March 02, 2018

Assignment #1: Case Studies (Toyota & Amazon)

Subject: MP 5317-Supply Chain Management

Lecturer: Dr. Aamer Ahmed Baqai

Section: MSPM 2-B

1867156 – Umair Azhar Cheema

Reference Textbooks:
(Chopra & Meindl, Supply Chain Management: Strategy, Planning & Operation, 3rd ed, pp. 18-20)
(Chopra & Meindl, Supply Chain Management: Strategy, Planning & Operation, 6th ed, pp. 15-16)
 Case Study#1: Toyota A Global Auto Manufacturer

1. Where should the plants be located and what degree of flexibility should be built into each?
What capacity should each plant have?

After the Asian financial crisis of 1996/1997, Toyota redesigned its factories according to the strategy of
global complementation, which ensured that each plant be capable of producing products that could be
exported in the situation when local markets weaken. This strategy ensures a flexible network, however, it
depends on the type, cost, complexity, and the socioeconomic factors of developing the parts. These
factors should be addressed before Toyota redesign any plants operational structure.

2. Should plants be able to produce for all markets or only specific contingency markets?

There should be a balance between developing parts for local demand, parts to be exported, and parts to
be stored in inventory. Toyota should make these decision after referring to socio-economic and logistic
factors. In retrospect Toyota increased the commonality in parts used around the globe which goes in line
with their global complementation strategy.

3. How should markets be allocated to plants and how frequently should this allocation be
revised?

It depends on the factors regarding cost of developing & maintaining a working plant, laws & regulations,
trade incentives, cost of exports, currency exchange rates of the intended market. After proper analysis &
evaluation in sight of the above factors the decision should be based.

4. What kind of flexibility should be built into the distribution system?

The global complementation strategy ensures the flexibility of the distribution system. Due to increasing
commonality of parts the system is standardized across the plants globally. The flexibility of the system
should be built based cost effectiveness of production till transportation.

5. How should this flexible investment be valued?

Flexibility of the supply chain is financially profitable for Toyota, as disruptions in supply chain network
and weak local markets has less effect on revenue.

On another note in 2009 Toyota had to recall 12 million cars using a standardized common part that
developed a defect, which caused a significant amount of damage to company image and finances. This
teaches us that other factors such as risk measurement and quality assurance should also be taken into
account when integrating any level of flexibility within the supply chain.

6. What actions may be taken during product design to facilitate this flexibility?

Specialized plants will cater for producing stable demand of parts, while flexible plants will be
utilized for conforming to unique/changing demands as required by consumer or market demand,
incorporation of new technology, landmark events, geopolitical circumstances; which may
dictate production.
 Case Study#2: Amazon.com: An E-business

1. Why is Amazon building more warehouses as it grows? How many ware-houses should it have
and where should they be located?

The strategy of increasing warehouses is in line with their corporate strategy, increasing response time
resulting in customer retain. These should be located where there is a greater influx of deliveries, resulting
in cost and time benefits for Amazon delivery operations. Amazon expansion of product line will benefit
from this growth and placement.

2. What advantages does selling books via the Internet provide over a traditional bookstore? Are
there any disadvantages to selling via the Internet?

Maintaining an electronic book store is more beneficial for reducing transport and inventory costs of the
company. Amazon has the advantage over traditional bookstores by providing the customer with a
convenient method to shop 24/7. In terms of marketing for new books, recommendation section allows
customer to buy books which they were not going to buy initially.

The traditional experience & environment of a bookstore, where customer can interact and read brief
extracts of books is the vital thing missing in e-bookstores. There is a greater time lag in purchasing and
receiving the intended book.

3. Should Amazon stock every book it sells?

Yes. It can stock books as per demand influx, while storing lesser known books in low quantity is
beneficial for inventory management, as the cost of inventory will decrease, while further orders could be
restocked by contacting publisher direct on demand of customer.

4. What advantage can brick-and-mortar players derive from setting up an online channel? How
should they use the two channels to gain maximum advantage?

We can maximize advantage of both channels by segregating our product line loosely by demand basis.
They can utilize online channel for their lesser known products, customer orders sourced to publisher or
other vendors on demand. Stocking high demand products in retail stores to reduce the shipping &
inventory costs.

5. Should traditional booksellers like Barnes and Noble integrate e-commerce into their current
supply chain or manage it as a separate supply chain?

Integrating both models will be more beneficial for traditional booksellers as they can retain customers
that prefer either model. They can provide a more flexible approach of buying a book to the customers, by
elimination of the limitations of both systems, providing convenient purchase experience with the
takeaway facility which will guarantee the traditional bookstore environment.

6. For what products does the e-commerce channel offer the greatest advantage? What
characterizes these products?

It provides the most advantage to lesser known books that lack expenses for large scale marketing. Those
products which demand could not be forecasted accurately during release by testing it in a cost effective
marketing campaign on the website. It also beneficial for books that are not available in print form (digital
books).