This is the case study most people start with as it models and simulates a relatively simple supply chain composed of one factory, one distribution center (DC), and three stores. This supply chain supports a company that makes food seasonings and spices and sells its products in stores around the Midwestern United States. As the case study progresses, you are challenged to keep expanding the supply chain to serve more stores farther and farther away from the original company factory and distribution center, and do so in ways that keep operating costs and inventory levels as low as possible.
[For instructors there is a step-by-step study guide for this case study. It is structured as a 12 week course and explores different aspects of this case study in detail. The structure can be modified as needed. It is illustrated with screenshots and commentary. Instructors using this case study in a course can contact firstname.lastname@example.org to request a study guide.]
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This case study will familiarize you with the basics of setting up a supply chain and managing its daily operations. You will get practice creating facilities, vehicles and routes. And as you simulate and improve the operations of this supply chain, you will get an appreciation for some of the key challenges involved in operating any supply chain.
Case Study Introduction
Imagine a company called “Cincinnati Seasonings”. It is located in Cincinnati, Ohio. The founder of the company learned about food seasonings while growing up because the family operates a chain of restaurants in Cincinnati whose specialty is Cincinnati-style chilli. This dish is the city’s offering to world cuisine, and it uses a certain fine mix of seasonings to give it the flavor it is famous for (Wikipedia article “Cincinnati chili” – http://en.wikipedia.org/wiki/Cincinnati_chili).
Cincinnati Seasonings has done well, and now you have been hired to head up the company’s supply chain operations. They have a seasonings factory and a distribution center in Cincinnati, and they are delivering products to stores in Ohio and the surrounding states. The company is looking for you to improve their existing supply chain, and then expand it to support the company’s growth.
This case study gives you hands-on experience dealing with the central challenge of supply chain management. On one hand, you need to design and operate a RESPONSIVE supply chain that always has inventory available to meet customer demand. And on the other hand, you need to run an EFFICIENT supply chain that always seeks to reduce inventory and operating costs. This is the challenge of balancing competing demands that supply chain professionals wrestle with every day. You cannot think of only efficiency or only responsiveness, you have to find a balance between the two.
The Cincinnati Seasonings Supply Chain
Go to the online library of case studies and import a copy of the Cincinnati Seasonings supply chain model into your account. When you first open the model of the supply chain in your edit screen (shown below) you see the seasonings factory and the company distribution center. You also see the routes connecting these facilities and the three stores that sell the company’s product.
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Click on the “Products” tab in the sidebar menu on the right side of the screen. You see a product called “Spicy Cube” in the products menu. Click on this product and a dialog box opens up with information about the product. It is a mix of different seasonings and spices the company makes and has a price of $1,000. It is shipped in a standard container that is one cubic meter in volume and 40 kilograms in weight.
Then click on the “Facilities” tab and click on some of the facilities. A dialog box opens up to display information about those facilities. In this supply chain most of the vehicles are stationed at the distribution center to support a “hub and spoke” distribution model (the DC is the central hub and the delivery routes are the spokes). So click on the Seasonings DC, and then click on the “Vehicles” menu tab to see the vehicles assigned to that facility. As you click on each vehicle, the route traveled by that vehicle is shown on the map. When you select a vehicle, click on the “Routes” menu tab and select a route. This opens a dialog box to show you information about that route.
Now you know something about this supply chain, so let’s see how it operates. Click on the “Simulation” button in the upper right corner of the edit screen, and a new browser tab opens up showing the simulation screen. Wait for the supply chain to draw on the map, then click the “Play” button to start the simulation. The simulation begins, you see vehicles moving on their routes and on the right side of the screen are graphic and numeric displays of data generated by the simulation. Then at the end of day two, a problem will occur.
FIRST CHALLENGE: Get the Supply Chain to Run for 30 Days
As the new supply chain manager for Cincinnati Seasonings you have inherited a mess. You need to make improvements to the supply chain to get it to run for 30 days. You are going to encounter a few problems early on that will cause the supply chain to crash. Either you run out of product at one facility, or build up too much product at another facility and run out of storage space to handle it. To fix these problems you may want to increase storage capacity, or reduce delivery amounts, or change the delivery schedules of vehicles bringing products to facilities. Do whatever you feel you need to do to get the supply chain to run for 30 days. There are many possible answers. Some answers work better than others.
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Keep trying things and running simulations to see what happens. After some experimentation you will find a way to get the supply chain to run for 30 days and even longer. If a simulation runs past 30 days, you can click the “Stop” button on the simulation screen to stop the simulation. Cincinnati Seasonings uses a 30 day S&OP cycle (sales and operations planning cycle) and that is why you focus on 30 day simulations. Every 30 days the company updates its demand forecasts at the stores and changes production rates at the factory, and that in turn leads to changes in the routes and delivery quantities. So there isn’t much point in running Cincinnati Seasonings simulations beyond 30 days. Your job is to manage supply chain operations from one 30-day S&OP cycle to the next, and find ways to meet product demand while also reducing inventory and operating costs.
TIP: Save backup copies of your supply chain model from time to time as you make changes. Then if a change doesn’t work out, you can restore from a saved copy.
SECOND CHALLENGE: Add more Stores
As soon as you stabilize the company supply chain and get it to run for 30 days, they want you to add more stores and delivery routes to support expansion of the business. Click on “Facilities” and then click on the “New” button to create new facilities in cities where Cincinnati Seasonings is opening new stores. Create stores in the following cities using the numbers shown below:
- Chicago Store: daily demand 100; quantity on-hand 300; storage capacity 500
- Columbus Store: daily demand 30; quantity on-hand 60; storage capacity 300
The VP Sales tells you the address for the new Chicago Store is: 1840 N Clybourn Ave, Chicago IL. As shown in the screenshot below, you type that address into the location finder in the upper left corner of the edit screen (1). The map zooms in on the location specified. You pull back a bit to get a sense of the surrounding area and switch to the satellite view by clicking on the Map/Satellite button in upper left corner of the screen (2).
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In the satellite view you zoom in again to take a closer look at the building where the new store will be located (red circle). You assess the loading facilities at the building and make some decisions about the size of trucks the facility can handle. Then you open the Facilities menu tab and click the “New” button to add this new store (3). And you click on “Product” in the facility dialog box to add products to the store (4).
Regarding the Columbus store, the store will be in the northwest side of the Columbus, Ohio metro area near the intersection of the I-270 expressway and Rt 33, but no specific address is known yet. So you just place the store in that general area. Zoom in on that area of the map and switch to the satellite view. Look for a shopping mall in that area or some other likely spot for the store and place it there. You can always come back later and edit the facility to change its location by dragging and dropping the facility on a different store location if needed.
After you create the Chicago and Columbus stores, select the Seasonings DC facility and create Vehicles and Routes to deliver the Spicy Cube to these new stores. Things to think about as you do this are: frequency of deliveries; size of trucks to use; and delivery routes for the trucks.
Unless your instructor tells you otherwise, just accept the default specifications for the trucks you create. The default speed is 90 kilometers per hour (about 55 mph) and the carry volumes and weights vary according to the size of truck (small, medium, or large). You can also try using other vehicles such as trains, planes and even ships on the Ohio River if you want. Simulations will show how well different kinds of vehicles and routes will work.
You can control the frequency of deliveries a vehicle makes by setting the number in the “Delay between departures” field. If you set the number to 24 then the vehicle will depart again 24 hours after it returns from its last delivery run; if you set the number to 8 then the vehicle will depart 8 hours after returning from its last delivery run, etc.
When you create delivery vehicles, select each vehicle and assign one or more delivery routes to it. You can create routes that take a vehicle back and forth between the DC and a particular store where it drops off all the products it carries, or you can create routes that take a vehicle from the DC to two or more stores where it drops off at each store some portion of the total products it is carrying. When you are finished creating your vehicles and routes, delete any vehicles that do not have routes assigned to them.
HINT: Try whatever vehicle and route combinations look best — then run simulations and see what happens. Experiment with different ideas. There are no right answers, only better answers. And better answers are those that keep the supply chain running for 30 days while also lowering operating costs and inventory levels. Also remember that as you make changes and additions to your supply chain model, the Butterfly Effect will cause your simulation results to differ somewhat from others who are working on the same case study.
As the company continues to grow, you can add even more stores after you get Chicago and Columbus up and running. Your instructor may suggest adding more new stores in cities such as:
- Kansas City Store: demand 75; on-hand 300; storage 500
- Louis Store: demand 50; on-hand 250; storage 400
- Or other cities (like Boston, or Buenos Aires, or Paris, or Shanghai or Singapore)
THIRD CHALLENGE: Lower Transportation and Operating Costs and Reduce On-hand Inventory [while still keeping the supply chain running for 30 days]
Now that you have created a responsive supply chain to support company growth, you need to improve its efficiency to support company profitability. You need to keep your supply chain running for 30 days while also finding ways to lower transportation costs, facility operating costs, and the amounts of on-hand inventory across the supply chain. This is what supply chain management is all about.
Screenshots below show a sample of the data displays you get when you run simulations. Use these onscreen data displays to keep modifying your supply chain model so as to improve overall performance.
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You will find you cannot just focus on lowering one cost without considering its impact on other costs. And you will find the overall performance of the supply chain is dependent on an ever shifting mix of interactions between the four supply chain entities (products, facilities, vehicles, and routes). You can learn more about how to analyze simulation data in the online guide section “Analyzing Simulation Data“. There is also a spreadsheet template at the end of the Analyzing Simulation Data section that you can download to your PC or laptop and import the data produced by your simulations to produce monthly Income & Expense reports and generate key performance indicators (KPIs) to measure supply chain performance.
You will get frustrated at times as you work through this case study. Welcome to the world of a real supply chain manager. Yet in the process of working through these challenges and figuring things out, you will acquire an intuitive or “street-smart” sense (a mental model) for how supply chains operate. You will also develop analytical skills for exploring different ideas to improve supply chain performance. It’s this combination of useful mental models plus analytical skills that makes for a top notch supply chain professional.
Apply supply chain principles and practices from your readings and lectures to address the challenges in this case study. Best practices you learn in class will work well to solve the problems you encounter here. And the problem-solving skills you develop here are directly applicable to the real world. Techniques that work well in these simulations will also work well to improve real supply chain operations.
It might feel a bit awkward at first as you start working with simulations, but after a little practice, you will start to get a feel for it (here’s how one instructor describes it in “What You Learn from Case Studies and Simulations“). You’ll find yourself starting to understand the patterns and dynamics of supply chain operations. And as you discuss your simulation results with your instructor and classmates, you’ll find yourself thinking and speaking like a supply chain professional. You’ll find yourself using supply chain terminology and concepts to describe the problems you encounter and the actions you take to fix them.
There are a few things you should NOT DO in the case study because they either don’t make business sense, or they don’t make logistics sense:
- Don’t reduce product demand or prices – that makes no business sense (business is about increasing demand and profits).
- Don’t increase or decrease initial on-hand inventory amounts at the start of a case study – that makes no logistics sense (inventory doesn’t simply appear or disappear).
- Don’t change default values for daily rent and operating costs at facilities, or default values for vehicle operating costs because, unless your instructor says otherwise, you can assume they are out of your control in this case study.
See further explanation of these points in Case Study Caveats and Taboos.
Other than these few things that you shouldn’t do, you can do anything else you wish as you address the challenges and solve the problems that arise. This case study is not a multiple choice test, there is no right answer — only better answers (those that keep the supply chain running for 30 days at lower operating costs and inventory levels). Simulations show where your ideas can lead. You may find solutions nobody else has thought of… the world is yours; see what you can do.