ASSIGNMENT NO 02

In this assignment, we are solving

the discussion questions of chapter
02,.

In this assignment, we are solving

the discussion questions of chapter
02,.

SEHER NAZ
Seat no. P-18108047

Submitted to: Sir. Hamza

Farooq.
Q# 01 How would you characterize the competitive strategy of a high-end department store
chain such as Nordstrom and what are the key customer needs that Nordstrom aims to fill .

Nordstrom is an American luxury departmental store.

Elements of NORDSTROM Competitive strategy:

Their competitive strategy is developed in such a way that they at their inception it was just a
shoe specialize store. Later on, it focused on providing large variety of products offerings. And
ended up in evolving into a full-line departmental store.

Variety of product Offerings:

So, the very first competitive strategy to provide compelling product offerings in variety of
products.

Outstanding service and responsiveness

The second thing that the store focused in its competitive strategy is to deliver outstanding
service and experience. It also focused on to achieve high responsiveness as compare to its
competitors, in order to create an edge and point of differentiation over its rivals.

PRICING: Targeting High Income Group

Nordstrom provides high responsiveness, outstanding delivery a huge variety against higher
price. Their pricing strategy focuses on high income group who can pay the price of achieving all
above benefits.

Right now, they are serving their customer in following departments: for clothing, footwear,
handbags, jewelry, accessories, cosmetics, and fragrances. Some stores feature home
furnishings and wedding departments, and several have in-house cafes, restaurants, and
espresso bars.
Q# 02, where would you place the demand faced by Nordstrom on the implied
demand uncertainty spectrum.

High implied demand uncertainty:

The demand faced by Nordstrom is placed on high implied demand uncertainty spectrum.

Implied demand uncertainty is the resulting uncertainty for only that portion of the demand
that supply chain tends to satisfy based on the attributes the customer desires. each individual
customer need contributes to the implied demand uncertainty.

Customer needs it aims to fulfill Causes high implied demand uncertainty

Type of products it offers For suppose the products offered by
Nordstrom such as accessories and cosmetics
are mostly based on ongoing fashion thus
implied demand for such product is higher.
Due to offering responsiveness: And because Nordstrom promises
responsiveness if it through its supply chain
efforts it meets the higher level of actual
demand while underlying product’s demand
is same. Here Nordstrom’s implied demand
uncertainty is again high. Because it also
depends on their level of responsiveness.

Outstanding service and experience Due to Promising outstanding service and

experience, firm now has to handle unusual
surges in demand.
Q#03, what level of responsiveness would be most appropriate for Nordstrom’s
supply chain/ what should the supply chain should be able to do particularly
well

Supply chain responsiveness is a firm’s ability to

 Respond to wide ranges of quantities demanded

 Meet short lead time
 Handle a large variety of product.
 Build high innovative products
 Meet a very high service level
If we talk about Nordstrom, the type product department it is working in, needs constant
innovative efforts to be stable in market and capture higher demand. They should keep working
on constant innovation of their products such as for clothing, footwear, handbags, jewelry,
accessories, cosmetics, and fragrances etc.

Besides, Nordstrom’s supply chain also needs to do particularly well in handling large variety of
products and meeting an outstanding service level. Because this is what they promise to
provide against higher prices. Because this is their edge, their point of differentiation on their
rivals.

Q# 04, How can Nordstrom expand the scope of strategi fit across its supply
chain.

Scope of strategic fit refers to the functions within the firm and stages across the supply chain
that devise an integrated strategy with an aligned objective. Every operation within each
functional area devises its own independent strategy with the objective of maximizing its local
performance. While all functional area across all stages of supply chain devise aligned strategies
that maximize supply chain surplus.
Throughout its supply chain to what extent Nordstrom is able to align its strategic fit among
different stages.

1. It may go for vertical integration.

Nordstrom can expand its scope of strategic fit through creating an alliance with its suppliers.
They can make their supplier a part of their company so as that they work for benefit of both. In
this way Nordstrom can take care of issues regarding:

Minimizing Inventory cost

Procuring best quality

Maximizing profits

Besides, Nordstrom must evaluate all aspects of taking a step towards vertical integration that
it backward and forward integration. It should evaluate all possible pros and cons of making
alliances within it supply chain and act accordingly. Thus, vertical integration is one opportunity
to expand the scope of its strategic fit.

2. (VMI) VENDOR MANAGEMENT INVENTORY:

VENDOR MANAGEMENT INVENTORY is another method to expand the strategic fit for
Nordstrom.

Q#05, Reconsider the previous four question for other companies such as
Amazon, a supermarket chain, auto manufacturer, and discount retailer such as
Walmart.

AMAZON:

 Implied demand uncertainty:

Amazon mostly offers products that are manufactured by other brands and it is basically an
online retail brand. Its major sales are items like books, music, other household’s items. With
that amazon focuses more on cost. It tries to keep the prices low and huge variety of products
that have lower implied demand uncertainty.

 Responsiveness:

Amazon must work on its responsiveness in term of responding to wide ranges of quantity
demanded. It should make efforts is maintaining minimum lead time.

 expanding the scope of its strategic fit,

as for expanding the scope of its strategic fit, it should go for VMI vendor management
inventory to get rid of stockout and fulfill the aim of responding to wide ranges of quantity
demanded.

Super Market Chain:

 Implied demand uncertainty:

super market chain provides products that are usually used commonly or their use is steady or
necessary thus, customer would purchase it anyhow and their focus on choosing a particular
store would base on prices. The super store would have to focus on lower costs and better
quality not any other thing. Thus, the implied demand uncertainty for a supermarket is lower.

 Responsiveness: they should Handle a large variety of product and Meet a very high
service level.
 Expanding the scope of its strategic fit: They can go for Vendor management inventory
system and backward integration.

Walmart:

 Walmart focuses on attracting huge foot traffic in store through lower pricing strategy.
Targeting a middle income group to higher it provide wide variety of products in
affordable prices. As we discussed that each customer needs contributes to the implied
demand uncertainty in case of Walmart it is lower. Because it doesn’t offer so much
personalized
  Responsiveness: Walmart needs to focus on lower lead time of providing its products. It
should focus on Build high innovative products and Meet a very high service level

 Expanding the scope of its strategic fit: They can go for Vendor management inventory
system and backward integration.

Q# 06. Give arguments to support the statement that Walmart has achieved
good strategic fit between its competitive and supply chain strategies/ what
challenges does it face as it works to open smaller format stores in urban
environment.

 Walmart has a strong logistics and information system that works out its aim to
coordinating with Walmart’s entire supplying chain. information system makes it
possible for supply chain to meet the demand of customer at time even when there is
surges in demand.
 The lower pricing ‘every day low pricing’ along with large variety of goods make
Walmart the first choice of its target market. It targeted an economic or middle-income
group of people. The strategic fit it created is best for its company which ended up to
secure its customers while leaving all other stores behind.
 Walmart has an incredible information technology system and they have invested most
of their funds in this regard allowing company to feed demand information across
supply chain to only what is being demanded. As a result, Walmart is a leader in its use
of the information driver to improve responsiveness and decrease inventory
investment.
 Sourcing as a driver, Wal-Mart identifies efficient sources for each product it sells. Wal-
Mart feeds them large orders, allowing them to be efficient by exploiting economies of
scale.
Q# 07, What are some factors that influence implied uncertainty/ how does the
implied uncertainty differs between integrated steel mill that measures lead
times in months and requires large orders and a steel service center that
promises 24-hour lead times and sells orders of any size.

As implied demand uncertainty is basically relates to customer’s desires. So, there are few
factors that influence implied demand uncertainty. Thses factors cause implied demand
uncertainty to go high or low.
When Range of quantity required increases.
When Lead time decreases
Variety of products required increases
Number of channels through which product may be acquired increases.
Required service level increases.
Besides this, implied demand uncertainty Is often correlated with other characteristics of
demand such as;
Forecast error
Average forecast error
Average stockout rate
Average forced season-end markdown.

As for steel mill that has lead time on moths and takes bulk orders at once have allow demand
uncertainty as compare to the one of steel service center that takes multiple orders of any size
and had a lead time of 24-days. Because it had to perform it order within the day. next day
waits for new orders short period of time is that make them highly uncertain implied demand.

Q#08. What is the difference in implied uncertainty faced by a convenience store chain such
as 7-eleven, a supermarket chain and discount retailer such as Costco.
Convenience store such as seven eleven’s customer choose the store for its convenience
of being nearby and availability. They might not possibly looking for lower price. Thus,
Implied demand uncertainty would be high as customers are looking for a variety of
products and convenience versus cost and demand levels are hard to predict.

a supermarket tends to keep variety of products and it focuses on providing the best
quality in the minimum cost. Here in supermarkets customers who usually shops from
there are same ans they are repeater for their same product. They are regular customer
and purchase goods that they constantly demand. Thus, their implied demand
uncertainty is low.

And in case of retail discount such as Costco, it really needs to provide in lower prices.
Because their point of differentiation for customer is that they offer at lower prices and
acceptable or good quality. They totally takes the advantage of purchasing in bulk and
give discount to their customers as well.

Q#09. What are some problems that arise when each stage of supply chain focuses
solely on its own profit when making decision
Identify some actions that can help a retailer and manufacturer work together to
expand the scope of strategic fit

Problems:
If each stage of supply chain focuses solely on its own goal and purpose the overall
supply chain profit would decrease or it may go negative into a loss.

Each department has its on goal but its goal must align to the overall goal of supply
chain.

For suppose marketing department would always want the product to be stores. To be
available in larger quantities than required. Because, their ultimate goal is to get it sold.
While, inventory department will have to for costs and manage according to produce
 only quantities that are needed to get rid of stock out or stock over. Because, these two
issues have their own costs for the firm.

So firm has to maintain and synchronization between all stages of its supply chain and
make a strategic fit.

Vendor managed inventory VMI and backward integration may help retailer and
manufacturer to expand their scope of strategic fit.

Q# 10. For each of the five levers—capacity, inventory, time, information, and price—identify an
example where a supply chain has focused on this lever to deal with uncertainty. In each case,
identify reasons why you think it is or is not an appropriate choice.

Pricing:

Walmart has focuses on lower pricing strategy with everyday products to deal with uncertainty
in demand.

Inventory:

Dell has made supplier alliances to manage their inventory and they produce with make to
order approach. When a customer enters an order description on their website their supplier
also gets notified for providing raw material. Dell’s suppliers own warehouses to manage dell
inventory.

Information:

Walmart, Seven-Eleven Japan and Zara use current demand information to drive
replenishment. The investment in information coupled with speedy replenishment allows them
to deal with uncertainty in demand.

Capacity:

The paint supply chain carries mixing capacity at every paint store to deal with demand
uncertainty across colors. This is an appropriate choice because the relative cost of a mixer is
low and the inventory saved by carrying base colors is large.
Time:

 Nordstrom use the speedy delivery a quick responsiveness in order to deal with
uncertainty of demand.
 Zara uses speedy replenishment to deal with uncertain demand for its trendy
products. This is appropriate because demand for its products is highly
unpredictable and the ability to match supply and demand more than makes up for
the higher cost of speedy replenishment.