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This report assesses whether Exel should enter the supply chain planning sector with Haus Mart now or explore different strategies to enhance Exel's current position. Economic and strategic reasons will be presented to persuade Exel's leadership of the optimal decision. The subsequent bullet points will outline the main concerns in the scenario, along with an examination of those concerns.
Haus Mart depends on more than 650 supply chains globally to manage shipping responsibilities for its brand name products, accounting for 70% of its revenue.
This poses significant risks in terms of timely delivery and product quality and quantity.
Exel is not in charge of the sixth DC, meaning that while they handle freight management for 30% of company revenue from private label products, they do not oversee the delivery process to the sixth DC.
Exel has a strong history of working closely with customers and expanding its services. The company has a wide range of experience and a well-established global network for freight management (675 locations in 112 countries) and contract logistics (1,600 facilities in 120 countries), making it well-suited to take on a supply chain planning role at Haus Mart.
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The transition to a Lead Logistics Partner (LLP) model aims to help Exel's customers align supply and demand, identify risk factors, and minimize risk for both parties. However, the challenges mentioned indicate that immediately shifting to a full-scale supply chain planning role may not be the best move for Exel right now. Instead, the company can begin by taking on a more limited role in supply chain planning, as outlined in the upcoming action plan.
Evaluating the opportunity at hand is most concerning due to 650 global suppliers of brand name products.
The lack of control over freight management for 70% of Haus Mart's revenue makes it difficult for Exel to make strategic planning decisions and ensure results. The abundance of brand name product suppliers leads to high costs, risks, weak relationships, low leverage, limited volume discounts, subpar performance, and inefficiency for Haus Mart. To guarantee customers a reliable experience, Haus Mart requires highly performing suppliers rather than an excessive number of them.
The main concern is that these suppliers have control over freight management. In order for Exel's supply chain planning to be successful, freight management and contract logistics need to work together to establish an efficient supply chain from the source point to the point of sale. Exel is successfully managing five out of the six Haus Mart distribution centers and delivering products to 350 German stores, with impressive in-store logistics. However, any disruptions in the freight management of these brand-name products before they reach the distribution centers could jeopardize Exel's supply chain planning and potentially lead to decisions that result in financial losses for Haus Mart.
Exel faces a major challenge with the lack of control over the sixth DC, limiting their efficiency and cost savings potential for Haus Mart. However, Exel manages freight and transportation for private label products in Germany, ensuring excellent logistics for the five DCs under their control. This specific business situation presents an opportunity for supply chain planning intervention, as Exel has full control over the supply chain from Turkey to the German stores through the five distribution centers.
In this scenario, all risk involved would be dependent on Exel's performance exclusively. The 3PL managing the sixth distribution center consistently falls short in comparison to Exel. Consequently, despite Exel's exceptional freight management, they have no authority over the contract logistics for private label products processed through this distribution center and certainly no control over the branded products. Exel is unable to collaborate with this distribution center to provide top-notch delivery and in-store logistics to the German stores it serves. While Exel can reactively manage in-store logistics at these locations, they are unable to leverage the synergies and efficiencies that could be achieved by coordinating with the distribution center and store locations to optimize consumer service.
Exel and Haus Mart should create an action plan to address the issues and position Exel for a business-wide supply chain planning role. First, Exel should take on supply chain planning for private label products in the five DCs it controls. Secondly, Haus Mart should analyze supplier performance and reduce the number of its 650 brand name product suppliers. A CAGE analysis should be conducted to assess suppliers based on cultural, administrative, geographic and economic factors at both regional and country levels.
Haus Mart should be careful not to unintentionally eliminate important partners or alliances while consolidating suppliers. The company can start by transitioning Exel to handle freight management for brand name products, beginning with a few key suppliers. As supplier consolidation progresses, Exel can gradually take on more freight management responsibilities until it manages the entire process. Additionally, Haus Mart should consider giving Exel control of the sixth distribution center once the contract with the other 3PL expires.
This 4-step action plan will help create an ideal environment in which Exel can effectively deliver top-notch supply chain management solutions. By utilizing Exel's advanced IT management systems for both freight management and contract logistics, Exel can meet its goal of maintaining precise data. With a consolidated list of suppliers for brand name products and Exel handling freight management for private label and brand name products, Haus Mart planners can trust the process and avoid unnecessary costs such as ordering extra inventory. By managing the entire supply chain from start to finish, including freight management to contract logistics, Haus Mart will see significant savings in the short and long term. This process will also allow Exel to transition into a broader supply chain planning role within Haus Mart after gaining experience in supply chain planning.
Optimizing Exel's Supply Chain Strategy for Haus Mart. (2016, Sep 15). Retrieved from https://studymoose.com/haus-mart-case-essay
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