Pan-European Supply Chain Case Study

A re-structure of the EMEA (Europe Middle East and Africa) region of a major US athletic footwear manufacturer from a collection of licensees to a combination of seven subsidiaries in Western Europe (who represented 80% of the turnover) and numerous licensees in Eastern Europe, the Middle East and South Africa, gave the organisation the opportunity to review their supply chain and determine how to capitalise on the new structure.

      There were no pan-European systems operating, each subsidiary continued to operate their own legacy systems from when they were licensees.

      The staff in the subsidiary operations and particularly the Country Managers, all of whom has previously worked for the licensees, were highly independent.

      The countries were used to buying their own stock and holding it in their own warehouses.

      The product was sports footwear, which is highly fashion driven.

      About 70% of the throughput has a life of one season (around 4 6 months).

      The order cycle is five months from placement of manufacturing order to delivery into Europe.

      Whilst the total production quantity was fixed at time of placing the manufacturing order, the size breakdown within the order could sometimes be changed until about 3 months before delivery.

      The customers typically would not start placing firm orders until about three months before the start of the season.

      The direct loss due to obsolete stock cost EMEA something in excess of 2.65 million in 1997. In addition to the direct margin loss, the effect on the brand image of selling obsolete stock at very low prices was unquantified, but reduction in brand value was thought to be substantial.

In order to overcome this problem, a way had to be found of predicting a consolidated EMEA demand, order against that demand level, monitor customer orders against the consolidated demand and to actively manage the stock throughout the region.

      The Country Managers were extremely reluctant to relinquish their control of the stock, so this required spending a lot of time with them explaining how having a single European stock could actually improve their availability whilst minimising their exposure to margin erosion at the end of the season.

      The next challenge was to gather reliable forecast information. The country operations were reluctant to submit monthly forecasts and to update them every month. At first the forecasts were very unreliable, but by constantly monitoring the actual outcome against the forecast and feeding this information back, the accuracy of the forecasts from most of the country operations improved. It was also possible by this means to assess the degree of confidence in each forecast and make appropriate adjustments in the EMEA office to the orders for manufacture.

      A consolidated forecasting system had to be developed and implemented. This was built as a bespoke development, utilising the PICK relational database as its core. It was implemented in all of the European offices, with a consolidation facility in the EMEA office. Transmissions being done over the WAN.

      Consolidated stock information for all of Europe was required to enable stock to be actively managed and shared by all of the country operations. This was effected by the implementation of JBA throughout Europe. Having a consolidated view of stock allowed the Inventory Management team to identify potential residual stock early enough in the season to ensure that appropriate actions were taken to minimise losses.

The net effect of these actions was to reduce the margin loss by 2 million in 1999 compared with 1997.

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