Value Chain Design

An explanation of why the research here was performed is to understand the complex inner-workings of the Value Chain Design. The research results are an in-depth discovery of 4 topics. The first topics begins with understanding the value of the initial project of Design Thinking using qualitative and quantitative measures as a manager. The second topic imagines a solution to a state-of-the-art grill sheets challenge for a well-known firm. The third topic evaluates the role different enterprises take in participating in value chains. The fourth topic focuses on the macroenvironmental factors that impact risk for supply chain disruption during the pandemic.

1. Focused Design Thinking Project: CSFs & KPIs

Critical Success Factors (CSFs) are described as actions a business takes to achieve goals while Key Performance Indicators (KPIs) are described as metrics to show business progress. Critical success factors are the few key areas where ‘things must go right’ for the business to flourish and for the manager’s goals to be attained. Timeboxing is a project management technique that allocates a fixed and maximum unit of time to an activity, called a timebox, within which a planned activity takes place. Timeboxing typically simplifies scope and risk management in a project.

The design thinking process involves 5 stages:

· Empathize

· Define

· Ideate

· Prototype

· Test

Within these phases, CSFs and KPIs can be implemented to manage the quality of output for each phase of the design thinking project. The purpose of utilizing these tools is to implement and adjust as needed for success. First, you'll need to create a problem statement using the empathize and define stage to adjust it as needed. Here are the CSFs and KPIs for each stage of the Design Thinking Project:

Problem Statement: How can the enterprise implement the most strategic gains to create the most profitable Value Chain?

a. Empathize and Define

· CSFs

o Interview prospective or key stakeholders

i. Quality and variety of qualitative responses having to do with:

1. Operations

2. Administration

3. Production

4. Customer

· KPIs

o Interview prospective or key stakeholders

ii. Key metrics are how many people were interviewed and the quality of questions to understand the KPIs.

1. Operations

2. Administration

3. Production

4. Customer

b. Ideate

· CSFs

o Generate ideas

i. Quality and variety of ideas

· KPIs

o Generate ideas

ii. Number of ideas generated

c. Action Stage (Prototype and Test)

· CSFs

o Create Prototypes

i. Quality and variety of prototypes

ii. Quality and variety of test-runs of prototypes

· KPIs

o Create Prototypes

i. Number of prototypes

ii. Number of test-runs of prototypes

While this process is taking place, the qualities of CSFs should be considered as insightful, standalone, qualitative, and specify requirements for success. CSFs should answer what should be done to achieve success. The KPIs should address insight generation, dependency on benchmark, be quantitative, indicate what is being done, and answer the question if success is being fulfilled by project managers.

This activity would be followed by an in-depth review where more traditional CSFs and KPIs can be implemented. This project process will ensure quality under the restrictions of timeboxing. Key inclusions for management success include:

• Coordination and Collaboration

• Technology Investment

• Organizational Process

• Leadership

• Employee/Human Resources

• Organizational Culture and Attitudes

2. A McDonald’s Bid: Saint Gobain High Performance Plastics

SCOR Model:

The supply chain impact of this new opportunity’s potential changes take effect in the plan, make and deliver processes in order to efficiently execute the opportunity. These processes are part of the Supply Chain Operations Reference Model outlined by Professor Murphy as:

· Plan

· Source

· Make

· Deliver

· Return

· Enable

The recommendations for Saint Gobain are as follow:

a. SCOR Plan Recommendation:

Demand Planning can be utilized to find the forecasted demand in the future. Forecasting techniques include qualitative and quantitative methods. Qualitative methods require judgment and allow for interpretative reasoning and adjustments. Quantitative methods show definite numbers and provide exact numerical measurements. Planning accurately can allow for Saint Gobain to predict how much product to create for this bid with relative accuracy. It is important to take into account new implementations like time to adjust products to the needs of the bid and employee sourcing. Creating too much product will require storage and capacity issues. Too little product will mean stores will lose out on purchases. Organizing the delivery and make can begin with the planning phase.

b. SCOR Make Recommendation:

Currently, Saint Gobain products are only made to order. For the purpose of this bid, this will be adjusted for new avenues of growth for the company Make process. The requirement of many similarly made parts would require that a new product is created with much of the same technology already available to Saint Gobain. Initially, an engineer to order product would illustrate a prototype from the existing ‘cook safe” model for much of the design that would be needed for a meeting and test with McDonald’s executives and grill specialist professionals. Soon after, minor changes to the tower set-up and processing would allow a widescale shift to a make to order would work best at first once McDonalds wants to try out the product. Soon after that a make to stock process would require that McDonald’s restaurants would require the product eventually and could be made ahead of order.

c. SCOR Deliver Recommendation:

Since One key requirement of the McDonald’s bid would be that Saint Gobain make same day pick up by McDonald’s 3PL partners for McDonald’s orders, the delivery phase would require McDonald’s 3PL partners manage distribution to the individual restaurants. A change in delivery would require shipment from the collocated warehouse and factory. A new warehouse between the final McDonald’s destination and the original warehouse/factory would allow the 3PL partners to pick and deliver orders same day. The cost would be to find and manage a new warehouse just for McDonald’s orders. This could be organized once McDonald’s confirms the need for the enterprise bid. This could also streamline order receiving, validating, and creating customer orders, scheduling order pick-ups, picking, packing and shipping, and billing/invoicing because it would make McDonald’s orders apart from other business with a new warehouse. Servicing 40,000 restaurants would be a huge undertaking for the company and would require McDonald’s full cooperation.

2. Defining an Enterprise’s Role in its Value Chain: Four Key Decision Points

a. What are the Enterprise’s Raw Materials Problems: Apple v. McDonald’s?

One of the challenges McDonald’s faced was its key raw material for its brand: potatoes for French fries. It faced an uphill battle having to compete in an unknown territory that promised success if potato fries could be a reality. The current reality for some time was that Indian climate created unsuitable Indian potatoes for French fries. What would result is a journey into McDonald’s Sourcing and huge success with a few failures along the way. McDonald’s use partners like McCain to identify local opportunities to produce and create successful potato farming in India. Finally, after much research and development there were viable ways to get potato fries to Indian customers in India. Many of the challenges had to do with the legal, environmental, economic, cultural, and political differences in India. The laws did not allow for foreign potatoes to be sold in India and anything of the sort was expensive. The Indian climate made it almost impossible for a suitable potato for French fry cooking. The supply chain in India depended on small businesses and was a challenge to organize for McDonald’s and McCain.

For Apple a different and overlapping set of challenges was presented. Their global chain created an opportunity to create high-end phones that could be shipped country to country for different parts, assembled, and sold in many countries. Apple’s supply chain is unique and a success for many reasons. Some of the challenges they face is the laws and economics abroad that do not make the phone attractive for many customers in India and China. The Sourcing is made for Western and other countries to enjoy at reasonable costs with strong lasting partnerships. Apple creates lasting partnerships by striking deals with their raw material suppliers. They also follow the rules of fair practices for mining which is sometimes questionable. Their sourcing is monitored by environmental and international agencies. As more and more people become aware of the dangers of mining metals required to make Apple increasingly must address issues of ethics repeatedly in their practices.

b. What are the Supply Chain Problems: Whole Foods v. McDonald’s?

Whole Foods focuses on reinventing its supply chain with the help of Amazon’s acquisition. It has been able to streamline supply chains and get food to stores across the country. It also reduced the number of stores where redundant cannibalization and lack of customers created unnecessary pockets of wasteful supply efforts. With the ability of company, Amazon, that already understands the complex needs of a highly efficient value chain, Whole Foods has become the premier online grocery store.

How could a French Fry reach an Indian customer became a more difficult question than first imagined. Like many business challenges, easy ideas create challenging answers. The operations that allowed McDonald’s to bring its key product to customers involved understanding the foreign environment of the Asian country. McCain manufacturing worked with small vendors and suppliers to bring potatoes to stores where they could be cooked for customers.

c. Which Technology Investments Will Support the Enterprise Strategy: Amazon/Whole Foods v. McDonald’s?

Making use of technology ensures a successful transition into the future of the enterprise’s value chain. Amazon created what would become Amazon Web Services in 2006 before the merger as a cloud-based solution for customers. Amazon was experienced at enhancing its experience for customers using technological solutions. Similarly, it implemented Amazon Marketplace to be a key player in the product delivery service generating $23 billion for revenue in 2017. Amazon continued to transform different industries utilizing effective supply and fulfillment chains centered on emerging technology until it reached the acquisition with Whole Foods. Whole Foods utilized received data from its customer loyalty program, now Amazon Prime, to make informed decisions about display, selection, layout, and sourcing.

Technology in value chain allowed McDonald’s partner McCain manufacturing in India to keep potatoes as a cost-saving raw material. The weather conditions in India made it difficult to store potatoes for months like in the US. However new technology allowed longer storage times while the crop season was out. Another technology breakthrough that allowed success in its value chain was to farm potatoes that were genetically superior to withstand the harsh conditions of India. This technology was a biological and agronomical breakthrough that cost the company $45 million.

d. How will the Solution Change the Enterprise Value Chain: Phillips v. Apple?

Some of the questions Phillips was left with once the pandemic took its effect was how would its supply chain be altered? The global crisis revealed weaknesses in its supply chain effectiveness. The company was encouraged to use the low-cost ventilator funded by tax-payers while instead using expensive commercial models. In this case, the solution came as a profit choice contributing to the national stockpile and not one out of necessity for customers as it should primarily accomplish. The major disruption of the pandemic created a deepening impact on Phillips’ supply chain solution that would reveal the political commitments that went against the ethical values of the larger society. This would lead directly to the new direction of a new ethically sustainable solution for the future.

Apple faced many challenges from competitors in finding a supply chain that would be the most cost-effective value chain. The answer was in its capability to use reverse logistics. This was effective on a cost level and a customer service/satisfaction level. This involved emailing and other rapid service throughout the value chain process. This was effective in the returns process as well. UPS and Fedex partners were employed. Discrete packages were used to prevent theft (8). The competitors would learn quickly from Apple how to most effectively employ a solution for reverse logistics for value chain success.

4. Chain Reaction

The film Chain Reaction: Why Global Supply Chains May Never Be the Same by Wall Street Journal (WSJ) identifies PESTEL elements that create a major change for global supply chains. The story follows a cell from charger from Vietnam to someone’s front doorstep on the east coast in the US. The film uses PESTEL tools to understand political, economic, technological, and sociological impacts to global supply chains. For each element of PESTEL identified there is a certain amount of positive or negative risk that require an appropriate recommendation.

There are 4 ways to categorize negative risk according to Professor Bruce Murphy as part of Plan Risk Responses from Project Management Professional:

• Avoid: elimination of the potential risk

• switching suppliers to avoid labor difficulties

• Transfer: shifting some or all the risk along with ownership of the response to a third party

• insurance, warranties, or some other guarantee

• not dumping or time-shifting

• Mitigate: reduction in the probability or impact of the risk

• partnering on a high risk/high reward project

• Accept: cannot use any of the three other responses

• passive: take no action; deal with it when it occurs

• active: set aside contingency reserves

There are 4 ways to categorize positive risk according to Professor Bruce Murphy as part of plan risk responses from project management professional:

• Exploit: ensure the opportunity is realized

• save money by using existing technology

• Share: transfer ownership of an opportunity, in part, to a third party to ensure the opportunity occurs

• hiring subcontractors with specialized skills

• Enhance: act to increase the probability or impact of the opportunity

• accelerate a production schedule by assigning highly skilled resources

• Accept: take advantage of an opportunity without actively pursuing it

• upside demand because of a competitor’s quality issue

a. Political:

In the film, Chain Reaction: Why Global Supply Chains May Never be the Same, the PESTEL tool for the macroenvironmental political impact is a major contributor to the risk involved in supply chain changes. There are several positive and negative risks associated with this impact. This risk has to do with a shortage of available truckers currently and into the future. Some companies have had to accept the risk. One of the reasons why it is difficult to maintain control of the supply coming into shore. Longshore men, the city, drivers all control the hours they work and if an item can be shipped from point A to point B. Getting all these people to agree is political. It requires the needs of each party to agree to be available as needed which is not simple or always safe for workers. The impact of the pandemic on workers is evident in the trucking industry.

One trucking company owner takes on shifts because of the long-term shortages of available drivers. This has ultimately been negative acceptance. During the pandemic it has also meant more business. This is a sign of positive acceptance that has increased the rate of unavailable drivers for his company as well and the related issues. This company, along with larger companies like FedEx and UPS have raised wages and benefits significantly in recent years. Amazon has also raised wages while identifying much different ways to deal with risk as well.

The political impact began with deregulation of the industry directly impacting wages and working conditions in the year 1980. Labor union truckers made up to 20% more than those without a union. This was much higher than any other industry during the time and still a very high difference. Since 2005, a retention problem began to be identified that would lead to growing issues into the future.

Not only has it put a lasting strain during the pandemic on the long-haul trucking industry, but The American Trucking Association estimates also that by the year 2028 the trucking industry will be short 160,000 truckers, costing $8 billion. The secondary and residual risk impact of this long-term shortage is shipping companies like Amazon not getting things to your doorstep where they should arrive. The film demonstrates that many customers were frustrated because they are used to getting items shipped when they want them immediately. This has led to trucks sitting with no drivers at New York state truck companies and around the country. Eventually, this would lead to paralysis within a decade for trucking.

Amazon has and will use different tactics involved with risk. They will use the transfer of risk with companies like Amazon Flex to subcontract vehicles to small business owners or individuals. This prevents liability and keeps costs low. Amazon drivers are known for lower wages than UPS workers according to the WSJ film. There are still benefits for working for Amazon Flex for subcontractors like its flexibility.

A recommendation for the future of dealing with political risk will involve various ways of intervention including navigating industry advances. The politics of the future of the trucking industry will continue to involve changing mandates and regulatory environments. Eventually and slowly the negative risk will require avoidance through advances with technology. While the decline for drivers decreases and the demand increases the gap will grow bigger into 2028 when the trucking industry is expected to be met with a stand still. The option to accept will at some point no longer serve the industry company owners and workers. Companies will need to continue to share risk including more and more part-time subcontracted employees similar to UberEats. Companies will need to continue to enhance positive risk by promoting more attractive wages and benefits. They will need to exploit positive risk with new technologies. While technology will be expensive at first the goal will be that the other option to pay workers higher and higher is unsustainable. This is because the future will involve self-driving trucks that require minimal supervision. The future of the trucking industry looks uncertain and will require quick thinking and change utilizing the best risk management to outperform competitors with optimal supply chain design.

b. Economic:

In the film, Chain Reaction: Why Global Supply Chains May Never be the Same, the PESTEL tool for the macroenvironmental economic impact is a major contributor to the risk involved in supply chain changes. There are several positive and negative risks associated with this impact. The issue is that the pandemic has increased warehouse business. A vice president of an Amazon warehouse describes the increase in supply as “a snake eating a deer, the supply chain has a huge bulge fed through it”. For an economy to be effective it must have an “in” of products and “out” to customers. The pandemic has caused an abrupt disruptive risk due to closures, lockdowns, and loss of employees.

Much of the risk has been to accept economic risk changes because of the precedence of the huge unknown situation. It is negative because of the loss of business to disruptive risk and positive because of the growing item delivery business. Businesses have been able to exploit risks and opportunities during the pandemic for economic growth. Amazon has been known for achieving new financial success. They have the current tools and technology and exploit risk by reutilizing them for this opportunity. Amazon has also been known to mitigate risk through partnerships with small companies.

Another example of adverse risk is at Long Beach Port: Single Point of Failure. The congested ports and higher shipping costs threaten economic recovery. They service about 900,000 container shipments per month—a high number on average. So, during the pandemic, it takes 2 weeks to process a ship that would typically take 3–5 days.

To be successful in the future, warehouses and ports should have bionomic capabilities leveraging optimization tools and technology. This would allow companies to move beyond acceptance and into enhancing awareness of the positive risk. Optimization tools and technology are the robots, machines, and systems that operate at the pace of humans who work with them while ensuring the human operators and employees stay safe and healthy. One suggestion for the Long Beach Port is to mitigate adverse risk by finding new stakeholders and partners. The need for more infrastructure in the company would allow the operations to meet the growing needs of supply chains.

c. Technological:

In the film, Chain Reaction: Why Global Supply Chains May Never be the Same, the PESTEL tool for the macroenvironmental technological impact is a major contributor to the risk involved in supply chain changes. There are several positive and negative risks associated with this impact. “The introduction of technology and the way it speeds up work can lead to more turnover and burnout”. Currently, there is more availability for products than ever in history. People expect to have more products because technology has provided the ability for it to be so. With more technology in the future products will become even cheaper. This also puts an expectation on managers to increase the rate at which machines create and send products. And the individuals must keep up but do not always succeed. Turnover at many Amazon warehouses has exceeded 100%. This problem has only grown during the pandemic. Many employees and managers have learned to accept this as part of good business. While many have been able to exploit the positive risk of technology has brought with it many ethical questions for employees.

With the opportunity to optimize robotics for labor, managers and employees can enhance the positive risk involved with technology. Robots can do more work much more quickly. The downside is that employees are left doing more and more repetitive tasks that require human capability. This has been the acceptance of managers and owners who are limited to humans and machines/robots to do work at a human pace.

The future of technology will ensure that negative risk of employee turnover and exhaustion can be avoided. This will by complete automation of many tasks currently assigned to humans. Robot and machine companies will take central roles in the daily operations instead of floor employees. Floor employees will be replaced with robot operators and specialists. This will allow the mitigation of negative risk for physical harm and burnout to employees.

d. Sociological:

In the film, Chain Reaction: Why Global Supply Chains May Never be the Same, the PESTEL tool for the macroenvironmental sociological impact is a major contributor to the risk involved in supply chain changes. There are several positive and negative risks associated with this impact. A shift to focus on the well-being of the worker means altering pay and benefits. It is also impacted by a shift from globalization to domestic factories. Understanding the value of the American worker involves the sociological impact of work on the individual and the risk involved in these changes from the pandemic and beyond. The reason for offshoring and outsourcing labor in the past has been to prevent the cost of labor going up and to transfer negative risk (51:15). Now, because of the high cost of supply chains and the uncertainty involved, companies like IBM are bringing chip making labor home to the US. With a more direct supply chain, a focus on the US worker comes into focus.

Employees have unionized and when they have not, wages have gone up during the pandemic. This risk for employee wages has been a recurrent risk. After the great resignation, employees needed to find work that was serving them and not the other way around. Companies like Amazon continue to push workers to create resilience by dividing them between those who can handle long, exhausting shifts and those who cannot perform. Many companies have tried to accept this negative risk to their benefit only taking a deeper look when something goes terribly wrong.

Companies should mitigate recurrent risk of turnover and exhaustion with efficiency. They can avoid long battles with unions. Amazon has recently fired managers who worked in areas that unionized. Starbucks has been known to use unethical intimidation and threats of firings to prevent unions. These contentious circumstances strain from the need of employees to be fundamentally respected. Companies should encourage environments that allow employees to feel respected. Currently there is a culture war between individuals and corporations. In the future, companies can benefit from this risk by enhancing the positive risk since employees are essential. Amazon encourages an environment where unions are not necessary. If employees find themselves with the ability to be heard and respected by a huge corporation, the risk can eventually be enhanced ultimately and mutually by corporations utilizing risk management.

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