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Supply Chain Management Design & Simulation Online

Supply Chain Case Studies

SCM Globe comes with a library of case studies that explore COMMERCIAL , HUMANITARIAN , and MILITARY supply chains. When you purchase an account you have access to all the case studies and their simulations.

The case studies range from relatively simple beginning cases like Cincinnati Seasonings , to quite challenging advanced cases such as Zara Clothing Company , or Nepal Earthquake Disaster Response .  Case studies are laboratories where you apply what you learn in lectures and readings to solve supply chain problems in highly realistic simulations. Each case has a " CASE STUDY CONCEPT " showing the supply chain principles and practices highlighted in that case.

SEE WHAT PEOPLE ARE SAYING ABOUT SCM GLOBE

Case studies presently available in the online library are shown below. You are welcome to use any or all of them. You can also create your own case studies, or we can create them for you. Cases are shown in the three categories. As you work with these cases you will gain an intuitive understanding of supply chain dynamics, and develop the analytical skills for designing and managing real supply chains.

People new to SCM Globe should start with the  Cincinnati Seasonings case study . Work individually at first, not in groups. Each person needs their own account. Do the three challenges shown in the online introduction to Cincinnati Seasonings. That's how you'll learn to use the software, and how to use simulations to analyze and design supply chains. Then you will be ready to work in groups or work on more advanced cases.  Click on the case studies below to see a description and introduction to each case.

Commercial Supply Chain Case Studies

Collaborative Supply Chains

S&J Trading Company – Angola

Java Furniture Company – Indonesia

Cincinnati Seasonings

Supply Chains of the Roman Empire

Ancient Silk Road – First Global Supply Chain

Zara Clothing Company Supply Chain

Fantastic Corporation – Global Supply Chain

Fantastic Corporation – Unexpected Disruptions

Humanitarian supply chain case studies.

Disaster Response Supply Chains: Flooding Scenario

Nepal Earthquake Disaster Response Supply Chain

Humanitarian Supply Chains: Syria Evacuation Scenario (CIV and MIL)

Military supply chain case studies.

Burma Campaign – 1944 Invasion of India

Battle of Smolensk – 1941 Invasion of Russia

Alexander the Great Needed Great Supply Chains

New case studies.

New cases are added based on projects we do with instructors, students, and supply chain professionals. Here are the new supply chain models in the library:

• Local and Sustainable Supply Chains – Blue Ocean Cooperative
• Aerospace Manufacturing Cluster – Rockford IL
• Hyderabadi Biryani – Paramount Restaurant 
• Western Desert War – May 1941
• Russian Logistics for the Invasion of Ukraine

Interactive Supply Chain Case Studies

Every case study has a main theme or concept that it illustrates. You will be challenged to use knowledge acquired in lectures and readings as well as your own real-world experience to expand and re-design the supply chains in these case studies.

In the commercial supply chain cases you need to improve and expand the supply chains to support new stores and still keep operating costs and inventory as low as possible. In cases that deal with humanitarian or military missions you need to create supply chains to deliver the right supplies to the right locations when they are needed, and do so at a reasonable cost.

We are glad to provide a  free evaluation account  to instructors, students and supply chain professionals interested in exploring SCM Globe simulations — click here to request an account —  Get Your Free Trial Demo  

See SCM Globe pricing for Academic and Business versions of the software.

The best case to start with is Cincinnati Seasonings . After working through the three challenges presented in the online introduction to this case you will be ready to handle further challenges in this case or move on to more advanced cases. Get a quick introduction to working with case studies in “ Working with Case Studies “.

As problems are found in the simulations, you make decisions about how to fix them. Make changes to your supply chain model in the Edit screen. Then go to the Simulate screen and run a simulation to see the results of your changes. Depending on the changes you make, your supply chain simulation runs for additional days and other problems arise. As you address these problems you see about how supply chains work. Apply what you learn in readings and and lectures plus your work experience to solve the problems you encounter.

Keep improving your supply chain model until you get the simulation to run for 30+ days. Then download your simulation results and create a monthly Profit & Loss Report plus KPIs (as shown below). This provides an objective basis for evaluating the merits of different supply chain solutions.

Monthly Profit & Loss Reports identify areas for improvement. They help you improve your supply chain to keep it running for 30 days and also lower operating costs and inventory levels. You can work on lowering the carbon footprint of your supply chain too. These are the challenges you address in SCM Globe, and they are the same challenges people face when managing real supply chains. What works well in the simulations will also work well with actual supply chains. Skills you develop in working with the simulations are directly transferable to the real world.

NOTE: You can run simulations for longer than 30 – 60 days, but there is usually no reason to do so. This is because most companies do not run their supply chains unchanged for longer than 30 days at a time. They use a 30 day S&OP ( sales and operations planning ) cycle and these simulations correspond to that monthly S&OP cycle. These simulations focus on the tactical realities of operating a supply chain from one month to the next, and finding what works best.

Accessing the Online Library of Case Studies

As shown in the screenshots below, logon to your account and access the case study library from your Account Management screen. Click on the “View Library” button (arrow 1) in upper right corner of the Account Management screen. In the Library screen you see a list of available supply chain case studies; click “ Import ” to load a selected case study into your account; give the imported case a Name , and click “ My Account ” to go back to your Account Management screen.

You are welcome to import any or as many of the supply chain models in the library as you wish. Once you have a copy of a supply chain model in your own account you can make any changes you want to it.

In Account Management, you “ Create a New Supply Chain ” or work with an existing supply chain by clicking the “ Edit ” button (arrow 2) next to the existing supply chain you want to work on. You can also upload copies of supply chain models sent to you by other SCM Globe users (arrow 3) , and check your account expiration date (arrow 4) .

Use the Default Values or Enter New Data

When you load any of the case study supply chain models from the SCM Globe library, they come with default numbers already plugged in. You can either accept the defaults or do some research to find more current data. This data (like data and prices everywhere) changes all the time.

Look for data on products, facilities and vehicles that are used in your supply chain and see what their specifications and costs are. Costs can vary widely in different parts of the world. Go to websites of commercial real estate brokers in cities of interest and see what you can find out about rent costs:

• for cities in North America start with www.cityfeet.com
• and for cities in other parts of the world start with  www.knightfrank.com

Metric System of Weights and Measures

In the case studies all weights, volumes, distances and speeds are expressed using the metric system. The metric system is used around the world in every country except three: Liberia; Myanmar; and the United States. So it is good for supply chain professionals to feel comfortable with the metric system.

Register on SCM Globe for Access to all Supply Chain Simulations

Click the blue "Register" button on the app login page, and buy an account with a credit card or PayPal (unless you already have one). Then scan the "Getting Started" section, and you are ready to start. Go to the SCM Globe library and click "Import" next to the supply chain models you want.

During the last decade, a cascading series of unpredictable events—including earthquakes, volcanic eruptions, catastrophic storms, disease outbreaks and armed conflicts—has exposed deep fragilities in global supply chains. These events served as initial alarm bells for much greater challenges to come.

Intricately woven supply chains were built on concepts such as just-in-time manufacturing and designed to reduce labor and operating costs. Over the years, companies relentlessly optimized their supply chains to serve markets with relatively predictable supply and demand patterns. However, recent and unprecedented events have shown how these choices have created inflexible supply chains that are brittle under stress.

Breaking a single link in a globalized supply chain can have a ripple effect, impacting customers thousands of miles away from the point of disruption. “Supply chain issues” has become a catchphrase for economic dislocation.

“In recent years, supply chain has gone from the background, something people did not think about, to a boardroom-level topic,” says Rob Cushman, Senior Partner, IBM Supply Chain Transformation. “It’s a concept that people have had very painful personal experiences with. And that’s why thinking about supply chain is pivoting from cost to being about resilience and agility, and ultimately driving growth.”

Cost savings

By deploying a cognitive supply chain, IBM reduced supply chain costs by USD 160 million   and built in more resilience and agility

100% order fulfillment 

Even during the peak of the covid-19 pandemic, IBM maintained a 100% order fulfillment rate of its products to clients

The worldwide reach, size and complexity of its supply chain organization represented a significant challenge as IBM began exploring transformation strategies for delivering a differentiated customer experience to promote customer loyalty and growth. IBM employs supply chain staff in 40 countries and makes hundreds of thousands of customer deliveries and service calls in over 170 nations. IBM also collaborates with hundreds of suppliers across its multi-tier global network to build highly configurable and customized products to customer specifications.

Previously, the IBM supply chain ran on legacy systems spread across different organizational silos, making information sharing slow and incomplete. Employees also performed much of their work on spreadsheets, which impeded collaboration and real-time data transparency.

However, at the same time the IBM supply chain was re-thinking business processes and transforming its technology platforms, IBM was making major strides in AI, cloud, data fabric, IoT, edge computing and other tools. “We saw the advances IBM was making in all these new technologies,” says Ron Castro, Vice President of IBM Supply Chain. “So, we asked, ‘Why not leverage our own technology to move our own supply chain forward?’”

“The principle behind why we embarked on this journey was to answer the question, ‘How can we best react to disruptions to manage resiliency and our client experience?’” says Castro. “We needed to identify disruptions quickly, analyze the data, get insights and decide on the best course of action.”

IBM supply chain management set out a bold vision to build its first cognitive supply chain. The aim was to have an agile supply chain that extensively uses data and AI to lower costs, exceed customer expectations, ruthlessly eliminate or automate non-value add work and exponentially improve the experience of supply chain colleagues.

IBM Consulting® was brought in at the beginning to help develop the processes required to drive the transformation. “We consider ourselves ‘Client Zero’ for IBM Consulting,” says Debbie Powell, IBM Digital Supply Chain Transformation Leader. “We have the technology to do what we need to do. It’s the culture and the processes where change was needed. We also realized that a lot of our knowledge was tribal and often depended on one person. We needed to digitize and democratize knowledge to support decision-making throughout the organization.”

IBM Consulting helped the IBM supply chain team use Design Thinking methods to plan its digital transformation and move from sequential to continuous planning. “We put a lot of effort into agility and a cultural shift to empower people and adjust workflows in a controlled way,” says Matthias Gräfe, Director of IBM Supply Chain Transformation. “We went from a top-down approach to identifying personas from the bottom up, the people that actually make the decisions.”

“Successful digital transformation required us to challenge traditional ways of working that were held sacred for decades and win the hearts and minds of supply chain colleagues for change to stick,” says Takshay Aggarwal, Partner, IBM Supply Chain Transformation.

At a high level, the IBM supply chain digital transformation revolves around building sense-and-respond capabilities. This was accomplished by democratizing data and automating and augmenting decisions achieved by combining cognitive control tower, cognitive advisor, demand-supply planning and risk-resilience solutions. “We view the cognitive control tower as the single source of truth where you have access to all the data and it helps advise the best course of action,” says Castro. “It also helps gather insights from the information quickly across the end-to-end supply chain.”

The cognitive control tower is powered by the  IBM® Cognitive Supply Chain Advisor 360  Solution, which runs on  IBM Hybrid Cloud  and on  Red Hat® OpenShift®  (link resides outside of ibm.com) software. Cognitive Advisor 360 enables real-time, intelligent supply chain visibility and transparency. It also senses and responds to changes in demand as they happen and simplifies the automation of supplier management.

The system uses IBM Watson® technology to enable natural language queries and responses, which accelerates the speed of decision-making and offers more options to correct issues. “I can ask—in natural language—about part shortages, order impacts, risks to revenues and trade-offs,” says Cushman. “There’s a button that recommends actions to solve issues — that’s what Watson does. It’s augmented intelligence so we empower people with better information to make data-driven decisions very quickly.”

“With the cognitive supply chain, we have the benefit of bringing in all these data from legacy systems and internal and external sources, as well as unstructured data, to apply advanced analytics and different elements of AI,” says Castro. “And since the system responds to natural language, think about the power of being able to extract data and get insights and recommendations without having to be an expert in a legacy system or an ERP platform.”

The IBM cognitive supply chain technology architecture also includes  IBM Edge Application Manager ,  IBM Maximo® Visual Inspection  and  IBM Track and Trace IoT —an integrated stack of solutions that connect data end-to-end across the supply chain. “Our procurement, planning, manufacturing and logistics data are connecting in close to real time,” says Cushman. “That’s how we can share inbound information from suppliers, manufacturing status updates with our external manufacturing partners and delivery information with our customers.”

“We’ve added demand sensing, so that the solution pulses the market for changes in demand, predicting the future. We’ve also embedded a cloud-based risk management tool called Resilinc into our procurement and inbound parts management process,” says Cushman. “It essentially uses AI to crawl the web and if there is a disruption, we can take action quickly to secure a second supply source.”

On a minute-by-minute basis, one of the biggest advantages of IBM’s cognitive supply chain is that it provides employees with immediate access to the information they need to read and mitigate disruptions. “There is unbelievable power that comes from taking lots of disparate data and putting it where people can see and understand it,” says Cushman.

“The real-time, single-view of the truth increases the velocity of decisions and leverages rapid response,” says Castro. “It helps us develop ‘what-if’ scenario analysis from a planning perspective all the way through to the execution team and suppliers.”

In fast-moving, real-world situations, quick, informed decisions provide a competitive advantage. “In the past, a major disruption—such as the closing of a major airport—would take days for us to understand the immediate impacts. With our current solution, we have ‘what-if’ capability that brings this analysis down to minutes,” says Powell. “In a supply constrained environment, whoever gets the information first wins.”

Since its cognitive supply chain became operational, IBM has saved USD 160 million related to reduced inventory costs, optimized shipping costs, better decision-making and time savings. “When mitigating a part shortage, it used to take four to six hours per part number,” says Powell. “We’ve brought that down to minutes and made further improvements to seconds.”

“Where’s my stuff?” is a common question in the supply chain industry. Finding an answer can entail hours of phone calls, emails and ERP queries across different geographies. “We’ve built a solution where you can log in and enter an order and you’ll have an answer in about 17 seconds,” says Cushman. “That was an enormous pivot and a powerful change in how we do business.”

By using its cognitive supply chain platform, the IBM supply chain team is also able to create new capabilities much faster. “Years ago, when we started this journey, we needed a long, looping roadmap with one or two years required for major capability upgrades,” says Castro. “With this digital enterprise, we now have teams that complete deployments in two or three weeks. We’ve moved to much more agile development.”

Despite dislocations caused by the COVID-19 pandemic, IBM fulfilled 100% of its orders by using its cognitive supply chain to quickly re-source and re-route parts as necessary. “During the last two years, the IBM supply chain did not fall behind. We met our commitments. Everyone else was screaming supply chain issues and we’re shipping products,” says Daniel Thomas, IBM Business Optimization Manager and Chief of Staff. “We delivered on our promises during the height of the disruptive era we live in.”

“Guaranteed supply is important, but many of our clients are also looking for predictability of supply,” says Castro. “The tools we have now help us address both issues. They enable us to manage the demand side to meet the right client expectations.”

“We have a responsibility to inspire younger supply chain leaders who will keep the IBM supply chain at the cutting edge and beyond for years to come,” says Aggarwal. “People entering the work force today have different experiences than previous generations. They are digital natives and expect a consumer-grade experience when managing their work. As we embarked on our journey, we actively engaged them in designing workflows and digital capabilities. There were trials and tribulations and we had multiple failures in design and rollout. Architecting the cognitive supply chain, and learning from failures and successes, made our young leaders champions of the cognitive supply chain and constant innovators of new capabilities.”

“IBM is the only global services company with its own multibillion-dollar supply chain, and we’ve transformed it into a data-driven architecture to drive our business. There’s a richness of experience that we bring to client conversations because we’ve done this work for ourselves,” says Cushman. “It’s all about how a supply chain delivers a differentiated customer experience to enable stickiness and growth.”

“The collaboration between IBM Systems and IBM Consulting teams to transform our own business and demonstrate the power of exponential technologies in supply chain has been one of our finest moments as a company,” says Cushman. “We look forward to sharing our real-world experience and learnings with our worldwide community of customers, partners and clients.”

IBM is an information technology company based in Armonk, New York. Founded in 1911, the company offers hardware, software and services in cloud computing, AI, commerce, data and analytics, IoT, mobile and cybersecurity, as well as business resiliency, strategy and design solutions. IBM has a global workforce of more than 280,000 employees serving clients in over 175 countries through IBM Consulting, IBM Software and IBM Infrastructure.

To learn more about the IBM solutions featured in this story, please contact your IBM representative or IBM Business Partner.

Build AI-enabled, sustainable supply chains that prepare your business for the future of work, create greater transparency and improve employee and customer experiences

IBM Sterling Supply Chain Insights with Watson provides visibility across the entire supply chain.

Sourcing minerals responsibly with blockchain technology

© Copyright IBM Corporation 2022. IBM Corporation, New Orchard Road, Armonk, NY 10504

Produced in the United States of America, July 2022.

IBM, the IBM logo, ibm.com, IBM Consulting, IBM Watson and Maximo are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at  ibm.com/legal/copyright-trademark .

Red Hat®, JBoss®, OpenShift®, Fedora®, Hibernate®, Ansible®, CloudForms®, RHCA®, RHCE®, RHCSA®, Ceph®, and Gluster® are trademarks or registered trademarks of Red Hat, Inc. or its subsidiaries in the United States and other countries.

This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates.

The performance data and client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.

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Case Study: How Should We Diversify Our Supply Chain?

• Krishna G. Palepu

A Chinese appliance maker considers expanding production to Mexico.

In the wake of Covid-19’s disruptions, Kshore, a Chinese appliance maker, is thinking of realigning its supply chain. Like many other global manufacturers, it’s being pressured by its customers, which include Walmart and other large retailers, to reduce the time, expense, and environmental impact of shipping goods between countries.

On a trip to Monterrey, Mexico, Kshore’s CEO and COO tour factories that are closer to North American markets—and are impressed by their professionalism. But questions about transportation and staffing give the executives pause. Should Kshore start production in Mexico or consider other countries? Two experts weigh in.

On the sidewalk outside the airport in Mexico City, Yun Liu and Keith Smith, the CEO and COO of Kshore, a Chinese appliance maker with $150 million in annual revenues, waited for their town car. Their journey from Guangzhou, China, had been a long one.

• Krishna G. Palepu is the Ross Graham Walker Professor of Business Administration at Harvard Business School. His research focuses on globalization, emerging markets, and strategies for multinational and local companies in those markets. He cochairs the HBS executive program Leading Global Businesses.

Partner Center

• The approach allows each function to understand the assumptions relating to transformation that affect it and how its own assumptions affect others.
• Understanding dependencies enables each function to perform its own design, building, and execution in coordination with other teams.
• A case study of a leading global retailer highlights how the approach harmonizes disparate elements, fosters cross-functional alignment, and promotes an end-to-end transformation.

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Supply Chain Management

/ article, a unified approach to end-to-end supply chain transformation.

By  Michael Hu ,  Kartik Goel ,  John Cheru ,  Ravi Srivastava , and  Michael Ryba

Key Takeaways

Supply chains play a leading role in enterprise growth . They are the engine of a virtuous cycle, driving customer satisfaction and, ultimately, higher revenue. But they are often vulnerable to the demand and supply uncertainties of the global landscape.

To increase resilience and improve performance, many companies have set out to transform their supply chains. Like builders constructing a complex house, however, they often must contend with the challenges of coordinating multiple teams, meeting ever-increasing demands for digitization, and adhering to accelerated timelines. As a result, their ambitious transformation initiatives fall short of expectations.

So how can companies ensure that every team involved in a supply chain transformation works in concert? We propose an innovative approach that allows companies to align their disparate supply chain elements with their broader business and commercial aspirations.

Supply Chains Are Essential but Fragile

By ensuring that the right products are available when and where they are needed, a high-performing supply chain enables exceptional customer experiences and fuels a virtuous cycle of growth. (See Exhibit 1.) The cycle starts with superior customer service, which drives demand and traffic. This, in turn, creates growth in revenue and margins. Ultimately, it provides the company with healthy coffers with which to further invest in capabilities such as talent, automation, and the data foundation that will improve customer service.

However, supply chains remain vulnerable to uncertainty and complexity arising from geopolitical volatility, macroeconomic challenges, climate change, technology disruptions, and changing consumer expectations. The pandemic-related supply chain shocks were not a temporary aberration but rather an especially acute illustration of supply chain fragility that will continue to threaten revenue growth.

In 2023, for example, despite an inflation rate exceeding 6%, retail sales continued to grow. The resulting strain on transportation and warehousing capacity drove higher costs—average freight costs in January 2023, for instance, were double those of four years earlier. Geopolitical factors, such as the war in Ukraine, have also intensified pressure on supply chains. Given this challenging environment, the need to strengthen supply chains has never been more pressing.

Transforming Supply Chains Is a Lot Like Building a House

Recognizing the urgency, many companies have launched end-to-end transformation initiatives to boost resilience and enhance their supply chain performance. But most of these efforts fail to meet expectations. In consumer sectors, less than 30% of large-scale supply chain transformations achieve their goals on time and within budget.

To grasp why supply chain transformations typically fall short, consider the building of a house. Homebuilders may start with a clear vision and a high-level blueprint. And they may employ the best architects, construction managers, masonry workers, plumbers, roofers, and electricians. But then the challenges begin. Although all the contractors may excel in their fields and follow the blueprint, they often lack the detailed information necessary to agree on key interfaces, dependencies, and design assumptions. Consequently, early prototypes may exhibit problems like rooms not connecting seamlessly with the roof or electrical wires laid in incorrect locations.

To improve coordination, homebuilders can hire a general contractor to orchestrate the various contractors. While this is a positive step, new problems arise: seamless integration is hampered by differing assumptions among the contractors, by the need to incorporate digital technologies for a “smart” house, and by the pressure to complete work within a reasonable timeframe.

Similar challenges occur when companies attempt to transform their supply chains. Many companies start with a piecemeal approach, addressing only specific aspects of the supply chain. Consider the example of an integrated business planning team establishing an AI-enabled multi-echelon revenue forecast for the end-to-end supply chain. Capturing the promised value from this initiative requires significant cross-functional coordination. The supply chain technology team must provide technological and data support, while the distribution and warehousing team must convert the new revenue forecast into daily labor, inventory, and trucking forecasts.

To remedy the shortcomings of a fragmented approach, the company may embark on an end-to-end transformation. It implements AI-enabled forecasting, for example, as one aspect of a broader transformation that also includes redefining the underlying processes and data foundations to ensure that an improved demand signal translates into better daily or weekly order fulfillment, replenishment, and inventory placement decisions across warehouses and store locations. While this holistic approach has the right level of ambition, it is challenging for three main reasons:

• Coordination. Defining new supply chain processes across various functions in a matrixed organization necessitates significant coordination, as well as collaboration with commercial teams.
• Digital Enablement. Companies need to understand how advanced digital technologies , such as AI and digital twins, can address the pain points in their supply chain. They must also ensure that the underlying data foundation and pipelines are set up to power the technologies.
• The Need for Speed. Transformations must be completed within one to two years, which demands a rapid and highly efficient mobilization to rework processes, capabilities, and data.

Ensuring That All Functions Pursue a Common Goal

To manage the complexity of an end-to-end supply chain transformation, companies need a blueprint that allows each function to understand the assumptions relating to the transformation that affect it and how its own assumptions affect others. The blueprint should also make dependencies, such as those between distribution and ordering, visible to all participants. This will enable each function to perform its own design, building, and execution in coordination with others.

To facilitate the development of this blueprint, BCG has designed an approach composed of five interlocking steps. It ensures coordinated action by providing a strategic and execution roadmap across functions and teams. (See Exhibit 2.)

• Articulate and quantify business aspirations. To guide its efforts, the company must specify what it wants to achieve through the supply chain transformation. It can then determine the KPIs and the underlying execution metrics that contribute to meeting the overall success criteria.
• Understand current and future product flows. The company needs a baseline, granular understanding of how pallets, cases, and individual items flow from suppliers through distribution networks to end customer locations. It uses this information to assess how it must change the product flow to achieve its goals.
• Map end-to-end supply chain capabilities. Understanding product flows allows the company to determine which end-to-end supply chain capabilities it needs today and in the future. It can then pinpoint critical capability gaps and decide how to address them.
• Develop a multiyear capability-building roadmap . The company must determine how to build new capabilities that will enable current and future product flows. This requires identifying which capabilities are prerequisites for others and which ones are critical to completing the transformation.
• Establish a high-touch and agile program management office. To support execution, the company needs to appoint a high-touch and agile PMO. (See Exhibit 3.) This body sets up the transformation program, defining KPIs and key milestones. It also creates the governance structure by assigning responsibilities across functions and developing the meeting cadence for evaluating critical tradeoffs and resolving issues. In addition, the PMO establishes tools and reporting formats, including the use of data analytics to enable more effective and agile decision making.

Case Study: Applying the Approach at a Leading Global Retailer

BCG applied this approach to support the end-to-end supply chain transformation of a global retailer. The company’s rapid growth had strained its supply chain and revealed key limitations, especially in cross-functional coordination and data enablement. Finding innovative solutions to these challenges was essential to realizing the company’s ambitious growth plans, including international expansion.

Deploying the Approach

The five-step approach described above provided key insights about the innovations and capabilities required to achieve the company’s goals.

Business Aspirations. We identified increasing revenue by 75% to 100% over the next decade as the primary business aspiration motivating the end-to-end supply chain transformation. We then developed an in-depth understanding of the supply chain implications, including numerical projections for case deliveries, stores in the network, and distribution centers required to service demand. We also identified supply chain innovations needed to achieve these goals, including the introduction of new nodes, such as market distribution centers that stock items closer to the stores and daily multiple deliveries from distribution centers to stores. Other necessary improvements were deploying different truck combinations at different times of day, having drivers manage drops during nonpeak hours, and using customized trucks to co-mingle selected products.

Product Flows. Mapping the end-to-end product flows for the current supply chain helped identify critical gaps. For example, the ordering process lacked essential functionalities for tracking order status, modifying orders, and rerouting orders when necessary. The product flow mapping also highlighted specific shortcomings in the current distribution network that limited its ability to support supply chain innovations.

We then mapped potential future product flows, considering delivery profile (number of drops, time of drop, and volume per drop), location of existing and new nodes (including the possibility of new nodes collocated with existing distribution centers), and type of transportation (including truck size and owned or leased fleets). This assessment helped narrow down the list of key future flows, which facilitated the development of the capability-building roadmap. For the shortlisted flows, we identified the activities needed at each node to realize the envisioned future supply chain.

Supply Chain Capabilities. We mapped each identified activity to an enabling supply chain capability. For example, the company needed an automated order forecasting engine to estimate the next day’s order based on starting inventory, the day’s sales, and heuristics-based forecasts of damaged orders. Such a system can significantly reduce the time that store owners spend placing orders each day.

Some of the key capabilities identified included the following:

• Revamped End-to-End Distribution Network. To support the identified innovations, we proposed investing in new distribution center capacity. This triggered the need to revamp the end-to-end distribution network. Although the new network entailed higher costs and complexity, it gave the retailer greater flexibility and control. The result was higher levels of service and support for product flows than the previous distribution network offered. To initiate implementation, we pinpointed portions of the distribution network that the company could prioritize in the short term and developed a full revamping plan for the long term.
• Digital-First Order Management Platform. The mapping of future product flows revealed that the company needed distributed order management capabilities. These include the ability to add or modify orders, track orders, reroute deliveries to contingent distribution centers in case of disruptions, and track end-to-end inventory. For instance, the company needed the ability to allocate a store owner’s order between the regional and market distribution center on a daily basis, depending on inventory levels at various nodes and delivery times. Recognizing the need for advanced capabilities, the company launched a digital-first order management platform and mobile app to facilitate intuitive and convenient ordering by its store owners.
• End-to-End Data Foundation. A cohesive end-to-end data foundation is a key enabler of a supply chain transformation. Considering future capabilities and product flow requirements, we identified several data gaps relating to, for example, KPIs (such as on-time in-full), end-to-end inventory across nodes, and recommendations for the daily order forecast. To address these gaps, we defined a strategy for capturing the right input data. Steps included requesting data from suppliers, placing GPS devices in trucks, and monitoring and reporting the temperature at distribution centers. We also determined the optimal flow of data to the company’s systems and tools to enable analytics, as well as the channels required to view and monitor output. Further, we supported the company in deploying these strategies, such as by developing and implementing a policy to send and receive key data from suppliers.

The data strategy and process design are mutually dependent. For example, the company needed end-to-end inventory data to support the daily order forecast. This insight led us to include an inventory module in the digital order management platform and to source the inventory data at stores directly from store owners at regular intervals.

Capability-Building Roadmap. We developed the capability-building roadmap for the next three to five years, including the critical interdependencies across various capabilities.

Exhibit 4 illustrates interdependencies relating to the ability to recommend the daily order that store owners should place with the distribution center. The company had to establish four capabilities to enable the daily recommendations. These recommendations, in turn, enable additional capabilities.

Many capabilities necessary to achieve the company’s goal entailed a long chain of interdependencies. Mapping all the capabilities from end to end revealed considerable complexity, necessitating an integrated roadmap to guide the capability-building sequence.

Program Management Office. The PMO facilitated the transformation by addressing several challenges. These included inconsistent ways of working across different teams, the complexity of the resource structure and layers, and an absence of unified incentives. The PMO also significantly streamlined end-to-end execution by developing a weekly meeting cadence for monitoring the most critical KPIs (such as those relating to reducing costs, increasing capacity, and improving quality) using a third-party tracking tool.

Summing Up the Benefits

Since adopting our approach, the company has seen significant improvements in the coordination of design and implementation across functions:

• Alignment on Success Goals. Leaders and their teams understand the key overall goals and how they relate to their own project goals and objectives over three to five years.
• Clear Understanding of Broader Integration. Functional leaders understand how their initiatives fits into the broader initiative, ensuring clear coordination with both upstream and downstream processes and solutions.
• Efficiency and Accountability. The approach has helped to reduce duplicative work and clarified ownership and accountability, streamlining the overall process.

BCG’s innovative transformation approach offers an integrative blueprint for companies seeking to fortify and streamline their supply chain processes. The approach emphasizes the importance of coordination, digital enablement, and speed. Recent successes highlight its efficacy in harmonizing disparate elements, fostering cross-functional alignment, and driving end-to-end transformation. By adopting such a comprehensive strategy, companies can navigate the challenges of supply chain transformation more effectively, thereby setting the foundation for long-term enterprise growth.

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Professionals in supply chain management use various methods to determine how to improve the performance of supply chain operations. Analysis of case study is certainly one of the most popular methods for people from business management background. In order to accelerate the learning, this article has gathered 20+ most sought-after supply chain case studies, analyzed/categorized them by industry and the findings are presented.

Boeing wants to encourage more flight frequency and direct route using a smaller capacity aircraft. Then they decide to outsource many things such as the design, testing and production of key components to key industrial partners and try to reduce number of components that go to assembly. The ultimate goal is to finish the final production process within 3 days. Airbus takes a bit different marketing approach. They want to utilize high capacity airplane to help airlines drive the operating cost down. They decide to selectively outsource the production of parts and keep the design and production of key components in-house.

Supply Chain of fashion industry involves a time based competition. Many customers have the unique product needs but a competition is very fierce because of the low barriers of entry. Many new players try to offer specialized products to customers all the time. This section features the supply chain case studies of H&M, Benetton, Zara and Adidas. –  H&M  aims to be the price leader in the fashion market.In order to materialize its vision, H&M tries to eliminate the middlemen in various stages of supply chain and consolidate the buying volumes. Product design is also the central part of its strategies. They don’t try to follow the high fashion designs but try to adopt the street trends which are easier to produce. At the end of the day, they can bring products to market within 2-3 weeks. –  Benetton , in contrast, chooses to have a full control of its production but allow its licensees to operate the stores so they can focus on production and quality control. The reason is that they would like to create the worldwide brand awareness. For fast moving products, they use the production facilities in Europe. Asian suppliers will perform production for standardized products. –  Zara  is very famous for its time based strategy. In order to launch a new product within 15 days, Zara uses a small lot production. A new product will be tested in pilot stores. If product sales is good, a larger batch will be ordered. Otherwise, remaining products will be removed from the shelves and sold as mark-down in other stores. This creates the perception among consumers that Zara’s products are unique and you have to take it while stock lasts. Vertical integration contributes to the success of Zara, they own the majority of its production facilities and stores (this is the reason why Quick Response can be effectively implemented). Its automated distribution centers are strategically located between the center of populations so products are delivered to stores quickly. Zara also works with Air France, KLM Cargo and Emirates Air in order that they can coordinate directly with the airlines to make the outbound shipments to its stores and bring back some raw materials and semi-finished materials with return legs. The last supply chain case study in the fashion retailing industry is  Adidas . In order to cope with changing customers’ demand, they decide to undertake Mass Customization strategy. The whole idea is to develop, market and deliver the product variety that most customers will find what they want. The first steps towards mass customization is to strategically offer the product choices. Too few variations will disappoint a customer but too many variations will simply postpone a buying decision. After that, Adidas asks the same key suppliers to produce custom components in order to achieve the economy of scale. In order to compensate a long waiting time, Adidas uses air freight or courier service. The reason why they can do this is that customized products are sold directly to customers so they have the higher profit margin to compensate the higher transportation cost. Supply chain strategy of the fashion retailing industry is summarized as below,

FMCG industry is typically the products sold to customers at a low cost and will be completely consumed within 1 year. The nature of this industry is the short product life cycle, low profit margin, high competition and demand fluctuation. This section will present the case studies of P&G, Unilever and Coca-Cola respectively. Forecasting and new product introduction has always been the issues for many FMCG companies,  P&G  is no exception. To cope with this, P&G conducts a merchandise testing at the pilot stores to determine the customer’s response to new product before the launch. The result is that the forecast accuracy is improved because a demand planner has an additional source data to make a better decision. Moreover, products can be shipped to stores in-time then lost sales is minimal. –  Unilever  also feels that the competition in FMCG industry has significantly increased. They have to launch the new products on regular basis but the forecasting of new product is difficult. So they create a better classification of new products (base, relaunch, repack, new) using a regression model to identify potential forecast errors for each type of new product. –  Coca-Cola  doesn’t really have many stock keep units when compared with other companies in the same industry. However, products go to over 2.4 million delivery points through over 430 distribution centers. Managing transportation at this scale is the absolute challenge. In order to streamline the delivery, Coca-Cola implemented a vehicle routing software. The reason is that is the software vendor has a very good relationship with Coca-Cola’s legacy ERP software vendor. Moreover, the vendor has a solid connection with the university who can help to develop the algorithm that fits in with the business’ needs. The result is that transportation planners at each distribution center can use the new tool to reduce travelling time/distance on daily basis.

Lean manufacturing concept has been implemented widely in the automotive industry so the case studies about lean manufacturing is very readily available. Due to the increasing competition in the automobile industry, car manufacturers have to launch a new model to the market more frequently. This section will show you how BMW manages a long term planning, how Ford applies lean concept to the new product development and how Hyundai manages the production planning and control. –  BMW  uses a 12-year planning horizon and divides it into an annual period. After that, they will make an annual sales forecast for the whole planning horizon. After the demand is obtained, they divide sales into 8 market and then select the appropriate production sites for each market, considering overall capacity constraints and total cost. As you may notice, this kind of a long range planning has to be done strategically. –  Ford  calls its product development system as “work streams” which include the body development, engine development, prototyping and launch process . The cross-functional team are the experts and their roles are to identify key processes, people, technology necessary for the development of new prototype. Each work stream team is responsible to develop timeline of each process. Detailed plan is usually presented on A3 sized paper. They clearly identifying current issues they are facing with supporting data, drawings and pictures. On weekly basis, they organize a big group meeting of all work stream team to discuss the coordination issues. –  Hyundai  deploys a centralized planning system covering both production and sales activities across the facilities and functional areas. They develop a 6-month master production plan and a weekly and a daily production schedule for each month in advance. During a short term planning (less than one month), they pay much attention to the coordination between purchasing, production and sales. Providing a long term planning data to its suppliers help to stabilize production of its part makers a lot.

Life cycle of technology products is getting shorter and shorter every day. Unlike FMCG, the launch of a new product in the hi-tech industry requires the investment in research and development quite extensively. Then, a poor planning will result in a massive loss. This section will cover JIT and outsourcing by Apple Inc, Supply Chain Risk Management by Cisco System, Technology Roadmap by Intel, Supply Chain Network Model by HP, Mass Customization by Dell and Quality Management by Sam Sung. Steve Jobs invited the Tim Cook to help to improve  Apple’s Supply Chain  in 1998. Jobs told Cook that he visited many manufacturing companies in Japan and he would like Cook to implement the JIT system for Apple. Jobs believed that Apple’ supply chain was too complex then both of them reduced the number of product availability and created 4 products segment, reduced on hand inventory and moved the assembling activities to Asia so they could focus on developing the breathtaking products that people wanted to buy. –  Cisco Systems  would like to be the brand of customer choice so they implement a very comprehensive supply chain risk management program by applying basic risk mitigation strategies, establishing appropriate metrics, monitoring potential supply chain disruptions on 24/7 basis and activate an incident management team when the level of disruption is significant. –  Intel ‘s new product development is done by the process called Technology Roadmap. Basically, it’s the shared expectations among Intel, its customers and suppliers for the future product lineup. The first step to prepare the roadmap is to identify the expectations among semiconductor companies and suppliers. Then they identify key technological requirements needed to fulfill the expectations. The final step is to propose the plan to a final meeting to discuss about the feasibility of project. Some concerning parties such as downstream firms may try to alter some aspects of the roadmap. Technology Roadmap allows Intel to share its vision to its ecosystem and to utilize new technology from its suppliers. –  HP ‘s case study is pretty unique. They face with a basic question, where to produce, localize and distribute products. Its simple supply chain network model is presented below,

From this example, only 3 possible locations result in 5 different way to design the supply chain. In reality, HP has more production facilities than the example above so there are so many scenarios to work with. How should HP decide which kind of a supply chain network configuration they should take to reduce cost and increase service to customer? The answer is that they use the multi-echelon inventory model to solve the problem. –  Dell  is one of the classic supply chain case studies of all time. Many industries try to imitate Dell’s success. The key ingredients of Dell’s supply chain are the partnership with suppliers, part modularity, vendor managed inventory program, demand management and mass customization. Also, you can find the simplified process map of Dell’s order-to-cash process as below,

–  Sam Sung  has proven to be the force to be reckoned with in the hi-tech industry. The secret behind its supply chain success is the use of Six Sigma approach. They studied how General Electric (GE), DuPont and Honeywell implemented six sigma. After that, they have created their own implementation methodology called DMAEV (define, measure, analyze, enable, verify). They use the global level KPI to ensure that each player in the same supply chain is measured the same way. Also, they utilize SCOR Model as the standard process. Any process changes will be reflected through an advance planning system (APS).

The last industry covered here is the general merchandise retailing industry. The critical success factor of this industry is to understand the drivers of consumer demand. Four case studies will be presented, namely, 7-11, Tesco, Walmart, Amazon and Zappos. –  7/11  is another popular case study in supply chain management. The integration of information technology between stores and its distribution centers play the important role. Since the size of 7/11 store is pretty small, it’s crucial that a store manager knows what kind of products should be displayed on shelves to maximize the revenue. This is achieved through the monitoring of sales data every morning. Sales data enables the company to create the right product mix and the new products on regular basis. 7/11 also uses something called combined delivery system aka cross docking. The products are categorized by the temperature (frozen, chilled, room temperature and warm foods). Each truck routes to multiple stores during off-peak time to avoid the traffic congestion and reduce the problems with loading/unloading at stores. –  Tesco  is one of the prominent retail stores  in Europe. Since UK is relatively small when compared with the United States, centralized control of distribution operations and warehouse makes it easier to manage. They use the bigger trucks (with special compartments for multi-temperature products) and make a less frequent delivery to reduce transportation cost. Definitely, they use a computerized systems and electronic data interchange to connect the stores and the central processing system. –  Wal-Mart ‘s “Every Day Low Prices” is the strategy mentioned in many textbooks. The idea is to try not to make the promotions that make the demand plunges and surges aka bullwhip effect. Wal-Mart has less than 100 distribution centers in total and each one serves a particular market. To make a decision about new DC location, Walmart uses 2 main factors, namely, the demand in the proposed DC area and the outbound logistics cost from DC to stores. Cost of inbound logistics is not taken into account. There are 3 types of the replenishment process in Wal-Mart supply chain network as below,

In contrary to general belief, Wal-mart doesn’t use cross-docking that often. About 20% of orders are direct-to-store (for example, dog food products). Another 80% of orders are handled by both warehouse and cross dock system. Wal-Mart has one of the largest private fleet in the United States. The delivery is made 50% by common carriers and 50% by private fleet. Private fleet is used to perform the backhauls (picks up cargoes from vendors to replenish DCs + sends returned products to vendors). Short-hauls (less than one working day drive) is also done by the a private fleet. For long-hauls, the common carriers will be used. There are 2 main information system deployed by Wal-Mart. “Retail Link” is the communication system developed in-house to store data, share data and help with the shipment routing assignments. Another system is called “Inforem” for the automation of a replenishment process. Inforem was originally developed by IBM and has been modified extensively by Wal-Mart. Inforem uses various factors such as POS data, current stock level and so on to suggest the order quantity many times a week. Level of collaboration between Wal-Mart and vendors is different from one vendor to the other. Some vendors can participate in VMI program but the level of information sharing is also different. VMI program at Wal-Mart is not 100% on consignment basis. –  Amazon  has a very grand business strategy to “ offer customers low prices, convenience, and a wide selection of merchandise “. Due to the lack of actual store front, the locations of warehouse facilities are strategically important to the company. Amazon makes a facility locations decision based on the distance to demand areas and tax implications. With 170 million items of physical products in the virtual stores, the back end of order processing and fulfillment is a bit complicated. Anyway, a simplified version of the order-to-cash process are illustrated as below,

Upon receipt of the orders, Amazon assign the orders to an appropriate DC with the lowest outbound logistics cost. In Amazon’s warehouse, there are 5 types of storage areas. Library Prime Storage is the area dedicated for book/magazine. Case Flow Prime Storage is for the products with a broken case and high demand. Pallet Prime Storage is for the products with a full case and high demand. Random Storage is for the smaller items with a moderate demand and Reserve Storage will be used for the low demand/irregular shaped products. Amazon uses an propitiatory warehouse management system to make the putaway decision and order picking decision. After the orders are picked and packed, Amazon ships the orders using common carriers so they can obtain the economy of scale. Orders will arrive at UPS facility near a delivery point and UPS will perform the last mile delivery to customers. Amazon is known to use Sales and Operations Planning (S&OP) to handle the sales forecast. Anyway, this must be S&OP process at product family/category level. To compete with other online retailers,  Zappos  pays much attention to the way they provide the services to customers. In stead of focusing on the call center productivity, Zappos encourages its staff to spend times over the phone with customers as long as they can so they can fully understand the customer’s requirements. They also upgrade the delivery from 3 days to 1 day delivery in order to exceed customer expectation.

All case study demonstrates that supply chain management is truly the strategic initiatives, not merely a cost cutting technique. Leading companies have a very strong customer focus because almost all of initiatives are something to fill the needs of customers. Relationship management is the unsung hero in supply chain management. It’s the prerequisite to the success of every supply chain. And at the end of the day, it comes down to the quality of supply chain people who analyze, improve and control supply chain operations. – See more at: http://www.supplychainopz.com/2014/04/supply-chain-management-case-study.html#sthash.MrnrGsyY.dpuf

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Walmart: Supply Chain Management

By: P. Fraser Johnson, Ken Mark

This case focuses on the supply chain strategy of Walmart. Set in 2019, it provides a detailed description of the company's supply chain network and capabilities. Data in the case allows students to…

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• Publication Date: Jul 8, 2019
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This case focuses on the supply chain strategy of Walmart. Set in 2019, it provides a detailed description of the company's supply chain network and capabilities. Data in the case allows students to compare Walmart's source of competitiveness with those of other retailers-both online including Amazon.com and traditional brick-and-mortar retailers, such as Target-to develop insights into the management of a large, complex, global supply chain network. As competition between Walmart and its online and offline competitors heated up, a key challenge for the company's president and chief executive officer was deciding what changes made to Walmart's expanding supply chain would best support its strategic objectives. What supply chain capabilities would Walmart need as its business model continued to evolve?

Learning Objectives

This case can be used in an undergraduate or MBA course in supply chain management, operations management, business strategy, international business, logistics, purchasing, or marketing. It can provide an introduction to supply chain management using a company with which most students are familiar. In doing so, it allows students to learn how Walmart has built up its supply chain capabilities over the past five decades, and how the company leveraged these capabilities to become the world's largest retailer. Combining the Walmart case with the "Amazon.com: Supply Chain Management" case (W18451) in back-to-back classes provides a powerful illustration of the differences between two leading companies and demonstrates the importance of alignment of supply chain competencies with organizational strategy. After completion of this case, students will be able to: Assess Walmart's supply chain and identify its key competitive advantages. Quantify Walmart's ability to generate value from its supply chain. Identify potential opportunities and challenges for Walmart to improve its supply chain. Analyze the effects of the opportunities and challenges facing Walmart on its growth and evolution.

Jul 8, 2019 (Revised: Sep 9, 2019)

Discipline:

Operations Management

Geographies:

United States

Industries:

Retail trade

Ivey Publishing

W19317-PDF-ENG

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Book description

30 up-to-date case studies illuminate every aspect of modern supply chain management

• Risk management, analytics, global supply chain issues, and much more

• Innovative processes, technologies, strategies, and tactics

• An indispensable resource for both students and practitioners

This casebook brings together 30 focused cases addressing virtually every aspect of supply chain management, from procurement to warehousing, strategy to risk management, IT to supplier selection and ethics. A global team of contributors presents key challenges in industries ranging from pharmaceuticals to fashion and previews issues ranging from the “limits of lean” to the potential of 3-D printing.

Cases vary in length and complexity, offering maximum flexibility to both instructors and readers; a convenient table provides fast access to specific topics. Qualitative cases are supported by relevant discussion questions and sample responses;  quantitative cases are supported by completed numerical solutions, and, where applicable, associated spreadsheets.

Table of contents

• About This eBook
• Copyright Page
• Dedication Page
• Acknowledgments
• About the Author
• Objectives of the Book
• Organization of the Book
• Salvation Army: Origins and Purpose
• United States Southern Territory and Salvation Army–Dallas ARC
• Discussion Questions
• Products and Markets
• Vertically Integrated Supply Chain
• The Manufacturing Process
• Investment in Collaborative Planning, Forecasting, and Replenishment (CPFR)
• Stanford Blood Center: “Give Blood for Life”2
• A Snapshot of the SBC-SUMC Supply Chain in 2006
• Company Background
• Financial Risk Management Background
• The Automobile Industry in China
• Toyota China’s Production Planning and Demand Management
• The Company
• BESSI Leather Goods
• The Central Role of Planning
• The Challenge
• Appendix 7-1 Gantt Chart of the Fashion Product Collection Definition (from Grid Definition to Start of Production)
• Appendix 7-2 Fashion Product Collection Definitions
• Appendix 7-3 Demand Forecasting Process
• Case 9. Multi-Echelon Inventory Decisions at Jefferson Plumbing Supplies: To Store or Not to Store?
• Introduction
• The Indian Pharmaceutical Industry
• The Indian Pharmaceutical Supply Chain
• Upstream Supply Chain for High-Range Cements
• Appendix 13-1: Baseline Data and Three Solutions Offered by UPS
• Organization Background
• Organizational Structure and Facility Layout
• Operations Management
• Supply Chain Management
• Two Different Perspectives
• Overview of Fair Trade
• The Fair Trade Supply Chain
• Criticism of Fair Trade
• Starbuck’s Fair Trade Policy
• Company Overview
• The Rebranding Process
• Background for the Cooperative and the Industry
• Transaction Costs Approach
• COAPEL Supply Chain
• Process Reforms
• Organizational Operations
• Case 24-1: Helmets
• Case 24-2: Puffs
• Case 24-3: Sirop
• Case 24-4: Blower
• Jacket’s Decisions
• The Meeting
• Plant Visit
• Bangalore: City Statistics1
• Collection of Waste
• Role of Non-Governmental Organizations (NGOs)
• About the Company
• The Power Sector in India
• Cloud Computing
• Supply Chain Structure of CEL
• Appendix 27-1: CEL’s Balance of Plants Business in the Power Sector
• Appendix 27-2: Trends in Installed Generating Capacity of Electricity Nonutilities in India from 1970–71 to 2010–11
• Appendix 27-3: Business Process of CEL Sourcing
• Spare Parts Supply Chain Management at IGNYS Automotive
• Industry Background
• Introduction of the Case Companies
• Search for an International Partner
• Joint Business Development and Complementary Service Offering
• Joint Project Illustrations
• Mutual Benefits from International Logistics Partnership
• Classification of Risks
• General Supply Chain Resilience Model
• European Case Study
• Appendix 30-1
• Financial Times Press

Product information

• Title: The Supply Chain Management Casebook: Comprehensive Coverage and Best Practices in SCM
• Author(s): Chuck Munson
• Release date: June 2013
• Publisher(s): Pearson
• ISBN: 9780133367300

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Creating an omnichannel supply chain: a macy’s case study.

In February 2020, Macy’s announced their Polaris plan , a three-year strategy created to stabilize profits and create growth. This plan included closing 125 underperforming stores and consolidating offices. It also included a major overhaul of their supply chain model.

But, of course, Macy’s had to close their doors less than 6 weeks later due to COVID-19. As their online presence was the only presence available, their longstanding supply chain strategy, which was already starting to cause major issues within the company, needed immediate attention.

Macy’s CEO Jeff Gennette stated in September 2020, “Everything on the digital agenda has been accelerated. We’re optimizing inventory placement to meet customer demand wherever and however they shop in our store.”

What’s so bad about Macy’s supply chain model?

Customers expect a strong omnichannel experience — one that integrates both the online and offline world of the retailer, enabling a frictionless shopping experience.

For retailers, the goal is to take the retailer’s replenishment cycle from days to hours and reduce inventory at stores. This way, retailers expand their use of stores to fulfil online orders and hold less inventory altogether, allowing them to dedicate more room for digital fulfillment.

Omnichannel shopping is the baseline expectation for customers, as companies such as Gap, Target, and many others have upped their omnichannel game.

And Macy’s is, er, behind.

Macy’s way of viewing their supply chain in the past was traditional: Move products from point A to point B and optimize costs at each stop along the way. Each delivery channel has its own transportation plan and technology stack, siloing all distribution and fulfillment centers.

This supply chain method was acceptable 10 years ago, but to stay afloat in the in-store and online retail spaces, Macy’s needed to make a change. Silos created major cost issues, not to mention slow speed and service in today’s two-day-delivery age.

The company’s supply chain model operated two separate warehouse networks, one for stores and the other for direct customer (online) orders. This system made rebalancing inventory nearly impossible, among other issues.

Macy’s supply chain also lacked a central platform for locating inventory at the SKU level across the chain, and the cost of goods were high compared to competitors since each private brand sold at May’s was sourced independently.

Creating a better supply chain

In 2019 Macy’s hired Dennis Mullahy , the first ever Chief Supply Chain Officer, to transform the supply chain into one that supports an omnichannel strategy.

Since then, Macy’s has made leaps and bounds in optimizing their supply flow, with COVID expediting the process.

The company is transitioning to a centralized warehouse model, implementing a flow and fold design, meaning a light initial allocation to stores and flexible replenishments. Multipurpose warehouses hold inventory, which can both replenish stores and fulfill e-commerce orders.

By having a centralized inventory, the retailer is better able to strengthen its margins and fulfill orders quicker and in the ways customers want.

“Our new model will leverage all of our assets much more productively and improve customer satisfaction by increasing speed of delivery as well as generate efficiencies in our operations and inventory utilization.” Dennis Mullahy wrote.

In addition, Macy’s is getting on board with using data and analytics to not only get items to customers faster, but also improve inventory forecasting and allocation and package consolidation.

The company plans to increase drop-shipping to boost margins in e-commerce, where delivery costs have been the largest drain on profits. They’ll also renew their efforts into Macy’s Backstage operations in order to compete with other off-price companies such as Nordstrom Rack and TJMaxx.

Behind the curve

And while these improvements are giving Macy’s the help it needs, they should’ve seen the warning signs sooner. Retailers of equal size have been making moves to change their supply chain for years now, and Macy’s is just catching up.

For example, Kohls has been working to integrate e-commerce and brick and mortar stores since the beginning of 2018. The company worked to change its purchase and inventory management system by starting with the smallest stores and working their way up.

Nordstrom has been working on omnichannel fulfillment for over 3 years, and brought in tech consulting firm Opex Analytics to help.

Walmart unveiled plans this month to install a high-tech automation system across 25 Walmart regional distribution centers through their partnership with Symbotic, a robotics and automation company — something they’ve been working toward since 2017. This system will digitize and modernize Walmart’s current supply chain facilities to enrich customer experience and support evolving demand.

But even though Macy’s may be a few steps behind, true omnichannel is a journey — and a difficult one at that. It requires a lot from the supply chain, especially in terms of speed, complexity, and efficiency. The global retailer is making strides in executing their Polaris plan by focusing more on the integrated fulfillment strategy and alternative fulfillment options and listening to what their customers want.  

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Supply chain management free case studies.

Share these free Supply Chain Management case studies with your class 

Engage your students with real-world case studies that provide insights into supply chain practices, challenges, and opportunities. Share each case study with your students by simply copying and pasting the activity page URL into your learning management system (LMS).

Case 1: Rising Health Care Costs And The Role Of Outsourcing And Offshoring In The U.S. Health Care Sector

In this case study, your students will identify factors that are driving the health care costs higher in the United States than in peer countries. They will also discuss advantages and disadvantages of emerging trends in supply chain management such as adopting outsourcing in health care. After reading the case, they are encouraged to create an argument in favor of or against the view that health care offshoring is a threat to the U.S. health care industry.  See case study . 

• Case 2: McDonald’s Reinvents Itself Again

In this case study, your students will identify factors that are affecting demand management in the fast food industry and evaluate the reinvention strategy that McDonald’s has used to keep their fingers firmly on the pulse of their international customer base. Students will also be asked to advice McDonald’s with regards to future trends and the changes it should consider. After reading the case, they are encouraged to research areas in which the company plans to reinvent itself in the coming years, particularly in light of the appointment of its new CEO and the COVID-19 pandemic. See case study

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Future-proofing the supply chain

Supply chains matter. The plumbing of global commerce has rarely been a topic of much discussion in newsrooms or boardrooms, but the past two years have pushed the subject to the top of the agenda. The COVID-19 crisis , postpandemic economic effects , and the ongoing conflict in Ukraine  have exposed the vulnerabilities of today’s global supply chains. They have also made heroes of the teams that keep products flowing in a complex, uncertain, and fast-changing environment . Supply chain leaders now find themselves in an unfamiliar position: they have the attention of top management and a mandate to make real change.

Forward-thinking chief supply chain officers (CSCOs) now have a once-in-a-generation opportunity to future-proof their supply chains. And they can do that by recognizing the three new priorities alongside the function’s traditional objectives of cost/capital, quality, and service 1 Employee safety, food safety, and employee retention are considered operational preconditions, not supply chain objectives. and redesigning their supply chains accordingly.

The first of these new priorities, resilience, addresses the challenges that have made supply chain a widespread topic of conversation. The second, agility, will equip companies with the ability to meet rapidly evolving, and increasingly volatile, customer and consumer needs. The third, sustainability, recognizes the key role that supply chains will play in the transition to a clean and socially just economy (Exhibit 1).

Boosting supply chain resilience

Supply chains have always been vulnerable to disruption . Prepandemic research by the McKinsey Global Institute found that, on average, companies experience a disruption of one to two months in duration every 3.7 years . In the consumer goods sector, for example, the financial fallout of these disruptions over a decade is likely to equal 30 percent of one year’s EBITDA.

Historical data also show that these costs are not inevitable. In 2011, Toyota suffered six months of reduced production following the devastating Tohoku earthquake and tsunami. But the carmaker revamped its production strategy, regionalized supply chains, and addressed supplier vulnerabilities. When another major earthquake hit Japan in April 2016, Toyota was able to resume production after only two weeks.

During the pandemic’s early stages, sportswear maker Nike accelerated a supply chain technology program that used radio frequency identification (RFID) technology to track products flowing through outsourced manufacturing operations. The company also used predictive-demand analytics to minimize the impact of store closures across China. By rerouting inventory from in-store to digital-sales channels and acting early to minimize excess inventory buildup across its network, the company was able to limit sales declines in the region to just 5 percent. Over the same period, major competitors suffered much more significant drops in sales.

Supply chain risk manifests at the intersection of vulnerability and exposure to unforeseen events (Exhibit 2). The first step in mitigating that risk is a clear understanding of the organization’s supply chain vulnerabilities. Which suppliers, processes, or facilities present potential single points of failure in the supply chain? Which critical inputs are at risk from shortages or price volatility?

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In 2021, for example, many companies in North America were affected by labor shortages  across their supply chain operations. Tackling those shortages has forced companies to be creative in their hiring and staffing strategy. One food distributor created regional floating labor pools of drivers, warehouse workers, and supervisors, recruiting staff in areas where they were more available and deploying them wherever they were most needed. Other companies are building their labor pipeline-management capabilities—from recruiting through retention—and sharpening their labor planning as well.

Today, most organizations lack effective systems to measure and monitor those vulnerabilities, and few have such visibility beyond their direct suppliers. In a 2021 McKinsey survey  of senior supply chain executives, just under half said they understood the location of their tier-one suppliers and the key risks those suppliers face. But only 2 percent could make the same claim about suppliers in the third tier and beyond. That matters because most disruptions originate in these deeper supply chain tiers.

Closing the industry’s current knowledge gaps will require it to increase its surveillance of supply chain participants and its understanding of the physical, financial, political, and social risks they may face (Exhibit 3). The complexity and diversity of supply chain risks require smart management tools, and leading companies are applying a range of new techniques, from digital alerting systems to track potential disruptive events to risk “heat maps” that help them focus their attention on high-risk regions and suppliers.

Companies will also need a management infrastructure to steer a proactive response to these risks. Such an infrastructure would include a dedicated team, headed by a senior leader, with the remit to identify, prioritize, and respond to vulnerabilities. Those responses might include structural changes to the supply chain, as well as the development of detailed contingency plans for disruptive events. Introducing resilience metrics into supply chain KPIs helps the whole organization to ensure supply chain design and execution decisions are made in a way that balances efficiency and vulnerability. And because supply chain risk is a continually moving target, the organization should conduct regular stress tests and reviews to ensure its resilience measures remain appropriate.

Increasing supply chain agility

Customer loyalty is no longer a given. During the COVID-19 pandemic, for example, 77 percent of US consumers changed stores, brands, or the way they shop . Much of that change was driven by necessity. People went online when they couldn’t access their regular stores, and two-thirds said that lack of availability was the primary reason for switching brands. The big winners of the crisis were companies, often the largest players, that could keep products flowing to their customers in a difficult operating environment.

In the postpandemic economy, established brands will face new challenges. As consumer-generated content replaces traditional brand marketing campaigns, companies have less control over the peaks or troughs of demand. Where a business might have once spent months preparing its supply chains for a carefully targeted promotional campaign, now a single viral video can bring attention from millions of consumers overnight. One consumer goods manufacturer experienced a surge in demand in 2020 after a video of a customer enjoying its product on a skateboard ride received millions of views and spawned dozens of imitators.

New players are disrupting retail channels too, widening available choices and creating space for smaller, independent manufacturers. While consumers opted for the security of big brands during the COVID-19 pandemic, a preference for smaller producers is rising, especially among younger cohorts. And the growth of comanufacturing businesses and third-party logistics (3PLs) organizations means new entrants can compete in consumer markets with fewer expensive manufacturing and supply chain assets.

For incumbents, the lesson is clear: move at the same speed as consumers. That means creating innovative products and brands that meet the changing needs of different consumer groups as those needs emerge. And it means greater skill in managing complex portfolios of brands with different market characteristics and delivering their products through multiple channels. These same pressures increasingly hold true for B2B businesses as well, as increased consumer product complexity and demand volatility trickle down the supply chain.

This fast-moving, fragmented, consumer-centric world will require a different sort of supply chain. Traditional supply chains sought to achieve stability and minimize costs. Future supply chains will need to be much more dynamic—and be able to predict, prepare, and respond to rapidly evolving demand and a continually changing product and channel mix. In short, supply chains will need to become agile .

The good news for CSCOs is that agility and resilience are highly complementary: an agile supply chain is inherently more resilient. To be truly effective, however, this agility would need to extend into R&D, procurement, planning, manufacturing, and logistics (Exhibit 4).

At the planning stage, for example, supply chain teams will need to work in a much more proactive way. As potential market opportunities are identified, the supply chain function can begin creating scenarios that are ready for implementation alongside the development of the new product or market offering. After launch, the use of advanced techniques for demand sensing and dynamic forecasting, aided by machine learning technologies, is set to become an essential part of day-to-day supply chain operations.

In supply chain execution, agility requires new capabilities and tools. Agile operations make extensive use of digital technologies in manufacturing, for example, and maximize the use of smart automation in both production and logistics settings. Unlike the rigid supply chain automation systems of the past, technologies such as collaborative robots and smart packaging machines are capable of faster changeovers and can handle a much wider range of products and shipment types.

The drive for agility may require companies to reassess make-versus-buy decisions. In manufacturing, for example, big players typically keep the production of their stable, high-volume products in-house, using comanufacturers for niche and special projects. Leading companies appear likely to invert this trend, investing in flexible core assets and skills that allow their own manufacturing to respond quickly to rapidly changing demands—and, in some cases, outsourcing stable, high-volume products to cost-advantaged external providers. In downstream logistics, meanwhile, greater use of 3PLs may become the most cost-effective way to increase asset flexibility and proximity to customers.

Agile supply chains will also need skilled, flexible people. An agile supply chain workforce is comfortable working with and alongside advanced technologies, and personnel may need a wider range of skills so they can move between tasks as business needs change. Accordingly, agile supply chains make use of agile teams and working methods, borrowing elements of the approach that have transformed flexibility, productivity, and quality in the software industry and beyond. Agile organizational principles are well-described elsewhere , but key elements of the approach include the use of tight-knit, cross-functional teams that work together to implement new concepts and solve difficult problems in short, incremental sprints. These principles are already gaining traction across a range of industries: one major consumer products manufacturer is using “flow to work” pools in its global support functions to dynamically allocate staff to projects, for example.

Digital twins: The art of the possible in product development and beyond

Achieving supply chain sustainability.

Post-COVID-19 consumers have become even more likely to prefer brands that offer robust sustainability credentials and a strong purpose, but industry surveys conducted in mid-2020 suggested that environmental, social, and governance (ESG) topics slipped down companies’ list of priorities during the pandemic. Big players are now making up for lost time. In 2021, 29 percent of companies included ESG metrics in their staff incentive plans, for example, a seven percentage-point uptick over the previous year.

Companies looking to avoid the increasing reputational, regulatory, and financial risks of poor ESG performance are being pressed to act. And as companies such as Henkel have shown, strong environmental actions are also delivering real operational results: a digital twin connects and benchmarks 30 factories and prescribes real-time sustainability actions, which over ten years have reduced energy consumption by almost 40 percent and waste by 20 percent.

The supply chain has a central role to play in the enterprise sustainability transformation. Of nine ESG initiatives highlighted by senior executives in a 2020 industry survey, most either involve the supply chain directly, or have significant implications for supply chain setups (Exhibit 5).

The foundation for an ESG-focused transformation is a clear understanding of the organization’s baseline impact. That would include, for example, quantification of the resources consumed and emissions generated by the company’s direct activities (Scopes 1 and 2) and by participants in its wider supply chain (Scope 3). This baseline allows an organization to identify the largest opportunities for improvement, helping it set challenging but realistic goals and timescales that can be communicated to external stakeholders. Capturing those improvements requires rigorous sustainability KPIs and changes from the shop floor to the boardroom, including optimized operating practices, an ESG focus in procurement decisions , and the adoption of more sustainable technologies in existing and planned manufacturing or logistics projects.

These new priorities of resilience, agility, and sustainability can’t be tacked on to existing supply chain setups. Realistically, they will need to be built in from the foundation and considered in every element of supply chain design, organization, and operation. For many companies, that will likely require a change in mindset from the top, with risk, agility, and sustainability KPIs considered alongside traditional ones focused on cost, capital usage, service, and quality. To excel in these six supply chain dimensions, workforce management and digital capabilities will be essential.

Jan Henrich is a senior partner in McKinsey’s Chicago office; Jason D. Li is an associate partner in the Toronto office; and Carolina Mazuera is an associate partner in the Miami office, where Fernando Perez is a partner.

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7 mini case studies: successful supply chain cost-reduction and management

Rob O'Byrne

Group Managing Director - Logistics Bureau

If you were to tell me that your company had never looked at its supply chain costs and sought to deliver reductions, I would be mightily surprised. On the other hand, if you told me your company hasn’t been able to sustain any progress in supply chain cost reduction, I wouldn’t be surprised at all.

Most companies begin with the best intentions to achieve successful and sustainable supply chain cost management, but somehow seem to lose momentum, only to see costs increase again in short order.

The following seven mini case studies explore a few high-profile companies that have managed to sustain their supply chain cost-reduction efforts and keep expenses under control. The challenges faced by these organisations and the steps they took, may provide some inspiration for successful long-term cost management within your organisation.

1. Deere & Company

Deere & Company (brand name John Deere) is famed for the manufacture and supply of machinery used in agriculture, construction, and forestry, as well as diesel engines and lawn care equipment. In 2014, Deere & Company was listed 80th in the Fortune 500 America’s ranking and was 307th in the 2013 Fortune Global 500 ranking.

Supply Chain Cost Reduction Challenges:  Deere and Company has a diverse product range, which includes a mix of heavy machinery for the consumer market, and industrial equipment, which is made to order. Retail activity is extremely seasonal, with the majority of sales occurring between March and July.

The company was replenishing dealers’ inventory weekly, using direct shipment and cross-docking operations from source warehouses located near Deere & Company’s manufacturing facilities. This operation was proving too costly and too slow, so the company launched an initiative to achieve a 10% supply chain cost reduction within four years.

The Path to Cost Reduction:  The company undertook a  supply chain network-redesign  program, resulting in the commissioning of intermediate “merge centers” and optimization of cross-dock terminal locations.

Deere & Company also began consolidating shipments and using break-bulk terminals during the seasonal peak. The company also increased its use of third-party logistics providers and effectively created a network that could be optimized tactically at any given point in time.

Supply Chain Cost Management Results:  Deere & Company’s supply chain cost-management achievements included an inventory decrease of $1 billion, a significant reduction in customer delivery lead times (from ten days to five or less) and annual transportation cost savings of around 5%.

One of the world’s largest manufacturers of computer chips, Intel needs little introduction. However, the company needed to reduce supply chain expenditure significantly after bringing its low-cost “Atom” chip to market. Supply chain costs of around $5.50 per chip were bearable for units selling for $100, but the price of the new chip was a fraction of that, at about $20.

The Supply Chain Cost Reduction Challenge:  Somehow, Intel had to reduce the supply chain costs for the Atom chip, but had only one area of leverage—inventory.

The chip had to work, so Intel could make no service trade-offs. With each Atom product being a single component, there was also no way to reduce duty payments. Intel had already whittled packaging down to a minimum, and with a high value-to-weight ratio, the chips’ distribution costs could not be pared down any further.

The only option was to try to reduce levels of inventory, which, up to that point, had been kept very high to support a nine-week order cycle. The only way Intel could find to make supply chain cost reductions was to bring this cycle time down and therefore reduce inventory.

The Path to Cost Reduction:  Intel decided to try what was considered an unlikely supply chain strategy for the semiconductor industry:  make to order . The company began with a pilot operation using a manufacturer in Malaysia. Through a process of iteration, they gradually sought out and eliminated supply chain inefficiencies to reduce order cycle time incrementally. Further improvement initiatives included:

• Cutting the chip assembly test window from a five-day schedule, to a bi-weekly, 2-day-long process
• Introducing a formal S&OP planning process
• Moving to a vendor-managed inventory model wherever it was possible to do so

Supply Chain Cost Management Results:  Through its incremental approach to cycle time improvement, Intel eventually drove the order cycle time for the Atom chip down from nine weeks to just two. As a result, the company achieved a supply chain cost reduction of more than $4 per unit for the $20 Atom chip—a far more palatable rate than the original figure of $5.50.

3. Starbucks

Like Intel, Starbucks is pretty much a household name, but like many of the most successful worldwide brands, the coffee-shop giant has been through its periods of supply chain pain. In fact, during 2007 and 2008, Starbucks leadership began to have severe doubts about the company’s ability to supply its 16,700 outlets. As in most commercial sectors at that time, sales were falling. At the same time, though, supply chain costs rose by more than $75 million.

Supply Chain Cost Reduction Challenges:  When the supply chain executive team began investigating the rising costs and supply chain performance issues, they found that service was indeed falling short of expectations. Findings included the following problems

• Fewer than 50% of outlet deliveries were arriving on time
• Several poor outsourcing decisions had led to excessive 3PL expenses
• The supply chain had, (like those of many global organisations) evolved, rather than grown by design, and had hence become unnecessarily complex

The Path to Cost Reduction:  Starbucks’ leadership had three main objectives in mind to achieve improved performance and supply chain cost reduction. These were to:

• Reorganize the supply chain
• Reduce cost to serve
• Lay the groundwork for future capability in the supply chain

To meet these objectives, Starbucks divided all its supply chain functions into three main groups, known as “plan” “make” and “deliver”. It also opened a new production facility, bringing the total number of U.S. plants to four.

Next, the company set about terminating partnerships with all but its  most effective 3PLs . It then began managing the remaining partners via a weekly scorecard system, aligned with renewed service level agreements.

Supply Chain Cost Management Results:  By the time Starbucks had completed its transformation program, it had saved more than $500 million over the course of 2009 and 2010, of which a large proportion came out of the supply chain, according to Peter Gibbons, then Executive Vice President of Global Supply Chain Operations.

Like Deere & Company, AGCO is a leading global force in the manufacture and supply of agricultural machinery. The company grew substantially over the course of two decades, achieving a considerable portion of that growth by way of acquisitions.

As commonly happens when enterprises grow in this way, AGCO experienced increasing degrees of supply chain complexity, along with associated increases in cost, but for many years, did little to address the issue directly, primarily due to the decentralized and fragmented nature of its global network.

In 2012, AGCO’s leaders recognised that this state of affairs could not continue and decided to establish a long-term program of strategic optimisation.

Supply Chain Cost Reduction Challenges:  With five separate brands under its umbrella, AGCO’s product portfolio is vast. At the point when optimisation planning began, sourcing and inbound logistics were managed by teams in various countries, each with different levels of SCM maturity, and using different tools and systems.

As a result of the decentralised environment, in which inbound logistics and transport management were separate operational fields, there was insufficient transparency in the supply chain. The enterprise as a whole was not taking advantage of synergies and economies of scale (and the benefits of the same). These issues existed against a backdrop of a volatile, seasonal market.

The Path to Cost Reduction:  Following a SCOR supply chain benchmarking exercise, AGCO decided to approach its cost reduction and efficiency goals by blending new technology—in the form of a globally integrated transport management system (TMS)—with a commitment to form a partnership with a suitably capable 3PL provider.

As North and South American divisions of the company were already working with a recently implemented TMS, leaders decided to introduce the blended approach in Europe, with commitments to replicate the model, if successful, in its other operating regions.

With the technology and partnership in place, a logistics control tower was developed, which integrates and coordinates all daily inbound supply activities within Europe, from the negotiation of carrier freight rates, through inbound shipment scheduling and transport plan optimisation to self-billing for carrier payment.

Supply Chain Cost Management Results:  Within a year and a half of their European logistics solution’s go-live, AGCO achieved freight cost reductions of some 18%, and has continued to save between three and five percent on freight expenditure, year-on-year, ever since. Having since rolled the new operating model out in China and North America, the company has reduced inbound logistics costs by 28%, increased network performance by 25% and cut inventory levels by a quarter.

Headquartered in Westport Connecticut, Terex Corporation may not be such a well-known name, but if your company has ever rented an aerial working platform (a scissor-lift or similar), there is a good chance it was manufactured by Terex and dispatched to the rental company from its transfer center in North Bend, Washington.

The North Bend facility is always full of lifting equipment. The company makes most pieces to order and customizes them to meet customers’ unique preferences. Terex maintained a manual system for yard management at the transfer centre, which generated excessive costs for what should have been a relatively simple process of locating customers’ units to prepare them for delivery.

The Supply Chain Cost Reduction Challenge:  A wallboard and sticker system was a low-tech solution for identifying equipment items in the yard at Terex. While inexpensive in itself, the solution cost around six minutes every time an employee had to locate a unit in the yard. It also required a considerable number of hours to be spent each month taking physical inventories and updating the company’s ERP platform.

The Path to Cost Reduction:  Terex decided to replace the outdated manual yard management process with a new, digital solution using RFID tracking. Terex decided to replace the outdated manual yard management process with a new, digital solution using RFID tracking. Decision-makers chose a yard management software (YMS) product, and then had the transfer centre surveyed before initiating a pilot project covering a small portion of the yard.

After a successful pilot, the company approved the solution for full-scale implementation, replacing stickers, yard maps, and wallboard with electronic tracking and digital inventory management. As of December 2017, Terex was planning to integrate the yard management solution with its ERP platform to enable even greater functionality.

Supply Chain Cost Management Results:  While the YMS cannot reconcile inventory automatically with the Terex ERP application, it does at least provide a daily inventory count via its business intelligence module. That alone has saved the labour costs previously incurred in carrying out manual counts.

More importantly, though, the RFID-based unit identification and location processes have saved the company around 70 weeks per year in labour costs, by cutting the process-time down from six minutes, to a mere 30 seconds per unit.

Avaya is a global force in business collaboration and communications technology, and not so many years ago, was operating what, by its own executives’ admission, was a worst-in-class supply chain. That situation arose as the result of multiple corporate acquisitions over a short space of time. The company was suffering from a range of supply chain maladies, including a long cash-to-cash cycle, an imbalance in supplier terms and conditions, excess inventory, and supply chain processes that were inefficient and wholly manual.

The Supply Chain Cost Reduction Challenge:  After Avaya purchased Nortel Enterprise Solutions in 2009, the freshly merged company found itself but loosely in control of an unstable and ineffective supply chain operation. Aside from having too many disparate and redundant processes, the company had multiple IT solutions, none of which provided a holistic view of the supply chain or supported focused analysis.

The Path to Cost Reduction:  Avaya’s senior management team realized that its technology solutions, which varied from being inadequate to inappropriate, were causing many of its problems. The various acquisitions and mergers had transformed Avaya into a different kind of enterprise, and what it needed, rather than a replacement for all the discrete systems, was one solution to tie them all together.

To that end, the company put its trust in cloud technology, which was relatively immature at the time, and migrated all processes onto one platform, which was designed to automate non-value-added activities and integrate those critical to proactive supply chain management, namely:

• Point of sale analysis
• Procurement analysis
• Supplier communication
• Supply and demand planning
• Inventory planning
• Inbound and outbound logistics planning

Of course, the technology was merely an enabler, and to transform its supply chain operation, Avaya embarked on a long-term, phased program to standardize processes, initiate a culture change, invest in top talent, and implement a system of rigorous  benchmarking and KPI tracking .

Supply Chain Cost Management Results:  Avaya’s program of transformation took place over a period of three to four years, between 2010 and 2014. The path to cost reduction was a long one, but ultimately successful.

By making a conscious effort to lead the enterprise into a new way of thinking, change business culture, and unify technology under a single platform, Avaya has improved inventory turns by more than 200%, reduced cash tied-up in stock by 94%, and cut its overall supply chain expenditure in half.

This dramatic turnaround also required the company to switch from a preoccupation with improving what it was doing, to a process of  questioning  what it was doing and why.

7. Sunsweet Growers

This final mini-case study in our collection, highlights how sometimes, excess supply chain costs are not about warehousing and transportation, but can be attributable to inefficiencies in manufacturing or production and—often at the root of it all—forecasting and planning.

Sunsweet Growers is the world’s biggest producer of dried fruits and a little over a decade ago, found that while it was managing distribution operations well, high production costs were inflating end-to-end supply chain expenditure.

The Supply Chain Cost Reduction Challenge:  When the leadership at Sunsweet looked into the company’s production cost issues, recognition soon dawned that the distribution network was at least partly behind the problems. As a result, the company looked at how it could redesign the network to take out some of the production costs.

Later, it became apparent that although a redesign would yield some benefits, one of the most significant issues was in the approach to demand forecasting. Sunsweet was using a manual forecasting approach, with spreadsheets being the only technology involved.

The inefficiencies of this approach proved not only to hamper effective forecasting and production planning, but the knock-effect was an excess of warehouses in the network—so forecasting proved to be both a driver of production cost, and a key to improving the distribution network.

The Path to Cost Reduction:  As in a number of the studies we’ve explored here, technology played a large part in solving Sunsweet’s problems. After evaluating some 30 different software solutions, the company finally settled on a supply chain planning suite, and planned its improvement program to make use of each of the solution’s modules in sequence, allowing ROI to be realized in phases as each module was implemented and leveraged.

At the same time, Sunsweet implemented a sales and operations planning program  (S&OP)  that once established, enabled plant resource requirements to be anticipated months—rather than weeks—in advance. As the overall improvement plan passed through its five phases, positive results accumulated and as hoped, software ROI reached 100% even before the company completed its full implementation.

Supply Chain Cost Management Results:  Of course, the objective of Sunsweet’s improvement program was not merely to achieve a 100% return on investment in its supply chain planning platform. The aim was to reduce production costs, and although the company hasn’t published hard figures to quantify the total financial gain, it has claimed the following wins:

• A 15 to 20% increase in forecasting accuracy
• A reduction in overtime from 25% to 8% in production facilities
• A 30% reduction in finished-goods spoilage
• Number of warehouses in the United States cut from 28 to just eight
• A transportation cost-per-unit that remained static for two years despite increased utilization of costly refrigerated transport and rising fuel costs

From the achievements documented above, and highlighted in several industry publications and articles, you don’t need to be too much of a mathematician to deduce that cost savings would have been considerable.

Making Supply Chain Cost Reductions Stick

Of course, the above case studies are merely summaries of the changes these high-profile brands made to their supply chains. What can be seen from these brief accounts, though, is that for an enterprise to make significant and sustainable cost improvements, substantial change must take place.

• Deere & Company had to overhaul its network completely.
• Intel had to shift an entire supply chain to a new and previously unheard of strategy in its sector.
• Starbucks had to shake up its third-party relationships and increase production capacity.
• AGCO had to invest in technology and collaborative partnerships with external service providers.
• Terex had to implement costly (but effective) RFID tracking capabilities.
• Sunsweet Growers needed a best-of-breed software solution, and an S&OP program to improve forecasting and planning.
• Avaya needed to change company culture, implement cloud technology, rethink processes completely, and invest in the best supply chain talent it could find.

At the same time, none of the changes took place overnight. Each of the companies tackled issues in phases, effectively learning more as they went along.

You Won’t Find Savings in the Comfort Zone

When it comes to making supply chain cost reductions that stick, you should explore every avenue. However, at the root of high costs, there will usually be one major factor requiring innovation, whether it’s the network, inventory strategy, the working relationships with supply chain partners, or some other element of your operation.

Seldom do companies make decent savings by whittling away piecemeal at what seem, on the face of it, to be the most pressing issues of the day (such as direct transportation costs or supplier pricing).

If you want to see sustainable cost reductions, your company will need to view the big picture from a new angle or two, and be prepared to step outside of the comfort zone to which it will have become accustomed.

Rob O’Byrne  is a supply chain consultant, coach and author with 40+ years experience in Supply Chain management. He is the expert making the blog called  Logistics Bureau .

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Case study: How EY optimized the supply chain of a leading Indian MNC

EY helped a leading FMCG company optimize vendor costs, eliminate redundancies, and create a common sales and operations platform.

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Ashish Nanda

EY India Business Consulting Leader

The better the question

How can we unlock synergies from two businesses post acquisition?

After acquiring several iconic brands, a leading FMCG company needed to capitalize on the synergistic benefits of the opportunity.

I n 2018, one of India’s leading FMCG companies acquired a consumer business which housed several reputed brands. After the acquisition, the immediate priority for the company was to identify and tap into synergistic opportunities of the acquisition. Supply chain and procurement was one of the primary focus areas for cost, operation and capacity optimization. Both sets of businesses had many overlaps across the supply chain, including suppliers, locations, and raw materials. The company had to quickly identify all existing overlaps and eliminate redundancies.

The better the answer

We optimized the supply chain of the complete brand portfolio

The optimization covered three critical areas ꟷ procurement synergies, logistics and network optimization, and sales and operations planning.

As the company wanted to ensure that it leveraged the benefits of synergies from the acquired entities, it employed EY to optimize the complete supply chain. The core areas of  supply chain optimization  included:

• Realizing procurement synergies and optimizing vendor costs.
• Lowering of warehouse and freight costs by identifying logistics overlaps.
• Integration of sales and operations planning across the complete brand portfolio. 

EY led three critical areas of supply-chain optimization: procurement synergies, logistics and network optimization, and sales and operations planning.

Procurement levers to extract synergistic value

To realize value from various synergistic opportunities in packaging, EY investigated several cost levers and their potential impact. The team deep dived into cost sheets and identified saving opportunities for major packaging material through index-linked buying. In addition, EY also consolidated vendor bases and leveraged scale across key categories for negotiation, besides leveraging different price floors which the two organizations had.

EY also conducted market assessments and index identification for synergistic raw material categories and alternate vendor and price discovery for high priority categories. It also developed a scientific price forecasting model for better indicative price visibility.

End-to-end network optimization from analysis to implementation

EY conducted an end-to-end investigation to identify network cost optimization opportunities. It included, sales gravity analyses, cost and service lever optimization runs, and network footprint implementation. The team also conducted center of gravity analysis for CFAs and hubs and determining cost baseline values and identified a list of several CFA locations and determined their associated cost savings.

The value drivers of the network optimization exercise included warehouse and freight lanes consolidation, price discovery and alternate vendor identification, and primary freight management. EY also piloted the 3PL logistics model in key regions.

Building a common sales and operations planning strategy

Since the two entities had different sales and operations planning approaches, the company needed a common governance model and tech-enabled process to establish visibility and control across the integrated entity’s complete value chain. EY’s intervention was targeted at bringing three crucial components of the sales and operations planning processꟷ demand planning, replenishment planning, and sales and operations planning meetings. These included overhaul to the company’s forecasting processes and reporting mechanisms, improving responsiveness of the entity’s replenishment planning approach, and establishing a formalized decision-making process.

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The better the world works

An efficient supply chain led to lower costs and better value

The company realized lower supply chain costs, more operational efficiency, and better decision-making across the complete brand portfolio.

EY’s approach was premised on several value drivers spread across different cost or value measures across all three optimization categoriesꟷ procurement synergies, network and logistics, and sales and operations planning. It involved investigation of different pricing models, alternate vendor discovery, and rightsizing different logistics costs. As a consequence of the supply chain optimization , the company identified and started implementing synergies across the target areas.

Cost and value improvements which EY’s delivered for an Indian FMCG company

• Procurement synergies

Identified procurement synergies of

across key packaging material categories

• Network and logistics

Optimized network and logistics cost reduction helped in identifying opportunities of

in logistics spend

• Sales and operations planning

inventory reduction potential

(Contributors include Nishit Bhatia, Shreyan Sarkar, Abhijeet Vaidya, Amit Kumar, Shivagurunathan Narayan, Chirag Goel.)

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Case Study | U.S. Third Party Logistics Firm

Colliers Supply Chain Solutions (SCS) redesigns distribution network yielding a 16% reduction in logistics operating cost and a 67% increase in two-day service

• Client had one distribution center (DC) in Southern CA service the entire U.S.
• Client wanted to identify the optimal DC network for three customer demand profiles that would reduce total logistics costs and improve service
• Generated a historical baseline model using historical inbound, interfacility, and outbound flows for each customer
• Applied eight-year growth and performed center of gravity analysis to identify the candidate locations to be considered for the future network
• Analyzed transportation cost, labor cost, occupancy cost, and customer service to identify the optimal network
• Recommended a two-DC network in Chino, CA and Cincinnati, OH that resulted in a 16% reduction ($26.3M) in supply chain operating expenses and a 67% increase in two-day service

Related Experts

Brewster Smith

Senior Vice President, Supply Chain Solutions

Richmond - North

Brewster Smith leads the Supply Chain Services group for Colliers within our Occupier Services Group.  He is a supply chain consulting leader focused on developing and implementing solutions for OPEX reduction and service improvement. Over the course of his career, he has helped clients to identify and / or achieve $300 million in logistics related cost savings. Brewster’s functional specializations include supply chain network optimization, transportation / route optimization, inventory targeting, distribution center operations, distribution center design, 3PL strategic sourcing, supply chain technology sourcing,  fleet asset management, disaster recovery planning and business process re-design. In his 26 years of experience as a supply chain practitioner, Brewster has advised, 100+ organizations on 3 different continents in both the private and public sectors.

Prior to Colliers, Brewster spent 7 years at Accenture in their Supply Chain Fulfillment practice and 7 years at Tompkins Solutions as part of their west coast leadership team.  Brewster has also held management positions at Penske Logistics and TriVista, a private equity advisory firm.

Brewster holds a Master’s degree in Business Administration from Case Western Reserve University and a  Bachelor’s degree from Ohio Wesleyan University.

Derrick Yim

Vice President, Supply Chain Solutions

Los Angeles - Downtown

Derrick Yim is a Vice President of Supply Chain Solutions team for Collier's Occupier Services group. He is an experienced supply chain consultant with a demonstrated history of working in the logistics and supply chain industry. Skilled in Network and Transportation Optimization, Operations Management, Industrial Engineering, Warehouse Operations and Continuous Improvement. Strong program and project management professional with a Bachelor's degree focused in Industrial Engineering from Cal Poly Pomona.

Automotive Case Study: Chery Phase 1

Established in 2023, Chery Super Factory is a cutting-edge automobile manufacturing plant with a focus on integrating advanced technologies and realizing digital transformation. With an annual production capacity of 300,000 vehicles and 200,000 KD units, the factory aims to be at the forefront of business integration, smart supply chain management, and a robust logistics ecosystem. Chery is a pioneer in the industry, being one of the first to adopt vision-based AMRs for automated material movement in the assembly workshop. In this first stage of deployment, more than 100 AMRs have been integrated with the factory's Logistics Execution Systems (LES) software to enable unmanned material movement across various assembly lines.

Please CLICK HERE to download the white paper.

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