Abstract
The underperformance of an international company was based on the following major problems: the information technology and the inventory management system used in the group (several distinct channels that did not interact with each other) and the company's external environment (devaluation of the Russian ruble and decrease in purchasing power). To approach these issues, the chapter presents solutions to implement a new retail system, a redesign of the technology system used by the company, and some recommendations on external factors. Recently, the company has focused on a closer relationship with consumers, making available several services that simplifies the whole process of buying a product.
TopIntroduction
The international company has undergone a remarkable evolution over the years, becoming a world leader in the sports industrial sector, with a wide range of products present in numerous countries. In the space of a decade, the Russia/CIS1 market stood out for its sales strength and steadily growing profits. Of the three major “attack markets” within the international company, which include North America and Greater China, Russia/CIS was recognized as a key growth market.
However, there were numerous setbacks that jeopardized the success of the international company in Russia. The main ones were the technology used by the international company, the macro environment, and the Russian crisis in 1998, which affected the Russian economy in several areas, such as the distribution channel, based on the wholesale model. This model proved to be inefficient, being considered a high-risk model. On the other hand, the market had the potential to recover, and a new era began, based on their own retail channel, enabling the phased opening of stores. In the same context of economic crisis, in mid-2014, the international company experienced a decline in sales and profits due to the sanctions imposed on Moscow, forcing the reduction and closure of stores. In addition, the collapse of the ruble and the decrease in consumer purchasing power were largely responsible for these events.
Figure 1. The company’s fulfilment process
To overcome some of these problems, the company built up a C&C2 capacity that was later revealed to be insufficient due to the high demand. New manager’s arrival in 2014, brought an impactful change within the international company, where he encouraged the workers to revamp the information technology structure, ERP (Enterprise Resource Planning) and WMS (Warehouse Management System) to support the business. The installation of these new systems was partially accepted. However, in the long run, it proved to be unproductive, and changes were needed. As a forecast for 2020, the company wanted to become more customer-centric, to be able to respond to the needs of consumers, namely greater accessibility, and convenience for them (Figure 1). For this goal, they intended to implement the following systems: Click-and-Collect (C&C); Customization; Endless Aisle (EA); Radio-frequency identification (RFID); Ship-from-Store (SFS).
In this article, we carry out a general analysis of the company productivity problem, find out whether the proposed solutions will be appropriate for the company in question and check their cost effectiveness. Finally, we consider the future position of the company so that it remains competitive in the Russian space such that it can maintain or increase productivity based on the various indicators.
TopCase Evolution And State Of The Art
The international company in Russia/CIS faced numerous adversities, with emphasis on the two main problems such as, the company’s inventory management, logistics and technologies and the macro environment of the company.
Key Terms in this Chapter
Master Production Schedule (MPS): The master level schedule used to set the production plan in a manufacturing facility.
Manufacturing Lead Time: The time required to manufacture an item.
Value Chain: A business process that includes activities from manufacturers to retail stores.
Balanced Scorecard: A performance measurement tool that aggregates key performance indicators (KPIs).
Performance Measures: Indicators of the performed work and the results achieved in an activity, process, or organizational unit.
Customer-Supplier Partnership: A long-term relationship between a buyer and a supplier.
Distribution Channels: Firms or individuals that ensures the flow of goods and services from the supplier and producer to the final consumer.
Global Strategy: A strategy centered on increasing worldwide performance through the sale of common goods and services with a minimum product variation.
Enterprise Resource Planning (ERP) System: A software for managing the resources needed to deal with customer orders.
Statistical Process Control (SPC): A statistical method for monitoring quality control in production processes.
Center-of-Gravity (COG): Methodology for locating distribution centers considering the spot which represents the minimum transportation costs between the network elements.
Inbound Logistics: The transport management of materials from suppliers into production processes or storage facilities.
Original Equipment Manufacturer (OEM): A manufacturer that buys and incorporates another supplier's products into its own products.
Supply Chain: Materials, information, and people involved in the process of transforming raw materials into finished goods.
Transportation Requirements Planning (TRP): Planning transportation needs considering the demand given by MRP and DRP databases.
Distribution Requirements Planning (DRP): A system of planning demands for inventory at distribution centers and consolidating demand information to the production and materials system.
Radio Frequency (RFID): Wireless communications from a terminal to a base station, linked to a computer.
Distribution: Outbound logistics, from the production line to the final user.
Free on Board (FOB): Contractual terms between two supply chain agents, that define where title transfer takes place.
Dashboard: A tool used to capture a summary of the Key Performance Indicators (KPIs)/metrics of a company.
Just-in-TIME (JIT): An inventory management system to monitor material flow into manufacturing plants by supplying the required materials just in time for use.