SCM

B41_Caselets

Somarrita Dey (41B)

The five categories are:

Re-engineered Supply Chain Innovation in Technology Inventory stocking Demand-driven supply chain Warehouse Management

Re-engineered Supply Chain

Cadbury was changed to Mondelez International, the snacks and drinks producer that was formed following the management buy-out of the Kraft Foods North American grocery business. Due to this companys supply chain became a tangled, messy composite of the individual supply chains of the acquisitions made over the past two decades. The supply chain has been built through a long history of acquisitions such as Milka, Nabisco and Lu and ended with the acrimonious takeover of British confectionary giant Cadbury in 2010. As a result, the supply chain network is fragmented, complex and inefficient. Moreover, the company had more than 4,000 individual suppliers, while only 15% of its production plants in the region were A-rated. In North America, 60% of its manufacturing facilities were more than 40 years old, with many described as sub-scale. All of these factors make it difficult to deliver consistent service levels at benchmark cost levels. What has been done at Mondelez is very innovative. A five-pronged plan has been drawn, which includes a complete overhaul of the firms executive team with some 30 senior management appointments in the last 12 months as well as the introduction of the six sigma programme across the organisation to improve productivity. A new cash management programme to free-up cash for reinvestment is also supposed to be introduced. However, it is in the design of new production facilities and the associated supply chain network that will appear which will witness the most dramatic transformation. The new production facilities will not only have considerably greater capacity, but also be of a Legolike modular design that can be easily replicated in other locations and emerging markets, constituting Mondelezs highest areas in terms of growth of sales, they are expected to be located closer to end markets to cut logistics costs, in a sort of reverse near-shoring exercise. Mondelez currently sees an average revenue per plant of around $210m a year, but plans to increase this to $300m a year by 2016 through building eight new state-of-the-art plants and closing a host of existing ones this year alone it has announced the closure of 12 plants and distribution centres around the world.

Another five new plants are slated to be built by 2020, leading to an overall production capacity increase of 28% over current levels and average revenue per plant of $500m per year. The flagship project in this programme is the facility under construction in Mexico, due to open in the second half of next year. This programme of construction, along with a radical rationalisation of its supplier base into a few core suppliers will generate $3bn in gross productivity savings, $1.5bn in net productivity and $1 billion in incremental cash, which will be the primary driver of an approximately 60-to-90 basis-point annual improvement in base operating income margin.

Innovation in Technology
Industry Blinds Solutions is the leading manufacturer of industrial blinds for the petroleum and chemical processing industries. IBS rents and sells industrial blind products to help with petro-chemical turnarounds. The inventory at IBS exceeds 400tons and isolation blinds, hydro/test blinds, blind flanges and blind racks. IBS also provide bleeder blinds, spec blinds, and stand-off blinds to the customers exact specifications. The company has designed an innovated racking system that provides customers with the right blinds when they need them, improving efficiency and time on tools during the turnaround process. IBS presorts all blinds and delivers them already organized on the rack, increasing ease of access while reducing sorting time at the projects start. Every IBS blind rack is manufactured to meet the individual customer requirements. The blinds inventory is always on display and easily identifiable by the workforce. IBS blinds are available in sizes up to 96 inches at the flange to meet most the customers specific requirements. The lockable IBS blind racking system allows customers to protect their inventory on the racks, eliminating loss of blinds between projects, while having them ready for the next project. The combination of the IBS inventory racks and the blinds colored T handles successfully reduces the loss of blinds on the job site to roughly 5%. The innovative IBS racks are designed for easy deployment, as they can be moved by forklift or crane. The IBS blinds rack rental/purchase program allows customers to save time and money with the right blinds at the right price.

Inventory stocking
Walmart, one of the largest retailers has problem of keeping its shelves adequately stocked. Wal-Mart had trouble keeping its stores stocked as it cut back on workers per store.

That has cost sales and driven away frustrated shoppers. On May 16, Wal-Mart reported that same-store sales in the U.S. fell 1.4 percent, the first drop after six straight gains. The Bentonville, Arkansas-based company also said second-quarter earnings per share will be $1.22 to $1.27. Analysts projected $1.29, the average of 24 estimates compiled by Bloomberg. It has started employing the method of On-shelf availability -- known as OSA which would be one of several new metrics by which managers and executives could be judged. This was done in collaboration with Acosta Inc., a Jacksonville, Florida-based consulting firm. Walmart started the green-dot program in Wal-Marts U.S. stores after previously conducting shelf audits without telling workers what items would be monitored. But then it realised it was actually better to have transparency with stores so they know the key items that particular time of year. Following this, Wal-Mart prepared a spreadsheet of more than 800 items -- merchandise that included peanut M&Ms, Hanes boxer briefs, Covergirl mascara and Crest toothpaste -- that needed stickering. The circle stickers would indicate to Wal-Mart workers which items Acosta would be searching for during its audits. The reason Walmart went to the green sticker process is because they realized it was going to help the store associates do a better job of being in stock in key items. Those are the most important items to be in stock on

Demand-driven supply chain

Based in Irving, Texas, a suburb of Dallas, Kimberly-Clark makes such well-known personal-care products as Kleenex facial tissues, Huggies diapers, and Scott's paper towels. For the past six years, Kimberly-Clark Corp. has been on a mission to connect its supply chain to the store shelf. It wanted to create a demand-driven supply chain that would make and warehouse only the precise amount of inventory needed to replace what consumers actually purchased. If the company made it one of its top priorities, they would align their activities to what's happening on the shelf, they could take a lot of cost, waste, and inventory out of the system The roadblock for Kimberly-Clark was that its store shipments were based on historical sales forecasts, which were not very accurate predictors of future sales. To match shipments with actual demand, the company would need to use point-of-sale (POS) data from consumer purchases as the basis for replenishments to grocers and retailers. To address that problem and improve forecasting, Kimberly-Clark conducted a pilot program with the software vendor Terra Technology that aimed to incorporate demand signals into its North American operation. Three retailers, which account for one-third of Kimberly-Clark's consumer products business in North America, currently, provide point-of-sale data. That information is fed daily into the solution's engine, which then recalibrates the shipment forecast for each of those retailers. Each day, the software evaluates any new data inputs from

the retailers along with open orders and the legacy demand-planning forecast to generate a new shipment forecast. That forecast, in daily buckets, covers the current week plus the next four weeks. Kimberly-Clark then uses that forecast to guide internal deployment decisions and tactical planning. The software contains algorithms that process data provided by the retailers, such as point-of-sale information, inventory in the distribution channel, shipments from warehouses, and the retailer's own forecast. It reconciles all of that data to create a daily operational forecast. The software also identifies patterns in the historical data to determine which inputs are the most predictive in forecasting shipments from Kimberly-Clark's facilities. The inputs are re-evaluated weekly, and how much influence each input has on the forecast can change. By using actual demandthat is, the point-of-sale datato recalculate its operational forecasts, Kimberly-Clark can better ensure that it has the products consumers want to buy in stores at the right time. For one thing, the company has been able to develop a more granular metric for forecast errors. In the past, it measured forecasts by product categories; the metric it uses now tracks stock-keeping units (SKUs) and stocking locations. This metric is defined as the absolute difference between shipments and forecast, and it's reported as a percentage of shipments. Using that particular metric to evaluate its daily forecast, Kimberly-Clark has seen a reduction in forecast errors of as much as 35 percent for a one-week planning horizon and 20 percent for a two-week horizon

Warehouse Management
Teva Pharmaceuticals, UK Limited is a manufacturer and distributor of generic and specialty pharmaceuticals based in Castleford, West Yorkshire, United Kingdom, (UK). The company supplies more packs of medicines to the National Health Service than anyone else, making it one of the biggest pharmaceutical companies in the UK. As a major supplier of pharmaceutical products to the UK health service, Teva UK Limited adheres to stringent quality procedures in order to safeguard the integrity of its stock, tracking products both by EAN number and batch number. Due to the growing complexity and scale of its business, Teva decided to build a new logistics centre that would support its increasing volume and provide new ways to service its customers. The company sought a warehouse management solution, with advanced features such as automated storage and retrieval, pick by light, a powered conveyor and a paperless operation, that would enable it to increase efficiencies, save costs and improve service in the new facility. Teva selected a warehouse management solution from RedPrairie, now a part of JDA Software, due to the companys strong partnership and experience in the pharmaceutical industry. The warehouse management solution enables Teva to optimize all of its processes from goods-in to customer dispatch as well as trace inventory across the supply chain.

Today, Tevas operation includes storage of more than 24,500 pallets, of which 2,808 are controlled in a fully automated high-bay area. Conveyor automation is used to move cases, picking totes and cartons to the picking areas, onto the packing stations and finally into the shipping dispatch lanes and loading areas. Incoming goods, primarily from Eastbourne, Sussex and Tevas European manufacturing sites, must be weighed, measured and cubed, then positioned in the correct storage or pick location by JDA Warehouse Management. Precision and quality control are critical. From goods-in, stock must be accurately moved to the high-bay area, then transferred to either the adjacent automated storage and retrieval system facility or to the pick and drop front location for full-pallet picks by crane, which either go straight to dispatch, or to the item pick area. Tevas customer order lead time varies between one and five days. A next-day emergency delivery service is offered, mainly for hospitals. The company processes approximately 140 orders daily, with total pick volumes averaging more than 9,200 carton equivalents. Maintaining a consistent process is critical to the companys quality control, as multiple products must be inspected and a final automatic weight check is calculated for each completed carton.