!!BA#244:#Supply#Chain#Management#

Zara#

!  Ver%cal!integra%on!

!  Interna%onal!Opera%ons!

!  Delayed!Differen%a%on!

!  Strategic!Management!

Reminders#

!  Article 1 - Joint supply chain risk management: An agency and collaboration perspective

!  LinkedIn Group: Presentation Grade for Nike and Zara

Internal#Supply#Chain#

Procurement! Produc%on! Storage! Distribu%on! Sales!and!Marke%ng!

Choice#of#Transport#of#Goods#

!  Mode!of!Transport!!  Road!haulage!!  Rail,!Air,!and!Sea!Freight!!  Inland!waterways!(canals)!!  Express!operators!or!couriers!(e.g.!DHL,!Fedex,!UPS)!!  Pipeline!(e.g.!specialist!industries!like!oil!and!gas)!

Factors#to#Consider#

!  Points!of!departure!and!des%na%on!!  limited!op%ons!may!be!available!(e.g.!sea!freight!in!a!

landNlocked!country)!

!  Length!of!the!journey!!  in!distance!and!%me!(%me,!risk,!cost)!!  Frequency!and!flexibility!of!departures!

!  Nature!of!the!goods!!  SwiS!or!special!transport!(e.g.!perishable,!

dangerous,!or!fragile)!

Factors#to#Consider#

!  Size!and!weight!of!goods!!  May!rule!out!certain!modes!of!transport!(e.g.!road!

haulage)!

!  Buyer’s!goods!inward!facility!!  Whether!it!has!space!and!equipment!to!receive!and!

unload!certain!types!of!transport!

!  Compa%bility!and!rela%onship!of!a!hauler!or!logis%cs!provider!!  Crea%ng!trust!!  Poten%al!for!collabora%ve!efficiency!improvements!

Intermodal#Transport#

!  Intermodal!(between!modes)!or!mul%modal!(many!modes)!

!  All!without!the!need!to!handle!the!goods!themselves!when!changing!modes!

Example#

Intermodal#Transport#

!  Specialist!companies!and!shipping!lines!act!as!combined!transport!operator!

!  Minimal!handling,!minimal!poten%al!for!damage,!minimal!space!inefficiency!

!  Standardized!road!or!rail!containers!that!can!also!be!carried!by!air!or!ship!

!  Specialist!documenta%on!(allowing!for!mul%ple!modes!of!transport)!and!handling!equipment!

Containers#

!  LCL!–!Less!than!Container!Load!!  FCL!–!Full!Container!Load!!  TEU!–!Twenty!feet!equivalent!unit!–!20’!container!–!21,670!kg!!  FEU!–!Forty!feet!equivalent!unit!–!40’!container!–!26,480!kg!

Traditional / Open Loop / Forward Supply Chain#

!  "system!whose!cons%tuent!parts!include!material!suppliers,!produc%on!facili%es,!distribu%on!services!and!customers!linked!together!by!the!feed!forward!flow!of!materials!and!feedback!flow!of!informa%on"!(Stevens,!1989)!

!  there!is!no!flow!back!from!the!customer!

Traditional SC Decisions#

!  Strategic!!  LongNterm!planning!!  e.g.!number,!loca%on,!and!capaci%es!of!distribu%on!

centers!(DC)!and!warehouses!

!  Tac%cal!!  Shorter!planning!horizon;!revised!monthly!or!quarterly!!  e.g.!selec%on!of!suppliers,!assigning!products!to!DC!

!  Opera%onal!!  Modified!daily!or!weekly!!  e.g.!scheduling,!dayNtoNday!flow!of!products!through!the!

network,!!amount!of!inventory!in!DC!

Traditional SC Design#

!  Network!op%miza%on!!  Design!the!least!cost!network!with!focus!on!

customer!demand!

!  Network!simula%on!!  Test!alterna%ve!models!to!predict!SC!behavior!

!  Design!for!robustness!!  An%cipate!unforeseen!circumstances!and!

possibili%es!

Traditional SC Performance Monitoring#

!  How!to!monitor!performance?!

!  Metrics!that!can!measure!the!effec%veness!and!efficiency!of!an!open!loop!SC:!fill!rate,!lead!%me,!onN%me!performance,!responsiveness!!  Fill!rate:!frac%on!of!customer!demand!that!is!met!

through!immediate!stock!availability!(vs.!backorders!or!lost!sales)!

Traditional SC Performance Monitoring#

!  Quan%ta%ve!performance!measures:!measures!directly!associated!with!cost!or!profit,!such!as!cost!minimiza%on,!sales!maximiza%on,!profit!maximiza%on,!inventory!investment!minimiza%on,!return!on!investment!maximiza%on!

!  Objec%ve!measures!that!are!based!on!some!measure!of!customer!responsiveness:!customer!response!%me!minimiza%on!

Traditional SC Disadvantages#

!  There!is!a!lack!of!accurate!measurement!of!the!efficiency!of!open!loop!supply!chains!!

!  Compared!to!the!closedNloop!supply!chain!systems,!open!loop!supply!chains!include!limita%ons!regarding!the!environmental!effects!and!regula%on!

Reverse Supply Chain / Reverse Logistics#

!  Stands!for!all!opera%ons!related!to!the!reuse!of!products!and!materials!

!  Incorporates!planning,!implemen%ng!and!controlling!the!efficient!costNeffec%ve!flow!of!raw!materials,!inNprocess!inventory,!finished!goods!and!related!informa%on!from!the!point!of!consump%on!to!the!point!of!origin,!for!the!purpose!of!recapturing!value!or!proper!disposal!!

In#the#1990s…#

!  OSen!associated!with!a!high!degree!of!uncertainty,!descending!value,!mul%Npartner!collabora%ve!requirements,!decentralized!loca%ons!and!the!high!cost!of!reprocessing!equipment!

!  Discouraged!companies!from!considering!reverse!models!

Over#the#last#decade…#

!  Demonstrated!increasingly!posi%ve!outcomes!!  financial!benefits!(profit!saving)!!  higher!customer!service!sa%sfac%on!!  environmental!benefits!!  various!taxNrelated!and!legisla%on!benefits!!  beier!coordina%on!of!the!company's!SC!through!

improved!coordina%on!of!the!forward!and!return!SC!processes!

Over#the#last#decade…#

!  allows!the!company!to!retain!contact!with!customers!and!derive!valuable!feedback!from!them!

!  e.g.!prior!to!the!development!of!the!remanufacturing!facili%es,!valuable!components!would!be!considered!waste!even!with!minor!defects!

Reverse SC: 2 Basic Processes

1.  Removing!new!or!used!products!from!their!ini%al!point!in!the!supply!chain!!  returns!from!consumers!!  overstocked!inventory!!  outdated!merchandise!

2.  Redistribu%ng!these!products!using!disposi%on!management!rules!that!will!result!in!maximized!value!at!the!end!of!the!item's!original!useful!life!

Options#

!  Enable!the!most!economically!airac%ve!op%ons!!  Direct!Reuse!!  Repair!!  Remanufacture:!Returning!the!product!to!original!

specifica%ons!!  Recycle!!  Disposal!

Reverse SC: 4 Steps to Successful Implementation#

1.  Retrieve!the!product!!  Quality!and!quan%ty!of!the!products!retrieved!must!be!

coordinated!with!other!distributors!and!customers!

2.  Transport!the!product!!  Should!be!efficiently!transported!to!a!central!loca%on!to!

be!inspected!and!sorted!!  Determine!the!product’s!condi%on!and!the!most!

economical!reuse!op%on!!  Determine!what!products!can!be!saved,!reworked,!

remanufactured,!resold!or!disposed!

Reverse SC: 4 Steps to Successful Implementation#

3.  Recondi%on!the!appropriate!products!!  Design!for!disassembly!(DFD)!is!a!method!of!designing!

products!(e.g.!electrical!devices)!so!they!can!be!easily!pulled!apart,!recondi%oned!and!reused!

!  Products!that!are!not!recondi%oned!should!be!recycled,!resold!for!parts,!or!disposed!of!!

4.  Distribute!and!sell!the!recondi%oned!products!!  Companies!should!create!a!market!for!their!refurbished!

products!which!can!be!sold!to!the!general!public!at!cost!or!discounted!price!

Other Key Considerations#

!  Companies!need!to!track!or!record!%me!metrics!in!their!returns!process!

!  It!is!advisable!to!spend!some!%me!designing!the!right!reverse!supply!chain!model!–!can!be!designed!for!cost!efficiency!or!for!a!quick!response!

!  Awareness!that!a!customerNcentric!approach!will!add!value!is!important!

Advantages#

!  Reverse!supply!chain!models!can!help!companies!increase!realN%me!visibility!

!  Reverse!supply!chains!lead!to!substan%al!environmental!benefits!which!are!mostly!related!to!the!process!of!recycling!and!reusing!

!  Reverse!logis%cs!can!help!companies!comply!with!legisla%on,!as!it!helps!to!eliminate!and!diminish!waste!

Disadvantages#

!  It!is!very!hard!or!even!impossible!to!forecast!and!plan!product!and!material!return!

!  Reverse!logis%cs!is!really!perceived!as!a!cost!driver!and!is!considered!to!be!making!an!insignificant!impact!on!profit!margins!(Verweij!et!al.,!2008)!

!  Reverse!logis%cs!can!be!a!%meNconsuming!process!

Case#Evidence#

!  Volvo!!  Swedish!car!manufacturer!!  An%cipated!the!Swedish!government!passing!a!

resolu%on!holding!auto!manufacturers!accountable!for!the!disposal!of!vehicles!

!  Quickly!implemented!a!reverse!logis%cs!process!of!salvaging!and!dismantling!cars,!genera%ng!revenues!by!selling!the!used!metal,!plas%cs,!and!car!parts!

!  Resulted!in!a!reduc%on!of!transac%on!costs!to!approximately!5%!(Stock!et!al.,!2002)!

Case#Evidence#

!  Levi!Strauss!!  In!conjunc%on!with!Genco,!a!third!party!reverse!

logis%cs!service!provider!!  Developed!a!returnsNprocessing!method!that!

computed!es%mated!costs,!generated!paperwork!in!advance!of!the!product!being!returned,!and!automa%cally!matched!the!items!with!the!prepared!paperwork!

!  Reduced!processing!items!to!only!72!hours!(Stock,!2007)!

Case#Evidence#

!  Heineken!!  uses!a!reverse!logis%cs!supply!system!which!includes!

returnable!packaging!material!(RPM),!such!as!glass!boiles,!crates,!and!kegs!

!  Total!returnable!value!of!RPM!for!Heineken!Europe!is!es%mated!at!€550m.!The!inventory!of!crates!in!one!par%cular!brewery!is!es%mated!at!3,57m!units,!each!of!these!having!a!unit!cost!of!€3.50!

!  In!most!cases,!return!percentages!on!crates!are!very!high!and!close!to!100%!(CarrascoNCallego!et!al.,!2009)!

Closed-Loop Supply Chain (CLSC)#

!  Generally!incorporates!ac%vi%es!observed!in!both!the!tradi%onal!forward!supply!chain!and!in!the!reverse!supply!chain!

!  Has!recently!gained!popularity!due!to!the!%ghtening!of!environmental!regula%ons,!increasing!product!returns!and!the!iden%fica%on!of!new!business!opportuni%es!related!to!the!residual!value!of!endNof!life!products!

Legislation#

!  EU!Waste!Electrical!and!Electronic!Equipment!(WEEE)!Direc%ve!that!came!into!force!in!2007!requires!Bri%sh!producers!and!importers!of!electronic!goods!to!recycle!their!products!

!  Similar!legisla%on!has!also!been!introduced!in!Canada,!Japan,!China!and!a!number!of!states!in!the!US!

!  Automo%ve!direc%ves!that!require!manufacturers!and!importers!of!cars!and!electronics!to!offer!takeNback!solu%ons!for!endNofNlife!products!

CLSC#

Case#Studies#

!  Xerox!Corpora%on!!  provided!prepaid!mailboxes!to!make!it!easier!for!

customers!to!return!used!copy/print!cartridges!to!Xerox!without!incurring!any!costs!

!  The!company!also!collects!cartridges!as!new!ones!are!installed!

!  Overall,!the!green!remanufacturing!program!saved!the!company!between!40%!and!65%!in!manufacturing!costs!through!the!reuse!of!parts!and!materials!(Ginsburg,!2001;!Guide!et!al,!2003)!!

!!End#