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International Business

STUDY YEAR 2019-2020

EXAM : ISC1 midterm exam Block 4

VERSION (only if it’s necessary) :

MODULE CODE/STUDYGUIDE NUMBER(SIS) : 1018ISC1TS

STUDY + YEAR : IB1; 2019/20

DATE : 18 May 2020

TIME (from - till) : 12:00 – 13:30

NUMBER OF PAGES (including front page) : 5

ALLOWED : Open book exam


(Example dictionary, law book, calculator)

LECTURERS : Mrs. Habiba Khan


Mr. Maarten van Amerom
Mr. Erik van den Thillart
Mr. Paolo Scala
Ms. Margarita Bagamanova

Total points: 45
Caesura: 25 points = 5,6

Good luck!

Name Benjamin Judet


Number 500816942
Class IB1P1
Teacher Ms. Scala
Could the next normal emerge from Asia?
Source: https://www.mckinsey.com/featured-insights/asia-pacific/could-the-next-normal-emerge-from-asia

From globalization to regionalization


The current crisis has shown that the world’s dependence on global supply chains is a weak link,
especially for commodities with a concentration around what now seem to be vulnerable nodes.
China, for example, accounts for about 50 to 70 percent of global demand for copper, iron ore,
metallurgical coal, and nickel.
We could see a massive restructuring of supply chains: production and sourcing may move closer to
end users, and companies could localize or regionalize their supply chains. This change is likely to
become especially prominent in Asia, where a growing middle class creates its own demand for
production. Intraregional trade, which has already driven Asian trade for the past decade, accounts
for almost as much of the total in Asia as in Europe. 19
Going forward, companies may accelerate their supply-chain transition from China to other parts of
Asia. 20 According to a 2019 AmCham survey, about 17 percent of companies have considered or
actively relocated their supply chains away from China. In some sectors. such as textiles, this has
already been happening, and the supply-side impact of the coronavirus could accelerate this change.
21
Japan’s automakers and South Korea’s electronics players have indicated that they may accelerate
the diversification of the manufacturing footprint beyond China. 22

Questions

1. In paragraph 1.3 of the book “Guide to supply chain management” the supply chain architecture
is being discussed. For a better understanding of the supply chain dynamics it is helpful to
include the geography and ask yourself questions like “What happens when a flow is
interrupted?”
What does the Corona crises show with respect to global supply chains and what example is
given in the case? (4 points)

2. What solution is suggested in the case for this weak link in general and what is suggested with
respect to China? (4 points)

3. In chapter 1.4 of the book “Guide to supply chain management” the supply chain dynamics are
explained by the metaphor of the Hoover Dam close to Las Vegas (Figure 1). This supply chain
concept could also be applied to the way the Corona virus is treated in western countries like the
Netherlands. Could you apply this metaphor to Corona and explain what the huge reservoir of
water represents, what determines the opening of the reservoir and what represents the
outcome. (8 points).

Rate of product supply

Rate of customer demand


Figure 1 Balancing supply and demand

Apple Supply Chain Braces for Disruption From Coronavirus


Source: https://www.bloomberg.com/news/articles/2020-01-28/apple-supply-chain-braces-for-disruption-from-
coronavirus

Virtually all of the world’s iPhones are made in China, primarily by Foxconn’s Hon Hai Precision
Industry Co. at its so-called iPhone City in Zhengzhou and by Pegatron Corp. at an assembly site near
Shanghai. Each of those locations is more than 500 kilometers away from Wuhan in central China,
the epicenter of the viral outbreak, but that distance doesn’t immunize them from its effects.
Apple has been increasing production to meet higher-than-anticipated iPhone demand, Bloomberg
News reported last week. The company typically launches its new high-end iPhones around
September, so the virus is unlikely to have meaningful impact on those plans, however the company
is also preparing to begin mass production of a new low-cost iPhone in February, which is more at
risk. The Cupertino, California-based company prepares for extreme scenarios such as the
coronavirus by mandating that major components be dual-sourced -- both in terms of vendors and
geography -- and a major immediate impact to its production plans is unlikely for now, according to
a person familiar with its operations. Even so, the vast majority of its assembly work is done in China,
and so a shortage of workers for assembly lines will have a direct impact on shipment numbers.

Questions

4. In chapter 3 of the book “guide to supply chain management “about sourcing and from the
Apple case we have learned that preferred partnership is a very important for Apple. Corona
showed that this can be a risky policy under the circumstances. Both for the supplier because
they are very dependent on Apple and for Apple vice versa. What new policy is pointed out in
the Bloomberg article and what does it mean (4 points).

5. Consider the souring strategy matrix of Kraljic. Explain where you would position the major
components from Apple and describe this category of products (4 points)

6. For the launching of the new high-end iPhones the purchasing department of Apple is looking for
2 new suppliers for one of its major components. Describe the steps in the order process of
finding 2 new suppliers and mention 3 departments which are involved?
(2x3=6 points)
Enabling workplace physical distancing
Source: https://www.mckinsey.com/business-functions/operations/our-insights/managing-a-manufacturing-plant-
through-the-coronavirus-crisis

Figure 2: McKinsey, 2020

Minimizing the potential future impact of infections will require companies to alter team structures
and working methods in order to limit contact across the workforce. One way this can be done is by
establishing “pods” for all on-site personnel, organized for self-contained teams with clearly defined
tasks and workspaces that can be physically and socially separated from each other as much as
possible.
Organizational changes to support the introduction of pods include dedicating workers to a single
production line and removing “floating” workers—for example, by making pod members responsible
for collecting materials and for conducting their own routine quality checks and maintenance. Shift
handover meetings can be conducted remotely, using videoconferencing technology, while the start,
stop, and break times of different pods can be staggered to minimize contact in communal areas of
the plant. Plants may even choose to modify shift patterns, so lines in close proximity to one another
are staffed and run at different times.
Figure 2 shows how the pod approach might work on a packaging line. Before the changes, perators
working on the line were responsible for multiple machines, supported by logistics, quality, and
utility personnel who worked across multiple lines. Under the pod system, operators are assigned to
fewer machines but responsible for more tasks within their work area, thereby minimizing contact
with staff and equipment outside the pod.
7. In Figure 2 you see the application of so called ‘’pods” for enabling the workplace distancing. In
chapter 4 of the book “Guide to supply chain management “about make, a couple of production
lay-outs are discussed. What type of production lay out is depicted for this packaging line?
Explain the process. (4 points)

8. What measures are taken to protect the workforce from infections according the case text? (8
points)

9. In the case is stated : “Organizational changes to support the introduction of pods include
dedicating workers to a single production line and removing “floating” workers for example, by
making pod members responsible for collecting materials and for conducting their own routine
quality checks and maintenance” What could be an effect of this way of organizing the
production on the efficiency of the production department? Explain your answer (3 points).

END
Answers

1. The case is mentioning how our World relies to much on China and their supply chains.
During the coronavirus crisis supply chains have been getting cut off and are in lack of key
inputs into the production process. Obviously, the coronavirus first came out in China which
resulted in a complete lockdown with everyone at home and all businesses and jobs on hold.
Of course, this had a snowballing effect on all businesses outside of China who suddenly had
their supply chain at a stop. This resulted in an economic plunge and many businesses going
bankrupt. The case mentions how more and more companies are moving their supply chains
away from China to other parts of Asia. This goes especially to companies within the textiles
sector who have been relocating their supply chains away from China during the corona
crisis.

2. The case suggests that not only production and sourcing may and should move closer to end
users but also that companies could and should localize or regionalize their supply chains.
Furthermore, with respect to China the case suggests that the diversification of the
manufacturing footprint should go beyond China and supply chains should extend to other
countries in Asia. It is clear that having so many supply chains active in China puts us in a
position where we have to rely on China in order to get our products. Furthermore
regionalizing or localizing supply chains would be good for domestic markets and would give
companies a greater overview and quicker access to their supply chain.

3. During this corona crisis it has often been seen that demand is exceeding supply in most
markets. Of course, this is due to the supply being lower than it usually is and the demand
for certain products is higher than it usually is. When applying this metaphor to the current
coronavirus situation in western countries we have to keep in mind that the water reservoir
is going to have to be very full. An example could be the DJ controller which I wanted to buy
for my birthday. When is was looking for shops in Amsterdam I realized that none of them
had this product in stock anymore. I proceeded to check other stores in the Netherlands and
nearly all of the shops had this problem. Eventually I looked for stores in Germany and came
across the exact same problem, it was sold out everywhere. In this case, there could not be
enough water in the reservoir for everyone to drink. In other words, the rate of product
supply did not match or exceed the rate of customer demand.

4. N/A

5. I would position the major components of Apple as Bottlenecks simply because due to their
outsourcing, their components have a low spend but provide significant risk to Apple if there
is no supply. These products fall under the category of electronics and everyone know
electronics can be produced for relatively little money but can be sold for extreme amounts
of money. Then again, they could also be classified as critical items as they are bought in
large quantities

6. In order to find new suppliers Apple will have to look at companies which are known to be
chosen by big electronic companies as an outsourcing partner. The marketing, financial and
HR department will all be involved in the process of finding the right new suppliers. Financial
department in order to make sure all expenses related to the outsourcing are within budget,
Marketing department to lure in the suppliers by making them understand this is a good and
quality product and that they can be a part of it and lastly the HR department to make sure
that the supplying companies are ethical and morally professional.

7. N/A

8. The case says that firstly organizations need to add pods within their workplace in order to
keep a distance and protection between employees. Furthermore, dedicating workers to a
single production line and removing floating workers. Additionally, the use of
videoconferencing in order to minimize avoidable physical contact and the start, stop and
break times of every production line should be spaced out a bit in order to minimize the
amount of people hanging out in communal areas.

9. By removing floating workers and dedicating a smaller amount of worker to one single
production line is also taking a risk that the quality might drop. If there are less workers that
means they will have to work more and work on the same thing all day. This creates a
shorter attention span and demotivates workers as they are bored and do not have enough
social contact in the workplace. This is a simple reason for which I think the efficiency is
going to drop. Of course it depends on the worker individually as well and his or her attitude
towards work but I believe having less social contact will decrease motivation which will
decrease quality and efficiency.