MERCADONA SUPPLY CHAIN

MERCADONA SUPPLY CHAIN

Companies like Mercadona acquired advantages from organized innovations that allowed them to obtain competitiveness and adaptability to complex demand. They began as a small business in 1977 Valencia, Spain, in an area away from their respective metropolitan market, but they advanced to become leaders in their domestic markets. Since 1993, the philosophy of Mercadona has been based in “TOTAL QUALITY”, and is based on five components:

• Customers (the chief)
• Personnel
• Suppliers
• The corporation
• Capital

The company aimed at organizing people´s abilities (suppliers, workers) in order to satisfy people´s needs (customers). Their innovative and efficient way of dealing with suppliers and customers, their low prices, their quality service, the adoption of technological advances in commercialization and logistic organization processes have developed in a business culture and made them the leaders of their direct competitors (conventional supermarkets, hypermarkets and a segment of the discount stores).

Mercadona has an automated distribution centers that provide them with sophisticated technology, probably one of the most modern of Spain and Europe. The real objective is to gain efficiency with less effort. It is seen that they are applying something similar to Lean Manufacturing, but with the benefits of the new technologies.  Let’s see a video that will show their distribution center from the inside.

http://www.youtube.com/watch?v=6vo-p0aAge0

Third Party Logistics (3PL)

The rise of globalization has made it possible for large and small organization to extend their reach abroad and offer their good and services to a larger market. However, as globalization has increased the supply chain has also extended and has made logistics more complex. So what happens when small organizations do not have a logistics department of their own or the logistics is too complex even for large organizations? In these cases it is common for organizations to outsource this work to a third party logistics provider or (3PL).

Third party logistics providers offer a wide variety of services for organizations such as planning, distributing, and storing in their warehouses, or manage the entire supply chain. If a problem arises abroad the third party logistics provider can take care of it because they will be more familiar with the local regulations. Using 3PL providers helps save time that can be devoted to better serving customers and also saves money on staff, facilities, and transportation equipment.

Supplier Development makes you competitive

Supplier Development makes you competitive

There is a growing recognition that supply chain performance possibly influence in the competitiveness of your company, in this way, many  organizations are increasing their interest about supplier development strategies, which include, the suppliers evaluation, selecting the best suppliers, making efforts to develop suppliers performance and capabilities, improving customer-supplier relationship, etc.

Supplier development is a process which includes any set of activities that a buyer (a company) undertakes to improve the supplier performance and capabilities, in a way that generate favorable results for both parties in a long-term. The buyer should design a Supplier Development Program, which require an investment of time, money and space from both parties (the buyer and the supplier); this program may result in an improvement in the supplier performance and, consequently, in a strengthening of the buyer´s competitiveness.

There are some elements that appear to be critical to the success of a Supplier Development effort:

•        Effective two-way multifunctional communication.
•        Top management involvement
•        Cross functional buying firms teams
•        Price versus the total cost of ownership
•        Long term perspective
•        Supplier evaluation
•        Supplier recognition

A supplier Development effort represents an initiative that can help the firm meet strategic organizational objective. In the one-page picture I´m adding to this post, you can also find other activities that can help an organization to reach competitiveness.

The Supply Network and its relationship with the ERP

I would like to write in this post about the Supply Chain Management Network (SCM) and its deep relationship with the Enterprise Resource Planning Systems (ERP) used in the enterprises nowadays.

As all know, the supply chain network management has recently become an area of great interest among academics, practitioners and the big enterprises and in the Management Science community in general. Today´s market place is competitive an dynamic. Rapid technology development, globalization and customers´ varied expectations are changing the type of markets´ competition from competitive independent firms to to Competitive Supply Chains (CSCs). Today´s e-business circumstance is another key factor that makes it possible for different firms to be able to compete as integral part of SCs. Naturally, efficient coordination of individual firms in the form of SCs requires better management of material flow throughout their network structure as well as a good integration between the company´s integrated systems . Here appears the importance of the Enterprise Resource Planning (ERP) software systems in any company today.

ERP have focused on internal process integration of traditional functions, such as sales, production, and inventory management. In essence, ERP systems are configurable information systems packages that integrate information and information-based processes within and across functional areas in the organization. Integration has been the holy grail of Management Information Systems (MIS) since the early days of computing in organizations (around the 70s). The current generation of ERP systems provides reference models of process templates that claim to embody the current best practices within an organization (see the figure below,  a sample of ERP Software System)

ERP is now consider to be the price of entry for running a business, and at least at present, for being connected to other enterprises in the network economy where we live. Furthermore, ERP is becoming a platform for applications such as executive information systems, data mining and, of curse, supply chain management.

This transaction based integrated processing provides different tools that can support supply chain integration. By gaining access to the suppliers´ production and delivery schedules, buyers can improve their own production plans and delivery schedules. Correspondingly, suppliers can use the buyer´s real time store level data to plan their inventory levels, and production schedules. Sharing order status information among the supply chain partners improves customer service  quality, speeds up the payment cycle and provides cost saving.

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Definitely, sharing data regarding to performance metrics such as leads times, quality specifications, return status, etc., helps supply chain partners to identify and overcome the bottlenecks in the supply chain.

Hope you would find this information interesting, I will carry on sharing some more in the next weeks!

Henar Cervera

Media Markt Online

Since Media Markt opened its online shop MRW has been the logistical operator. The process started in 2012 with over 3.500 product references, but it has increased till about 100.000 according to predictions.

In this way, MRW became the biggest logistical operator in the Iberian Peninsula. The logistical centre is placed in the industrial estate of Coslada, Madrid. It’s very near to MRW injection platform and they have the most extensive schedule to satisfy the online customer requests.

They work with an enormous flexibility and can deliver the customer requests in one day aproximately. Moreover, the operational quality and efficiency is evident and they manage the warehouses with RFID technology (described in the previous post).

Media Markt very often has offers online which increases the online requests. In addition, you can pick up your product in the store or they can carry it to you, whatever you prefer.

Finally, we can see the concept of “GARANTIENDA” in the following video, but it’s in Spanish:

Only Media Markt has this innovative concept.

RFID technology in Media Markt SC

First of all, we’re going to start explaining briefly in what consists RFID technology.

Radio-frequency identification (RFID) is a technology used to transfer data of way wireless and contactless using radio-frequency electromagnetic fields and it has as its purpose identifying and tracking attached tags to objects automatically.

This technology can seem new but it isn’t. It was already used in the forties in the Second World War to avoid friendly fire.

The system is composed by transponders (tags), readers, antennas and a host (central system). The reader connected to a computer, communicates through an antenna with tags by radio waves. These tags are attached to products or packing and send back an identifying response.

Next image shows how it works:

Walmart is the pioneer in promoting RFID technology and it’s able to save up 8 billion dollars annually and reduce Out-of-stocks by 30 percent for products sold between 0.1 and 15 units a day.

RFID technology helps a lot to Media Markt supply chain. The tags are placed in storage areas where products are inspected and packed. Moreover, these tags allow that every product is placed in every step along the whole supply chain till the final customer.

The pallets are controlled at the exit and entry of the warehouses with RFID antennas. The same process happens when products go to the store.

Now we’re going to see some RFID advantages:

Increases SC efficiency, security and control (real-time).
Decreases thefts, losses, errors and stock.
Decreases time dedicated to preparation of shipments, inspections and logistics.
Helps to know exactly the goods quantity in stores.

Finally, the following video shows how we could shop in a near future:

I think it’s an easier and faster way to buy.

Overnight-Express or: How to order lobster from overseas

Do you know how long it takes to walk 1000 kilometers? I bet you don´t. Of course you could calculate it, for example by taking an average speed and adding some time for basic needs like sleeping and eating. I won´t tell you the question´s answer, but all of us know: it will take a lot of time. Next question: How long takes a flight from Madrid to New York City? Less than 9 hours you will say. And by the way, the distance is almost 6000 kilometers. The 100-year old invention of the airplane completely changed all our lives. The airplane connects the world. It plays an important role in freighting people as well as goods. The air freight has become indispensable for sending urgent as well as perishable cargo, because it is fast, reliable, and the freight is under controlled conditions. Some examples for delicate cargo: medical supplies, foods, animals.

Thanks to logistics engineers, who developed an all over the world perfectly working, highly sophisticated logistics-system based on IT-technologies, nowadays it is possible to receive a package from overseas within 24 hours. To make this possible, it is indispensable that all required steps interlock perfectly, beginning with the record of an order, to the delivery to the customer. Same for the information flow.  In one of the world´s largest air freight transshipment-centers, the DHL HUB Leipzig in Germany, 1500 tons of freight are transshipped per night. Of course every step has to work and there is no space for mistakes.

When starting its journey around the world, an express package like a coolbox containing lobsters will rarely stand still. The journey is planned from A to Z by an IT-System and it will be timed minutely. Do you still remember the question at the beginning of this text? The lobsters will be faster!

Developments in logistics

New developments in logistics helped many companies to handle their logistic processes more effective and to save money by this. But also negative consequences appeared due to new innovations. Many employees lost their jobs because of the application of machines or diverse electronic systems.
The highest goal for the company is to lower their transaction costs. Transaction costs occur for the transaction of diverse business processes like for example the communication between a company and its business partners. Electronic communication systems help to lower the transaction costs. Communication is simplified, information can be exchanged fast and effective, on the direct way.  Former communication via intermediaries is not required anymore. Intermediaries are just substituted by electronic trading system.
But on the other hand also new intermediaries appear on the market…

Five supplying goals of the “Discounters”

Nowadays, the price of the products has become one of the most significant aspects that consumers take in consideration when they go to do their shopping.  Customers increasingly demand lower prices, whilst they are spoilt for choice. And in this context, discount supermarkets such as LIDL or ALDI are adquiring more and more clients. Discounters attribute their strong performance to a highly efficient supply chain  based on five aspects:

1. Focused assortment: limiting the number of stock keeping units. Unlike traditional supermarkets with an average product range of 10,000 food and non-food items, or hypermarkets with as many as 50,000 items, discounters offer between 1,000 and 3,000 products.
2. Standardized outlets: discounters stores are standardized not only in neighboring markets, but worldwide, which allows for efficient in-store processes. Lidl’s supply-chain infrastructure is organized with roughly 105 regional distribution centers supplying 10,000 stores; transportation is usually outsourced.
3. Efficient replenishment: efficiency is the focal point for discounters package-design and replenishment processes. Shelf-ready packaging (SRP) reduces handling and waste and has a positive impact on branding—nearly 100 percent of discounters products use it, compared with only about 40 percent of non-discounters.
4. Consistent no-frills approach: Discounters apply their no-frills approach throughout the entire supply chain. In warehousing, discounters build large distribution centers with lots of floor space and loading bays relative to volume. Although this ties up capital and requires longer distances for picking, it eliminates waiting times and the need for detailed timing of deliveries. It also leaves room for expansion without jeopardizing efficiency.
5. Smart innovations and investments: Contrary to popular belief, discounters use innovative concepts to streamline store operations, warehousing and distribution. An example of this is selectively installing fully automated technology for the picking and packing of all ambient food in distribution centers. Like the SCP ( Schäfer Case Picking).