Due: Beginning of class, April 29
What to say to general management
Assume that you have just been made head of supply chain management at your
You have secured a meeting with general management, and have one hour to
describe your plans, how they will benefit the company, and the support you will need
from general management to implement them.
Briefly summarize the key sources of
supply chain uncertainty your company’s operational and financial performance is
exposed to, how you would explain them to management, and one or two alternatives for
managing them you might propose in order to give management a feeling for the
The company you work for sells high margin products that require large, long
lead time R&D and capacity investments, for example pharmaceuticals or
Large, long lead time fixed costs leave the company’s performance exposed to the
demand for and the sales price of its products far in the future.
matching these exposures is very difficult, since it is rare that customers will have a
comparable business risk that would give them with the incentive to enter into a
forward-dated, long term contract.
For example, even for a generic commodity such
as electricity, as discussed in class suppliers frequently struggle to find customers
interested in contracts similar in length to the useful life of a power plant, typically
When R&D is involved there is the added risk of its ultimate success,
the potential that similar or better competing products will come along, changes in
technology will occur that make it irrelevant, etc.
With asset-liability matching difficult or impossible, the best you can offer
management is 1) high quality analysis to quantify and communicate the risks of the
business, and 2) the development of strategies to allow necessary investments to be
made in stages, with risk “front-loaded” if possible, and as much cost as possible
delayed until the high risk early stages have been completed.
b) The company you work for sells high margin fashion products with short product
lifecycles, and its largest cost component is marketing.
Due to the short lifecycles of the company’s products, most if not all of a product’s