On Thursday March 27, 2003, Barry McLeod, Director of Procurement and Marketing for “The North West Company”, was considering the option of proposed move to a “pull” merchandise replenishment strategy – also known as localization. Currently North West employs a “push” strategy in which category managers at North West’s Winnipeg HQ analyses the trends, places the orders and allocates products to stores. The shift towards localization expects to tap into the local knowledge that resides with store managers, allowing the local management to tailor product demand to the preferences in their communities. Under localization, product assortment decisions, which had been previously made at the Category Manager’s level at Winnipeg HQ, would become the responsibility of North West’s 147 store managers. Ken Claudel, Vice President of Logistics & Supply Chain, e – mailed to Barry McLeod for a meeting on Monday morning to review the below: - 1.The benefits and costs of localization;
2.The potential risk of localization; and
Forecast & Procurement: The North West Category Manager analyses the Sales, markdown the trends, works with the suppliers to determine the new products to be in stocked in inventory and then submit purchase orders at least 4 months in advance of popular selling periods such as back – to – school season or Christmas shopping session. Using historical averages and the next year’s forecast growth rate, Category Managers estimates the demand for products at a company level. Product Receiving and Shipping: Approximately two months before the selling period, the supplier’s product arrives at North West’s distribution center in Winnipeg, Manitoba. ISSUE IDENTIFICATION
1.Shipping products to remote regions was always a calculated risk on the part of the Category Manager: if it were a popular item, it would often sell out the day it arrived. If excess stock were shipped, there would be markdowns according to a set schedule. When the markdowns reached the 75% level, product was shipped to North West’s clearance outlet in Winnipeg, Manitoba. If particular items were not immediately available, Northern customers were often known to either shop at competitor’s stores or purchase substitute items. 2.Information flow not in close loop;
3.Longer lead – times from sales perspective;
4.Longer manufacturing lead time from the production perspective; 5.High WIP inventory;
6.Disruptive material flow;
RECOMMENDATION (S) AND IMPLEMENTATION
Inter-organizational Information System
•Real – time information transaction;
•Information flow based on value chain;
•Traceability in the Supply Chain for quick response;
•Reporting system for Commodity management
•Designing a Win – to – Win transactional model.
•Leverage the logistic channel.
•Smooth the Material Flow
•Vendor Variability: We set - up a system for establishing appropriate buffer lead times and tracking vendor performance that directly incorporated variance. •Reduce in – transit inventory
1.Set – up matrixes and Key Performance Indexes to monitor as well as control the implementation plan. 2.Prepare a project plan based on the implementation with milestones in order to track the progress. Supply Chain Relationship
Propensity – to – partner Matrix
•Aligning partnership expectations between the...