Supply chain management of H&M

Supply chain management of H&M

By Jingge Lou and Hua Xu

Erling Persson founded Hennes&Mauritz AB in Sweden in 1947, short for H&M. H&M mainly engaged in sale of clothing and cosmetics. At present, H&M develop so fast, and it has more than 3000 stores in 53 countries. Germany is one of his biggest markets, followed by Sweden and the UK. Logistics is extremely important to H&M. To make the right product with right quantity, at the tight time sending to the correct sales store, it is need good logistics distribution system; the key of logistics is fast and efficient. As the importers and retails, H&M have to monitor every step of the supply chain. In addition, it is also important to update information technology constantly for supporting the logistics system.

Different with other fashion retailing industry, H&M does not have its own factories. It outsources its products to independent supplier mainly in Europe and Asia.  Asia always in charge the base demand which needs longer lead time, and Europe always in charge of surge demand which needs lower lead time. Because Asia usually has lower cost of production, it is a good way to reduce the costs. And opposite with Asia, Europe usually in charge the cloth that are popular and will be popular because the Europe and America market always changes fast. And it will not cost a lot because the quantity of each style will not be much since trend changes fast. Another unique supply chain in H&M is its transportation. H&M always make the best route plan according to the truck touting. Usually, the production produce by supplier will directly send to the central warehouse in Hamburg, Germany and than deliver to the stores. But if the production is design or a regional market, it will deliver the production directly to the segment in the country, and even directly to the stores to ensure the supply just in time. And also, H&M always use the lowest cost transportation. Productions produce by European suppliers always transport by railway traffic; productions produce by Asian supplies always transport by ocean transportation; productions which have to deliver to stores from warehouse always transport by truck.

H&M’ inventory turnover is very fast. As the data shows online, a cloth averagely depreciated 0.7% every day, which means if it sold 10 days earlier than it will be less depreciated 7%, and the gross profit margin will also increase by 13%. H&M’s central logistics system can follow the sales process for every piece of production through ICT (Information and Communication Technologies) in order to avoid a backlog caused by excessive production. H&M’s suppliers of products usually shipped the productions to a central warehouse in Hamburg, Germany, to collate and transmit, but if this product is for a regional market, H & M will respond quickly through ICT, and the product will deliver directly to the country's division and even direct delivery to stores. When the goods arrive in a different distribution center, they will be checked and then allocated to different shops with local warehouse. H & M distribution system can handle daily goods reach more than 160 million pieces, and there will be 20-55 pieces of new goods into the store everyday to ensure freshness.

            Flexible procurement is the core of the supply chain of H&M. Generally, apparel industry purchase seasonally, but H&M break this mode since 1968. The buyers of H&M use the strategy that purchase twelve times a year in order to make change according to the change of trend. ICT make a huge contribution for support this mode. On the ICT platform, H & M's purchasing department and the sales department work closely, and all stores can know each other's sales in the ICT platform and when the production allocation. Procurement and logistics departments could track the sales of each product and inventory in order to replenishment in time. "Sync" is the concept proposed by H&M's first CEO that means update detailed list weekly. So that each procurement departments and store could know how much of each product has been sold. This idea has been on implementing till today on ICT. ICT created a closed-loop feedback system which makes sales, inventory, procurement plans and capacity information becomes completely transparent.

H&M believe they have more efficient flows. Large parts of the shipments are directly sent from the suppliers’ factory into their logistics center of sales markets. The logistics center provides support to nearby store without any boundaries. There is no inventory in the stores; they can replenish any time they want from the distribution center.

H&M claimed that they are faced with a challenge that how to meet their requirements to keep up with the rapid growth of H&M at the same time, and reduce the impact of transport in the environment greatly. H&M plan to use three methods to improve this situation. Firstly, H&M decided to avoid air and road transportation as far as possible. And then, H&M cooperate with the transport company that attached great importance to the environmental protection. Finally, H&M will improve the logistics efficiency to reduce the impact on the environment as much as possible. In 2012, H&M shipped around 90% goods by sea or railway transport from the supplier factory to the distribution center.

                                                                                         

 Additional information and links can be found below here:

VIDEO:

http://www.youtube.com/watch?v=wA207SCAry8

The background of H&M

http://en.wikipedia.org/wiki/H%26M

http://yingyu.100xuexi.com/view/examdata/20100906/E0743ECE-EC8E-4683-BCBE-A5AF7DDAFC58.html

http://wenku.baidu.com/view/89718f59be23482fb4da4ca9.html

http://ec.europa.eu/enterprise/archives/e-business-watch/studies/case_studies/documents/Case%20Studies%202004/CS_SR01_Textile_2-HM.pdf

Reference

http://supply-chain-case-studies.blogspot.com/2008/09/hm-supply-chain-practices.html

http://www.supplychainopz.com/2014/04/supply-chain-management-case-study.html

http://about.hm.com/en/About/facts-about-hm/idea-to-store/logistics-and-distribution.html

ZARA

The Most Fashionable Supply Chain in the World

By: Kristina & Zhencen

      Coming in at #52 on the Forbes 500 list, Zara is considered to be one of the leading retail brands in the world. Zara’s home base is located in Spain but they have amassed global popularity with presence in 73 countries and 1,800 plus stores. For fashion conscious adults aged 18-35, by closely imitating styles of high end designer brands yet maintaining lower costs, Zara has won the hearts of many shopaholics and includes a strong celebrity following. Zara manages to dominate in the fashion world thanks to their unique supply chain model that allows them to stay on top of the latest trends.

In an industry where styles are in one day and out the next, it is rather difficult to predict the required raw materials needed to keep business flowing. As a result, Zara has chosen to ditch the old school push model where suppliers base production off of consumer demand.

Zara’s supply chain uses vertical integration, allowing them to focuses on the JIT (Just in time) model to supply the freshest designs to their stores. By incorporating work cell organization Zara improves response times due to simplified internal communication. With lead times averaging just two weeks, Zara aims to produce small batches of the latest designs. In house production allows them to centralize design and production, cutting down on delivery costs to their distribution centers. As a result money is saved on transportation costs. Zara has shown success due to their ability to minimize inventory buildup and create demand due to the limited quantity of their items.

By avoiding overproduction Zara manages to mitigate the bullwhip effect, which damages many of their competitors. Surprisingly, their limited quantities of merchandise also help them avoid the additional costs incurred with running out of a product because the racks are always stocked with new designs.

Perhaps Zara’s most impressive feat is that they manage to succeed without spending money on advertising. Limited qualities of products also helps create a sense of exclusivity meaning customers are drawn to visit the stores, without being prompted by advertisements, in order to snag the latest styles. Instead that money goes to fund the creation of new designs and the never-ending stream of new selections.

Direct competition from stores such as H&M and Bennington create a threat to Zara. The flexibility that puts Zara on the map also creates a hurdle for them as higher costs stem from their scale of operation and cost per unit. In last year, the total revenue from H&M was higher than Zara. However Zara pulled in higher operating profits, proving their efficiency. In conclusion, Zara must focus on maintaining superiority over their competitors by finding ways to circumvent the costs that their flexibility creates.

Videos:

Links:

http://cmuscm.blogspot.com/2012/09/fashion-forward-zaras-supply-chain.html

http://www.forbes.com/sites/walterloeb/2013/10/14/zaras-secret-to-success-the-new-science-of-retailing-a-must-read/

http://amirisara.blogspot.com/2012/04/zaras-supply-chain-performance.html

http://www.supplychainopz.com/2013/09/7-rules-fashion-supply-chain-management.html

http://fashionworldwide.wikispaces.com/Supply+Chain+Basics

Reference:

http://www.slideshare.net/Dimpiramani/zara-supply-chain

http://jacennedyconsulting.wordpress.com/2012/03/04/social-media-integration-risks-and-challenges-zara/

Supply Chain Management of PepsiCo

Supply Chain Management of PepsiCo

By: Austin Scheid & Chuansu Tan

In 1965, PepsiCo, Inc. was established through the merger of Pepsi-Cola and Frito-Lay. Today, it is a food and beverage leader in the worldwide. PepsiCo has 22 brands and each one has produced more than $1 billion in estimated annual retail sales, and has earned $65 billion in net revenue in 2012. It also has provided more than 250,000 jobs around the world. Brands like Pepsi, Mountain Dew, and Sierra Mist, are just a few of the products that are sold in more than 200 countries and territories. PepsiCo is still looking forward to becoming a more competitive company even though “PepsiCo is already one of the world’s most popular food and beverage companies” (PepsiCo).

What is unique about PepsiCo’s supply chain is that they use “direct store delivery” (MH&L). The key point of direct store delivery is to “diminish the step in warehousing by trying to get a high-turnover, high-volume in perishable goods such as soft drinks and other snacks into the market” (MH&L). So, what PepsiCo does is they have their suppliers take their products straight to the store. With direct store delivery suppliers, it “frees up warehouse space for retailers, and allows them to have better control on product sales and inventories” (MH&L).  

PepsiCo’s direct store delivery approach has cut cost in the inventory system-wide. The benefits to this approach has cut “direct labor costs in the warehouse by 40 percent, network inventory has been cut by a third, and transport trailer loading productivity has “increased by up to 58 percent.  Delivery productivity has been able to increase by 15 % with more than a 25 % internal rate of return” (SupplyChainBrain).

According to “Supply Chain Index” a case study was done between PepsiCo’s and Coca-Cola’s beverage industries. The case study was done over a twelve year period and looked at the company's Gross Margin and Cash-to-Cash Cycle. The study started in 2000 and ended in 2011 and the data was recorded in a chart. Over the twelve year period PepsiCo stays quite consistent even during the troubling economic times, while on the other hand, Coca-Cola’s Cash-to-Cash Cycle shows large fluctuations during the time. At the end of the twelve year period PepsiCo comes out as a winner because “consistency plays such an important role in supply chain” and PepsiCo “displays such small differences in movement during the period” (Supply Chain Index). 

Another way that makes PepsiCo’s supply chain unique is the way it packages their products. Over the past five years, PepsiCo has reduced the packaging weight of it’s products by more than 350 million pounds. “Over last 5 years the packing weight that PepsiCo has been able to get rid of, is equivalent to avoiding 95 tons of packing everyday” (PepsiCo). This has allowed PepsiCo to save money on the cost of materials that goes into producing and shipping products. After cutting the amount of material that PepsiCo uses to package it’s products, PepsiCo uses a “sustainable stretch wrap system that also reduces waste material. This way of bundling its products has helped guarantee the correct transfer and delivery of products, which reduces the waste by 70%, and cutting costs by 5%. It also cuts down the amount of warehouse space needed” (PepsiCo).

At PepsiCo, they “strive for the “5 Rs” - to reduce, recycle, use renewable sources, remove environmentally sensitive materials and promote the reuse of packaging in the entire process of packaging selection, design and procurement” (PepsiCo).  One of PepsiCo’s brand, “Mountain Dew” has teamed up with “Burton,” a winter sports apparel and action sports company, and has worked together on making t-shirts and even men’s and women’s jackets and pants out of recycled bottles. The t-shirts, pants and jackets are made from “50 percent recycled plastic bottles and 50 percent organic cotton” (PepsiCo). 

When PepsiCo makesit products, just like other companies, it uses a lot of water for manufacturing. PepsiCo optimizes its water use with great care and efficiency. With new innovative processes and new technologies, PepsiCo “has made great strides in reducing its water use in their direct operations” (PepsiCo). By being able to “improve global operational water-use by 20 percent” and from the improvements PepsiCo has made in efficiency, PepsiCo was able to save “nearly 14 million liters of water in 2012 and saved more than $15 million in water costs” (PepsiCo).  PepsiCo’s food industry in “Funza, Columbia” is a prime example of how PepsiCo is “implementing innovative solutions to conserve water” (PepsiCo). The plant in Funza is able to “reuse 75 percent of the water entering the plant while conserving nearly 90 million liters through a high efficiency water reclamation system” (Pepsico).

Additional Information

Conserving water at PepsiCo’s Funza, Columbia Facility
https://www.youtube.com/watch?v=FFpyMaVqf5Y

Case study chart (picture 5)
http://supplychainindex.com/wp-content/uploads/2012/09/Picture5.jpg

Reference

10 Best Supply Chains
http://mhlnews.com/transportation-amp-distribution/10-best-supply-chains

PepsiCo Official Website
http://www.pepsico.com/Company

Direct-to-Store Model Delivers Top-Line Benefits to Pepsi Beverages
http://www.supplychainbrain.com/content/research-analysis/supply-chain-innovators/single-article-page/article/direct-to-store-model-delivers-top-line-benefits-to-pepsi-beverages-1/

Case Study in the Beverage Industry
 http://supplychainindex.com/a-case-study-in-the-beverage-industry/

Supply Chain Management of Starbucks

  Supply Chain Management of Starbucks 

By Xiaoye Zhu and Landi Fu 
  

            Starbucks is the largest coffeehouse company around the world. It is a place where share great coffee with friends and help make the world a little better. The first store of Starbucks is founded in 1971. From the beginning, Starbucks set out to be a different kind of company. One that not only celebrated coffee and the rich tradition, but that also brought a feeling of connection. Its mission to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time. Starbucks does not only offer different beverages such as iced tea, latte, hot chocolate, Frappuccino and so on, it also supplies bread, chocolate chips these deserts. Today, with more than 18,000 stores in 62 countries, Starbucks is the premier roaster and retailer of specialty coffee in the world. In fiscal 2013, Starbucks had more than 3 billion customer visits to them more than 19,000 stores in 62 countries. Meanwhile, it plans to open 1,500 net new stores in 2014.

            There are three objectives that are the unique supply chain of Starbucks. First of all, reorganize its supply chain organizations. According to Gibbons who were the vice president for Starbucks, that involved taking a complex structure and simplifying it so that every job fell into one of the four basic supply chain functions: plan, source, make, and deliver. In addition, reduce its cost to serve stores and improve executive. As part of that effort, the sourcing group worked on identifying the cost drivers that were pushing up prices. Meanwhile, the manufacturing group developed a more efficient model for delivering coffee beans to its processing plants, with the goal of manufacturing in the region where the product is sold. It can reduce the transportation cost and lead times. Finally, lay the foundation for future supply chain capability. Starbucks creates one world, one logistics system. It ships the rights things to the right places. Thus, it earns the company’s confidence.

            As we all known, the company's supply chain is facing a double challenge because of its rapid growth and economic hardship caused. Starbucks in 2008, his role is a difficult time. At that time, Starbucks store manager to complain, Starbucks delivery service is not enough and they didn't spend enough attention in store service. Although it is widely spread in the area of production, transportation, distribution, logistics make up the bulk of Starbucks because the company's operating expenses ship so many different products around the world, it is proposed to obtain the control of the supply chain group a daunting challenge. Therefore, they believe that increasing the supply chain such links to be his top priority.

            In fact, Starbucks created a new approach to cooperation with external partners. For example, the company has a reputation " to create a contract that almost let the hands of their third-party logistics providers, and now, in order to allow greater interests of the company, which seeks to build closer relationships with key suppliers, which began positioning themselves People within the distribution center, to keep watch and ISP operations and strengthen closer relationship. They were convinced their leadership team and believe that the spirit of cooperation between them. After the restructuring of the supply chain functions, departments and turned his attention to supply chain transformation second goal: to reduce costs and improve efficiency. As this part of the Procurement Working Group efforts in identifying cost drivers are the factors pushing up prices.

            Starbucks supply chain has been completed, just to keep up with in the store number of stores and other fast-growing pace. They developed a more efficient mode of delivery of coffee processing plants and manufacturing its target sales region. Expansion of such a dizzying speed, it can cover a lot of mistakes. Meanwhile, in another aspect, Starbucks is working to create a green supply chain to be more environmentally friendly and healthy living and attitudes, their mode by choosing the best equipment and service partners, and it has been looking for its history of involvement in sustainable products extends to the way it gets the commodity markets.

            As a result, Starbucks has become a lot better cooperation with green and sustainable human development. Additionally, Starbucks needs of most people, so they are now focused on the discovery and cultivation of talent development talent. Since the beginning of Starbucks supply chain transformation, the company 's key short-term engineering and transport management skills very important because they are a key factor in the introduction of talent and now they the right talent and the right technology infrastructure to ensure the industry by turning around.

Additional information and videos can be found in the following links:

Video：

https://www.youtube.com/watch?v=ElYNhGbOTOQ

https://www.youtube.com/watch?v=83yInyY1KLs

References：

http://www.starbucks.com/about-us/our-heritage

http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhome (FY13 Annual Report)

http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/

http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/

http://www.dcvelocity.com/articles/20101004starbucks_supply_chain/

http://www.usanfranonline.com/resources/supply-chain-management/starbucks-supply-chain-balances-efficiency-with-sustainability/#.U4ULOJSSxVI

http://managementstudyguide.com/swot-analysis-of-starbucks.htm

http://wtvr.com/2013/11/06/starbucks-to-hire-10000-vets-military-spouses/

http://online.wsj.com/article/PR-CO-20131106-904557.html

Supply Chain Management of Coca-Cola

Supply Chain Management of Coca-Cola

By Benqi Wei and Changda Song

The Coca-Cola Enterprise is the world’s largest beverage company. Coca-Cola produces more than 500 products worldwide including core brands like Diet Coke, Fanta, Sprite, Powerade, and are sold in more 200 countries. The company has the largest bottling system, the most widespread production, and also the most distributed network. It provides syrups and concentrates to more than 1,200 bottling plants. It has over 900 plants around the world, and every job in Coca-Cola Company generates additional 10 jobs in local communities in Asia, Africa, and Eastern Europe. Coca-Cola Company accounts for 40.5% of the market share.

            Coca-Cola’s unique supply chain is local business oriented. Coca-Cola never ships their products overseas, instead they used a so called “Customer-driven supply chain” approach. Coca-Cola manufacturing plants have the same formula, procedures, and capabilities all around the world. They produce and ship directly to local retailers. “We typically don’t ship Coca-Cola more than a few hundred miles; it’s all about being responsive to the customer’s needs and the local tastes of consumers in every market”, said Steve Buffington, vice president of Coca-Cola supply chain development. In this way, Coca-Cola can save large transportation expense on freighters and local stores can replenish its Coca products quickly and consistently.

Coca-Cola’s supply chain offers diverse choices. It provides a wide variety of packaging types in response to different customers’ demands. The way they work with its large range of customers is called “brand, pack, price, channel, architecture” They use the method to order packages based on reported consumer preferences and other influencing factors. According to Buffington, “planning supply is driven by forecasted customer demand input, seasonality and also by promotions or changes in merchandising in the store.”

Coca-Cola places a significant core value on running its supply chain. In general, Coca-Cola desires the four supply chain guiding principles implemented. “Focus on metrics needing no manual intervention”, this principle is desired to develop a better technology system and to make their products better without humanities’ intervention. “Focus on metrics to drive profit consistency and metric consistency across the supply chain”, this principle requires the accurate information throughout the company. “Focus on industry standards that are not Coke specific”, “Develop a robust system for reporting hierarchies that change when business changes”.

After a decade of suffering from droughts and water shortage, Coca-Cola had to acknowledge climate change as its threat in production. Coca-Cola established the largest bottling factory in India in 1999. Water is the critical ingredient of Coca-Cola’s production. The factory extracts 510,000 liters of water everyday. It requires a ratio of 4 to 1 for every liter of soda being produced. For the past few years, Coca-Cola has been accused for taking large amount of water and responsible for water shrinkage in India. Coca-Cola lost its operating license in 2004. In 2007, the factory had to be shut down under community forces and political criticism. Coca-Cola realized the urgency to create a green supply chain and made its goals in 2012. Coca-Cola projected to “replenish 100% of the water used in our products by 2020”, and “ 7% improvement of water use ratio in production plants by 2012 compared to 2004 baseline”.

Additional information & video about Coca-Cola Company may be found at links below:

https://www.youtube.com/watch?v=3bJwIeinyv8
http://www.worldofcoca-cola.com/coca-cola-facts/coca-cola-history/
http://www.coca-colacompany.com/sustainabilityreport/index.html

Reference:
http://www.linkedin.com/jobs2/view/9349775
http://cdn.journey.tccc.psddev.com/41/42/6b9f776e430882e3a1fbc9474ca2/08%20-%20B_Kelley%20-%20Product%20Supply%20System.pdf
http://www.csc.com/application_services/success_stories/78846-coca_cola_supply_chain_management_success_story
http://www.sdcexec.com/article/10325447/things-go-better-with-cokes-supply-chain

Supply Chain Management of Proctor and Gamble

Thursday, May 22, 2014

Supply Chain Management of Proctor and Gamble

By: Ramandip Singh and Yihui Li

     

      Procter & Gamble is currently the biggest seller in the global household and personally product industry. It manufactured its products in forty countries and sells them all over the world among more than 180 countries in terms of earning a great amount of revenue. P&G’s sells over eighty different kinds of products from best in basics to the hottest trends through mass merchandisers, grocery stores, membership club stores, drug stores, department stores, salons, e-commerce and high-frequency stores, and the neighborhood stores. Currently P&G has five segments, which are beauty, grooming, health care, fabric and home care, and the baby and home care. Nearly 66% of P&G’s revenue is from outside of the U.S.

     

      P&G has over 90,000 suppliers and they do not only provide raw material to 150 manufacturing plants, but also produced finished goods to P&G. They use multimodal movement distribution strategy to move their goods to the distribution center. For instance, operations in four major continents require combination of trucking, airfreight and waterways. The unique aspect of P&G’s supply chain management is their supply network, which is voted number one in supply chain management in the past three years by Power Ranking Industry survey.  They call it supply network is because they believe information flows in the different direction, not a one way movement. P&G uses consumer-driven supply network as its centerpiece business strategy. It believes in two moments of truth, which are “when customer buys the product from the shelf” and “when they actually use it and like it”. To accomplish the first truth, P&G has to make sure there are stocks available on the shelf for customers when they need it. P&G linked their actual sales with their supply chain process and mainly focus on the customer demand. Therefore, what they are actually producing is not based on forecasting but on customer demand instead. To implement this strategy, P&G formed “web order management”, this enables retailers to connect to P&G and access its inventory, scheduling and replenishment level.  

      At P&G their core objective is to meet customers demand at any given level.  Their consumer and market knowledge is critical for the managers to efficiently supply the products to the consumers and not to create a surplus.  Company “core work is the integration of consumer, shopper, and market understanding to catalyze business growth all of the brands” (P&G)”.  Also P&G reduced its transportation cost by switching to environmental sustainability “We continue to implement logistical efficiencies of our supply chain in order to make measurable environmental footprint reductions. Our goal is to reduce truck transportation by 20% per unit of production by the year 2020. Plans are in place for each region, including optimizing transportation modes and routes as well as operational excellence” (P&G). We live in the world with technology surrounding us in every corner and it has become asset for humans and we are dependent on it. Technology accommodates businesses to communicate data across the world and to globally integrate information and create stronger bonds among countries as one. There is abundance of information  flowing through networks channels across globe and with that much information security threats increase which can disrupt the operations of the company “If the IT systems, networks or service providers we rely upon fail to function properly, or if we suffer a loss or disclosure of business or stakeholder information, due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively address these failures on a timely basis, we may suffer interruptions in our ability to manage operations and reputational, competitive and/or business harm, which may adversely impact our results of operations and/or financial condition” (P&G). Here below are some videos and links that can broaden your understanding of their supply chain.

Little background information of P&G supply chain

https://www.youtube.com/watch?v=ku4EETQOBcE

http://www.pg.com/en_AP/news_views/pressreleases/award-for-supply-chain.shtml

P&G environmental sustainability scorecard
https://www.youtube.com/watch?v=BHYgJMWVkLk

Here you can find P&G purpose& people, heritage, core strengths etc.
http://www.pg.com/en_US/company/purpose_people/index.shtml

Reference:

“http://www.pg.com/en_US/downloads/sustainability/reports/PG_2010_Sustainability_Overview.pdf”

“http://www.supplychainbrain.com/content/industry-verticals/retail/single-article-page/article/procter-gamble-uses-consumer-demand-info-to-drive-supply-network”

“http://www.pg.com/en_US/_php/search.php?searchtext=supply+chain+skills&category=&numberOfRecord=10&start=0”

“http://www.pg.com/en_US/sustainability/environmental_sustainability/conservation_resources/transportation.shtml”

“http://www.pg.com/en_US/downloads/investors/annual_reports/2013/2013_AnnualReport_10k.pdf”