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1、nProject Introduction and BackgroundnCustomer Survey- Survey Approach- Survey Results- Findings and OpportunitiesnLogistics Network- EOQ inventory modeling- Logistics network modelingnRecommendations and next stepsnAppendices - Process flow - Cost analysisContentsMajor Brands Market Share in 1999Ele
2、ctrolux ObjectivesElectrolux ObjectivesReduce working capitalIncrease turnover (through greater product availability)Reduce operating costsElectrolux China has committed to achieve Best Practice Service and Cost, as basis for rapid business growthhigh inventory carrying costin-store stock-outstoo ma
3、ny warehouses: limited inventory and service control: SOP systems and procedures for inventory control are not systematically in place/applied limited know-how and supportunclear responsibilities and performance criteriaElectroluxs supply chain objectives. are to improve current performance. to deli
4、ver real bottom line benefitsElectrolux China has identified supply chain improvements as one of its corporate priorities to improve customer satisfaction and cost performance.Satisfy requirements of target customers (better than competition)Achieve full control of the entire logistics processLimite
5、d visibility and control, appropriate perforrmance criteria not in placeLikely gaps in service satisfaction. Required Service Levels and competitors position are not measuredThe overall objective of Electrolux China Network Strategy Project is to optimize the distribution network configuration in te
6、rms of: - Meeting customer service requirements; - Achieving minimum costs; and - Controlling the entire outbound logistics process.Increased Revenue- Improved product availability and promising capabilities- Scalability to meet future business requirements.- Improved responsiveness to market condit
7、ions.- Optimized fill rate capability.- More flexible, responsive delivery options- More value-added services.Reduced logistics costs- Improved end to end supply chain visibility- Lower cost-to-serve in transportation and distributionImproved asset productivity- Fewer stock locations through rationa
8、lization to achieve higher network productivityReduced working capital- Lower LDC stocks through more flow-throughs, smaller more frequent orders, centralized slow movers, better use of supplier stocks etc.EXPECTED RESULTSPROJECT OBJECTIVE:The overall objective of Electrolux Network Strategy Project
9、 is to determine the least cost distribution network configuration to satisfy the specific service level requirements of its current and future target customers Project Objective and ScopeProject Objective and ScopeThe scope of the Network Strategy Project is to answer the following questions:The sc
10、ope of the Network Strategy Project is to answer the following questions:What are the customer service requirements which impact channel design, logistic process and infrastructure? What is the current performance (performance measure and customer satisfaction) of Electrolux in meeting these require
11、ments and what is the GAP versus the competitors as well as against the “Best Practice” achievable in China?Should Electrolux provide inventory carrying and transportation services to our clients (with appropriate price increase)? What other additional logistic services can provide competitive advan
12、tage to Electrolux in the market place?Should Electrolux change the structure of its distribution channels in China (e.g. sales to retailers, vs to distributors?)Can Electrolux gain by plant direct shipping?How many distribution centers (DCs) should Electrolux have? How many RDCs and LDCs? Where sho
13、uld the DCs be located? Which types/location of customers and which branch should be served by each DC? Which customers should be served directly?Should all DCs carry all products or should they be specialized by product line?Should Electrolux contract for warehousing services or operate its own DCs
14、?What impact do different transportation modes have on Electrolux logistics network requirements?What inventory control procedures (high level) should Electrolux establish in order to satisfy customers, minimize cost and maintain control?What are the systems and human competencies requirements to ac
15、hieve these objectives?In developing the optimum supply chain capability for Electrolux China we are utilizing a three-phased approach to developing and rolling-out the new distribution network - This project covers only Phase IOverall Approach towards Network OptimizationOverall Approach towards Ne
16、twork OptimizationBuildLogisticsModelTask 5AssessAlternativesTask 6Conduct ReviewSessionsTask 7Present Results,Recommen-dations& Implemen-tationAction PlansTask 8ConductVisioningSessionsTask 1 a.InitiateDataCollectionReviewCurrentOperationsTask 2Under-standService Require-ments Task 3InitiateDetaile
17、dProjectPlanningTask 1Task 4Full-Scale Implementation RolloutPhase IPhase IIPhase IIIDistribution NetworkProcess DesignDistribution NetworkStrategy DevelopmentCUSTOMER SURVEYNETWORK OPTIMIZATIONProject Approach1Initiate Detailed Project Planning1.a Conduct Visioning Sessions2Review Current Operation
18、s2a. Understand current network setup2b. Review current network logistics strategy2c. Review current customer service strategy3Understand Service Requirements (customer interviews and analysis)3a. Create customer segmentation frameworks5Identify Alternatives5a. Perform demand aggregation analysis6As
19、sess Alternatives7Conduct Review Sessions8Present Preliminary Results & RecommendationsKey Activities by Week (assuming 10 weeks) 123456789103h. Analyze customer requirements and assess Electrolux GAP3k. Analyze Cost to Serve and Strategic Attractiveness3l. Develop Recommended New Service Offerings3
20、m. Assess Logistics Warehouse Netwk Strategy Implications4Initiate Data CollectionCollect Current Warehouse Network Dataa. Facility Operating Costsb. Transportation Costsc. Inventory Costsd. Demand volumes3b. Interview Customers in Location 13c. Interview Customers in Location 23d. Interview Custome
21、rs in Location 33e. Interview Customers in Location 43f. Interview Customers in Location 53g. Interview Customers in Location 65b. Selection of 5-8 “best options”Project WorkplannProject Introduction and BackgroundnCustomer Survey- Survey Approach- Survey Results- Findings and OpportunitiesnLogistic
22、s Network- EOQ inventory modeling- Logistics network modelingnRecommendations and next stepsnAppendices - Process flow - Cost analysisContentsThe sample for the customer survey targeted a representation of Electroluxs current operations in China, and its current and future market- Customer Sampling
23、Methodology - Historical SalesMarketGrowth &TrendsCurrent Logistics Operation Where were the highest demand areas?Where are the customers located, which has significant contribution to Electrolux revenue?What are the current customer types?Where are the key account customers?What is the current sale
24、s regions?Where would be the potential high growth areas for refrigerators?What will be the emerging channel for white goods?What are the service requirements from the emerging channel players?What is the current logistic service pattern, with regard to the LDCs” distribution and the customers which
25、 are being served?Interview AreasInterview CustomersSurvey Sample Size and CoverageInterview AreasSurvey Sample Size and CoverageInterview AreasInterview CustomersSurvey Sample Size and CoverageThe project team focused on obtaining as much customer data through direct interviews. A customer survey w
26、as faxed out to broaden geographic coverage- Customer Survey Approach - Fax Out Survey Focused on several AC/Electrolux chosen locationsBeijing, Tianjin, Shanghai, Guangzhou, Changsha, Chengdu, Shenyang, ShenzhenCustomer TypesDistributors: Provincial level, city level Retailers: Department store, ho
27、me appliance store, chain storeKey Accounts: International chain storesBroad geographic coverage to include areas where direct interviews could not be conductedStill aimed to achieve representative sampling of distributors and retailersDirect InterviewsIn total, 81 customer survey questionnaires wer
28、e collected representing a broad cross section of Electrolux customers- Customer Survey Breakdown - DistributorsRetailersKey AccountsProvincial Level728International Chain StoreCity Level12133Department StoreHome Appliance Multiple Format 10Chain Store 7Total81Sub Total19593Super Market 1- Customer
29、Survey Breakdown - RegionsNCECGZWestCentralCSNEInterviewedSurvey2121957441076068Total4140Total6228155131281 and also Electroluxs marketsChangshaBeijingShenyangShanghaiChengduGuangzhouQingdaoSuzhouTianjinDalianKunmingNCNECentralECGZwCSnProject Introduction and BackgroundnCustomer Survey- Survey Appro
30、ach- Survey Results- Findings and OpportunitiesnLogistics Network- EOQ inventory modeling- Logistics network modelingnRecommendations and next stepsnAppendices - Process flow - Cost analysisContents8. Are you being served by Electrolux directly? Yes NoAll responses were in the “Yes” categoryQuestion
31、 8Why were non-Electrolux Customers not covered by the survey?Due to new survey regulations which were recently released (Dec. 1999) by the State Statistical Bureau (SSB), a company must obtain permission and approval for all market surveys conducted (this approval covers survey scope, approach and
32、also a review and approval of the survey results by the SSB before they are released clients). The obstacles put in place by the regulations (e.g. applying for permission, having a survey reviewed and approved, etc.) could have added several weeks to the project commencement date and additional time
33、 before the results can be released. At this stage, we are not aware of any companies which have sought and gained approval (including Gallup). The key problem is that the survey reforms having only recently been implemented and the local branches of the SSB are still establishing the administrative
34、 system to deal with it. Therefore, the most ”practical” approach for conducting the project survey given the current environmental constraints was to cover only our existing customers since it was unlikely that they would report the survey to the SSB.Electrolux Customer9. Sales revenue growth in th
35、e next 1-2 years 60%Response: 33%30%19%3%12%Question 9CommentsThe majority of respondents were positive in their sales outlook both for their sales overall (ranging from refrigerators to general home appliances) as well as specifically for Electrolux products. Typically, growth in sales of Electrolu
36、x products responses ranged in the 10 to 30% band.Guangzhou, Western China, Eastern China, North Eastern and the North China regions were anticipated to experience the greatest sales growth in the next two years. Changsha and the Central regions are anticipated to have . And customers who is the new
37、 entry into the market expect higher growth rate than the othersNote: Data limitation since responses were tailored based on the position of the person interviewed (i.e. a general manager of a distributor would have a broader view of sales growth to that of a sales manager only involved in the sales
38、 of Electrolux products).Sales Revenue Growth10. What are the key brands of refrigerator in your current business and what is the proportion of these brand sales represent in your total refrigerator sales? Who sell directly? Who supplies you directly ? Question 10Refrigerator Sales Brand NameElectro
39、lux Haier Rongsheng Xinfei Meiling ChanglingPercentage of Total Sales (%)Purchase Directly from Vendor by RetailerGoods Shipped Directly from Vendor to Retailer Days Inventory SiemensDR60%21%DR23%27%DR19%14%DR17%13%DR9%9%DR6%8%DR8%17%92%91%84%86%86%95%91%91%94%83%72%92%86%92%1715N/AN/A15N/AN/ADRDRDR
40、DRDRDRDR12181616161917Comments8 out of the 26 customers who distribute Electrolux refrigerators only sell Electrolux products.Over 90% of the customers purchase directly from Electrolux and are also directly served by Electrolux Foreign players, such as Carrefour, Ito Yokado, keep low inventory leve
41、ls, typically less than 5 days. In contrast, the average inventory level for local players varies from 7 to 30 days. Customers in CS and NE holding higher inventory level than other regionsElectrolux has lower inventory level than the competitors at its retailer shop, but has higher inventory level
42、at its distributor sites LegendD: DistributorR: Retailer11. Please specify the amount of the refrigerator sales in 1999Question 11CommentsWholesale RetailAverage Volume 19994,752 units, 4,640 unitsMarket Share (%)28%24%Refrigerator SalesNote: These results are only for high level reference(1) Except
43、 8 out of 19 distributors who are purely doing distribution sales and 36% of retailers who only have retail sales, the rest are all carry on multiple roles in both distribution and retail sales. (2) The distribution sales is quite low because survey includes a number of new distributors, and the sal
44、es number is also skewed by retailers who have weak distribution sales. (3) The retail sales number is skewed by a couple of retailers whose retail sales is even higher than most of distributors sales during a year(4) The market share of retailers looks higher since the data is skewed by some domina
45、nt local retail chains and dominant retailers in county level cities.12. Do you experience the sales fluctuation in different months? Yes, the fluctuation is as follows No Peak months are _, Sales _units/month Normal months are _, Sales _units/month Low months are _, Sales _units/month Question 12Su
46、rvey ResultsCommentsn92% of respondents confirmed the seasonal nature of their salesnThe period just prior to Chinese New Year and the summer months are the two peak seasons with sales volumes around 80% higher than transitional periods.nThe 2-3 months after Chinese New Year and November are the low
47、 season months with average sales volume 26% lower than transitional periods.nMay, October and December are the transitional month from normal season to peak season.Peak seasonsAverage Sales(Units / month)MonthsTransitional period(s)Low seasonsJanuary (pre-Chinese New Year), June to SeptemberMay, Oc
48、tober, DecemberFebruary to April (post New Year) November849472351SeasonSales FluctuationOrderingOrdering - Table AOrdering Service Importance and Customer SatisfactionProduct AvailabilityAbility to Respond to Urgent Orders Order FrequencyMinimumOrder Size1.41.31.21.1Ordering1.ItemsNo.Satisfaction (
49、Electrolux)Importance4.1421354.1421353.642135Satisfaction Generally3.9421354.1421354.3421354.6421354.6421354.0421353.53.5421353.7421353.7421353.6421353.84213542135aRate from Electrolux Sales Managers Rate from Electrolux customers A3.74.93.83.34.41.94.03.8Ordering - Table Av“Ability to Respond to Ur
50、gent Orders”, and “Product Availability” ranked the most important factors from the surveyvThough above average, the customer satisfaction rate towards Electroluxs ability to respond to urgent orders scored relatively the lowest among all the factors. Customers from most of the regions, such as Carr
51、efour Beijing, Guangzhou Department Store complained that there is no differentiation in response levels between the normal orders and urgent ordersvThe overall customer satisfactory rate towards Electroluxs ordering service level is particularly low in the Guangdong region vMost of the retailers sh
52、owed lack of understanding for minimum order quantity and order frequency as they are presently ordering based on demand and payment credit, and regard minimum order quantity as less important in affecting their business revenues. Several customers indicated “1” as desired minimum order sizeOrdering
53、 Service Importance and Customer SatisfactionOrdering - CommentsOrdering Service - Best Ordering Service - Competitor Feedback from Surveys Ordering - Competitor1. Minimum Order SizeBestWorstElectrolux4 (2-EC)Haier33 (2-W)Siemens3 (2-W)Xinfei2Best - Overall, Electrolux does have the most answers for
54、 best, but the responses were quite spread out geographically. Electrolux appears to be slightly stronger in Eastern China, while Siemens appears to be slightly stronger in Western China.Worst - Haier clearly has the most mentions and it appears to be weakest in the West.Data - Data is scattered acr
55、oss answers. Minimum order size is 1, but it is very much dependent on who the customer is. Similarly for the worse2. Order FrequencyBestWorstHaier22Electrolux2Best & Worse - Scattered results across several players with no clear indication of best playersSlim leads by Haier and Electrolux both rate
56、d 2 mentions in the best category.Interesting note, is that Haiers responses in EC rates it as the best by one distributor while it is the worse by the retailerData - No specifics3. Ability to respond to Urgent OrdersBestWorstElectrolux3Haier42 (2-EC)Samsung32Xinfei2Rongsheng2Best - Haier has the mo
57、st mentions with 4 (which are spread throughout China). Electrolux next has 3 mentions but all focused on EC (2 retailers, 1 distributor). Samsung also appears moderately better with 3 mentions overall, 2 being in EC.Worse - Most of the worse case mentions were fairly distributed with the exception
58、of Haier which had 2 mentions in EC.4. Product AvailabilityBestWorstElectrolux2Haier3 (2-SC)7 (4-EC,)Xinfei2 (2-EC)Siemens4 (2-CS)Rongsheng2Best - Moderate feedback with best for Electrolux, Haier and Xinfei. Haier appears slightly stronger for product availability in SC while Xinfei is stronger in
59、EC.Worst - Haier appears to have the worse problems with product availability, particularly in EC. Siemens also appears to have some problems (focusing on CS).Data - Only several pieces of data given for best (ranges from 70 to 100%)13. What is you current order transmission mode Fax Telephone Email
60、 Other_Ordering - Question 13Order Transmission ModeSurvey ResultCommentsnMany customers have a preference for utilizing “interactive” (i.e. telephone or face to face) ordering modes so that they can get a clear idea of product availabilitynCurrently, no respondents use e-mail to place orders. Presu
61、mably this is because of the low level of IT infrastructure in China and that vendors have not developed this type of service. Customers in Guangzhou region are more open to adopting new technologies than those in the North China and Central areas.nCustomers and sales staff indicated problems with c
62、urrent order processing related to the heavily manual work process involved, multiple hand-offs (between Electrolux logistics and sales depts) and problems with outdated inventory information on product availability in LDC.14. What is the order fulfillment performance of Electrolux? Order fulfill ra
63、te_88%Back order rate_8%Order unfulfilled rate_4%Survey ResultsCommentsnThe average order fill rate is 88%, the rate of back order is 8%, and the unfulfilled rate is 4%.nCS region has the highest order fulfill rate at 92%, enhanced by its close proximity to the manufacturing base.nSince the LDCs in
64、NE region usually have large inventory and use LDCs to serve almost all the customers, the order fulfill rate is also very high.nThe order fulfill rate in GZ region (Guangdong, Fujian, Guangxi) ranks the lowest at 73%, due to the lack of effective and efficient communication on both local inventory
65、level and inventory level in RDC. nOrder fulfillment performance is relatively better in big cities. Almost all the responses from Shanghai said the fulfill rate is 100%. nKey accounts, such as Carrefour experienced higher rate of back orders during the weekend when Electrolux has no person take car
66、e of logistics service, and they usually keep lower inventory level n(Sales Managers in both Guangzhou and Shenzhen were concerned about the lack of available and timely inventory information in the RDC, since they could only receive the information on a monthly basis).Order FulfillmentOrdering - Qu
67、estion 14Electrolux Stockouts - Frequency Ordering - Question 1515. How often do you experience stockout of Electrolux products?(frequency and the number of units)Survey ResultCommentsnRespondents indicated that most stockouts occur during promotional periods and new product launch.nOut of 16 respon
68、ses who registered stock out, 3 are distributors, 9 are retailers, and 4 are multiple retail formatsnGenerally speaking, customers experienced stock out ranging from once to more than 10 times, respectively. And the units for each stock out ranged from 1 to 200 each time. nThe stock out happens more
69、 often in GZ regions whose business is still in infancy, also the small cities without LDCsnTian Li Fei, a distributor in Shenzhen, experienced stock out prior to the Chinese New Year, 2000 period with the product shortage estimated around 200 units.Number of times respondents experience d stockout
70、of Electrolux products Once3Two6Three2Three1Five1Ten2Fifteen1Note: limited response 16 companies registered stockoutsElectrolux Stockouts - Value Loss Ordering - Question 1616. What is the estimated value loss for stock out? (in % of total volume sold) 0.1-4% 4.1-6% 6.1-8% 8.1-10% 10%Response: 60% 1
71、7% 8% 4% 10%Survey ResultCommentsnA high proportion of customers who indicated sales loss due to stockouts as over 10% were from the GZ region, especially for the customers in Guangdong and Fujian which experienced severe stock-outs during the last year.nAs confirmed by both customers and Electrolux
72、 sales managers, some of the reasons for stock-outs are high demand, low inventory and lack of timely information on inventory and product availability.- Ordering Performance -v“Ability to Respond to Urgent Orders”, and “Product Availability” were identified as the most important factors from the su
73、rvey, which Electrolux performed relatively weak compare to other items in ordering servicesvThe order fulfillment performance varied significantly across the different regions. Markets in which Electrolux have had a longer history of operation, were in close proximity to the manufacturing base, or
74、were more mature markets, (i.e. Shanghai) reported better customer satisfactionvThe overall customer satisfaction for Electroluxs ordering service level is higher than the customers general experience within the marketplace, with the exception of GZ regionvStock-outs occurs more often during promoti
75、onal period and new product launch. Customers in GZ region experienced more stock-outs and higher value loss (10%) due to the growing demands caused by heavy marketing campaign, low inventory, and lack of transparency for inventory and product availability informationvSome key accounts whose invento
76、ry level is kept low, such as Carrefour, experienced back orders during weekends while Electrolux has no logistics contactsvThe order processing workflow is still very manual and paper-based with quite low efficiency. And customers tends to prefer “interactive” ordering modes to get better idea of p
77、roduct availability.Summary: OrderingDelivery - Table BDelivery Delivery - Table BDelivery Service Importance and Customer Satisfaction Delivery Lead Time: Urgent Orders Delivery Lead Time: Standard Orders Order FulfillmentFrequency of Delivery2.42.32.22.1Delivery2.ItemsNo.4.3421354.2421354.2421354.
78、0421354.0421354.0421354.6421353.8421353.7421353.7421353.5421353.442135Satisfaction GenerallySatisfaction (Electrolux)Importance4.3421354.2421353.7421354.33.83.04.24.34.74.33.93.74.9aRate from Electrolux Sales Managers Rate from Electrolux customers ADelivery - Table BDelivery Service (continued) Sat
79、isfaction GenerallySatisfaction (Electrolux)ImportanceShipping FlexibilityAccuracy of DeliveryPackaging Quality (Product protection)Punctuality2.82.72.62.5ItemsNo.4.2421354.2421354.2421354.2421354.5421354.6421353.942133.842133.842134.7421354.142134.442135aRate from Electrolux Sales Managers Rate fro
80、m Electrolux customers A4.94.24.54.74.64.64.14.7Order FulfillmentvIn most regions, customers are more satisfied with Electroluxs order fulfillment than the other brands in general. But in both NC and GZ, the satisfaction level is below the overall level. vCustomers desired order fulfill rate is 96%
81、on average, which is higher than Electroluxs current 88% order fulfill rate.Delivery Lead TimevCustomers desired lead time is 2 - 4 days. vThe survey indicated that Electrolux has no standard order lead time. It varies from the same day to 15 days. In the extreme case of Guangzhou Department Store,
82、the interviewee said the lead time ranges from 3 -15 days.vFor urgent orders, the satisfaction with Electrolux is below the other brands in GZ, NC and NE regions. The customer desired lead time is 1.5 days in average. Currently, the Electroluxs lead time ranges from the same day to 15 days. The case
83、 of the 15 days lead time occurred to a particular customer, Guangzhou Department Store, which also commented that there was no difference between urgent and standard order lead time. Delivery - CommentsDelivery Service Importance and Customer Satisfaction Delivery Punctuality and AccuracyvFrom the
84、survey result, Electroluxs delivery punctuality is 89% and the accuracy on quantity is 93%. In the GZ, NC and NE regions, the satisfaction with Electrolux delivery punctuality is below the general level. In GZ and NE regions, the customers are less satisfied with Electrolux delivery accuracy than th
85、e general level. Packaging Quality vIn Central, GZ and NC regions, the customers are less satisfied with Electrolux packaging quality compared with the general service level. The customers mentioned the following brands for their good packaging quality: National, Siemens, Haier, Shangling and Meilin
86、g.Other Delivery Services vAs to the delivery frequency, Electrolux delivers goods to customers based on their orders currently.vBecause most of the customers have only one site for delivery, so the need for shipping flexibility like multiple drop-off points are not that important currently.Delivery
87、 - CommentsDelivery Service Importance and Customer Satisfaction Delivering Service - Best Delivering Service - Best Delivery - Question 17Tolerated Lead Time 17. What is the maximum tolerated lead time with which will not influence your sales? 7-10 days 5-7 days 3-5 days 2 days 1 day same daynAs to
88、 the longest tolerated lead time, the majority of the responses is 3-5 days.- Amongst retailers, 36% of the responses are 2 days.- Amongst distributors, 53% of the responses are 3-5 days.nBecause the factory is in the same region, Electrolux services the customers in CS with shorter lead time. The c
89、ustomers get used to the shorter lead time compared to other regions and their tolerated lead time is the shortest among all the regions.nIn NE region, all the customers are found to be served by LDCs. Hence, they are also getting used to enjoying the shorter lead time. Longest Tolerable Lead TimeNC
90、ECGZCSCentralNEW7-10 days3-5 days3-5 days2 days3-5 days2 days2-5 daysResponses DistributionMajority of responses by RegionSurvey ResultComments451813321583007-10 days5-7 days3-5 days2 days1 daySame dayRetailerDistributor18a)What is your view on picking up products yourself at your nearest Electrolux
91、 Warehouse instead of Electrolux delivering the product to you? b)What if Electrolux provides self pick up and Electrolux delivery services at different prices?Customer Pickup Delivery - Question 18Customer Response(s)nAlmost all the retailers, whether presently receiving delivery service from Elect
92、rolux or not, did not want to pick up goods from the LDCs nA variety of reasons were given against customer pickup: - lack of transportation capability- difficult to co-ordinate internally (e.g. in dept stores)- not economical due to small quantities- lack professional in-house staff and therefore f
93、ear damagenRetailers who place orders which are less than truck load, will be served by the LDC via self pick-up or delivery by Electrolux, depending on situation. Usually, the key accounts, Carrefour, Wal-Mart, Pricesmart, etc., and retailers in Changsha, and some in Chengdu enjoy the delivery serv
94、ice from Electrolux, the rest have to pick up goods themselves. Customer FeedbackCompetitorsnOther key players in the market, such as Haier, Siemens, Xinfei, Shangling, National etc., are all offering goods delivery to key customers. Payment for DeliverynOne of the key Electrolux retailers in Guangz
95、hou (Dongze) even indicated a willingness to pay an additional RMB10 per unit for delivery service.nOverall, it would be very difficult to remove delivery services for customers who currently receive it, because of the additional burden it places on their operations. nCustomers did indicate that the
96、y were drawn to Electrolux by our brand image and marketing strength while delivery capability was not a major factor - therefore we might remove this service from new accountsLead Time Delivery - Question 1919. Which statement do you most agree with?- Lead time is ok for Electrolux, please keep the
97、 same- Please shorten the lead time, we will pay more - Extending the lead time will not influence my sales of Electrolux refrigerators- Extending the lead time will influence my sales of Electrolux, unless_nThis answer reflects the idea that customers are not likely to pay for shorter lead timesnTh
98、e majority of the response is “The current lead time is OK for Electrolux, please keep the same”nCompared to the lead time, price reduction is seen as a faster and more straight forward way to more profitable sales, since few customer wants to pay more for the shorter lead time.nAt the current stage
99、, customers are less skilled in reducing the logistics cost by requiring a shorter lead time, so they do not want to pay more for it. Survey ResultComments82%5%3%11%Maintain current lead timePay more for shorter lead timeExtend lead time wont impact salesExtend lead time will impact salesPreferences
100、 for Changes to Lead TimeLead Time - Sales Growth Impact Delivery - Question 2020. If Electrolux provide you with shorter lead time by say 50%, the sales will grow by: 0% 1 - 5% 6 - 10% 10%nThe majority of the customers which answered this question expect that shortening lead times will have a minor
101、 impact on sales growthnIn the interviews, some customers indicated that the shorter lead time will not influence their sales, but bring benefit to their business by reducing stock and improving the turnover of cash flow. Survey ResultCommentsResponses Distribution30%52%10%7%01020304050600%1-5%5.1-1
102、0%10%of response21. What is your average inventory level (in days) of Electrolux products 50nCurrently, the inventory of most customers is on the high side. It shows their inventory management is far behind the worlds best practice. There is great potential for improvement.nCompared to the retailers
103、, the distributors usually have higher inventory levels to service their customers.nDue to the lack of inventory management expertise/knowledge, 35% of the distributors have inventory levels ranging from 11-50 days. CommentsSurvey ResultOverall Responses0%22%54%25%0%0102030405060 50days%0%6%59%35%0%
104、0%28%54%17%0%010203040506070 50daysDistributorRetailer%Distributor vs. RetailerAverage Electrolux Inventory Delivery - Question 21vFrom the survey, customers are generally satisfied with Electroluxs logistics performance, although “lead time towards urgent orders” scored a relatively low level of sa
105、tisfaction v“Order fulfillment”, “Delivery Accuracy and Punctuality” ranked the most important among the issues related to delivery performance, and Electrolux performance basically satisfies the customers with the exception of GZ regionvAlmost all the retailers prefer delivery service from Electrol
106、ux to be more economic and avoid the difficulties related to internal co-ordinations and goods damages. Though delivery capability is not the key factor compare to the brand image and marketing strength, it is difficult to remove the delivery service from current customers but could be an alternativ
107、e for new accounts. Another influencing factor is that other key competitors, such as Haier and Siemens are providing delivery service to key accounts vUnder the current business environment, most customers do not think shortening lead times can greatly influence sales increase given that the lower
108、importance rating towards lead time and relatively longer lead time tolerance reported in the customer survey. The reduction of price is viewed as the faster and more straight forward way to increase sales- Delivery Performance -Summary: Delivery PerformanceDelivery - SummarySupporting Services Supp
109、orting Services -Table- Supporting Services Importance and Satisfaction by Customers -Supporting Services Importance & Customer Satisfaction 4.03.43.4aRate from Electrolux Sales Managers Rate from Electrolux customers ASatisfaction GenerallySpare Parts Lead TimeAfter-sales Repair ServicesConsignment
110、3.33.23.1SupportingServices3ItemsNo.4.2421354.2421354.63.93.84213542135421353.442135421354213542135Satisfaction (Electrolux)Importance4.3421353.5421353.8421354.23.054.02.64.03.53.24.03.43.4Supporting Services - Best 22. Beside consignment sales, can you suggest an equivalent alternative to consignme
111、nt salesConsignment Sales Alternative Supporting Services -Question 22nMost of the large department stores indicated that they could not accept alternatives to the consignment sales.nGenerally, the response to this question revolved around the strength of the Electrolux brand. Many retailers indicat
112、ed that for a brand which is still emerging in the marketplace, then it must offer incentives such as consignment in order to draw the attention of the retailersn“If your market share has grown enough(and you have the best selling products in the market place), then ”I can even consider cash on deli
113、very”General quote from several department stores in Guangdong, Chengdu & ShenyangCustomer Feedback23.Are you willing to accept in replacement of consignment sales, if Electrolux can manage the inventory in some other ways like replenishment, vendor managed inventory, special discounts, etc.Consignm
114、ent Sales Alternative Acceptance Supporting Services - Question 23Consignment is used as a bargaining tool in developing the relationship with retailers. It is used in markets where Electroluxs market position is not very strong, such as in Guangdong, NE and West regions. It is also mainly used for
115、the retailers who has strong bargaining power with its big sales volumes. In Beijing, there are four large department stores who only accept consignment.Consignment sales varies across regions.For example, for Shanghai and most of East China, there is no consignment sales for Y2000.Guangzhou, the hi
116、ghest with approx. 30% of cost of goods sold.At the national level, it is approx. 20% of cost of goods sold.Consignment brings added burden on inventory carrying cost and cash flow management and increase the risk of losing payment of goods due to poor management control. With increasing brand image
117、 and market share over time, cash in advance, cash on delivery or monthly credit terms could be accepted instead by retailers as alternative payment terms. Customer Feedback24.Please name other brands which also offer consignment deliveriesConsignment Sales Alternative Acceptance Supporting Services
118、 - Question 24nAll the key brands were mentioned as offering consignment terms at different extent: (These names have been listed in order of the project teams perception of how extensively they offer goods on consignment. i.e. groups such as Meiling and Changling offer consignment to most customers
119、).nConsignment is viewed as being an offering which either a weaker player or a player who is entering a new market needs to offer.Customer Feedback0% of consignment100% of consignmentHaierRongshengSiemensChanglingMeilingElectroluxXinfei25.If Electrolux improve the overall service level in logistics
120、 and after-sales services, you expect the sales for their product will increase: 1-5% 6-10% 10-20% 20-30% above 30%Sales Increase due to Service Improvement Supporting Services - Question 25Survey ResultCommentsnGiven the improvement of Electrolux service level, the potential for the sales increase
121、ranked high in the region with low service level, such as GZ and NC.n80% of the customers from Northern China believe that sales can increase by more than 10% if Electrolux service level improves. n63% of the customers in GZ region believe the sales will increase more than 20% along with the service
122、 level improvement given by Electrolux. nThe sales increase is believed to be quite small by the customers in East China, due to the relatively high level of service currently provided.26. What is the price level of Electrolux product? lower than average average higher than averageElectrolux Price L
123、evel Supporting Services - Question 26Survey ResultCommentsnOverall, 65% of the response think the price positioning of Electrolux refrigerator is above average, 35% of the responses agree its price positioning is at average level, and no response indicate that the price positioning is below average
124、. n100% of the responses in the NC region agree the price is above average. nThere is quite high proportion of responses in the central region like Shandong and Henan provinces, which perceive Electrolux product price is at the average level. 27. Please explain the process of Order to Delivery for r
125、efrigerators and highlight any differences for other home appliances (e.g. washing machines). Please specify if there is any difference between other brands and suggest ideas on how to improve it. Also state who has the best practice and is the best service provider and why.Order to Delivery Process
126、 Supporting Services - Question 27Sales people have no efficient communication with local logistics or RDC staff, therefore have no confidence about the inventory level and product availability. From interviews, we discovered that even local logistics people lack updated LDC inventory information (e
127、.g. in the Guangzhou office). There is no immediate confirmation letter to either customers or sales people on what products will be delivered until products arrive. Both sales personnel and customers complained that the order fulfillment process is inefficient, due to the ineffectiveness of sharing
128、 inventory and product availability information among the whole company. It was claimed that the order-to-confirmation cycle usually takes 2-3 days. Order to Delivery ProcessCommentsSales Rep.LDCDistributorRetailerSOP ChangshaTransportation OrderTL?SanctifyOrderSanctifyPreparePick UpNYInformDeliverA
129、cceptAcceptAcceptAvailable?YAvailable ProductsNPick UpAvailable ProductsIllustrative28. In order to become your preferred supplier, what other value added services should be provided to differentiate Electrolux from other suppliersPreferred Supplier Status Supporting Services - Question 28Most respo
130、nses from customers focused less on differentiating services as opposed to identifying areas where Electrolux could improve on to catch up to the leading competitors. Value added services (explored by the project team) such as vendor managed inventory or consumer direct delivery were not well unders
131、tood.After Sales Service - Some retailers emphasize that after-sales services is the key issue for Electrolux to improve on. They mentioned problems such as: no response from “800” calls; the service skills and attitude of after-sales personnel which need to be improved, and the response to customer
132、 requirement is not prompt and timely etc. Urgent Order Handling - Electrolux should strengthen its response to urgent orders. Several sales managers and customers complained of poor handling of urgent orders. Vendors like Haier have 24-hour logistics service to their customers.Out of Office Hour De
133、livery & Support - Many retail customers (GZH, Chengdu & Shenyang) complained that Electrolux does not deliver on weekends (Carrefour Shenyang complains that 20% of its orders must be delayed to the next week because there is no weekend delivery). Secondly, Electroluxs working day delivery hours are
134、 perceived to end too early (e.g. Guangzhou - no one in office by 5 p.m.) For major city deliveries which need to occur after 8 to 9 p.m. in the evening, this is perceived to be a problem.29. What are your comments on the Electroluxs return policy compared with the other vendors and the industrys co
135、mmon practicesElectroluxs Return Policy Supporting Services - Question 29vGoods returning policy is regarded by the customers as the most complex among all the vendors. vThe process of returning goods usually takes 2 weeks at the retailers and 4 weeks at the distributors, and involves a lot of handl
136、ing which inflicts even more damages to the goods.vThe damaged goods verification from Electrolux after-sales people normally needs 2-4 weeks to resolve, due to the present policy which requires damaged goods to be accumulated to more than 5 units before resolution; hence impacting greatly on the cu
137、stomers business and their confidence in selling Electrolux products . vDistributors complained that the goods returning policy is not consistent with the marketing campaign which says goods with quality problems can be returned immediately without any conditions, within one year after the purchase.
138、 vThe goods return policy of Haier is seen to be better and more efficient, as the damaged goods can be replaced with the new ones within 1 to 2 days. Some vendors, such as Xinfei and Shangling, sell the goods which are slightly damaged at a discounted price at the distributor or retailer site.Custo
139、mer Feedback30. Please provide any other comments about Electroluxs logistics services and other aspects we may not have covered and how we can improve on it.Improvement Opportunities Supporting Services - Question 30Order Processing Lead Times - Should be shortened. Several customers from Guangzhou
140、/Shenzhen indicated that it took one to two weeks to get feedback that a product was stocked out during peak seasonInventory Information Availability - Electrolux sales people should have the ability to see what products are availableSales and Marketing Improvements:Needs to be more aggressive -perc
141、eived to be weaker than competitionCustomer Support - train customer staff in product knowledge so when Electrolux promotional staff are absentMore support materials - not enough brochures, etc.Sales Managers Comments- Sales managers in Guangzhou and Shenzhen strongly recommend that Electrolux need
142、to clarify the overall order-to delivery process, redefine the roles and responsibilities, and establish the logistics information sharing and tracking system in the future so as to improve on production planning, demand forecasting, customer service levels, and reduce logistics cost.- Some sales ma
143、nagers complained that the whole supply chain, which includes demand forecasting, production, logistics, sales and marketing, and after-sales service is not integrated in the current practice.After Sales ServicevThe after-sales repair service is viewed as one of the most important factors which will
144、 influence sales growth. Electrolux s performance in this areas is viewed as weaker than the competition, particularly in Guangzhou, North China and the North Eastern regions. Key problem areas cited included longer response times, shortage of staff and low technical capabilityvHaier and Siemens are
145、 commonly regarded as examples for providing good after-sales repair services for their timely responding and problem solvingConsignmentvConsignment is used as a bargaining tool in the business between vendors and retailers, and is provided by other key players, such as Siemens, Meiling, Changling,
146、Rongsheng, Xinfei,Haier under different circumstances. Usually, consignment is used by vendors to entering into the new markets and in the markets which have weak brand image and marketing positioning. Besides, it is also perceived as a strong bargaining power with its influential positioning from r
147、etailers. vWith the increase of brand positioning and sales volume, cash on delivery can be perceived as an alternative payment term instead- Supporting Services Performance -Summary: Support ServicesSupporting Services - SummarynProject Introduction and BackgroundnCustomer Survey- Survey Approach-
148、Survey Results- Findings and OpportunitiesnLogistics Network- EOQ inventory modeling- Logistics network modelingnRecommendations and next stepsnAppendices - Process flow - Cost analysisContents3Neutral4Important5Very Important3NeutralMinimum Order SizeOrder FrequencyAbility to Response to Urgent Ord
149、ersProduct AvailabilityFrequency of DeliveryOrder FulfillmentDelivery Lead Time: Standard OrdersDelivery Lead Time: Urgent OrdersPunctualityPackaging QualityDelivery AccuracyShipping FlexibilityConsignmentAfter-sales Repair ServicesSpare Parts Lead TimeAnalysis of Survey ResultsSatisfaction with Ele
150、ctrolux4Satisfied5Very SatisfiedAreas of Strength to LeverageWeaknessesDelivery AccuracyPunctualityOrder FulfillmentShipping FlexibilityPackaging QualityAfter Sales ServiceAbility to Respond to Urgent OrdersProduct AvailabilityDelivery Lead Time: Urgent OrdersImprovement Matrix - ConsolidatedElectro
151、lux Refrigerator Sales by Region (Units)SatisfactionEC region has the highest sales volume with higher satisfaction rate from the customers. Electrolux need to maintain the service level to further increase sales Though NC region has higher sales volume, customers are not so satisfied with Electrolu
152、x service levelCentral region has the highest satisfaction with lowest sales volume, strategies other than logistics need to be implemented to increase sales Electrolux service need to be improved in GZ, NC regions to propel the sales growth34010,00020,00030,00040,00050,00060,00070,000CentralCSECGZN
153、CNEW5Market Importance vs. SatisfactionAnalysis of Survey ResultsLStrengthWeaknessOpportunity Areas by RegionCentralCSECGZNCNEWMinimum Order SizeJJJJJKJOrder FrequencyJLJJJKLAbility to Respond to Urgent OrdersLLJLJJLProduct AvailabilityJJKLLLJFrequency of DeliveryJJKJJJJOrder FulfillmentJJJLJJKDeliv
154、ery Lead Time: Standard OrdersLJJLJJLDelivery Lead Time: Urgent OrdersJJKLKLLPunctualityJJJLJLJPackaging QualityLLJJJJKAccuracy Delivery (Quantity)JJJJJJJShipping Flexibility (multi-site)JJJJKLConsignmentJJLJLJAfter-sales Repair ServicesLLJLLKKSpare Parts Lead TimeLLLLLKLAnalysis of Survey Results 1
155、. Most contracted warehouses lack basic material handling equipment to load and unload shipments, resultingin high damage of goods.Most loading and unloading are done manually and there are instances where spare tyres are used as supportand shock absorbers during unloading.Also, insufficient trainin
156、g is provided to contract warehouse operators in handling shipments.2. The amount of Class B, C and damaged goods in most LDCs are stockpiling and growing at an alarming rate.For example, in Tianjin LDC, there is 500 units of Class A goods, while there are 1,700 units of Class B, C and damaged goods
157、.The problem will deteriorate further as sales volumes increases over time and will become a vicious cycle, restricting sales growth, as some regions sales are based on credit limit which includes these Class B, C goods.3. There is no clear policy on handling of Class B, C and damaged inventory.For
158、example, some are sold to rural customers and some are sold to internal Electrolux employees.4. Sales of Class B, C goods are not considered within the sales performance targets of the sales personnel. Hence, there is no incentive to push sales of these goods, resulting in further stockpiling. Wareh
159、ousingFindings and OpportunitiesFindings & Opportunities: Warehousing 5. There are instances where inventory of Class B and C goods are stockpiling in Guangzhou, Tianjin and Shanghai where there is little incentive to sell them, while distributors in Changsha are looking for Class B and C goods to s
160、ell, due to their higher margins fetched.This has led to excessive supply in some areas and high demand and lack of stock in Class B and C goods in certain areas.6. There is a need to have clearer guidelines and procedures for warehouse operators in accepting goods.Existing practices of warehouse op
161、erator handling of slightly damaged goods leave too much room for personaljudgement and attracts unwarranted and shady transactions between warehouse operators and transportation service providers.7. LDCs / RDC monthly closing time difference causes much rework and re-conciliation in data and figure
162、s.8. There is a lack of standard reports to track product inbound / outbound transactions and their associatedcost. For example, transportation cost information from various LDCs to customers is not available.WarehousingFindings and OpportunitiesFindings & Opportunities: Warehousing 1. There is a la
163、ck of differentiation of products into categories by fast moving items vis-vis slow moving items and communication of this information to the relevant parties concerned.2. There is no fixed order quantity policy for customers. Order quantities and order frequency varies acrosscustomers and regions a
164、nd are based on demand and payment credit of customers.The methodology used is to try to make the order to fit a Full Truck Load, wherever possible.3. There is no consistent or fixed level for safety stocks and re-order quantities for each LDC across the region.Decision on how much to re-order are u
165、sually based on the fancy of the sales and logistics personnel in thatregion to make up Full Truck Load quantities.4. Presently, the Logistics Department has no total control and accountability for all matters related to warehousing and transportation; like the existence of warehouses in Taiyuen and
166、 Baotou, which are not underthe control of the Logistics Department.This has made management control and capturing of total logistics cost within the company a major problem.5. There is a lack of timely information on inventory, order status, sales forecast, product availability andtransportation st
167、atus which are required simultaneously by RDC, LDCs, sales personnel and carriers.For example, sales personnel has no visibility of product availability and shipment delivery information; LDChas no visibility on product availability at RDC etc. Inventory controlFindings and OpportunitiesFindings & O
168、pportunities: Inventory Control 1. Although, Electrolux uses 3 - 4 main transportation service providers across China; in actual fact, the main transportation provider also outsource again to smaller transportation companies, making control and quality of service provided difficult.At the LDC level,
169、 LDC co-ordinators again used a number of local transportation providers to service the customers in the region.2. Due to the many transportation providers at the RDC and various LDCs, provision of training to transportationproviders to handle shipment properly and correctly proved difficult, result
170、ing in the high rate of damaged goods.3. Mistakes in delivery accuracy happens mostly in the wrong colour of goods delivered, since real-time information on product availability is not available and sales personnel has no immediate updated information on exact inventory information of the warehouse.
171、TransportationFindings and OpportunitiesFindings & Opportunities: Transportation 1. Generally, Electrolux implements relatively good price control for their products, where price wars betweendistributors are prevented.But in terms of control in the selling of different classes of goods, there is sti
172、ll room for improvement.For example, a particular department store is found selling all Class A, B and C goods concurrently, resultingin customers going for the cheaper Class B and C goods and affecting the sales of Class A goods.2. Contracted repair centres were found to outsource to other repairer
173、s (e.g. in Shanghai and Chengdu) whichcauses problems in controlling the quality of repair services offered; ultimately doing damage to Electroluxsbrand image.OthersFindings and OpportunitiesFindings & Opportunities: GeneralnProject Introduction and BackgroundnCustomer Survey- Survey Approach- Surve
174、y Results- Findings and OpportunitiesnLogistics Network- EOQ inventory modeling- Logistics network modelingnRecommendations and next stepsnAppendices - Process flow - Cost analysisContentsvOur approach to calculating inventory is to develop coefficients that help us “shape the curve” that represents
175、 the relationship between throughput and inventoryvAdditionally, the square root law of inventory can be applied to determine the impact on re-sizing the networkvIn many instances, the impact of various network options on inventory investment can be accurately assessed from historical operating data
176、Network Modeling- Cost ComponentsInventory cost for Network Modeling : Inventory Cost Network Modeling- Cost ComponentsInventory cost for Network Modeling : Inventory Cost( Continued.)InventoryTurnover(times/year)010.08.06.04.02.012.0Distribution Center Annual Throughput($ million)2.03.04.05.06.07.0
177、8.09.0 10.01.014.0TurnoverAverageInventoryInvestment($ million)00.50.40.30.20.10.7Distribution Center Annual Throughput($ million)2.03.04.05.06.07.08.09.010.01.00.80.6InvestmentFinished Good InventorySquare Root Law of Square Root Law of InventoryInventoryI IN N = I= I1 1n nI IN N = Inventory at N=
178、Inventory at N facilitiesfacilitiesN = Number of facilitiesN = Number of facilitiesI I1 1= Inventory for 1 facility network= Inventory for 1 facility network FixedCostsWarehouseOperatingCostsVariable CostsoHandlingoStorageWarehouse Flow or StorageCost of Operating WarehouseNetwork Modeling- Cost Com
179、ponentsWarehouse cost is divided into fixed cost and variable cost.Network Modeling- Cost ComponentsWarehouse cost is divided into fixed cost and variable cost( Continued.).Warehouse Space from Survey and Richards Data on renting fee.LDC SecondGrand TotalRenting Fee(RMB/M2/Month)Rent Total Fee( RMB)
180、Weighted Average Renting Fee( RMB/M2/Month)BJ150014210001.36Changchun2001122000.11Chengdu800648000.13CS480011528002.69Guangzhou122015183001.27Hangzhou4931259160.33Hefei200816000.06Jinan1000990000.38Nanjing4001248000.27Ningbuo1501015000.07Shanghai246015369002.57Shenyang250011275001.40Tianjing20008160
181、000.59Xian12908103200.38Zhenzhou450731500.10Grand Total194631021578611.72Assumption on Warehouse Variable cost - Every refrigerator monthly cost of space renting fee is RMB 4.186:* Warehouse weighted average renting fee is 11.72RMB/M2/Month for national wide. See the below Chart.* Warehouse space ut
182、ilization rate is 70%* Every Refrigerator occupies 0.5 square meters * Double Stack refrigerator in warehouse.Assumption on Warehouse fixed cost- Every warehouse yearly needs RMB672000* Each Warehouse needs two people . Every People monthly costs 1000RMB. INVENTORYINVENTORYTARGETTARGETMODELSMODELSRe
183、commendation(s)Recommendation(s)ModelingModelingParametersParametersServiceServiceStrategyStrategySupply &Supply &DemandDemandInputsInputsUnits & DollarsUnits & Dollarsof Inventory,of Inventory,Fill Rates, etc.Fill Rates, etc.The evaluation of different inventory scenarios involves changes to the re
184、levant inputs for the Inventory Target Models (ITMs). The outputs are then compared to the established inventory baseline for each region.ProductsProductsLocationsLocationsModelOutputNetwork Modeling- EOQ1. List of Warehouses and consignment locationsstock locations-2. List of products by locationsS
185、KUs-3. Cost of Goods Sold (COGS)inventory and carrying costs-4. Month ending inventory by SKU by locationaverage inventory and turns12 months5. Distribution Network Mapdistribution leadtimes-6. Sales by SKU by monthABC analysis12 months7. Sales by SKU by location by monthaverage demand 12 months8. F
186、ixed Ordering CostEOQ Model input-9. Expected customer service level by product fill rates Safety Stock Calculation-10. Inventory Carrying Cost (ICC) by locationinventory carrying costs-The inventory and production analyses, as well as the Model inputs, are derived from a number of raw data sources.
187、 The following list details the types of data that are required for refreshing the Models.Data ItemUsed for.Data IntervalNetwork Modeling- EOQThere are six key factors that are used to properly size cycle stock and safety stock. Strategic business decisions will directly effect these factors, thus c
188、hanging the size of the total inventory investment.Cycle StockSafety StockReplenishment FrequencyLead TimeNumber of Stocking LocationsDemand(per time period)Service Level(Order Fill Target)Forecast Error(Demand Variability)Network Modeling- EOQCycle stock is inventory needed to satisfy expected dema
189、nd between production campaigns. The optimal amount of cycle stock varies based on total lead times and replenishment frequencies.Safety stock is inventory needed to provide stock-out protection for unexpected changes in supply or demand. The level of safety stock is largely based on the variability
190、 of demand and the targeted service level for an item.Cycle Stock / Economic Order SizeTimeTotal Lead Time(Distribution)Safety StockReorder PointMaximumAverageMinimumCycle StockNetwork Modeling- EOQMore on Cycle Stock / Safety StockTransit stock is the inventory necessary to bridge the total leadtim
191、e between the point of demand (the stocking location) and the point of supply (the producing plant). This stock is necessary to prevent stock-outs during the lagtime between placing and receiving an order. Total LeadtimeStocking Location(LDCs)Distribution Network( Distribution Leadtime)Plantsand/orS
192、uppliersRDC1week1weekNetwork Modeling- EOQTransit StockThe Model has been color coded to distinguish the sections that require user input. Yellow cells require data inputs by the model user. White cell contain formulas and calculate automatically.These cells containdata input by themodel userThese c
193、ells containdata input by themodel userEach line representsone unique product and locationcombinationEach line in the Model represents a unique combination of product, package, and stocking location. Obsolete lines may be deleted and new line may be inserted using standard MS-Excelcommands.Inventory
194、 Target Model for ElectroluxTransportation Mode Optimal Replenishment FrequencyCodeModeQuantityOption 4: 6 Warehouses in China(units)( Time in Weeks; Units in , RMB )2LTL153TL100Key to Table Cells4Small TL70InputCalculated by ModelInv.Avg CustCurrentTransp-DemandStorageValue/DemandInventoryortationM
195、ean AbsFacilityProductCGSModeDeviationLead-WarehouseProduct SKUConsignTier(RMB/Unit)(Units/week)(Units)Code(Units)timeCS-HunanBCD-200NFConsignA$1,80067.61,411332.01.0CS-HunanBCD-209ConsignA$1,80047.91,491321.41.0CS-HunanBCD-234ConsignA$1,80034.0148315.41.0CS-HunanBCD-187WNFConsignB$1,80018.51,007310
196、.21.0CS-HunanBCD-223ConsignB$1,80018.837439.31.0CS-HunanBCD-248ConsignB$1,80017.3578315.21.0CS-HunanBCD-263ConsignB$1,80016.016311.01.0CS-HunanBCD-182NFConsignC$1,80012.9622215.01.0CS-HunanBCD-192ConsignC$1,8001.96522.51.0CS-HunanBCD-197ConsignC$1,8009.1351211.21.0CS-HunanBCD-205ConsignC$1,8004.8241
197、26.71.0CS-HunanBCD-216WNFConsignC$1,8009.3219210.81.0CS-HunanBCD-218ConsignC$1,8008.951127.61.0CS-HunanBCD-230ConsignC$1,8008.093210.71.0CS-HunanBCD-232ConsignC$1,8005.333322.91.0CS-HunanBCD-236WNFConsignC$1,8004.3-1024.81.0Network Modeling- EOQThe Model is built around the philosophy of modeling in
198、ventory for specific items at specific points of demand. The user input data characterizes the demand variability for the SKUs at a warehouse (location).Inventory Target Model for ElectroluxTransportation Mode Optimal Replenishment FrequencyCodeModeQuantityOption 4: 6 Warehouses in China(units)( Tim
199、e in Weeks; Units in , RMB )2LTL153TL100Key to Table Cells4Small TL70InputCalculated by ModelInv.Avg CustCurrentTransp-DemandStorageValue/DemandInventoryortationMean AbsFacilityProductCGSModeDeviationLead-WarehouseProduct SKUConsignTier(RMB/Unit)(Units/week)(Units)Code(Units)timeCS-HunanBCD-200NFCon
200、signA$1,80067.61,411332.01.0CS-HunanBCD-209ConsignA$1,80047.91,491321.41.0CS-HunanBCD-234ConsignA$1,80034.0148315.41.0CS-HunanBCD-187WNFConsignB$1,80018.51,007310.21.0CS-HunanBCD-223ConsignB$1,80018.837439.31.0CS-HunanBCD-248ConsignB$1,80017.3578315.21.0CS-HunanBCD-263ConsignB$1,80016.016311.01.0CS-
201、HunanBCD-182NFConsignC$1,80012.9622215.01.0CS-HunanBCD-192ConsignC$1,8001.96522.51.0CS-HunanBCD-197ConsignC$1,8009.1351211.21.0CS-HunanBCD-205ConsignC$1,8004.824126.71.0CS-HunanBCD-216WNFConsignC$1,8009.3219210.81.0CS-HunanBCD-218ConsignC$1,8008.951127.61.0CS-HunanBCD-230ConsignC$1,8008.093210.71.0C
202、S-HunanBCD-232ConsignC$1,8005.333322.91.0CS-HunanBCD-236WNFConsignC$1,8004.3-1024.81.0Specific StockingLocations(Warehouses)Specific Productsand Packages(SKUs)Network Modeling- EOQCost of Goods Sold (COGS), Average Weekly Demand, and Current Inventory Level are also user inputs.Inv.Avg CustCurrentTr
203、ansp-DemandStorageValue/DemandInventoryortationMean AbsFacilityProductCGSModeDeviationLead-WarehouseProduct SKUConsign Tier(RMB/Unit) (Units/week)(Units)Code(Units)timeCS-HunanBCD-200NFConsignA$1,800119.31,411356.61.0CS-HunanBCD-209ConsignA$1,80084.61,491337.81.0CS-HunanBCD-234ConsignA$1,80060.01483
204、27.21.0CS-HunanBCD-187WNFConsignB$1,80032.71,007318.11.0CS-HunanBCD-223ConsignB$1,80033.2374316.41.0CS-HunanBCD-248ConsignB$1,80030.5578326.81.0CS-HunanBCD-263ConsignB$1,80028.316319.51.0CS-HunanBCD-182NFConsignC$1,80022.9622226.41.0CS-HunanBCD-192ConsignC$1,8003.36524.41.0CS-HunanBCD-197ConsignC$1,
205、80016.1351219.71.0CS-HunanBCD-205ConsignC$1,8008.5241211.81.0CS-HunanBCD-216WNFConsignC$1,80016.4219219.01.0CS-HunanBCD-218ConsignC$1,80015.6511213.51.0CS-HunanBCD-230ConsignC$1,80014.293218.91.0CS-HunanBCD-232ConsignC$1,8009.333325.21.0CS-HunanBCD-236WNFConsignC$1,8007.7-1028.51.0CS-HunanBCD-240NFC
206、onsignC$1,8001.31,10521.81.0CS-HunanBCD-277ConsignC$1,8007.92,31322.51.0ECBCD-200NFConsignA$1,800124.01,717331.01.0ECBCD-209ConsignA$1,800170.11,776371.51.0ECBCD-234ConsignA$1,800162.3205339.31.0ECBCD-187WNFConsignB$1,800130.8934356.21.0COGS is from Finance Department on 1999 cost data.Average custo
207、mer demand isthe result of dividing 1999 salesvolume (by SKU by branch)over 52 weeks per year.Current inventory representsthe baseline for targeted savings.1999 average (month-end)inventory was used.In this Model, Data isnt availableThe MAD is calculated by the userprior to being input. Ideally, the
208、 MADwould be based on actual deviation fromthe sales forecast. For this Model,the MAD is approximated as:MAD = Std Dev of historical DemandThe total Leadtime is calculated by theuser prior to being input. It is thedistribution leadtime. This accountsfor the order fulfillment cyclefrom the plants to
209、the stocking locations.Network Modeling- EOQThe Fixed Order Cost is used in the EOQ calculation. The Max Periods of Order can serve as a constraint on the size of the EOQ order size.LogSOPF/ASub. TotalNE1113N/BJ10.50.52N/TJ10.50.52N/ZZ10.50.52NW1113SD10.50.52EC1113CS1113SW0.50.512GZ0.50.512BJ Office
210、2114Total28TelTaxiSalary&Bonus/personSub.TotalDaily Management Fee1015120145(RMB/Day/Person)Order fixed cost102(RMB/Order)Order fixed cost=Daily Management Fee/ Order number daily receivedAverage daily order number=40Fixed Order Cost CalculationAvg CustCurrentTransp-DemandStorageMin.FixedInv.MaxDema
211、ndInventoryortationMean AbsFacilityOrderOrderHold.PeriodsModeDeviationLead-Qty.CostCostof Order(Units/week)(Units)Code(Units)time(Units)(RMB)(%)(weeks)67.61,411332.01.0100$1020.15%13.047.91,491321.41.0100$1020.15%13.034.0148315.41.0100$1020.15%13.018.51,007310.21.0100$1020.15%13.018.837439.31.0100$1
212、020.15%13.017.3578315.21.0100$1020.15%13.016.016311.01.0100$1020.15%13.012.9622215.01.015$1020.15%13.01.96522.51.015$1020.15%13.09.1351211.21.015$1020.15%13.04.824126.71.015$1020.15%13.09.3219210.81.015$1020.15%13.08.951127.61.015$1020.15%13.08.093210.71.015$1020.15%13.05.333322.91.015$1020.15%13.04
213、.3-1024.81.015$1020.15%13.00.81,10521.01.015$1020.15%13.04.52,31321.41.015$1020.15%13.070.31,717317.61.0100$1020.15%13.096.41,776340.51.0100$1020.15%13.091.9205322.31.0100$1020.15%13.074.1934331.91.0100$1020.15%13.0The Fixed Order Cost is the total internal cost of executing anorder to fulfill deman
214、d. See detail in the left-hand Chart. Thisnumber is used in the EOQcalculation.The Max Periods of Order is aconstraint value which limits themaximum weeks of supply per order.The value was arbitrarily set at 13 wks.(one business quarter) for all SKUs. This implies that stock targets will be assessed
215、 at least four times per year.This is not used in this Model.Network Modeling- EOQThe ABC Classification data of fast-slow moving has been put into the model Original Service Level Look-upNote: The ABC Classification data has been put in the model to provide visibility into fast-medium-slow moving S
216、KUs.Service LevelProduct TierOrder Fill RateA100%B98%C98%ProductWarehouseProduct SKUTierCS-HunanBCD-200NFACS-HunanBCD-209ACS-HunanBCD-234ACS-HunanBCD-187WNFBCS-HunanBCD-223BCS-HunanBCD-248BCS-HunanBCD-263BCS-HunanBCD-182NFCCS-HunanBCD-192CCS-HunanBCD-197CCS-HunanBCD-216WNFCClass ABCBCD-200NFABCD-209
217、ABCD-234ABCD-187WNF BBCD-223BBCD-248BBCD-263BBCD-182NFCBCD-192CBCD-197CBCD-203CBCD-216WNF CBCD-218CBCD-230CBCD-232CBCD-236WNF CBCD-240NFCBCD-277CNetwork Modeling- EOQThe “Transportation Mode” TableThis is used to set the minimum order size which, in turn, is used to increment the Economic Order Quan
218、tity (EOQ) to the next greatest quantity.This has the greatest impact on inventory target levels for TL minimum order quantities.The “MAD Interval”This is the interval for measuring demand variability and it is used in applying a risk factor to the safety stock level. For this Model, the interval is
219、 not used.Note: Safety Stock Threshold and Packaging Minimum Quantity do not come into play in this Model.Transportation Mode CodeModeQuantity(units)2LTL153TL1004Small TL70MAD Interval4weeksSaf. Stk. Threshold2UnitsPkgng Min Quanty1UnitsNetwork Modeling- EOQThe same approach is used for Transportati
220、on Mode and MAD Interval look-up calculations in the ITMs.Network Modeling- EOQThe Output of the ITM: Safety Stock,EOQ,ROP,Total Stock Target,Inventory Turns.Inv.MaxCurrent Calcd SafetyCurrent Adjd SafetyCurrent AdjdROPTotal StockCalcdAdjdAdjdHold.PeriodsStock TargetStock TargetSafety Stock Target -
221、MinTarget (Incl.EOQEOQEOQ -TargetedCostof OrderCurrent CalcdTransit)1CalcdInventory(%)(weeks)(Units)(Units)Safety Stock Target(Units)(Units)(Units)(Units)EOQTurns0.15%13.08010020168218701003016.20.15%13.05310047148198591004112.60.15%13.0381006213418450100509.60.15%13.0131008711916937100635.70.15%13.
222、0121008811916937100635.80.15%13.0191008111716736100645.40.15%13.0141008611616634100665.00.15%13.0193011436531451410.30.15%13.0315121724121534.00.15%13.01415124392630412.10.15%13.0915620351930117.20.15%13.01415124392630412.30.15%13.01015524392530511.90.15%13.01415123382430611.00.15%13.041511203520301
223、07.80.15%13.0615919341830126.60.15%13.010-11871584.70.15%13.020-241918301211.91.Safety Stock=SF*Demand Mean abs Deviation*0.53. ROP=Safety Stock + Leadtime*Demand4. Total Inventory= Safety Stock+0.5*EOQ +Leadtime*Demand2. EOQ= (2*Order Cost*Demand Inv.Cost*Unit PriceEOQ Model Inventory Analysis by A
224、BC Fast/Slow moving type for 19991999 EOQ recommended Inventory Target by ABC 0500010000150002000025000300003500099 Actual(28)As isModel(28)Option 1(8)Option 2(18)Option 3(12)Option 4(6)UnitsCBA224063329711976179641466810372Note: 1999 Actual inventory which is the Electrolux Quality A inventory can
225、not be divided into ABC fast-medium-slow moving classification due to lack of information.EOQ Model Output Inventory Analysis by ABC Fast/Slow moving type for 1999 .Inventory Chart is volume based inventory analysis.1999 EOQ Recommended Inventory Target Percentage by ABC40.9%40.9%18.2%0%20%40%60%80%
226、100%National CBA1999 Sales Shipment by ABC54.4%18.3%27.3%0%20%40%60%80%100%National %CBANetwork Modeling- EOQBase Assumption:* Leadtime from ordering to receiving goods is one week for all warehouses.* ABC classification of refrigerator is to provide visibility into fast-medium-slow moving SKUs Ever
227、y Class A product ships above 15% of 1999 national sales, Class B is about 4%-8%, Class C is below 3% Transportation Mode of Class A and B is 100units/time, Transportation Mode of Class C is 15units/time.* 6 Warehouses, one warehouse by each branch of 1999.* Average demand figure is based on 1999 sa
228、les data shipped from LDCs to customers which comprised of 34% of 1999 total sales. The other 66% shipped from plant directly to customers was not counted into Electrolux owned inventory.* EOQ Model only analyze Inventory which is the Electrolux Quality A inventory .* Original Customer service level
229、 (Order fill rate) is about 100% for Class A fast moving products, 98% for Class B medium moving &C slow moving products Inventory EOQ Output Analysis by ABC by Branch Fast/Slow moving type for 1999( Continued.) Inventory Chart is volume based inventory analysis.1999 Shipment by LDC0%5%10%15%20%25%3
230、0%ECNCNENWSDCSSWGZCBANetwork Modeling- EOQ1999 EOQ Recommended Inventory Target Percentage by Branch by ABC0.0%5.0%10.0%15.0%20.0%ECNCNENWSDCSSWGZCBAImplications of findings for the logistics network modeling strategy1. All key account customers like Carrefour, Wal-mart etcrequire delivery services
231、by Electrolux. In addition, their order quantities are usually small, making Full Truck Load order quantities almostimpossible. Some international key account customers even insist that Electrolux must have a LDC nearby to service their requirements, inorder to have business dealings with them, due
232、to their purchasing leverage on a global basis. This is one of the key considerations in developing the network modeling strategy.2. Electrolux Chinas sales strategy of moving away from a wholesaler-weighted strategy towards a more retailer-weighted strategy, as in accordance with the market trends,
233、 also influence considerably the development of options in the network strategy.3. Warehouses which were set up previously by other departments and which are not under the control of the Logistics department, have caused management control and accountability problems; rendering the capture of accura
234、te logistics related cost components difficult within the company. Without affecting customer service levels, all “illegal warehouses” will be closed in developing the options for the logistics network modeling.4. The lack of a consistent approach to safety stock and re-order quantities by each LDC
235、across the region and the lack of differentiation of products into categories of fast moving items vis-vis slow moving items, causes high inventory level to stockpile at the various LDCs. This makes inventory carrying cost to be one of the major cost component consideration in the network modeling s
236、trategy. Implications of findings for the logistics network modeling strategy .contd5. From the customer surveys, it was found that the majority of Electrolux customers (69%) can tolerate a lead time between 3 - 10 days. We shall use this as a basis in siting LDCs and its local service coverage when
237、 developing the options for the logistics network modeling. During the year of 1999, Electrolux has 2 RDCs and 24 LDCs in 20 cities to cover most provinces of China. The only transportation mode outbound from RDC is truck, which is cheaper and more reliable than rail, in China.Logistics Network Mode
238、lingLDCChangshaBeijingShenyangShanghaiChengduGuangzhouQingdaoSuzhouTianjinDalianKunmingElectrolux serves its customers either by RDC directly if the order quantity fits full truck load, or via LDC if the order quantity is less than truck load or when customer demands shorter lead time.Logistics Netw
239、ork ModelingRDCsDistributorsRetailersLDCsFTLLTLFTLIn 1999, total logistics cost represents approx. 4.5% of sales. The biggest cost component was transportation cost, and 66% of refrigerators (177,000 out of 270,000) were shipped to customers directly from RDC.Logistics Network ModelingLogistics Cost
240、 ComponentsSales Volume by Distribution Channel(RDC direct Vs. Via LDC)Note: based on available sales statistics, the sales volume of Henan province was counted in NC region.77.8%7.1%15.1%83%17%2416423933599664508190066590340626In order to optimize logistics network, the following key factors would
241、be taken into consideration:Logistics Network ModelingvElectroluxs sales strategy to put more emphasis on retailers than on wholesalers and to serve retailers directly instead of via wholesalersvBalance customer service level and cost-to-servevMinimize total logistics cost (warehouse cost, transport
242、ation cost and inventory carrying cost)Apparently, the cheapest way to serve customers is to ship all goods from RDC to them directly with FTL quantities. But it conflicts with Electroluxs sales channel strategy and could not meet customer service level.Based on the customer requirements from 81 cus
243、tomer surveys, the following key implications have major impacts on logistics network modeling:vMajority of Electrolux customers (69%) can tolerate a lead time between 3 - 10 daysvFew customers think that the shortening of the lead time is the key driver for their sales increasevAverage retailers or
244、der quantity is about 15 units per order, and wholesalers order quantity is normally greater than FTLGiven the above customer requirements, 5 network options are considered: Baseline with 20 LDCs, Option1 with 8 LDCs, Option 2 with 18 LDCs, Option 3 with 12 LDCs and Option 4 with 6 LDCs, with 2 RDCs
245、 as a common denominator for all the options.Logistics Network ModelingSome assumptions are made to simplify calculation of transportation cost, which includes all tiers transportation costs at city level.Based on 1999 contract transportation unit price, the unit price not covered by the 1999 transp
246、ortation service contract is inferred as following: 0 - 1000KM0.090 RMB/KM/UNIT 1001 - 2000KM0.057 RMB/KM/UNIT 2001KM and above0.044 RMB/KM/UNIT In-town delivery rate is 10 RMB/Unit for all LDCs. 60% of LDCs in-town sales will be delivered to customers, the rest will be picked up by customers or pai
247、d by local sales office, and 100% of LDCs out-of-town sales will be delivered to customers by FTL Total sales volume is from financial department excluding goods returns which are negative numbers. RDC sales volume is from logistics RDC outbound record, and LDC sales volume equals total sales minus
248、RDC salesAll shipments from RDC are considered shipped from ChangshaLogistics Network ModelingIn the baseline model, only EOQ (Economy Order Quantity) is applied, and logistics network structure remains the same. So the warehouse and inventory carrying costdecrease, while transportation cost is stil
249、l the same.The total saving is RMB 2,090,000.Logistics Network Modeling31,720,00029,630,00032,060,000In the model of Option A, the following criteria are considered:vMaintain warehouses in key cities, and consolidate smaller warehousesvReduce double transportation as much as possiblevLead time from
250、any one of those LDCs to the cities within its service area is 1-2 days ( 1000km) except Ulumuqi (2874km from Xian), Xining (1146km from Xian), Nanning (1008km from Changsha) and Fuzhou (1211km from Changsha)Logistics Network ModelingOption 2LDCChangshaBeijingShenyangShanghaiChengduGuangzhouQingdaoS
251、uzhouTianjinDalianKunmingIn Option A, transportation cost is increased by RMB 350,000, warehouse cost is decreased by RMB 930,000, and inventory carrying cost is decreased by RMB 2,200,000.The total saving is RMB 2,780,000.Logistics Network Modeling31,720,00028,940,00031,050,000In the model of Optio
252、n B, the following criteria are considered:vAny city having 2 or more key accounts is considered to have a LDC. Although Dongguan has 2 key accounts, it is very close to Guangzhou (61KM), so no LDC is setup in DongguanvMandatory requirements of key account are satisfied in Dalian and KunmingvKey pro
253、vincial capital cities with high demand are considered to have LDC Logistics Network ModelingOption 3LDCChangshaBeijingShenyangShanghaiChengduGuangzhouQingdaoSuzhouTianjinDalianKunmingIn Option B, transportation cost is increased by RMB 520,000, warehouse cost is decreased by RMB 1,240,000 and inven
254、tory carrying cost is decreased by 2,680,000.Logistics Network Modeling31,720,00028,320,00030,050,000The total saving is RMB 3,400,000.In the model of Option C, the following criteria are considered:v6 sales regions, each has 1 LDC in the major cityvMandatory requirements of key accounts are satisfi
255、ed in Dalian and KunmingvLead time from any one of those LDCs to the cities within its service area is 1-3 days ( 1500km) except Ulumuqi (3114km from Chengdu) and Yinchuan (1900km from Chengdu)Logistics Network ModelingOption 1LDCChangshaBeijingShenyangShanghaiChengduGuangzhouQingdaoSuzhouTianjinDal
256、ianKunmingIn Option C, transportation cost is increased by RMB 760,000, warehouse cost is decreased by RMB 1,470,000 and inventory carrying cost is decreased by 3,070,000.The total saving is RMB 3,780,000.Logistics Network Modeling31,720,00027,940,00029,360,000In the model of Option D, an extreme si
257、tuation is considered where we want to use it as a yardstick to see the maximum savings which could be achieved theoretically. The same criteria as option C are followed, except no LDC is setup in Dalian and Kunming to meet mandatory key account requirements.Logistics Network ModelingOption 4LDCChan
258、gshaBeijingShenyangShanghaiChengduGuangzhouQingdaoSuzhouTianjinDalianKunmingThe total saving is RMB 3,980,000.Logistics Network Modeling31,720,00027,740,00028,970,000In Option D, transportation cost is increased by RMB 920,000, warehouse cost is decreased by RMB 1,600,000 and inventory carrying cost
259、 is decreased by 3,300,000.It takes longer time to consolidate warehouses for the options with less number of LDCs. Since it will change current branch offices order pattern to use EOQ model, it needs more management effort. Logistics Network Modeling18 LDCs12 LDCs8 LDCs6 LDCsTotal China MarketOptio
260、n AOption BOption COption D# of Units%NC1-2 days1-2 days 1-3 days1-3 days1-3 days80,250 27%35%EC2 days1-2 days1-3 days1-3 days1-3 days61,475 20%27%SC2 days1-2 days1-3 days1-3 days1-3 days54,004 18%10%Central3-5 days1-3 days1-3 days1-3 days1-4 days15,000 5%9%NE2 days1-2 days1-3 days1-3 days1-3 days45
261、,000 15%7%W2 days1-6 days1-7 days1-7 days1-7 days45,804 16%10%301,533 16%56%56%59%10%50%50%53%Electrolux Sales (Retailers)Potential Sales (Retailers)Electrolux Market SizeRetailer Service RequirementRisk RegionOptionnProject Introduction and BackgroundnCustomer Survey- Survey Approach- Survey Result
262、s- Findings and OpportunitiesnLogistics Network- EOQ inventory modeling- Logistics network modelingnRecommendations and next stepsnAppendices - Process flow - Cost analysisContentsRecommendations and next steps Based on the data analysis from the survey questionnaires and the key findings from the f
263、ieldtrips to various regions, the recommendations for improvement are as follows :-1. As much as possible, a set of detailed criteria which include warehouse operators need to have basic material handling equipment must be included before potential warehouse operators are considered qualified for ou
264、tsource requirements.In addition, a systematic training curriculum should be set up to ensure that all contracted warehouse operatorshave undergone training and certification by Electrolux logistics personnel for good warehouse practices and proper handling of Electroluxs products.2. There is an urg
265、ent need to formulate a clear policy on resolving Class B,C and damaged goods. A multi-functional task force which involves personnel from sales, after-sales repair, logistics and finance should be set up to tackle this ever-growing problem and ensure that all parties interests are addressed. Presen
266、tly, After-sales department has a policy on it, but is deemed to be isolated and not comprehensive; hence ineffective.3. Logistics department at Head Office should detailed a set of guidelines and procedures for all warehouse operators to follow, and as much as possible, rid off any guess-work and r
267、oom for personal judgement in accepting goods which are slightly damaged.4. Initiate immediately, a system of paper-based reporting which ensures timely information of all the associated cost related to logistics are captured, reported and analyzed on a monthly basis.In the mid-term, an automated in
268、formation system network could be considered. WarehousingRecommendations and next steps Based on the data analysis from the survey questionnaires and the key findings from the fieldtrips to various regions, the recommendations for improvement are as follows :-1. It is good logistics practice to diff
269、erentiate products into fast moving and slow moving items and this informa-tion should be collated on a weekly and monthly basis by Logistics Department and communicated to the relevant parties like sales, LDCs / RDC co-ordinators, production planning and senior management, so that timely and approp
270、riate decisions could be made accordingly.2. Inventory management is a big head-ache when customers placed orders erratically (both in terms of order frequency and order quantities )and LDC co-ordinators have no consistent policy for safety stock and re-order quantities, causing high inventory level
271、s to stockpile along the whole supply chain.It is recommended that a basic and universal system of setting inventory safety stock, re-order quantity and order frequency be set up by Logistics Department at the Head Office, by using the Economic Order Quantity(EOQ) model as a guide.This will help to
272、smoothen the fluctuations and make inventory management manageable at the regional andnational level.3. Logistics department has to have total control of all matters related to warehousing and transportation. Allwarehouses not under the control of Logistics department has to be brought under the fol
273、d of Logistics department or be shut down. This is to facilitate total management control and capturing of all the cost relatedto logistics within Electrolux China. Inventory controlRecommendations and next steps Based on the data analysis from the survey questionnaires and the key findings from the
274、 fieldtrips to various regions, the recommendations for improvement are as follows :-4. For the lack of timely information on inventory, order status, sales forecast, product availability and transport-ation status which are required simultaneously by RDC, LDCs, sales personnel and carriers, we reco
275、mmend a 2-stage solution to the problem.In the near term, we recommend that all branch offices and representative offices to have computers and be connected through LAN servers with the manufacturing plant to improve communication.In the medium term, we recommend that an Entreprise Resources Plannin
276、g (ERP) system like SAP or J D Edwards be installed company-wide, so that company-wide data can be consolidated and be used from a common database without duplication. Inventory controlRecommendations and next steps Based on the data analysis from the survey questionnaires and the key findings from
277、the fieldtrips to various regions, the recommendations for improvement are as follows :-1. Regarding control and quality of service provided by the numerous transportation service providers, we recommend to look for service providers to provide both transportation and warehouse services together for
278、 some regions wherever possible, so as to simplify processes, streamline responsibilities and improve control over inventory. One good example for this is Bao Gong, the service provider in Suzhou RDC which providesboth transportation and warehouse services.In this case, the service provider is more
279、committed as he is getting a bigger slice of the business and trainingof the service providers to handle shipments will be easier and more systematic.2. As much as possible, encourage customers (especially retailers) to perform self-pickup of goods from LDCs,so as to reduce transportation cost and l
280、iability. This could be achieved through a price rebate of RMB 10-15per unit for self-pickup customers. TransportationRecommendations and next steps Based on the data analysis from the survey questionnaires and the key findings from the fieldtrips to various regions, the recommendations for improvem
281、ent are as follows :-1. In the logistics network modeling, we would seriously consider eliminating warehouses which the Logistics Department presently has no control, provided that it does not affect the service levels to customers.2. We would also consider eliminating warehouses which has high inve
282、ntory of slow moving goods and has little sales demand in those regions. A good example in point would be the shutting down of Shandong branchoffice and LDC.3. In areas where service levels are not affected, we can consider consolidation of a few LDCs into one biggerLDC servicing the entire region.
283、For example, Shandong is close to Jinan and Shandong LDC could be easily combined with Jinan LDC to serve the customers in the entire region, with improved sharing of inventory information.4. If retail and key account customers service level requirements are 1-2 days for delivery, we can considerwid
284、ening the service areas of LDCs. For example, Chengdu which presently does not cover Chongqing, could made to cover customers in Chongqing, which is only 6 hours away by truck.5. Due to LDC being able to provide shorter delivery lead time of 1-2 days, we recommend to use LDC to reduce inventory leve
285、ls of consignment customers (presently 20-60 days of inventory) to 10 days of consignment inventory through vendor managed inventory and implementation of stable and timely order and inventory replenishment system. Logistics networkRecommendations and next steps Based on the data analysis from the s
286、urvey questionnaires and the key findings from the fieldtrips to various regions, the recommendations for improvement are as follows :-6. Due to seasonal sales fluctuations, where sales volume could vary from +80% to -26% of average sales volume during normal seasons, we should, as much as possible,
287、 negotiate with warehouse providers based on a flexible pay-as -you use basis, rather than a flat fee all year round.7. It was found that customers (both distributors and retailers) from Northeast region holds large inventory and enjoys high order fulfil rate and short delivery lead time, as they ob
288、tain all their goods from the LDC, irrespective of the size of their order quantities. This has caused unnecessary build-up of inventory at the Shenyang LDC, where the correct practice is to get distributors to order direct from Changsha, due to their large order quantitiesto fit Full Truck Load qua
289、ntities and retailers to order from LDC where their orders are usually too small to make up a Full Truck Load quantity. Logistics networknProject Introduction and BackgroundnCustomer Survey- Survey Approach- Survey Results- Findings and OpportunitiesnLogistics Network- EOQ inventory modeling- Logist
290、ics network modelingnRecommendations and next stepsnAppendices - Process flow - Cost analysisContentsReturn Process: from Customer to LDCReturn ProcessCustomer(1) Customer accumulates defective goods up to a certain amount (e.g. 5 units), then informs the After Sales Service Center directly or via s
291、alesmanAfterSales(3) Submit Return Requirement(5) Pick up from the customer(4) - Issue Return Form - Inform the carrier for pick-up(7) Report periodically(2) Repair people go to the site for verification - Fix the refrigerator if possible - If can not fix it and have to return it, repair people fill
292、 in Trouble Shoot Record FormLDCW/HCarrier(6) Return to warehouseWarehouse:fill in Input FormBranch: F/A, SOP,Log. Dept.B. Mgr.Return Process: from LDC to RDC(1) Submit Return Requirement(3) Pick up from LDCReturn Process(2) - Issue Return Form - Inform the carrier for pick-up(5) Report periodically
293、LDCW/HCarrier(4) Return to RDCWarehouse:fill in Input FormBranch: F/A, SOP,Log. Dept.B. Mgr.RDC: F/A, SOP,Log. Dept.RDCW/H(5) Report periodicallyWarehouse:fill in Output FormReturn Process: from Customer to RDC(1) Submit Return Requirement(3) Pick up from customerReturn Process(2) - Issue Return For
294、m - Inform the carrier for pick-up(5) Report periodicallyCustomerCarrier(4) Return to RDCWarehouse:fill in Input FormBranch: F/A, SOP,Log. Dept.B. Mgr.RDC: F/A, SOP,Log. Dept.RDCW/HExchange Process: from Customer to LDCExchange Process(1) Customer accumulates defective goods up to a certain amount (
295、e.g. 5 units), then informs the After Sales Service Center directly or via salesman(6) Deliver good products to the user(7) Pick up defective goods from the userCustomerAfterSales(3) Submit Return Requirement(4) - Issue Return Form - Issue Delivery Bill - Inform the carrier for exchange(9) Report pe
296、riodically(2) Repair people go to the site for verification - Fix the refrigerator if possible - If can not fix it and have to exchange it, repair people fill in Trouble Shoot Record FormWarehouse:- fill in Input Form- fill in Output FormLDCW/HCarrierBranch: F/A, SOP,Log. Dept.B. Mgr.(5) Pick up goo
297、d products(8) Return detective goodsRepair ProcessRepair Process: among User, After Sales and Customer (Seller)(1) User informs the After Sales Service Center(3) Inform the seller of exchange or return(4) If exchange: deliver good products to the user, and pick up defective goods from the user(4) If
298、 return: pick up defective goods from the userUserAfterSalesSeller(2) Repair people go to the site for verification - Fix the refrigerator if possible - If can not fix it and have to exchange or return it, repair people fill in Trouble Shoot Record FormRepair ProcessRepair Process: between Service C
299、enter and LDC Warehouse(1) Apply for defective goods pick-up from LDC(4) Apply for repaired goods delivery to LDCWarehouse:- Fill in Output Note of defective goods- Fill in Input Note of repaired goods(6) After Sales delivers repaired goods to warehouse(3) After Sales picks up defective goods from w
300、arehouse for repair(2) Issue Bill for Warehouse Transfer(5) Issue Bill for Warehouse TransferAfterSalesLDCW/HBranch: F/A, SOP,Log. Dept.B. Mgr.(7) Report periodicallyOrder to Delivery Process: from RDC to CustomerOrder to Delivery(1) Customer places an order via phone call, FAX or salesman(2) If yes
301、: Branch Office submits Sales Order to RDC(3) If yes: - RDC informs the carrier - Issue Delivery Bill(4) Carrier picks up goods from RDC(8) Carrier delivers goods to customer(7) Branch Office passes delivery information to Customer(3) If no: inform the Branch Office(6) RDC passes delivery informatio
302、n to Branch Office(5) Carrier pass delivery confirmation to RDC- Check credit?- Contract & other info.?- Payment history etc?.- Check credit?- Check inventory?- Contract & other info.?- Payment history etc.?CustomerCarrierRDC: SOP, F/A, Log. Dept.Branch: F/A, SOP,Log. Dept.B. Mgr.Order to Delivery P
303、rocess: from LDC to CustomerOrder to Delivery(2) If yes: - Branch Office informs the carrier - issue Delivery Bill(3) Carrier picks up goods from LDC(4) Carrier passes delivery confirmation to Branch Office(1) Customer places an order via phone call, FAX or salesman(6) Carrier delivers goods to cust
304、omer(5) Branch Office passes delivery information to Customer- Check credit?- Check inventory?- Contract & other info.?- Payment history etc.?CustomerCarrierLDCW/HWarehouse:- Fill in Output Note(7) Report periodicallyBranch: F/A, SOP,Log. Dept.B. Mgr.Order to Delivery Process: from LDC to Customer -
305、 Self Pick-upOrder to DeliveryCustomerLDCW/H(3) Customer picks up goods from LDC(1) Customer places an order via phone call, FAX or salesman- Check credit?- Check inventory?- Contract & other info.?- Payment history etc.?(2) If yes: Branch Office issues Delivery Bill and inform customer of self pick
306、-upBranch: F/A, SOP,Log. Dept.B. Mgr.Warehouse:- Fill in Output Note(7) Report periodicallyOrder to Delivery Process: from RDC to LDCOrder to Delivery(6) Carrier delivers goods to LDC(4) Carrier passes delivery confirmation to RDC(1) Branch Office submits Sales Order- Check Branch stock information&
307、 inventory- Check RDC Inventory(2) If yes: - RDC informs the carrier - Issue Delivery Bill(3) Carrier picks up goods from RDC(2) If no: inform the Branch Office(5) RDC passes delivery information to Branch OfficeLDCW/HCarrierRDC: F/A, SOP,Log. Dept.Branch: F/A, SOP,Log. Dept.B. Mgr.Warehouse:- Fill
308、in Input Note(7) Report periodicallyOrder to Cash Process: PaymentOrder to CashCustomer pays for the goodsOffice Assistant checks the paymentBranch F/A checks the paymentThe payment is put into Branch AccountThe payment is transferred to CNT AccountCNT F/A checks it for statisticsSales Assistant kee
309、ps records of the paymentSOP checks it for statisticsOrder to Cash Process: InvoiceOrder to CashCustomer asks for invoiceSalesman submits Invoice ApplicationOffice Assistant checks the application (Price/Amount/Accounts Receivable)Office Manager signs the applicationBranch F/A makes out the invoiceCNT F/A checks it for statisticsCustomer sign for the invoiceSales Assistant keeps records of Invoice Confirmation
