Analysis of Hudson Jewelers: Global Diamond Supply Chain and Pricing

This report provides a comprehensive analysis of Hudson Jewelers, a business operating in the diamond industry. It begins with an introduction to the company and outlines the learning outcomes of the assignment. The report then delves into the global diamond supply chain, classifying it as a pull system and assessing its efficiency. The analysis includes examples to justify the reasoning. Furthermore, the report examines the global supply and demand dynamics for diamonds, exploring how these factors influence prices. It discusses the role of diamond reserves (inventory) in price determination and presents a visual representation of the demand-supply curves. The report highlights the major players in the diamond market, including DeBeers and ALROSA, and discusses the impact of supply and demand on diamond prices. The report also includes a visual representation of the supply and demand curve for diamonds. Overall, the report provides a detailed overview of the Hudson Jewelers case study, offering insights into the diamond industry's complexities.

Running head - HUDSON JEWELERS
Hudson Jewelers
Name of the student
Identity Number
Course Name

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Table of Contents
Introduction..........................................................................................................................2
Learning Outcomes..............................................................................................................3
Question 1........................................................................................................................3
Question 2........................................................................................................................5
Question 3........................................................................................................................8
Question 4......................................................................................................................10
Conclusion.........................................................................................................................11
References..........................................................................................................................12

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Introduction
The following assignment is based on the case study of Hudson Jewelers. The
organization was founded in the year of 1944. The jewelry shop is situated in the Metro East of
the United States of America (Hudsonjewelers.com 2019). More than 80 years, Hudson Jewelers
have been the trusted and most reliable in the jewelry shop. It have served and provided people
with the utmost quality of jewelry and diamonds throughout the years. The organization is solely
owned and the working of the organization is operated by the Hudson family themselves form
the very beginning of the shop. The business conducted by the organization have grown and
outreached to various extent with the growing community. The organization have acquired a
huge brand name and brand loyalty through their work. Hudson jewelry not only provide elegant
jewelry or diamond cut into fine pieces and unique design, it also provide beautiful watches and
gifts that are like treasures. The organization also provide the scope to their customers for custom
designing their ring like they want and in any manner would feel like and also high class jewelry
repair for their customers who want to repair their old pair of jewelry.
The main motto and goal of the organization is to provide their customers with utmost
satisfaction through the service they provide. The organization try to make every individual of
their customers feel like they are buying the jewelry form someone they could trust. The range of
unique and personalized design they provide to their customers are very high when compared to
other shops in the market (Hudsonjewelers.com 2019). As the organization is a private company
and not a limited organization, the main concern of the family owned business is to hold the
company and the employees that work for them to the highest level of integrity.

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Learning Outcomes
Question 1. Explain whether the global diamond supply chain a push or pull system, and
whether the global diamond supply chain is an efficient or responsive system for make-to-
order and make-to-stock jewelry. Provide examples to justify your reasoning.
Answer – The supply chain of diamond around the globe could be considered as a pull system of
supply chain. A pull system in the supply chain management of any organization could be
considered as a manufacturing process of the good in a lean manner strategy. This kind of
strategic management plan of supply chain management is taken in to account by the
organizations to minimize the waste that is produced at the time of production of the good that
the organization manufactures (Bieri 2016). In the following process of supply chain, the
components that are used by the production process are replaced only in the situations or
scenarios when the components are consumed fully or completely during the process of
manufacturing. This is done by the organizations in order to make enough amount of products
form the raw materials or the components used for manufacturing to meet the demand of the
customers that they expect from the organizations. This process further helps the organization in
making profit as most or the entire resources of the manufacturing are used for producing as
much as goods and these end products are immediately sold in the market. This is reason why
diamond industry is always on profit.
The pull system works in a different way that rest of the strategic plans that is used in the
supply chain management (Berger and Gavish 2015). The process works in a backward manner.
This process of working the backward manner includes in knowing the demand of the customers
or in the market that they are dealing in. The pull system allows the organizations in knowing the

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orders of their customers so that they could start working on those particular manner and
producing the exact amount of products that is needed in the market. This backward manner also
allows the organization in using visual signals in every steps of the production. This also helps in
promoting the actions of the organization in every possible steps of the process of manufacturing
of the products. Thus, the products that are produced are pulled through the process of
manufacturing from the demand of the customers (Richman 2015).
The global diamond supply is considered to be a system of efficiency or an efficient
system. Supply chain efficiency is considered to be inter-related with the processes that is
undertaken by the organization to in harnessing the resources that is used in the organization in
every possible ways (Baker 2018). Now the resources could be of technological aspects or
manpower, financial and the raw components or the material used for manufacturing.
The Hudson Jewelry being a part of the diamond industry, also falls in the pull system of
the supply chain management (Rarick and Angriawan 2017). The Hudson organization knows
the demand of the customers, when the demand of the jewelry and diamond are low and when
their demands are high. As per the working and demand, the peak season for the sale of the
diamonds are from January to April. The customers form the north countries, also known as
snowbirds begins their arrival in the shops at the starting of October. Thus, due to this thorough
demand of diamond, the Hudson orders the manufacturer according to that. The average
inventory for the Hudson Jewelry shop in the lean seasons is up to a minimum amount of $1
million to $3 million. In the peak season the demand increases and the inventory reached up to
$15 to $20 million due to some special orders by the customers (Chopra and Thomas 2017).
The industry of diamond could be an efficient system but the Hudson Jewelry keeps their
priorities clear when it comes to their employees and their organization. The organization tries to

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use the resources in every human manner as possible. This helps them in maintaining their long
acquired brand name and loyalty (Fu et al. 2017).

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Question 2. Research global supply and demand for diamonds and how it affects prices.
What role do “diamond reserves” (inventory) play in determining prices? Explain. What
do you think the demand-supply curves for diamonds looks like? Try to sketch it out.
Answer – Diamond is considered to be one of the most valuable substance in the face of earth.
In has great value in the global market. The global supply and demand of the diamond is huge
and this is one of the major industry that shape and hold the economics of the global market.
Majority of the diamond reserve falls under the territory of Russia and countries of Africa. More
than 70 percent of the reserves of diamond are there (Wang et al. 2017). There are many major
corporations that deals in the supply and demand of diamond industry. Out of all the possible
organizations, DeBeers hod the maximum percentage of share in the market of diamond
industry. DeBeers have mining caves under their corporation that produces diamond that is sold
in the market in either in raw form or cut in pieces. The market share of DeBeers is
approximately 37 percent (De Wit et al. 2015). The organization is based in Kimberley that is
situated in the country South Africa. The organizations have their mines and facilities at South
Africa, Botswana, Namibia and Tanzania.
ALROSA is another Russian based organization that have huge market valuation and the
market share that they hold in the diamond market is 30 percent. This organization have its
facilities and mines in almost the whole of Russia and Angola. They have the majority of share
in the market after DeBeers.
The rest of the organizations that have shares in the global market of the diamond and
deals with the supply and demand of diamonds globally are Rio Tinto, Aber, BHP, Billiton, and
Leviev. Rio Tinto is an Australian organization that holds 5 percent of the diamond market (Cao
et al. 2019). It have their mines of diamond in Australia, Africa, Canada and Zimbabwe.

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The major supply and demand of the organization depends on the trade and the demand
of the diamonds in the market. Recently, there have been a decrease in the global diamond
market. The decrease was introduced for the producer inventories and at all the multi-years lows
and thus, a demand increase should allow the prices of the diamond to go up. It have been
estimated that the demand of the diamond would be up so the price of the diamond would also
possibly hike up. As majority of the diamond centers are would by private corporation and
governments of different countries to control the demand and supply of diamonds, the price of
diamond never get lowers. Thus the demand and supply would always effect the price of the
diamonds (Bieri 2016).
Diamond reserve, as in the inventories play and important role in determining the price of
diamonds. The reserves, which could also be called as mines hold the production of diamond.
From these mines raw diamonds are taken out and small fine cut diamonds are produced that is
sold in the market (Dixit 2016). Natural occurring diamonds are rare are found in the mines only.
They take millions of years to form as crystallization is a process through which diamonds are
produced. Carbon fossils are forced to interlock under immense pressure inside the earth crust.
Thus the carbon atoms are forced do that the intermolecular space in between them decreases
and thus crystallization helps in the process. This is the reason why it takes so much time for the
formation of each raw diamonds. For this, the price of the diamonds are always high as it
considered as rare minerals (Berger and Gavish 2015). The reserves produces this supply of
diamond. When the reserve would fail in producing diamonds, the price of diamond would rise
exponentially as natural diamond could only be get form the reserve (Walker 2017). This is the
reason the reason why diamond reserves control and play important role in determining the price
of diamonds.

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Fig – 1 Curve representing demand and supply of diamond
Source – (W. (2019). What do supply-demand curves really look like?)
The supply and demand curve represents the relation between supply and demand of any
product that is manufactured and produced in the market (Francisco and Swanson 2018). As
drawn in the picture, the supply curve could be demonstrated as exponential curve. Now an
exponential represents the rapid growth. The representation illustrates the growth of supply being
increased with the increase in quantity and price of the diamond. It could be represented as direct
relation with the price and the quantity factor. The curve is upward sloping that represents that
willingness of the manufacturer to sell their products more in the market with maximum price
with increase in the manufacturing quantity. The demand curve is quite different. It is down
sloping and more complex than the supply curve. The relation of demand with quantity is
inversely proportional and with price directly proportional. It means that the time of high
demand, the quantity of diamonds would be low but the price would be extremely high. In the
times of low demand, the quantity of the diamond would be immense but at that time, the price
of the diamond would be low as well. In this complex situation of demand and supply, there is a
point that is known as market equilibrium (Riasi 2015). It is demonstrated as the function in the

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market that helps in analyzing the demand and supply with the help of price mechanism. At
sometimes, when the buyer of diamonds are willing to purchase more quantity of diamond than
the availability at a very prevailing price. This makes the price to bid up. Same occurs when the
buyers are willing to purchase less quantity of diamonds than the availability in the market,
which makes the suppliers to bid the price rally low. This mechanism is known as market
mechanism or price mechanism which helps in moving towards equilibrium price. Thus the
balance in the supply and demand in known as market equilibrium.
Question 3. Research the extent of vertical integration in the global diamond supply
chain? Provide examples of forward and backward integration and the extent to which this
is practiced in today’s value chain? In this industry, what is the impact of vertical
integration?
Answer – The term vertical integration is commonly used to demonstrate a strategic plan or
strategic management in the global supply chain of diamond industry. This kind of strategic plan
is taken by organization that deals in the particular supply chain to gain their control over the
suppliers of the materials or the distributers of the products (Song, Niu, and Xiao 2017). This
helps them in increasing the organization’s power in the marketplace or the industry in order to
reduce the cost of transaction and help them in securing channels of distribution and supplies.
The particular vertical integration is used by organization in order to gain access and control over
the industry value chain (Francisco and Swanson 2018). This strategy is considered to be an
important aspect in building the level strategy in the diamond demand and supply chain globally.
Before analyzing the extent of the vertical integration, some of the issues that is needed to kept in
the mind. Before applying integration in the diamond supply chain, cost is one of the most
important parameter that is need to be analyzed thoroughly. When the cost of the making of the

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diamonds is lower than the cost of cost of buying the product in the market. This factor have
been on favor of in the global supply chain of the diamond industry as there is now price in
making the diamond, as it is naturally occurring and the price of taking the diamond out form the
mines is lower than the cost of buying the diamond in the market (Francisco and Swanson 2018).
As vertical integration refers in gaining the power over the value chain of the diamond globally,
the diamond value chain is viewed in major states. The extent to which the vertical integration of
the diamond supply chain goes is exploring, mining, rough diamonds, polished diamonds and
customer jewelry. The vertical integration is extended for a period of 18 to 36 months.
Forward integration is defined as a plan when organization uses in the beginning of the
supply chain controls and that farther along. A typical example related to mining industry of
diamond to analyze the value chain the use of it in iron mining. The companies that are in to iron
mining own the activities that are down-streaming as the products form the mining ends up in the
steel factories.
Backward integration is when companies or organizations apply the particular strategy at
the end of their business’s supply chain and takes part in up-streaming activities. It is also the
gain ownership or control over the previous suppliers. A typical example is the coal mining
industries that indulge their again over the previous suppliers (Richman 2017).
In today’s value chain analysis of the diamond industry, the forward and backward
integration is applied to gain over suppliers. Diamond mining tycoons like DeBeers apply
vertical integration in their structure.