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f+h Intralogistics 1/2016

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  • Intralogistics
f+h Intralogistics 1/2016

Supply chain increases

Supply chain increases the availability of goods SUPPLY CHAIN MANAGEMENT In spite of extensive investments, above all in the field of marketing, an Indian fashion goods manufacturer could not succeed in positioning themselves as the market leader in their industry. The insufficient earning power of the business was in the main caused by structural problems in the field of logistics. Coping with the structural problems and reducing logistics costs a complete restructuring of the supply chain was necessary. AFL Fashion Limited is one of the largest fashion goods manufacturers in India with three distinct brands. After economically challenging times at the end of the 1990’s the management undertook extensive changes in the business, in order to newly present the group of companies to the market place. The aim of these measures was to establish themselves as the leading manufacturer of fashion goods in India. However, despite all their exertions in market positioning and branding, the owners and the management were not satisfied with the company balance-sheet that had been achieved. Above all in the areas availability of goods, stocks of primary materials and finished goods as well as logistics costs, the targets which had been set were not being met on a regular basis. In order to solve the supply chain problems AFL defined a restructuring program for the supply chain− but they were not aware of the complexity of such a measure from the beginning. In order to realize this project the business contacted Miebach Consulting on the basis of their extensive expertise in supply chain optimization and in the fashion industry. The objective was to raise the “bottom line results” to the intended level. Vision and goals The three brands in the portfolio of the clothing fashion manufacturer are partly in competition with one another. The company’s supply chain covers procurement, manufacturing, as well as the distribution and sale of the goods in their own Retail Outlets (Illustration 01). At the moment these sales outlets are supplied by a central storage location for India. At the start of the project Miebach Consulting installed a joint task force, which integrated experts from all areas of the business right along the supply chain and for the three brands. f+h Distribution 1/2016

Together with the AFL management a “Supply Chain Vision”, including their service-driven and economic goals, was formulated: “To pioneer a sustainable flexible supply chain in the Fashion Industry empowering the AFL Fashion Brands to deliver superior value to its consumers, with operational cost and capital efficiency.” Over and above this, based on international benchmarks and the intention of setting new standards in India’s fashion industry, the following goals were set: n Days of inventory held- 60 days maximum (previously it was 120 days) n Reaching 96 percent reliability of delivery (previously it was 70 percent) Precise problem analysis makes effective solutions possible As part of a business process mapping along the supply chain, from the suppliers through to the retail outlets, the task force identified different problems in the field of communication, control, and monitoring: n Non-homogenous, IT systems which were not integrated n A lack of data integrity and therefore have false key performance indicators n Process responsibilities were not clearly allocated As a consequence measures to remove the interface problems between the IT systems and a standardized data hierarchy were introduced, which for example attributes sales costs and stocks to the respective brand with a more appropriate effort. In this way the causes of the high stocks or of the unsatisfactory availability of goods could be determined in the next step: n Setting up buffer stocks on each level of functioning, starting with sales planning through to production and up to supply chain management because of non-transparency and unreliability in the supply chain n A push replenishment system in the retail outlets, controlling stock levels that are too high or incorrect at the POS n Extensive obsolete stock levels caused by past mistakes n Significant values for company business objectives such as days of inventory held and availability of goods are not a constituent part of the individual target agreements n A high number of decentralized supply chain and procurement functions are attributed to the brands and work in isolation from one another Firstly a key number system was built up, which records the most important key supply chain figures on all levels and is available in a consolidated form to the respective decision-making plans. On this basis indicators such as levels of stock or availability of goods were accepted into the personnel target agreements. From now on these are essential components of the company business objectives and are published on monitors throughout the entire business. The key number system takes into account external as well as internal measurement parameters, which includestock levels, the availability of goods as well as the reliability of delivery and ensures that it is consistent across all brands. In addition supplier monitoring was introduced and all suppliers (external as well as internal) were made responsible for any deviations. With the help of these measures Miebach was able to create a uniform appreciation and awareness of the objectives across all areas of the business. The key numbers system provides the required level of transparency in order to control the levels of stock and availability effectively. Centrally anchored in the structure of the organization The fashion business had been organized classically; up until this time according to the brands, which managed all the functions from procurement through to production and up to sales autonomously. With the exception of logistics, which adopted a central position, the supply chain and procurement functions were forced into purely sales-driven objectives. Therefore these areas of functioning scarcely had the opportunity to optimize levels of stock and product availability or to use the potentials for synergy between the brands. Based on these realizations a new, central supply chain and procurement function was set up, which is now no longer subordinate to the brands and which sees its central task in achieving the new service level and stock level objectives. Breaking away from the past ways of thinking The AFL Sales Team – as in almost every Indian retail business – out of conviction trusted the Indian saying “Jo dikhtha hai, woh bhikhtha hai”, which freely translates to „One buys what one sees“. As a consequence this traditional approach meant that the retail outlets were often filled with goods far above the maximum levels of capacity for the sales stands. In order to break with this ingrained tradition, with the help of a pilot study in 20 retail outlets the capacity was lowered by 30 percent in each case and the goods were displayed in a new and clearly visible way. The results had a positive outcome and in part led to higher sales, so that the principle could be rolled out across the board and the company. 01 The existing supply chain indicates problems in the field of communication, control and monitoring f+h Distribution 1/2016

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