Case study : FedEx

Q1. How has IT changed the definition of “logistics”?

The definitions

Past: management of physical flow between the point origin and the the point of consumption

Now: management that plans, implements, and controls the efficient, effective, forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer's requirements.

How has IT changed the definition of "logistics”?

Including information flow along the whole supply chain

Using information technology to achieve competitive advantages by cost reduction and service differentiation

Source : A Survey of Information Technologies in Logistics Management

Examples:

EDI

This technology requires firms to have common data formatting and transmission standards or protocols. Such technologies have been employed by companies to coordinate their value chain activities including logistics

Bar coding 

Bar coding is one of the most IT enablers to date and has made significant impact in the practice. It allows to identify and keep track of objects thus provides a strong foundation for integrating the corporate logistics and the supply chain (Closs & Kefeng, 2000).

Real-time

communications capabilityThe logistics IT capability of real-time communications is essential for maintaining the flow of information. As noted by Dudley & Lasserre (1989), one of the important roles of logistics IT is to substitute information for inventory. To make real-time tracking of goods, logistic information systems of business partners should have real-time communications capability

Changing Trends in Logistics

More companies are looking to use virtual integration enabled by information technology as their business strategy. That means they will prefer using third party logistics in order to focus on their core competencies as IT allows efficient coordination between shipper firms and the 3PL providers .

Source : A Survey of Information Technologies in Logistics Management

Q2. List the benefits of a virtual supply chain

1. Reduce inventory cost by taking advantage of  real-time communication (substitute information for inventory)


2. Provide fast and accurate service
Example: Real-time communications allows or schedule plans to change in dynamic routing and scheduling system when the vehicles are already out on the road.


3. Provide better coordination between different firms along the supply chain (EDI)


4. Provide competence for companies to outsource part of functions among the supply chain so that they more focus on their core-activities. (3PLs)


5. Improve relationship with customers
More communication with each other

Q3. Discuss the role of IT in FedEx's Business Strategy

Promoted the globalisation of commerce

Enable FedEx to share information between operations/departments within a company and between organisations  so that it can generate operational efficiencies, reduce costs and improve customer services.

Replaced inventory by information

Just-in-time inventory management helped to reduce costs and improve
efficiency by reduce the inventory turnover.

Allowed FedEx to build one-to-one relationships with their customers

By using EDI, FedEx can identify points along the supply-chain where
they could provide management services

Integrated its services within the supply-chain

When a FedEx customer placed an order through fedex.com, the information would find its way to COSMOS, FedExís global package-tracking system. It helps generate increases in customer loyalty and in customer's switching costs

Provided additional services to the customer

IT initiatives like PowerShip systems can provide additional services to the customer, including storing of frequently used addresses, label printing, on-line package pick-up requests, package tracking, and much more.

Q4. Discuss the virtual integration of supply chains without ownership

Definition:

     Virtual integration is a new form of value chain management. Under such a system, the links of the value chain are brought together by informal arrangements among suppliers and customers. Shipments of the components that your firm needs can be easily arranged through the Internet or a networked computer system. The same type of arrangement allows you to fully serve your customers in ordering, services, or any other needs.

Eliminating inter-company boundaries, replacing physical asset by information flow and integrating suppliers with customers among the value chain by using information technology.

 

 

Examples in FedEx’s case

   Even as early as 1979, a centralised computer system - Customer, Operations, Serv, Master On-line System (COSMOS) - kept track of all packages handled by the Company. This computer network relayed data on package movement, pickup, invoicing and delivery to a central database at Memphis headquarters. This was made possible by placing a bar-code on each parcel at the point of pickup and scanning the bar-code at each stage of the delivery cycle.

    In 1984, FedEx started to launch a series of technological systems, the PowerShip programme, aimed at improving efficiency and control, which provided the most active customers (over 100,000) with proprietary on-line. In summary, these PowerShip systems provided additional services to the customer, including storing of frequently used addresses, label printing, on-line package pick-up requests, package tracking, and much more.

    In 1994, FedEx became the first big transportation company to launch a Website that included tracking and tracing capabilities.

    In 1999, customers could build integrated Websites using FedEx Applications Programming Interfaces (API) or FedEx intraNetShip 9(free downloads from fedex.com) and incorporate a link that would allow them to track packages directly from their own site.

Advantages

Provide companies the capability and efficiency of outsourcing their non-core activities by sharing the information flow to their business partner among the supply chain. Example, share required information for the outsourced companies who help them produce vehicle’s components. (competitive advantage)

Provide value-added services for end-customer to enhance their loyalty, such as speeding up the supply chain management

Improve customer relationship by letting them get more involvement in the supply chain management

 

 

 

Q5. What are the factors that put pressure on FedEx to consolidate its operation, while remaining customer-focused?

The Internet Market and e-Tailing

Because of low cost, diversity, the impact of the Internet on

FedEx was twofold. Firstly, it opened up opportunities in logistics management for FedEx as

businesses were using the Internet to re-engineer their supply-chains so long as customers

were satisfied, integration with customer supply-chains was the key.

àappealing and accessible, re-engineer their supply-chains

Intensive Competition

The industry was loaded with companies, local and global, that provided a myriad of transportation services to a wide range of businesses. Although FedEx pioneered the Web-based package-tracking system, such systems became the industry norm rather than a competitive advantage.

Rising fuel prices and US domestic market growth slowing down:

 Both trends had a significant negative impact on net income since the express transportation business (mainly Federal Express and RPS) accounted for over 80 per cent of the Groups revenue, and that the US market accounted for approximately US$10 billion of the Groups revenue. Therefore, these are putting pressure on the Company to re-think its business strategy.

Competition was fierce.

The industry was loaded with companies, local and global, that provided a myriad of transportation services to a wide range of businesses. Although FedEx pioneered the Web-based package-tracking system, such systems became the industry norm rather than a competitive advantage.

Being difficult to promote their brand under too many subsidiary companies

FedEx was trying to promote five different subsidiary companies with

completely unrelated names and business logos under the FDX banner through distinctly separate sales and customer service teams

Form the competitive advantage of the Company by providing  a wide range of business solutions in collectively the Group

There was to be one toll-free telephone number, one Website, one invoice and account number, one sales team, one customer service team and a streamlined customer automation platform to handle electronic transactions for small and large businesses. – Lower cost, higher efficiency

 

 

 

Yakult visit

Yakult is a Japanese probiotic milk-like product made by fermenting a mixture of skimmed milk with a special strain of the bacterium Lactobacillus casei Shirota. It was created by Minoru Shirota who graduated from the Medical School of Kyoto University in 1930. In 1935, he started manufacturing and selling Yakult. Since then, Yakult has also introduced a line of beverages for the Japanese market that contain Bifidobacterium breve bacteria, and has also used its lactobacilli research to develop cosmetics.

Yakult started their business in 1969 in Hong Kong. The first factory was located at Kwun Tong and now the factory is moved to Tai Po.

The manufacturing process of yakult:

First of all, there are 3 huge tanks under specific  temperature only for Yakult’s manufacturing.

 Then, Yakult will be bumped into a container and the plastic bottle is prepared at the bottom of the container. Yakult will be fully filled and be deliver to next stage. The  products will be package for 5 in a line, and each package contains 5 bottle. At the same time, staffs will supervise on the manufacturing of  Yakult what they will do is observing the package of yakult, if they find the mistake such as wrong package, they must pick it out in order to maintain the quality at high standard.

Those selected Yakult will be disposed afterwards. Finally, 5 bottles of Yakult will be packed as one pack and deliver to the warehouse under 0-4 degree Celsius for storage. The manufacturing center in Hong Kong will produce around 1 million bottles of Yakult. To ensure the healthiness and freshness of Yakult, preservative will not be added as ingredient. Consumers are suggested to consume it within a month after the production.

The design of bottle:

Yakult is marketed in different sizes. In Australia, Europe, India, and Indonesia, Yakult comes in 65mL bottles.

 In the Americas (including Mexico, one of Yakult's largest selling markets), Japan, Philippines Thailand and South Korea, 80 ml bottles are available.

 In Singapore, Tai Wan and Mainland China and Hong Kong where are available and comes in 100 ml bottles. Most of people may not know that the largest size of bottle is in hk. The reason is hk people prefers larger volume of drink due to the specific culture so yakult have to cater to the needs of them.

Vision of Yakult:

Yakult’s corporate philosophy “We contribute to the health and happiness of people around the world through pursuit of excellence in life science in general and our research and experience inmicroorganisms in particular,

SEVEN-ELEVEN JAPAN

Q1. Identify the major obstacles to e-commerce in Japan.

Environmental factor:

1. Internetdial-up cost is very high

Nippon Telephone & Telegraph (NTT) controlled 95 per cent of Japan’s telephone lines. Since there is lack of competition, NTT are charging a high telephone communication fee and internet fee.

2. Government intervention in markets

-For example, under what was termed as the saihan system, it was illegal for retailers and e-tailors based in Japan to sell music CDs at a discount because of a law that protected copyright holders. Also, before 1999, the Japanese Government had regulated companies heavily in the ecommerce sector, essentially strangling the growth of online transactions.

3. Personal computer is not popular in Japan

Since the penetration rate of personal computers in Japan was only about 20 per cent as opposed to 41 per cent in the US (2000), the usage of PC is low. As a result, the popularity of e-commerce is low.

Cultural problems:

1. Being reluctant to use credit card payment due to security problem

Japanese did not like online transactions since they were wary of the ease with which hackers hacked into servers to obtain credit card information and other personal data.

2. Worry about End-fulfillment of on-line orders

End-fulfillment of on-line orders was a problem for Japanese. Most of the consumers do not stay at home during the day to receive parcels which they had ordered on-line. Consumers are also doubtful about receiving their parcels from on-line stores, either due to mailing errors or non-fulfillment on the part of the stores.

3. Cash-based culture

Japan had traditionally been a cash-based society. It was not unusual to see salaries paid in bank notes. About 90 per cent of all mail-order sales were paid for with cash-on-delivery or by bank transfer, which were also the most commonly used methods of payment for on-line shopping. Cheques were not used. Credit card payment, the most common of payment in ecommerce websites elsewhere, was not very popular, accounting for just over 10 per cent. Polls indicated that 70 per cent of Japanese disliked using credit cards for online purchases,

4. A long history of mail-order and catalogue shopping

Customers could touch the products, and perhaps obtain discounts daily necessities stores, convenience stores, or konbinisas they were known in Japan, were almost everywhere.

1. Identify the major obstacles to e-commerce in Japan.

Q2. Describe the proposed 7dream.com business model.

Target customers:

Mainly young people from teens through thirties, who had taken to the Internet most enthusiastically

Product

Offer services in eight content areas: travel; music; photographs; merchandise, gifts and mobile phones; tickets; books; car-related items; and information

This diverse range of merchandise was specially aimed at the buying pattern of most Japanese consumers and to complement the range of goods offered in the 7-Eleven Stores. The products to be offered were especially chosen for their ease of handling - if they were not viewable on screen or downloadable, they were small-sized.

Price

Price is relatively low comparing to other competitors. It is because 7dream.com is obtaining the goods directly from the warehouses of its suppliers. This meant that it would not have to hold inventory and incur warehousing costs. Beside, 7dream.comis leveraging on an existing delivery system, so customer would not be charged exorbitant delivery rates

Also, here is the payment methods:

1) Payment at 7-Eleven stores

2) Payment slips with bar codes

3) Assigned payment reference number

4) Pay by credit card over the Internet

Promotion

7-11place Internet-enabled multimedia kiosks in 7-11 stores. Customers who without the access of personal computers and the Internet can visit 7dream.com easily. 7dream.com is actively investing in e-commerce joint ventures (e.g. on-line bookshop joint venture ,car broker ) use its stores as the payment and delivery stations for eight major on-line shop operators,

Place

More than 8000 convenience stores located at nearly every street corner, city or town in the country (easily access by customers).

Customers can specify the delivery location like their home address, or address that customer preferred as well as any specifi 7-11 store.

Q3. How does 7dream.com define and differentiates its offerings from its traditional model?

	Traditional 7-11 store	7Dream.com
Payment	In 7-11 stores Cash and credit card	In 7-11 stores or through internet Cash and credit card
Business Nature	Franchise	Joint Ventures with different partners (NEC, SONY)
Accessibility	Over 8000 stores	Anywhere with internet access
Distribution Channel	Utilize the existing logistics system	Utilize and further enhance the existing logistics system
End-fulfillment	Take the merchandises from store	Take the merchandises from store / Deliver to their home or address that customer preferred as well as any specific 7-11 store. delivery address
Product	·         Food, drinks, cosmetic, newspaper and magazines, cigarette, daily necessities	·         Travel, music, photographs, merchandise, gifts and mobile phones, tickets, books, car-related items, information
Promotion	Catalogue shopping	Website for PC and mobile / Internet-enabled multimedia kiosks
Target	Whole population	Mainly young people
Variety of products	Limited range	Wide range

Q4. Identify the critical success factors of the business plan of 7dream.com.

Problem: Internet dial-up cost is very high

Solution: Japanese government deregulated stock commissions in 1999. It enable consumers to start trading via the Internet. Japanese government also introduced competition into the telecommunications industry by splitting Nippon Telephone& Telegraph into3companies.

Problem:. 

Government intervention in markets

Solution: 

In the 1999, the government promoting deregulation and e-commerce, splitting the ISP monopolies up

Problem:. 

Personal computer is not popular in Japan

Solution: 

Internet-enabled multimedia kiosks enable consumers who did not wish to connect to the Internet at home, or did not have personal computers with Internet access, to access the full services of 7dream.com.

Problem:. 

Being reluctant to use credit card payment due to security problem and Cash-based culture

Solution: 

Customers pay for the purchases through their assigned payment reference number to the cashier or Payment slips with bar codes. They don’t need to use purchase or worry about the end- fufilment because they can also directly take the products from stores.

Problem:

. Worry about End-fulfillment of on-line orders

Solution:

If customers do not satisfy the merchandise, customers can return to the same store.

Problem:. 

A long history of mail-order and catalogue shopping

Solution:

The youngers in Japan enjoy stay home and do as much thing as they can, instead of go outside. 7dream provides the platform they need to buy things for daily use. Also, 7dream.com provide products which traditional stores does not provide.

TAL

Q1.

China’s accession into the WTO and the elimination of all textiles quotes

China's agreement of WTO accession :

• Quota Liberalization
• Tariff reduction
• De-regulation of the retail and distribution sector
• Potential anti-surge mechanism and non-tariff barriers

China-US Agreement - a good general guide to the obligations China entered into with its WTO partners

Source's link

Example :  China will reduce its tariffs on textiles and apparel products from its current average tariff of 25.4% to 11.7%

At the result of China's WTO access, companies like TAL lose the advantage of being the commercial gateway to china and the sourcing hub for the Asian region due to the elimination of textile quotas as well as the deregulation of distribution sector. But meanwhile, eliminating the textile quotes and the deregulation means that the companies having production facilities in china can input raw material at lower cost and the products can have a greater access to the Chinese market as well. As a whole, it is expected that the manufacturer/trader/one-stop sourcing center like Hong Kong will strengthen further.

Migrations of manufactories

The fact:

The production sector of the apparel industry had undergone several migrations in the past few decades: from North America and Western Europe to Japan in the 1950s, from Japan to Hong Kong, Taiwan, and South Korea (collectively known as the Asian Big Three) in the 1970s, and most recently from the Big Three to other developing economies in the 1980s3. In 1983, the Asian Big Three, together with China, were responsible for two-thirds of total apparel imports in the US. In 2001, this share had dropped to 27 percent, with competition originating from other Asian countries, Central America and the Caribbean, and most notably Mexico.

Reasons behind the migrations

Some developing countries like Mexico benefited predominantly from their low labour wage and preferential tariffs in their regional trade networks (North American Free Trade Agreement), while the traditional top contender in the industry, such as the Asian Big Threes, were losing their competitiveness.

The results of fundamental changes to the competitive landscape in the industry

Different types of lead firms use different networks and source from different parts of the world.



    Retailers and marketers in developed countries tend to rely on full-package
sourcing networks, buying ready-made apparel primarily from Asia, where
manufacturers in Hong Kong, Taiwan and the Republic of Korea historically specialized in this type of production. But as wages have risen, multilayered sourcing networks have been developed; lowwage assembly can be done in other parts of Asia, Africa or Latin America while the NIE manufacturers coordinate the full-package production process.



    Branded manufacturers, by contrast, tend to create production networks that focus on apparel assembly using imported inputs. Full-package sourcing
networks are generally global and the production networks of branded
manufacturers are predominantly regional. Manufacturers in the United States
of America use Mexico and the Caribbean Basin (due to North American Free
Trade Agreement), European Union (EU) firms look to North Africa and Eastern Europe, and Japan and the East Asian NIEs to lower-wage regions within Asia.

Apparel industry's value chain

    The apparel value chain is organized around five main parts: raw material supply, including: natural and synthetic fibres; provision of components, such as the yarns and fabrics manufactured by textile companies; production networks made up of garment factories, including their domestic and overseas subcontractors; export channels established by trade intermediaries; and marketing networks at the retail level.

How apparel industry is classified as a buyer-driven industry

    Apparel is an ideal industry for examining the dynamics of buyer-driven value chains. The relative ease of setting up clothing companies, coupled with the prevalence of developed-country protectionism in this sector, has led to an unparalleled diversity of garment exporters in the third world. Furthermore, the backward and forward linkages are extensive, and help to account for the large number of jobs associated with the industry.

    With the globalization of apparel production, competition between the leading firms in the industry has intensified as each type of lead firm has developed extensive global sourcing capabilities. While “de-verticalizing” out of production, these firms are fortifying their activities in the high value-added design and marketing segments of the apparel chain, leading to a blurring of the boundaries between them and a realignment of interests within the chain.

The examinations (apparel industry):

• Entry barriers are low for most garment factories, although they become progressively higher when moving upstream to textiles and fibres

• Brand names and stores are alternative competitive assets that firms can use to generate significant economic rents. 

• The lavish advertising budgets and promotional campaigns needed to create and sustain global brands.

• Sophisticated and costly information technology employed by mega retailers to develop “quick response” programmes that increase revenues and lower risks by getting suppliers to manage inventories.

• The emergence of “lean retailing” includung bar coding and point-of-sale scanning used to provide immediate and accurate information on product sales; electronic data interchange (EDI) used by the retailer to restock; and automated distribution centers to handle small restocking orders, rather than the traditional warehouse system used for large bulk shipments.

Q2.

What is VMI?

Vendor-managed inventory (VMI) is a family of business models in which the buyer of a product (business) provides certain information to a vendor (supply chain)supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location (usually a store). A third-party logistics provider can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps.

How the use of VMI has enabled TAL to turn the sequential value chain to an integrated and synchronous value network?

Inbound logistics

With the authority to directly access customers’ POS data, TAL know more about the sales pattern and they can manage a minimal input stock level, minimize materials shipping time, increase efficiency of operations for incoming materials, etc.

Operations

TAL can place production orders once the POS data shows that there is a shortage of products in stores, without asking permission by the customers. And for orders which could be filled with existing stocks, production orders would be generated automatically and would be processed with priority.

Outbound logistics

Combining with TAL’s sophisticated pack and ship-to-store systems, VMI enable TAL to directly ship the finished products to customers’ store. This means products can arrive to stores faster than before and warehouse costing is greatly reduced.

Marketing and sales

By using VML, TAL provides a good incentive for customers to make purchase because it helps customers to avoid shortage and enhance their service level.

Service

Learning more about the sales pattern enable TAL to provide service that can better suit the customer in the future. As a whole, VMI can be regarded as an alternative for customers that can integrate value-added services among the value chain.

Q3.

Driving changes in industry structure

Minimize threat of new entrants

The IT initiatives are long-term investment with long-term effects and benefits. In TAL's case, they started poured money from about 20 years ago and get the successful result year by year gradually. That means it is not easy for new entrants to duplicate this IT advantage in a short period.

Balance the power of buyer

IT initiatives like VMI gain TAL a competitive advantage among the industry. Therefore, switching cost is relatively high because customers need to give up the benefit provided by TAL’s IT initiatives.


IT initiatives always provide better communication and cooperation among seller and customers. For example, VMI enable TAL to get POS data from customers so they can learn more about the sales pattern in the industry and gain more bargaining power to customers in the future.

Erode power of supplier

IT initiatives can provide more information to customers so they can have more choice when finding their business partners.

Creating products and service differentiation

VMI allow TAL to replenish the stock just in time


Using ASL system to launch Made to measure strategy help TAL to Provide mass customized garmet that are specified and unique for the customers.

These help TAL to create services that are different from other competitor.

Provide new business opportunities

Shifting from OEMs to OBMs (Original Brand Manufacturers) because IT initiatives can help TAL the following things :


Gain the information they need to establish a new brand that can best suit the industry


Streamline the supply chain so it can be a competitive advantage once they become an OBM


Example: VMI can turn the sequential value chain to an integrated value network.

Q4.

New technologies

SofTAL Process

A wet processing finish that can be applied to 100% cotton, and cotton-rich blend, garments ensuring a wrinkle free pristine appearance throughout the day. Added benefits of our SofTAL process treatment include minimal shrinkage and enhanced color retention even after numerous washes.

Trademark's register page

EZCOOL

With our EZCOOL treatment moisture is easily drawn away from the body to keep you cool and comfortable. The applied treatment allows the garment to dry twice as fast as a normal cotton garment with the additional benefits of being wrinkle-free.

TAL Pucker Free Seam Technology

An innovative sewing technology that utilizes adhesives along the seams to prevent pockets, cuffs, armholes and plackets from puckering. Patented in the Europe and Japan.

Trademark's register page

Emboss

A proprietary process that raises a permanent pattern or logo on 100% cotton garments. The treatment offers a softer and subtler alternative to embroidery or printing.

Dot.TAL

De-odorant Technology of TAL
An antimicrobial finish that acts as a shield against bacteria and mold growth on clothes thus preventing unpleasant odors.

Expandable Waistband

TAL’s patented expandable waistband technology imparts just the right amount of natural elasticity to provide better breathing and comfort throughout the day. Designed for maximum performance the natural elasticity lasts for the lifetime of the garment.

WOR – nano technology 

TAL use a proprietary WOR-nano technology resin system plus nano-scale chemical treatments to produce exceptional stain resistant performance. Furthermore, because the treatment is applied to finished garments even the sewing thread.

SofTAL Woo!

TAL’s washable wool is made from 100% pure wool. Our unique SofTAL Wool process enables us to provide machine wash and dryable wool garments without the headaches of shrinkage or felting. Good fabric and seam smoothness, as well as sharp pleats are retained after multiple wash cycles. No other manufacturers can offer the same product.

Innovatives

Replenishment





X-stocking




VMI




CRFR




Speed to market




FRM




Made to Measure







Reference
https://www.gtap.agecon.purdue.edu
香港貿易發展局
THE GLOBAL APPAREL VALUE CHAIN : What Prospects for Upgrading by Developing Countries