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1、 Andersen Consulting 1999Electrolux China“Network Strategy”ProjectFinal Report PresentationBeijing,March 10,1999Page 1nProject Introduction and BackgroundnCustomer Survey-Survey Approach-Survey Results-Findings and OpportunitiesnLogistics Network-EOQ inventory modeling-Logistics network modelingnRec
2、ommendations and next stepsnAppendices -Process flow -Cost analysisContentsPage 2Major Brands Market Share in 1999Page 3Electrolux ObjectivesElectrolux ObjectivesReduce working capitalIncrease turnover(through greater product availability)Reduce operating costsElectrolux China has committed to achie
3、ve Best Practice Service and Cost,as basis for rapid business growthhigh inventory carrying costin-store stock-outstoo many warehouses:limited inventory and service control:SOP systems and procedures for inventory control are not systematically in place/applied limited know-how and supportunclear re
4、sponsibilities and performance criteriaElectroluxs supply chain objectives.are to improve current performance.to deliver real bottom line benefitsElectrolux China has identified supply chain improvements as one of its corporate priorities to improve customer satisfaction and cost performance.Satisfy
5、 requirements of target customers(better than competition)Achieve full control of the entire logistics processLimited visibility and control,appropriate perforrmance criteria not in placeLikely gaps in service satisfaction.Required Service Levels and competitors position are not measuredPage 4The ov
6、erall objective of Electrolux China Network Strategy Project is to optimize the distribution network configuration in terms of:-Meeting customer service requirements;-Achieving minimum costs;and -Controlling the entire outbound logistics process.Increased Revenue-Improved product availability and pr
7、omising capabilities-Scalability to meet future business requirements.-Improved responsiveness to market conditions.-Optimized fill rate capability.-More flexible,responsive delivery options-More value-added services.Reduced logistics costs-Improved end to end supply chain visibility-Lower cost-to-s
8、erve in transportation and distributionImproved asset productivity-Fewer stock locations through rationalization to achieve higher network productivityReduced working capital-Lower LDC stocks through more flow-throughs,smaller more frequent orders,centralized slow movers,better use of supplier stock
9、s etc.EXPECTED RESULTSPROJECT OBJECTIVE:Page 5The overall objective of Electrolux Network Strategy Project is to determine the least cost distribution network configuration to satisfy the specific service level requirements of its current and future target customers Project Objective and ScopeProjec
10、t Objective and ScopeThe scope of the Network Strategy Project is to answer the following questions:The scope of the Network Strategy Project is to answer the following questions:What are the customer service requirements which impact channel design,logistic process and infrastructure?What is the cu
11、rrent performance(performance measure and customer satisfaction)of Electrolux in meeting these requirements and what is the GAP versus the competitors as well as against the“Best Practice”achievable in China?Should Electrolux provide inventory carrying and transportation services to our clients(with
12、 appropriate price increase)?What other additional logistic services can provide competitive advantage to Electrolux in the market place?Should Electrolux change the structure of its distribution channels in China(e.g.sales to retailers,vs to distributors?)Can Electrolux gain by plant direct shippin
13、g?How many distribution centers(DCs)should Electrolux have?How many RDCs and LDCs?Where should the DCs be located?Which types/location of customers and which branch should be served by each DC?Which customers should be served directly?Should all DCs carry all products or should they be specialized b
14、y product line?Should Electrolux contract for warehousing services or operate its own DCs?What impact do different transportation modes have on Electrolux logistics network requirements?What inventory control procedures(high level)should Electrolux establish in order to satisfy customers,minimize co
15、st and maintain control?What are the systems and human competencies requirements to achieve these objectives?Page 6In developing the optimum supply chain capability for Electrolux China we are utilizing a three-phased approach to developing and rolling-out the new distribution network-This project c
16、overs only Phase IOverall Approach towards Network OptimizationOverall Approach towards Network OptimizationPage 7BuildLogisticsModelTask 5AssessAlternativesTask 6Conduct ReviewSessionsTask 7Present Results,Recommen-dations&Implemen-tationAction PlansTask 8ConductVisioningSessionsTask 1 a.InitiateDa
17、taCollectionReviewCurrentOperationsTask 2Under-standService Require-ments Task 3InitiateDetailedProjectPlanningTask 1Task 4Full-Scale Implementation RolloutPhase IPhase IIPhase IIIDistribution NetworkProcess DesignDistribution NetworkStrategy DevelopmentCUSTOMER SURVEYNETWORK OPTIMIZATIONProject App
18、roachPage 81Initiate Detailed Project Planning1.a Conduct Visioning Sessions2Review Current Operations2a.Understand current network setup2b.Review current network logistics strategy2c.Review current customer service strategy3Understand Service Requirements(customer interviews and analysis)3a.Create
19、customer segmentation frameworks5Identify Alternatives5a.Perform demand aggregation analysis6Assess Alternatives7Conduct Review Sessions8Present Preliminary Results&RecommendationsKey Activities by Week(assuming 10 weeks)123456789103h.Analyze customer requirements and assess Electrolux GAP3k.Analyze
20、 Cost to Serve and Strategic Attractiveness3l.Develop Recommended New Service Offerings3m.Assess Logistics Warehouse Netwk Strategy Implications4Initiate Data CollectionCollect Current Warehouse Network Dataa.Facility Operating Costsb.Transportation Costsc.Inventory Costsd.Demand volumes3b.Interview
21、 Customers in Location 13c.Interview Customers in Location 23d.Interview Customers in Location 33e.Interview Customers in Location 43f.Interview Customers in Location 53g.Interview Customers in Location 65b.Selection of 5-8“best options”Project WorkplanPage 9nProject Introduction and BackgroundnCust
22、omer Survey-Survey Approach-Survey Results-Findings and OpportunitiesnLogistics Network-EOQ inventory modeling-Logistics network modelingnRecommendations and next stepsnAppendices -Process flow -Cost analysisContentsPage 10The sample for the customer survey targeted a representation of Electroluxs c
23、urrent operations in China,and its current and future market-Customer Sampling Methodology-Historical SalesMarketGrowth&TrendsCurrent Logistics Operation Where were the highest demand areas?Where are the customers located,which has significant contribution to Electrolux revenue?What are the current
24、customer types?Where are the key account customers?What is the current sales regions?Where would be the potential high growth areas for refrigerators?What will be the emerging channel for white goods?What are the service requirements from the emerging channel players?What is the current logistic ser
25、vice pattern,with regard to the LDCs”distribution and the customers which are being served?Interview AreasInterview CustomersSurvey Sample Size and CoverageInterview AreasSurvey Sample Size and CoverageInterview AreasInterview CustomersSurvey Sample Size and CoveragePage 11The project team focused o
26、n obtaining as much customer data through direct interviews.A customer survey was faxed out to broaden geographic coverage-Customer Survey Approach-Fax Out Survey Focused on several AC/Electrolux chosen locationsBeijing,Tianjin,Shanghai,Guangzhou,Changsha,Chengdu,Shenyang,ShenzhenCustomer TypesDistr
27、ibutors:Provincial level,city level Retailers:Department store,home appliance store,chain storeKey Accounts:International chain storesBroad geographic coverage to include areas where direct interviews could not be conductedStill aimed to achieve representative sampling of distributors and retailersD
28、irect InterviewsPage 12In total,81 customer survey questionnaires were collected representing a broad cross section of Electrolux customers-Customer Survey Breakdown-DistributorsRetailersKey AccountsProvincial Level728International Chain StoreCity Level12133Department StoreHome Appliance Multiple Fo
29、rmat 10Chain Store 7Total81Sub Total19593Super Market 1Page 13-Customer Survey Breakdown-RegionsNCECGZWestCentralCSNEInterviewedSurvey2121957441076068Total4140Total6228155131281 and also Electroluxs marketsChangshaBeijingShenyangShanghaiChengduGuangzhouQingdaoSuzhouTianjinDalianKunmingNCNECentralECG
30、ZwCSPage 14nProject Introduction and BackgroundnCustomer Survey-Survey Approach-Survey Results-Findings and OpportunitiesnLogistics Network-EOQ inventory modeling-Logistics network modelingnRecommendations and next stepsnAppendices -Process flow -Cost analysisContentsPage 158.Are you being served by
31、 Electrolux directly?Yes NoAll responses were in the“Yes”categoryQuestion 8Why were non-Electrolux Customers not covered by the survey?Due to new survey regulations which were recently released(Dec.1999)by the State Statistical Bureau(SSB),a company must obtain permission and approval for all market
32、 surveys conducted(this approval covers survey scope,approach and also a review and approval of the survey results by the SSB before they are released clients).The obstacles put in place by the regulations(e.g.applying for permission,having a survey reviewed and approved,etc.)could have added severa
33、l weeks to the project commencement date and additional time before the results can be released.At this stage,we are not aware of any companies which have sought and gained approval(including Gallup).The key problem is that the survey reforms having only recently been implemented and the local branc
34、hes of the SSB are still establishing the administrative system to deal with it.Therefore,the most”practical”approach for conducting the project survey given the current environmental constraints was to cover only our existing customers since it was unlikely that they would report the survey to the
35、SSB.Electrolux CustomerPage 169.Sales revenue growth in the next 1-2 years 60%Response:33%30%19%3%12%Question 9CommentsThe majority of respondents were positive in their sales outlook both for their sales overall(ranging from refrigerators to general home appliances)as well as specifically for Elect
36、rolux products.Typically,growth in sales of Electrolux products responses ranged in the 10 to 30%band.Guangzhou,Western China,Eastern China,North Eastern and the North China regions were anticipated to experience the greatest sales growth in the next two years.Changsha and the Central regions are an
37、ticipated to have.And customers who is the new entry into the market expect higher growth rate than the othersNote:Data limitation since responses were tailored based on the position of the person interviewed(i.e.a general manager of a distributor would have a broader view of sales growth to that of
38、 a sales manager only involved in the sales of Electrolux products).Sales Revenue GrowthPage 1710.What are the key brands of refrigerator in your current business and what is the proportion of these brand sales represent in your total refrigerator sales?Who sell directly?Who supplies you directly?Qu
39、estion 10Refrigerator Sales Brand NameElectrolux Haier Rongsheng Xinfei Meiling ChanglingPercentage of Total Sales(%)Purchase Directly from Vendor by RetailerGoods Shipped Directly from Vendor to Retailer Days Inventory SiemensDR60%21%DR23%27%DR19%14%DR17%13%DR9%9%DR6%8%DR8%17%92%91%84%86%86%95%91%9
40、1%94%83%72%92%86%92%1715N/AN/A15N/AN/ADRDRDRDRDRDRDR12181616161917Comments8 out of the 26 customers who distribute Electrolux refrigerators only sell Electrolux products.Over 90%of the customers purchase directly from Electrolux and are also directly served by Electrolux Foreign players,such as Carr
41、efour,Ito Yokado,keep low inventory levels,typically less than 5 days.In contrast,the average inventory level for local players varies from 7 to 30 days.Customers in CS and NE holding higher inventory level than other regionsElectrolux has lower inventory level than the competitors at its retailer s
42、hop,but has higher inventory level at its distributor sites LegendD:DistributorR:RetailerPage 1811.Please specify the amount of the refrigerator sales in 1999Question 11CommentsWholesaleRetailAverage Volume 19994,752 units,4,640 unitsMarket Share(%)28%24%Refrigerator SalesNote:These results are only
43、 for high level reference(1)Except 8 out of 19 distributors who are purely doing distribution sales and 36%of retailers who only have retail sales,the rest are all carry on multiple roles in both distribution and retail sales.(2)The distribution sales is quite low because survey includes a number of
44、 new distributors,and the sales number is also skewed by retailers who have weak distribution sales.(3)The retail sales number is skewed by a couple of retailers whose retail sales is even higher than most of distributors sales during a year(4)The market share of retailers looks higher since the dat
45、a is skewed by some dominant local retail chains and dominant retailers in county level cities.Page 1912.Do you experience the sales fluctuation in different months?Yes,the fluctuation is as follows No Peak months are _,Sales _units/month Normal months are _,Sales _units/month Low months are _,Sales
46、 _units/month Question 12Survey ResultsCommentsn92%of respondents confirmed the seasonal nature of their salesnThe period just prior to Chinese New Year and the summer months are the two peak seasons with sales volumes around 80%higher than transitional periods.nThe 2-3 months after Chinese New Year
47、 and November are the low season months with average sales volume 26%lower than transitional periods.nMay,October and December are the transitional month from normal season to peak season.Peak seasonsAverage Sales(Units/month)MonthsTransitional period(s)Low seasonsJanuary(pre-Chinese New Year),June
48、to SeptemberMay,October,DecemberFebruary to April(post New Year)November849472351SeasonSales FluctuationPage 20OrderingOrdering-Table APage 21Ordering Service Importance and Customer SatisfactionProduct AvailabilityAbility to Respond to Urgent Orders Order FrequencyMinimumOrder Size1.41.31.21.1Order
49、ing1.ItemsNo.Satisfaction(Electrolux)Importance4.1421354.1421353.642135Satisfaction Generally3.9421354.1421354.3421354.6421354.6421354.0421353.53.5421353.7421353.7421353.6421353.84213542135aRate from Electrolux Sales Managers Rate from Electrolux customers A3.74.93.83.34.41.94.03.8Ordering-Table APa
50、ge 22“Ability to Respond to Urgent Orders”,and“Product Availability”ranked the most important factors from the surveyThough above average,the customer satisfaction rate towards Electroluxs ability to respond to urgent orders scored relatively the lowest among all the factors.Customers from most of t