Answer the Following 2 questions from the Passge Below:

1. Discuss Key Supply Chain strategies from each industry type?

2. Discuss the impact of these strategies on an individual company's supply chain?

Aerospace Supply Chain Case Study

Aerospace Industry is characterized by high material costs (about 65-80%). Manufacturing systems and regulatory compliance are considered to be very complex, coupled with the limited number of suppliers due to the high barriers to entry. Moreover, the aircraft manufacturers have to do whatever it takes to win the order long before the commencement of production.

There are two things Boeing and Airbus have in common, utilization of lean manufacturing systems and strategic sourcing concepts. However, the overall implementation of strategic sourcing is a bit different between the two companies.

1. Boeing wants to encourage more flight frequency and direct route using a smaller capacity aircraft. Then they decide to outsource many things such as the design, testing, and production of key components to key industrial partners and try to reduce the number of components that go to assembly. The ultimate goal is to finish the final production process within 3 days. 2. Airbus takes a bit different marketing approach. They want to utilize high capacity airplane to help airlines drive the operating cost down. They decide to selectively outsource the production of parts and keep the design and production of key components in-house.

Fashion Supply Chain Case Study

Supply Chain of the fashion industry involves a time-based competition. Many customers have unique product needs, but competition is very fierce because of the low barriers to entry. Many new players try to offer specialized products to customers all the time. This section features the case study of H&M, Benetton, Zara, Adidas, Louis Vuitton and Marks & Spencer (M&S).

3. H&M aims to be the price leader in the fashion market. In order to materialize its vision, H&M tries to eliminate the middlemen in various stages of the supply chain and consolidate the buying volumes. Product design is also the central part of its strategy. They don't try to follow the high fashion designs but try to adopt the street trends which are easier to produce.

They don't invest in production facilities at all because they utilize a network of nearly 700 suppliers located in Asia and Europe. Also, they don't own any stores because they choose to rent the space. In order to control its supply chain, they use a central warehouse in Germany to receive and ship products to local distribution centers in different countries.

At the end of the day, they can bring products to the market within 2-3 weeks.

4. Benetton, in contrast, chooses to have full control of its production, but allow its licensees to operate the stores so they can focus on production and quality control. The reason is that they would like to create worldwide brand awareness.

For fast-moving products, they use production facilities in Europe. Asian suppliers will perform the production of standardized products.

5. Zara is very famous for its time-based strategy. In order to launch a new product within 15 days, Zara uses a small lot production. A new product will be tested in pilot stores. If product sales are good, a larger batch will be ordered. Otherwise, remaining products will be removed from the shelves and sold as mark-down in other stores. This creates the perception among consumers that Zara's products are unique and you have to take it while stock lasts.

Vertical integration contributes to the success of Zara, they own the majority of its production facilities and stores (this is the reason why Quick Response can be effectively implemented). Its automated distribution centers are strategically located in the center of populations so products are delivered to stores quickly.

Zara also works with Air France, KLM Cargo, and Emirates Air in order that they can coordinate directly with the airlines to make the outbound shipments to its stores and bring back some raw materials and semi-finished materials with return legs.

6. Adidas copes with changing customers' demand by adopting a Mass Customization strategy. The whole idea is to develop, market and deliver the product variety that most customers will find what they want.

The first step towards mass customization is to strategically offer product choices. Too few variations will disappoint a customer, but too many variations will simply postpone a buying decision.

After that, Adidas asks the same key suppliers to produce custom components in order to achieve the economy of scale.

In order to compensate for a long waiting time, Adidas uses air freight or courier service. The reason why they can do this is that customized products are sold directly to customers so they have the highest profit margin to compensate for the higher transportation cost.

7. Louis Vuitton is one of the largest luxury brands in the world. In the past, they supplied products to department stores. In order to create the best buying experience and control counterfeiting products, they establish their own stores in high-end shopping malls. Having own stores means they can have a better understanding of buyer behavior so they can adapt most rapidly.

8. Marks & Spencer (M&S) is one of the biggest fashion retailers in the UK. Other than fashion items, they also sell food items and home products.

The primary focus of M&S is always a cost reduction. For example, they ask each supplier to develop samples for all ranges of fashion items so they can decide which items they will order from whom. The delay in the development of samples, testing, sample approval, and final decision making causes a very long time-to-market. As a result, they're able to respond to the rapid change in the fashion industry. However, they change some of the sourcing processes as below, - Close its production facilities in the UK and use suppliers in Asia or Eastern Europe - Instead of asking suppliers to produce the items exclusively for them, now they allow suppliers to produce items for other retailers too. Then, suppliers don't have to provide a dedicated production facility which results in no investment cost. Using common raw materials also helps to reduce cost drastically - Assess the capability of each supplier and reduce the number of suppliers - Ask low-cost producers to make standard items and ask capable suppliers to make innovative products - Reduce the number of SKUs and pay much attention to 500 best-selling items Supply chain strategy of the fashion retailing industry is summarized below,

FMCG Supply Chain Case Study

FMCG industry is typically the products sold to customers at a low cost and will be completely consumed within 1 year. The nature of this industry is a shorter product lifecycle, low-profit-margin, high competition, and demand fluctuation. This section will present the case study of P&G, Unilever, Coca-Cola, and L'Oreal respectively.

9. P&G: forecasting and new product introduction have always been the issues for many FMCG companies, P&G is no exception. To cope with this, P&G conducts merchandise testing at the pilot stores to determine the customer's response to a new product before the launch. The result is that the forecast accuracy is improved because a demand planner has an additional source of data to make a better decision. Moreover, products can be shipped to stores in-time, then lost sales are minimal.

10. Unilever also feels that the competition in the FMCG industry has significantly increased. They have to launch the new products on a regular basis, but the forecast for the new product is difficult. So they create a better classification of new products (base, relaunch, repack, new) using a regression model to identify potential forecast errors for each type of new product.

11. Coca-Cola doesn't really have many stock-keeping units when compared with other companies in the same industry. However, products go to over 2.4 million delivery points through over 430 distribution centers. Managing transportation at this scale is the absolute challenge.

In order to streamline the delivery, Coca-Cola implemented vehicle routing software. The reason is that is the software vendor has a very good relationship with Coca-Cola's legacy ERP software vendor. Moreover, the vendor has a solid connection with the university who can help to develop the algorithm that fits in with the business' needs. The result is that transportation planners at each distribution center can use the new tool to reduce traveling time/distance on a daily basis.

To expand its global footprint, Coca-Cola creates a global supply chain through a franchising model. They only produce key raw materials such as beverage bases and syrups. Then these raw materials will be sold to 300 bottling partners throughout the world. Then, franchisees in each area make the final products by adding water, sweeteners, and carbonate. Then finished products will be sold via the retailing partners. From its inception as a local company in Atlanta, Coca-Cola has now become one of the biggest multinational companies in the world, thanks to the franchising model.

12. L'Oreal is one of the world's best cosmetics brands with 41 factories across the country. To speed up the revenue growth in major markets, they acquire other brands as below,

- Maybelline New York for expansion in the US

- Yue-Sai for expansion in Asia

- Mininurse for expansion in China

They also establish the R&D facilities in Chicago and Shanghai so they can understand and develop products that customers love.