Wholesale and Retail Management Instructional Materials PDF

Wholesale and Retail Management ENTR 361 Week 1 - Briefing of the subject 3 Week 2 - The Market Economy 4 Week 3 - Uses of SWOT 7 Week 4 – Market Economy - A SWOT...

Wholesale and Retail Management ENTR 361 Week 1 - Briefing of the subject 3 Week 2 - The Market Economy 4 Week 3 - Uses of SWOT 7 Week 4 – Market Economy - A SWOT Analysis 9 Week 5 - Managing the Supply Chain 13 Week 6 – Raw Materials 15 Week 7 - Intermediate Products 18 Week 8 - Retail Supply Chain 20 Week 9 – Community in Retail History 23 Week 10 – Charity retail 27 Week 11 – From the local to the global 29 Week 12 - Effective Policy Support Received During the Covid-19 32 Week 13 – Climate Change Challenges and Opportunities 35 Week 14 - Models of Excellence in Organizations 36 Week 15 - Principles of Lean Philosophy 39 Week 16 - Trading with China: Market Barriers 43 Week 17/18 Exporting Goods Process for Exporting Goods to China 45 References 49 2 Week 1: Briefing of the subject and Expectation Setting Overview and significance of course Course requirements Grading system Course expectations and teaching pedagogies PUP Vision, Mission, Goals PUPQC History PUPQC Mission, Goals and Objectives 3 Week 2 - The Market Economy – A SWOT Analysis To better understand the basis and characteristics of the economic system in which corporate managers and small-business owners operate, this chapter will provide you, the business decision makers, with information to understand, predict, and strategize to solve problems as they arise, especially during the boom-bust cycle. The United States has a mixed economy, as do many nations around the world in contrast to a “pure” market economy, which is also known as free enterprise, the free market, laissez-faire, or capitalism. There are, however, several variants of a mixed economy, different degrees of government intervention coupled with relatively free markets. There are mixed economies where governments own some key industries and intervene extensively in business. France is probably one of the best examples of such an economy. There are mixed economies that have relatively minimal government ownership of businesses and varying degrees of government intervention, for example, the United States, Japan, Germany, and so on. And there is what is generally recognized as an unfettered market economy, also known as laissez-faire, which currently does not exist anywhere in the world. To provide a better understanding of the U.S. market economy in which your company operates, we will perform a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis in the following section. It will clear up the misconceptions and misinformation that are prevalent throughout our society about business and the economy. In addition, a SWOT analysis will reveal how even our “hampered” market economy provides an enviable standard of living for a substantial portion of the population. What Is SWOT? Undergraduate business students typically learn how to analyze a company’s Strengths, Weaknesses, Opportunities, and Threats (SWOT) in a management course. When business students graduate, they have a tool that they either can introduce to the firm in which they are employed or assist managers who are already familiar with a SWOT analysis to gather the information to assess a company’s overall conditions. 4 A company’s Strengths can be summed up succinctly: what gives it a competitive edge in the marketplace? The Strengths of a business are brand recognition, high market share, quality workforce, competent management, intellectual property, strong balance sheet, good corporate citizenship, seamless supply chain, clear strategic plan and vision, and other characteristics that make the business a “powerhouse” in the marketplace. When a SWOT analysis is performed, a company’s Weaknesses may be obvious or subtle. Obvious weaknesses include the lack of a strategic plan, declining competitive position, insufficient cash reserves, operational bottlenecks, low employee morale and high turnover, declining workforce productivity, dubious marketplace image, and a “weak” managerial team. Other Weaknesses may be lack of intellectual property and poor inventory management. The matrix (Table 1.1) highlights many of these Weaknesses and a plan of action to deal with them. 5 Companies could have a myriad of Opportunities— favorable external factors— to improve sales and profitability by entering new markets (especially overseas); by attracting successful management, marketing, and technical expertise; by introducing cost-saving techniques; by forming strategic alliances with new companies or competitors; by getting “ahead of the curve” as consumers’ tastes and preferences change; and being attuned to the unfolding political and macro-economic trends that could impact your operations. Overall, in the 21st century, companies may have to “reinvent” themselves by downsizing, reducing, or eliminating their brick-and-mortar stores and boosting their e-commerce. In short, astute and company business analyst or consultant must in effect be a “jack of all trades” who understand the economy’s Big Picture and can identify— and embrace— the Opportunities that propel businesses to greater success. Table 1.2 illustrates this approach. If competition is a “war,” then there are plenty of landmines so to speak that could pose as lethal or debilitating Threats— factors that can harm performance and undermine a business’ future. An impending recession, foreign competition, financially stronger competitors, new technology, or obsolete product or service could threaten a company’s future, as well as competitors poaching its management and technical experts. Moreover, is the market for the company’s products or services decelerating? Are the marketing experts unaware of changing tastes and demographic shifts that are impacting the company’s sales and bottom-line? 6 Week 3 - Uses of SWOT A SWOT analysis can help business decision makers pinpoint where they should focus their attention to improve their firm’s performance. The internal issues highlight the strengths and weaknesses of a company. Business decision makers should obviously build on the strengths and address as quickly as possible the weaknesses to improve the company’s prospects. By the same token, decision makers must be aware of the external factors— opportunities and threats— that would improve the business’ sales and profitability and be mindful of the threats that could undermine their companies’ permanency. The history of American business unfortunately reveals how one-time iconic companies— and products— have fallen by the wayside. A SWOT analysis of the whole economy can provide business decision makers with the “macro” perspective about the ebbs and flows of the business cycle, which have widespread impacts on virtually all sectors. Thus, knowing where we are in the business cycle could provide valuable information for a business decision maker to plan appropriately and avoid the consequences of an economic downturn, which could turn profitability into substantial losses. Examples of SWOT Although SWOT provides an easily understandable general and easy-to-use method to highlight the internal and external factors affecting a business, additional information is needed to “drill down” to obtain the specific issues that should be addressed to create a better company. Nevertheless, by having an initial framework for distilling a company’s overall performance, analysts like Kenneth J. DeFranco, Jr. have used a SWOT to highlight, for example, Coca-Cola’s business strengths and challenges. DeFranco’s succinct analysis highlights the key aspects of each SWOT component after providing a brief history of the company. At that time, the author concluded that “conservative investors wanting a reliable source of income and a bit of capital gains exposure might want to give the CocaCola Company a glance.” Needless to say, a SWOT analysis is not a foolproof method for investor success but a good starting point to determine if the company’s stock is indeed a “buy” based upon a comprehensive evaluation of its Strengths, Weaknesses, Opportunities, and Threats. 7 A SWOT, therefore, can be used by internal analysts to improve the company’s prospects but also by financial analysts who provide guidance for investors. Additional SWOT analyses for 30 well-known companies— from Amazon to Facebook to Walt Disney— can be found at https://strategicmanagementinsight.com/swot-analyses.html. Lesson Activity 1 1. Why understanding SWOT analysis important in the business? Explain. 2. Aside from what was mentioned, can you also provide your own example on the uses of SWOT as a budding entrepreneur? 8 Week 4 - The Market Economy - A SWOT Analysis A Google search of a market economy and SWOT analysis does not provide any tangible results. However, a Google search of advantages and disadvantages of a market economy yielded more than 41 million results. It would take several lifetimes to review all the results of such a search. Nevertheless, a perusal of the common themes can be used to create a SWOT of the market economy. A market economy’s Strengths, Opportunities, and Threats are obvious given some critical thought and examination of the subject. However, critics of a “pure” market economy assert there are Weaknesses that should be corrected by government policies, which will be cited in the SWOT matrix. A free market economy nevertheless has many advantages over a command economy, where the government typically controls virtually all production and distribution of goods and services. The former Soviet Union and China before its economic reforms are examples of a command economy as is Cuba and North Korea today. All non-command economies in the world today are mixed economies, where government owns or controls such sectors as railroads, airlines, utilities, highways, medical care, education, and other key activities. In a mixed economy, numerous government agencies, bureaus, departments, and so on regulate the private sector. The government intervenes in the economy with regulations that impact wages, prices, working conditions, and so forth. Most policy makers and many economists in the United States, Europe, and other regions typically support a mixed economy, claiming a mixed economy is preferable to a “hands-off” or laissez-faire economic system. A SWOT of a free market economy (see Tables 1.3 and 1.4) resulted in the following analysis. The Strengths, Opportunities, and Threats and the subsequent discussion highlight how a free-market economy would provide boundless opportunities for both large and small businesses and sustainable prosperity. The Weaknesses cited in the matrix are those of free market critics who claim that a mixed economy would eliminate the flaws they have identified (see Table 1.3). Strengths A free market’s Strengths can be summed up from the SWOT. In an unhampered market economy, entrepreneurs invest in productive enterprises to provide consumers with the goods and services that they value the most. Without burdensome regulations and low taxes, the theory of free markets asserts that an economy would achieve the highest living standards for both entrepreneurs and workers. 4 Thus, according to the advocates of free 9 markets, curbing government intervention in the economy would produce sustainable prosperity. Weaknesses Critics of the market economy assert that income and wealth inequality, business monopolies, pollution, the boom-bust cycle, and insufficient spending on education and public health are some of the negative consequences of laissez-faire economics. Economists in this camp generally support government policies to correct the “deficiencies” of a market economy. Other critics claim that a market economy lacks a firm moral foundation and therefore government intervention is necessary to combat what is viewed as the counterproductive “selfishness” and individualism of the free market. In short, according to this perspective, a free market does not promote a compassionate collective spirit and therefore should be tempered by enlightened social and economic policies. 5 Natural income inequality occurs because some people have more talent, skills, or entrepreneurial drive than others. Professional athletes, entertainers, and self- made entrepreneurs as well as competent business executives— CEOs, CFOs, and other upper-level management— earn substantial multiples of the average individual income in our country. Individuals are highly compensated because of their talents. Interestingly enough, professional athletes and entertainers are rarely criticized for their multimillion- dollar annual incomes while corporate executives on occasion are excoriated— sometimes justifiably when they are fired for 10 Opportunities A market economy flourishes when entrepreneurs have the freedom to invest, innovate, produce, and trade— domestically and internationally— in order to meet consumers’ needs. Thus, fewer regulations, lower taxes, eliminating trade barriers, and financial stability create an environment for sustainable prosperity. President Carter’s administration in the late 1970s undertook an extensive deregulation of major sectors of the U.S. economy, which unleashed the creativity of American entrepreneurs, and the slaying of the inflation dragon by then Federal Reserve Chairman Paul Volcker created conditions for a booming 1980s. For more than four decades since the Carter deregulation policies, consumers have benefited from the increase in competitive forces, which have led to lower prices in telecommunications, transportation, and other sectors that were stifled by the federal government’s interventionist policies. In the health care sector, even before the pandemic of 2020 revealed the weaknesses in the American health care system, physicians and entrepreneurs have begun to implement free market medical care all across America. Physicians who were unhappy with the traditional medical practice where they would have approximately 2,000 patients and spend very little time with each patient opted out and created a Direct Primary Care (DPC) practice In a DPC practice, a physician would typically have no more than 700 to 800 patients. Patients pay a relatively modest monthly fee and have access to the physician virtually 24/7. Neither patients nor physicians would have to file an insurance claim in a DPC practice, thus reducing the number of administrative staffers needed in office. At Forward, also a fee-only practice with offices in several major cities, innovative state- of-the-art diagnostic tests discover medical issues that could be treated before the onset of an irreversible chronic condition (see the Forward website, https://goforward.com). Threats Several years ago, Warren Buffett noted, “we will have periodic recessions and occasional panic, but the good news is in the 20th century, we had two world wars, the flu epidemic, the Cold War, atom bomb, you name it. And the Dow Jones [Industrial Average] went from 66 to 11,004. All these terrible things happened, but America works.” We had the dotcom bubble, the housing bubble, and the deepest financial crisis since the Great Depression; the pandemic of 2020, which saw the U.S. economy contract by more 11 than a 30 percent annual rate in the second quarter of the year and the unemployment rate jump to the highest level since the 1930s. Clearly, in the face of a public health crisis and periodic financial bubbles, the resiliency of the U.S. economy cannot be denied. According to an annual survey published by the Competitive Enterprise Institute, Ten Thousand Commandments, an ongoing threat facing the U.S. economy is the more than $1.9 trillion cost of federal regulations (Crews, 2020). To put the costs of federal regulations in perspective, the annual survey points out that federal regulations cost each U.S. household $14,000 annually, which “equals about one- fifth (18 percent) the average pretax household budget as the second biggest budget item after housing.” The estimated $1.9 trillion regulatory cost is slightly less than the “$2.5 trillion COVID-19 Phase 3 stimulus bill Congress passed in April 2020.” A bright spot in the annual survey is that the number of pages in the Federal Register declined during the Trump administration to an average of 66,490 pages per year, substantially less than the annual average of 80,420 pages during President Obama’s presidency. Additional threats that could undermine rising living standards include trade wars, increased federal spending accompanied by huge budget deficits, and monetization of the federal debt by the Federal Reserve, all of which have the potential to cause higher price inflation and rising interest rates. The debt/GDP ratio has been on an upward trajectory since the dot-com bubble burst in 2000. Historically, rising debt levels and central bank monetization of the debt have created widespread dislocations in both production and the labor force. 12 Week 5 - Managing the Supply Chain Even if business cycles never existed, managing a business successfully is challenging. These challenges include competition, changing consumer preferences, input price pressures, selling prices, cash flow issues, employee morale, strikes, taxes, regulations, geopolitical events, natural disasters, quality control, and of course supply chain disruptions. In other words, entrepreneurs should be thinking of value networks that will allow them to switch out links, take new routes from supplier to market, and be agile and flexible. Business is a constant swirling flow of change and more change. And in 2020, COVID-19 caused the greatest challenge to American businesses— large and small— possibly in our country’s history as many states and cities locked down “nonessential” businesses for weeks or months and then imposed draconian restrictions as they slowly allowed restaurants, gyms, hair salons, and small shops to reopen. During 2020, 29 retailers declared bankruptcy, including such iconic retailers such as JCPenney, Lord & Taylor, Neiman Marcus, and Brooks Brothers. And thousands of small businesses have closed their doors permanently. And during the 2007– 2009 Great Recession, retailers that filed for bankruptcy or liquidated their businesses included, Chrysler, GM, KB Toys, Circuit City, CompUSA, Linens ’N Things, Fortunoff, Levitz, and Bombay, while other retail outlets reduced the number of brick-and mortar stores. A successful business where “all cylinders” are working smoothly will no doubt be profitable and sustainable. If one or more of a business’ cylinders is underperforming, then the enterprise could not only suffer losses, but its survival could also be in jeopardy. The business cycle, however, adds another dimension that poses a huge challenge to managing a business. Just when it appears that a company is firing on all cylinders, the bump in the road— a major economic decline (the bust phase of the cycle)—could turn profits into losses and could jeopardize a business’ very survival. Thus, the U.S. economy is in reality multidimensional. We have the “real” economy based upon savings, investment, consumer preferences, and international trade; in other words, the voluntary choices of buyers and sellers that create the economy’s mosaic of goods and services valued by consumers. Imposed on the economy is the business cycle, which we have seen is “man-made” and manifests itself in distorting the structure of production leading to unsustainable booms and painful busts. Consequently, the supply chain would be affected from raw materials to consumer sales during the business cycle. An overview, therefore, of the business cycle and the supply chain would provide managers with insights on how to best manage their enterprises no matter where their business is in the structure of production. One template of viewing the economy is based on Sean Corrigan’s cone of production (see Figure 5.1). 13 Over time, primary (raw) materials, mixed with capital become intermediate goods, which are then distributed to wholesalers and eventually to consumers. Essentially, this is the flow of goods in the free market economy. In short, we can trace the roots of every consumer good back to its “state of nature” and then follow its journey as these raw materials are eventually transformed into retail products that are purchased in stores or online. In other words, virtually all the challenges cited at the beginning of the chapter must be addressed continuously for all firms to be profitable. Inasmuch as in a growing market economy, profits are more prevalent than losses, and the entrepreneurs/ managers who are the most adept in organizing their businesses will be the most successful. Lesson Activity 2 1. How does the following challenges must be seriously addressed by business entrepreneurs, to wit: competition, changing consumer preferences, input price pressures, selling prices, cash flow issues, employee morale, strikes, taxes, regulations, geopolitical events, natural disasters, quality control, and of course supply chain disruptions? Explain and provide an example for each. 14 Week 6 – Raw Materials Just as commerce is the lifeblood of civilization, raw materials are the lifeblood of the supply chain and the production process. From copper, lumber, iron ore, crude oil, rare earth minerals, and dozens of other commodities, which must be extracted from the earth, the producers of raw materials as well as the consumers of the resources that nature provides must work harmoniously for the supply chain to operate smoothly. Suppliers of raw materials are subject to environmental regulations, volatile prices, labor strikes, competitive pressures, domestic and global logistical challenges, and of course the business cycle. In other words, the challenges facing raw material producers are formidable. Nevertheless, without raw materials, civilization ceases to exist, as we know it. Raw materials can be divided into two categories— direct materials, which is self- explanatory, and indirect materials, the supplies necessary to bring the raw materials to the marketplace. All direct and indirect materials, therefore, must be part of the planning process to calculate the costs of production. In addition, “in many cases, while it is always better to calculate than to predict, materials planning may include forecasting due to seasonality, market volatility or other external factors” (emphasis added). One of the primary external factors is the business cycle, which has a profound impact on the raw materials supply chain. With the supply chain having gone global the past several decades, factors such as lead time, mode of production, long/short supply chain legs, overstocking and understocking, and quality and compliance issues all weigh on managers’ ability to optimize the raw materials supply chain. One of the greatest challenges that face raw materials managers is relying on optimistic forecasts, which would cause overstocking of several commodities such as copper, lumber, and crude oil, to name a few. For example, the price of copper (see Figure 5.2), one of the most price-- sensitive raw materials that fluctuates markedly during the business cycle, poses an obvious challenge to producers, namely, when to expand capacity, how much to put into inventory, how much to discount as demand falls, when to close mines as demand slows, and so on. 15 The same concerns apply to lumber, where production is highly correlated with housing starts, a key indicator of the business cycle (see -Figure 5.3). Although the correlation is not “perfect,” the volatility in lumber prices reflects how this commodity is affected by factors other than just housing starts and the business cycle (recessions are shaded gray). U.S. Census Bureau and U.S. Department of Housing and Urban Development, Housing starts: Total: New privately owned housing units started [HOUST], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/HOUST, December 21, 2020. Lastly, the price of crude oil (see Figure 5.4) has had a history of widespread volatility since the first oil crisis in 1973– 1974 and then again in the late 1970s. The collapse in all prices in the mid-1980s and then the spike a few years later wreaked havoc with the economies of such cities as Houston, which is at the epicenter of the oil trade in the United States. Commercial real estate was overbuilt in Houston and the subsequent collapse in prices (mid-1980s) and then again in the early 1990s created enormous opportunities for investors who had the cash or the ability to borrow from the banks to purchase real estate properties and/or oil properties at depressed prices. 15 And since the end of the dot-com bubble in the early 2000s, the price of oil has been on amazing roller coaster for the past two decades. With the push for electric cars throughout the world, the question remains whether the price of crude oil will be permanently repressed, or if another bout of price inflation in the 2020s will lift crude oil prices and other commodities well above their current levels. And another variable that could impact the price of oil would be any new initiatives to reduce the use of hydrocarbons in the coming decades from the Biden administration. Thus, oil producers will be hard-pressed to forecast an accurate price of oil for the remainder of the decade. A sustained rise in commodity prices, however, is a real possibility based on the enormous increase in the money supply during 2020. According to several analysts, the “money pump” to counter the effects of the COVID-19 lockdowns will boost prices in general and commodity prices in particular. 16 Previous commodity booms were preceded by easy money policies in the United States and around the world. 17 The bottom line for managing raw materials and the supply chain is to be flexible and nimble, especially as the business cycle unfolds over time. Several tactics should be pursued for both material producers and raw material users. Raw material suppliers should monitor economic conditions as closely as possible and avoid overstocking their inventory. Insofar as an inverted yield curve is a precursor to a 16 recession— and the cable business channels report on this phenomenon frequently— the lead time before a recession begins should give managers ample time to decide if the “big one” is coming— a downturn that could cause a precipitous drop in commodity prices. For users of raw materials, having several suppliers during the boom is important to avoid any production bottlenecks. Relying on one or even two suppliers during the boom when commodity prices are typically rising could have a negative impact on the bottom line if prices of a company’s output cannot be raised to cover its cost hikes. One way to avoid prospective price hikes during the boom is to make pre-emptive purchases. The danger here is increasing inventories of several commodities could backfire if a recession occurs soon thereafter when commodity prices may be falling. Thus, purchasing agents must try to gauge strength of the boom and forecast when the downturn may occur to minimize the negative impact of rising and falling commodity prices. Lesson Activity 3 1. Explain in your own words why the raw materials are the lifeblood of supply chain? Provide an example 17 Week 7 - Intermediate Products In the supply chain, intermediate products are in effect a way station to eventually reaching the consumer. Intermediate products can be characterized as durable and nondurable goods. Durable goods would include wood products, nonmetallic mineral products, primary metals, machinery, computer and electronic goods, motor vehicles and parts, among others. Non-durable goods would include relatively recession-proof products such as food, beverages, and tobacco and more economically sensitive products such as textile and product mills, paper, apparel and leather, petroleum and coal products, chemicals, and plastic and rubber products. These products are thus processed to satisfy consumers’ demands, both durable and nondurable goods, which will be reviewed in the next section. During the business cycle, we would expect durable manufacturing, one of the most economically sensitive sectors, to fluctuate more than the nondurable manufacturing sector. Over the course of many cycles since the mid-1970s, durable manufacturing rose faster during booms and fell greater in the bust than the less-sensitive nondurable manufacturing sector. The drop in manufacturing during 2020 was not your typical business cycle plunge and recovery. However, Figure 5.5 reveals that manufacturing was beginning to slow down during 2019, before the pandemic lockdown pushed manufacturing over the cliff. In other words, a typical cyclical slowdown was unfolding as in previous cycles with nondurable goods contracting faster this time than durable goods manufacturing. As far as intermediate goods prices are concerned during the business cycle, Figure 5.6 highlights the gyrations since the first oil shock recession of 1973– 1975. Intermediate goods prices tend to decelerate prior to the start of a recession and occasionally decline year-over-year. The sharpest decline occurred during the housing bust of 2007– 2009 when petroleum products prices plunged, driving the index into negative year over year change (see Figure 5.7). For intermediate goods producers, the challenges during the business cycle are as follows. During the boom phase, as raw material prices are increasing a company’s margins may be squeezed if it cannot pass its higher input costs on to wholesalers and/or retailers. Depending upon the industry of 18 the intermediate goods supplier, resistance to higher prices in the early stages of the boom may be significant. However, as the boom unfolds, wholesalers and retailers may be more willing to pay higher prices because the injections of new liquidity that kick- started the boom may be sufficient for them to pay the higher prices and pass on higher prices to consumers. For example, the price of inputs to computer manufacturing may be increasing, and if the final demand for computers is also robust, then computer manufacturers should have no problem raising prices. When the boom reaches a peak, intermediate goods manufacturers may be in a major price squeeze as raw materials may still be rising but the final demand is flattening or beginning to decline. And if intermediate goods manufacturers have overestimated final demand, they may have inventories piling up just as final demand prices are falling. 19 Week 8 - Retail Supply Chain Not long ago, the supply chain for retailing was quite simple. Manufacturers would ship their products to wholesalers who in turn would send the merchandise to department stores, grocery stores, and other retail outlets. Consumers, in turn, would make their purchases at the local mom-and-pop shop or nearby department store or in a store located in a mall if they lived in the suburbs. As retailing evolved, consumers could order products through a mail order catalog. And the introduction of a toll-free 800 number for ordering without having to leave one’s home made shopping a relatively seamless experience— which was made famous by such well-known retailers as Sears and L.L. Bean. The commercialization of the Internet has led to one of the greatest shifts in consumer spending in history. Instead of the traditional supply chain, e-commerce has created a more “layered” distribution of goods from the manufacturer to the customer. Now, manufacturers can send their goods not only via the long-standing supply chain but also to a regional distribution center, which in turn would send the merchandise to a “front distribution center (FDC).” The FDC has the option of sending directly to the retailer or to the customer. In addition, the wholesaler now has three options in the supply chain; the merchandise can be shipped to the regional distribution center, the front distribution center, or the retailer. E-commerce has caused a substantial transformation of consumer shopping habits and has created additional challenges for retailers, online platforms, and manufacturers. Consumers want quick, free shipping and free return shipping. At a minimum, consumers want merchandise delivered in two days and to be able to return an item hassle-free, which means receiving a return shipping label with packaging. This obviously poses both challenges and opportunities. E-commerce retailers have had to invest heavily in automation, artificial intelligence (AI), logistics, and other tools to get products out the door as rapidly as possible, and to be able to satisfy customers who were dissatisfied with their purchase. Consumers, being tech savvy these days, comparison shop to get the best deal possible creating enormous price pressures for retailers. Unless productivity rises for online retailers, profit margins will tend to be squeezed as consumers scan to comparison shop on their smart phones in a brick-and-mortar store and see what the best deals are online. In fact, a strong case can be made that one of the reasons consumer price inflations has been kept at bay for the past 20 years, especially on the goods side, is the fierce competition for the consumers’ dollars. Consumers have more information at their fingertips than they ever had before, and retailers therefore have to be superefficient to 20 maintain sales in the most competitive retail environment in our history. Thus, the long- term secular trend in retail prices should be down for the reasons stated previously. The phrase “The consumer is king” is more appropriate today than at any time since the first department store was opened in the 19th century. Price deflation is the hallmark of a free- market economy but has been interrupted by bouts of price inflation, which we have witnessed prior to the creation of the Federal Reserve in 1913 and since then. Inasmuch as consumer price inflation has been in a downward trend for four decades, will this trend continue, or will another price inflation cycle unfold in the 2020s? If consumer prices will accelerate in the future, what does this portend for the retail supply chain? During the boom phase of the business cycle, consumer prices in general tend to rise or even rise moderately and occasionally decline, as was case during the Roaring Twenties. Each product and service therefore have an “inflation cycle” over the course of the economy’s boom and bust. A price index does not capture the dynamics of individual sectors and companies within those sectors. If consumer demand were robust in some sectors, manufacturers and then retailers would be able to pass along higher costs to consumers. If consumers were price- sensitive, they would tend to balk at higher prices or seek out lower price alternatives. This poses a challenge for both manufacturers and retailers, namely, how much of their costs would they be able to pass on to consumers during the boom phase of the cycle? On the other hand, if prices in general are rising (e.g., the double-digit price inflation of the 1970s), consumers may be making pre-emptive purchases in order to avoid higher prices in the future. This is one of the defenses consumers have to protect themselves from rising prices during the boom. And when the recession begins with unemployment climbing and consumers become more anxious about keeping their jobs, even as price inflation is moderating, they will tend to reduce their purchases of discretionary items such as jewelry, clothing, new automobiles, and any other merchandise that could be postponed for an indefinite period of time during the downturn and possibly into the early months of the ensuing upswing in the economy. The What tactics and strategies could corporate managers and small business owners implement to deal with the challenges of the business cycle? One obvious tactic is to lock in prices of goods for upcoming seasonal merchandise in the expectation of higher wholesale prices. If retailers and wholesalers’ contract with manufacturers a set price months before production, then they could reap the benefits of higher price inflation in general as the new money that has been created “trickles down” to consumers in the later phase of the boom cycle. The downside to this tactic is that manufactures may want retailers and wholesalers to commit to a certain amount of production to lock in a price. That could be problematic if final demand does not materialize as much as businesses expect for the inventory that has been purchased in anticipation of higher prices and 21 sales. Nevertheless, managers and small business owners could “do nothing” and pay higher prices as the merchandise moves along the supply chain and then observe consumer reactions to the price inflation. Creative marketing then would be needed to move the higher priced merchandise such as “Beat the price hikes. Buy now!” campaign or other inducements to keep real sales from declining. Thus, if retailers have extensive knowledge of their customers’ needs and wants and price sensitivities, they should be able to navigate the challenges during the inflationary boom. As the recession unfolds, retailers may find that consumers are even more price sensitive as economic uncertainty pervades society. During the economic downturn, profit margins would be under pressure as sales may be flat or declining and costs may still be rising. Retailers then could be in a position to get price concessions from wholesalers and/or manufacturers in order to move merchandise to the consumer. For retailers, therefore, it would be prudent to have more than one or two wholesalers in their supply chain so they could survive the bust phase of the cycle and be in a position to thrive when the next upswing in the economy begins. 22 Week 9 - Community in Retail History This collection contributes to a strand of scholarship that complicates the dominant narrative of a transition from traditional to modern retail by challenging the assumption that the social dimensions of retailing were left behind in the process. In presenting case studies of continuity and adaptation, rather than decline, we break from views of modernity that draw binary distinctions between traditional lives, deeply embedded within a series of social relationships and rooted in a specific place, and unrooted modern lives. As far as there was any clear transition from the traditional to the modern, it was more than a matter of shedding social entanglements and did not always render encounters between increasingly atomized individuals ever more transactional. The history of modern retail –as of modernity itself –is not one in which community is simply something lost. A fuller understanding requires us to ask questions about the changing nature of belonging and the boundaries of inclusion and exclusion. In order to understand how the social dimensions of retail played out over the long 20th century, we must first trace the changes seen in the world of retail during this time. The emergence of modern retail has traditionally been seen as beginning in the late 19th century. Although historians have been keen to highlight earlier innovations, the notion remains influential that there was a change across Western Europe and North America around this time when, as Selfridge put it, ‘a few shopkeepers became inoculated with the spirit of enterprise’ and ‘grew beyond the little shop’. He saw ‘the modern spirit of organization’ represented by the new department store, both through the scale of its operation and its impact in the locality: ‘It is intimately associated with every family in the community in supplying them with the necessities of life, and thus by force of circumstances enters into the daily life of the city in which it is.’ Historians have tended to agree that department stores had a significant impact in a number of respects. For retail historians, they relocated consumption to city centers and were instrumental in the establishment of new practices for displaying, advertising and pricing the goods on sale, alongside rationalization and a ‘managerial revolution’. Meanwhile, cultural histories of the department store have explored the extent to which it was architecturally and symbolically something new and exciting, promising democratized luxury and the opportunity to browse as a form of leisure activity. Writing in the 1950s, James B. Jefferys identified the emergence of the department store alongside two other defining trends over the late 19th and early 20th centuries. One was the growth of the co- operative movement, strongest in its industrial heartlands in the Northwest and East Midlands. 23 Local societies typically established themselves by selling groceries and provisions, always adhering to the model set out in 1844 by the Rochdale Pioneers which saw surplus profits returned to members in the form of a dividend. The other trend was the rise of multiple store retailers (or chains), whereby expansion was made profitable through economies of scale, standardization and prioritizing low prices over luxury. By 1914, both the newsagent WH Smith & Son and the Singer Sewing Machine Company had over 1,000 sales outlets, with the likes of Lipton Ltd, the Home and Colonial Tea Company and the Boots Pure Drug Company not far behind. It was only over the middle of the 20th century, however, that these and other new forms of retail became the norm. Mass retailing and mass consumption developed less rapidly over this period than it did in the United States, though the transformation was still dramatic. As John Benson noted, by the 1980s ‘British shoppers [had] transferred the bulk of their custom from small, local retailers … to larger, more centralized, and more impersonal outlets’. At the forefront of retailers adopting the practice of selling pre-packaged branded goods at a fixed price were the new self- service supermarkets. Increasingly the customer’s guarantee of quality came from the standardized product and the way it was mass advertised, rather than through negotiation and relationship with a specialist retailer. What might be celebrated as greater freedom for the consumer could also be regretted as a loss, though felt differently according to class. This might be a loss of the economic advantages of credit and bargaining for working- class consumers, and equally a loss of the subservience displayed to middle- class customers. If the mid- 20th century saw the relationship between buyer and seller depersonalized and disentangled from local relationships, then the past half- century has seen it commonly relocated from localities altogether. By the 1990s, out- of- town British versions of the North American shopping mall were being developed. Retailing moved further away from traditional urban sites when it then migrated online more dramatically in the United Kingdom than elsewhere in Europe. This was evident long before the COVID- 19 lockdowns, with one in five Britons having bought food online by 2012, and 15 per cent of all retail sales taking place online by 2014. These changes combined have prompted an existential crisis for the high street and bricks- and- mortar retailing more generally. The core narrative of these changes is one in which retailing has been standardized, depersonalized and essentially uprooted from the communities within which it operates. Where historians have explored the limits and counternarratives to this, they have tended to do so with a focus on credit. For Margot Finn, ‘Victorian and Edwardian tradesmen remained hostages to traditions of consumer activity rooted in credit, character and connection’, which worked against the 24 emergence of economic relationships entirely defined by the cash nexus. Sean O’Connell has seen some continuity despite the further developments of the 20th century, as ‘agents from within working- class communities made many business decisions on behalf of mail order catalogue companies or the large- scale moneylenders. Meanwhile, in his study of working- class credit in Tyneside, Avram Taylor looked to ‘the interpenetration of instrumental and affectual spheres of action’ to explain the apparent contradiction that small shopkeepers ‘were part of the communities that they exploited’. The chapters in this collection consider credit as one of a variety of ways to explore the place of retailers within those communities. This is clearest when looking at small- scale retailing, which has, despite the modernizations and consumer revolutions of the 20th century, remained an important part of the retail landscape. Michael Winstanley acknowledged this for the early part of the century, noting that the great many independent traders and small shopkeepers who survived tended to be skilled specialists rather than the general stores more easily displaced by the supermarket. Moreover, and significantly for our purposes, he found they often ‘value[d] social and psychological rewards which find no place in the balance sheet or the economic textbooks’, placing independence and respectability ahead of a simple calculation of profits made. The tendency to overlook small- scale retailing continued into the 21st century, as John Benson and Laura Ugolini noted: ‘The hawker and peddler, the Saturday- night market, the corner shop and even the specialist grocer, clothes shop and off- license can all too easily be relegated to a sepia- tinted, Christmas- card version of the world we have lost.’ These traders have undoubtedly had to operate alongside increasingly large- scale, automated and depersonalized alternatives, but small- scale retailing –often with a local and personal character –has never stopped being an important part of modern retail. Indeed, in 2018, those with fewer than five employees accounted for three- quarters of VAT (Value Added Tax) or PAYE (Pay as You Earn) based enterprises in the UK retail sector. Despite the challenges and disruptions of the COVID- 19 pandemic, small traders are still an important part of contemporary retailing. We therefore cannot understand retail, historically or today, if we overlook small- scale and local retailers. And it is the tailor in Leamington Spa, the fundraising bazaar in Darlington, the womenswear shop in the Black Country, the charity shop in Manchester, the fish and chip shop in County Durham and the British Asian corner shops up and down the country which occupy much of this book. ‘Successful small shopkeeping’ in the early 20th century, as Christopher Hosgood put it, ‘demanded an investment by the proprietor in the social life of the community’. In Chapter 7, Nadia Awal and Jenny Gilbert document this in the cases of two small female- owned clothing retailers trading throughout the 20th century. 25 As brought to the surface in a new heritage project at the Black Country Living Museum, the buying and selling of women’s clothing was and continued to be social, tactile and embedded in community networks, deeply rooted in place and regional identity. Meanwhile, it is local contexts and cultures that Ian Mitchell tells us, in Chapter 4, explain not only the business success or otherwise of individual co- operative societies, but also the choices made in balancing paying out the members’ dividend and funding a range of educational, social, cultural and political projects. In doing so he adds to our understanding of both co- operative retailing and the political movement. 26 Week 10 - Charity retail This collection addresses the very limited inclusion of charity retail in retail history scholarship. This is especially striking given the attention from scholars across a wide range of disciplines prompted by the growth in the number of charity shops in the final decades of the 20th century. These were retail outlets run usually as one of a number of shops trading to raise funds for the same charity, typically staffed at least in part by volunteers and primarily selling donated second- hand goods. At the time of writing, there are over 10,000 such shops in the United Kingdom. Charity shops are not an exclusively British phenomenon, although the latest available figures do show the United Kingdom to have more per head than any other country in the world, at 15.22 charity shops per 100,000 population in 2023. This is significantly more than the equivalent figures for North American charity- run thrift stores, which (even grouped together with other kinds of resale retailers) would be roughly half the UK rate in the United States and only a quarter in Canada. The only other countries to come close are New Zealand (12.56) and Australia (9.60), where they tend to be called opportunity shops or op shops for short, and the Republic of Ireland (10.42). The most common charity- run stores across the rest of Europe are the world shops (previously third world shops) selling foodstuffs and craft items produced ethically in the Global South. Germany leads the way with 900 of Europe’s 2,500 world shops today, though compared to population this is only around one per 100,000 people. Most of the United Kingdom’s charity shops are in England, along with the vast majority of the population. However, pre- COVID- 19 figures showed that, of the constituent Four Nations, England in fact had the lowest number of charity shops per head (at 16.61 per 100,000), behind Wales (17.86) and Northern Ireland (17.83) and noticeably lower than Scotland (18.48). An independent Scotland would therefore have the highest number of charity shops per head in the world. This stands in stark contrast to only 68 South African charity shops listed by Charity SA (1.13 per 100,000). In Chapter 9, Jessica Field looks to the 1970s as a time when there were efforts to export the British model of the charity shop to the former colony. The difficulties these efforts ran into offer some insight into the geographical boundaries of this retailing phenomenon. It is this distinctly, though not uniquely, British form of charity retail that first came under serious investigation from a range of disciplinary perspectives in the 1990s, led initially by retail and marketing researchers. 27 The reasons for growth were identified as both the increased popularity of supporting charities as customers and donors, and the willingness of charities to embrace the fundraising opportunities presented by turbulence across the retail sector, including vacated premises. In 1992 researchers found that 41 per cent of charity shops were run by medical or disability charities, 18 per cent by international development organizations and 14 per cent by children’s charities. Detailed surveys profiled the charity shopper, finding that more than half the population had bought from a charity shop, and investigated how distinctions of class, education, gender and generation played out in patterns of and motivations for charity shopping, donating and volunteering. Contemporary charity shop retailing and consumption was mapped out. Sociologists and geographers were among those who brought a heightened focus on the charity shop as a site of alternative modes of consumption, with the commodification of donated and sold items complicating the supposedly linear process of production and consumption. This means that ‘goods are not only potentially resaleable but are open to re- enchantment; they have consumption histories and geographies just as much as production histories and geographies. The motivations for consumers to engage in this process can range from affordable provisioning to using obscure purchases for positioning themselves within subcultures or as a political choice to engage in ‘alternative economies’ as a way of ‘fighting against the capitalist system’. By the turn of the 21st century, the distinctiveness of this model of retailing, and the tax advantages it brings, were widely seen as being undermined by the increasing professionalization of the charity shop. Suzanne Horne mapped this onto a continuum, whereby the development of a charity retailing operation entailed moving from a ‘social service orientation’ to a ‘commercial service orientation’, resulting in ‘a retail sector which at one end of the scale shows unrivalled retail professionalism and at the other a safety net for the socially excluded in society’. The Socia volunteers and functions that a charity shop might leave behind in its professionalization were listed by Elizabeth Parsons as including ‘providing a contact point between the parent charity and the general public, providing clothes and household goods cheaply for customers, providing useful employment, support and training for a range of volunteers, and recycling unwanted household items’. Researchers emphasized the complexity of these developments. Richard Goodall noted that ‘professionalization and commercialization’ were accompanied by ‘alternatives and counterposed resistances. Equally, Parsons’ typology of charity shops revealed that the most profitable were not always the most professionalized, with community- rooted local hospice shops a clear counterexample. 28 Week 11 - From the local to the global The chapters in this collection respond to the call of Benson and Ugolini that historians ‘should look to the broader economic, political and social environment within which retailers (and potential retailers), customers (and potential customers) found themselves’. 69 Those environments, and the factors that shaped them, did not stop at the water’s edge. For this reason, the following chapters consider the international and global dimensions of modern retail’s social embeddedness alongside the local, the regional and the national. They are therefore in step with a broader disciplinary shift that recognizes the extent of transnational connections; no longer treating national borders as stable, inevitable markers of historical analysis nor of human organization or identity. Efforts by British historians in the 1990s ‘to recast the nation as an imperialized space materialize[d]the traffic of colonial goods, ideas and people across metropolitan borders and indeed [threw] into question the very Victorian distinctions between Home and Away that defined the imaged geography of empire’. Gregory A. Barton’s favored response was a ‘British World model’ focused on the ‘elite transformations, trading patterns, and cultural exchange that gave rise to a single global culture’. Although critiqued for its lack of engagement with the diversities and power dynamics of imperial history, this scholarly project has shed new light on the histories of global Britishness and Britain’s place in the world through its networks across the globe. This adds to the longer- running explorations of imperialism as a cultural phenomenon, focusing instead on the impact of the world, including the British Empire, on Britain itself. In keeping with this diversity of scholarly approaches, various chapters in this collection adopt different ways of exploring the movement of people, practices and products in, to and from modern English retailing. Within retail histories at the local level, we can see wider global entanglements playing out through the impact of migration. It was not uncommon historically for migrants to secure an income from itinerant trading as hawkers or peddlers. As Benson and Ugolini have noted, ‘the economic disadvantages and cultural discrimination faced by many working- class and minority families encouraged them to enter trades like hawking and peddling and small shopkeeping, which demanded only a small initial investment and provided the opportunity to turn their working- class/ minority identity to economic advantage’. Mui and Mui drew a distinction between 18th- century 29 hawkers and peddlers in the North of England, whose trading they saw as complementing the range of goods on sale in local shops, and those in the South who were widely perceived to be in more direct competition with local shopkeepers. It was those southern concerns that prompted reforms in 1832, whereby acquiring a license required character references to prove local connections and social standing. Among those who suffered were the Scottish and Irish itinerant sellers identified by Alison Toplis as filling a gap in the rural retailing of non- elite women’s clothing in early 19th- century Herefordshire and Worcestershire. The same can be assumed of the Jewish traders commonly associated with the itinerant selling of second- hand clothes by this time. Historians and migration scholars, as Léa Leboissetier has noted, have viewed the more recent history of itinerant trading differently. Historians have typically written it off as a form of retail that fell into decline over the 19th and 20th centuries and was not a significant part of modern retailing, while migration scholars have recognized its continuing significance for those seeking to make a living in a new place. Despite this, the opportunity dramatically declined over the postwar period as traditional door- to- door sellers lost out to the new mail order catalogues, whose part- time agents were more often women drawn from the local community than offering an entry point into it. At the same time, other forms of employment were becoming easier to find. For the first generation of postwar Commonwealth immigrants, as Kennetta Hammond Perry has noted, manual work was both easy to find and assumed by employers and the state to be suitable for Black workers. By contrast, the widespread manufacturing redundancies in the 1970s prompted growing numbers of Sikhs and other Punjabi migrants to pool family savings and purchase a shop. These patterns and the wider relationship between retail and migration over the 20th century remain ripe for further study. One area of immigrant retailing which is better addressed in the scholarship (more often by migration studies scholars than historians) is that in relation Historians and migration scholars, as Léa Leboissetier has noted, have viewed the more recent history of itinerant trading differently. Historians have typically written it off as a form of retail that fell into decline over the 19th and 20th centuries and was not a significant part of modern retailing, while migration scholars have recognized its continuing significance for those seeking to make a living in a new place. 30 Despite this, the opportunity dramatically declined over the postwar period as traditional door- to- door sellers lost out to the new mail order catalogues, whose part- time agents were more often women drawn from the local community than offering an entry point into it. 80 At the same time, other forms of employment were becoming easier to find. For the first generation of postwar Commonwealth immigrants, as Kennetta Hammond Perry has noted, manual work was both easy to find and assumed by employers and the state to be suitable for Black workers. By contrast, the widespread manufacturing redundancies in the 1970s prompted growing numbers of Sikhs and other Punjabi migrants to pool family savings and purchase a shop. These patterns and the wider relationship between retail and migration over the 20th century remain ripe for further study. One area of immigrant retailing which is better addressed in the scholarship (more often by migration studies scholars than historians) is that in relation to food. ‘Historically’, as Marta Rabikowska and Kathy Burrell have noted, ‘food has always been central in maintaining ethnic identity away from the original homeland, and an important means of asserting a presence on the new landscape through market stalls, shops and restaurants. Lesson Activity 4 1. Why does global retailing should be considered by local industries? Explain your answer. 31 Week 12 - Effective Policy Support Received During the Covid-19 CRISIS Support measures were vital during COVID-19 and continued to play a non- negligible role after the pandemic. The ecosystems that received the most support were Textiles and Electronics (73% of firms each), while the ones that received the least support were Energy – Renewables, Digital and Agrifood (52%, 50% and 48% of firms, respectively). The support measures included subsidies (on average 41% of firms), subsidized or guaranteed credit (18%), deferral of payments (18%) and other measures (7%). The Textiles ecosystem had the highest share of firms that received subsidies and subsidized or guaranteed credit, while deferral of payments was particularly important for Electronics, with 25% of firms using it. Policy support helped firms weather the drop in sales and turnover during COVID- 19. Initially the sales balance, that is, the difference between the share of firms that reported an increase in sales and the share of firms that reported a decrease, was negative from 2019 to 2020 for all ecosystems, except for Agrifood, Retail and Digital. The sales balance from 2020 to 2021, instead, was positive for all ecosystems, witnessing a strong recovery after the pandemic. 32 Firms increased investments to reduce climate-related risks and greenhouse gas emissions The risks of climate change include physical risk, due to losses caused by extreme climate events, and transition risk, resulting from the enforcement of climate change policies. The ecosystem most affected by physical risk is Agrifood, with almost half of firms reporting to be highly impacted. Conversely, in the Digital ecosystem, only 6% of firms report physical risk to have a major impact on their business activities. Energy-Intensive Industries is the ecosystem with the most firms concerned about transition risk. Smaller firms report being less impacted by both physical and transition risks. Across ecosystems, small firms in Agrifood are the most affected, while for large firms, Construction is most impacted by physical risk. Firms react to climate-related risks by implementing investments to tackle the impacts of weather events and to help reduce carbon emissions. As of 2022, the average share of firms that had already made such investments was 52%, with the lowest share observed in Digital. 51% is also the average share of firms that were planning such investments, which is higher than the average over the period 2020-2021 (45%). 33 34 Week 13 - Climate Change Challenges and Opportunities Energy – Renewables and Energy-Intensive Industries are the ecosystems that witnessed the strongest recovery from COVID-19: compared to 2020, sales and turnover in 2021 increased for 72% of firms in Energy – Renewables and 76% of firms in Energy- Intensive Industries. After the energy crisis, these ecosystems can now refocus on the opportunities or challenges resulting from climate change. These two ecosystems are the most impacted by transition risk, although in opposite ways: the Energy-Intensive Industries ecosystem sees it as an actual risk (45% of firms), while the Energy – Renewables ecosystem perceives it more as an opportunity (48% of firms). Smaller firms are less likely to report that they are impacted by transition risks. Physical risk from climate change is reported to have a major impact on business activities by 20% of firms in Energy – Renewables, and 14% of firms in Energy-Intensive Industries. While less reported as a major impact over time, this physical risk is increasingly reported to have a minor impact for these ecosystems. 35 Week 14 - Models of Excellence in Organizations The Toyota Production System (TPS) has inspired many models of excellence not only in production but also in the organization as a whole. Since the first journal article published in 1977 about TPS (Sugimori, Kusunoki, Cho, & Uchikawa, 1977) models have been created and evolving to the present day (see general overview in Figure 2.1). Toyota Production System: Beyond Large-Scale Production, was the first book in English about TPS (Ohno, 1988), published in 1988 by Taiichi Ohno, known as the father of TPS, although that version is just a translation of the first Japanese version published ten years earlier in 1978. Models of excellence are understood here as being descriptions of how to proceed to achieve a competitive advantage in the market. In other words, they are descriptions of what to do, what principles to follow, and what tools to use to be more effective and efficient than competitors. Probably the first kind of excellence model inspired by TPS, published in English after the TPS itself, was presented by Eliyahu Goldratt in his famous and bestseller book “The Goal” (Goldratt & Cox, 1984). One of the possible reasons that justify the success of this book is the fact that although it is a book with technical content it was written in a novel format. This innovative way of presenting the model made it very attractive due to the ease of its reading and understanding. The model presented and coined as Theory of Constraints, became very popular as its Optimized Production Technology method was firstly published in 1982 (Fox, 1982) as well as the Drum-BufferRope dispatching technique published a few years later (Goldratt, 1988). Both Just-In-Time and Theory of Constraints models were very much focused on just one side of the socio-technical nature of organizations, the technical side, more precisely in the material flow control. “Just-In-Time” or just “JIT” together with “Kanban” has long been connoted in the West, in a relaxed way, as if it were the materialization of TPS or simply equivalent to TPS. Just- In-Time was referred in 1977 (Sugimori et al., 1977) and later referred by Taiichi Ohno (Ohno, 1988) as one of the two pillars of TPS. During these decades, most western organizations and universities were more interested in the physics concerning the flow control of materials than the human behavior and cultural side of TPS. JIT or “Just-In- Time” was accepted as a kind of operational excellence model pursued by most industrial engineering professionals and scholars. After the successful publication in 1990 of the books “The machine that changed the world” (Womack, Jones, & Roos, 1990) and later in 1996 with the publication of “Lean Thinking” book (Womack & Jones, 1996) the term JIT was gradually replaced by the term “Lean Production”, “Lean Manufacturing”, or simply “Lean”. 36 Although changing the term used, the Lean Thinking model was still very much focused on only the same technical side of the TPS as JIT. The second excellence model inspired by TPS is most probably the one presented in a book by Masaaki Imai in 1986 (Imai, 1986). In that book, the author suggests that the economic success of Japan was the result of the Japanese management practices summarized in the so-called Kaizen umbrella presented in Figure 2.2. Under the umbrella, a list of concepts, principles, and tools are presented as the Kaizen model guidelines or structure. From that list, it is possible to understand that the scope of the model covers the sociotechnical nature of organizations, from a more technical side to a more human side as expressed in the article referred earlier from 1977 about TPS (Sugimori et al., 1977). In that article, the authors argue that TPS is based on the following two main concepts: Reducing cost from the elimination of waste and treat the workers as human being and with consideration. In the items presented under the umbrella of Figure 2.2 the reader can see the technical aspects such as “robotics” and “kanban”, as well as the human and behavior side as “Small-group activities” and “Cooperative labor-management relations”. Despite the existence of this very comprehensive model, during the 1980s and 1990s in the West, the terms that became popular were mainly “Just-In-Time” and “Kanban” as being the central part of TPS. Just-In-Time was referred in 1977 (Sugimori et al., 1977) and later referred by Taiichi Ohno (Ohno, 1988) as one of the two pillars of TPS. During these decades, most western organizations and universities were more interested in the physics concerning the flow control of materials than the human behavior and cultural side of TPS. JIT or “Just-In-Time” was accepted as a kind of operational excellence model pursued by most industrial engineering professionals and scholars. “Continuous Improvement and Respect for people in everything we do”. Jeff Liker, a famous Toyota scholar and author of several books on the subject, published a book in 2003 where he presents and describes these 14 principles of the Toyota Way (Liker, 2004). On the other hand, another important interpretation of the way Toyota organizes and manages itself is presented by the Shingo Institute in what they have dubbed the Shingo Model (Shingo Institute, 2020). As those of you that are reading this book and working in this area of continuous improvement know, Shigeo Shingo also contributed to 37 the development of the TPS (being Taiichi Ohno its main creator) and therefore this model was developed with the collaboration of a person who knew Toyota very well, Shigeo Shingo. The Shingo Institute frequently mentions in its publications that its model is a model for to pursue Operational Excellence and maybe that is the reason why many people associate the designation Operational Excellence with the Shingo Model. Lesson Activity 5 1. Explain the concept of JIT and how retailing and wholesaling enterprises can benefit from this model? 38 Week 15 - Principles of Lean Philosophy Principles are guidelines that are established in order to condition behavior; serve to help determine whether or not a given behavior is appropriate in relation to them; and also help to select the tools/solutions that best align with the organization’s philosophy. Principles are the ground rules of an organization and necessarily have consequences for decision-making and conditioning behavior. Each one of the excellence models presented in this book is shaped by its principles and for that reason understanding the principles is necessary to understand the model. The five principles of the Lean Philosophy were presented in 1996, in the book entitled “Lean Thinking” (Womack & Jones, 1996), a little after the book “The machine that changed the world” (Womack et al., 1990) which made the term “Lean” popular worldwide, and which is still a great reference in the world of Excellence in organizations. Principle 1 - “Specify Value” – This principle consists in identifying, as far as possible, what the market interprets as value in the products the company offers. The customer’s point of view (regarding the product’s characteristics) is more important than the point of view of those who design and produce the product. This idea is very much linked to the old saying “no one should be a judge in their own cause” from the Latin “Nemo judex in causa sua”. The value of the product should not be assumed to be its total cost since many of the partial costs may result from the inclusion of operations that in reality the customer does not value or does not want. These costs are associated with the term waste (Muda ). The concept of value is an important one but may not be easy to define in a precise and consensual way. Value is also often described as everything the customer is willing to pay for. This description is not completely right because the truth is that the customer is frequently willing to pay for waste as well. Waste is paid for by customers otherwise organizations would not be able to survive. It is probably safer to say that the value of a product is in most cases defined by the market and therefore results from the balance between supply and demand. In order to clarify the concept of value we will add another aspect that can increase the interpretation of the concept. We can say that an operation adds value to a product when it produces a physical or chemical transformation, and that transformation is recognized by the customer as added value. In short, we can say that operations on a product can transform it physically or chemically, simply change its position by transport or handling, or not cause any change in the product. By definition, all operations that only change the position or simply do not result in any change in the product are understood as waste. 39 This does not guarantee that operations that result in physical or chemical transformation represent value added. There may be physical and/or chemical transformations that are not recognized by the customer as added value and therefore cannot be considered as value adding operations but rather as waste. This type of waste is called “over- processing” and will be presented later in this chapter. Principle 2 - “Identify the Value Stream” – This means identifying all the processes involved in the process of producing the product, not only those that add value (value from the customer’s point of view) but also those that do not add value. The latter are the so-called wastes and should be eliminated or at least minimized. The most popular tool to analyze the value stream is probably the tool called Value Steam Mapping 4 which consists of representing in a kind of flow chart the connections with mains suppliers and clients, the production planning and control main communication channels, all main stages of the production process as well as some details of each stage in order to identify main sources of waste and bottlenecks in the flow. Figure 2.5 shows the representation of a simplified example of the value stream for a hypothetic and generic product or a family of products. In this representation the reader can see in a time scale the sequence with 4 processes where value is added (represented with a “V”), and four periods where time is spent without any value being added to the items (represented with “Waste”). These “waste” periods include mainly transport and handling, materials waiting (inventory), rework and eventually quality control steps. Typically, inventory plays a major part of waste in the timeline. The concept of Throughput Time is a very important concept and indicator that must be understood when analyzing value stream and the concept flow. Throughput Time can be defined in general terms as the amount of time required for a product to go through a manufacturing process, being converted from raw materials into finished products. For the case expressed in Figure 2.5 the throughput time is the sum of all the times when materials are waiting (waste) and the times when value is being added with operations to those materials. It is often referred in several publications, such as Beecroft, Duffy, & Moran (2003) and Productivity Press Development Team (1998) to a round figure of 95% for the typical percentage of Throughput Time that is spent without any value being added to the products (see Figure 2.5). In other words, we can say that 95% of the time that an article is within a production system that article is standing still waiting for something to happen to it. This 95% value is referred to and used as a reference but in fact the most important aspect of this round value lies in the transmitted idea that the overwhelming part of the time of the articles in production units is spent waiting (as inventory) for the next process. In the various evaluations we have performed in dozens of organizations in the last decade, this value is normally higher. It is also 40 important to note that everything depends on where we start counting time and where we stop. If we consider that the throughput time should start counting when the materials arrive at the raw materials warehouse and only stop counting when the products are shipped to the clients, it is natural that this percentage is higher than if we count the time from when we pick up the materials from the warehouse until the products are sent to the finished product warehouse. When evaluating the throughput time, the analyst must clearly establish the boundaries of the systems with managers, so everyone knows what the real meaning of the results. The throughput time can also be evaluated to specific parts of the production process, such as production lines of specific processes steps. Waste can be understood as any activity in a production system that does not add value to products. It is more or less easy to understand that the identification and elimination of activities or operations that do not add value to products results in improvements on production performance. Waste present in every production unit, is always around us, but the truth is that it is not always easy to be identified by an inexperienced observer. 41 Let us look at some classes of waste: Transportation - The product is transported within the factory between the various sections. These transport operations use organization resources, uses at least labor, some form of transport and quite naturally energy. All this expenditure does not result in any value recognize d by the customer. No customer will recognize value (and pay more for) a product that has moved more than another product within the plant. Storage - Storing goods also uses organization resources including labor, space and energy. Customers do not recognize value in products because they have been stored too long (there are some exceptions, such as whisky and old brandy). Rework - Performing an operation to repair or improve one product that has been carried out incorrectly, uses organization resources, represents a cost but does not add value to the item. The reader may argue that these types of waste are necessary evils and that it is not possible to produce items without transport, or storage, or waiting. While this is almost always true, we have to understand why we look at these operations as waste. The reason is that we need to look at these operations that do not add value as operations to be eliminated. Whenever any particular waste is eliminated or reduced, the organization becomes more efficient and more competitive. On the other hand, whenever one is aware that there is waste, there is always space for improvement by reducing it. Discovering waste can be seen as discovering treasures because whenever waste is recognizing a potential space for improvement opens up. 42 Week 16 - Trading with China: Market Barriers Distribution The food and beverage market remains decentralized in China, still lying in the condition of competition and free growth. There are very few large distributors dedicated to imported food and beverages. The varieties of products sold are also limited, as there are few importers or distributors with more than 1,000 varieties of imported food products. The great majority of Chinese distributors tend to be reluctant to introduce new products, are primarily interested in wholesaling, and do not put a lot of emphasis on brand development. They are mainly interested in products that are already present in the market but are sold through sub-distributors or grey channels. Exporters with a limited product range need to work both ends of the supply chain simultaneously, trying to identify both retailers interested in the product and distributors who can work with the retailers. Considering that imported food and beverages are typically higher priced compared to domestic equivalents, they are currently concentrated in first-tier cities in north, east, and south China, which has resulted in large distributors being based in these regions. As the economy grows, consumption in second and third-tier cities is expected to increase fast, resulting in imported food and beverage products to -transfer to these regions in the next years. At present, however, imported food and beverages in second and third-tier cities are mainly supplied by importers and distributors from first-tier cities. With rising demand for imported food, the inefficient logistic channels of current distributors may encounter greater challenges and, as a result, the development of local distributors in second-tier cities will be of great importance to importers. Infrastructure and Logistics Shanghai, Beijing, and Guangzhou are the key entry points to China. Recent improvements in the national highway system have considerably eased trucking directly out of Shanghai or Guangzhou compared to a few years ago. High-speed rail has greatly reduced the travel time across the country and now trains from Shanghai to Hangzhou take half an hour and to Nanjing one hour. The Chinese government is continuing to support and develop the rail network. As for container ports, China has the largest ones in the world, with Shanghai holding the world’s top spot since 2010. In the region of Guangzhou, Hong Kong and Shenzhen - container ports come third and fourth, respectively, and China has another three ports within the world’s largest 10. Ports in 43 satellite cities offer a growing array of services, often including bonded storage with temperature-controlled services, online tracking facilities, and duty-free industrial zones where goods can be repackaged or processed, with duty paid only on the original import value and only after the products have left the zone. However, further inland logistic services, inefficient and fragmented, make it difficult to transport products directly from the coast to inland cities. Importers are not very confident in cold chains. Economies of Scale Organic food producers, especially those with a geographical identification (GI) mark, face the challenge of scaling up their production capacity in order to meet local demand and produce at sufficient volume to make a profit. However, the quality of their products— and their GI status— depends on their small production capacity. On the other hand, China is a very large market, and if a product is successful, demand will grow beyond capacity. Considering the difficulties of entry and the costs involved, it can be a challenge to make a successful and profitable market entry. Producing locally can make production and selling at quantity more affordable. For example, some Dutch and Hungarian companies have had some success by breeding geese locally and producing goose livers in partnership - with Chinese producers. A Chinese company has established an Italian-style meat processing company which uses Italian processes, and their products are marketed as Italian. Increasing Local Competition Western products are regarded as high quality and produced to high safety standards, but they tend to be pricier than their local equivalents. In terms of international competition, the United States remains the - largest single exporter of consumer-oriented food to China. The country is the only exporter with a presence in most categories. Local manufacturers tend to push imported products out of the price-sensitive mass market, into niche markets where novelty and - quality are more important than price. In the past, bars and restaurants were often obliged to import all of their specialty Western products, but they are now able to turn to local producers. For instance, Le Fromager de Pékin sells cheese directly to hotels and restaurants and many local producers are now making European style cured meats and other delicacies. 44 Week 17 - Exporting Goods Process for Exporting Goods to China The first step is always to determine what category the goods you want to export fall into. China’s Ministry of Commerce (MOFCOM) regulates ­ the imports of foreign goods. According to the New Foreign Trade Law, goods are classified into the following three categories, depending on how helpful they are for the Chinese’ government’s economic targets: free imports, restricted imports, and prohibited imports. 45 Process for Exporting Goods to China Free Imports Free importable goods are obviously the least regulated category of goods and can normally be imported into China without restriction. On the other hand, selected items do require an automatic import license which is granted to all companies who apply. This license enables the Chinese government to monitor the imported amounts of certain goods. The list of products that require this automatic license is jointly updated by MOFCOM and GAC (General Administration of Customs) on a regular basis. Restricted Imports Restricted are imports whereby the importer must apply for and obtain an import license, a tariff quota license, a quota import license, or any combination of these. According to Chinese law, only products under quantitative restriction by way of quotas and products under restriction by way of necessary licenses are considered as “restricted.” Products under tariff-rate quotas are not considered “restricted.” Import License Although China has been reducing red tape and the amount of paperwork required for imports since joining the WTO back in 2001, importers still need to receive formal approval in the form of an import license from MOFCOM before importing certain products. Making the registration and obtaining the proper license is the responsibility of the importer. Documentation required to obtain an import license includes an application for issuance of an import license, the business license of the importer, as well as other documents required for specific categories of restricted goods under the license system. It is crucial to verify whether your goods require an 46 import license prior to shipping the product. In case goods are imported without the required license, local customs authorities may confiscate them. Wool, steel, and natural rubber are examples of goods restricted by way of import license. Next you can see a sample list of goods subject to automatic import license. Import Quotas An import quota is the maximum amount of foreign goods that can be imported into a country in a given period of time. It is, in fact, a type of trade restriction used to limit the supply of foreign goods available in the market, which results in a higher market price of these goods. Certain goods are regulated under a quota management, meaning that China will allow only a certain quantity of these goods to enter the borders each year. In this case, importers have to apply for a relevant import quota license prior to importing any goods into China. Examples of such products are pesticides, tobacco, and crude oil. Tariff-Rate Quota Management An import license is also required in order to import goods under tariff-rate quota management. Goods under tariff-rate quota management, among others, include grain, cotton, sugar, and vegetable oil. Next you can see a sample list of goods subject to tariff-rate quota management: Prohibited Imports Certain goods are prohibited from import into China for health, environmental, and national security reasons. It is unlikely that your goods will be on this list. Prohibited goods include illicit drugs, weapons, ammunition, or explosives. Next you can see a sample list of goods prohibited from import. 47 Standards Once you have checked and confirmed the import category your goods fall into and once you have gathered the necessary documentation, you will need to ensure that your products meet the corresponding Chinese standards. Although some Chinese standards might correlate with international standards, it does not mean that you will automatically meet the -Chinese standards. There are four levels of standards professional standards, local standards, standards. Be aware that it is only national standards or Guobiao (GB) standards that are mandatory. The others are considered voluntary. Standard levels are also hierarchical; meeting the highest existing standard for your product means that you automatically meet all lower- level standards. However, certain product categories may require compliance with professional and national standards, since those standards usually regulate different aspects of the product. Never launch big initiatives with only the support of the local government and not the central one. The central government’s plans will ultimately prevail, no matter how many connections local interests may have. The business landscape is littered with ventures that failed because companies failed to gain support from enough layers of the government. in China. National Standards Administered nationally by the Standardization Administration of China (SAC) and consistent across China, 15 percent of national (GB) standards are mandatory. The SAC has a database of over 27,000 national standards. 48 References Retail and Community: Business, Charity and the End of Empire, Bristol University Press, 2024. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pup/detail.action?docID=31324044. Post-COVID Recovery and Green Transition: An Ecosystem View, European Investment Bank, Commission des Communautes europeennes, 2024. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pup/detail.action?docID=31594151. Carvalho, José Dinis. Continuous Improvement in Organizations, River Publishers, 2023. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pup/detail.action?docID=30172497. Krokou, Danai. Trading with China: How to Export Goods, Services, and Technology to the Chinese Market, Business Expert Press, 2021. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pup/detail.action?docID=6733374. Sabrin, Murray. Navigating the Boom/Bust Cycle: An Entrepreneur's Survival Guide, Business Expert Press, 2021. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/pup/detail.action?docID=6730694. 49