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Contents
Introduction .................................................................................................................................................. 3 Problem Recognition: ............................................................................................................................... 3 The Supply Chain in Spain ............................................................................................................................. 4 Supply Chain in China.................................................................................................................................... 5 Push and Pull View ........................................................................................................................................ 6 Networks of Supply chain ............................................................................................................................. 7 1. 2. Centralized Network(Europe e.g. Spain) ........................................................................................... 7 Decentralized Network(Asia e.g. China) ........................................................................................... 7
Supply Chain Drivers ..................................................................................................................................... 8 Cross functional Drivers ........................................................................................................................ 9 Strategic Fit ................................................................................................................................................. 11 Understanding the customer and supply chain uncertainty: ................................................................. 11 Understanding the supply chain: ............................................................................................................ 12 Achieving strategic fit: ................................................................................................................................ 13 Expanding Strategic Scope .......................................................................................................................... 14 Role of Distribution ..................................................................................................................................... 15 Transportation ............................................................................................................................................ 16 Outsourcing................................................................................................................................................. 17 Design Collaboration ................................................................................................................................... 17 Role of IT in Supply Chain............................................................................................................................ 18 Conclusion and Recommendations ............................................................................................................ 19
Introduction
Supply Chain Managment is one of the key activities that determine the success of a company. It is important to consider all the existing flows in the supply chain, from the origin to the final customer, in the demand chain, from the market to the producers. In light of it, this case study proposed a global framework that considered key concepts to design and manage supply chains: customer service, intregration of supply chain, production and operations, distribution and storage, technology, reverse logistics, sustainability and green supply chains and strategic alliances.
Problem Recognition:
In the form of a case study the paper explains global strategies of Carrefour in China and Spain. The paper also discusses similarities and differences in the supply chain management in both contexts.
Centralized Network
Customers
Push and Pull (Carrefour Spain) The Push processes are speculative in nature and anticipated in terms of order generation. Hence the procurement cycle for goods (the purchasing of goods from suppliers) falls under the push process of the supply chain. The Pull processes are also referred as reactive processes, activated when the actual customer order arrives. Carrefour delevoped a client oriented culture, focusing customers and aspects as service, sales and comepetence within different formats.Hence the pull processes incooperated the replenishment cycle and customer order cycle. As Carrefour is Retailer there is no manufacturing cycle. Push and Pull (Carrefour China) The procurement of goods and products are done by the respective store managers with a decentralized system being followed, Carrefour Chinas procurement and replenishment cycles are categorized under push processes. As China has different cultural influences in different cities and regions so it is difficult to provide a homoegenous products all over the country.hence a decentralized approach is adopted
by Carrefour which gives liberty to store managers to make decisions and as a result only the customer order cycle stage comes under pull processes.
Competitive strategy
Efficiency
Responsiveness
Logistical Drivers
Facilities
Inventory
Transportation
Information
Sourcing
Pricing
Cross-Functional Drivers
Cross functional Drivers 1) Facilities: This includes the warehouses and the distribution plants that a company owns. Role of the facility is that in inventory is either transformed into another state (assembling of component parts) or it is stored (warehousing). The components of facility are role, location and capacity. As for Carrefour which is a major retailer, it does not have production or manufacturing plants it merely accepts as an intermediary to provide goods and products to the end consumer. The company helps smooth out networks betwen a manufacturer and a consumer by providing the products under one roof. However Carrefour does provide some food items are e.g frozen foods that are produced in its retail store located across the world. Procured goods are stored in the warehouses/retail stores and put on display shelves for customers to buy.In Spain Carrefour used applications for warehouse management.Carrefour did not manufacture or design any product. However, its influence is clear as it demanded that suppliers use a certain packaging and pallet format to facilitate the internal management of goods. 2) Inventory: The role of inventory in supply chain is due to mismatch between supply and demand. Inventory could be the raw material purchased and the product in its final state until or unless it does not leave the facility. As for Carrefour Spain and China both use inventory management systems.However Carrefour avoid stocking extra inventory as it increases the holding costs and risk as well. For fresh products and perishable their is no inventory pile up as the risk of these products going bad is high hence Carrefour stocks these products on a daily sale basis as for other such as electronics and apparel these are stored using cross docking techniques in the warehouse/retail store facilities alocatted.
3) Sourcing: Sourcing is the set of business processes required to purchase goods and services. In supply chain it is also lending out a function to the 3rd party to handle it more wisely as the firm already has a lot on its plate.In beginning Carrefour Spain was in charge of the logistics management, this activity, due to the increment of the associated logisitcs costs, was externalized/outsourced with specialized logistics providers such as FCC, DHL , Salvensen Logistics. In order to manage online negotiaitions with providers Carrefour used the tools provided by Agentrics Sourcing which was also used in all countires in which Carrefour operated.The components of sourcing are In-house or out source, supplier selection and procurement.
4) Information: It is one of the most important ingredients of a supply chain that drives the whole network smooth if conveyed effectively. Good information can help improve the utilization of supply chain assets and the coordination of supply chain flows to increase responsiveness and reduce costs. The example of information flow through supply chain was seen in the case of vertical supply chain integration characterized by sharing information. This information flow between store managers and suppliers in Chinas case and information systems usage in Spains case utilizes companies inter modal and directs mutual interdependence, establishing trust and openness. Poor inventory management practices led to costly operations in China hence Carrefour offered lessons for suppliers to improve business operations by making it more efficient and responsive. Whereas in Spain use of software applications was very common tool in order to minimize the global cost of the process ( storage and management). Carrefour also worked with application Infolog WMS (warehouse management system) which sent GLC in Madrid. Since the process control was greater in this way, it allowed for a higher service rate. Infolog also developed the GTS ( Goods Traceability System), which allowed knowing the exact position of each unit of inventory at every moment. 5) Pricing: Pricing is the process by which a firm decides how much to charge customers for its good and services. Its a long process before which a lot of research has to be done for getting prices and evaluating all your vendors and suppliers. The components of pricing are pricing and economies of scale, everyday low pricing versus high-low pricing and fixed price versus menu price. As for the case of Carrefour the European markets e.g Spain in particular were less price sensitive rather the Chinese markets. So Carrefour had to set price accordingly, procuring from local suppliers was good idea to reduce costs and improve quality. Spanish people focused more on quality rather price so it was easier to set prices however in China due to different cutlures and economics groups this couldnt be done so easily, hence alternative ways were figured to that resulted in hiring local managers so that they would have a better understanding of what the people wanted and how much the price should be for a particular product.
6) Transportation: It is the Movement of product from one location to another. Medium of transport can vary from product to product. As per the case of the retail store Carrefour operating in China the only medium of transport were roads, which included 18 wheel trucks as well as three-wheel bicycles depending on whatever was needed on that particular occasion. As for Carrefour operating in Spain a mulimodal transportation system was used, depending on the geographical zone covered.but the main mode of transport were roads.
Strategic Fit
A strategic fit creates a balance between the competitive strategy and the supply chain capabilities. The core of this fit is to create balance between the needs of customers and the costs of fulfilling those needs keeping in mind the capabilities. The concept of achieving strategic fit in the supply chain of Carrefour can be explained on the basis of:
The supply chain uncertainty for the products in Chinese is more complex because of the weak integration and flow of information between the supply chain network and lack of infrastucture and transportation options could hinder communication between the store manager and the producer/supplier.Fresh and perishable goods are made on daily basis if the daily quota isnt met then the product might be wasted. A trade off is done between responsiveness and cost efficiency here because of the risk of facing demand uncertainty. The implied demand uncertainty present in the supply chain for perishable products.
Delivery schedules must be integrated inorder to fulfill the customers needs and orders. Price sensitive culture of China and nature of products provided with close to home facilities whereas in Spain stores are located on the outskirts and high prices are charged for even better response to customer orders. With the help of information systems that track the orders as it moves along the supply chain.
High service level is practiced by the delivering company, as component parts also need to be assembled sometimes increasing efficiency in the supply chain.
Perishable Products (Spanish Markets) Perishable Products (Chinese Markets) The Perishable Products(Carrefour Spain) need to be responsive by nature because the type of target market and the product would be wasted if not delivered on time at the store. Hence they are responsive in catering to customer needs along with uncertain demand. The Perishable Products (Carrefour China) need to be efficient due to the type of the target market which prefers efficiency over responsiveness and are price sensitive in nature hence the demand comparatively remains stable comparatively.
Supplier/Manufacture
Distributor
Carrefour(retailer)
customer
Retailer
Customer
Product development
Marketing Strategy
The case compares two totally different in which Carrefour a mulitnational retailer is operating and difference in supply chain strategies it has to adopt in each market. As European markets differ from Asian Market Carrefour has adopted two different supply chain strategy applications to achieve success in each market. Intercompany interfunctional scope is best suitable for Carrefour in both markets. Currently the companies e.g Tesco, Wal-mart discussed in the case are following the traditional methods of supply chain integration(treating China as a Homogeneous market rather than Heterogeneous), but there is a need to expand the strategic scope. The intercompany interfunctional scope covers all the stages of supply chain and all the functions of a business. The Supplier/Manufacturer, distributor, Retailer (Carrefour) and the customer should all be integrated in terms of communication, along with the functions of the businesses they are dealing with. The companies competitiveness strategy should lie in accordance with the business strategies. This would increase efficiency of not only the supply chain, but all the business processes going in and out of the stores.
Role of Distribution
Distribution refers to the steps taken to move and store a product from the supplier stage to a customer stage in the supply chain. Distribution occurs between every pair of stages in the supply chain. Distribution is a key driver of the overall profitability of a firm because it affects both the supply chain cost and the customer value directly. When considering distribution between any other pair of stages, such as suppliers to manufacturer or even a service company serving its customers through a distribution network, several distributions networks are used. Design of distribution networks: Both Carrefour Spain and China use the distribution network with retailer storage with customer pickup, with Manufacturers acting as suppliers and involvement of 3rd party logistics system for integration of distribution channels into Carrefours supply chain distribution centers deliver to the retail store located in the center of cities in the case of China and in the outskirts of the cities in the case Spain, the customer can visit these retail stores and purchase goods with added advantage of receiving discounts on their purchases. With everything avialable under one roof.
Customers
Transportation
Transportation is the movement of product from one location to another as it makes its way from the beginning of the supply chain to the customer. It is also one of the supply chain driver because products are rarely produced and consumed in the same location. There are seven modes of transportation. Modes of transportation are the medium that is used to transport good or product from one place to another. Trucks are used as the transportation mode for transporting the products from the producer to the Retail stores in China, also three wheel bicycles are used. Trucks are used for transporting goods domestically and not for very long distances. 3rd logistics are used such as DHL and FCC which are more efficient for transportations via mutlimodal/intermodal transport. It also aims that the truck carries the maximum load for each delivery, though it makes it slow but makes it cheap as well. This segment is called Truck Load (TL). Whereas there is another segment Less than Truck Load (LTL), which is faster though but cost more as well because it carries small loads and make several stops in route to pick and drop things. It is usually used for small and not so heavy products. The issue with the trucks are that their return journey is mostly empty but have to incur fixed cost. In European countries Carrefour makes the use of multimodal transport system to efficiently transport goods and products to its retail centers in the outskirts with minimum delays.
Outsourcing
Outsourcing is when one of the activities is contracted to outside parties. In this case the activity for delivering the fresh food products and other goods from the producers to the retail stores was outsourced to a logistics company. The logistics companies were responsible for delivering the specific product through trucks and other mediums in Spain. As for China only Trucks and three wheel bicycle were used for transportation purposes. The idea to outsource was a good one because it helped Carrefour control additional costs being associated with products when logistics systems were not outsourced. Outsourcing helped the company to stay efficient and focuse on its core operations which meant Carrefour becoming more responsive to customer orders. Storage issues were reduced by the outsourcing the logistics, also applications were integration in the computer systems that could track packages and products on the go.
Design Collaboration
Design collaboration is an integral part of the supply chain and it occurs when the buyers and producers work together to improve efficiency of the product and reduce costs. It results in system integration which leads to reduced costs, improved quality and fastens the time to market. In the case study it was mentioned that in Carrefour China local managers were given full autonomy to make their decisions regarding the stores activites and other supply chain processes which also meant that manager would now try to work in coordination with suppliers and buyers to deliver a more healthy and responsive environment for the business and its stakeholders.
The roles for the particular macro processes are mentioned in the diagram above. Integration of all these processes is required. The port industry, according to this paper, is deprived of IT and dynamic management of the supply chain. The traditional models of supply chain cannot be applied to industry today. More use of technological inventory control and planning, inclusive of all actors in the supply chain, would allow the industry to improve in terms of integration of the 5 main research themes mentioned earlier in the report. Each macro process is equally integral to the supply chain management because it is affected by uncertainty of demand and implied demand uncertainty as well.