Supply chain management

contents

• introduction
• Lego's big move
• Starbucks improved supply chain
• points to ponder
• conclusion

Supply chain management

• management of the flow of goods
• two very different case studies
• both have visible supply chains
• both companies follow sustainability practices

Lego

• 6th largest toy company
• 1932 Ole Kirk Christiansen founded the company
• From moulding till distribution takes 10 days
• Market = 130 countries, USA and Mexico
• All suppliers have to sign a code of conduct

Raw Materials

• Plastics: Saudi Arabia and Kuwait
• Pocessed in countries like Singapore, Korea etc
• Manufacturing in Billund, Denmark
• Rubber: Malaysia and Thailand
• After processing shipped to rubber trading centers

The Big Move

• 2004: 20% of logistics were cut
• Distribution centers were all consolidated into one in Czech Republic 
• 2008: 19-percent jump in annual revenue, 21% profit margin
• Transport was outsourced by DHL due to seasonal sales
• before: 55 transporter providers, 11 warehouses and now 2 carriers

The big move

• transportation issues
• skilled labour
• reduction in number of products and services
• "odd" orders and transport inefficiency

Benefits to LEgo

• 2005 to 2008: 35% in sales, cost reduced from 75% to 33%
• Number of touches reduced to one
• lower cost of labor, value added tasks by labour 
• transport company could increase base of service
• unnecessary inventory was reduced

Conflict with DHL

Starbucks Supply Chain Management

Starbucks

• 16,700 retail stores, 50 mil customers
• coffee and other merchandise is supplied
• 2007 to 2008: supply chain expenses rose by $825 mil
• New stores but supply chain was old
• http://www.starbucks.com/responsibility

Need to change

• 2008: analysis of supply chain
• 60 to 70% expenses were tied to third party logistics (3PLs)
• simplify the complex, bring costs down, improved supply chain
• Africa, Asia, Latin America to US and Europe
• 5 Regional DCs in USA, 2 in Asia and 2 in Europe

Simplify the complex

• 4 basic supply chain functions
• plan
• source
• make 
• deliver

reducing costs and improving inefficiencies

• 'should cost' model
• regionalizing coffee production: 4 coffee plants
• Washington, Nevada, York + Columbia

One World One Logistic System

• stores are supplied by either regional DC or small warehouse
• 45 Central DCs; dairy products, baked goods, and paper items like cups and napkins
• 3PLs were reviewed for productivity and contrast rates
• more confidence in company, retained supply chain talent, increased savings
• complete supply chain sketched and one logistics systems throughout

Conclusion

• unexpected benefits
• conflict resolution
• supply chain knowledge retention
• simplify
• reduce when necessary

References

• Logistics. LEGO's game-changing move. By James A. Cooke, Editor | From the Quarter 3 2009 issue
• http://www.supplychainquarterly.com/topics/Logistics/scq200903lego/
• From bean to cup: How Starbucks transformed its supply chain By James A. Cooke, Editor | From the Quarter 4 2010 issue
• http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/