logistic & supply chain management
TRANSCRIPT
Problems Faced By Companies In their supply-
chain Management
COMPANIES
http://www.supplychain247.com/article/papa_johns_achieves_10_15_reduction_in_freight_spend_in_6_months/case_studies
Papa John's
Papa John's primarily takes carryout and delivery orders, although some stores have tables and chairs for dining in.
Corporate operations looks over franchisees to ensure brand consistency.
In January 2002, Papa John's became the first national pizza chain to make online ordering available to all of its U.S. customers.
Problem Faced!
The supply chain management system was not efficient enough to cope up with the substantial increases in commodity prices, fuel and the minimum wage.
Problem Faced!
• Papa John's had ongoing limited time consumer offers which
did not have immediate supply chain responses
• Challenges were being addressed manually with
spreadsheets, maps and decisions based on personal
experience.
Solution
Papa John’s selected
Solution
Package
Replenishment
Transportation Procurement
Transportation Planning & Execution
Warehouse Management
Supply Chain Intelligence
Impact of solutionInventory Management, Replenishment15.7% reduction in inventory66% reduction in outside storage costs83% lower inventory write-offsROI <1 year
Transportation Procurement, Inbound Transportation Planning & Execution
10% reduction in freight costsROI <1 year
Impact of solutionWarehouse Management9% increase in pieces loaded/labor hourIncreased picking efficiencyReduced labor costsFewer picking and delivery errorsReduced cycle count adjustments and inventory write-offsProjected ROI <2.5 yearsOutbound Transportation Planning & Execution25% improvement in cube utilization (at TP&E facilities)11% lower mileage (approx)15% increase in stops/truck (approx)16% increase in tractor fill (approx)Projected ROI <3 years
Problem faced by P&G
• In the early 1990s P&G faced a problem of extreme demand variations for one of its best-selling brands - Pampers diapers.
• The logistics executives at P&G examined the order rates for Pampers across the supply chain.
• Though the purchase rate remained more or less steady at the consumer end, the logistics executives found that the variation of orders increased from the retailer level to the distributor level up the supply chain.
Problem Faced by P&G• P&G believes in 2 moments of truth.i. First, when customer buys the product from shelf.ii. Second, when they actually use it and like it
• In order to handle first moments of truth, it is important to have stock available on shelf.
• P&G realized that 48% of times their products were unavailable on the shelf when customers wanted it.
• They were losing large quantum of sales and hence needed to take corrective action.
Initiative taken by P&G
• P&G started its supply chain from store shelves and moved back to its suppliers
• This operating strategy was called consumer driven supply network
• CDSN required P&G to create a responsive supply chain that would produce and supply products as per demand at the customer level
Continued…
• P&G redefined its supply chain strategy under the leadership of Keith Harrison head of global product supply division
• P&G decided to have a connection between actual sales and the supply chain process
• Paradigm shift in viewing supply chain management from forecast driven to actual demand driven. Supply Network instead of a supply chain because of information flow in all directions.
Results of Change
• Forecasting Accuracy: Improved forecast accuracy by 30%
• Shelf Level Out of Stock: The percentage of products that are out of stock on retailers shelves at any given time. P&G has cut this to 5% from 10% within 8 months of implementation.
• Total Supply Chain Response Time: The time from when a cash register record the sale of a product to the purchase of raw material to produce its replacement. From 6 months it came down to 2 months.
Continue…
• Total Supply Chain Inventory: P&G got a daily count of all products flowing through supply chain at any given moment, rather than weekly or monthly and hence reduced safety inventory by 10%.
• Pricing design from the shelf back: CDSM helped in determining an acceptable price point for an item and then working it back through manufacturing and distribution to see if the product can be delivered at a price acceptable to consumer and profit acceptable to P&G
• Topline and Bottom-line: Increased over all sales by 15% in one year. Net profits witnessed a 19% gain from $4.35 billion to $5.19 billion.
