Famosa S.A. Full Speed Supply Chain Jorge León Bello__Master GEPS

2 The company  Company name: Famosa S.A.  Location: Spain, Onil (Alicante)  Product offered: Toy industry sector (games, dolls, soft toys, puzzles, toys for babies, etc.)  Activity: Toy manufacturer and distribution company  Two main production locations: China and Spain  Employees: 700 Jorge León Bello__Master GEPS

3 Logistics factors at Famosa  Toys are strongly season products: sales are concentrated between 3 or 4 months.  Toys life cycles are very short: arrive at the sales point at the beginning of October and have become obsolete by the end of December.  Manufacturing process needs to be “stock to order” which implies high risks in stocking inventory.  Since China is its largest supplier and lead times are long, Famosa is dependent on the intensive use of forecasting. Jorge León Bello__Master GEPS

4 Problem Description IMBALANCED SUPPLY CHAIN: In 2003 the company could not deliver orders effectively due to stock outs, ignorance of the existence of orders, lack of warehouse management and control tools, etc. Jorge León Bello__Master GEPS

5 Problem Description  Not structured production plan.  Operational and logistics costs were too high.  High level of capacity with huge semi-finished inventories.  Products suffered high rates of obsolescence.  Outsourcing in China used only as a source of components; products were still finished in Spain.  Production in Spain gave flexibility but incurred high cost inefficiency.  Distribution carried out from a single point only.  Dispatch of products packed loose, without using pallets. Jorge León Bello__Master GEPS

6 The solution REDESIGN OF THE SUPPLY CHAIN: Changes in Organization and Information Technologies Reactive planning processes Collaborative planning with China Total redesign of distribution network Jorge León Bello__Master GEPS

7 Changes in Organization and Information Technologies  Creation of and independent organization to manage a global and integrated supply chain to became more agile and capable in decision making.  Integration of the procurement process into operation management moving from a simple price negotiation to negotiation of business rules.  Integration of the operations in China into the company’s operations management, to improve quality and the reliability of production planning. Jorge León Bello__Master GEPS

8 Reactive Planning Processes  The main objective was to reduce the variability of forecasting accuracy due to market uncertainty.  This involved the creation of a planning department and transformation of speculative capacity (which involved purchase orders to enlarge capacity which ignored customer demand) into reactive capacity (which is more reliable).  Adaptation of the supply chain to the production cycles of the suppliers in China. Jorge León Bello__Master GEPS

9 Reactive Planning Processes  Lowering the lead time of products classified as very important, to permit product to be launched with significant changes implemented as late as possible.  Giving priority to launch products which have a lower impact if forecasting proves to be wrong.  Rewarding customers who confirm their purchasing intentions in advance. Jorge León Bello__Master GEPS

10 Collaborative Planning with China  Famosa decided to produce 80% of its end product in China.  The company’s relationships with suppliers are close: Famosa carries out production planning, and negotiates a Master Production Schedule with its given supplier, which launch its on Material Requirements Planning.  Famosa has at its disposal the capacity necessary during peak seasons and is able to postpone loading through a more efficient planning and negotiations process. Jorge León Bello__Master GEPS

11 Distribution Network Redesign IMPLEMENTATION OF CENTRAL AND REGIONAL DC´s:  Goods are dispatched direct from the DC in China to the market and to the central DC in Spain.  Some goods are also dispatched from Onil (Alicante) to important customers, and small orders from Madrid.  Famosa operates warehouses in all the principal European markets. Jorge León Bello__Master GEPS

12 Distribution Network Redesign CREATION OF A CONSOLIDATION CENTER IN CHINA:  The objective was to take advantage of logistics and fiscal benefits, including the potential of consolidating products from different suppliers.  The supply chain consolidation center is an export bonded warehouse. Jorge León Bello__Master GEPS

13 Distribution Network Redesign ADAPTATION OF LOGISTICS PROCESSES:  Adaptation of logistics processes to consumer goods sector standards: coding and labeling, Electronic Data Interchange EDI messages, barcodes and RFID in SAP and the use of pallets. Jorge León Bello__Master GEPS

14 Jorge León Bello__Master GEPS Thanks for you attention!