MSc Supply Chain & Logistics Management

Business, Operations and Supply Chain Strategy

Date: PRACTICE EXAM Time: 2:00 – 4:15

(105 minutes for the exam itself, plus

30 minutes reading time for the case

study)

Answer TWO questions: ONE from Section A and ONE from Section B

Business, Operations and Supply Chain Strategy PRACTICE EXAM

Page 2 of 5

SECTION A: ANSWER ALL PARTS OF THE FOLLOWING QUESTION

(worth 60 marks in total)

Q.1 First, please read carefully the attached Case Exercise on ‘Hagen Style’. Then answer

the following questions:

(a) Discuss the business strategy that the company has followed so far. What kind

of issues or questions does the company face with respect to the future

direction of its business strategy?

(18 marks)

(b) Discuss the operations strategy that the company has followed so far. What are

the current competitive priorities in operations? What is currently the main

problem area in operations?

(18 marks)

(c) Develop a number of strategic options for the company (relating to business to

strategy in general, and operations strategy in particular). Explain what

strategic decision criteria you consider to be appropriate for evaluating these

options. Based on a careful evaluation of these options, give the company

advice about its future business and operations strategy.

(24 marks)

Please turn over for Section B /….

Business, Operations and Supply Chain Strategy PRACTICE EXAM

Page 3 of 5

SECTION B: ANSWER ONE OF THE FOLLOWING QUESTIONS

(worth 40 marks each)

Q.2 Some articles in the business press advise managers to focus on their company’s core

competences and to outsource ‘non-core’ activities as much as possible. Do you think

that such general advice is always appropriate? If not, then explain under what

conditions outsourcing would be inappropriate. Illustrate your explanation with

appropriate examples from real-life business organisations.

(40 marks)

Q.3 Explain what is meant by the following two network structures in operations:

horizontal networks and vertical networks. Compare the main challenges involved in

managing these different network structures. Illustrate your comparison with

appropriate examples from real-life business organisations.

(40 marks)

END OF THE EXAM PAPER

(Examiner: Dr Robert van der Meer, Strathclyde Business School)

Please turn over for the case exercise /...

Business, Operations and Supply Chain Strategy PRACTICE EXAM

Page 4 of 5

Hagen Style case exercise

‘Hagen Style’ was one of the most successful direct marketing companies in Europe, selling

kitchen equipment, tableware, containers, small gadgets, salad bowls and so on. Founded

around forty years ago as a manufacturer of plastic kitchenware, it originally sold its products

through department stores. However, soon it had evolved into a pioneering direct marketing

operation which sold its products (only about half of which were now manufactured by itself)

through a network of local representatives. Working from home, they were recruited to

service a geographic area, usually within a one-hour drive. In total the company had almost

10,000 representatives although only around 70 per cent of them were ‘active’.

Representatives would sell from door-to-door or at places of work, community centres, clubs,

etc. and consolidate their orders on a weekly basis. Hagen would receive their orders, pack

and dispatch them so that the representatives could deliver to their customers in less than one

week. Most representatives still mailed their order to Hagen using pre-printed forms and pre-

paid envelopes, some faxed their orders and a growing number posted their consolidated

orders by Internet. Whereas many representatives now used the Internet to place orders, most

of their customers were not yet amongst those who would have access to, or be comfortable

using, this way of placing orders. Most of Hagen Style’s products were ‘value’ items of

reasonable quality with standard rather than innovative design.

Orders were received at one of Hagen Style’s two distribution centres (staggered through the

week so as to smooth demand on the centres). Both centres, one in Dortmund (Germany) near

the company’s head office, the other, just outside Munich (Germany), used the same

processes, perfected over many years. First, the representatives’ orders were keyed in to the

company’s information system (or checked if they came through the Internet, as mistakes by

representatives were still common using this medium). This information was fed down to the

warehouse where each representative’s order (usually containing 20 to 50 individual items)

was packed. Much of the packing process was standardised and automatic. A standard-sized

box was automatically loaded on a moving belt conveyor and, as it proceeded down the belt,

automatic dispensers, each loaded with one of the higher selling products, deposited items in

the box. At the end of the belt, if an order was complete, as around 45 per cent were, the box

would be automatically check weighed (to ensure that no items had missed the box), the

delivery note inserted, filler put in the box to prevent damage in transit, sealed, and

addressed. Those boxes which needed additional items packing (usually these were less

popular or large items which would not fit the automatic dispensers) were automatically

routed on to a manual line where operators would complete the packing process. At the end

of the packing lines were the loading bays where boxes would be loaded onto the trucks for

their journey to the representatives. The packing sequence fed down to the warehouse was

calculated so as to ensure that all boxes for a certain area arrived at the correct loading bay

just in time for dispatch on the correct truck.

Please turn over for the rest of case exercise /...

Business, Operations and Supply Chain Strategy PRACTICE EXAM

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Kurt Meyer, Hagen Style’s vice president of distribution, was proud of his distribution

centres:

“It is no exaggeration to say that we run one of the slickest order fulfilment

operations in the world. Years of investment and improvement have gone into

perfecting it. Certainly industry benchmarking studies show that we are significantly

superior to similar operations. We have lower costs per order, far fewer packing

errors, and faster throughput times from order receipt to dispatch. Our information

system, transportation and warehouse people have together created a great system.

Our main problem is that the operation was designed for high volumes but the direct

marketing business using representatives is, in general, on a slow but steady decline.”

Kurt’s anxiety over future business was shared by all the company’s management. Direct

selling using door-to-door representatives was regarded as an old-fashioned market channel.

Traditional customers were moving towards using catalogues, TV shopping channels, or just

buying from supermarkets and discount stores, most of which now stocked the type of

products in which Hagen Style specialised. Recently even Hagen Style, bowing to the

inevitable, had started selling a limited range of its products through selected discount stores

and was planning to sell through a catalogue operation. It reckoned that it could maintain, or

even improve, its product margins selling through these channels. The problem was how to

distribute their products to these new channels. Should they modify their existing fulfilment

operation or subcontract the business to specialist carriers? And what would happen to their

distribution centres?

This posed a problem for Kurt:

“Although our system is great at what it does, the downside is that it would find it

difficult to cope with very different types of order. Moving into the catalogue business

will mean dealing with a far greater number of individual customers, each of whom

will place relatively small orders for one or two items. Our IT systems, packing lines,

and dispatch arrangements are not designed to cope with that kind of order. We

would have the opposite problem delivering to discount stores. There, relatively few

customers would place large orders for a relatively narrow range of products. As far

as I am concerned, it would be better to concentrate on what we know. For example, I

have been talking with Lafage Cosmetics who sell their products in a very similar way

to our traditional business. They have always been envious of our fulfilment operation

and have indicated that they would be willing to subcontract most of their order

fulfilment to us. I am sure we could still get profitable business by utilising our

distribution skills for the substantial number of companies who still need our kind of

service.”