Sunday, September 30, 2012

Will China Remain the Low-Cost Country of Choice?

According to the AlixPartners 2011 U.S. Manufacturing-Outsourcing Cost Index, Mexico had the lowest landed costs for U.S. customers while other key low-cost countries (LCCs), including India, Vietnam, and Russia, had higher costs but remained more competitive than China. Looking ahead, as key general manufacturing cost drivers stabilize at more economically sustainable levels after the recession of 2008/2009, we expect LCCs’ competitiveness with the U.S. to erode. While Asian LCCs will likely be more impacted than Mexico, China may experience particular negative pressure on landed costs due to wage inflation, exchange-rate pressures, and higher freight rates.

Key Trends

While the U.S. regained some cost advantage relative to the major LCCs, due largely to the weak dollar, major LCCs maintained a cost advantage over U.S. domestic suppliers, with savings potential similar to that seen in 2005-2006 (figure 1).

Since 2007, the competitive landscape for outsourcing has shifted significantly to favor Mexico, some locations in Europe, and several locations in Asia other than China. Mexico delivered products at the lowest landed costs in 2010, and emerging LCCs such as India, Vietnam, Russia, and Romania had lower landed costs than China, which faces not only climbing wages but also increasing freight fees and growing pressure to allow the yuan’s exchange rate to fluctuate with the currency market.
Nevertheless, China is expected to remain an LCC stalwart for the foreseeable future for many manufactured products consumed in the U.S. due to its mature manufacturing infrastructure and the significant switching costs of moving production.

When Will China Be More Expensive Than The US?

While there are a large number of factors that drive a manufacturing cost, three will be critical in the coming years for China: wage inflation, exchange rates, and freight fees. To understand the relative impacts of these three key drivers on China’s landed costs over the next four years, AlixPartners assessed each driver separately (as if the other two were to remain unchanged from 2011 through 2015), and then in combination.
The analysis was based on three assumptions:
  • 30% annual increase in China’s wage rates. This is in line with Chinese wage inflation over the last several years.
  • 5% annual increase in the strength of the yuan. A widely accepted estimate of the under-valuation of the yuan is 20% - 25% relative to the U.S. dollar.
  • 5% annual increase in freight rates. This is a reasonable assumption based on increasing fuel prices and stabilization at pre-boom and bust levels. 
Looking at the results of this sensitivity analysis, it’s easy to see not only why China’s role as an LCC is durable, but also how the three drivers in combination could erode China’s dominance.

Four Scenarios

One scenario in the analysis assumes the 30% annual wage rate increase in China, unchanged freight and exchange rates, and a steady, baseline wage-rate increase of 2.5% per year for the U.S. over four years. Under those conditions, China’s landed cost for the basket of parts would still be about 10% lower than the U.S. (figure 2).

Likewise, if the yuan were to increase in strength 5% annually relative to the U.S. dollar while wages and freight rates remained flat, China’s landed cost would still be about 5% lower than U.S. landed costs in four years (figure 3). In this scenario, the yuan’s exchange rate would have to strengthen by about 10% annually to push China’s landed cost up to that of the U.S. with other factors remaining flat.

The study’s third scenario has freight rates rising 5% annually and wage and exchange rates flat, which would leave China’s landed cost about 10% less than that of the U.S. after four years (figure 4). Freight rates would have to increase 35% annually for China’s landed cost to reach that of the U.S.

Based on this analysis, it is very unlikely that any one factor will tip the balance for manufacturing costs in favor of the U.S. over China. However, the three cost drivers’ potential combined effect, according to the analysis, would leave landed costs for China and the U.S. about equal four years from now (figure 5).


While these hypothetical scenarios certainly don’t rule out China as an LCC contender, they do illustrate the challenges that companies can expect if they have concentrated the supply base for their U.S. operations in China. Again, while no one factor is likely to tip the cost advantage in the favor of the U.S. over China, a combination of reasonably likely factors could well erase some or all of China’s cost advantage over the next four to five years. Finally, these scenarios also highlight the need for flexible strategies and constant diligence when implementing an aggressive global supply chain strategy.


How do the companies have to adapt to any of these possible scenarios where no low cost option is optimal? Those that mean that they'll have to sacrifice efficiency in orden to gain responsiveness? And what does that imply in a global environment? How much does technology can make them more flexible to this constant change?

Source: Alix Partners (2011). U.S. Manufacturing-Outsourcing Index. Retrieved 09/25/2012. Available at: 2011USManufacturingOutsourcingIndex.aspx

Tuesday, September 25, 2012

Going Lean and Green: The Coke Way

This speech by Rick Frazier, VP-Supply Chain at the Coca-Cola Company, got me intrigued. The first thing that caught my eye was the sheer size of their supply chain in monetary terms. Ok, I knew it would be big but I did not know it would be THIS BIG - $64 billion! Apparently, they have introduced a vision 2020 which includes revamping their supply chain in a big way.

First of all, let’s talk about the lean. They want to move to a more responsive Demand-Driven Supply Chain. In my previous blog post, I’d spoken in detail about this and about the main components needed for this type of supply chain to optimally work. I’m sure Coke must have, if it did not already have, put in place a solid information sharing platform throughout its supply chain. This includes all the stakeholders – the large players, the small players and the local players.

Considering the magnitude of the scale of operations, it isn’t surprising to see them having implemented many lean strategies already to cut costs related to inventory management. How can they go leaner then? First of all, in a significant change, Rick talks about moving from a “push” to a “pull” system. This surely means that they’re getting good PoS data, easily sharing it (or soon planning to) throughout their supply chain and have tried, tested and approved various demand forecasting models. The challenge, I think, would be for them to incorporate these changes keeping in mind the diversity of their product portfolio and the subsequent actions needed to alter the complex supply chains. Also, their breakup of different branches[i], in terms of work function and information sharing, makes a lot of sense in order to keep their competitive advantage intact (which is, not surprisingly, one of the strategic objectives they want to achieve using this new system).

Now, the green. Coke had introduced a new kind of PET bottle which was sourcing 30% of its raw materials from sugarcane-based products as opposed to oil-based products. 

This meant that it could lower its carbon footprint in the PET bottle production by up to 25%. Also, through its wholly owned subsidiary – Coca-Cola Recycling – it has invested more than $300 million in huge recycling plants in major countries of operation. It has not only increased the recycling ability of the supply chain (automatically making it green), it also has concentrated on the most critical component of its operation – water. This is important not only to improve its image but also, in some countries with low water tables, to be able to continue production. Reducing water inefficiencies throughout the supply chain to a target of 20% by 2020 (at 2004 baseline) is their top priority in this area. I think that having additional things like zero waste in all their promotion and packaging materials would add value if they’re serious about this initiative.

This brings me to a few interesting questions that I’d like to know your thoughts on:
1.       How can Coke forecast for hidden costs associated with these lean and green initiatives?
2.       What more can it do in countries where the water table is precarious?
3.       What pressures this places on competitors (read Pepsi) and their suppliers if this system turns out to be impactful and cost-effective? What if it goes the other way?

[i] Slide 43. “Cola-Cola: Lean, Green and Love”. Web. Accessed 9/25/12. < >

Ten Ways to reduce the impact of inventory costs

Wanted to share this article with the class

Ten ways to reduce the impact of inventory costs

Consumers are more demanding than ever. More businesses are increasing inventory to accommodate diverse customer preferences. Unfortunately inventory is an asset and as such can erode company profit if not managed effectively.
Global and Mail has worked with small and mid-sized business (SMB) owners, and have identified numerous strategies to maintain optimum levels of inventory, regardless of business sector or size. In no particular order, here are the ten most effective strategies:

1. Inventory as part of strategy. They have yet to find a business that does not have money invested in obsolete or slow-moving inventory. Interestingly enough, business owners are typically aware of this, but struggle with how to avoid it. Aligning inventory investment with business growth strategies will help to define the spending patterns, volumes, and space requirements fundamental to achieving business growth with minimal investment in assets.   Getty Images/iStockphoto

2. Understand usage patterns. I find it difficult to predict how much gasoline to put into my car to drive to Montreal if I haven’t spent time to determine historically how much gasoline I consumed on a similar trip. Lack of awareness relative to inventory consumption is one of the most significant problems that SMBs struggle with. Not having clarity around material consumption will only result in two possible outcomes: over-ordering, which is a waste of money; or under-ordering, which leads to a loss in revenue. Taking time to review customer order history and purchase frequency can provide significant insight into how much inventory to purchase, seasonal patterns, and the influence of pricing stimulation.

3. Forecast the future. Managing inventory requires a forecast. However, when building a forecast it is important to consider more than just customer demand. When a new competitor enters the market, most businesses move to quickly diversify their offerings, shedding low margin and goods in an effort to reduce the risk of inventory over-stock and obsolescence. This might seem sensible, however competition can often open markets rather than close them. Why do you think car dealerships, restaurants and gas stations often open across the road from one another?
To assist with developing an effective forecast, ask yourself the following questions: How might customer demand patterns evolve? What new products are likely to enter the market that might impact the demand of existing products? What are the regional economic forecasts over the next three to five years?

4. Incorporate lead times. Supplier lead-times place business owners in an uncomfortable position, stuck somewhere between customer demands and supplier deliveries. The response for most, particularly to appease demanding customers, is to increase inventory levels. Well, here is another strategy. Develop a stocking program for your key customers (i.e. those who demand quick turn around or for whom you retain high value inventory) whereby you charge a small fee in order to stock inventory specifically dedicated to their use. Although inventory may remain at existing levels, you can actually collect compensation to hold the inventory, allowing the offset of finance and holding charges. Some of our client’s customers are delighted with this program, as it is not offered by competitors and guarantees them quick order replenishment despite fluctuations in their demand. Try it and see for yourself.

5. Avoid ‘impulse buys.’ Walk through the back of any storeroom or warehouse and you will observe several examples of ‘impulse buys.’ These are inventory buys that have been influenced by such things as a supplier sale, a highly demanding customer, an end-of –model year, lack of awareness of customer demand or lack of time. Such buying impulses are detrimental to any organization in that they are unplanned and do not typically align with the business growth strategy. Buying on impulse is similar to leaving money at the front door. There is a chance it will be there at the end of the day, but it is unlikely.

6. Maintain accountability. One of the easiest ways to maintain control over inventory investment is to make someone accountable. In a small business this is often the owner, but in these circumstances, the owner is often buying what employees tells him or her to buy. Making someone else accountable to monitor and replenish inventory frees up time for the business owner, allowing him or her to focus their time on more valuable inputs while ensuring they are confident that inventory will be maintained at the levels they have identified.

7. Monitor accuracy. Inventory accuracy in a small or mid-sized business is typically measured in one of two ways: A physical inventory is completed once per year; or inventory is counted on a more frequent and smaller scale (i.e. cycle counting). Both exercises are a waste of time unless someone takes action to resolve discrepancies (hint:this is where most businesses fail). Despite which method you use, answer the following questions as part of inventory validation: What is the acceptable financial tolerance for adjusting inventory? What items should I count more frequently to maintain improved accuracy? What are the possible reasons for inaccuracy, and how might I resolve them?

8. You can’t manage what you can’t see. Inventory management is 75 per cent visual, and by that I mean the business owner must be able to see their inventory if there is any hope of effectively managing it. Have you ever been to a grocery store and found that they have overstock inventory on upper shelves? This is a great example of visual inventory management, because it allows those who are ordering stock to see the inventory that is on-hand (most of the hand-held order input terminals in grocery stores do not reflect any inventory that is held in the back stockroom). Remember, if you can see it, you can manage it.

9. Use space effectively. If you could take a peek into the backrooms of most businesses, you will find that the greatest amount of space is consumed by slow-moving or obsolete inventory. Managing inventory investment requires the frugal management of space. How you position or display inventory is the key to supporting visual inventory management (see item #8 above). To minimize inventory investment; support rapid customer order replenishment; and manage inventory space allocation, we recommend to our clients that storage space be reviewed and re-positioned at least quarterly.

10. You’re bigger than you think. When we suggest that our small and mid-sized clients discuss inventory management programs with their suppliers, we repeatedly receive the same response: “But we are too small, they won’t listen.” Wrong. Small businesses are a lucrative market for most businesses as they are quick to pay their bills, which is in stark contrast to larger conglomerates that can take between 90 to 120 days to pay suppliers. Ask your supplier’s what types of programs they offer to help manage or offset the cost of inventory. You will be surprised at how many have a program already available to support a reduction in your investment of cash and time. If you don’t ask, you won’t receive.
Try applying just three of the above suggestions in addition to what you may have in place today, and you will gain more clarity and control over your inventory and your cash. For other tips to reduce costs, check out our website under the resources tab. .
Interestingly, did you notice that out of ten points I never once mentioned reducing your price?

Casemore, S. (2010).Ten ways to reduce the impact of inventory costs. The Globe and Mail. Retrieved 9/11/2012. Available at:

The importance of lithium future, globalization and geopolitical dynamics

Commodities or raw materials like metals, chemicals, grains, etc. are not always appreciated by us, as consumers, because we don't necessary use as a finished product. However, a small change in the market or supply of this commodities may impact greatly over the final consumer. Two or three classes ago, it was explained to us the bullwhip effect but related to demand forecasting but I think this is a good example of how that could happen also from a supply perspective. 

So in this particular case, if lithium supply is not flowing right, prices in our so needed electronic devices may become more expensive. Furthermore, if its inaccessible for political reasons maybe the batteries of our things will become heavier because will be produced from another material. So this example, paints the picture of the supply chain network from the very first material and the bullwhip effect that may cost to the finished good and particularly explains how  geopolitical dynamics affects the distribution of lithium supplies.

Study outlines supply chain challenges for lithium future

September 24, 2012

As demand increases for lithium, the essential element in batteries for everything from cameras to automobiles, a researcher at Missouri University of Science and Technology is studying potential disruptions to the long-term supply chain the world's lightest metal. 

Although the current dominant battery type for hybrid electric vehicles is nickel metal hydride, lithium-ion battery technology is considered by many to be the "power source of choice for sustainable transport," says Ona Egbue, a doctoral student in engineering management. 

"Lithium batteries are top choices for high-performance rechargeable battery packs," Egbue says. "Batteries make up 23 percent of lithium use and are the fastest growing end use of lithium.

" With nearly a dozen different kinds of electric vehicles on U.S. roads this year, more drivers are getting behind the wheel of vehicles powered by advanced lithium power packs. 

Therefore, The U.S. is a major importer of lithium. The majority of known lithium reserves are located in China, Chile, Argentina and Australia. Together these regions were also responsible for more than 90 percent of all lithium production in 2010, not including U.S. production. 

"More than 90 percent of lithium reserves - what is economically feasible to extract - are in just four countries," Egbue says. "The geopolitical dynamics of this distribution of lithium supplies has largely been ignored." 

Due to political instability, there is a question of U.S. access to materials produced in Bolivia, which holds the world's largest lithium resource and has new production projects in the pipeline, she says. 

"The diplomatic relationships between the U.S. and Bolivia had deteriorated during the Evo Morales administration, leading to the dismantling of key partnerships," Egbue adds. 

In addition, the emergence of lithium as a strategic resource and the associated geopolitics is troubling, she says. 

"As China has demonstrated in recent years with rare-earth elements, a major raw material for nickel-metal hydride batteries, a country that supplies a resource can greatly affect the country that receives the resource," Egbue says. "China, which controls more than 95 percent of global rare-earth elements supply, recently made a decision to restrict its export quota of this raw material, causing a significant increase in prices. This action by China highlights the risks of global dependence." 

Egbue has developed a supply chain model for lithium that demonstrates the connection between supply and demand and provides a framework with which to investigate the technical, geopolitical and economic factors that could potentially impact the supply of lithium for electric vehicles. Provided by Missouri University of Science and Technology.

Read more at:

I guess is not just about who has the lithium but also who has the technology and the know-how of how to extract rare-earth elements, specifications of how to transport and handle it. Would it be more convenient to American Companies to invest in extraction and logistic technology in friendly countries with important lithium reserves or to invest in R&D to develop batteries that need materials that are not conflicted by geopolitical reasons?

New Products and Apt Supply Chains

                Consider this situation: Company X has many different successful product lines in a particular industry. It is introducing a new product which will take 8-10 months to get from pulp to shelf.
               What factors determine its initial supply chain? What happens if the product line is a huge success/failure? What are the fundamental factors that it should incorporate in its supply chain to absorb, to a decent extent, such extreme positions?
                 In this paper, the authors focus on how to build an apt forecast and inventory management for P&G for a hypothetical new cosmetic line-up. They then test their model on an historical data of existing product lines and come up with fairly successful and interesting results.
                The primary thing for inventory management for such new end-customer based products is the existence of a good informational flow within the DDSN (Demand-driven Supply Network). There should be a very good process in place for generation and transmission of real-time demand info between the company, its external suppliers and customers (both upstream and downstream) and also within the company itself.
                The next important thing is to have a good forecast. But how do you have a forecast for a product lacking historical sales data? According to the insightful paper,[i] you need to use analogous product sales’ data, iterate for each significant change (this may however lead to problems discussed in the last paragraph) and make appropriate dynamic changes to minimize cost. Although the product can be in high demand or low demand depending on audience reception, the fact is that this demand is tractable for new products with low supply. You could easily invest aggressively in marketing, promotion and expenses to get the optimal number of wall stock units to get the demand curve to come closer to resembling the following (in its introduction stage):
               Even if the product turns out to be a terrible idea, you have the optimal number of products on your wall to get rid of (depending on how quickly your forecasts track demand changes which, in turn, depends on information sharing in your DDSN). If the product is successful though, you can simply build on the robust supply chain you’ve built and scale it up. Although because of the long lead times it seems almost inevitable that all new products would need the initial leap of faith, if you’re not tracking your demand and adjusting production appropriately in the 6th or 8th week, there are some serious problems with your forecasting or DDSN.
              But, then, if you create a hyper responsive system (to get to good demand forecasts in 2nd or 3rd week instead of 6th), how would you deal with the associated bullwhip effect? And since we’re at the bullwhip effect and all in the same SCM course, when do we get together to play the beer distribution game?

[i] Cheung, Christine. “A Short-range Forecasting and Inventory Strategy for New Product Launches”. Web. Accessed 9/25/2012.  <>


In the article, “Time to rethink offshoring?” the author presents interesting points about the changing landscape of the production of high-tech goods in Asia. One of which was a conversation about the rises costs of labor and manufacturing. Developed nations are no longer enjoying the benefits of low labor costs in developing countries. From a business perspective, the need to improve supply chain management practices is apparent. However, from a policy perspective, the solutions aren’t as apparent. 

While I read this article, I couldn’t help but think of the outsourcing policies of the Bush, Jr. Era. To be clear, “Outsourcing occurs when a company contracts a specific process out to a third party, finding someone who specializes in whatever needs to be done.  Offshoring happens when businesses send in-house jobs overseas.  Both may save a company money, but only offshoring specifically means sending jobs out of the country.”[1]

I found an interesting article about the upcoming campaign and how candidates from the left and right are using outsourcing as a target against each candidate:

My questions for this particular topic of rising costs of offshoring:
·         What happens when the developing countries demand for rising labor costs are too much for 3rd party suppliers to be sustainable and affordable?
·         Can there be policy to support job creation for American job manufacturing? How about a sustainable option that will support high-tech goods at an affordable price?
·         Is it possible to support a new standard where the supply chain manufacturing process can be made in a developed nation?


Ursula Project: Unified Rating System, Universal Lifecycle Assessment

In the reading, “2016 Future Supply Chain,” we were introduced to new concepts of measuring a SC apart from successfully meeting customer demand. These new measures included energy use, CO2 emissions, traffic congestion, security compliance and infrastructure simplification. Most of these measures help the bottom line of a company; however, I stumbled upon an initiative that seeks to aggregate such measurements in order to make them transparent and available to the public. In this way the “true” cost of a given product will be known. It is called the Ursula Project (

They have created a system that weighs a given product, capital asset, environmental asset, etc. through a system of internal weights and what they call “intelligent social voting,” basically crowd sourcing for inputs to give a score. The system incorporates environmental, social, economic, political and technological factors. This means that it is similar to the internal rating system that Herman Miller created for their eco-friendly chairs but applicable to any product. Personally, I am skeptical of anything that involves crowd sourcing for votes but it appears to be balanced with other concrete measures. Unfortunately they don't yet have publicized weights for products since it still a new, but I think it is a great idea as it would allow a consumer to evaluate a product by more measures than just the price.

If you designed your own rating system and gave weights to a measure, what would be most important to you? Environmental, economic, social, political, or technological?

If you saw a score on a product in a grocery store would you pay attention? Or would the price influence your decision more? For example, say you are at a store and you see two types of apples: one that had a low score (indicating that it had a larger carbon footprint or came from a country where there was political turmoil etc.) and another type that was more expensive but had a high score. Which would you buy?

Outsourcing in China is Losing Its Allure

About two months ago, a small California company, Seesmart Inc has changed its manufacturing processes from China back to US for the economic situation of increasing costs of logistics, freight and high labor in China. [1]

As the second biggest outsourcing service country, China used to have huge advantages of low cost labor. However, the changes of economic conditions have undermined those advantages of outsourcing services in China. The soaring price of labor costs have risen 15 percent a year, and as the dollar value declined 23 percent since its peak in 2002, the cost of factory labor in dollar terms fell 11 percent in the U.S.[2]  In addition, the price of shipping finished goods has jumped since the average price of barrel of oil has gone from $22.81 in 2002 to $87.48 last year. [2] Although the labor costs of China is still much lower than in the U.S., the total cost of producing in U.S. may be lower when all factors are calculated. The researcherGartner recetly predicted that by 2014, the production of 20 percent of goods mow made in Asia and destined for U.S. consumers will shift to the Americas. [2] Another study by Accenture demonstrated that 61 percent of 287 manufacturers are thinking of moving operations closer to customers. [2]

Outsourcing in China is also a topic in the 2012 U.S. presidential election since most American people think the large amount of outsourcing services in China has stolen American’s jobs. Apparently outsourcing is also a topic for this verbal battle. And both Obama and Romney tried to use pressuring China strategy to win supports from electors. But if those policies will be implemented after the election is suspicious. There are so many benefit bonds between China and the U.S., the policy towards China is inevitable to be dual.  

From my point of view, although the trend of economic conditions (higher labor cost, appreciation in the Chinese yuan compare with the U.S. dollar, higher shipping costs) is not optimistic to outsourcing services in China, for those labor intensive manufactures, China still has relative advantages compare with US.  Otherwise, China is also craving shift from “made in China” to “created in China” status and to promote the living conditions for Chinese people. And china already has taken a lead in solar and wind power industries. In future, it is also possible that China will be a new outsourcing market for high tech manufacturing.


Change Management at Its Best: Kim Lane's Work at the CDC

In "Smarter Medicine," Michael Copeland explains the high-stakes changes that the Center for Disease Control (CDC) made in its supply chain management when it came to deploying vaccination to children in all U.S. states and territories. With just six vaccines in 1994, the Vaccinations for Children (VFC) operation seemed simple enough when it first began. By 2000, however CDC National Immunization Program manager Kim Lane saw that the current supply chain, with its increasing amount of stakeholders and variety in vaccinations, wasn’t scaling well. She predicted that the chain wouldn’t be able to withstand any disruption—from something as minor as one refrigerator malfunction to something with broader impact, like an anthrax scare.

In 2003, the program was still plagued with several inefficiencies, chief of which is the variability of its implementation. VFC allowed each of the 64 different state and city health agencies with which it worked its own operational decision-making, meaning that some agencies deployed vaccination via third party distributors, while others asked doctor reps to pick up the vaccines themselves. Per Prof Z’s first and second lectures, variability is poison to a supply chain—it allows for too many inefficiencies and deficiencies. Standardizing practices was key in streamlining the VFC supply chain.

I applaud the method that Lane and her colleagues, Lamont and Gimson, used in identifying the best solutions to their challenges. Their grit, their ability to highlight what was working well in VCF instead of being distracted by the inefficient programs, reminded me of a book I read this summer: Switch, by Chip and Dan Heath. The Heath brothers argue that to create large-scale change, leaders should look for the “bright spots.” In this case, what parts of the supply chain are working well? Taking a cue from some of the more successful programs among the 64 agencies, they identified centralized distribution as key. Outsourcing this function to McKeeson freed up the healthcare workers, and even CDC, to focus on what they do best: not inventory management, but healthcare.

 Of the many wise decisions that Lane and her team made, below are the two that I think had the broadest impact on the program’s success:

  •      They incorporated stakeholder feedback when restructuring the supply chain. Lamont held several town hall meetings that lent him the perspective of healthcare specialists who are actually doing the work of vaccinating children. Had he not done this, the new practice, he would’ve implemented a component of the supply chain, the call center, that would’ve eventually proved as inefficient as the old system. Furthermore, the call center would’ve weakened in the supply chain in that two of its major groups of stakeholders, the doctors who order the vaccines, and the program managers who distribute them, would’ve had less contact with each other.
  •      They implemented private sector best practices in operations, yes, but they tailored it to a public sector setting. While they looked to companies like Walmart and Amazon for more efficient operations settings, they understood that government, with its requirement to build consensus among stakeholders, simply can’t manage such a huge change as swiftly as most private organizations. Also, Lane’s team only used the salient factors of ops research—while many supply chains call for implementing a Just in Time system, they recognized that their project calls for reserves of vaccines, should there be another shortage.
As a former educator, this article most piqued my attention because of the critical
services that VCF provided to a vulnerable population. Having served in a low-income area, I’m well aware that not all children have access to preventative medicine. Running VCF efficiently allows them to serve that many more kids.

            Still, the article raises a few questions: how can the CDC implement this more robust supply chain in one of its broader goals—its commitment to global immunization? The network would be more complex. I imagine that this would require the CDC to work with at least one distribution center from each of the 60 countries with which it works on this initiative.

Another question: what other government agencies would benefit from revamping their supply chain entirely?  


Copeland, Michael. "Smarter Medicine." Smarter Medicine. Strategy Business, 26 Aug. 2008. Web. 23 Sept. 2012. <>.

"CDC's Commitment to Global Immunization." Centers for Disease Control and Prevention. Centers for Disease Control and Prevention, 28 Nov. 2011. Web. 24 Sept. 2012. <>.
Heath, Chip, and Dan Heath. Switch: How to Change Things When Change Is Hard. Waterville, Me.: Thorndike, 2011. Print.

Michalka, Elizabeth, and Victoria Bouloubsis. "What Will You Change: Taking on the Role of Vaccine Distribution." Feature Story. Duke Fuqua School of Business, 20 Apr. 2010. Web. 24 Sept. 2012. <>.