Executive Master

1
Supply Chain Overview Illustrated by XYZ
Project
2
Agenda

• Overview
• Issues
• Strategies

3
Overview

• EU Subsidiary of XYZ Corp
• Sells White goods
• Channels Resellers Distributors
• Expected service level 5 days
• Source of product Japan Thailand
• JV with Japanese supplier
• Broad range of products 150 SKUs
• Wide range of volumes
• From 100K units/year to 1-2 units/year
• Seasonal Sales 4-5 month selling season

4
EU Sales Volumes
5
Current Structure

• Independent Distribution centers in
• UK served via Southhampton
• Italy via La Spezia
• France via Marseilles
• Spain via Valencia
• Greece via Piraeus
• Portugal via Porto

6
Overview

• Each DC operates as a subsidiary
• Each has a P L
• Each develops forecasts and places orders takes
  2-4 weeks
• Each maintains inventory
• OTD 120 days

7
Why?

• Products can be large 300 kgs
• Transportation is expensive 1/km
• Customers are small and widely distributed
• History, language, culture,

8
Burning Platform

• Inventory
• Nearly 1 Billion spread across EU
• Some of it dead
• Service
• 50 of orders shipped on time

9
Example

• Example SKU 4,000 units/year
• Revenue 1.4 million
• Service Level 49 shipped on time
• Inventory 650 units worth 0.2 million spread
  across Europe

10
What to do?

• Youve been named VP of SC for the parent company
• What do you do about your subsidiaries in EU?

11
Step 1 Help with Forecasting

• Help develop and implement consistent and
  effective forecasting and ordering processes at
  each DC
• Improve local inventory management
• Why?

12
Step 2 Coordination

• Many cases we have excess inventory in one
  country and back orders for the same sku in
  another
• Rein in the ordering process cant order more
  of whats already in EU

13
Step 3

• Work with suppliers to shorten order lead time
• Their process was adding another 2-4 weeks

14
What Else?

• Good job You took 4-6 weeks out of lead time and
  cut inventories by 200 Million
• But
• You incurred some hefty transportation costs
  shifting product from DC to DC
• This strategy has run its course
• Now what?

15
Forecasting Basics

• Forecasting Rule 1
• Shorter forecasts are better forecasts
• Forecasting Rule 2
• Aggregate forecasts are better forecasts

16
Key Questions

• How to speed order-to-delivery?
• How to consolidate forecasts?

17
Where were headed

• Forecasting
• Managing Inventory
• Ordering (Sport Obermeyer)
• Manufacturing Strategies
• Pull vs Push
• Pricing Revenue Management
• The Bullwhip Effect
• Your projects

18
Next Time

• Forecasting
• Review for Exam next Thursday
• Exam on October 8th