ntegrative Case: Hudson Jewelers "Good afternoon, may I help you?” the Naples, Florida jewelry store attendant said with

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ntegrative Case: Hudson Jewelers "Good afternoon, may I helpyou?” the Naples, Florida jewelry store attendant said with asmile. “No, I’m browsing with my fiancée.” “Oh! So, you two aregetting married. Congratulations! My name is Bill Hudson, my wifeBetty and I own the store. What’s your name?” as Bill extends hishand out to shake hands. “My name is Lilly and this is my husbandto be—Lester. “Well, if you need my help, please let me know,” Mr.Hudson said as he walked behind the counter about 1:30 pm. “Wouldyou like a glass of wine while you browse,” Mr. Hudson asked. “Nothank you,” as Lester noticed for the first time a small wine rackand comfortable leather chairs in the back corner of the store.Lilly and Lester continued looking at engagement rings as Bill gavethem space. After about ten minutes, Lester asks Mr. Hudson, “Inoticed your big high definition television with that beautifulwedding ring rotating. What is this?” Mr. Hudson replied, “It’s a3D software system that allows you to co-design your own ring. Youcan pick out the diamond(s) and then mount them on any ring youwant. Once the entire ring is finalized our manufacturer willproduce it.” “Can we sit down and see how it works?” Lilly ask Mr.Hudson. The three of them began to design a prototype ring with Mr.Hudson answering questions. Mr. Hudson and Lilly were beginning toestablish a friendly relationship based on trust. All of the ringdesigns could be stored on the computer for future reference. Adiamond became a symbol of social status and wealth in India about3,000 years ago. De Beers, a diamond mining and production company,began to market diamonds in the 1900s with slogans like “A diamondis a girl’s best friend,” and “A diamond is forever.” De Beers’advertisements promoted the idea that those who do not buy diamondjewelry must not love their partner as much as those who do. Onemodern De Beers’ ad states, “She already knows you love her. Noweveryone else will too.” A century of advertising and branding hasmade a diamond a symbol of “eternal love.” While Mr. Hudson andLilly exchanged ideas about alternative ring designs, Lester askedMr. Hudson’s daughter, Jasime, what was the time. “It’s 3 pm,”Jasime replied. “Whew! I need a break,” Lester responded as hestood up from his chair. Everyone laughed at Lester’s comment asthe clock kept ticking. “OK, I’ll hurry,” Lilly said as she glancedat Lester. Lester walked around the store for a few minutes andthen sat back down to reenter the “design your own ring”conversation. By 4 p.m., everyone was exhausted with an array ofring design questions, answers, and what ifs. However, Lester andMr. Hudson now had a much better idea of what Lilly wanted in anengagement ring. Jasime had been listening to the three-waydiscussion but decided not to join the conversation at this time.Two ring designs were stored on the computer. “I’ll have mydaughter Jasime work on these designs,” Mr. Hudson said. “I am goodwith the software but my daughter is the true CAD expert. And shewill call our diamond and ring dealers in New York and make surewhat we have designed can be manufactured at your target price,”Mr. Hudson continued. “Mr. Hudson,” Lester asked as he was walkingtoward the door, “Is your inventory lower because of this customdesign capability?” Mr. Hudson replied with a positive nod, “Yes,definitely. It is a high risk business to stock lots of diamondsand jewelry at the store. With the 3D/CAD system, I think we do abetter job of matching our physical inventory to customer needs andtrends. We have less security, loan, and insurance risk using CAD.And the customers seem to enjoy designing their own uniquejewelry.” (Case Exhibit 1 provides example customer comments duringone month.) Lilly and Lester left the store thanking Mr. Hudson andJasime for their help. At the same time, Betty, Mr. Hudson’s wifeentered the store and everyone was introduced. Hudson Jewelers wasa true one-store family business. Lilly and Lester walked across5th Avenue to a restaurant and discuss their first computer-aidedengagement ring design experience. Lilly was excited about theprospect of having a one-of-a-kind ring as Lester drank a beer as areward for his patience. After three more visits to Hudson’sJewelers the final ring design was done with everyone’s approval.Jasime and Mr. Hudson carefully went over every aspect of the ringdesign to assure agreement. For example, the CAD technology allowedLilly and Lester to see several alternative designs regarding goldor platinum prongs to hold a yellow diamond. Checks were writtenand the final ring design was electronically sent to themanufacturer. One month later Hudson Jewelers called Lilly andLester, and they went to the store to pick up their engagementring. As they entered the store Betty and Bill Hudson and Jasimegreeted Lilly and Lester by name. “Are you ready to see your ring,”Jasime asked in an excited voice. “Yes, we are so excited,” Lillyresponded. Mr. Hudson asked Lester to come to the backroom safe. Heunlocked the safe and gave the ring to Lester “Can we put it in abox?” Lester asked. “Sure.” Lester took the box and ring and walkedinto the storefront and gave Lilly the ring with a kiss on thecheek. Lilly opened the box and the ring sparkled under the highintensity lights of the store. “Oh! It is so perfect,” Lilly saidas she hugged Lester. Mr. Hudson then said, “We have some otherpresents for you as he handed Lester a bottle of champagne andLilly a small picture album that summarized how the ring wasdesigned and manufactured step-by-step. It showed a 3D line drawingof the ring, a wax model of the ring that was used in production,the raw casting with platinum and gold prongs without the diamonds,and finally the complete ring from several viewpoints. The couplethanked everyone and walked across the street to their favoriterestaurant to celebrate this memorable experience. Computer-AidedDesign Since the 1970s, computer-aided design (CAD),computer-aided-engineering (CAE) and computer-aided manufacturing(CAM) enable corporations to design and manufacture a wide varietyof items such as industrial parts, buildings, furniture,landscapes, and kitchens. Today, many firms have achieved completeintegration of their design and production functions into what wenow call computer-integrated systems. Designers can design,analyze, test, and simulate product design options before theyphysically exist, and then actually produce them such as withBoeing’s 777 Dreamliner airplanes. Also, 3D CAD and 3D printing areexpanding the frontier of designing plastic parts almostinstantaneously such as gears, toys and heart values. Today CADtechnology has made its way into the design of custom jewelryeither on-line or in-the-store. The customer and/or in-store CADexpert go through a step-bystep computer led process to co-designthe jewelry. For a diamond wedding ring, for example, the size,clarity, color, cut, price, and shape of the diamond are firstselected followed by choosing the setting such as a single goldband of a certain thickness with matching prongs to hold thediamond. Once the CAD designed ring is assembled it can be rotatedto any angle and even placed on a virtual male or female hand. Thisring can be stored as design option 1, followed by other designoptions, and then portrayed sideby-side on the high definitiontelevision screen. And, of course, alternative ring designs can bee-mailed to friends and family worldwide. The Global Value Chainfor Diamonds A simple way to view the diamond value chain ismining, rough diamonds, polished diamonds, and customer jewelry.From the time a diamond is mined until it reaches a retail store isnormally 18 to 36 months. Rare and large stones often reduce thisprocessing time by one-half. The supply chain is global since noone country or company performs all the work required to bring adiamond to its final resting place – customer jewelry. Aboutone-half of rough diamonds are used in industrial applications suchas oil and gas drilling equipment and metal cutting tools. Themajor stages of the global value chain for diamonds can be definedin numerous ways but usually consists of the following stages. 1.Exploration A diamond is a unique pyramidal structure of carbonatoms. Billions of years ago heat and pressure deep inside theearth created natural diamonds. The ancient Greek word for diamondmeans “unbreakable.” Historically, much of the diamond industryinvolves African countries with the exploitation of native people.Russia and Africa account for 70 percent of the world’s diamondreserves. Major corporations that focus on diamond mining,production, and sale include DeBeers with about 37% market share.DeBeers is a Kimberley, South Africa based corporation with minesand facilities in South Africa, Tanzania, Botswana, and Nambia.Aapoca-Alrosa is a Russian state-owned corporation with about 30%market share with mines and facilities in Russia and Angola. RioTinto is an Australian corporation that mines diamonds, iron,copper, uranium, aluminum, gold, and coal with about a 5% globalmarket share in diamonds. Their mines and facilities are inAustralia, Zimbabwe, Africa, and Canada. Other firms such as Aber,BHP Billiton, and Leviev compete in the diamond industry. 2. MiningThe two major ways to mine rough diamonds are an open pit methodwhere rock and soil at the surface is excavated and undergroundmining. First level sorting is done at this stage with gem-qualitystones being separated from obvious industrial grade stones. Thecontroversies begin at this stage of the diamond value chain. The2006 movie Blood Diamond, for example, starring Leonardo DiCaprio,Jennifer Connelly, and Djimon Hounsou highlighted militant groupsand corrupt governments trying to get their share of “blooddiamond” revenues. Conflict-free diamonds are supposed to be freeof other injustices such as child labor, smuggling, workerexploitation, and sexual violence. And, of course, ethical supplychains try to prevent all of the previous cited issues plus workeraccidents, environmental pollution, deceitful grading of diamonds,deforestation, poverty, and low wages. 3. Sorting and Grading Thebasic criteria for grading diamonds include size (carets), color,shape, and quality. At this stage second-level sorting and gradingbegins normally at separate locations from the mines. About 20-25percent of rough diamonds are used in the retail value chain whilethe rest are used for industrial proposes. Human eyes, hands, andexpertise access the quality and value of most diamonds. Advancedmachines do some of the sorting and grading process for smallerstones. But sorting and grading diamonds is not an exact scienceeven with current industry regulations and quality standards. 4.Cutting and Polishing The Four C’s – Cut, Color, Clarity, and Caratweight – are used to further classify diamonds at the productionfacility located in cities like Dubai, New York, Johannesburg, HongKong, London, Tel Aviv, Antwerp, and Mumbai. Diamond defects cantake many forms in this industry such as impurities, optical flaws,mixed colors, crystal flaws, and cutting mistakes. The cutter mustdecide how best to cut the diamond to remove defects and make thediamond as perfect as possible. Normally, by end of this stage overone-half of the rough diamond is waste. For example, a ten-caratrough diamond might result in a three- to five-carat diamond thatcan be set in customer jewelry. The remaining carats are lost inprevious stages as waste. Yet, some of this waste can still be usedas industrial diamonds. During the Great Recession smaller diamondcutters and polishers went out of business while larger firmsgained market share. Cutting and polishing costs per carat rangefrom about $100 in Antwerp, New York, and Tel Aviv to $10 to $50 inIndia, China, and Thailand. The quality of a rough diamond can beenhanced or hindered by the way the rough diamond is cut andpolished. High quality rough diamonds of over 20 carats almostalways go to the world’s best cutters and polishers. A currentindustry trend is the consolidation of cutting and polishing withtrading centers into a “diamond hub” in cities like New York, TelAviv, Antwerp, Dubai, and Mumbai. Major producers like DeBeers sellmost of their diamonds based on long-term contracts with a selectgroup of buyers and sellers. Long-term contracts provide price anddemand stability, predictable buyers and sellers, and large salesvolumes. However, new sales channels are emerging that takeadvantage of Internet capabilities such as on-line auctions andvirtual sales platforms. Sales take many forms such as face-to-facenegotiations, take-it-or-leave it on-line offers at fixed prices,live online auctions with multiple bidding rounds, and time limitedon-line auctions. In addition, physical diamond auctions often takeplace at Sotheby’s and Christie’s. 5. Jewelry ManufacturingManufacturing transforms cut, polished, and graded diamonds intocustomer jewelry. Diamond defects can be hidden by the cleverdesign of customer jewelry. Here the jewelry artist or customerdesigns how the finished diamond will be displayed. Over $50billion in value added is created at the jewelry manufacturing andretail store stages. 6. Retailing In the diamond value chain,Tiffany & Company and Cartier are two example luxury goodsretailers that enjoy high margins. The price per carat (value) of atypical diamond usually increases eight to ten times from mining toretail store as each stage of the value chain adds its profitmargin. After the original sale, most diamonds don’t wear out sothey are resold many times within the value chain. The “diamond isforever” slogan also applies to generating repeat sale profits. Tofurther complicate customer and trading center buying decisions,they must cope with whether the diamond is synthetic. In one auditby the International Gemological Institute with a sample of 1,000stones, over one-half were found to be synthetic diamonds.Moreover, the synthetic diamonds had human engineered flaws to makethem appear as natural stones. Only expert gemologists with specialequipment can tell the difference between a natural and syntheticstone. Synthetic diamond pollution of the value chain is anever-increasing industry problem. However, some argue thatsynthetic diamonds are the only true ethical diamonds. TheKimberley Process Certification Scheme (KPCS) A multitude ofindustry related associations, governments, and corporations haveadopted quality and sustainability standards, trade regulations andlaws, and certification programs to ensure no conflict or blooddiamonds enter their value chain. But diamond traceability alongthe value chain is poor. In 2003 in Kimberly, South Africa the KPCSwas designed to certify rough diamond shipments as “conflict-free”and prevent conflict diamonds from entering the value chain. Thisinitiative has been somewhat successful but fake KPCS certificationdocuments have been found throughout the value chain. A recentinitiative is to etch a serial number on each non-conflict diamondwith a laser that is not visible to the human eye.Question- Please provide your suggestions and feedback as to howyou would have dealt with the issues/situation/challenge ifyou were the operations manager of the organization discussedin the case.