Business Services – Facal & Cía

Ericsson’s Proactive Supply Chain Risk Management

admin — Thu, 11 Jan 2018 09:52:16 +0000

Project Infomation

When faced with a supply chain disruption, proactive and reactive supply chain risk management can in fact make or break a company’s existence. One of the most famous (or rather infamous) cases is the fire at the Philips microchip plant in Albuquerque, New Mexico, in 2000, which simultaneously affected both Nokia and Ericsson. However, both companies took a very different approach toward the incident, and in hindsight, clearly displayed how to and how not to handle supply chain disruptions.

In the late 1990s, Swedish-owned Ericsson was one of the big international players in the mobile phone industry, together with the Finnish company Nokia. My first mobile phone in 1996 was in fact a Nokia, but I switched to Ericsson in 1999, because they made much better phones, so I thought. While the phones may have been better, risk management for sure wasn’t.

Client : Insight Studio
Date : 20 Feb, 2018
Skills : Project Planning

Challenge & Solution

Ericsson learned its lesson and now has a completely different supply chain risk management system in place. It starts with mapping all the components and products many tiers upstream the supply chain and identifies critical suppliers and sites that have to be prioritized and assessed further. After a rough assessment on how shortage will affect the supply chain, a more thorough investigation into probability and impact of different accidents at different suppliers is conducted to assess the impact on the supply chain as a whole, particularly the impact on business recovery time.

Improve sales and operations and production planning:

I haven’t been able to find much research literature on Nokia’s supply chain risk management, maybe because it went so well for Nokia. Ericsson, on the other hand, is another story. The incident turned disaster cost the Swedish company $400 million in lost sales, and it had to quit the mobile-phone business, leaving Nokia to cement its position as the European market leader. What went wrong?

Determine the right inventory level

On March 17, 2000, a small fire hit a microchip plant owned by Philips, the Dutch company. The plant supplied chips to both Ericsson and Nokia, and the smoke and water damage from the small and easily contained fire contaminated millions of chips — almost the plant’s entire stock.

Optimize the supply chain for perfect order planning

This article was written in 2004, when Nokia was still a major player in the mobile market. While Nokia may have learned a lesson in supply chain resilience, Nokia did not learn what it would have taken to stay a major player.

Our Process

Finally, risk management actions (protection) are evaluated against risk costs (impact and consequences), to avoid over-action or over-insurance against incidents. Not only Ericsson, but many other companies have also learned from this incident. Supply chain risk management (SCRM) is a necessary component of any supply chain. SCRM may lead to increased costs in the form of prevention measures, and SCRM may lead to increased lead time, in order to have buffers, should something happen. In essence, though, risk exposure always has a price, and as a company, one should think through what price (or rather cost, as in disruption cost) that is.

Improve sales & operations & production planning

Determine the right inventory level

Optimize the supply chain for perfect order planning

Improve sales & operations & production planning

Result Driven

In his 2006 article Robust strategies for mitigating supply chain disruptions, Christopher Tang uses Nokia’s approach as one of three prime examples of how to counter supply chain disruptions. Most recently Jon Hansen of Procurement Insights decided to reopen the case and ask industry experts to weigh in with their opinion as to what happened at Ericsson and why, and what they believe should take place to address the obvious shortfalls on a go forward basis.
(Credit: husdal.com )

Reduced lead time by 43%

Decreased variability by 50%

Lowered the risk of back-order by 95%

Increased stock for finished goods by 10%

Spending More on Ads To Overcome a Slump

admin — Thu, 11 Jan 2018 09:46:14 +0000

Project Infomation

Robin and Chris Sorensen, brothers and former firefighters, opened their first Firehouse Subs restaurant in 1994. They emphasized their firefighter heritage by featuring red furnishings, colorful murals of firefighters in action and sandwiches like the hook-and-ladder sub.

Firehouse Subs is a 16-year-old restaurant chain based in Jacksonville, Fla. It emphasizes a firefighter theme and has more than 390 restaurants that serve specialty submarine sandwiches.

Client : Insight Studio
Date : 20 Feb, 2018
Skills : Project Planning

Challenge & Solution

THE CHALLENGE Facing declining sales throughout its system, the chain sought a new marketing strategy in the depths of the recession. By 2001, the chain had grown to 30 company-owned restaurants in Florida and switched to a franchise model to expand into new markets. By early 2008, the company had expanded to 300 locations in 17 states, mostly in the South and Southeast. But then growth fizzled.

Advertising through chain stores

At first, Mr. Sorensen balked. But when the ad agency laid out data showing that some competing chains were spending more on advertising per store, he began to change his mind.

Alternative subway franchisees

Subway franchisees, for example, pay an 8 percent royalty and a 4.5 percent advertising fee; Quiznos franchisees pay a 7 percent royalty and a 4 percent advertising fee, according to those companies.

Creative campaign and radio ads

Zimmerman developed a creative campaign and radio ads that emphasized the food and the portion sizes, but offered no discounts. The agency used the Sorensen brothers as spokesmen.

Our Process

That March, comparative sales for the entire system declined from the previous March. “In our entire history, we had never had a period like that when our entire system was running negative sales,” said Don Fox, the chief executive. “It was something completely foreign to us.”

Improve sales & operations & production planning

Determine the right inventory level

Optimize the supply chain for perfect order planning

Improve sales & operations & production planning

Result Driven

The ad program ran only in markets where all franchisees agreed. Those who did not agree paid the 2 percent fee. With a new marketing war chest, Firehouse Subs and Zimmerman started an $8 million advertising campaign in September 2009. (Credit: nytimes.com)

Reduced lead time by 43%

Decreased variability by 50%

Lowered the risk of back-order by 95%

Increased stock for finished goods by 10%

Can Chasing Small Customers Lead to Big Profits?

admin — Thu, 11 Jan 2018 09:29:26 +0000

Project Infomation

Mr. Robbins, a former full-time musician who still plays in a band, was nostalgic for the multicolor tour shirts of his youth, which he described as “works of art.” He said he was appalled by the one-color shirts sold at today’s shows. He was also disappointed by the quality of shirts created by some of Austin’s many screen printers and said he could do better.

Darren Robbins and a partner founded Big D Custom Screen Printing in 2007. In its first year, the company, which is based in Austin, Tex., and specializes in printing T-shirts, recorded sales of $325,000 and a small loss.

Client : Insight Studio
Date : 20 Feb, 2018
Skills : Project Planning

Challenge & Solution

THE CHALLENGE To become profitable, Big D must determine whether to cater to customers with large printing orders or small. With that goal, Mr. Robbins and his partner, who worked for Capitol Records, invested a total of $225,000 to open Big D. The division of labor was clear. “I was a natural-born customer-service geek, and he was a natural-born salesman,” said Mr. Robbins, who resolved to take care of the customers his partner brought in. “We wanted to be one of the big boys.”

Land accounts from major banks

At first, Mr. Robbins and his partner agreed on strategy. With their industry contacts, they said they believed they could land accounts from major bands. Focusing on high-volume orders made sense to them in part because Big D’s suppliers offered a price break on large quantity T-shirt orders.

Chasing down high-volume clients

But the partners did not realize that most bands were locked in to long-term contracts for their tour shirts. Given that, Mr. Robbins started to wonder about the strategy of chasing down high-volume clients, particularly when he had so many smaller prospects knocking on his door.

Conduct office presentations

But, he said, his partner saw no point in accepting orders for one or two shirts. His partner continued to believe big orders were crucial to profitability and that he could best win those accounts by conducting in-office presentations for corporate prospects across the country.

Our Process

After a year in business, Mr. Robbins threw an anniversary party in April 2008 to thank his employees for their dedication. His partner, however, opposed the modest celebration because its cost meant the difference between breaking even and showing a loss on Big D’s first-year sales. This disagreement highlighted the increasing tension between the partners’ growth philosophies.

Improve sales & operations & production planning

Determine the right inventory level

Optimize the supply chain for perfect order planning

Improve sales & operations & production planning

Result Driven

Determined to accept smaller orders, Mr. Robbins bought out his partner around the time of the party. The split was amicable, Mr. Robbins said, with his former partner breaking even on the sale and returning to the music business. And then the economy crashed. “Almost overnight, companies tightened their belts,” Mr. Robbins said. (Credit: idynamics.com)