Wednesday, March 13, 2013
In relation to this week’s topic about supply chain challenges my blog is about the HPs initiative to ship their product from central china to Europe, and highlight the challenges they face underway.
The labor in the coastal areas of china is seasonal. People come for job from the central regions to coastal parts generally at the end of a lunar year. They live in dormitories and have all the diversity in cousins and dialect. As they are away from home it adds to workplace stress. They usually work until the spring break and go back to their families for holidays. They may or may not come back. And consequently labor becomes a challenge for coastal companies. To address this challenge instead of putting the people on train HP put the PC on train and take the manufacturing facility closer to the labor making it less stressful and more convenient for them.
The problem with Trans-Siberian railroad was that to get to Europe all the way from Russia through central china was happen to be a very long route. The logistics at HP worked with china’s ministry of rails, Kazakstan railway, and Germen Rail Company to develop a new route. HP was pioneer in developing this route. They have 33 trains, 1 every week that delivers the laptop and printers to European market in 21 days. The one way transportation could not have been feasible for anybody. So on a return route, BMW (BMW), Audi, and Volkswagen (VOW) are shipping auto parts produced in Germany east to their assembly plants in China.
The third challenge before them was the environmental sustainability. The sea transportation as per there calculation of carbon intensity is 57 times less carbon intensive than air transportation. Trucking are the most at 72 times intensity, and rail being half way at 25 times is the second preferred environmental friendly mean for HP after sea. Shipping one container by train costs one-third the price of air transit.
To sum it up, 21st century supply chain challenges such as environment concerns, labor availability, transportation will continue to force the companies to maneuver their tactics in the future years ahead.
The most exciting about doing the project about Kiva Systems is that we continuously gain a deeper understanding of the global supply chain and even perceive insights in how the business will look like in the future.
This weeks reading shows us how the way doing business has changed with evolving technology. Despite what technology we are going to use, either 3D printer or RFID, the principle is, business is all about an idea. The global supply chain network and advanced technologies enable us to outsource business processes, including manufacturing, assembling and shipment to outsiders.
From a pure supply chain perspective, one of the most recent shifts has been in the transition form third party to fourth-party logistics providers. Kiva’s new owner, Amazon, is an outstanding fourth-party provider by all means. Amazon’s has more than 100 distribution centers globally, which makes it a strong competitor to FedEx or UPS. In 2006, Amazon Business Solutions launched “Fulfillment by Amazon”. It allows businesses to use Amazon’s own order fulfillment and post-order customer service infrastructure, and allows Amazon customers to receive the shipment directly by Amazon when buying from third-party sellers. A typical workflow is like this:
Step1: You send your products to Amazon
You send your new or used products to Amazon’s fulfillment centers
Step2: Amazon stores your products
Amazon catalogs and stores your products in their ready-to-ship inventory
Step3: Customers order your products
Customers search for and purchase your products directly on Amazon.com, or on other e-commerce channels such as your own site
Step4: Amazon picks and packs your products
Fulfillment by Amazon picks your products from inventory and packages them
Step5: Amazon ships your products and provides support
Amazon ships products to customers from their network of fulfillment centers
During these steps, Amazon as a fourth-party provider provides value-added services including:
“Sell on Amazon” that let you sell your products on the Amazon Marketplace,
“Amazon Payments” that let customers pay with their Amazon accounts
“Build a Website” that let you build a full-featured eCommerce web store
“Advertise on Amazon” that let to advertise on Amazon’s website
Amazon’s ecosystem made it possible for customers to focus on their products rather than manage the whole business process. However, there are still limitations of using Amazon service. In terms of cost, fulfillment by Amazon is not suitable for oversized products. The service fee charged by Amazon may consume customers’ profit margin. By contrast, the service fee charged for small size product is reasonable. In addition, the coverage of Amazon’s DCs may not be enough to be a cost-effective for its customers. The initial transportation of products from customer to Amazon’s DCs will become extra expense, which is not necessary especially when customers are far away from Amazon’s DCs.
As Amazon keeps expand and investing in its logistic network, as well as its value-adding services. We can foresee that Amazon service will be a good option for running business. And we’ll follow up to see what a role Kiva Systems will play in this process.
Tuesday, March 12, 2013
Amongst the 51 best of the supply chain sustainability stories, McDonalds was honored with the 2012 best of sustainable supply chain. It is not the company alone that gives the best products, but the companies who supply goods and stay on schedule. 51 different stories based on the lines of food manufacturing, climate/energy, animal welfare, water, and community impact were submitted.
The McDonald’s supply chain is a complex web of direct and indirect suppliers. This complex system is managed by working with direct suppliers who share their values and vision for sustainable supply. They hold them to clear standards for quality, safety, efficiency and sustainability. They are expected to extend those requirements to their suppliers. Overall, McDonald’s and their suppliers are collectively focused on three areas of responsibility: ethics, environment, and economics:
- Ethics - McDonalds envision purchasing from suppliers that follow practices that ensure the health and safety of their employees and the welfare and humane treatment of animals in their supply chain.
- Environment - They envision influencing the sourcing of their materials and ensuring the design of their products, manufacture, distribution and use to minimize life-cycle impacts on the environment
- Economics - They envision delivering affordable food, engaging in equitable trade practices, limiting the spread of agricultural diseases, and positively impacting the communities where the suppliers operate.
Their commitment to source more of food and packaging from sustainable sources has resulted in significant progress. Through 2011 they sourced 99% of white fish from sustainable fisheries. McDonald’s Europe, Australia and New Zealand buy 100% of their coffee from Rainforest Alliance Certified™ or UTZ Certified farms, and McDonald’s U.S. and Canada have also started increasing their purchases of certified coffee, including 100% of their espresso. Additionally, McDonald’s Canada, McDonald’s U.S. and their operators are making an investment in a sustainable agriculture program focused on stabilizing long-term supply and driving positive change in coffee farming and trading practices.
They met the 2011 goal of requiring all McDonald’s palm oil suppliers to become members of the Roundtable on Sustainable Palm Oil (RSPO), and began sourcing a portion of their palm oil from RSPO certified sources in 2012. In addition to coffee and palm oil, other priority focus areas include poultry, fish, fiber, and beef. They have been working to improve their measurement and verification processes at the agricultural level across all six of these priorities, while beef continues to be their primary focus. They estimate that approximately two-thirds of their carbon footprint is associated with livestock in the supply chain. Globally, McDonald’s is working with other organizations to address the need for standards and principles for measuring sustainable beef. They are supporting a variety of innovative programs and initiatives.
In 2011, 100% of their suppliers signed the Code of Conduct, and continue making sure all new suppliers sign the Code as well. In early 2012, they established a global, cross functional Animal Health and Welfare team that includes internal and external experts on beef, pork, poultry and egg-laying hens. As an industry leader, they are striving to facilitate stakeholder engagement, address global animal health and welfare opportunities in our supply chain and influence the industry for resolution. With a supply chain developed strongly on these responsibilities, who is going to stop them from being the best?
Swot Analysis; 21th Century Supply Chain
Overview of 21th Century supply Chain
Historically, the term supply chain management is credited to Keith Oliver a consultant at the Booz Allen Hamilton when interviewed by the Financial Times in the early 1980’s. Early before this year global supply chain was more of the traditional model where corporations doing business together did so directly, that is each supplier maintains individual links to each customer or buyer. In the 21th century supply chain has changed to include hugely technology; the Internet, operations, logistics and procurement management.
The 21th century supply chain addresses the bottlenecks in the traditional supply chain systems, which includes; distribution network configuration, distribution strategy, trade-offs, information, inventory management and cash flow. Modern day Supply chain is a cross-functional approach, which captures raw materials management in an organization; aspects of internal processing of materials into finish products (design, forecasting and manufacturing) and the successful movement of finish goods out of the organization to the final consumer. In the 21th century, several models have been proposed for the better understanding of materials movement for example the Global Supply Chain forum have grouped supply chain into strategic, tactical and operational levels.
In 2012, Gartner came out with a top 5 list of well doing companies in terms of supply chain management.
Coca Cola Company
These companies have certain characteristic and features, which are particular to modern supply chain. These are elaborated in the diagram below:
FIG 2 CRITICAL FEATURES OF MODERN SCM
· Enhanced Joined Networks, strategic alliances and partnership between giant companies (Example Foxccon and Apple)
· Have enhanced the potential of Lean Manufacturing among companies.
· Introduction of technology and the Internet have speed up global supply chain.
· Security levels in global supply chain is enhanced example the use of RFIDs
· Have aided Just-In –Time practices in organizations are enhanced.
· Global Supply chain in the 21th Century has helped companies to lower their production or call center cost because it has allow to a greater extent outsourcing.
· Complications in supply chain networks as it handles many different players.
· High employees Turnover
· Greater Competition
· It involves heavy investment of time, money and resources to successfully overlook the supply chain network.
· Although outsourcing can lower operational cost the decision to outsource can lead to backlash from media, and customer.(Nike case in Vietnam)
· Mostly some high level supply chain companies turns to focus too much on the input and output of the system and pay less attention to internal management issues.
· Sometimes there are conflicts among partners especially large supply networks.
· Since it relays heavily on technology and systems a failure of any creates big issues along the supply chain
· Huge potential with the introduction of new technologies like RFID and Internet of Things
· More Attention is been given to the discipline as it has attracted the attention of the best global companies therefore more research and models are coming up.
· Globalization, IT and outsourcing has made the 21th century supply chain seem to have more bright future
· Growing in online markets and easy international expansion of markets.
· New and Emerging markets
· Increase acquisition synergies
· Growing political issues across countries affecting large corporations
· Potential substitute like new technology or improvement in barcode.
· International competition
· Global economic and bad economy