Discuss below questions based on attached case study PART A 1) What ?were ?the ?Top ?3? ?capability ?strengths ?for ?i-??AM, ?Inc.? ?Top ?3? ?weaknesses? ?Describe ?an ?example ?of

Discuss below questions based on attached case study

PART A

1) What were the “Top 3” capability strengths for i-‐AM, Inc.? “Top 3” weaknesses? Describe an example of each strength and weakness.

2) Based on the resilience gaps computed by the SCRAM tool, are there any patterns that i-‐AM, Inc., can use to their advantage?

PART B

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.

SC-Resilience-CSCMP-Case-Study.docx.pdf

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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.

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