Operations management assignment on: Just In Time – Shipping.

1. Executive Summary:

This report highlights the issues in the case study Just In Time – Shipping. It talks about four different issues i.e. Nintendo should deal with the dangers of under stocking & over stocking, how the logistics service providers supporting the customers, what would be the long term position of Nintendo, the role information system would play in order to reduce the inventories & its implications on the manufacturers as well as the service providers & the future aspect of Nintendo.

2. Introduction:

The case study talks about Nintendo Co., one of the manufacturers of the video games which deliver the video games to its customers in nine days. The case talks about the stock outs during the holiday season i.e. in the months of December.

Nintendo had started shipping the commodities through voyages 10 years ago by applying the trends in Just-In-Time (JIT). The case talks about the dangers which the company might face either by under or over stocking the video games. It also talks about the benefits of the logistics provider which might help the company to have a sustainable competitive advantage.

In order to reduce the inventory various new as well as expensive technology would be required to be installed, which would help to keep a track of all the commodities.  The proper tracking of the goods would help the retailer to see he specified goods, its delivery place, date & match with the needs of the consumers.

The last paragraph of the case study states that how Nintendo has managed to pass on certain cost over the retailers by shifting the transportation costs. The Marketing Head of the company states that they are trying to the retailers the various types of benefits as well as helping them to cut down the inventory & show casing the new products on the shelf area very quickly.

Q1. From the retailer’s perspective, what are the dangers of under stocking a video game during the holiday season? What are the dangers of overstocking? How do direct shipments, like those described for Nintendo’s products, help retailers deal with these dangers? Are the retailers simply trading inventory costs for transportation costs? Explain.

Ans1. Under stocking of video games at the time of holiday season would create various types of danger for the retailers. Under stocking refers to a position which takes into consideration the supply as well as the demand of a particular commodity.

In this particular case study, when Nintendo which manufactures video games under stocks, it means that the company i.e. Nintendo is producing the product i.e. the video games in a lesser quantity as compared to the demand of the video games by its consumers (Kouvelis, Chambers & Wang, 2006).

In such type of a situation, the company tends to increase the price of the commodity it produces & charge high prices from its customers. The main goal or aim of any company would be produce sufficient amount of commodity in order to match up with the demand created by the consumers in the market. The major danger for the retailers in case of under stocking the commodities would be that the company would lose high amount of money invested in the production of the commodity as well as it will not be able to sell sufficient amount of product in the market which would lead to less profit generation (Kouvelis, Chambers & Wang, 2006).

The dangers in this particular case study from the retailer’s point of view would be listed as under. There would be majorly two types of dangers which would be faced by the retailer’s. They are as follows:

• The first & the foremost danger of under stocking the video games during the holiday season would be that, if the video games would go out of stock the consumers will lose interest in it which means that the customers would tend to switch to another brand which would provide them the same video game every time when the consumer goes to buy it.
• The second major danger to the company in this particular case would refer to the drop in the overall sales of the video games as the production of the games would not be enough to match up with the demand created in the market. The decline in the sales will also lead to a decline in the revenue generated by the company & thereby leading to a huge loss in the long run (Kouvelis, Chambers & Wang, 2006).

Over stocking of the product refers to a situation where in the production of the commodity would be higher as compared to the commodity demanded by the customers in the market. The demand of a particular product is nit constant throughout the year; hence it would be advisable for the companies not to over stock the commodities.

The two major dangers in over stocking the video games would be as under:

• As mentioned above that the demand for a particular commodity would not remain constant throughout the year, therefore the company in this case should not over stock the video games as the floor price i.e. the amount charged for a particular would be too expensive.
• The video games are technology based products & regular advancements take place in technology & the company cannot only concentrate on one product, hence it would be advisable for the company not to over stock the product (Larson & Halldorsson, 2004).

Direct shipment like those described for Nintendo‘s products, help retailers deal with dangers in the following manner. It is discussed as under:

• Whenever there is any demand for the video games in the market Nintendo tries to fulfil the demand by providing the customer with the product on time. This helps Nintendo to retain the customers & become one of the leading video games sellers in its region. Such a situation is overcome as the company practices overstocking which help them in order to meet the requirements of the consumers (Larson & Halldorsson, 2004).
• Since the delivery made by Nintendo is on time hence the retailer is not required to over stock the video games which in turn lead to a reduction in the floor price of the video game & the order is made a per the demand of the video game in the market.

Yes, the traders are simply trading inventory cost for transportation costs because of the following reasons. They are listed below:

• Whenever the company uses a slower or a cheaper mode of transportation i.e. Ships in order to transport the commodity, the level of inventory being carried by the particular means of transportation would rise as it is one of the most economical means of transport.
• Whenever the company uses a fast means of transportation it becomes expensive but the levels of inventory being carried would be much lesser as compared to the cheaper means of transport. Hence, it could be said that the traders simply trade the inventory cost with the cost of transportation (Larson & Halldorsson, 2004).

Q2. In addition to supporting tighter delivery schedules, how else are logistics service providers supporting their customers? In your opinion, is this “good” for the long term competitive position of the logistics providers? Why?

Ans2. In addition to the tighter delivery schedules, the logistics service providers are helping to support the customers in the following manner. It is listed as under:

• Delivery reliability & on time:

One of the ways through which the logistics service providers are helping to support the customers in order to meet up with the tight delivery schedule is by delivering the customers the video games on time i.e. on the date on which the game was demanded by the customer. This would help the company in order to retain minimum levels of customers & dealing with them in near future (Kouvelis, Chambers & Wang, 2006).

• Delivery speed:

The second benefit which would be provided by the logistics service providers would be by delivering the video games in the minimum possible time i.e. the time taken in order to deliver the goods from the date of issuing of the order would be very less. The logistics service providers would help in gaining competitive advantage over the others.

• Volume flexibility

The last benefit which would be provided by the logistics service providers would be to deliver the video games in whatever volume required by the customer. Volume flexibility would also help Nintendo to gain sustainable competitive advantage which would help in focusing on the needs of the customers as & when required (Kouvelis, Chambers & Wang, 2006).

No, it is not “good” for the long term competitive position of the logistics providers due to the following reasons:

• The volumes would not be able to justify as the quantity demanded by the customers would be fluctuating in the years to come.
• Such type of benefits would limit the firm in order to match up with the changes in the market place.
• The last reason as to why it would not be good for attaining long term competitive position is that Logistics is not the core competency for Nintendo.

Q3. What role will information systems play as retailers seek to reduce inventories by receiving smaller yet more frequent & accurate shipments? What are the implications for the manufacturers and the logistics providers who serve the retailers?

Ans3. The role which the information system will play in order to reduce inventories by receiving smaller yet more frequent & accurate shipments are as under. There are three types of information system which would help Nintendo to reduce inventories (Kouvelis, Chambers & Wang, 2006). They are discussed as under:

• Decision support tools:

The decision support tools would help the managers at the Nintendo in order to find the numbers of containers they need to travel as well as deliver to the customers what time, place in the most appropriate cost available to them at that particular span of time.

• Planning system

Another information system which would help them in order to reduce the inventories is through the planning system. This type of system would help in dealing with various type of activities such as selecting the mode of transportation in order to deliver the goods in the most effective & efficient manner in regards to the cost. It would also help in formulating a weekly delivery schedule which would give the company a brief idea regarding the number deliveries to be done & where (Souder, 2004).

• Execution system

The next best information system which would be used by Nintendo in order to reduce the inventories would be through the execution system. This system would help the company in order to see whether the execution of the delivery system is done properly or not. Any kind of problem which is being faced by the company would be easily solved which would help in the smooth functioning of the delivery process (Dear, 1988).

The implications for the manufacturers as well as the             logistics providers who serve the retailers are explained as under:

Manufacturers:

The manufacturers would be required to produce a minimum quantity of the commodity which would help them in order to match up with the requirements of the customers. This would help to reduce the lead time to deliver the goods to the retailers (Souder, 2004).

Service Provider:

The information system would also help the service providers in the reduction of the average delivery time of the goods to the retailers. This would also help them to choose the most appropriate mode of shipment to deliver the goods on time & in the most cost effective manner. The execution system mentioned above would help the service providers in order to solve the inbound problems efficiently & effectively.

Q4. Currently, Nintendo is able to pass on some of the costs of the faster shipments to the retailers. In the long term, what do you think will happen.

Ans4. Currently, Nintendo is able to pass on some of the costs of the faster shipments to the retailers.

In the long run, the company would not be able to pass on the costs of the faster shipments to the retailers due to the following reasons. The reasons are as under:

• Since the demand levels would not be same always throughout the year, hence the company would not give more importance in delivering the goods on time but it would give importance to keep some stock with them in order to meet up with the demand of the customers (Souder, 2004).
• The Nintendo would not be able to pass the costs of the faster shipments to the retailers as they will deliver the goods when required & hence would have to incur the cost of storing the goods in the warehouse (Dear, 1988).

7. Conclusion:

Hence, it could be concluded that Nintendo should not under stock as well as over stock the video games which would be profitable for the company. It should be concluded that the various information system discussed above should be used in order to practice free flow of the delivery of the commodities. Nintendo should take into consideration that it should not pass on the costs of the faster shipments to the retailers as the demand for a particular commodity fluctuates as well as technology used in the video games also changes quite fast, hence over & under stocking should not be done.

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