Supply Chain Movement » Cases

Canon makes collaboration measurable

Martijn Lofvers — Fri, 21 Oct 2011 08:47:01 +0000

[sponsored content] Intensive collaboration between various disciplines is a vital prerequisite for Sales & Operations Planning (S&OP). But how do you create the right mindset? Canon Europe arranged for 80 of its employees across five different time zones to take part in an in-company version of The Fresh Connection.

Business game
“There is a tendency to think, ‘Why did they go and do that?’ and believe that one’s own way would have been better. People are quick to judge their colleagues in other disciplines,” explains Marco van Noppen. “This project offered our company the chance to say to all those people: ‘Have a go for yourself’.”

Both Van Noppen and his colleague at Canon Europe, Harm Hendriks, are full of enthusiasm for The Fresh Connection, the in-company training from Involvation. This business game involved seventeen teams from Canon battling it out over the course of ten weeks to see which team provided the most help to a fictitious fruit-juice manufacturer.

Each team comprised four people who each fulfilled a particular role for the purpose of the game, ranging from Sales Manager to Operations Manager. “In this game, the impact of my decisions on my neighbour and my neighbour’s neighbour becomes apparent much more quickly,” says Hendriks.
As Demand Management Manager, Van Noppen is responsible for the sales forecast and allocating stocks. As Supply Chain Manager, Hendriks meanwhile is responsible for fulfilment, from receiving orders right up to the moment of despatch.

Both of them know from experience how important it is to communicate and cooperate well with each other. “I’ve come to realize that I cannot expect our logistics department to assemble 80 per cent of the kits on the last day of the month,” Van Noppen says, by way of illustration. The training exercise has led to a considerable improvement in how people work together in practice too. “Since you’ve become more familiar with colleagues from other disciplines on a personal level, it’s easier to raise issues with them,” reflects Hendriks. “In fact, we often still refer to the project. Mid-conversation, someone will suddenly say, ‘Just like in The Fresh Connection, remember?’”

Implementation of S&OP
Canon Europe has used the in-company training exercise as part of a large-scale business transformation project. Sales & Operations Planning (S&OP) is currently being implemented throughout the whole of Europe. “We have to learn to approach our supply chain differently. It needs to revolve around the customer,” explains Remco de Marie, EMEA Demand & Supply Management Director of the Canon Imaging Group. De Marie had previously taken part in The Fresh Connection competition at nationwide level and decided to bring the game to Canon. “S&OP is all about communication and considering the implications for roles beyond your own. The Fresh Connection makes collaboration measurable,” says De Marie.

The seventeen Canon teams played a total of five online rounds with a two-week gap in between each one. In the intervening weeks, Involvation specialists held a series of webinars covering various theoretical topics. De Marie is more than satisfied with the results of the exercise. “The competitive element provided extra motivation for the participants to work well together. And all of the highest finishing teams scored strongly on this aspect, without exception.”

In the meantime, the implementation of S&OP is going entirely according to plan, states De Marie. “Two previous attempts have been unsuccessful, so this time we are taking a more thorough approach. The
Fresh Connection game definitely helped us to create the right mindset.”

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August 2010’s loser of the month: Apple

Martijn Lofvers — Wed, 01 Sep 2010 14:03:52 +0000

Apple may be at the top of AMR Research’s annual Supply Chain Top 25, but its supply chain is not (see the online discussion by trade journal Logistiek on LinkedIn). This summer, one of Apple’s supply chain managers was arrested for corruption and is alleged to have taken a total of more than one million Euros in hush money. Then, in one of Foxconn’s Chinese factories where iPads and iPhones are manufactured, an employee working on the conveyor belts committed suicide; the tenth in five months. Two other employees tried the same, but failed.

According to lobbyists, the employees were driven to desperation by the awful working conditions. They work long hours, at least ten hours a day, and then work overtime to boot. It’s monotonous work, it requires a lot of concentration and the conveyor belts run at ridiculous speeds. Foxconn reports to be doing everything they possibly can: hiring therapists, hanging up safety netting, opening a library and a swimming pool and even inviting Buddhist monks in to help. The last resort: doubling their salaries. Other figures that are currently doing the rounds put Foxconn’s suicide statistics into perspective. Relatively speaking, more people commit suicide in the city of Utrecht in The Netherlands than they do at Foxconn.

Whatever the truth of the story is, the hype that Apple has created surrounding its new products such as the iPod, iPhone and iPad – and the resulting shortage of them – has left a particularly bad taste in the mouths of many consumers: the taste of blood.

August 2010’s winner of the month: Philips

Martijn Lofvers — Sun, 01 Aug 2010 14:14:38 +0000

Philips’ results for the second quarter were better than expected. Turnover rose by 12 per cent to more than 6 billion euro, whilst its net profits went from 45 to 262 million euro. Meanwhile, the electronics giant continues to take measures to streamline its supply chain: Philips plans on closing a total of eight warehouses in the Benelux.

Sustainability is also on their agenda. Philips recently announced that 600 of its sea containers were, from now on, going to be transported from Roosendaal to Rotterdam by ship instead of by road, meaning savings of 80,000 kilometres and 200 tons of CO2 emissions. This project will reduce the company’s carbon footprint by 0.1 per cent; a modal shift that is the result of a pilot project between Philips, Maersk Line and the Port of Rotterdam Authority. The only prerequisite was that Philips’ transport costs remain unaffected by the change, which looks to be the case. The port is pleased with the project because it has improved accessibility around Rotterdam.

June 2010’s loser of the month: Foxconn

Martijn Lofvers — Thu, 01 Jul 2010 14:02:48 +0000

The Taiwanese Foxconn, the largest electronics manufacturer in the world and producer of Apple’s iPods and iPhones, among other things, has put its wages up twice in June by considerable amounts. Foxconn has announced a decision to more than double its wages (from 237 euro per month) and implement a bonus system of 66 per cent for hard working employees. These changes have been sparked by the ten employees who committed suicide in the past five months as a result of their work on the conveyor belts and the two additional attempted suicides.

These employees were all between the ages of 18 and 24 and were driven to suicide through desperation resulting from the awful working conditions. The suicides all took place in Foxconn City, a state-owned factory in the southern Chinese city of Shenzhen, where approximately three hundred thousand people live and work. According to Foxconn’s CEO, his company is not a sweatshop and it complies with all local regulations. However, lobbyists claim the work is extremely monotonous, and that the supervisors act like military drill sergeants. There is little social contact and no one really knows anyone in the anonymous dormitories because of the high rate of staff turnover.

When compared to France Telecom, the number of suicides at Foxconn is less shocking. Of the one hundred thousand people working for France Telecom, 46 have committed suicide, 11 of them in the past six months alone.

Chinese employees have not made such a commotion about these incidents at Foxconn in the same way as the western world has. In fact there are still thousands of young Chinese people queuing outside the company’s doors whilst Foxconn has put its job vacancies on hold. Perhaps the Chinese attitude has something to do with the fact that the families of the victims received a pay off that amounts to ten years’ salary; an arrangement that has recently been abolished.

In response to all the commotion, Foxconn has announced that it will be moving part of its production from the Chinese factories to Taiwan and Vietnam. This will put tens of thousands of jobs at risk in China.

June 2010’s winner of the month: SCA

Martijn Lofvers — Thu, 01 Jul 2010 13:59:31 +0000

As of 1st August 2010, SCA Consumer Benelux will be the first supplier to have achieved carbon neutral distribution. The producer of Dreft, Libresse, Libero, Tena, Edet, Tempo and Plenty has entered into a partnership with a select group of carriers under the name ‘Green Care Transport’.

“Our primary goal is to reduce the carbon footprint of our transportation using ‘reduction targets’ – a defined action plan for transport companies combined with investments in sustainable energy projects,” comments Riny Strik, regional director Business Logistics at SCA and brain behind the concept. SCA hopes that more carriers, suppliers and retailers will take part in the ‘Green Care Transport’ programme and has put together a road map explaining all of the steps that are involved in joining the initiative.

Defined action plan

SCA has formulated CO2 targets and a concrete action plan. SCA and its carriers are going to use their existing CO2 registration to follow up the scheduled activities. These will include, for example, more economical motorcycles, improved aerodynamics and driving courses to reduce fuel consumption and therefore reduce their carbon footprint. The remaining emissions will be neutralised by working together with Climate Neutral Group to invest in sustainable energy projects (according to Gold Standard), such as wind farms in Turkey and Taiwan, and realising one hundred per cent CO2 neutral transportation.

Time for the next step

Hero and SCA in Hazeldonk, the Netherlands, have already established a successful strategy, combining deliveries and realising a CO2 reduction of 90 per cent. “Now it’s time to take the next step,” comments Strik. This new initiative is in line with the SCA’s global corporate social responsibility (CSR) strategy. “We have been actively trying to reduce our carbon footprint and energy consumption since 2001 and have received various awards for our efforts.”

Climate and transport costs go hand in hand

Cooperation and transparency in the whole supply chain is what the group needs to reduce its carbon footprint as much as possible. This will have a positive effect on the climate as well as reducing transport costs (e.g. by optimising loads and limiting the number of empty trucks on the road). Cooperation in this case means that SCA (and other participants) will use only this pool of sustainable carriers for distributing their goods.

Procter & Gamble reduces safety stock by 50%

Martijn Lofvers — Tue, 15 Jun 2010 14:01:11 +0000

How can supply networks respond to the increasing fluctuations in consumer demand? This is the question Alistair Hill, Director of Western Europe Supply Network Solutions at Procter & Gamble, answered with conviction during his presentation on 9th June at the 3-day SCL Europe congress in Prague.

“The average weekly volatility of shipments of one of our product categories went from 66 per cent in 2005 to 98 per cent in 2007,” commented Hill whilst illustrating the problem at hand. After implementing the supply chain software SAP APO, the accuracy of the forecasting went up only to drop again later. This drop was caused by increased volatility in demand and promotional campaigns.”

Procter & Gamble found the solution when they implemented Demand Sensing software from Terra Technology. This software package comprises a self-learning algorithm that can actually predict shipments after just two or three months. “On average, Demand Planning got its predictions wrong about 50 per cent of the time,” tells Hill. “By using internal data about our actual shipments and outstanding orders, we have reduced the error rate to thirty per cent. This meant that we were able to reduce our safety stock by one third. When we used customer data the prediction errors were reduced to twenty percent, halving our safety stock yet again.”

According to Hill, retailers are surprisingly willing to share their Point of Sale data with them. This most likely has something to do with the increase in the accuracy of the orders, which went up from 97.5 per cent in 2007 to 99.1 per cent in 2009. In the near future, Hill is going to be focusing his efforts at Procter & Gamble on fulfilment.

May 2010’s loser of the month: Alcatel-Lucent

Martijn Lofvers — Tue, 01 Jun 2010 13:06:50 +0000

Out of stock and unable to generate turnover. Try explaining that to your shareholders. Ben Verwaayen tried, and failed. The Dutch CEO of Alcatel-Lucent had the job of announcing a loss of 515 million Euros at the end of the first quarter of this year. That was a hefty 100 million Euros more than in the first quarter of 2009 when the crisis was at its peak. The reason was a lack of stock. “We were unable to fulfil customer demand due to the limited stock availability,” he explained in one announcement. Yet, in the fourth quarter, history repeated itself. After the crisis hit, the French-American organisation reduced its stock too dramatically and, now that demand is picking up faster than expected, are having to say no. The fast-growing popularity of the smart phone demands extra network capacity, especially in North America. Investors were not impressed by the CEO’s explanation and the quarterly announcement sent the share price plummeting.

Procter & Gamble launch supplier sustainability scorecard

Martijn Lofvers — Wed, 19 May 2010 13:04:06 +0000

Following on from Wal-Mart and IBM, Procter & Gamble (P&G) has adopted a sustainability scorecard for its supply chain. On 12th May 2010, P&G, well known for brands such as Pringles, Duracell and Gillette, announced its new Supplier Environmental Sustainability Scorecard and value system. With the launch of this scorecard, and by also making it available to other businesses, this American multi-national wants to set a new industry standard.

“The launch of the Supplier Environmental Sustainability Scorecard represents the next step in P&G’s path towards environmentally-friendly sustainability and reflects our holistic end-to-end supply chain strategy,” says P&G’s CEO Bob McDonald. “We will grow P&G by touching more consumers’ lives and improving more parts of the world, more completely. In order to achieve this, we need to continue to innovate and grow in a sustainable and responsible way. Keeping sustainability at the core of our business stimulates innovation and improves our results.”

P&G’s new Environmental Sustainability Scorecard website (www.pgsupplier.com/environmental-sustainability-scorecard) provides an example of a generic scorecard to use as a training module for companies that need a complete scorecard, as well as for companies to have a look at. The website also gives information about P&G’s existing and future suppliers. The scorecard requires input from the supplier about a range of factors, such as electricity consumption, fuel and water. The P&G scorecard also asks for CO2-emissions data from the supplier, whether the company has a management system for sustainability and how much waste they dispose of on an annual basis. P&G also gives suppliers the opportunity to add additional information, such as, for example, the use of renewable energy, the fuel efficiency of its lorry park and whether or not they recycle their waste materials.

Audit at Apple uncovers violations in the supply chain

Martijn Lofvers — Tue, 20 Apr 2010 11:29:01 +0000

Apple carried out audits at 102 of its suppliers’ production facilities in 2009 and identified 17 serious violations. In almost 50 per cent of cases at 60 locations, employees were found to be working too many hours and other suppliers were found to be carrying out pregnancy tests.

Sony sells Slovakian LCD factory to Foxconn

Martijn Lofvers — Sun, 04 Apr 2010 12:55:36 +0000

Sony has announced the sale of its Slovakian LCD factory to the Taiwanese company, Foxconn Electronics. The sale is expected to complete in September, giving ninety percent ownership to Foxconn.

Sony hopes that selling this factory will streamline its TV production, reports Digitimes. The factory cost Sony 73 million Euro to build and was completed only two and a half years ago. In fact, it looks like Sony is trying to sell off large portions of its TV production capacity. Foxconn had already acquired one of Sony’s Mexican factories in September 2009 and the company just announced that it has sold another factory for the production of LCD panels to the Japanese Kyocera.

Foxconn rarely uses its own name when selling its products, tending to manufacture products for other hardware producers like HP, Dell, Apple and Nokia. Sony will reportedly continue to work with these manufacturers in the future.