Tuesday, February 19, 2013

Starbuck's Supply Chain

By Olivia Brink

Starbucks Coffee has become a giant global company, but what exactly goes into the process from coco beans in a field to a steaming cup of delicious coffee?
Starbucks has acquired an amazing supply chain that spans across almost nineteen countries.  Coco beans can come from one country while milk could come from an entirely different country hundreds of miles away! This country diversification can be seen in the image provided below, showing which countries the coffee beans, sugar, and paper sources come from. This global resource span is a great way for Starbucks to expand the company and reach more countries than ever before.  Not only that, but Starbucks Coffee is able to supply the best ingredients to their customers for a lower price. 

Starbuck's and McDonald's supply chains

            All raw materials are then sent to a roasting, manufacturing, and packaging plant.  Starbucks has six roasting centers where the beans are prepared.  This number may seem very small for such an incredibly large company like Starbucks, but this centralized system is very effective.  These roasting centers make sure every single one of the beans is prepared, manufactured, and packaged in the exact same way and quickly through a series of well-designed manufacturing processes.
            Once the beans are prepared, Starbucks has a tedious, well thought out delivery process.   The amount of coffee being deliver each day is astonishing (hundreds of thousands of pounds), but with over seventy thousand deliveries daily, Starbucks is able to supply each store with adequate amounts of coffee!
            I have gone to Starbucks for years (I even have a Gold Card), but I had never thought about the operations happening behind the scenes. Below is an excellent video about the expansive supply chain of Starbucks Coffee.   After researching Starbucks, I now have a new respect for the amount of planning and organization that goes into my warm, grande Pumpkin Spice Latte!

Friday, February 8, 2013

L.L. Bean Inventory Management at the Freemont Distribution Center

By Morgan Hall
Inventory management is the planning and monitoring of product inventories.  To meet the competitive priorities of the organization companies must effectively manage their inventory. 

Get an inside look at L.L. Bean’s largest distribution center here:

It started with an all-weather boot.  In 1912 Leon Leonwood Bean founded a mail-order catalog company.  The original catalog was four pages long featuring their one product, the Bean Boot.  Today, the company has extended its product lines far beyond the boot.  Bean now offers clothes, camping gear, and home items; it’s even helped Subaru outfit its car interiors.  L.L. Bean currently has 33 retail stores nationwide, as well as stores in Japan and China.  As if that wasn’t enough, L.L. Bean sends its catalogs to over 160 countries. 

To more effectively manage its inventory, L.L. Bean created two inventory pools.  It separated its retail and catalog /online sales and now operates two distribution centers in Freeport, Main.  The distribution center for the online/catalog sales is the largest building in the state.  Freeport manages to process around 145,000 orders in one day during the winter holiday season and over 1 million orders in November and December.  That’s a lot of inventory to manage, 128,000 unique items (SKUs) to be exact.  In the distribution center for the online/catalog sales there are over 30 miles in shelves, each towering 36 feet-tall.  Bean’s pickers need to be in great shape because they can walk over 8 miles in one workday.   

However, L.L. Bean was struggling with effectively managing their inventory.  They found they consistently had too much seasonal inventory left over.  These items would not generate sufficient revenue to cover the expense of storing them.  L.L. Bean needed help to avoid having to buy another storage building (and in cutting inventory expenses with these obsolete items that need to be written off), so they hired Fortna for help. 

Fortuna suggested dividing the stock into “core” and “non-core” items.  Core items are things that are sold all year and things L.L. Bean does not want to be out of.  Non-core items are typically seasonal, or items that L.L. Bean still wants to carry, but do not sell in large quantities.  The non-core items were given a flag noting their expected lifecycle.  The result: smaller and more frequent orders, and as the seasons wind down, L.L. Bean starts to reduce its stock of that item by limiting orders and having special seasonal sales. 

Once L.L. Bean got a better grip on its inventory management it was able to close a 150,000 square-foot warehouse that it used for extra storage.  Two exisiting distribution centers took in the inventory from the old warehouse.  Its new inventory management strategy doesn’t mean that L.L. Bean carries a less extensive product mix.  Instead, it adjusts the amounts of items in stock to match anticipated sales more accurately.


"L.L. Bean's Smarter Stocking Strategy." Supplychainquarterly.com. Ed. James A. Cook. CSCMP, 2011. Web. 29 Jan. 2013. <http://www.supplychainquarterly.com/topics/Strategy/201104llbean/>.

Go Behind-the-Scenes at L.L.Bean with Rob Caldwell. Perf. Rob Caldwell. WCSH6, 2010. News Story. YouTube. YouTube, 17 Dec. 2010. Web. 29 Jan. 2013. <http://www.youtube.com/watch?v=o_t5spwDpl0>.

Monday, February 4, 2013

Snowmaking Capacity Planning: Increasingly a Lifeline to the Ski Industry

Snowmaking Capacity Planning: Increasingly a Lifeline to the Ski Industry

By Stephen Thorley

      At first thought, one might assume as cold as Ohio can be, offering downhill skiing and snowboarding would be easy money for dedicated entrepreneurs. Truth is, Ohio’s erratic winter weather could only support a handful of ski days each winter and in order to keep the slopes covered, lifts turning, tickets selling (and drinks pouring) ski areas execute the delicate balancing act that is snowmaking.

Snowmaking makes a ski season possible at Mad River Mountain in Bellefontaine, Ohio
            Snowmaking is extremely expensive and when snowmakers can operate is always at the hands of often unpredictable windows of optimal weather conditions. Several of the key factors that go into planning a snowmaking operation are:
1)       Access to water: Most preferable option is an unrestricted stream or resort-owned pond. Some ski areas suffer from water restrictions and thus the effectiveness of the entire operation is capped by how much water the resort can acquire.

2)                    Pumping Capacity: Often after a low snow year skiers can expect to hear resorts touting pumping capacity improvements which promise to take greater advantage of snowmaking temperature windows. A local ski area, Mad River Mountain near Bellefontaine, Ohio can pump 7,000 gallons of water uphill every minute. According to the attached OnTheSnow.com video, resorts can typically pump as much water uphill every minute as the average family uses in showers over the course of a year. Strategies for investing in snowmaking capacity can directly affect the number of days a resort can operate each winter, and the quality of the product (snow), which is a key factor influencing the happiness of guests.
            3)  Automation: A very large investment can make snowmaking equipment much more efficient. By automating a system of snowmaking units resorts can maximize the time conditions are right and save on labor costs up to 30% by eliminating the need for a technician to manually activate each unit.

           4) Cold Temperatures: Obviously, water can only freeze below 32 degrees Fahrenheit. For snowmaking to be effective, however, a measurement of temperature and humidity called wet bulb must remain below 28. In moderate climates like Ohio and even the east coast mountains, there are certainly a limited number of hours each year and sometimes warm-ups following extended periods of optimal weather. Because of the high price tag on snowmaking hours, it is uncommon for a resort to make snow if only a few days later a warm period would melt away the new snow.

The author enjoys the snow on a day that would have had only grassy slopes if it were not for snowmaking technology
Mad River Mountain snowmakers replenishing the base following the warm spell at the end of January

   5)        Size of Checkbook: The most substantial costs to snowmaking are labor and electricity to run the pumps. Blanketing a single acre (55yds x 88 yds) with 12 inches of snow can cost between $1000 and $2000 and takes between 1 and 6 hours. For some perspective, Mad River Mountain (45 minutes northwest of Columbus, OH) claims to have 144 skiable acres, meaning 12 inches could conservatively cost $144,000. This season, Mad River has built a 30inch base multiple times before and after 60 degree periods in January. Snowmaking strategy is obviously key to keeping guests happy and balancing the desire for pristine conditions, the business need to keep the slopes open, and not unnecessarily wasting money by making snow in excess or only to see it melt away before capturing revenue during its existence.

The need to make snow differs greatly by size of operation, clientele, and most especially location. Because snowmaking equipment costs millions and operating millions more, resorts’ expansion strategies have differed greatly based on location. Ski areas receiving less natural snowfall have followed a more expansionist strategy by investing heavily in snowmaking technology.  When these hills receive natural snow or are spared from a mid-season melt-away of the established snow base, there is unused snowmaking capacity. 
For Mad River, snowmaking is an absolute necessity since the resort only receives 36 inches on average per year. Ohio’s frequent fluctuations above and below freezing require a system that can take advantage of a short cold spell. Until recently, the snowmaking network at Mad River was larger than that at many resorts with triple the acreage and skier visits.

                 On the other end of the spectrum are resorts like Jackson Hole, Wyoming and Vail, Colorado which are accustomed to 300+ inches of snow each winter. Such resorts have followed more of a wait-and-see strategy when it comes to snowmaking. Rocky mountain resorts have built up their existing snowmaking networks slower over the years, often tacking on new capacity increments after lower than average snow in a winter such as last year (2012).  These resorts may use portable snow machines and repurpose their grooming equipment as a short-term fix when the natural snow is absent. However, in a winter like last, resorts without the technology in place suffered.