Assignment 1

A. Order fulfillment

Order fulfillment, in general speaking, it is the complete process form of sales inquiry to delivery of a product to the customers. In logistic function, in a border sense it refers to the way that firms respond to customs orders.

Real Life Example

There are several possible steps of order fulfillment. I am going to take Dell computer as an example to lists the steps below.

1. Product Inquiry - Initial inquiry about offerings, visit to the web-site, catalog request

For Dell, buyers can visit their web page for the inquiry about the products. The products are dividing into different categories and with its spot light and introduction. Customers can choose the product they want and they can have some changes with t the hardware or modification of the computer.

2. Sales Quote- Budgetary or availability quote

For Dell, there mainly two ways for quotation, the first one is direct quote from the system, after the customers choose the product and selecting the package, the price is show in the shopping cart. Another one is that call their sales hot lines and ask for the quotation.

3. Order Configuration - Where ordered items need selection of options or order lines need to be compatible with each other

For Dell, it is a very good example of order configuration, as when the buyer click on the product on the page, there are many order configuration. For example, it would ask for the selection of the hardware, the outfit modification of the product, the necessity of the complements, special package of other related products etc

4. Order Booking - The formal order placement or closing of the deal
(issuing by the customer of a Purchase Order)

Order booking, Dell can have online order booking and it require the customers to fill in some information for the order booking and the delivery address etc.

5. Order Acknowledgment / Confirmation - Confirmation that the order is booked and/or received

For Dell , the confirmation of the booking mainly have two steps, one is email confirmation , which an confirmation email is sent to buyer. Also the sales officer may call for the receiver of the order.

6. Invoicing/ Billing - The presentment of the commercial invoice / bill to the customer

For Dell, the invoice is automatically form when the buyer filling in the delivery details.

7. Order Sourcing / Planning - Determining the source / location of item(s) to be shipped

For the order sourcing, Dell asks the buyer to fill in the delivery address, contact number etc during ordering.

8. Order Changes- Changes to orders, if needed

When the order is confirmed and the order is in processing, there can be change by calling the sales officer.

9. Order Processing- Process step where the distribution center or warehouse is responsible to fill order (receive and stock inventory, pick, pack and ship orders).

After the order confirms, and the payment is received, Dell starts to configure the product and delivery the product directly to the buyer.

10. Shipment- The shipment and transportation of the goods. 

11. Delivery- The delivery of the goods to the consignee / customer

Dell‘s order is directly deliver to the customer

12. Settlement - The payment of the charges for goods / services / delivery

For the payment, Dell allows several payment methods, such as, credit card payment, bank cash payment, bank transfer payment etc.

13. Returns - In case the goods are unacceptable / not required

Dell allow returns of the products, within the 14 days of delivery, if defeats or any other problems are found.

B. Push and Pull system

Push vs. pull system is widely used by supply chain operations.

Push System

For the push system which required the company to keep certain level of stock. The company may use different method to calculate the optimal level of stock. This method is to fulfill the customers’ need since the company have certain level of stock, they can fulfill the customer order immediately when they receive the order. The push system have many advantages, first, the company can reduce the risk of the customer switch to another homogenous products due to stockless, since the customer can choose homogenous products if there is out-of-stock. Second, the company can obtain economics of scales, because the company can easily reduce the cost when they produce since they can choose the production size. Lastly, the inventories are easier to control since the company has calculated the optimal stock level, the company just need to meet the optimal stock level. However, the push system have different disadvantage too, first, the company may have overstocking or under-stocking, since there are different unpredictable factors that make the product become more popular or unpopular. Second, the company have high inventory cost, since, the product are make-to-stock, the company need to find a warehouse to store the products. The example company of using push system is Shell Oil Company, the oil is save underground, and the company waits until a car to come in to refuel. The oil companies are used push system.

Pull System

Pull system is the production method which started production when the order is occurred. The company starts to produce when the customer had ordered. The main advantage of this system is to minimize the inventory level which can lower the holding cost. Since the company start produce when the order is place, and they may send the products to the customer when the company finished the production, which can significantly reduce the holding cost for the company. However, this system has a disadvantage too, due to make-to-order; the company may have high risk on out-of-stock. The example company using push system is Toyota, this company produce when they receive the order. Toyota use Just-in-time system to produce, when they receive the order, they may asked the raw materials suppliers to send them the raw materials. This method can significantly reduce the holding cost of raw materials since the raw materials are ordered when the production order is place.

Actually, many companies combined these two systems for their production, for example, Dell computer produce the different components for different models of the computer, and this involved push system. When they received the customer order, they will have the customer to customize their request and this involved pull system. The other example is the motor car company, Rolls Royce, Rolls Royce used the same method of Dell computer, Rolls Royce will produce different component of the car, when they have order, they can let the customer to customize the inside component of the car, for example, the customer can order for a television inside their car. These two companies involved both push and push system.

C. Reverse logistic

Reverse logistic is the process of moving products or goods from customers to distributor or manufacturer. It involved in reducing, managing and disposing of hazardous or non-hazardous waste from packaging and products. Manufacturer can reuse or recycle the products and use it to create value or disposal. The manufacturer can remanufacture the product or refurbish the recycled products and transfer the non-usable products into a usable product.

The goal of reverse logistic is to optimize the aftermarket activity, therefore saving cost and saving environment resource. In addition, reverse logistic can also improve the customer’s satisfaction.The process starts from the customer return a defected product, and the retailer ship the defected product to manufacturer and then manufacturer may perform a detective work and repair work. And finally, the repaired product would be either resale or return.

Real Life Example

Many battery manufacturers started to collect used batteries. The consumers dispose defected batteries at designated retailer or location. Subsequently, the retailers shipped these defected batteries to battery manufacturers. The battery manufacturers would extract reusable metal from these defected batteries and use the extracted metal in manufacturing process of their new lithium batteries. By recycling the defected lithium battery, battery manufacturers can use less environmental resource.

D. Disintermediation 

Disintermediation is the removal of intermediaries in a supply chain.High market transparency allows the companies to maintain the consumers, in that buyers are aware of supply prices direct from the manufacturer.Buyers bypass the middlemen (wholesalers and retailers) in order to buy directly from the manufacturer and pay less. Buyers can alternatively elect to purchase from wholesalers. A business-to-consumer company may use electronic commerce functions as the connection between buyer and manufacturer.The advantage of disintermediation is obviously the greater efficiency and lower cost achieved by reducing the number of transactions and processes involved. It may not easy to achieve because wholesalers who sell the products of many manufacturers may achieve economies of scale that a single manufacturer's distribution system can not replicate.

At the start of the Internet revolution, electronic commerce was seen as a tool of disintermediation for cutting operating costs. It allows consumers to purchase products directly from producers via the Internet, the product delivery chain would be shortened.

Real Life Example

Company – Dell, sells many of its systems direct to the consumer. It removes the intermediaries in the supply chain. Dell directs sell its products to their customers. Dell is successful in creating the value of e-commerce. The customers can purchase the products directly in Dell’s website.

Post company visit - LEE KUM KEE

LEE KUM KEE is found by LEE KUM TONG in 1888. At first, the main product of LEE KUM KEE is Oyster source. The target market at that time is not local family. It targeted the chinese restaurant in foreign countries. It mainly because, oyster source, at that time, is a luxury stuff with quite expensive price.

The vision of LEE KUM KEE is to provide the chinese cuisine to the foreign countries. This vision is symbolized by the brand of LEE KUM KEE. The bridge shape liked brand is the way for the chinese cuisine get into Eastern countries.

Nowadays, LEE KUM KEE not only produce oyster source, but many other sources, which already been a necessity in local family's kitchen. With a wide range of source, LEE KUM KEE being the giant source company in Hong Kong.

Throughout the whole supply chain in LEE KUM KEE, quality control is essential part for producing a perfect source. The quality control include ingredients checking, taste testing, etc.
Taste testing is mostly related to the customer as testers will test whether the taste of the source is acceptable or not. These testers received training about the original and perfect taste of each source. This process guarantee the quality of every source.

For our company visit of LEE KUM KEE, we visited a factory that only product oyster source. Also, we knew that that factory will only produce once everyday in order to produce sufficient amount of Oyster source to the market.  The amount of production will vary according to the market demand. However, because of lack of significant peak season, there is no significant fluctuation of production process. Lack of significant changes, it helps the demand forecasting.

 

Expanding the company's vision, INFINITUS is found in 1992. INFINITUS aims to bring the benefit of chinese herbs toward foreign countries. The types of products is much more various for INFINITUS as it mix herbs into facial masks, toothpaste, drinks and even detergent. During these 20 years, INFINITUS already got the permit from the related department in China.Till now, the main target of INFINITUS is still Mainland and Hong Kong. From time to time, as benefits of chinese herbs are being recognized by the world, INFINITUS will sell their product all over the world.

From this company visit, we learned that  the most costly part of the supply chain is not necessarily the most important part of supply chain. It depends on the nature of the products. For LEE KUM KEE, they treat Quality Control as one of the essential part of supply chain. It is because, a source with bad taste will no longer being attractive to their customers.

Post Company Visit - Yakult

Yakult is a Japanese probiotic mike-like product which was created by Minoru Shirota in 1930. Dr. Shirota discovered that lactobacilli were effective in suppressing harmful bacteria within the intestines.


Philosophy
For a long time, people have believed that a healthy intestinal tract leads to a long life. That was also the belief of our company's founder, Dr. Minoru Shirota. He worked with volunteers, then developed an inexpensive, good tasting beverage, so that as many people as possible could benefit from Lactobacillus casei strain Shirota, which reaches the intestines alive and promotes intestinal health.

Business Details

Yakult started their business in 1969 in Hong Kong. The first factory was located at Kwun Tong and now the factory is moved to Tai Po. In the beginning, Yakult used to employ “Yakult Mama” direct marketing strategy to sell the drink. It used to use glass bottles in order to recycle and reuse them. Then Yakult changed to use plastic bottle in 1968. Yakult has recently published a new flavor of Yakult – Yakult LT

Yakult has localized its bottle size in different coutries. In Australia, Europe, India, and Indonesia, Yakult comes in 65mL bottles. In the Americas (including Mexico, one of Yakult's largest selling markets), Japan, Philippines and South Korea, 80 ml bottles are available. In Thailand, Singapore, Taiwan and mainland China, and the United States. It is also available in Hong Kong where it comes in 100 ml bottles.

The following is the latest video advertisement of recent introduced Yakult LT.

During the Visit

We have learned:

• The breeding process of the lactobacilli 
• The manufacturing process of Yakult drink
• The design of Yakult drink bottles at different countries
• The underlying  biology principles of lactobacilli 
• To taste the freshly produced  Yakult LT

 Reflection - Yakult Business Practice
After the company visit, we had a deeper understanding of Yakult Co. There are several business practices are worth highlighted.


Emphasis on Quality Control

1. Actively apply Replenishment & recycle with retailers

• Strict Quality Control, because of short valid period of Yakult drink( 1 month)

2. Provide marketing strategy – Impact Marketing

• suggest placing loads of Yakult drinks at the eye-catching place of store
• Increase the sale of drink
• Reduce the amount of recycling drinks

3.. Insist of placing bottles by their own staffs

• ensure first in first out (FIFO)
• No Yakult drink at Tastes because of the negotiation of this policy 

4. Yakult has their own fleet of trucks to distribute drinks



Localized of product and selling method



5. Design localized bottles(100mL)

• maximum size, localize for HK people which culture prefers larger volume of drink

6. Change the strategy of Yakult mama into retailer stores selling

• because of cultural difference
• HK people refuse direct marketing (door-to-door selling method)

 Minimize manufacturing cost 

7. Forecast demand for production

• because Yakult drink has short span of storage 
• daily production ~1million bottles , mostly original flavor and less Yakult LT (green)

8.    Yakult production operates at night

• the lower electricity cost at night in the factory district
• save manufacturing cost

9. Make plastic bottles by their own

• reduce transportation cost and time

Case 3: FedEx

The way that IT changed the definition of “logistics”

In the past
Logistics was merely the physical transportation (handling, warehousing and transportation of goods) and emphasized outbound logistics


IT impacts on Logistics

• To integrate customer supply chain
• To coordinate and control of storage and movement of parts and finished goods. 
• To provide value-added activities such as order processing, distribution centre operations, inventory control, purchasing, production and customer and sales services.
• To focus on inbound as well as outbound material flow, within companies as well as the movement of finished goods from dock-to-dock. 
• To enable businesses to redefine themselves and to re-engineer their selling and supply-chains. Information came to replace inventory. Just-in-time inventory management helped to reduce costs and improve efficiency. 
• With the advent of IT, express transportation became an aggregation of two main functions: the physical delivery of parcels, and the management and utilization of the flow of information pertaining to the physical delivery (i.e., control over the movement of goods).
• To enhance the ability to share information between operations/departments within a company and between organizations so as to generate operational efficiencies, reduce costs and improve customer services 

e.g. FedEx was also the first company to issue hand-held scanners to its drivers that alerted customers of when packages were picked up or delivered.

The benefits of a virtual supply chain

1. Building one-to-one relationships with their customers

    Electronic data interchange (EDI) 

• ŸTo match supply to demand without wastage
• ŸTo squeeze time and inventory out of the system.
• To identify and accommodate demand between buyer and seller electronically, provide efficient gathering and dissemination of real-time data.
• ŸTo provide integrated logistics systems formed the basis of many partnership arrangements. By helping them to redefine sources and procurement strategies so as to link in with other parties in the supply-chain, such as raw materials suppliers, in order to increase profitability and reduce costs

2. Improving efficiency and control 

    PowerShip system

• To provide the most active customers with proprietary on-line services
• ŸTo store frequently used addresses, label printing, online package pick-up requests, package tracking

3.  Keeping track of all packages handled by the Company 

     On-line System (COSMOS)

• To manage vehicles, people, packages, routes and weather scenarios on real time.
• ŸTo relay data on package movement, pickup, invoicing and delivery to a central database at Memphis headquarters.
• To place a bar-code on each parcel at the point of pickup and scan the bar-code at each stage of the delivery cycle

The role of IT in FedEx’s Business Strategy

IT promoted the globalization of commerce with the strategy “use IT to help customers take advantage of international markets”.


1.  To create opportunities in Logistics Management

• ŸInterconnectivity through the Internet and Intranets and the integration of systems enabled businesses to redefine themselves and to re-engineer their selling and supply-chains.
• ŸThe ability to share information (Just-in-time inventory management) between operations/departments within a company and between organisations to generate operational efficiencies, reduce costs and improve customer services

2.  To provide Value-Added activities 

• Technological breakthroughs and applications innovations promoted significant advances for customer ordering, package tracking and process monitoring.
• The Internet refined the COSMOS system. Whenever new information was entered into the system by FedEx or by customers through the Internet, all related files and databases was automatically updated.

The virtual integration of supply chains without ownership

• FedEx introduced PowerShip programme, provided additional services to the customer, including storing of frequently used addresses, label printing, on-line package pick-up requests, package tracking, etc.

         For example,

         Cisco

 It has developed an extranet that allowed its customers to order FedEx services without leaving the Cisco Website. By integrating its services within the supply-chain of its customers, and thus generating  increases in customer loyalty and in customers. switching costs,, FedEx managed to effectively raise  the barriers to entry for competitors.

• FedEx gave away more that 100,000 sets of PCs loaded with FedEx software, designed to link and log customers into FedEx.s ordering and tracking systems

• Parts Bank:  FedEx built a small warehouse on the end of its sorting facilities. This was FedEx.s first attempt at multiple-client warehousing. Customers would call up and order the dispatch of parts and the order would be picked up on the same day.

The factors that put pressure on FedEx to consolidate its operations, while remaining customer-focused

Rising fuel prices 

Rising fuel prices had severely impacted upon the Company’s net income, it put pressure on the Company to re-think its business strategy.

Internet

The Internet changed the basis for competition for most businesses. Its low cost and diversity

of applications made it appealing and accessible. The expectations of its customers, the size of the company was of no significance. 

The impact of the Internet on FedEx was twofold. Firstly, it opened up opportunities in logistics management for FedEx as businesses were using the Internet to re-engineer their supply-chains. So long as customers were satisfied, it really did not matter whether the goods were warehoused or not, whether the goods came directly from a factory in some distant location or whether the goods had been made to order. 

e-Tailing 

The express transportation needs associated with the growth in e-tailing (expected to reach US$7 billion in 2000) and business-to-business EC (expected to reach US$327 billion by 2002) presented enormous opportunities for companies.

Customer Confusion

IT resources spread across the Group, customers were confused and resources were duplicated.

Intensive Competition 

The industry was loaded with companies, local and global, that provided a myriad of transportation services to a wide range of businesses. Although FedEx pioneered the Web-based package-tracking system, such systems became the industry norm rather than a competitive advantage.

Post Company Visit - HIT

Company Preview

Hongkong International Terminals (HIT) is a member of HPH Trust, the world's first container port business trust listed in Singapore. HIT is also a part of HPH's global network of port and logistics operations, and continues to have access to services and resources enjoyed by companies within the HPH Group.

Situated in the Kwai Tsing container port area of Hong Kong - one of the busiest container ports in the world - HIT operates twelve berths at Terminals 4, 6, 7 and 9 and another two through its joint venture with COSCO Pacific Limited at Terminal 8 (East). HIT and COSCO-HIT handle over 50 per cent of Kwai Tsing's container port traffic.

Established in 1969, HIT has continuously set the industry benchmarks for productivity, efficiency and value-added services. Using modern management techniques, state-of-the-art computer systems and award winning IT applications, HIT has become the centre of excellence for the group, Hutchison Port Holdings. 

 Control Tower

This tower contains the controller of HIT. The controllers in this tower are responsible for different operation of HIT. For example, the ship planner will in charge of the loading and discharge operations. They will use the technology and different strategies to plan the loading and discharging sequences. The berth planner will decide where the ships should dock.

This screen is showing the nGen system of HIT. nGen refers to next generation terminal management system. This system shows the immediate situation of the terminal. The staff in the control tower can know the situation of the terminal by seeing the screen which help them to update the status of the terminal.

During the field work guided by the staff of HIT, we learned lot of things about the operation of a terminal.
First, we learned that there are different kinds of crane, which can perform different kinds of movement.
Second, we learned the communication between the terminal and the truck driver. Every driver need to check in through the specific gate. After checking in, a sms will be sent to driver about wherever the driver should go for picking up the cargo.
Third, we learned that there is a very powerful system for planning the allocation of cargoes in the terminals and on the ship. Doing the optimization of the allocation, the waiting time and the system time of the whole operation will be shorten.
Knowing these information, we got very practical understanding related to terminal operation. Other then the theory and example on the book, we can truly knowing what is really happening in the operation. It is definitely a valuable experience for us as a students learning logistic related topic.

The following is the video from the field report as a reference.

Assignment 2

Supply Chain Management (SCM) vs Logistics Management

Supply chain management (SCM)

Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996).[2] Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption (supply chain).

In other words, Supply chain management means design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building competitive advantage.

Management optimizes the whole process through the development and control of planning, supplying, manufacture scheduling, warehousing and distribution. The supply chain manager's objective is to achieve maximum efficiency through the coordination of each of the steps that comprise the cycle. Supply chain management consists of cost reduction, minimal returns and effective distribution.

DHL operates with Supply chain management including plan, make, source, deliver, return, and store and customize.Plan consist Supply Chain Analysis and Design, Lead Logistics Provider (LLP) Services and Environmental Compliance.

Make consist Industrial Projects Transportation, Inbound to Manufacturing (I2M), In-plant Logistics and Contract Manufacturing.Source consist Procurement Services, Raw Materials Warehousing, Raw Materials Transportation and International Supply Chain Management.

Deliver consist Transportation and Distribution Management, Service Parts Logistics (SPL), Home Delivery, E-Fulfillment and In-store Logistics.Store and Customize consist Finished Goods Warehousing ,and Assembly and Co-packing.

Return consist Reverse Logistics and Environmental Compliance.

DHL through supply chain consulting and network design studies, they help customers with the big picture; what's working and what can be optimized for improved operational efficiency and better customer service.

Logistics Management

Logistics Management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements.

\The Logistics Management covers a segment of the supply chain. A logistics manager is responsible for planning, developing and controlling the complete product flow. The manager also supervises product delivery to customers and the reception of returns from them, as well as warehouse organization and unit control. 

We can see DHL operate with logistics management. DHL manage the raw materials transportation, raw materials and the products warehouse, and in-plant logistics.

Producer-driven value chains vs buyer-driven value chains

According to definition from Gereffiin 1999, the value chain is described as a comprehensive set of activities that are required to bring a product from a concept stage to marketing and consumption of end products. A typical value chain includes support activities and primary activities showed as followings.


Nowadays, Globalization has promoted two types of value chains that global production networks are managed and operated. They are producer-driven and buyer-driven value chains.

Producer-driven Value Chains

The producer-driven value chains are those large and usually transnational manufactures play the central roles in coordinating international production networks to access vital and profitable raw materials. These companies have substantial control over the backward and forward linkages in the entire value chain. It is characteristic of capital and technology-intensive industries such as automobiles, aircraft, computers, semiconductors, and heavy machinery, and other advanced technology industrial activities.

Buyer-driven Value Chains

The buyer-driven value chains are those larger retailers, marketers, and branded manufacturers play the central roles in establishing global decentralized production networks. The networks are located in different exporting countries, typically in developing countries. It is characteristic of labour-intensive, consumer goods industries such as garments, footwear, toys, house wares, consumer electronics, and a variety of handicrafts.

The comparison between producer-driven and buyer-driven value chains has been tabulated as following.

Real Life Examples

Producer-driven chain:

Toyota in automobiles and the Samsung Group, play a central role in coordinating geographically distributed network of subsidiaries, affiliates and suppliers. They generally retain control of R & D, basic product design and innovation.

Sony Corporation sourcing worldwide imposes very high standards on suppliers, requiring strong technological capability, flexibility in response, strong customer service orientation and the capacity to work with its ICT-based e-procurement system.

The Ford, Motorola and Intel are also the examples of producer-driven chains which are Capital‐intensive or technology‐intensive industries.

Buyer-driven chain:

Carrefours in food, Leviin garments, play the lead role sourcing from decentralized networks of independent suppliers, defining product and process specifications and standards.

IKEA, the Swedish home furnishing retailer, has a worldwide sourcing strategy involving more than 2,000 suppliers. The sourcing is governed by IKEA’s own technical product and process specifications, as well as by other types of standards such as those that relate to environmental and labour requirements.

Nike, Gap, Wal‐Mart and Dell also apply decentralized production networks in developing countries.

Sources

http://www.unescap.org/tid/publication/indpub2439_chap2.pdf

http://globotrends.pbworks.com/w/page/14809275/Value%20Chain#ValueChainnbsp

OEM vs OBM

OEM and OBM both describe the operating format of companies in all kind of industries. The difference will be shown in the following: 

OEM 

OEM (Original Equipment Manufacturer) manufactures products or components that are purchased by a company and retailed under that purchasing company's brand name. Apart from production, OEM would provide other services, like, delivery and quality control services. 

The main responsibility of OEM is producing the assigned product. The products produced need to meet the requirements from their customer. For example, Apple assigned Foxconn to produce particular amount of IPhone. Then Foxconn is the company, which running in OEM format. All the IPhone produced by Foxconn will be marketed as Apple’s product but not Foxconn. Foxconn rely on its mass productivity to earn economies of scales, therefore, drive down the production cost. Foxconn is not required to design the product or involve on the product development. The whole designs and technologies are provided by Apple. However, the performance of the parts needs to fulfill the requirement of Apple, like high resolution of monitors, the thickness of the phone. 

There are more international examples of OEM. 

In apparel industry, companies like, DKNY, RALPH LAUREN, BURBERRY and CK, own their own design team. Their design team is responsible to design a series of fashionable clothes in every season. Then, after the approval of the design, these designs will be transferred to OEM companies, like TAL, for mass production. The brand name of designing company will be printed on the product as required, rather than TAL’s brand name. In this case, TAL is required to produce the clothes according to the design given by other companies. Also, quality control and delivery services might be needed. 

In computer industry, the giant companies like, INTEL, DELL and HP will not produced all parts of the computer. For example, Japanese company, SANYO will produced fans, which help to cool down the computer, for these giant companies. 

OBM 

An original brand manufacturer, or OBM, is typically a company that sells an entire product made by a second company or including a component thereof from a second company sources as its own branded product. Selling the product of the second company under its own brand just adds a virtual extrinsic value to the product. 

OBM actually is responsible to the whole supply chain, like, production, development, delivery and marketing. OBM actually refer to the entire retailers in the market, as they sell the product to the market, no matter they produce the product or not. 

OBM vs OEM 

OBM need to take more risk as OEM. It is because there is uncertainty of the marketing. OBM need to produce the product before receiving the order. Therefore, It is possible for OBM to produce excessive product and that would create great loss for OBM. On the other hand, OEM will only produce the assigned product after receiving order. Therefore, the possibility of excessive stock for OEM is far below than OBM.  

However, because of OBM take care of the whole supply chain; they are able to maximize the profit. OBM responsible most of the operation, therefore, they outsource less operation to other company. Therefore, less profit of the supply chain is shared by other manufacturer. The fewer outsourcing to other company, the higher the profit OEM can earn. 

Evolution from OEM to OBM 

Sometime, as OEM is experienced with the whole process of production, they are familiar with the production process and technology. Also, they got enough information about the market, like the taste and the trend of the targeted customer. They are able to develop their own brand, in order to increase the potential profit by competing with their existing customer. 

There are many example of OEM transfer to OBM. However, they are mostly not directly transfer to OBM from OEM. They would first transfer to be ODM (original design manufacturer), which will responsible to production and also design of product. ODM will sell their product to retailers and wholesalers, but not directly sell 

to individual. From ODM to OBM, OBM need to develop their brand name and take care of the whole supply chain process.

Global Sourcing Network

Global Sourcing Network refer to a sourcing network from global market across countries boundaries. The objective of global souring is to lower cost by fully uselize different countries' resource and environment.

Real Example : Manufacturing Airbus A380

A380 is the largest jet airplane in the world. The manufacturing process is very complicated and involve many countries.

The Sourcing network of A380

Major structural sections of the A380 are built in France, Germany, Spain, and the United Kingdom. For example, The wings are built in UK, vertical tail are made in Germany, the head is made in France, the horizontal tail are made is Spain. The final assemble is located at Toulouse, in France. As shown at the figure above, most of the parts are transported by ship and train. The main reason for the company to separate the manufacturing process into different countries and location is, there are better technologies to produce that part and the resource are cheaper.

Vendor Managed Inventory (VMI) system

VMI is a supply chain management method in which sales information will be send to supplier by stores, and then the supplier will manage the reorder process. With VMi, a company reduce inventory level and therefore reduce the cost. Moreover, it can centralize forecasting, which enable a company to forecast the demand more accurately.

Benefits to Manufacturers

•Lower inventory investments (raw and finished)

•Better scheduling and planning

•Better market information

•Closer customer ties and preferred status

Benefits to Retailers

•Fewer stock-out with higher inventory turnover

•Better market information

•More optimal product mix

•Less inventory in channels (transfer costs)

•Lower administrative replenishment costs

Implementation Challenge

Although VMI can improve the inventory turnover, the implementation of VMI is not always success. VMI require the sales force to share information with supplier and also give out the control of reorder. Also, the low level of inventory may lessen the ability to due with a demand strike.

Made-to-measure (MTM) system

Made-to-measure system means products will be made according to different a person which is most fit to the customer. In another word, that means to make a produce before asking the customer opinions. For garment industry, the tailor will first measure the size of their customers, and then they will make the clothes which exactly fit the customer’s size. This kind of measuring method can make the clothes which are very suit for their customer, not like the clothes which produce for massive amount. The customer can choose what fabric they want, they can choose the color and so on. So the customer can have the clothes that fit to them and also they can use their favorite fabric, buttons, and so on.

The examples of the company which use made-to-measure system are:

1. Gucci, they have a made-to-measure service for their customers. The customer can make an appointment with Gucci and ask for different materials for their customized clothes. Gucci provided made-to-measure of shirt and shoes.

2. Marks and Spencer, they have a made-to-measure service for the men. The men can customize their shirt in Marks and Spencer. They can put their height, weight and collar size measurements into their website. Also, they can choose fabric; some customize features like collar, cuffs and so on.

3. G.B Bertollo Scarpesumisura is a company that made shoes. They can make shoes for their customer with the size which very suit to the customers. The customers will have shoes that suitable and they will feel very comfortable.

4. Laura Ashley, they have made-to-measure for curtains and poles which are the home furniture. The customer can choose the fabric, curtains style. The customer can choose whatever they want.

Electronic Data Interchange (EDI) system

Electronic Data Interchange (EDI) is the electronic interchange of business information using a standardized format. In other words, EDI is a process which allows one company to send information to another company electronically rather than with paper. Business entities which conduct business electronically are called trading partners.

Many business documents can be exchanged using EDI, but the two most common are purchase orders and invoices. At a minimum, EDI replaces the mail preparation and handling associated with traditional business communication. However, the real power of EDI is that it standardizes the information communication communicated in business documents, which makes possible a "paperless" exchange.

The traditional invoice illustrates what this can mean. Most companies create invoices using a computer system, print a paper copy of the invoice and mail it to their customers. Upon receipt the customer frequently marks up the invoice and enters it into its own computer system. The entire process is nothing more than the transfer of information from the seller's computer to the customer's computer. EDI makes it possible to minimize or even eliminate the manual steps involved in this transfer.

The process improvements that EDI offers are significant and can be dramatic. For example, consider the difference between the traditional paper purchase order and its electronic counterpart:

A Traditional Document Exchange of a Purchase Order

* Buyer makes a buying decision, creates the purchase order and prints it.

* Buyer mails the purchase order to the supplier.

* Supplier receives the purchase order and enters it into the order entry system.

* Buyer calls supplier to determine if purchase order has been received, or supplier mails buyer an acknowledgment of the order.

This process normally takes between three and five days!

An EDI Document Exchange of a Purchase Order

* Buyer makes a buying decision, creates the purchase order but does not print it.

* EDI software creates an electronic version of the purchase order and transmits it automatically to the supplier.

* Supplier's order entry system receives the purchase order and updates the system immediately on receipt.

* Supplier's order entry system creates an acknowledgment an transmits it back to confirm receipt. 

Enterprise Resource Planning (ERP) system

Enterprise Resource Planning (ERP) is actually a process or approach that attempts to consolidate all of a company’s departments and functions into a single computer system that services each department’s specific needs. It is, in a sense, a convergence of people, hardware, and software into an efficient production, service, and delivery system that creates profit for the company.

While the idea is easy to grasp in theory, the reality has been different. Most companies have a conglomeration of different systems and procedures (as well as hardware and software) designed specifically for their own needs. The Human Resources Department holds employee records (including payroll, medical, and other benefits). The Finance Department holds financial data and processing, which includes payroll computations and employee compensation as well as invoicing and billing for company products and services. Manufacturing holds production data, Warehousing holds Inventories, Customer Relations holds customer orders, and so on.

ERP’s dream is to have a single software solution integrating the different functions and activities into a seamless whole where information needed for decision-making is shared across departments, and the action that one department takes results in the appropriate follow-up action up and down the line.

The most often cited example of an ERP software is customer ordering and delivery where a customer’s order moves smoothly from Sales, where the ‘deal’ is consummated, to Inventory and Warehousing, which retrieves and packages the order for delivery, to Finance, where invoicing, billing, and payments are handled, and on to Manufacturing, where purchased product replacement is done.