Supply Chain Management Strategy Saves Millions


By University Alliance

Supply chain management has many links, with the ultimate goal of improving profit, maximizing efficiencies and adapting to unexpected changes. There are a variety of strategies for strengthening the links in the chain depending on a company’s individual characteristics and needs. For some multinational companies, implementing supply chain management techniques have been credited with bringing better performance and millions of dollars in savings.

John Deere

Illinois-based John Deere, which is celebrating its 175th anniversary in 2012, reported $32 billion in net sales and revenue in 2011, a 23% increase over the previous year. The company has facilities across the globe and recently announced plans to build seven factories overseas, part of its strategy to meet growing demand.

Since the early 2000s, John Deere’s Commercial & Consumer Equipment (C&CE) division has teamed with the Pittsburgh, Pennsylvania-based SmartOps Corporation for logistics management. According to a SmartOps press release, John Deere has used SmartOps’ software to develop recommended stocking levels for hundreds of products at more than 2,000 warehouses, plants and dealer facilities in North America.

By using its Multistage Inventory Planning & Optimization (MIPO) software, SmartOps says businesses can analyze data to predict when and where inventory will be needed at any given time, allowing companies to more efficiently manage stocking levels, and production and distribution schedules.

John Deere executives saw benefit in such optimization tools. “Our overall strategy was to use better science to address our challenge,” Loren Troyer, then-director of order fulfillment for the C&CE division, told the industry journal Supply Chain Quarterly in 2007.

According to SmartOps, the MIPO software helped John Deere reduce its inventory by almost $1 billion and boost on-time shipments to dealers from 63% to 92%.

Siemens

With about 360,000 employees and almost 300 manufacturing locations across the globe, supply chain issues are of particular concern to Siemens, a Munich, Germany-based conglomerate with interests in energy and healthcare, among other sectors.

In addition to financial benefits, supply chain management “also includes quality assurance as well as guaranteeing delivery reliability and dependable, efficient logistics,” the company notes on its website.

Siemens has turned to the consulting company Accenture as it looks for ways to streamline and improve its logistics across various sectors. For example, Accenture reported that it helped Siemens’ electronic communications division to save $5 million and sharply reduce errors in forecasting customer demand.

According to a report by Accenture, the two companies reviewed Siemens’ existing procedures and identified obstacles along the supply chain. They then introduced software that models consumer and product requirements, with a goal of helping “Siemens factories develop better supply plans by more fully considering the needs of purchasing, manufacturing, distribution and transportation.”

Nike in Brazil

Athletics footwear giant Nike reported total revenue of almost $21 billion in 2011, a 10% increase over the previous year. The Beaverton, Oregon-based company says its products are manufactured at about 600 contract factories that employ more than 800,000 workers in nearly 50 countries.

Several of the factories are in Brazil, which will host the soccer World Cup in 2014 and the Olympics in 2016. Nike has said it anticipates that the South American nation will become the company’s third-largest market by the time of the Olympics.

For more than a decade, Nike has worked with DHL Supply Chain to streamline and integrate its logistics operations in Brazil, according to a report by DHL. Nike wanted to cut costs while boosting service and delivery, as well as controlling changes in its supply chain and responding to volume spikes.

DHL Supply Chain said it introduced a slate of improvements to Nike’s supply chain, including implementing radio-based monitoring of products during warehousing and distribution, and providing real-time delivery information. In addition, delivery errors were reduced by using pre-shipping identification labels, the DHL report stated.

As a result of integrating the supply chain, costs were cut, service was improved and a new warehouse management system was introduced without disrupting service, DHL noted.

Follow Their Leads

In order to optimize operations and meet the challenges of a changing global marketplace, companies such as Nike, Siemens and John Deere have invested resources in streamlining and integrating their supply chains. The reported benefits of that strategy include cost reductions, better service and more flexibility in responding to consumer demand.

In a July 2011 letter to shareholders, Nike CEO Mark Parker said the company saw “tremendous opportunity in evolving our operational capabilities. We continually refine our operations – how we create product, how that product is manufactured, and how we get it into the hands of our retail partners and consumers.”

 

Category: Supply Chain Management