> See the Specific Questions and Instructions for Each of the Five Case Analyses listed the
Appendix of this syllabus.

3. Peer Evaluation (5%)

The purpose of this is to ensure that all team members contribute and, hence, learn. At the end of the
semester, by 5:00 pm on Monday, April 18, each one of you should send the TA through e-mail an
evaluation for each of your team members (except yourself) in the following tabulated format:

Name of your Team Member Number of Cases worked with me Overall Evaluation on Scale 1 – 5:
1 = worst, 5 = best

4. Mid-Term Exam (20%) and Final Exam (30%)

There will be a take-home mid-term exam and an in-class final exam; see the course schedule for specific
dates. Both exams are individual work. For you to practice and prepare for the exams, there will be series
of optional home-work problems assigned throughout the semester. See some of the Optional Home-
work Questions listed in the Appendix of this syllabus.

Course Polices (These policies are meant to be enforced.)

1. All case reports and the mid-term exam should be handed in before the start of the class on their respective due
dates. Late submissions will result in a reduction in your grades at the instructor’s discretion.
2. Submit your homework in hard copies and bind/staple them properly whenever you have multiple pages.
Electronic submissions are NOT accepted, unless a special permission has been issued from the instructor.
3. DO NOT use your laptop computer during classes unless you are told to do so.
4. All students are expected to adhere to CWRU’s Honor Code. Each student is individually responsible for
proper conduct in matters of coursework and assignments. Undue cooperation on individual assignments is not
appropriate. Student behavior deemed to be discreditable as determined by the instructor and the TAs may
result in a reduction of grade for the assignments involved or for the course as a whole.

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Appendix
Appendix A. Specific Questions and Instructions for Each of the Five Case Analyses:

• For Case #1 – Applichem (A): Use the following questions when preparing your case report:

[1] Compare the performance of Applichem's six Release-ease plants. Please be specific about the
measures of plant productivity selected by you and why they are important.

[2] Why are some plants "better" performers than others? List the factors that you feel affect
performance. How should plant performance be compared?

[3] You are provided a workbook APPLICHE.XLS to help you evaluate production and distribution
decisions. All costs are in 1000’s of US$. Data contained is from Exhibits 2, 4, 5 of the case and is
as follows:
Variable cost per 100,000 lb.: Calculated from Exhibit 2 using raw materials, direct labor, waste
treatment and supplies as the components. The costs are given in 1000’s of $ per 100,000 lb.
Fixed cost: Remaining costs (not including ‘package, load & ship’) are treated as fixed costs and
the fixed cost per plant is obtained by multiplying the remaining costs by the volume produced in
1982. The costs are in 1000’s of $.
Transportation costs: Obtained from Exhibit 5. The costs are given in 1000’s of $ per 100,000 lb.
Import duties: Obtained from exhibit 5. The worksheet assumes that duties are charged based on
the production cost (i.e., the ‘Total Cost’ from Exhibit 2) in the source country. Thus the duties for
entry into Mexico would differ if the source plant is Frankfurt or Gary.

Demand: The demands assumed by region are

Mexico 3.0 million pounds
Canada 2.6 million pounds
Latin America 16.0 million pounds
Europe 20.0 million pounds
Asia Pacific 11.9 million pounds
U.S.A 26.4 million pounds

Exchange rates: Obtained from Exhibit 6.

Price Indices: Obtained from Exhibit 6.

All input data is contained in the worksheet APPLICHE. All cost calculations are based on the costs
given in 1982 US$. The basic assumption is that the technology at the plants has not changed
significantly in the specified six years. To evaluate variable and fixed costs for a given year (between
1977 and 1982) simply click on the button Calculate Costs in the worksheet APPLICHE. A dialog
box will appear asking you for the year for which cost calculations are to be made. Enter the year
(say 1981) and click OK. All calculations are done automatically and the costs in 1981 US$ are
obtained. The variable and fixed costs are calculated and appear on sheet1 along with the demand by
region. These can then be used as input to any optimization model. The adjustments to cost are as
follows:

EXCHANGRT 1982 PRICEINDEX 19XX

COST 198219XX = COST 1982 * ( )* ( )
EXCHANGRT 19XX PRICEINDEX 1982

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 For example the raw material cost in Mexico in 1982 was $75.05 per hundred pounds of release ease.
This translates to 75.05*96.5 Pesos in 1982 which is equivalent to 75.05*96.5*(124.4/194.2) 1981
Pesos. This is equivalent to 75.05*(96.5/26.2)*(124.4/194.2) = 177.07 1981 US$. For this calculation
to be truly valid we are making the assumption that all raw materials are procured locally for
production.

How do you think Joe Spadaro should structure his worldwide manufacturing system. Assume that
the past is a reasonable indicator of the future in terms of exchange rates and inflation. You must
provide a detailed justification for your answer.

[4] What impact do you think the abolition of all duties will have on your recommendations?

• For Case #2 - Mintendo Game Girl: See the questions at the end of the case. Together with your
hardcopy report and attachments of your analyses, make sure to attach a description of your
mathematical model formulation of the problem; and e-mail the TA your Excel implementation of
your model.

• For Case #3 - Delivery Strategy at MoonChem: See the questions at the end of the case. Please
attach your related calculations.

• For Case #4 - Managing Inventories at AlKO Inc: See the questions at the end of the case. Please
attach your related calculations.

• For Case #5 - Sport Obermeyer: Consider the following questions:

[1] Using the sample data in Exhibit 10, make a recommendation for how many units of each style
Wally Obermeyer should order during the initial phase of production. Assume that there is no
minimum order size requirement, and that Obermeyer’s initial production commitment must be at
least 10,000 units. Assume that all ten styles in the sample problem are made in Hong Kong and that
an initial order of 10,000 units leaves sufficient capacity for the second order.

[2] What operational changes would you recommend to Wally to improve performance? Clearly list the
expected benefits from each change. Please try and be specific in terms of the changes and benefits in
response to this question.

[3] How should Obermeyer management think (both short term and long term) about sourcing in Hong
Kong versus China. What sourcing policy would you recommend?

Appendix B. Optional Home-Work Questions:

Throughout the semester, we will assign a series of homework exercises for you to reinforce the key
concepts discussed in class and to practice the analytical skills needed for supply chain management and
analysis. These exercises are optional and will not be graded, while we will distribute detailed solutions
and discuss them together in class when needed. On the other hand, it is absolutely essential for you
to do all these problems thoroughly and carefully, in order for you to perform well enough on the
two individual exams. With minor changes, some of these homework exercises will appear on your
exams. The following are some initial homework assignments by Chapters in the textbook. (More
problems will be assigned later during the semester.)

Chapter 2: Discussion Question #6

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Chapter 3: Discussion Question #6

Chapter 5: Exercises #2 and #3 on pages 132 – 133.

Chapter 8: Discussion Questions 7, 8.

Additional Exercise: For the aggregate planning problem of Red Tomato Tools discussed on
pages 210 – 216 and the related Excel implementations on pages 219 – 221, consider each of
the following three scenarios separately: (The Excel implementation program can be
downloaded from your course Blackboard.)
a) Assume that demand depends on the product price during the season. Specifically, market
studies show that the demand function during any period t , denoted by Dt , follows
Dt = At − 100 * ( P − 40) , where P denotes the price offered during the season; and At
is the demand of period t when the product is priced at P = $40 /unit, so the specific
values of At are given in Table 8.1 on page 211. For example, for January At = 1,600 .
Your task here is to modify the Excel file to reflect such a fact, and then for each of the
following 6 different values of P run the program and fill in the results in the table
below. What price you would recommend, if you are the operations manager at Red
Tomato? A marketing manager?
P 30 35 40 45 50 55
Total cost
Total revenue
Total profit

b) Assume that the number of layoffs in a period cannot be more 5% of last period’s work
force. Modify the mathematical model formulation and the corresponding Excel
implementation to reflect this fact, and then re-run the program.
c) Assume that unsatisfied demand in a period becomes lost, instead of being backlogged
over to the next period. Modify the model and the Excel implementation, and then re-run
the program. (Hint: In addition to make necessary changes to the constraints, you need to
change the objective function from cost minimization into profit maximization. (Think
about why?).

Chapter 11: Exercises #1, #2, #3, #4 and #6 on pages 332 – 334.

Chapter 12: Exercises #1, #2, #6 and #7 on pages 373 – 375.

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Appendix C. Tips for Case Write up:

What is a good case write up? As already said in the course syllabus, it is not a chronology of questions
and answers. Think of yourself (your team) as someone who has been asked by senior management (or
your client) to investigate the situation at hand and make a recommendation. How would you structure
your recommendation? Below are some elements of a good write up.
1. Start with an executive summary. This should be a paragraph or two about half-page stating the issue
at hand and your recommendation.
2. The main body of the report should then have the following parts (not all of these might be applicable
for each case study):
a) Describe the situation (at the company, symptoms of problems, what you believe are the root
causes).
b) Present your analysis (this could be analysis of what the company is presently considering or
analysis of various options you are evaluating). A few points to consider in describing your
analysis:
• Clearly state your assumptions. What I will be looking for is how reasonable your
assumptions are and, more importantly, if your analysis consistent with your assumptions.
• You may present a short summary of your analysis in the main part of the paper and move the
details to Exhibits in the appendices. A good report exhibits a judicious choice on the
appropriate level of detail for the main body (summary tables, charts, etc.) leaving the rest to
the appendix.
• Give justification for why you choose the options you do. Most situations will have several
potential solutions. In making a choice of certain recommendations, you must have strong
reasons to make the choices you did and also rule out the others. Explain why.
• Discuss the pros and cons of the various options, as appropriate.
3. Make your recommendation(s) giving reasons & conclude.
4. Finally a few presentation issues:
a) There should be logical progression across different parts of the report.
b) Cite every exhibit (either in main part or in the appendix) in the report.
c) If your analysis requires a spreadsheet, explain (perhaps as a separate exhibit) how you calculate
the various entities of relevance. E.g., in ALKO case, it is not enough to say that you used the
safety stock formula on pp. xxx in the textbook / class notes and then give a tabular output of
your spreadsheet. Walk me through an illustrative calculation of the safety stock (this could itself
be an exhibit in the appendix).

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 OPMT / MRKR 476 : Supply Management in the Supply Chain
Spring 2006

Professor Yunzeng Wang

Course Pack Content

1. Applichem(A) (HBS case 9-685-051)

2. Teaching Note: Postponement

3. Vendor Managed Inventories

4. Third Party Logistics: Current Issues and World Wide Web Resources
5. Sport Obermeyer, Ltd. (HBS case 9-695-022)