Fender’s Supply Chain Management Essay
Fender’s Supply Chain Management
The world’s manufacturing leader–Fender Guitar Company which was established in 1946, the full name of Fender Musical Instruments Corporation. In the past 60 years, Fender has become one of the hallmarks of the United States. The contribution of Fender sound’s modern music development has already been spread in global and still continuing. Through the first to introduce the commercialization solid electric guitar, produced the first electric bass and numerous classic speaker. The style of Fender musical instruments includes jazz, pop, rock, country music and so on. Everyone from beginners to enthusiasts and even the world-renowned performers all can find the suitable musical instruments for them. Fender intends to position itself in the company not only a revered music industry name, but also a cultural icon (HREF 1). Fender Squier series of guitar, bass, speakers and other products combined with its full line of Fender acoustic guitar considering the price for focusing on musicians endurance offers a wide range of options.
Long-term development by the inspired, Fender created a complete product line of professional-grade guitar and bass speakers. Fender has a series of pro audio, including complete portable sound systems, professional-grade audio equipment. Fender also provides a wealth of accessories, including strings, standard replacement parts, Fender logo strap, as well as casual wear. Fender set the assembly plant in Arizona Scottsdale; California Cornona; Tennessee, Nashville; Mexico Ensenada; London; Germany Dusseldorf; Paris, France and Gothenburg, Sweden. In North America distribution centre, Fender is the only distributor of electric instruments in the United States and Canada. They provided music equipment products from the main series to accessories. Fender’s warehouse directly ships to more than 1500 musical instrument dealers who located in the United States and Canada.
2Fender’s supply chain managementFrom 1946 till now, 60 years experience in business management, fender has a very sophisticated supply chain management in its product parts procurement and sales activities. Although the structure of their supply chains gradually updated and changed by the age development. However, from the international status of today of Fender in the guitar industry around of the world, which has already proven the success of supply chain management in Fender and also clearly discover that the importance of doing supply chain management in their business activities. I plan to analyze the typical aspects case by case of Fender in their supply chain management. It includes the international market supply chain strategy, supplier selection, customer strategies, raw material supply chain management, supply chain partners.
2.1 Fender’s global supply chainFender positioned their products for the highest quality, high-quality, medium quality. The highest quality products manufacturing at corona factory in California. Ensenada factory in Baja California, Mexico is responsible for the production of medium to high-end guitar. Fender also developed their market to Asia. They contracted with the Asian guitar manufacturers to manufacture fender guitar. And also produce the cheap Squier guitar to meet the needs of different consumers.
Fender Guitar previously only popular in the United States, but since 1990, Fender guitar expanded the market into Japan and has achieved outstanding results. Fender was in its Ensenada, Mexico plant started to produce the guitar for the Japanese market, although only a small number of production, but is a signal to enter the international market. Squier brand by Fender is a marketing tool to win the business. It also made the introduction of the foundation for Sratocasterr series in international market. Gradually, Stratocaster have become increasing popular in Japan, China, South Korea and Indonesia. Fender’s supply chain management made successful in Asian.
2.2 Fender’s typical suppliersIn recent years, Fender Musical Instruments Corporation purchased a number of instrument from his supplier, these suppliers including the Guild Guitar Company, the Sunn Amplifier Company, and other brands such as SWR Sound Corporation (HREF 1). 2003 early, Fender made some adjustment for its family of products Gretsch and started the production and distribution of new Gretsch guitars.
2.3 Fender’s new supply chain strategyFender plans to promote their products can be more clearly conveyed. They announced in Feb. 2007 will be to produce a product guide with illustrations of replace the traditional front-line journal of the year. This change in order to give publicity by its supply chain cost considerations, The traditional cost of printing, as well as the most trend copyright convenient substitute for internet magazine, which can solve the printing, distribution, copyright issue of cost and time. The guide contains a set of new Fender product introduction and picture. The new Fender Frontline In-Home will be conveyed to customers the latest products of Fender, and the provision of mail to customers if they need and have registered in the Fender website. This shows that the Fender was constantly improving its customer service systems to optimize their supply chain management.
2.4 Fender’s Australia supply chainFender in Australia has a complete supply chain system, but it still has a few aspects need to improve. Fender established more than 92 local authorized dealers in the Australia, 26 in NSW (HREF 2). Fender distributes Recommended Retail Price (RRP) information to all of its authorized Fender Dealers in Australia, but the retailers is no obligation to follow recommended price, so retailers can manage the price flexibility in different regions.
Fender in Australia also provides the service of identification of guitars of customer own. Through the phone and internet application, customer can bring their guitar to retailer shop. In the sell model, Fender Australia does not sell directly to consumers. Customers need to find an authorized Fender Dealer to buy the product. It required Fender need to establish more enough dealers to satisfy the customers from different regions. I must give up some potential customer in small regions when Fender want to cut cost for retail establish.
In addition, Fender provides the service to customer to help them value their advantages of guitar choice. They are dealing with an established local business and provides warranty for local customer, and also customer can receive excellent advice from a professional from Fender.
2.6 Fender’s American supply chainFender’s commitment to achieve customer satisfaction, all the production lines in the United States must first be assigned to the Fender’s California warehouse. Products must pass stringent inspection and quality control process to allow the shipment. Fender staff inspect all equipment to ensure that the voices of debugging, interoperability, as well as the unloading of containers from retailers.
Fender use Barcode system to inventory all products. “The savings from bar code system will be in the form of the elimination of running the same orders twice due to error” (Joansson, 2008). Barcode system can efficiently locate and retrieve any given product in seconds by computer operating. Bar code also provides an important follow-up of the electronics and data, including price information, model and serial number, transportation and receiving dates. It helpful convinced service to dealers.
Before shipment, the products need to be inspected stringently again. Fender distribution center provide their dealers a variety of shipping way. The high quality ship and quickly delivery time by only 3-4 working days from warehouse to United States and Canadian dealers.
For Fender’s supply chain management, the quality of product would be put in the heading mission. Fender insists that they can provide the high quality and also valued their network of customers and dealers in order to efficiency distribution systems in the musical instrument industry (HREF 1)3. The value-add from Fender’s supply chain partners3.1 Outsouring and supply chain integrationThird-party logistics is no stranger to Europe, as a business outsourcing industry has been in Europe several hundred years of history. Many well-known companies such as Schenker. They began to use such as the provision of transport, warehousing and other services.
However, due to specialization aware of the importance of paying attention to outsourcing and as the rise of an industry was beginning from 80s, 90s during the 20th century in United States (Weng, 2006). According to statistics, in 1992 the United States third-party logistics market turnover of 35 billion U.S. dollars, accounting for the logistics market, the total turnover of 2% -3% in 1996 has reached 50 billion U.S. dollars, an increase of the total logistics market to 5% — 6%, and third-party logistics in the United States in 1997 and 1998, the business growth of 40% and 15% respectively. Third-party logistics began to extend to all parts of the world from the United States, today’s third-party logistics business world as a whole accounted for about one-third and also a 15% annual growth rate.(Li, Yu & Xu, 2006).
Third-party logistics companies in the supply chain is a link, it will throughout the supply chain of other companies as its clients and customers. While in reality the demand for customer-oriented environment is bound to drive with the strengthen communication between the logistics enterprise and the each member of the supply chain in order to know each other more than before(Li, Yu & Xu, 2006). To become effective organizers and managers of the supply chain, we must first understand the specific circumstances of the members, along with third-party logistics own familiarity with the logistics are far higher than that of other members, so third-party logistics enterprise supply chain integration is of course an expert. It is for this reason that more enterprises are now seeking cooperation with third-party logistics companies to supply chain integration. For example, Fender collaborated with Global logistics company-UPS to integrate their supply chain and improve the performance.
UPS distribution center in United Kingdom helps Fender to complete its process of flow lines and centralized so that the Fender Company in recent years to achieve sales in Europe doubled in the Scheme. UPS management from factories from all over the world on sea and land purchase by a third party logistics companies to manage their inventory EDCs. EDCs inspection by the quality of the employees to view the inventory, distribution and retailers to meet orders, manage the delivery of multi-carrier. Fender can shorten the delivery time and better monitoring of the quality and delivery of orders. More importantly, before UPS ship the guitar to the retails. They will complete each of the guitar tuning to ensure that you can play guitar when retailers remove products from t he box.
3.2Fender also value their partnerFender and BestBuy established a collaboration relationship in 2008. in July 28,2008, BestBuy announced they will open up 2500 square feet of “Music centers” in its 85 stores for sale include Fender, Gibso and other well-know brands, including more than 1000 kinds of ordinary accessories, music high guitar, bass, DJ equipment, musical instruments of professional products and provide enthusiasts gathering irrigation discs, musical training services(Rudnick,2008).
Faces to about 80 billion a year U.S. musical instrument market, as was the same as BestBuy Mobile implementation, BestBuy and Wal-Mart can share the music game market from now on. However, it has a highly requirement for supply chain management of suppliers. Accordingly, Fender reduced the delivery time for 1 week through outsourcing logistics management company’s entire system of UPS, and also decreased by almost 10% of distribution costs (HREF 3). It not only meets the fast delivery request from BestBuy, but also reduces the total cost ownership of Fender.
4. Supply Chain Operation Reference (SCOR) model in Fender
The basic elements of the SCOR model are:4.1 Planning in Fender Supply ChainIn the planning phase, fender first plan resources. They are planning the parts of guitar, the definition of the demand for production and purchase. For special materials, such as the type of wood to a strict screening, different corresponding and various types of woods are produced for different types of guitar series, even take up some wood seasoned for several years, this is a long-term resource planning process.
Secondly, Fender’s production team is not only has the professional production skills, but also the production of each staff is professional guitar enthusiasts. In this making planning stage. The need for a clear definition of the design and need to be aware of the guitar development at this stage and clear understand the needs of the consumer. People always say that guitar is a culture, for the designers, the experience of this culture for the guitar production is very important.
Thirdly, delivery work in the sales process is particularly important. Fortunately, Fender made strategy with 3PLs which brought a large advantage in the issue of product shipments for them. Faster, reduce costs and ensure security is the best result in the SCOR model implement in Fender.
Finally, in the return planning, it can be defined as the return of commodity and return of profit. Fender has developed its product returning of after-sales service system, including maintenance, replacement and the responsibility for risk protection. Fender makes the return of profit have more capital to develop new sales markets, the design of new products and increase the welfare of employees.
Source from Lee Styger, 20094.2 Make to stock & Make to orderWhatever in selling online or retail sales, Fender is trying to maintain adequate stock to meet the needs of customer. Absolutely, in the framework of a reasonable forecast, Push (make to stock) model can help Fender improve sales performance, as well as Fender can rapid response capability. However, over storage, high inventory level will lead to cost increased. In addition, many customer want to buy a special appearance and type guitar from Fender.
Therefore, Fender’s Custom Shop was established to meet those needs. They use Pull (make to order) model when customer release the order to them. Design and produce the specifically product to customer. However, it is also has some limited by Pull model, timeless will be a biggest challenge for Fender production line. Thus, keep the necessary raw material by Push model is necessary. This kind of Hybird model still suit for most manufactory companies, such as McDonald’s and vehicle industry.
ConclusionsSupply chain is critical for Fender Guitar Company. The manufacturing sector has heavily depends to supply chain management, whatever in its purchase of raw materials, plant location, production planning, warehouse management, transportation, sale of products and customer service. All of these cannot be separated from supply chain management. Obviously, Fender made a good job in its supply chain management. Although there are a few problems still need to optimize by Fender via supply chain development.
The recommendation can be included that make risk and cost analysis when Fender want to expand their sale network, because too much retail outlets establishment lead to cost increased. In addition, the accession to join the online shopping business, allowing online orders, online payment, order tracking, such as a series of e-supply chain strategy, so that the fender can be a richer sales model, reduce the cost and time instead of text paper working process, and it also cater the tastes of young people. Absolutely, the new electronic supply chain strategy can also be outsourced to third-party logistics companies.
Joansson,J2008,http://bsminfo.com/index.php?option=com_content&task=view&id=625&Itemid=147, accessed 15/05/2009Li, Y, Yu, J & Xu, L 2006, 3PLs in supply chain management, http://www.globrand.com/2006/18441.shtml, accessed 12/05/2009Rudnick, M 2008, Best Buy, Super-Regional See Major Gains in White Good, http://www.allbusiness.com/company-activities-management/sales-selling-sales/9341175-1.html, accessed 14/05/2009Weng, D 2006, 3PLs-The Breakthrough of Supply Chain Innovation, http://www.globrand.com/2006/40390.shtml, accessed 12/05/2009HREF 1: ww.fender.com, accessed 13/05/2009HREF 2: http://www.fender.com.au/prices.php, accessed 13/05/2009HREF 3: http://www.globrand.com/2009/226020.shtml