Case Study - Supply Chain

Management Johnson Skin Care

Executive Summary

The following report is an analysis of Supply Chain Management for Johnson Skin Care
company, in order to successfully establish a traditional approach to logistics involving retail
outlets for accessing customers.
The report begins with an overview of Supply Chain Management and its characteristic
features that assist with implementing effective supply chain networks. The five basic supply
chain management steps are also articulated for the benefit of readers, and for study
purposes.
This is followed by the complete flow chart of all possible supply paths for the given case
study. The structural attributes as well as the functional ones are further elaborated through
the medium of tabular representation.
The recommended supply chain network compatible with the multi echelon system(Plant →
Staging Warehouse → Distribution Centre → Store) is discussed as part two of the case study
solution. That is, a Serial Multi-Echelon System
Furthermore, part three of the solution revolves around the opinionated modifications. As a
suggestion, the benefits and possibility of both third-party logistics and an integrated supply
network with complete ownership are elaborated for the purpose of comprehension.
This is followed by a brief action plan, modelled around the modification and
recommendations provided in the sections (Part II and Part III) of the report. This includes
implementing a Serial Multi-Echelon network, that minimizes the inefficiency and
randomness emanated from the discretion of third-party controllers of the critical echelons of
the supply network.
This is followed by a Conclusion that has been summarized in order to stick with the
prescribed word count. The remarks highlight the possibility of reaping the full benefits of
supply chain management that occur due to ‘cooperation,’ ‘integration,’ and ‘communication’
between the dynamic essential stages of the supply chain.
Table of Contents:

Serial Topic Page Number

Number

1 Introduction 4

2 Statement of Situation 4

3 Analysis 6

4 Part I: Flow Chart 6

5 Part II: Recommendation 8

6 Part III: Suggestive Modifications 9

7 Action Plan 11

8 Conclusion 11

9 References 12
Introduction

The problem presented in the Case Study represents the classic principle features of Supply
Chain Management. It is a completely systematic approach for enhancing productivity,
Supply Chain Management is an approach that is directed towards managing the flow of
Information, money and materials in-between the suppliers and the customers (Erpint,
2014). The movement is processes starting from the supplier, to manufacturer, to
wholesaler, to retailer, and finally to the consumer. In supply chain management, each level
of the supply chain is described as a ‘tier,’ and several tiers can exist beneath the final
supplier. It involves the effective coordination as well as the integrating of supply flows
amongst all the echelons involved, for a productive, valued and profitable supply structure
(Masterclass Management).

The flow of materials atypically is from the Supplier to Customer (unless its RMA (see five
stages of SCM below)). The stages count from the warehouses to distributors, moving on to
dealers and lastly retailers before the consumers. The task of the SCM manager here is to
ensure the adequate flow of materials quickly, without any halts as inventory in the various
nodal points in the chain. The third party logistics (3PL) involved in the process can also
have a definitive and considerable impact upon the total costings incurred in the Supply
chain network (Erpint, 2014).

A very simplistic Supply Chain View incorporates:

Plan -----> Source -----> Make -----> Deliver -----> Buy

The five basic Supply Chain Management steps are:

1. The Strategic planning that includes developing metrics for effectively monitoring the
supply chain, necessary for delivering high quality service and value to consumers
(Masterclass Management).
2. Sourcing from reliable suppliers for delivering goods and services, and also for
managing the inventory of the same that has been received from suppliers end, all
done at the same time as that of monitoring the metrics for continuously possible
improvements (Masterclass Management).
3. Manufacturing and scheduling activities for production, testing, packaging and
delivery, in consonance with optimum quality levels, worker productivity as well as
production output (Masterclass Management).
4. Delivering, coordinating and communication, all encompassed under ‘logistics,’ is
necessary for establishing proper supply chain management networks (Masterclass
Management).
5. Return Merchandise Authorization (RMA). Receiving back the defective and excess
products (Masterclass Management).
Statement of the Situation

The primary situation concerns with the company’s decision to implement supply chain
management over a more so traditional market structure, with a supply network that includes
sale and distribution of network of retail stores.

Products - Women’s Foot Care, Men’s Foot Care, Body Butter

Manufacturing Plant - New Jersey, California
Staging Warehouses - New Jersey, Kentucky, California
Distribution Centres - NE, MW, S, NW, SW

Basically, Supply Chain Management is a set of approaches that are adopted to efficiently
integrate - Suppliers and Manufacturers with Warehouses and Distribution Centres. The
SCM operational necessity dictates the minimization of system wide costs, and the adequate
satisfaction of service level requirements. To articulate for the sake of comprehension, the
most basic aim of SCM is to ensure the distribution of as well as ensuring that the production
a) made in the right quantities, b) shipped to the right location and c) is delivered at the right
time (Verma, 2011).

The Analysis

Part I: The Flow Chart

The below given flow chart shows the supply chain’s distribution network, starting with the
factories, the central and regional warehouses and the trans-shipment points (CW, RW, TP)
and ending with the retailers.
Functional Attributes of the Consumer Goods Supply Chain (Dumke, 2011)

Attributes Contents

Number and Types of Products Procured Few, Standard Raw Materials

Supplier Lead Time and Reliability Short, Reliable
Sourcing Type Multiple
Materials Life Cycle Long

Organization of the Production Process Flow Line

Changeover Characteristics High, Sequential, Dep. setup Time and Costs
Repetition of Operations Batch Production
Working Time Flexibility Stationary
Bottlenecks in Production Unknown

Distribution Structure Four Stages

Pattern of Delivery Dynamic
Deployment of Transportation Means Unlimited, routes (3rd stages)

Availability of Future Demands Forecasted

Products’ Life Cycle Several Years
Demand Curve Seasonal
Number of Products Types Hundreds
Degree of Customization Standard Products
Portion of Service Operations Tangible Goods
Structural Attributes of the Consumer Goods Supply (Dumke, 2011)

Attributes Contents

Network Structure Mixture

Degree of Globalization Single Country
Location of Decoupling point(s) Deliver to Order
Major Constraints Capacity to Flow Lines

Legal Position Intra-Organizational

Balance of Power Customers
Direction of Coordination Mixtures
Types of Information Exchanged Nearly Unlimited

The three core business processes inherent supply chain management are (Viswanadham,
Indian Institute of Science) - a) The Procurement/Sourcing of raw materials and components
from the suppliers, and followed by delivery scheduling as well as the management of
inventory. b) Manufacturing the product, at a single location or distributed geographically
distributed. c) Retail and Distribution, that includes transportation, packaging and
warehousing. The 3PL come into play here, or the alternative of direct shipping can also be
exercised, however its not recommended from this paper’s perspective to manage the
shipping requirements (Viswanadham, Indian Institute of Science, Pg - 17).

Horizontal and Vertical Integration: The most basic difference between the two is that the
former integration always occurs at the same stage, as that of the supply chain. Whilst the
latter i.e. Vertical Integration always occurs in between the different stages of the supply
chain (Viswanadham, Indian Institute of Science, Pg - 10).

Part 2: Recommended Supply Chain Network under

Multi Echelon Structure.
A supply chain network with optimal functionality for a multi echelon structure is the Serial
Multi-Echelon System.
Under this network, the supply chain management is regarded as being separately
composed of numerous different stages, each representing the physical locations, the
activities encompassed under processing and/or bill of materials (BOM); these stages are
then further grouped into echelons (Gordon, Small Business). The efficiency issues that
arise in a supply chain, caused by the control over echelons by different contending parties
with competing and conflicting interests are ably addressed under the serial multi-echelon
system. This is an optimization technique in which inventory positions at the different
echelons are assumed to be driven by a common demand process (Gordon, Small
Business).

Part 3: Recommended Modification to Supply Chain Management

A tightly integrated supply chain, with complete control are some of the modifications that
ought to be adopted for efficient supply chain management. Alternatively, 3 LP's(third party
logistics provider) are again immensely advantageous when it comes to reducing the costs
of supply networks, thus the overall transportation expenses. Lets take a look

In order to effectively develop an adequate logistics strategy, the proper comprehension and
understanding of the inherent factors and characteristics becomes imperative. The aspects
of pricing and transportation economics are both concerned with characteristics and factors
responsible for driving up the costs (Bowersox, Pg -356). Successful negotiation requires a
full understanding of transportation economics. Grasping a holistic overview of the
transportation economics and pricing becomes crucial for reducing costs, as it generally
revolves around the following four topics: (a) Factors driving up the transport costs, (b)
Classifications or cost structures, (c) the carrier pricing strategies, and (d) transportation
ratings and rates (Bowersox, Pg -356). As a simplistic hard and fast rule, logistic managers
must strive for dealings only with manufacturers (no independent distributors are contacted)
and provide an enhanced business situation. It all comes down to keeping the costs low and
the services high.
The insertion of an additional level of logistics (3PL’s) imparts a growth in the savings. Take
a look at the below mentioned table, comparing the benefits and cost saving capabilities of
both third party logistics and in-house supply chain management.

FMCG 3PL’s v/s FMCG Shippers

Source: 2010 15th Annual Third-Party Logistics (Langley, 2010)

An Integrated Supply Chain Network (Viswanadham, Indian Institute of Science).

Action Plan
implementing a Serial Multi-Echelon network, that minimizes the inefficiency and
randomness emanated from the discretion of third-party controllers of the critical echelons of
the supply network.

Conclusion
The complete Flow chart with supply chain network recommendations and suggestive
modifications to the currently implemented structural network have been satisfactorily
presented. The Action Plan further divests upon the essential steps necessary for effectively
implementing supply chain management for a traditional logistical approach.