Single Chain Antibody Production

Single Chain Antibody Production ABSTRACT The study aimed to characterise His- and Myc- tagged scFv MFE-23 antibodies produced from transformed E.coli cultures using ELISA and immunohistochemistry assays. Anti-His, anti-myc and anti-MFE secondary antibodies were used in the CEA/PBS coated ELISA plate with horseradish peroxidase-OPD chromatic reaction for detection. Culture 1 was identified to produce MFE-His and culture 2 giving MFE-Myc antibodies. The immunohistochemistry assay confirmed the CEA binding profile of scFv MFE-Myc by the comparison between negative controls, positive anti-CEA binding reactions and 4-stage anti-Myc binding of the scFv MFE-Myc examined. The CEA specificity displayed by tagged scFv MFE-Myc can be utilised in antibody-based cancer therapy by targeting tumour antigens specifically. INTRODUCTION Cancer arises due to the defective regulation of normal cell proliferation and homeostasis. This allows tumours to possess the capabilities including self-sufficiency in growth signal, insensitivity to antigrowth signals, avoidance of apoptosis, unlimited replicative potential, sustained angiogenesis and metastasis.1 In additional to the surgical removal of tumours, conventional cancer therapies such as radiation, chemotherapy and immunotherapy have a focus in inducing cytotoxicity against malignant cells. With better understanding of the molecular biology of carcinogenesis, targeted therapies are being developed to achieve lower toxicity to normal tissues and higher clinical efficacy through disrupting pathways that contribute to the tumours proliferative advantage. Attempts are also being made in developing cancer gene therapies to compensate or repair the mutated genes. All tumours express their unique set of antigens on cell surface which can be a result of genetic alterations, upregulated self-antigens or tissue-specific antigens that can be utilized to distinguish cancer cells from normal cells. Antibodies, one of the effectors in immune response, are Y-shaped proteins that each recognizes and binds to specific antigen (Figure 1). The protein consists of two light chains and two heavy chains, with variable (Fab) and constant (Fc) domains on each of the chain. The region of the antibody at which antigen binds is referred as the Complementary Determining Regions (CDR) present at the variable Fab region. The Fc region is responsible in modulating immune response through activation of the complement cascade and Fc receptor mediated activation of effectors such as phagocytes, mast cells, neutrophils and Natural Killer (NK) cells.3 The initial approach of antibody-based cancer therapy is to tag cancerous cells as foreign and eliminate such targets thro ugh cytotoxic effectors of the human immune system. Antibodies against essential growth factors can be synthesized to sequester such molecules from further promoting tumour growth. The high specificity of antibodies to particular antigens also serves as a vehicle in delivering killing machineries to tumour cells. For example, antibodies can be directly conjugated to radionuclides, toxins or cytokines, or indirectly to the surface of liposomes carrying drugs or toxins.4 Antibody-directed enzyme prodrug therapy (ADEPT) is also available in which the antibody targets an enzyme selectively to the tumor where it converts a relatively non-toxic prodrug to a potent cytotoxic drug.4 These various strategies aim to minimize the systemic toxicity afflicted by the cytotoxic agents administered. Monoclonal antibodies are usually preferred compared to polyclonal ones, as they recognize specific epitope of an antigen and hence have greater specificity. Carcinoembryonic antigen (CEA) is first identified as a glycoprotein in the human colon cancer tissue extract and fetal gut, and plays a role in cell adhesion.5 Although CEA can also be detected in normal gastrointestinal tissue, the glycoprotein is overexpressed on the plasma membrane of colon cancer tissues.5 CEA level has also been found to be highly elevated in various cancers of an epithelial origin such as breast, lungs and pancreas.5,6 Moreover, normal CEA is localised on the luminal surface of columnar epithelial cells lining the crypts of the intestine so the glycoproteins are not directly accessible to the blood flow.6 However CEA is usually found on all sides of the cell membranes in tumours. Thus, CEA can be a useful target on cancer cells in immunotherapy using anti-CEA antibodies. The objectives of this lab practical are to introduce the applications of antibodies in cancer therapy and diagnosis through immunohistochemical staining of tissues. It also serves to familiarise students with the enzyme linked immunosorbent assay (ELISA). This is achieved by the production of MFE-23 single chain Fc antibody fragment (scFv) against CEA from transformed E.coli cultures. The scFv MFE-23 can be linked to either a His- or a Myc- tag. The unknown antibodies are characterised in the ELISA assay using appropriate detection antibodies, and the chromatic reaction between horseradish peroxidise (HRP) and OPD substrate. The scFv MFE-23 obtained by students is also used in the immunohistochemical characterisation in cryostat sections of normal and cancerous human tissues. MATERIALS METHODS E. Coli growth curves E.coli cultures were transformed with pUC119 containing either His- or Myc- tagged scFv MFE-23 (Culture 1 2) and were incubated overnight. The expression of pUC119 was controlled by the lac operon, which could be induced by either lactose or lactose analogue isopropyl-1-szlig;-D-thiogalactoside (IPTG). The vector also encoded for ampicillin resistance. The E.coli cultures were grown with ampicillin selection and 0.05% glucose. Optical density (OD) readings at 600nm were taken at 30min interval until OD=0.9 when IPTG was added to both cultures to induce pUC119 expression and hence scFv MFE-23 production. A negative control of 2xYT was set up, and all three cultures were incubated at 30? overnight. Full experimental procedures are described in Appendix 1. ELISA assay The ELISA assay aims to characterize the identities of the tags conjugated to scFv MFE-23 obtained in the supernatant of the overnight E.coli cultures. Detailed protocols of the assay can be found in Appendix 1. 36 wells of the 96-well ELISA plate were coated with the CEA antigen or phosphate-buffered saline (PBS) as its negative control. Supernatant of the overnight E.coli cultures 12 from the bacterial growth curve assay was obtained which contain either His- or Myc- tagged scFv MFE-23. The supernatant samples 12, the positive control MFE-his-myc antibodies and the negative control 2xYT growth medium were added to the corresponding wells as indicated in the format diagram in Appendix 2. Secondary antibodies rabbit anti-MFE23 polysera, mouse monoclonal anti-HIS tag (TetraHis, Qiagen) and mouse monoclonal anti-MYC (Sigma) were added to the corresponding wells (Appendix 2) to bind the primary antibodies present. Tertiary horseradish peroxidase (HRP) conjugated antibodies against the secondary antibodies goat anti-rabbit HRP (sigma) and sheep anti-mouse HRP (Sigma) in blocking solution were added to the wells (Appendix 2). OPD substrate buffer was applied to each well to detect the presence of HRP, which should give a yellow-orange product in case of positive result. HCl was added to stop the reaction when colour has developed, and the OD at 490nm for each well was measured. Immunohistochemistry assay Five glass slides, each containing 2 colonic adenocarcinoma, 1 normal colon and 1 normal liver tissue sections were fixed and processed for immunohistochemical staining. Avidin-biotin-peroxidase complex (ABC complex) was added following the application of biotin-labelled antibodies. The localisation of antigens was visualised by the formation of brown pigments, as peroxidise reacts with the diaminobenzidene (DAB) substrate. Lattices of several peroxidase molecules were formed to amplify the binding signal from the biotinylated antibody.7 A summary of the treatment given to each slide was illustrated in Table 1, and the complete protocol can be found in Appendix 1. RESULTS E. Coli growth curves Both E.coli cultures transformed with either His-tagged scFv MFE-23 or the Myc-tagged version in a pUC119 vector follow a similar exponential growth curve, as shown by the plot of OD600 against time (Figure 2). The bacterial cultures were in lag phase at t=0-90, and the log phase from t=90. It took approximately 175minutes for the cultures to reach OD600=0.9. The PBS negative controls in wells A-F/7-12 worked relatively accurately with low OD490 readings. Most readings also corresponded to the negative controls in the CEA coated wells (B4-6, D4-6, F4-6) but with 2xYT added instead of primary antibodies. However, the OD490 readings for wells C10-12 and E10-12 were higher than most readings from the negative controls. The higher OD490 readings obtained in certain wells in comparison of their corresponding negative controls indicated the presence of yellow-orange product formation from reaction between HRP and OPD substrate. These positive outcomes found in certain wells are highlighted in the shaded cells of Table Immunohistochemistry Assay Figure 4 shows the immunohistochemical binding reactions for the negative controls (slides 3-5). Slide 3 acts as a negative control for slide 1, treated with the 4-stage anti-Myc technique but omitting the primary Myc-tagged scFv MFE-23 antibody. Thus we should not be able to visualize the localization of CEA antigens due to the absence of MFE-23 binding on slide 3. Slide 4 is a negative control for slide 2, omitting the mouse monoclonal anti-CEA A5B7 antibody treatment in the 3-stage mouse monoclonal technique. No binding reaction is expected on slide 4 as well. Slide 5 was treated like slide 4 but without initial biotin/avidin blocking. As expected, the colonic adenocarcinoma tissue section of slide 3 does not display brown colouration and hence there is no binding reaction to the cytoplasm of tumour cells and connective tissues. Binding reaction to the cytoplasm of cryptal epithelium is not seen for the normal colonic mucosa, although there are strong brown colourations for a few cells in the lamina propria. The normal liver tissue on slide 3 shows some weak reaction with the parenchymal cells. Similarly, the parenchymal cells of the normal liver tissue on slide 4 do not display brown colouration and hence indicates the absence of binding reaction. On slide 5, the normal parenchymal cells are positive for binding reaction, demonstrating the presence of biotin in normal liver. Figure 5 shows the immunohistochemical binding results of slides 1 and 2. Slide 1 was treated with the 4-stage anti-Myc technique and slide 2 is the positive control treated with the 3-stage mouse monoclonal technique (See Table 1). For the colonic adenocarcinoma tissue on slide 1, strong brown colouration is present in the cytoplasm of tumour cells and the basement membrane of malignant acinar structures. Weak positive binding reactions can also be observed in fibrovascular stroma. The normal colonic mucosa of slide 1 shows strong reactions to the cytoplasm of goblet cells in the cryptal epithelium as well as a few cells in the lamina propria. The normal liver tissue shows only weak positive reactions with the parenchymal cells. Thus the scFv MFE-myc antibody was reactive with both normal colonic epithelium and adenocarcinoma, but not the biotin/avidin blocked liver tissue. The colonic adenocarcinoma tissue on slide 2 shows strong reactions with the tumour cell cytoplasm and the basement membrane of malignant acinar structures similar to the reactions seen in slide 1. Weak positive results are obtained in fibrovascular stroma of the positive control slide. As the binding reaction of slide 1 was similar to that of the positive control, this confirms the CEA reactive profile of the scFv MFE-myc antibody from the E.coli supernatant sample 2. DISCUSSION E.coli Growth Curve Both E.coli cultures followed the exponential growth curve as expected. However, the growth curve was obtained in the absence of a negative control i.e. same volume of 2xYT to be treated in the same way as the two cultures. The lack of a proper negative control means that the possibility of contamination cannot be eliminated. Thus it is unknown whether the increase in OD600 readings was partially attributed to culture contamination. ELISA Assay As mentioned in the results, the OD490 readings for wells C10-12 and E10-12 were higher than most readings from the negative controls. This might indicate contamination of these wells with CEA antigens, or insufficient PBS washing following the application of HRP-conjugated antibodies. Wells A-B/1-6 were applied with anti-His secondary antibodies and so would indicate the presence of His-tag by the production of yellow-orange product. Wells A1-3 were treated with supernatant from bacterial culture 1 and wells A4-6 with that of culture 2. As higher readings of OD490 in the positive control B1-3 and wells A1-3 were obtained compared to the negative control B4-6, the culture 1 supernatant contained the His-tagged scFv MFE-23. Wells C-D/1-6 were applied with anti-Myc secondary antibodies and so would indicate the presence of Myc-tag by the production of yellow-orange product. Wells C1-3 were treated with supernatant from bacterial culture 1 and wells C4-6 with that of culture 2. As higher readings of OD490 in the positive control D1-3 and wells C4-6 were obtained compared to the negative control D4-6, the culture 2 supernatant contained the Myc-tagged scFv MFE-23. The anti-MFE antibodies added to wells E-F/1-12 can bind to both His- or Myc-tagged scFv MFE-23. Thus binding should occur against primary antibodies from both cultures 12 and also the positive MFE-myc-his control, as demonstrated by the higher OD490 readings in wells E1-6 and F1-3 compared to the negative controls F4-6. It can be observed that the anti-His antibody gave a stronger signal than anti-Myc and was due to anti-His binding more strongly to its target than anti-Myc (Unpublished results, Kogelberg, H.). Comparing the OD490 of wells E1-3 and E4-6, absorbance of anti-Myc was slightly higher than anti-His despite the lower binding affinity of anti-Myc. Thus there might be a higher concentration of MFE-Myc in the culture 2 supernatant than MFE-His in culture 1, although technical issues like washing times, salt concentration and pH, or structural characteristics affecting the accessibility of antibody can affect the amount of binding. Immunohistochemistry Assay The results obtained from slides 1 and 2 confirm the CEA reactive profile of scFv MFE-myc antibody, as both slides displayed similar binding reaction patterns in colonic adenocarcinoma. The weak positive signal in normal liver tissue in slide 1 is likely to be caused by cross-reaction of secondary mouse anti-Myc antibodies, as similar result can be observed in the negative control (slide 3). Primary antibodies may also cross react and bind to non-target tissues. This demonstrates the possible cross-reactions with antibodies and hence the importance of negative controls to eliminate such artifactual reactivity. The strong binding to goblet cells cytoplasm in cryptal epithelium of normal colonic mucosa in slide 1 is consistent with the findings of CEA present in normal colonic mucosa.5 Although CEA level is lower on normal colonic mucosa, their presence implies that antibodies against CEA in cancer therapy may target normal cells other than malignant cells. Thus it is important to control anti-CEA antibody concentration used to avoid imposing toxicity to normal tissues yet is effective in producing a clinical response on cancer. The negative controls (slides 3-5) allowed the assessment of the level of binding for secondary, tertiary and quaternary antibodies/reagents. The slides also revealed any endogenous background material that might be confused with specific binding of primary antibodies, as well as information about the basic pathology of tissues. The inclusion of normal liver sections helped illustrate the importance in carefully controlling the specific reactions of test antibodies with potential targeting specificity for other cellular proteins. The ABC complex for detecting biotinylated horse anti-mouse antibodies can also react with biotin present in liver and give a positive non-specific result. This unwanted reaction as seen in slide 5 can be prevented by biotin blocking treatment of tissue samples. Moreover, myeloperoxidase white cells containing endogenous peroxidase can react with the DAB substrate and produce brown colouration even in the absence of ABC complexes. The normal colonic mucosa in slide 3 provided examples of such artifact. The naturally occurring bile pigments in liver seen as green/brown granules under high-power bright field microscopy can also be found occasionally. Careful interpretation of slides is required to avoid false judgments as there can be false positive reactions. In addition, it should be noted that adequate fixation of the sample is important in successful localisation of antigens present and hence an accurate representation of antigen distribution profile. The procedure helps to ensure the preservation of tissue morphology, the immobilisation of antigen and the preservation of antigen immunoreactivity. It is also important to ensure optimal fixation for an adequate permeability of the tissue to the immunochemical reagents. Other than mmunohistochemistry, western blotting and immunoprecipitation (IP) can be carried out to confirm scFv specificity. Antigens transferred to nitrocellulose membrane can be probed by specific antibodies in western blot, or precipitated out of lysate using antibodies in IP. Affinity chromatography can also be used which is a method of separating biochemical mixtures based on highly specific biological interaction. Specific antigen can be covalently coupled to a solid support and allow supernatant with the testing antibody to flow through so that only specific antibodies will be bound to the antigens. The assay used in this study can only detect antigens in a non-quantitative way with chromatic display of antigen localisation. Instead radioimmunoluminography (RILG) can be used for quantitative measurements of antigen concentration along with its distribution in histological sections.8 Radiolabelled antibodies against specific antigen can be applied to tissue sections and bound antibodies are mapped by phosphor imaging. Radioactivity detected in each pixel of the digital image will be proportional to antigen concentration if saturating antibody concentration is used. Future Perspective of Antibody Targeted Cancer Therapy The successful application of scFv MFE-23 with a Myc-tag at its C-terminus for detection in immunohistochemistry proves that the attachment of small molecules to the antibody will not affect its specificity for CEA. Thus the scFv chain can be conjugated to cytotoxic reagents or to be used for ADEPT as mentioned previously. The potential clinical efficacy of scFv MFE-23:enzyme fusion protein has been shown in nude mice with human colon adenocarcinoma xenografts by the Bhatia group.9 Moreover, scFv MFE-23 can be used in radioimmunoguided surgery (RIGS) based on the pre-operative injection of a radiolabelled anti-tumor antibody to detect tumour deposits during surgery. A Phase I clinical trial of RIGS using 125iodine-labelled MFE- 23-his scFv has reported good selective localisation at sites of primary colorectal cancer and metastases.10 As illustrated by MFE-23 scFv fragment, antibody targeting has the potential for selective imaging or delivery of anti-cancer molecules. Antibodies can be engineered to modify their biological properties with increased specificity and functionality. This is achieved by reducing antibody size, altering valency, and fusing to different molecules to improve therapeutic efficiency. Scientists have been trying to produce smaller antibody fragments but retaining specific binding to antigens, in order to minimize immunogenicity and achieve better tumour penetration. Continuous research on the specificity and stability of these fragments, and hunting for more tumour-specific antigens are required to further expand the field of antibody-targeted cancer therapies. Slide 3 is a negative control for slide 1 which was treated with the 4 stage anti-Myc technique. Slide 4 is a negative control for slide 2 which was treated with the 3 stage mouse monoclonal technique. Slide 5 is a negative control for slide 2 as well but without biotin/avidin blocking. Slide 1 was treated with the 4 stage anti-Myc technique, and slide 2 was treated with the 3 stage mouse monoclonal technique. REFERENCES Hanahan D, Weinberg RA. The hallmarks of cancer. Cell. 2000 Jan 7;100(1):57-70. Baron, E. J. 1996. Classification. In S. Baron et al., eds. Barons Medical Microbiology, 4th edition. University of Texas Medical Branch. Gura, T. Therapeutic antibodies:Magic bullets hit the target. Nature 417, 584-586 (6 June 2002) Carter, P. Improving the efficacy of antibody-based cancer therapies Nature Reviews Cancer 1, 118-129 (November 2001) Sten Hammarstrà ¶m. The carcinoembryonic antigen (CEA) family: structures, suggested functions and expression in normal and malignant tissues. Seminars in Cancer Biology. Volume 9, Issue 2, April 1999, Pages 67-81 A. Mayer, K. A. Chester, et al. Taking engineered anti-CEA antibodies to the clinic. Journal of Immunological Methods. Volume 231, Issues 1-2, 10 December 1999, Pages 261-273 Hsu SM, Raine L, Fanger H. Use of avidin-biotin-peroxidase complex (ABC) in immunoperoxidase techniques: a comparison between ABC and unlabeled antibody (PAP) procedures. J Histochem Cytochem. 1981 Apr;29(4):577-80. GBoxer, SStuart-Smith, et al. Radioimmunoluminography: a tool for relating tissue antigen concentration to clinical outcome. British Journal of Cancer (1999) 80, 922-926. Bhatia J, Sharma SK, et al. Catalytic activity of an in vivo tumor targeted anti-CEA scFv:carboxypeptidase G2 fusion protein. Int J Cancer. 2000 Feb 15;85(4):571-7. Mayer, A., et al. Radioimmunoguided Surgery in Colorectal Cancer Using a Genetically Engineered Anti-CEA Single-Chain Fv Antibody. Clinical Cancer Research May 2000 6; 1711. APPENDIX Appendix 1 Experimental Procedures (UCL Cancer MSc Lab Practical 2 Handout, 12-13Nov09) E. Coli growth curves E.coli culture transformed with pUC119 containing either His- or Myc- tagged scFv MFE-23 (Culture 1 2) were incubated overnight. The expression of pUC119 was controlled by the lac operon, which could be induced by either lactose or lactose analogue isopropyl-1-ß-D-thiogalactoside (IPTG). The vector also encoded for ampicillin resistance. 30 µl of the media was added to 15ml growth media with ampicillin selection and 0.05% glucose. Both tubes on loose caps were placed into a 37? shaker at 225rpm and time was taken as t=0. Optical density (OD) of the culture was measured with a spectrophotometer at 600nm from t=0 at a 30min interval until reading reached OD=0.9. 1mM IPTG was added to each culture and the tubes were incubated at 30? overnight with shaking. A negative control was set up using the same volume of growth media 2xYT with 1mM IPTG for overnight incubation. ELISA assay 100 µl of 10 µg/ml CEA antigen was applied to strips 1-6, A-H of the 96-well ELISA plate. 100 µl of PBS was applied to strips 7-12, A-H as negative controls. The plate was covered with plastic film and incubated for 1 hour at room temperature. Each well was rinsed 4 times with PBS and blocked with 200 µl 5% Marvel milk/PBS. The plate was covered and incubated overnight at 4?. The plate was washed with PBS 4 times after the overnight incubation. Overnight bacterial cultures and the negative control were centrifuged at 4000rpm for 20minutes to obtain the supernatant. 100 µl of each supernatant sample and negative control was added to the ELISA plate according to the format diagram as seen in Appendix 2. The covered plate was left at room temperature for an hour. The plate was then rinsed twice with 0.1% Tween-20/PBS and 4 times with PBS. 100 µl of secondary antibodies rabbit anti-MFE23 polysera, mouse monoclonal anti-HIS tag (TetraHis, Qiagen) and mouse monoclonal anti-MYC (Sigma) with a concentration of 1:1000 in 1% blocking solution was added to the wells according to the format diagram: anti-His A1-12 and B1-12; anti-Myc C1-12 and D1-12; anti-MFE E1-12 and F1-12. The covered plate was left at room temperature for an hour. The plate was washed again twice with 0.1% Tween-20/PBS and 4 times with PBS. 100 µl horseradish peroxidase (HRP) conjugated antibodies against the secondary antibodies 1:1000 goat anti-rabbit HRP (sigma) and 1:500 sheep anti-mouse HRP (Sigma) in 1% blocking solution was added to the corresponding wells. The covered plate was left at room temperature for an hour, and then rinsed twice with 0.1% Tween-20/PBS and 4 times with PBS. 100 µl of OPD substrate buffer was added to each well to detect the presence of HRP, giving a yellow-orange product in the case of positive outcome. 100 µl of 4M HCl was added when the colour has developed, and OD was measured at 490nm with an automated plate reader. Immunohistochemistry assay Five glass slides, each containing 2 colonic adenocarcinoma, 1 normal colon and 1 normal liver tissue sections were removed from the freezer and air dried for 5minutes. Slides were fixed in acetone in 10minutes and rinsed in tap water for 2minutes. Slides were flooded with PBS and Avidin blocking solution was applied to slides 1-4 for 10 minutes. Slides 1-4 were rinsed in PBS and applied with Biotin blocking solution for 10minutes followed by PBS wash. PBS was removed from slide 1 and flooded with 1:20 normal horse serum in PBS for 15minutes. Slide 1 was drained and applied with bacterial supernatant containing Myc-tagged scFv MFE-23 antibodies for 45minutes. Slide 1 was then rinsed with PBS thrice over 10minutes, and 1:20 normal horse serum in PBS was added to slides 2-5 for 15minutes. 20 µg/ml of mouse monoclonal anti-Myc antibody (Qiagen) in PBS was added to slides 13 and left for 35minutes. 20 µg/ml of A5B7 anti-CEA antibody was added to slide 2 for 35minutes. Slides 4-5 were washed in PBS. Slides 1-3 were rinsed with PBS thrice over 10minutes. 1:200 biotinylated horse anti-mouse immunoglobulins in PBS with 5% normal human serum was added to all slides and incubated for 35minutes. All slides were rinsed with PBS thrice over 10minutes. The avidin biotin-peroxidase complexes reagent (ABC reagent) was added to all slides, followed by PBS wash 3 times over 10minutes. 0.03% of hydrogen peroxide in 1mg/ml 3,3,diaminobenzidene tetrahydrochloride solution was applied to all slides immediately and left for 5minutes. Slides were washed with tap water. All slides were stained in Harris haematoxylin for 40seconds, rinsed in tap water and left for 5minutes for colour to develop. Slides were then dehydrated through graded alcohols (70/95/100%), cleared in inhibisol and coverslip using DPX mountant. The slides were then ready for observations under the light microscope.

American Airlines Essay

1. Issues 2. American Airlines’ objectives 3. The airline industry 4. Market 5. Consumer needs 6. Brand image 7. Distribution system 8. Pricing 9. Marketing related strategies 10. Assumptions and risks 1- Issues The main issue of this case is the lack of profits of the airline industry, an industry that should be more than profitable due to the large amount of customers, the necessity of using airlines’ services and the high prices charged by most of these airlines. What we are going to deal with is, why is this happening? And how is American airlines dealing with this problem?. To be able to discuss how American airlines wants to regain profitability, we must identify and analyse different issues such as, the company’s background, the airline industry as a whole, the demand for air travel, the marketing strategies, the distribution systems, pricing policies etc. 2- American Airlines’ objectives American Airlines’ prime objective is to bring back value to air travel, through stimulating business travel, lowering prices etc. So in other words American Airlines’ main objective is to become as profitable as possible. To understand better the company’s objectives we first have to focus on the company’s background, this way we will find out why the airline is not as profitable as it should, and what kind of a change is needed. American Airlines had been the largest airline in the United States for a long time. In 1990 and 1991 due to a recession and the Gulf War, demand for air travel dropped drastically, for this reason, fare wars started and all the airlines incurred massive losses. 3- The Airline industry and the market The airline industry is large, specially in the United States, mainly due to the † Deregulation† of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air transportation industry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was found inefficient and in 1978 deregulation took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many new companies  emerged and regional airlines saw deregulation as an opportunity to expand. Due to the rise in competition, by 1986 mergers started to take place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is determined mainly by price, studies revealed that half of the leisure travellers and on quarter of business travellers did not have a preference for a particular airline, which means that prices determined the preference. So the strategy to compete for customers consisted mainly in pricing and flight schedules. The demand for flights varies depending on the season or the business cycle therefore airlines have to develop different pricing strategies and offers depending on the season or the business cycle period. An other determinant for demand is technology, the new telecommunication possibilities have made air travelling unnecessary in some cases, which of course has affected airlines revenues. 4- Consumer needs. Consumer needs are clear, what airline consumers need is basically god prices and good flight schedules. These are the basic needs, apart from these ones we could also point out other needs such as big, comfortable seats for long flights, good service on board, good food, punctual departures, check-in facilities, movie channels, etc. All these are consumer needs, but studies have shown that demand is mainly determined by price and a flight schedules, the rest just add value to these two, therefore companies must focus on ways to lower prices and provide good flight timetables. There are two types of travellers, business travellers and leisure travellers, these two of course have different needs, for the first ones price is not so important because usually the company pays for it on the other hand punctuality and flight schedules are very important to them. For leisure travellers the most important thing is usually price, and the rest comes after that. But as I said before consumer needs can be summarised in these to price and schedules. 5- Brand image American Airlines’ brand image is good, due to its successful background and its new marketing strategies. In 1991 American Airlines was the biggest airline in the United States, and the reason for it is that this airline was pioneer in many fields gaining competitive advantage over the other airlines. When deregulation took part in 1978, American transformed in  such a way that it became the industry’s market share leader. American had also pioneered several policies that affected the industry’s structure and standard practices. In the late 1960’s, American introduced the first computerised airline reservation system, which revolutionised the marketing and distribution of the travel industry. American also introduced â€Å"the super saver† fares in 1977, which was the first programme of deep discounts for leisure travellers, and in 1981, American launched the first frequent-flier programme, which created brand loyalty towards the airline. American Airlines is constantly developing new strategies, and introducing new technologies, and this is why its brand image is so high. Some of the new innovations that American Airlines is introducing are, the any time fares for business, new plan ahead for leisure, lower first class fares, etc. 6- The distribution system The main distribution system for air travel is the travel agent, which provides not only the flight ticket, but also supplementary services such as car rentals, hotels, excursions, etc. Airlines ask the agents to make reservations and deliver tickets. There is a difference in the distribution of tickets for business travellers and leisure travellers. Leisure travellers deal always with the agent, but for business travellers sometimes the airlines make deals directly with the companies. Airlines also make special offers to large corporate buyers, like price discount for frequent flier travellers, or quantity discounts. Nowadays there are other distribution systems, such as on line booking, and airlines’ home delivery tickets. 7- Pricing After the deregulation, pricing policies changed drastically, airlines started to offer a wide variety of fares discounted below the regular price. These discount were accompanied by several restrictions such as advanced booking, no refund, no changing dates, etc. Therefore people unwilling to meet these restrictions paid a higher price. At American Airlines management was viewed as selling the right seat to the right person, this means that they search for ways to find out who is willing to pay a higher price, and how can they make him pay a higher price. By 1991, the industry’s pricing structure had become enormously complex. American’s flights involved maintaining 500,000 fares. By late 1991 93% of the tickets  were sold at one kind of a discount or another. And the average discount was 63%. Due to the complex pricing structure American developed the â€Å"value pricing† plan. This plan consisted in: First for any given flight there would be only four different fares. Second, all fares would be mileage-related, and finally, the new fares were set below the levels of comparable existing fares so lower prices would be available to more business and leisure travellers. 8- Marketing related strategies Some the marketing strategies carried out by American Airlines have been: -Computerised reservation Systems: This system changed the industry’s marketing and distribution systems. This system stored information about, flights, seats availability and fares. Which made the booking and distribution a lot easier. CRS systems gave American Airlines a great competitive advantage over the other airlines, as booking fees by CRS enabled American to earn substantial amounts from its competitors. -Hubbing: With hubbing, flights from various origins on spokes of the network are channelled through an intermediate location, where they change planes and are re-routed to their final destination. This way the airline can serve more locations with fewer planes. -Frequent Flyer programmes: These programmes provide discounts or bonuses to frequent travellers. The value of the bonuses increase as the mileage flown increase, the bonuses can take various forms such as, fare reductions, upgrades to better classes or even free tickets. 9- Assumptions and risks In my opinion all of this strategies are brilliant, the only risk I see is in hubbing, customers sometimes don’t want spend additional time changing planes, there is the risk of missing connecting planes, luggage may get lost, etc. In the rest of the strategies I don’t see any risks what so ever.

Procurement process in small or Micro Enterprises. Essay

1. Introduction This assignment entails the information of procurement processes and the comparison of three different organizations that we have chosen – the Minimart, Online shop and Pet item industries. Although they are all micro organisations and retailers in the supply chain, they encompass individual requirements and selection criteria of their procurement processes. In this assignment, we will identify what are the similarities and differences in their Procurement-to-Pay process, their ‘What if† risk factors and the mitigation approach in overcoming the risks. 2. BRIEF DESCRIPTION OF ORGANISATIONS The three micro organisations selected are namely the Mini-mart, Online Apparel Shop and the Pet Shop. Firstly, the mini-mart act as a â€Å"convenient store† located around housing estates. It takes advantage of the proximity and locality and targets the morning rush hour crowd such as the students and working adults. The mini-mart offers products like canned food, drinks,  tidbits, newspapers, ready-to-go foods like packed rice, finger food and desserts. As the mini-mart deals with highly perishable goods, the procurement procedure will be special to the industry, as they have limited shelf lives. Next, a recent trend in the fashion industry is the online shop. The online shop sells apparels and accessories that the owner source from around the world leeching on bulk discounts. The online shop targets female consumers that enjoy the convenience of online shopping. Lastly, the pet shop sells pets and their related items such as cages, food and treats, grooming kits and toys. The main consumers will be the people who are looking for pets and existing pet owners who will need to purchase the pet’s necessities frequently. 3. POSITION OF ORGANISATIONS AND TWO MAJOR PRODUCTS IDENTIFIED All three organisations act as retailers where consumers purchase products from them directly. They directly import the products themselves from overseas or purchase from local wholesalers who import them in bulk. The focus for these three micro organisations chosen in their procurement process will be on the strategies that they make due to the limited space operating in Singapore. In addition, the mini-mart and pet shop have limited shelf life for some of the products that they carry. The two major products we identified for minimart are the newspapers and the ready-packed food. As mentioned, the consumers are mainly working adults and students that patronize during rush hour. Items like local newspapers and ready-packed food are in high demand. The shelf life of these products are short, thus once unsold will deem the newspaper obsolete and food stale. Next, the two major products for the online shop are clothing and accessories. The online shop needs to bring in new apparels constantly. They need to catch up with the growing demands and changing taste of the customers. A factor that contributes to these is the seasonal fashion that changes every time. Thus, seasonal demand should be included into forecasting for inventories as this would keep the company competitive. Finally, pet item consumers would mainly look forward to daily requirement such as pet canned foods and grooming products. They are two major products that petshop need to constantly keep them in sufficient amount of inventory required when they affect the sale rates. As mentioned earlier, they are imported overseas. 4. PROCURE TO PAY PROCESS COMPARISON Appendix A The three organisations that we have chose have all followed this Procure to Pay process, however they have their differences in determining these processes. For forecasting, the online shop and the pet shop has less frequent level of forecasting their requirements due to its irregularity sales of goods which depends on seasonal demand. However, the mini-mart actually requires daily forecasting and is more volatile in their forecast. The shopkeeper take into considerations like public and school holidays before he actually consider how much to procure for the day worth of food and newspapers to sell. For example, during weekends in the morning, crowds tend to be lesser and thus, lower in demand. For the clarification/requisition and supplier selection process, the online shop had done their clarifications virtually through online e-mails and phone calls as most of their suppliers are all overseas. The mini-mart and the pet shop actually do face-to-face meet up with suppliers to look at the real products, whether they can match their requirements before confirming the order and delivery. The approval and contract process is quite similar for both the mini-mart and the pet shop as it is done locally. After identifying a supplier, they will send purchase order according to demand. The online shop process is slightly different as the suppliers are mainly from overseas. Once the proprietor has identified their supplier, she will travel to the country to visit the supplier to determine the product’s quality, and to establish a rapport with the supplier before giving the approval. After discussing with these three organisations, we have discovered that price is one of the key factors on how these three organisations measures the performance of their suppliers. They will not want to see a sudden increase of their cost of products. However, there is a difference in their selection criteria. The mini-mart factors in the timeliness of goods, the petshop factors in the brand of products that consumers prefer, and the online shop focuses in the design, quality and bulk purchase discounts. 5. SUPPLIER IDENTIFICATION AND SELECTION The similarity in requirement for selecting suppliers is the timely delivery. All three organisations, especially the mini-mart requires punctual delivery of newspapers and ready-packed food daily. They rely on the supplier’s punctuality to stock up right inventories to make items available at the right time and place for consumers. With the Fedex Strategic sourcing process (Annex B), we are able to show their differences in identification and selection of suppliers. Minimart Online shop Pet Shop Profile the Sourcing Group – Requires volatile changes of good supplies depending on the daily requirement. Thus, while setting the profile, the owner will prioritise familiarity and reliability with the supplier. – Requires volume discount. – Timely delivery affects forecast for seasonal demands and thus, will affect their sales. – Requires volumes discounts for pets related item. – Requires credibility and reputation of the supplier. Select Sourcing Strategy – Has no bargaining power over the products from the current suppliers. – Have little alternatives over suppliers as suppliers are niche and limited. – Has bargaining power when ordering goods in bulk. – An alternative way when current supplier is unable to meet the needs, online shop owners in Singapore can go for overseas hunts to look for direct suppliers instead of normal wholesalers in Singapore. For example, Bangkok is one of neighbouring countries who is the direct supplier for apparels sold locally. – Has bargaining power due to bulk purchase ability and due to the large supplier base, it is easy to find alternative sources that can provide similar/better services. Generate Supplier Portfolio – Has only one source for getting the newspapers due to the limited publisher in Singapore. – However, for the food supplies, the owner will look into  the value added services such as packaging of the food items. This helps to save the time of re-packaging and selling to the customers. – Every piece of apparel is packed neatly in packaging and owners do not have to re-package themselves again. They are also delivered to owner’s doorstep from overseas. This adds value to the supplier’s service. – Selects and identify suppliers with no value added capabilities. However, main selection criteria are bulk discount and price. Select implementation path – Very little adjustment to be done on the sourcing due to the basic business model. – Many online shops sells similar items so they look for suppliers who can provide self-manufacture services and also bulk discounts. For example, suppliers follow designs as given from online shop’s purchase order. – Increase bulk discount criteria to shrink the list qualified supplier. Major product like canned foods can be stored longer, thus, storage will not pose as a problem. Negotiate and select suppliers – Due to the only existing publisher in Singapore, negotiating power is very limited. However, for the food supplies, reduction of price and efficiency is viable with increase in order quantity. – Base on shortlisted suppliers, they will look into the one who can compromise the most and satisfy their requirements. – With the sourcing strategy established, they will try to bargain for more bulk discount with the suppliers. Operationalize supplier integration – Link their suppliers as a part of their operating process as timeliness is an issue for sales of goods for the mini-mart. – Long-term collaboration ensures quality and efficiency when there is mutual trust. – Will establish relationship with the supplier and also promise loyalty if the supplier maintains their quality service and discounts. However, they do not link the suppliers to their key processes. Benchmark the supply market – Mini-marts tend to prioritise in bulk discounts and timely delivery in selection of suppliers. – By comparing selected suppliers, they will narrow  down the suppliers who can provide the most efficient services and bulk discounts. – Does market comparison with other pet shops and also suppliers. They look out for cheaper suppliers and latest pet products. 6. STRESS TESTING AND RISKS MITIGATION APPROACHES 6.1 Four categories of risks identified in each organization A) Minimart Supplier-Related Customer-Related Risk Mitigation Approach Disruptions – Supplier who delivers ready-to-go food abruptly stops their supply. – Excess inventory due to forecast error, seasonal demand, wastage in food. – Lose potential consumers who prefer food produce by original supplier. – Sudden increase or decrease in demand. – Acquire alternate source of supplier. – Proper forecast to keep the right inventory level required. Delays – Traffic jam delays the delivery of morning orders. – Supplier delivers to wrong address. – Miss and disappoints the morning crowds. – Delay in displaying all the ready-food to sell. – Increase responsiveness of Supplier. – Look for wholesaler who can supply last minute. Procurement – Supplier is forced to increase the price of raw materials. – Increase in Transport costs. – Force to increase price due the spike of cost of goods or transport cost. – Having a redundant pool of suppliers to benchmark. Systems – Supplier’s order tracking system breaks down. -Suppliers food processing machine breakdown – Telephone line break down and customers cannot order via phone. – Increase flexibility in other means of contact. For example, e-mails, mobile phones, telecommunicating for urgent orders. – Alternate source of supplier. For the Minimart, we have identified two key mitigation strategies to acquire alternate/redundant source of suppliers and increase responsiveness. Acquiring redundant suppliers helps to reduce disruptions, procurement and inventory risk. However, as we discuss further, the mini-mart might face the risk that alternate supplier capacity might not be sufficient to meet their needs. This will in turn, pose as a risk to their inventory. To reduce the risk of delay, we have proposed to increase the responsiveness of the supplier due to short life cycle of food products. It also helps to reduce both forecast and inventory risk. B) Online shops Supplier-Related Customer- Related Risk Mitigation Approach Disruptions – Natural disasters like haze, tsunami happen and cause shipment delay. – Sudden shortage production of cotton fabric and raw material for making apparels. – Excess inventory due to wrong stock count. – Demand increases. – Increase in prices when demand is high and low in productivity. – Have alternate redundant source of suppliers to rely on. – Increasing inventory level. – Better forecast inventory due to seasonal demands. Delays – Stock delays that resulted from shortage of important raw material e.g. fabric etc. – Distribution takes longer when delay from shipping companies. – Customer order fulfillment gets delayed – Stocking up more predictable and lower cost product. – Look for direct alternate suppliers overseas, shortens waiting time for shipping and save cost. Procurement – Increase in production costs from supplier due to shortage in raw materials or labors. – Shipping costs increases that was incurred from transportation companies. – Need to increase selling price while unable to reduce waiting time required, or even higher waiting forecast. – Customer orders gets mixed up and resulted in poor customer service. – Acquire redundant suppliers for benchmark. – Increasing responsiveness approach to meet customer demand. Systems – System breakdown at overseas supplier side. – Online shopping website breakdown locally and technical repair takes some time – Website gets infected and not able to receive customers order. – Increase inventory level to mitigate supplier system risk. – Increase in flexibility of point of contact. For Online shop, the main focus was to get supplies ready when needed. Having alternate suppliers is necessary when there is delay or failure in the potential supplier. Accurate forecast is important when consumer demand is different every season. Leftover items from excess inventory could have difficulty in meeting buyers and cause wastage. C) Pet Shop Supplier-Related Customer- Related Risk Mitigation Approach Disruptions – Local supplier has stopped supplying a hot selling product. – Health production examined a major pet canned food product contains chemical that is not suitable for consumption. – Consumers forced to go for other alternative supplies. – Retailers forced to absorb losses for existing inventories. – Increase in inventory. – Have redundant suppliers. Delays – Supplier delay delivery of promotional item by a day. – Supplier deliver wrong type of items and causes re-delivery delays. – Inadequate supplies to meet expected demand. – Severe shortage on particular items affected. – Increase in inventory level. Procurement – Supplier refuses the bulk discount of a certain product due to drop in purchasing volume. – Supplier increase in price when production cannot catch up with demand. – Forced to increase price due to lesser sales of a product. – Consumer still enjoys usual selling rates due to competitiveness at retailer side. – Having redundant supplier so that they can benchmark their suppliers to get the best competitive price. Systems – E-order system broke down. – Overseas supplier lose track of all orders due to system breakdown – Online web page is down and customers are not able to get information and order online. – Increase flexibility in having other source of communication like telephone or backup copy of customer’s orders. As for the pet shop, we concluded that to gain competitiveness in pricing, they require the suppliers to issue bulk discount. Thus, they will have a few redundant suppliers to allow them to manipulate the prices between the suppliers, giving them a lower price. In doing so, it also mitigates on problems like disruption and delays as if any of the suppliers will fail on such a secondary will take the job mitigating these issues. We must understand that when they engage any supplier, they will stock in more than enough stock setting buffer and leeching on the bulk discount. 6.2 Risks Mitigation For the above different categories of risk, there are a few similar mitigation strategies for each risk for the three organizations studied. For the risk of disruption, the key strategy for the organizations is to acquire alternative/redundant suppliers. This strategy will help to mitigate the risk of sudden stoppage of supplies. Also, it helps to reduce the procurement and delay risk. However, we have also concluded that as these organisations are retailers, which are subjected to the supplier capacity to  provide the inventory needed. As such, if disruption from supplier were to happen, the organisations might face inventory risk. Coming to risk of delay, the pet shop and online shop are able to eliminate this risk by increasing inventory level as canned food and clothes can be stored. This will also help to lower disruptions and procurement risks to the organisation. However, for the mini-mart, the approach is different due to the short life cycle of food products and the timely delivery requirement due to daily demand. As such, it requires an increase in the responsiveness of the suppliers to ensure quality of products. For risk of procurement, we are able to conclude that all three organisations require having redundant suppliers. Mostly, for these organisations faces risk in an increase of the cost of goods and transportation cost. As such, they require different suppliers so that they are able to benchmark their suppliers against others to get an overall competitive edge in cost saving. Lastly, for the risk of system, the organisations are facing mostly on issues like purchasing system breakdown or the organization system failure. Thus, they need to increase their flexibility in having other source of communication like telephone, mobile phones or backup copy of their own orders. 7. CONCLUSION In conclusion, the above analysis on the three organisations helps us better understand the procurement process and the importance of considering such processes when it comes to reducing costs, risks and selection of suppliers. It is also concluded that all the three organisations rely in a way or another procurement strategies to ensure normal business function in serving targeted consumer demands, making them available in the right time, right place and location. In addition, the suppliers and the three organisation’s relationship in the existing market play an important role in terms that affects the delivery to end consumers. Also, we have concluded that for micro organisations, the three most important mitigation strategies is in having redundant suppliers, and keeping and forecasting the right inventory level and having flexibility in their organisations. This will help in the organisations smooth operating process. 8. Reference 1. Chopra, S., Shodhi, M.S. (2004). Managing Risks to avoid Supply-Chain Breakdown MIT Sloan Management Review, 46, 1. 2. Monczka, R., Trent, R., and Handfield, R. (2005). Purchasing and Supply Chain Management, Thomson-South-Western, Third/Fourth Edition 3. Interview: Junction 168 Minimart – Mr. Tan, C.T. (2013) – Understanding the Organisation and its Procurement processes. 4. Interview: Kwong Fatt Pet Centre – Mr. Wong, K.F. (2013) – Understanding the Organisation and its Procurement processes.

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