SCM 303 Introduction to Supply Chain Management

Tuesday, June 3, 2014

Lenovo Special Supply Chain Management

Lenovo Special Supply Chain Management

By:Yinfan Deng, Ruiqi Chen

Lenovo Group Ltd. is a Chinese multinational computer technology company with headquarters in Beijing, China and Morrisville, North Carolina, United States. ("Our Company". About Lenovo. Lenovo. Retrieved 30 April 2013. "We have headquarters in Beijing, China and Morrisville, North Carolina, U.S.") Lenovo, which was formerly known as ‘Legend’, was founded by Liu Chuanzhi and a group of ten engineers in Beijing in 1984 and changed its name to ‘Lenovo’ in 2004. Today, Lenovo Group designs, develops, manufactures and sells personal computers, tablet computers, smartphones, workstations, servers, electronic storage devices, IT management software and smart televisions. It has operations in more than 60 countries and sells its products in approximately 160 countries. In addition, it became the world’s largest personal computer vendor in unit sales in 2013("Gartner Says Worldwide PC Shipments Declined 6.9 Percent in Fourth Quarter of 2013". Gartner.com. 2014-01-09. Retrieved 2014-02-03.)

One of the unique aspects of Lenovo’s supply chain is their end-to-end business model. Lenovo’s end-to-end business model leverages its vertical integration so that is has greater control over both product development and supply chain operations. This model is a significant source of competitive advantage and helps the company bring more innovations to market, more efficiently, and aggressively attack the PC+ opportunity. ‘PC+’, which was created by Lenovo Group, is that people use PCs as well as a range of smart devices that are, at their heart, PCs. ("Our Company". About Lenovo. Lenovo. Retrieved 30 April 2013.)

In support of the corporate strategy, Lenovo’s global supply chain consistently drives customer focused innovation and execution. (John Zapko, Inside Lenovo Hybrid Supply Chain Strategy, 10) Lenovo would like to continue to leverage the spirit of innovation and history of technological breakthroughs into new product categories to drive future growth. In addition, Lenovo has consistently delivered high quality, reliable and durability products to the delight of their customers. Its products have won many awards and frequently receive rave reviews. The ultimate goal of Lenovo is to improve the overall customer experience while driving down the cost of ownership (Jon Pershke, vice president, strategy & transformation, global supply chain, Lenovo).

Since June 2006, in order to integrate Lenovo’s core values comprised of customer satisfaction, innovation, operational excellence and trustworthiness into their supply chain, the company became a member of the Electronic Industry Citizenship Coalition (EICC). Following the EICC standards, Lenovo created a new supply chain management style called a Hybrid Supply Chain Strategy. Using this new style, Lenovo focused on achieving a balanced mix of in-house and outsourced manufacturing. Also, Lenovo adopted four basic concepts to capture customer value and grow profitability. First they strengthened the control and agility in the end-to-end supply chain though investments in their in-house plants, Secondly, they increased their responsiveness to their customers, so as to deliver the industry’s best customer experience in all market segments. Thirdly, they leveraged their suppliers to help with innovation and, finally, they improved their flexibility, execution, and resiliency speed (John Zapko, “Inside Lenovo’s Hybrid Supply Chain Strategy”, 12).

From 2010 to 2011, Lenovo experienced several unprecedented natural disasters. March 2010, the Icelandic Volcanic ash disrupted air supply routes in Europe; March 2011, the Japan Earthquake damaged some electronics factories; October 2011, Thailand’s flooding disabled more than 20% of the company’s hard drive suppliers (John Zapko, “Inside Lenovo’s Hybrid Supply Chain Strategy”, 19). According to Lenovo president & COO, Rory Read said in FOX Business that Lenovo first tier about micro process did not affect, but the second and third tier of smaller controller components was challenged. Fortunately, Rory Read claimed all of this emergency under company control. Moreover, market competition is another big challenge for Lenovo. Dell and HP are powerful competitors. Lenovo has a long-term strategy that leverages its supply chain to fulfill its goals.

Additional Information

Lenovo: How & why world’s No. 2 computer marker is building a brand worth its business

http://articles.economictimes.indiatimes.com/2012-01-16/news/30627898_1_lenovo-pc-business-dell

Lenovo Analysis

https://www.lenovo.com/ww/lenovo/pdf/Lenovo_Q3%20FY13_PPT_Eng_FINAL.pdf

Video

Reference

John Zapko, Inside Lenovo Hybrid Supply Chain Strategy

https://supply-chain.org/f/Zapko-Inside_Lenovos_Hybrid_Supply_Chain_Strategy.pdf

Lenovo’s Supply Chain Challenges

http://video.foxbusiness.com/v/4632774/lenovos-supply-chain-challenges/#sp=show-clips

http://en.wikipedia.org/wiki/Lenovo

http://www.lenovo.com/lenovo/us/en/our_company.html

http://www.industryweek.com/supply-chain/how-create-world-class-supply-chain?page=1

Nestlé: Good Food, Good Life

By Wanting Zhao and Shuyang Wang

Nestlé is a Swiss multinational food and beverage company headquartered in Vevey. It is the largest food company in the world which measured by benefits, has a very long history, which can date back to 1860s. Their products consist of baby food, bottled water, cereals, chocolate & confectionery, coffee, healthcare, nutrition, etc. They also provide food service and weight management. Nestlé has 447 factories, operates in 194 countries, and employs around 333,000 people. It is one of the world's largest cosmetics company.

Nestlé was founded in 1905 by the merger of the Anglo-Swiss Milk Company, established in 1866 by brothers George Page and Charles Page, and Farine Lactée Henri Nestlé, founded in 1866 by Henri Nestlé. The first world war helps Nestle have a significant growth and again following the Second World War, expanding its offerings beyond its early condensed milk and infant formula products.

The Nestlé Corporate Business Principles are at the basis of Nestle company’s culture, which has spread over the span of 140 years. When Henri Nestlé first developed his successful infant cereal “Farine Lactée”, Nestle has built their business on the conviction that to have a long time success for our stockholders, Nestle not only have to comply with all applicable legal requirements and ensure that all our activities are sustainable, but additionally we have to create significant value for society.

Bernard Teiling, assistant vice president of business process integration for Nestle S.A., which is based in Vevey, Switzerland, says supply chain management (SCM) is “both a source of competitive advantage and a lever for profit margin.” Although the complexity and the cost of SCM has keep increased over the last two decades, companies must be proficient in this process. “If you are not good at SCM, someone else will be,” says Teiling.

Nestle defines SCM as the two-way management of the flow of goods, services and information from suppliers to manufacturers, wholesalers, distributors, stores — to the end user. SCM is especially critical for the food industry because of the ease of spoilage.Teiling holds an opinion that if we want consumer products company remains profitable only if it has the right product at the right price in the right place at the right time. However, getting these stars to line up only happens when “the entire supply chain works as one.” This is the Nestle's unique supply chain, they trying to make whole company supply chain works as one.Seen that way, SCM becomes a branding issue. When Nestle made one product, they put the logo on the product. The logo represents “a seal of quality.” Protecting that quality makes Nestle responsible for its entire supply chain. Teiling says consumers don’t care if a supplier or distributor had a problem. “If something goes wrong in the supply chain, it ruins things for the consumer,” says the Nestle executive.Even though Nestle feels responsible for every line in the supply chain management, it use outsources of many of those activities. “No one company can claim to do everything from A to Z in the food industry. Today that’s impossible,” says Teiling. For example, Nestle does no farming. And the world’s largest food company sells almost nothing directly to consumers.

However, new challenges comes with supply chain in Nestle.

1.Companies have to discover the best eMarketplaces for their needs. A good guideline, he says, is the ability to develop a two-way relationship.

2.Companies have to learn how to work with more than one eMarketplace. This can be a technical challenge at the outset since no standard has yet emerged.

3.Companies have to make changes internally to take advantages of eMarketplaces. For example, Teiling says Nestle’s IT infrastructure will have to change to work with these new exchanges. Companies will have to learn how to interface with these marketplaces.

Also, Nestle has its own supply chain weakness. Nestlé urged to be more transparent about supply chains. Investors are using their financial clout to ask big corporations to do more to tackle environmental and social risks. With Nestle become a big company, the supply chain pay more attention on efficiency in products. But does not focus on Environment and society any more. Tracks pollution and labor rights become a big problem on Nestle's supply chain management. This is the weakness they need to make some change.

To learn more about Ford’s and their supply chain, visit the following links:

http://www.nestle.com/brands

http://www.answers.com/topic/nestl

Reference:

http://www.theguardian.com/sustainable-business/investors-mars-nestle-transparency-supply-chain

http://outsourcing-center.com/2001-03-supply-chain-management-article-38848.html

http://en.wikipedia.org/wiki/Nestl%C3%A9#Major_competitors

http://www.nestleusa.com/about-us/supply-chains-act

http://businesscasestudies.co.uk/nestle/coffee-the-supply-chain/the-supply-chain.html#axzz33a3M7Kxp

http://www.nestleusa.com/about-us/suppliers

Monday, June 2, 2014

Ford Motor Company: An All-Wheel Drive Supply Chain

By: Anas Aldasouqi & Yilin E

Ford Motor Company is one of the world’s greatest automotive manufacturers with over 350,000 employees, operated in 200 countries and with sales reaching $160 billion. In 2013 Ford ranked 6^th place globally in terms of market value; standing at a value of $51.8 billion. They also led the US market in sales just last April ’14, and experienced a 7.4% increase from last year. Ford Currently maintains 15.3% of the US market and 7.9% of the European market. In china, which currently has a demand of about 20 million vehicles per year, Ford has seen a 60% increase in sales this year. It appears Ford remains on the incline and is currently on the offence; and what is their secret? Their supply chain strategy, which without, they would have possibly died out in 2008.

As an automaker, Ford works with hundreds of suppliers, whom provide different parts and materials of automobiles in order to combine and make the final products. Therefore, Ford has a very complicated supply chain and tends to create its own sustainable supply chain management which brings a positive impact in the markets. There are three methods to achieve this goal; the first one is to build strong relationships with suppliers and engage strategic suppliers. Having open communications and clear expectations, Ford can encourage and influence its suppliers to achieve its sustainability goals. The second method is to develop shared commitment and supplier capability. Ford helps their suppliers to build the capability and train workers, which can also encourage suppliers to do sustainable work and help them to meet Ford’s requirements. Furthermore, the last approach is to collaborate across the automotive industry. Through the Automotive Industry Action Group, Ford is able to improve their managements at all levels of their supply chain. By using there three approaches, both Fords and its tiers are required to accompany specific sustainable expectation and improve their own sustainable supply chains.

Since Ford has a large number of suppliers and tiers, and business is usually done over the phone instead of communicating in person, it is a risk on their complex supply chain management. If one of the suppliers fails to meet its manufacturing demands or requirements, Ford should generate a plan to find another supplier in order to fill in with minimal delay; which is a very difficult task. In addition, another weakness of its supply chain is the lack of technology knowledge in lower tiers, which is the reason that Ford tends to develop shared commitment and supplier capability. Helping lower tiers to improve and develop, Ford can reduce the risk in its supply chain management.

In 2008 when GM, Chrysler and Ford were just months from running out of cash, GM and Chrysler received a government bailout in which Ford declined. Instead Ford developed a supply chain strategy which required vertical and horizontal coordination. Without this strategy, not only would Ford had suffered, but its competitor’s and suppliers would have also felt the pain. The matter of fact is that finding suppliers to provide automotive parts is not at all an easy task; most pieces are engineered to order and ordered in advanced. Every model differs tremendously and finding a supplier to work with takes tremendous effort. Ford CEO Alan Mullally began his mission to save Ford by cutting the list of supplier to 850 that were exceptionally necessary for Ford to continue running. Ford chose to cut relations with supplier that mainly supplied to their competitors most likely to fail, such as Chrysler; because if Chrysler did fail, the supplier will likely also fail. In order for business to continue, auto makers need parts. And in order for part suppliers to continue supplying parts at a price that is profitable to car producers, the demand requirements must be met. Ford realized it would not be able to prop up the global automotive supply base on its own and so they reached out to other manufacturers to join in the quest. GM refused claiming the proposal violated U.S antitrust laws and Chrysler was of little help because they were shutting down so quickly. Ford found the most help from Toyota and Honda which were also very concerned on the future of their suppliers. These three manufacturers began purchasing from suppliers essential to the other manufacturer in order to keep the suppliers alive; they agreed to share the cost of keeping particular suppliers in business. Finally Ford, Toyota and Honda persuaded the U.S. Treasury Department to take concrete steps to ensure the protections of the suppliers. The supply chains of U.S car manufacturers is so inter-related that without the horizontal coordination, there would no longer exist a vertical coordination. This project was known to Ford as Project Quark, and the team met every day, often before 7 a.m. and into the late darkness of the night.

Ford began as a company with the goal of manufacturing every part of their automobiles and slowly became a company that found benefit in venturing outside of their own walls. Until recently most manufactures would have their own OEM parts from suppliers, Ford found that unnecessary and created a system in which manufacturers shared and used the same parts at times. The Automotive industry is so connected in the U.S., to the extent that its success lies extremely heavily on appropriate coordination among the members. And in a way this has created a more friendly competition amongst auto-makers.

To learn more about Ford’s and their supply chain, visit the following links:

Learn more about ford.

References

http://www.mbaskool.com/fun-corner/top-brand-lists/7544-top-10-automobile-companies-in-the-world-2013.html?start=4

http://online.wsj.com/mdc/public/page/2_3022-autosales.html

http://www.fool.com/investing/general/2014/03/06/ford-motor-companys-sales-soar-in-the-worlds-large.aspx

http://heizerrenderom.wordpress.com/2012/03/11/om-in-the-news-fords-secret-battle-to-save-its-supply-chain/

http://online.wsj.com/news/articles/SB10001424052970204781804577269410217101038#

http://corporate.ford.com/microsites/sustainability-report-2012-13/supply-creating

http://online.wsj.com/ad/article/managingrisk-disruption

3M, A Product for Tomorrow!

3M, A Product for Tomorrow!

By Andrew Stefanick and Tyler Jelonek

Dating back to 1902, 3M was started in Two Harbors, Minnesota on Lake Superior by five businessmen: Henry Bryan, Hermon Cable, John Dawn, William McGongale, and Danley Budd (3M History) (or as it was previously known, Minnesota Mining and Manufacturing Company) 3M is an international collection of companies that produce more than 65,000 consumer products (3M Stories - Keep Moving). The products span industries from healthcare to transportation, but they are more commonly known for their various office supplies. 3M requires more than 88,000 employees worldwide in 196 countries to insure everything runs smoothly (3M Stories - Keep Moving).

3M’s supply chain is in a state of transition. Currently, 3M has 214 different plants throughout the world (Wall Street Journal). 3M plans to reduce its supply chain by moving from small production plants to large regional hubs. The large regional hubs can produce a wide array of goods. Currently, supply chain activities for a product may have to travel to many different sites. This has led to long cycle times and large transportation costs. The introduction of regional hubs should lower costs and cycle times. These regional hubs will produce many different products in the same location, thus reducing complexity as well. Furthermore, each hub will cater the products it produces to the region in which it is located (SC Digest). The supply network change also moves production from various contractors to in house; The move to regional hubs vertically integrates the supply chain. This supply network change will streamline 3M.

Demand management plays a large role in 3M’s corporate strategy. Forecasting demand helps 3M raise and lower output to meet the shifting global markets. This increases the overall profitability of 3M. The supply network design and demand management working in unison creates a unique supply chain that is unlike any other.

Since 3M is such a massive company, their supply chain allows them to win against their competition by purchasing large amounts of raw materials. In addition, 3M owns a majority of their physical locations, which helps reduce their overall operating costs (3M). Since they do not have to pay rent, this keeps more money within the company, which can then be allocated to other areas. Another strategic aspect of their supply chain, is their location of plants to water shipping yards. If their products are made closer to the water it becomes easier and less expensive for them to be shipped.

3M combines multiple technologies in unison to meet a specific customers needs helping to reduce lead time by anticipating future market trends. It is from their data analytics of customers which helps them predict how to reach new potential customers (3M™ Clean-Trace™ Online Software). From the implementation of the expert choice process, 3M continue to create products in shorter time frames than before (3M Makes Critical Supply Chain Decisions Using Expert Choice). By creating products involving less time in product development streamlines more opportunity for sales and lowers research costs.

A major part of 3M’s supply chain is the high standards of Six Sigma when creating quality products for consumers (3M.com). Six Sigma is benchmark that helps reduce the number of defects and thus saves money by preventing external failure costs in the process. In order to protect their supply chain governance and the threat of counterfeit products, they actively pursue companies that infringe on their patents. It is from the hard work of their employees that they have an excellent reputation when it comes to standing by the products they create.

3M responds to customers’ needs and desires especially with regard to global impact. Starting in 1975, 3M started their 3P initiative, which stands for Preventing Pollution Pays (3P - Pollution Prevention Pays) Since that date; they have reduced $3.8 billion pounds of pollution and saved nearly $1.8 billion in pollution costs (3P - Pollution Prevention Pays). The altering and re-engineering of their staple products has led to this bottom-line success. However, a large part of this has come from people, many of whom are 3M employees themselves. Over the years, these people have been able to complete 10,000 projects, some that include redesigning adhesive electrodes and replacing solvent based paper treatments in Brazil (3P - Pollution Prevention Pays). The loyalty of 3M employees to help out and give back, shows their passion for 3M and translates into hard workers that get tasks accomplished for their customers.

Large-scale natural disasters and accidents threaten 3M’s supply chain. With the move to large regionalized plants, natural disasters that could incapacitate a plant would be devastating. Also, demand management introduces risk into the supply chain. Forecasts are not always accurate, leading to possibilities of missed opportunities or over production.

3M is a giant in the international business world and diverse in their business pursuits. Their intelligent usage of supply chain management techniques has helped the growth of 3M and propelled them to success. In order to maintain this success, money needs to continue to flow into new technologies and emerging markets. As the growth of technology in the past 15 years has streamlined growth in large markets, such as China and India, 3M’s reliance on information technology to anticipate new ventures will remain important for the foreseeable future.

Videos:

Sources:

http://solutions.3m.com/wps/portal/3M/en_US/3M-Company/Information/Resources/History/

http://solutions.3m.com/innovation/en_US/stories/keep-moving

https://www.youtube.com/watch?v=CLlX9yJZosk

http://expertchoice.com/wp-content/uploads/ExpEng/xres/uploads/resource-center-documents/3M_casestudy.pdf

http://solutions.3m.com/wps/portal/3M/en_US/3M-Company/Information/Resources/History/

http://solutions.3m.com/wps/portal/3M/en_US/Facilities-Care-Cleaning-NA/commercial-cleaning/facility-maintenance-resources/facility-maintenance-information-technical-library/technical-bulletins-and-datasheets/?PC_Z7_U00M8B1A0G7SD0I70B999308R6000000_nid=0DP4HHVD9GgsN2RL3FHWVKglLW0RD3SGZCbl

http://expertchoice.com/wp-content/uploads/ExpEng/xres/uploads/resource-center-documents/3M_casestudy.pdf

http://online.wsj.com/news/articles/SB10001424052702303877604577382260173554658

http://www.scdigest.com/ASSETS/ON_TARGET/12-06-06-1.php

http://solutions.3m.com/wps/portal/3M/en_US/3M-Sustainability/Global/Environment/3P/

http://solutions.3m.com/innovation/en_US/stories/keep-moving

Social Media/ 3M website:

Facebook

Twitter
3M

Thursday, May 29, 2014

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: