1. HEATMAX ® Heather Hassler Nikki Martin Lubu Mishra Suja Ramachandran Chitra Yalamanchili Dalton, Georgia

2. Some Hot Facts History: HotHands™ originated in Japan HeatMax® began as a Distributor of HotHands™ in U.S. Present: HeatMax® is the ONLY Manufacturer and Distributor of hand warmers in U.S. Expanded product portfolio includes cooling, military, and medical products Follows a developed and successful Corporate Strategy Hopes to optimize its Supply Chain

3. The Corporate Strategy

4. Supply Chain Optimization The optimized process would involve: Higher levels of customer service Reduced costs Guaranteed deliveries Smoother movement of goods and services through the chain

5. (IRON) Hogenaez Company U.S. (DISTILLED WATER) Local Water Company (SALT) Callaway Chemicals, Inc. U.S. (CHARCOAL) Norritt Americas Company U.S. (VERMICULITE) Small company in U.S. (NON-WOVEN FABRIC) Asahi Company U.S. (POLYMER CRYSTALS) Small company in U.S. PurchasingManufacturing Wal-Mart K Mart Target CostCo Sam’s Club Vendors Hospitals Military S U P P L I E R S H E A T M A X D E P A R T M E N T S C O N S U M E R S Sales E D I PRODUCT FLOW INFO. FEEDBACK HeatMax® S u p p l y C h a i n D i a g r a m

6. HeatMax® Purchasing Philosophy: “Don’t order too early; don’t order too much” P u r c h a s i n g o f R a w M a t e r i a l s Operations Manager maintains spreadsheet of formulas to calculate when to order what raw materials so that demand is met The Suppliers are contacted

7. Raw Material Lead Times P u r c h a s i n g o f R a w M a t e r i a l s HEATING PRODUCT RMMINIMUM ARRIVAL TIME Iron2 Weeks WaterImmediate Salt2 Days Charcoal3 Weeks Vermiculiten/a Non-Woven Fabric3 Months COOLING PRODUCT RM Polymer Crystalsn/a

8. Buying Strategies P u r c h a s i n g o f R a w M a t e r i a l s Overseas Suppliers Forward Buying Strategy Sport Obermeyer Case Study Domestic Suppliers Just in Time Strategy

9. Transportation of Raw Materials P u r c h a s i n g o f R a w M a t e r i a l s Holding cost Overseas shipping and associated costs Packaging specifications for each raw material –Transportation costs are borne by HeatMax® Leverage Principle

10. HeatMax® Manufacturing Philosophy: “Perfection in process and product.” Goals Minimize total costs Achieve lowest unit costs M a n u f a c t u r i n g o f R a w M a t e r i a l s

11. The Layout 45,000 square feet 6 machines Raw materials storage M a n u f a c t u r i n g o f R a w M a t e r i a l s

12. Production 30 million units/year 100% capacity during peak 65% capacity during off-peak Batch mixing M a n u f a c t u r i n g o f R a w M a t e r i a l s

13. The Process Schedule drafted Raw materials mixed –6 types simultaneously –compare to Blanchard Raw materials processed/shipped Fly-wheel effect Machines operate 10 hours/day 2 can produce 60 items/minute M a n u f a c t u r i n g o f R a w M a t e r i a l s

14. Strategy No warehouses No distribution centers No trucks No transportation costs No inventory carrying costs M a n u f a c t u r i n g o f R a w M a t e r i a l s

15. Customization Challenges High volume commodities Specialized products Compare to Hewlett Packard Remedy: Die cut machine M a n u f a c t u r i n g o f R a w M a t e r i a l s

16. HeatMax® Customer Service Philosophy: “The customer is always right” HeatMax® is the only manufacturer of hand-warming products in the United States. –Produce products at a lower rate, smaller lead times, and better customer service C u s t o m e r S e r v i c e

17. Market Segments Sporting Goods Market Mass Merchandisers Vendors WalMart KMart Sam’s Club Costco Target Grocery Stores Convenient Stores Drug Stores Specialty Stores Military and Medical Markets 30,000 Consumers C u s t o m e r S e r v i c e

18. Examples C u s t o m e r S e r v i c e Three Market Segment Examples: Sporting Goods-HotHands, ToastiToes, Cool Bandana, Body Warmers, etc. Military-Apache Helicopter runway assistance devices Medical-MediHeat packs

19. EDI C u s t o m e r S e r v i c e Electronic Data Interchange (EDI) Helps forecast demand especially with (s, S) reorder policies Used only by companies that have the capability within their own systems

20. Demand Forecasting C u s t o m e r S e r v i c e Initial glimpse of demand is seen when deal is secured during meeting of HeatMax Sales Division and Customer The Weather Channel is used to determine short-term fluctuations Old ordering methods have been eliminated with use of the EDI system

21. P u r c h a s i n g o f R a w M a t e r i a l s Purchasing is 40-60% of sales value of the end products Just-in-time strategy for ordering domestic raw materials Forward buying strategy for non-woven Japanese fabric Corporate Strategy: Cost reduction Some Hot Points to Remember:

22. M a n u f a c t u r i n g o f R a w M a t e r i a l s Fly-Wheel Effect: achieve minimum fixed costs on a unit cost basis by maintaining a constant production schedule Primary challenge: customization Unique aspect: no product inventory, warehouses, distribution centers or trucks Corporate Strategy: Smoother movement of goods and services Some Hot Points to Remember:

23. “The customer is always right” Use last years’ sales and The Weather Channel to create future demand schedules Competitive edge: Only manufacturer of air-activated hand warmers in the United States Corporate Strategy: Attain higher levels of customer service Some Hot Points to Remember: C u s t o m e r S e r v i c e