Valkyrie

Global Supply Chain Management*

Introduction

Rob Brown sat at his desk in late 1994 awed by his new assignment as implementation team leader for Valkyrie. Both he and his team members were new to this concept of managing the supply chain, although everyone had come from within the Valkyrie organization. He remembered the comments of Richard Jones, the Director of Operations:

Thisis a crucial time for Valkyrie. We know we can’t go on the way that we have in the past. This idea of a supply chain is not entirely new to us, but the way that we have to make it work is. That’s why I pulled this team together. Every one of you has been here long enough to have a stake in the survival and prosperity of Valkyrie. Each of you brings a particular perspective to the team. Thisis important in making the supply chain an integral part of the company. It also means that the old ways of doing business are not good enough. We have to rethink the entire process.

Rob thought of the other team members. Marcia Gulick came from corporate finance. He was glad she was aboard the team because she had a good analytical mind. Al Ferrenti had been in sales for the last fiveyears. He had frequently passed on the comments of frustrated customers who could not get the products delivered in the quantities or times that they wanted. John Sherwin had been responsible for production planning at Valkyrie’s main plant in Denver and was instrumental in reducing work-in-process inventory for Valkyrie. George Fuentes represented the information systems group. Sandra Falknerhad extensive experience in production procurement. Rob’s own experience from logistics was substantial but different from theirs. He had negotiated for transport services and more recently had managed distribution center operations.

If any group could implement the supply chain, this team was it. However, this task was going to extend everyone’s experience. He thought to himself, “We are atthe beginning of a learning curve. We are bound to make some false starts as we go along. The main thing is that we get started. Jones as Director of Operations has charged us with the task of design, implementation and operation of the supply chain. We will have to live with this result and take responsibility for making it work.” At the time, Jones dropped a sheaf of documents and reportson Rob’s desk. This was the only information that the team could use to guide their task.

The Industry

The technical lighting industry was highly competitive. Until recently, there had been few major innovations and the competing firms had consolidated into a small number who were competing for market share in a slow-growing market. This balance had been recently disturbed by a change intechnology, starting with quartz-halogen lamps, but soon exceeding that. Valkyrie had been early to seize on the new trend and gained superiority based on a technical virtuosity. Other competitors soon followed, so a technological lead was only temporary unless it was maintained and supported by other forms of competition such as pricing and customer service.

The market for the most partconsisted of large buyers who liked to playoff their suppliers against each other. Some of these were contractors who wanted to supply entire buildings at one time. Others were mass merchandisers and retailers who offered large sales volumes but wanted their suppliers to carry inventory for them. The outward sign was an aggressive-price rivalry. Customers would ask for and receive 1-2% discountsregularly. While these might appear small they were taken against small operating margins and high overhead costs. The market was also fragmenting in the sense that standard designs were becoming less desirable and each customer was asking for variations. Each competitor tried to counter this by offering a wider variety of product designs (stock-keeping units or SKUs). At the same time, there...