Mercedes seeks to cut costs by streamlining supply chain processes
Mercedes aims to be the leading luxury car maker by 2020. In the first quarter, their return on sales was 9.4 percent, slightly behind their rivals BMW (with 9.5 percent) and Audi (with 9.7 percent). Mercedes wants to reduce its costs by 20 percent per car as it invests millions of euros to reorganize its global supply chain network. Mercedes Production and Supply Chain boss Markus Shaefer stated that with 30 vehicle derivatives built from several thousand parts, the complexity is vast. To better manage their supply chain, a 90 million euro consolidation center was built. Its sole purpose is to consolidate components from the company´s European suppliers, repack them more efficiently, followed by shipping them to Mercedes plants in China, the US and South Africa.
The intelligent restructuring of logistics allows customers outside of Europe to have an increased level of flexibility, whereas before, built S classes would have to be frozen weeks in advance, elaborated Shaefer. This halt in changes is known as a “pearl chain,” implying that manufacturing plants no longer allow customers to change their orders. This new change means that customers 8,000 kilometers away in China can alter the configuration to their car at a later date, adding more flexibility to Mercedes´s supply chain network.
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Chicken recall reflects big gap in supply chain transparency
Two major recalls (Aspen Foods and Barber Foods) were announced last week by the US Department of Agriculture due to possible salmonella contamination. The recalls affected approximately 4 million pounds of chicken sold within the US. This reflects the lack of supply chain transparency in the food retail industry. A recent survey conducted by Trace One found that 91 percent of customers find it important to know where their food comes from, while 7 percent said they trust the quality and safety of the food they consume. Furthermore, most large firms only know their first tier suppliers and not their second, third, fourth or fifth tier suppliers. Big brands are slowly realizing that they need to fill-in the information gaps in their supply chain, as it is they who will be blamed if things go wrong, and not their suppliers.
Andrew Winston, a transparency and retail expert and author of The Big Pivot, believes customers expect brands to do the right thing while also working with local communities to achieve this. Johnson & Johnson, for example in 2009, had issues in gathering waste materials from Brazilian landfills. As a result, the company aided a local cooperative to gather the materials, and was in turn supplied with recycled materials for their Band-Aids. This was also a good story for the firm to tell its customers and reinforce its caring brand image. The key take away is: with the right communication and awareness between supply chain partners, future damages to both the supply chain and a firm’s brand image can be minimized.
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Yodel CEO Dick Stead speaks on company turnaround
With the cutthroat nature of the parcel industry, it is becoming increasingly difficult to innovate and compete. In the last 6 months, City Link went out of business and TNT Express has recently stopped part of its service. Yodel was formed in 2011 following the acquisition of the UK domestic business of DHL by Home Delivery Network, owned by the Barclay brothers. Dick Stead has managed to turn the company that was losing £11 million a year around by focusing on the end customer, as customer satisfaction means continued service use. By developing their real time analytics and evaluation tools, Yodel was able to get live customer feedback on their services. After a little more than a year, over 1 million customers have provided their feedback, leading to a huge wealth of information on how Yodel can improve their performance. This has led to 15 percent of an employee’s salary being dependent on their customer’s feedback.
The live feedback comments were also used to determine specific employee training needs. Dick Stead indicated that retailers should also promise to deliver what they can deliver and when they can deliver as this is the key to keeping customers loyal to the brand. A key to Yodel’s success is that they have aligned their delivery plans with those of retailers; this has resulted in more accurate delivery times and customer retention.
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Have a nice weekend!