Developing a Forecasting System:

 

Forecasting follows seven basic steps: (1) Determine the use of the forecast; (2) Select the items to be forecasted; (3) Determine the time horizon of the forecast; (4) Select the forecasting model(s); (5) Gather the data needed to make the forecast; (6) Make the forecast; (7) Validate and implement the results

Identify at least three supply chain risk:

 

Supply Chain Risks and Tactics

RISK	RISK REDUCTION TACTICS	EXAMPLE
Supplier failure to deliver	Use multiple suppliers; effective contracts with penalties; subcontractors on retainer; pre-planning	McDonald’s planned its supply chain 6 years before its opening in Russia. Every plant—bakery, meat, chicken, fish, and lettuce—is closely monitored to ensure strong links.
Supplier quality failures	Careful supplier selection, training, certification, and monitoring	Darden Restaurants has placed extensive controls, including third-party audits, on supplier processes and logistics to ensure constant monitoring and reduction of risk.
Logistics delays or damage	Multiple/redundant transportation modes and warehouses; secure packaging; effective contracts with penalties	Walmart, with its own trucking fleet and numerous distribution centers located throughout the U.S., finds alternative origins and delivery routes bypassing problem areas.
Distribution	Careful selection, monitoring, and effective contracts with penalties	Toyota trains its dealers around the world, invoking principles of the Toyota Production System to help dealers improve customer service, used-car logistics, and body and paint operations.
Information loss or distortion	Redundant databases; secure IT systems; training of supply chain partners on the proper interpretations and uses of information	Boeing utilizes a state-of-the-art international communication system that transmits engineering, scheduling, and logistics data to Boeing facilities and suppliers worldwide.
Political	Political risk insurance; cross-country

 

TQM:

seven concepts for an effective TQM program: (1) continuous improvement, (2) Six Sigma, (3) employee empowerment, (4) benchmarking, (5) just-in-time (JIT), (6) Taguchi concepts, and (7) knowledge of TQM tools.

 

Cause and effect diagram:

Hypothetical Process Map:

Lean Manufactured:

Look it up and add a little more.

Triple Bottom Line:

Managers must consider how the products and services they make affect the people and environment in which they operate. Certainly firms must provide products and services that are innovative and attractive to buyers. But customers and policy makers are savvier than ever in obtaining information about the companies that make these products.

Internet-based technologies today allow consumers, communities, public interest groups, and regulators to be well informed about an organization’s performance. As a result, these stakeholders have strong views about firms that fail to respect the environment, take advantage of less fortunate societies, or engage in unethical conduct. Firms need to consider all the implications of a product—from design to disposal.

Many companies now realize that “doing what’s right” and doing it properly can be beneficial to all stakeholders. Companies that practice corporate social responsibility (CSR) introduce policies that consider environmental, societal, and financial impacts in their decision making. Operations functions—from supply management to product design to packaging—play a profound role in meeting CSR goals.

Sustainability is often associated with corporate social responsibility. The term sustainability refers to meeting the needs of the present without compromising the ability of future generations to meet their needs. Many people who hear of sustainability for the first time think of green products or “going green”—recycling, global warming, and saving rainforests. This is certainly part of it. However, it is more than this. True sustainability involves thinking not only about environmental resources but also about employees, customers, community, and the company’s reputation. Three concepts may be helpful as managers consider sustainability decisions: a systems view, the commons, and the triple bottom line.

Managers may find that their decisions regarding sustainability improve when they take a systems view. This means looking at a product’s life from design to disposal, including all the resources required. Recognizing that both raw materials and human resources are subsystems of any production process may provide a helpful perspective. Similarly, the product or service itself is a small part of much larger social, economic, and environmental systems. Indeed, managers need to understand the inputs and interfaces between the interacting systems and identify how changes in one system affect others. For example, hiring or laying off employees can be expected to have morale implications for systems in an organization, as well as socioeconomic implications for external systems. Similarly, dumping chemicals down the drain has implications on other systems. Once managers understand that the systems immediately under their control have interactions with systems below them and above them, more informed judgments regarding sustainability can be made.

Many inputs to a production system have market prices, but others do not. Those that do not are those held by the public, or in the common. Those resources held in the common are often misallocated. Examples include depletion of fish in international waters and polluted air and waterways. The attitude seems to be that just a little more fishing or a little more pollution will not matter, or the adverse results may be perceived as someone else’s problem. Society is still groping for solutions for use of those resources in the common. The answer is slowly being found in a number of ways: (1) moving some of the common to private property (e.g., selling radio frequency spectrum), (2) allocation of rights (e.g., establishing fishing boundaries), and (3) regulation. As managers understand the issues of the commons, they have further insight about sustainability and the obligation of caring for the commons.

Triple Bottom Line

Firms that do not consider the impact of their decisions on all of their stakeholders see reduced sales and profits. Profit maximization is not the only driver by which to measure success. A one-dimensional bottom line, profit, will not suffice; the larger socioeconomic systems beyond the firm demand more. One way to think of sustainability is to consider the systems necessary to support the triple bottom line of the three Ps: people, planet, and profit (see Figure S5.1 ), which we will now discuss.

Companies are becoming more aware of how their decisions affect people—not only their employees and customers but also those who live in the communities in which they operate. Most employers want to pay fair wages, offer educational opportunities, and provide a safe and healthy workplace. So do their suppliers. But globalization and the reliance on outsourcing to suppliers around the world complicate the task. This means companies must create policies that guide supplier selection and performance. Sustainability suggests that supplier selection and performance criteria evaluate safety in the work environment, whether living wages are paid, if child labor is used, and whether work hours are excessive. Apple, GE, Procter & Gamble, and Walmart are examples of companies that conduct supplier audits to uncover any harmful or exploitative business practices that are counter to their sustainability goals and objectives.

Improving the Triple Bottom Line with Sustainability

Recognizing that customers increasingly want to know that the materials in the products they buy are safe and produced in a responsible way, Walmart initiated the development of the worldwide sustainable product index for evaluating the sustainability of products. The goals of that initiative are to create a more transparent supply chain, accelerate the adoption of best practices, and drive product innovation.

Walmart found a correlation between supply-chain transparency, positive labor practices, community involvement, and quality, efficiency, and cost. Walmart is committed to working with its suppliers to sell quality products that are safe, that create value for customers, and that are produced in a sustainable way. The firm is accomplishing this in four ways:

1. Improving livelihoods through the creation of productive, healthy, and safe workplaces and promoting quality of life

2. Building strong communities through access to affordable, high-quality services such as education and job training that support workers and their families

3. Preventing exposure to substances that are considered harmful or toxic to human health

4. Promoting health and wellness by increasing access to nutritious products, encouraging healthy lifestyles, and promoting access to health care

Walmart’s CEO has said that companies that are unfair to their people are also likely to skimp on quality and that he will not continue to do business with those suppliers.

Accordingly, operations managers must consider the working conditions in which they place their employees. This includes training and safety orientations, before-shift exercises, ear plugs, safety goggles, and rest breaks to reduce the possibility of worker fatigue and injury. Operations managers must also make decisions regarding the disposal of material and chemical waste, including hazardous materials, so they don’t harm employees or the community.

Planet

When discussing the subject of sustainability, our planet’s environment is the first thing that comes to mind, so it understandably gets the most attention from managers. Operations managers look for ways to reduce the environmental impact of their operations, whether from raw material selection, process innovation, alternative product delivery methods, or disposal of products at their end-of-life. The overarching objective for operations managers is to conserve scarce resources, thereby reducing the negative impact on the environment. Here are a few examples of how organizations creatively make their operations more environmentally friendly:

· ▶ S.C. Johnson, the company that makes Windex, Saran Wrap, Pledge, Ziploc bags, and Raid, developed Greenlist, a classification system that evaluates the impact of raw materials on human and environmental health. By using Greenlist, S.C. Johnson has eliminated millions of pounds of pollutants from its products.

· ▶ Thirty-one public school districts across the state of Kentucky operate hybrid electric school buses. They estimate fuel savings as high as 40%, with fuel mileage of 7.5 mpg increasing to 12 miles per gallon, relative to standard diesel buses.

· ▶ BMW designs automobiles with recycled materials and with materials that can be recycled or reused after the vehicle has reached its end-of-life. BMW recycles and reuses many of its plastic components for its newer automobiles to reduce the amount of waste headed for landfills.

To gauge their environmental impact on the planet, many companies are measuring their carbon footprint. Carbon footprint is a measure of the total greenhouse gas (GHG) emissions caused directly and indirectly by an organization, a product, an event, or a person. A substantial portion of greenhouse gases are released naturally by farming, cattle, and decaying forests and, to a lesser degree, by manufacturing and services. The most common greenhouse gas produced by human activities is carbon dioxide, primarily from burning fossil fuels for electricity generation, heating, and transport. Operations managers are being asked to do their part to reduce GHG emissions.

Industry leaders such as Frito-Lay have been able to break down the carbon emissions from various stages in the production process. For instance, in potato chip production, a 34.5-gram (1.2 ounce) bag of chips is responsible for about twice its weight in emissions—75 grams per bag (see Figure S5.2 ).

Social and environmental sustainability do not exist without economic sustainability. Economic sustainability refers to how companies remain in business. Staying in business requires making investments, and investments require making profits. Though profits may be relatively easy to determine, other measures can also be used to gauge economic sustainability. The alternative measures that point to a successful business include risk profile, intellectual property, employee morale, and company valuation. To support economic sustainability, firms may supplement standard financial accounting and reporting with some version of social accounting. Social accounting can include brand equity, management talent, human capital development and benefits, research and development, productivity, philanthropy, and taxes paid.

 

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