Once upon a time, a man ate a bad batch of cinnamon toast for lunch. This one action began the spread of a deadly disease, with a high contagion rate the Cinnamon Toast Virus. Slowly this virus dispersed throughout the world, requiring quick decisions to be made at the regional, country and state level. You have just found out that in the Kellogg North America Region, there was a government mandate stating that all plant employees must wear masks while at work. The mandate is set to be enforced beginning on Monday, today is Thursday. The expectation is that this mandate will last at least 6 months, but there is a strong possibility that there will be governmental recommendations to continue wearing face coverings for up to 18 additional months. Plan that you will need to have a mask supply for 2 years.

The rule states that plants are not allowed to operate if workers are not wearing face coverings, knowing this risk, you must decide on an action and present it to the Board of Directors. With only 3 days to make a decision, what will you do?

There are some things you know up front, First, Kelloggs has 30 plants within North America that you need to supply for. Within each plant, there are 250 employees. Second, there are four options of masks that you will need to do a cost-benefit analysis on. Third, we ask that you work to have an efficient amount of supply on hand, should this ever happen again. Lastly, shutting down a plant is costly, each plant that shuts down due to minimal masks will cost Kelloggs $100,000 per day. While the safety of Kelloggs employees is the top priority, the companys commitments to sustainability is equally as important.

option 1

With the recent mandate coming in with short notice, there is a significant increase in demand in the global face covering market. Companies and countries are fighting to have priority with manufacturers. In the short term (1 month), Kellogg's will have to purchase masks from an external supplier, however when we look at the long-term effects of the new CTV worldwide, a viable option to secure a steady supply of needed face coverings is to produce them in house. This option involves producing disposable masks that are thrown away after each day/use. In order to do this, Kellogg's would need to factor in the following costs and timelines to produce in-house.

- Cost of machinery: $450,000

- Lead time: 15 days

- Time to get machinery up and running: 5 days

- Short term disposable mask cost: $1/mask

- Raw material cost per mask: $0.21

- Wasted material cost per mask: $.03

- Total output per day: 5,000 disposable masks

- Team of 5 to manage and run the operation (3 operators, 1 quality and 1 operations manager)

- Cost per day of operational team: $1,000

- Added waste disposal services will cost $25,000 every 6 months

- Shipping cost each day to all facilities: $750

With the production of disposable masks Kellogg will have to produce 5,000 each day (5 days a week) to account for reserve inventory and ensure all employees have a face covering. This will account for weekend production and reserve masks.

option 2

Upon hearing the announcement of the mask mandate, you plan a meeting with the MRO team in order to strategize the optimal plan for securing masks. After meeting with the MRO team, you decide that face shields are the best option for all Kellogg plant employees. Being that the employees work with food, you want them to have the best protection. Due to federal regulations, employees wearing a face shield must wear a reusable mask under the shield as well. When choosing your option, consider the fact that this is the highest form of protection. Additionally, the supplier that will supply this mask bundle is a diverse supplier. Diversity and inclusion is very important to Kellogg and supplying from diverse suppliers helps to give business to those who are normally underrepresented. The detailed information in order to procure both face shields and reusable masks is placed below.

Face shields: $4/ mask

Reusable masks: $2/mask

Bundle package will supply 750 masks per type of mask

Masks are supplied from domestic diverse suppler; Lead time is 1 month

Estimated shipping costs will be a fixed $4000 per month

When analyzing this option, keep in mind that you will need to supply masks for 250 employees across each of the 30 plants within Kellogg North America. Also, there will be 5000 employees working each day in total across the 30 plants. Additionally, you will want to ensure that each plant has a sufficient amount of safety stock for each type of mask.

option 3

Having just received news of the government issued mandate requiring face coverings for all plant employees, you spring into action. Given the strong stance Kelloggs has on sustainability, you realize that providing employees with a reusable mask will offer the safety needed while also cutting down on the potential waste Kelloggs will contribute to landfills. You get started on prospecting some domestic suppliers that could meet your needs.

After talking to a few suppliers, you lean towards Tonys PPE, who is in the U.S. with five different manufacturing plants spread throughout the country. This is perfect as it will help reduce the lead time and shipping costs incurred to supply all the plants. Tonys PPE produces masks made from washable material that can withstand multiple washes without shrinking or the material degrading. The masks are created with a filter pocket in the front to protect the user and combat the spread of the virus. Tonys PPE also manufactures these filters, so Kelloggs does not need to source from elsewhere. Also, in an effort to reduce costs, every employee will be responsible for washing their own masks. Everyone is to use a clean mask and filter during each shift.

Sourcing reusable masks domestically sounds like a great option, but it will come with a cost. Due to the high quality that Tonys PPE claims, they charge a premium for their masks. After looking over expected costs, this is what youd need to factor in:

Each mask will cost $2.00

Each filter will cost $0.08

Tonys PPE will ship a refreshment of masks and filters every month. This will need to provide employees with new ones while also contributing to a reserve inventory.

You decide on a monthly delivery of 750 masks and 10,000 filters to each plant.

You estimate shipping costs to total $4,000/month to supply all 30 plants nationwide.

option 4

Kelloggs has been taking the new mask mandate very seriously as safety of our employees is our first priority. Realizing that are many different ways to procure the masks, it is your job to choose the most efficient way. It should take into account cost, lead time, quality, and safety. This option involves procuring cost effective masks from the worlds largest manufacturer: China. Mask Makers are the largest manufacturer of disposable masks in China and are able to provide Kelloggs with their needs of the 2 year demand horizon. Given the 3 weeks lead time, a short-term supplemental solution is required

Key quantitative details to focus on for this option are:

Kelloggs needs to procure masks for up to two years

5,000 Disposable masks would be used daily by Kelloggs Employees

Disposable Masks will cost $0.60 each

Factors in shipping and manufacturing costs for bulk orders made

The lead time is expected to be 3 weeks

Short-term masks to cover the lead time come at a cost of $1 per mask

Disposing of disposable masks incurs a waste management cost as well.

$25,000 Waste management cost for every 6 months

Your decision should ultimately support Kelloggs goal of safety for its employees, while also standing by our goals of sustainability.