Supply Chain And Distribution Management

Question 1

The main goal of effective logistics and supply chain management is

providing of competitive advantage. The foundations for success in the
marketplace are numerous, but a simple model is based around the
triangular linkage of the company, its customers and its competitors -
three-way relationship. The source of competitive advantage is found
firstly in the ability of the organization to differentiate itself, in the eyes of
the customer, from its competition and secondly by operating at a lower
cost and hence at greater profit. Seeking a sustainable competitive
advantage has become the concern of every manager who is alert to the
realities of the marketplace. It is no longer acceptable to assume that
good products will sell themselves, neither is it advisable to imagine that
success today will carry forward into tomorrow.

First, Think Strategically:

Beware of Cost Advantages: As the initial step, you must think about the
direction you’re headed ‐‐ what is the competitive advantage you really
have? If it’s just price, that probably will not be good enough, because
every sinking competitor will cut its prices to survive, catching you
potentially in a death‐spiral of endless cost‐cutting. Squeezing suppliers
who are undercapitalized and strapped for cash will probably be counter‐
productive and my just drive them out of business. A strategic focus on
competitive advantage and value creation is, in the longer view, more
important. Innovation is a more powerful advantage than low cost.

Supply Chain as a Strategic Asset: If your outside purchases are more

than 40% of your total corporate budget, then your supply chain is a
strategic asset, but most probably it’s not been used to create a real
competitive advantage, although it should be. The best companies, like
Toyota and Honda, collaborate with their suppliers to create massive
advantage by focusing on innovations, including those that will lower the
cost of flowing products and services efficiently throughout the entire
supply chain.

For example Carrefour using the EDI system in their supply chain
management. EDI was originally conceived to target « zero paper » and
for data processing: have available rapidly an exhaustive and reliable
information. In practice, EDI allows to reduce considerably human
intervention in data processing, and thus makes it faster and more
reliable. This allows to fluidify the information flow, and to reduce
considerably processing costs while improving the security of transactions
Acceleration of commercial cycles
Electronic exchanges between partners reduce considerably the cycles
«order/delivery»
and «invoice/payment». They allow stock reduction and a better cashflow
management.
They enable precision in the follow-up and traceability of goods. They
serve as basis for automating some operations.

Reduction of administrative costs

Savings realized are proportional to the volume of the dematerialized
flows and the processing automation in place, in particular through
messages integration in the information system.

Reduction of keyboarding time

- Reduction of direct costs (data processing costs)
- Reduction of indirect costs linked to keyboarding errors
- Reduction of litigations thanks to automatic integration

Reinforcement of collaboration
- Simplification or current and future exchanges
- Contribution of additional services
- Development of partnerships
Second, Focus on Your Customers:
Keeping your Customer Competitive: New economic realities demand
dramatically different thinking from the past. This time around you’ve got
to think about how to keep your customer alive, too. If your customer is
not healthy, you will inherit the malady! More businesses fail for lack of
sales and strategic positioning than other reasons. Remember the top‐
line: REVENUES; it’s the only line on your operating statement that makes
a positive contribution to profit. Understand the Customer’s Value Needs:
But don’t start with what you want to “sell” to a customer. Instead, set up
a meeting with your top ten or twenty customers. Then explain to them
you are seeking ways in which to create competitive advantage for them.
The objective is to make your customer more successful by: offering them
new innovations that will help them thrive and beat their competition,
thus increasing their revenues and profits, which, in turn increases your
revenues. Seldom will the customer’s procurement people know the
answers to these questions; you’ll probably need to speak directly to
senior management.

Towards a better understanding of our consumers

Knowledge of the needs and buying habits of our customers is key to

improve constantly our client's satisfaction.
This satisfaction has to come from an optimal assortment, the best
products in store, and a buying experience compliant to the customer's
expectations.

Through the loyalty cards, Carrefour is able to analyze the information

gathered and be as close as possible to the consumer's needs.

Client Datasharing consists in the secure and reliable exchange of part of

this information with our suppliers in order to improve collaboratively the
consumers experience at the buying and consumption point.

Merchandises DataSharing consists in the exchange of POS (Point of Sale)

data aggregated or detailed, allowing the supplier to make analysis, such
as:
- Promotional efficiency
- Evolution of product sales
- Supplier benchmark in its category
- Regional analysis

Carrefour is providing information

- A the international level, for all store formats and countries, with
different levels of granularity and additional analysis
- At the national level, in order to take into account specific country
information and detailed information per point of sale.

Third, Concentrate on Value & Innovation Flows

Engage your Chief Supply Chain Officer: Your key supply professional
should be an integral part of the customer discussions – they need to
know what creates competitive advantage for your best customers so that
innovations from key suppliers can flow through to key customers. Cash
flows in the opposite direction and in direct response to value and
innovation flows. If you want to generate cash, find ways to create value
and useable innovation. Be sure to learn what the customer truly values
and what innovations will create competitive advantage.

Innovation from Suppliers: Some of the most important innovations are

simply “process” innovations that eliminate non‐value added and cut time
and cost, without eroding the profit margins of suppliers. (Toyota and
Honda are experts at this.) However these are often the most difficult to
identify and replicate because they look invisible. In the larger view, the
most competitive companies at the end of the chain are those that have
lined up a series of best‐in‐class companies contributing to the end
product/service. In other words, this is a battle of value chains. Thus,
thinking of your suppliers strategically and getting your customers to treat
you strategically in the creation of value is a powerful weapon in the
competitive battle.

Carrefour use and practice Vendor Managed Inventory is an ECR (Efficient

Consumer Response) best practice between manufacturers and retailers
aiming at supplying warehouses and/or stores according to management
rules defined in a cooperation contract.

The supply management of the retailer is transmitted to the manufacturer

through a shared process. Vendor Managed Inventory optimizes the
supply process through the exchange of stock and/or sell data.

Based on this information, the manufacturer establishes an order proposal

which may be validated by the retailer.

The VMI objectives can be summed up :

- Improve the Supply Chain efficiency by reducing stock levels and
transport costs, while improving the service level
- Optimize demand management through anticipation and better planning
Two VMI models
- VMI with confirmation by the retailer of the order proposal generated by
the manufacturer (CMI, Co-Managed Inventory)
- VMI without confirmation by the retailer of the order generated by the
manufacturer (VMI, Vendor-Managed Inventory)

Fourth, Build a System of Trust & Teamwork:

Trust is the Foundation of Teamwork & Innovation: Great leaders
understand that … Trust unleashes and focuses the latent human
energy in an organization, resulting in enormous productivity and
innovation. Internal teams function to keep your organization alive.
Alliances with customers, other providers, and suppliers are the external
teams that can radically improve your prospects for success.

Trust is a Competitive Advantage: Our initial research is indicating that

there is up to a 50% competitive advantage for companies that have high
trust with their suppliers and customers, as opposed to those with deep
distrust. This is a massive advantage that’s too often overlooked in
companies. It is a terrible cost of doing business that is, for all intents and
purposes, hidden from view ‐‐ it never gets reported on the balance sheet
or P&L, because, like a poison, it’s imbedded in every line item. Every
leader at every level of the organization should be attuned to creating
trust, because it costs far less to have trust than the alternative ‐‐
nagging, gnawing distrust that daily pilfers people’s energies and
creativity. Yet most leaders tell us that their relationships in business are
filled with manipulation, deceit, criticism, extraneous legal protections,
posturing, skimming, hidden agendas, and subtle trickery that damages
good decision‐making, slows down communications flows, and blocks
creativity and innovation.

For example Carrefour, practise Data Synchronization consists in all the

activities linked to the acquisition of the product information (in creation
and update) with the suppliers in an electronic form (« dematerialization
of the data»)

The quality of the product information is essential in the good functioning

of the processes of the Supply Chain.
The improvement of the Master Data introduction process thus depends
on the capacity of Carrefour and its suppliers to exchange some
qualitative data.
The common target is to supply to our customers:
the right product, in the right place, at the right time and at the
right price.

For that purpose, Carrefour implemented a solution called DataSync

allowing the acquisition of product data via 3 possible acquisition channels

- Webform / Upload of data

- Peer to Peer : Exchanges of files standardized
- Global Data Synchronization Network

Carrefour' strategy leans mainly on the Global Data

Synchronization Network

Indeed, GDS corresponds to the exchange of product information with the

suppliers through a network of electronic catalogues ( GDSN), according
to standardized data model and exchange processes.

The supplier publishes his catalogue on the GDS network, and makes it
available for all the distributors, thus replacing spreadsheets, portal or
EANCOM messages which the suppliers currently use.
For the retailer, it is the possibility of receiving in a single point of entry of
the already dematerialized, standardized and reliable data

Question 2
The contemporary business environment has become complex and competitive
forcing organizations to be strategic in their internal and external structures in
order to effectively survive the storm. With globalization tending to control the
flow of international trade, firms are adjusting themselves with corporate
strategies that not only involve diversification, but also organizational structures
that can effectively allow them to gain competitive advantage in the global
market. Indeed, globalization and technological advancement have influenced
companies to seek ways of optimal space management, cost effectiveness,
optimal human resource capacity and operational efficiency. In this regard, firms
have resorted to outsourcing various organizational functions and maintaining
only the most sensitive and those that can be easily and competently managed
within the firm. Some of the mostly outsourced functions are customer service
(help desk) functions, technological supply and maintenance, human resource
recruitment, security services and cleaning services among others.
In simple terms, outsourcing may be defined as contracting outside agency for
the management of a firm’s operations that otherwise could have been managed
through in-house staff (Lock, p. 149). Outsourcing may be beneficial to a
company especially in terms of cost saving, production efficiency, knowledge
blending, operational flexibility and resource mobilization. However despite
these benefits, outsourcing may have damaging impacts on the firm itself
especially in terms of quality, customer service and security. This paper wills
discus the reasons as to why outsourcing is a bad idea for a company.
Over the last few years, companies, especially the multinationals have embraced
outsourcing as a means of restructuring their business. With the current
economic crisis biting the global business world, many firms have found an
escape route of downsizing to outsourcing causing limited negative impacts that
could have been realized through formal downsizing/staff lay off procedure (Hira
and Hira, 2008). In addition, many multinationals and transnational have realized
the benefit of outsourcing services from developing countries where input costs
(labor and raw materials) are cheaper than the developed countries. This has
been one of the major contributing factors behind the rapid growth of some
developing countries like India and some East Asia and African countries. For
example, most American and Japanese auto makers have been outsourcing labor
from India due to low salaries thus saving on operation costs. However, low cost
is always the case especially when outsourcing specialized skills that require a
huge paycheck. In addition some internal processes such as internal audit and
payroll management are costly to outsource (Bragg, 2001, 406).
For outsourcing to succeed, the company outsourcing should be capable of
validating the outsourced provider’s ability to provide throughput with expected
quality, low cost and within required time frame. Where a company lacks
adequate processes to validate this, consequences of poor quality, cost and time
overruns may result leading to ineffectiveness of the outsourcing process.
Quality of work may feature significantly in the outsourcing process especially
where the company outsourcing has no direct contact or control of the company
performing the outsourced function. Communication problems between the
contracting company and the outsourced company may hinder the efficiency of
service delivery, especially considering that the outsourced company needs to
perform the tasks with reference to the organizational mission, strategies and
goals. It is also worth noting that, the overall responsibility and accountability of
the results from the contracted activities lies with the outsourcing company and
therefore it should be involved in decision making as well as constant/regular
monitoring and review of the progress of the outsourced functions.
Service delivery including customer service may be compromised especially
where the customers have to contact the contracted firm for business issues.
Where a company outsource call center operations or technical operations from
an oversees firm, communication between the company and the customers may
be affected especially where the contracted firm has to make reference (which
may take time) from the company or wrong information is provided, the
customer tends to be less satisfied and may even switch to competing firm in the
long run. In this case, outsourcing may lead to loss of customers in the wrong run
due to ineffective communication and time overruns.
Outsourcing that involves different countries with different time zones may also
be ineffective. This is due to the fact that, the customer who is in the same time
zone with company may not get what he/she requires from the company directly
but has to wait for odd hours to contact the outsourced firm. This leads to
dissatisfaction and lost time on the side of the customer who may as well seek
services from a more flexible company. In addition, customer identity and loyalty
may be affected as most customers like identifying themselves with the
company whose products they are consuming