Supply chain for

cheese and
desserts

JACQUES Sylvain

LASNIER Jérémy

ULRICH Olivier

Plan



I – SC objectives and SC network



II – The logistical Supply Chain concept



2.1 – Managed system



2.2 – Managing system



Hierarchical decision levels



Type of decision making



Position of the CODP



Level of co-ordination



2.3 – Information system



2.4 – Organisation structure



III – SC uncertainty and sources of SC uncertainty



IV – Concluding remarks

The Supply Chain consists in

three main groups



Food suppliers: two suppliers of
dessert and one cheese food
supplier



One Redistribution Centre (RDC)



Retailers: about twenty five retail
outlets.

I - SC objectives and SC
network

Objectives of this supply chain are to

obtain a higher level of supply chain
integration that would result in
higher sales at less cost.

OBJECTIVES

The logistical supply chain performance
indicators that were acknowledged by both
parties are:



Lowest inventory levels, in retailers outlets



As few as possible stock outs in retail outlets



Highest remaining shelf lives for desserts on
outlet shelves



Lowest integral costs of all supply chain
business processes

The supply chain network

3 main actors is this supply
chain network:
The food supplier
The redistribution centre
The retail outlets

The food supplier is a supplier of several types
of whole, partitioned, sliced and graded cheese
products.

He buys cheeses from an industrial supplier and
then stores, preserves, processes, and packs
them.

Desserts are delivered by two foreign industrial
food suppliers and successively stored in the
food supplier warehouse.

The redistributing centre (RDC) for chilled
food products operates via the “cross-docking”
principle.

This means that goods are moved to loading
docks and loading aboard outbound trucks within
24 hours of good receipt.

The redistribution centre acts as a consolidator to
reduce the number of trucks received at the
stores.

This supplier of cheese products and desserts
supplied the RDC each time with 25 roll-in
container containing the ordered goods for each
individual retail outlet.

The supply chain network

II. The logistical SC concept

Organisation Structure

Managing

System

Managed System

Information

System

Control

Informations

Control

Actions

Internal

Data

Supply Chain

2.1. Managed system



Physical Supply Chain design

Weak distance between food supplier and retailer
Order picking process assigned to the food supplier
External transport



Facility layout

Restricted shelf capacities for the retail outlets
No storage in RDC
Limited storing capacity for the food suppliers
Specific inventory (specific price tag, cross docking

arrangement)

7 packaging lines

2.1. Managed system



Resource characteristics

Relative long set-up times of packaging lines
Air conditioned of food supplier’s storing sheld
Transport not air conditioned



Product / process characteristics

Shelf life ranging from 15 days (desserts) to 70 days (whole

cheese)

Specific price tag on products destined for the retailer

Seasonality of the demand

2.2. Managing system



Hierachical decision levels



Type of decision making



Customer Order Decoupling Point
(CODP)



Level of co-ordination

Plans, controls and co-ordinates business

processes in the SC

2.2.1. Hierachical decision

levels



Strategic management

Adoption of a strategy to reach annual goals



Tactical planning

Strategy for the coming weeks or months

=> Product promotions achieved every 6 weeks



Operational Control

All daily operational decisions
Influencing the flow of materials or informations

- description of the retailers processes
- description of the food suppliers processes

Retailer DC

Retailer

outlets

1.Generate

order

3. Orders to

suppliers

6. Checking of

the goods

5.Receive

goods

7. Cross

docking

4.Plan

Cross-docking

8. Distribute

orders

4.Plan

distribution

2.Process

order

13.Write of

products

12.Fill

shelves

9.Receive

goods

14.Re-fill

shelves

11.Control

inventory

10. Administrate

deliveries

15.Sell

products

The retailer’s processes

Food supplier’s processes

1) Receive

outlets

orders

Distribution

5) Pick orders

4) Plan

order

picking

3) Plan

distribution

2) Generate

order picking

lists

13) Stock

goods

12) Receive

desserts

11) Generate

purchasing

orders

10) Produce

cheese

9) Provide

store cheese

8) Plan

production

7) Control

inventory

2.2.2. Type of decision making



From the retail outlet

generate order, receive goods, fill shelves



From the retail DC

process orders, cross-docking, delivering



From the food supplier

process orders, pick goods, plan production, delivering

2.2.3. Position of the CODP

Suppliers

Of half Of end
fabricats products

Customers

Distribut
ion

Deliver from decenter, stock

End

product

Raw

materials

Production

Sales

Make to stock

Assemble to order

Make to order

Engineer to order

Located at the food supplier’s end-product
inventory

2.2.4. Level of co-ordination



Improvement possible between production

and marketing



Relatively small organisation



Huge waiting time between departments

Not a real integration in the SC

Except for promotional activities

2.3. Information
system

Generation of retail outlet orders (POS

scanning facilities and terminals).

Modem

Orders clustered and processed at a fixed time
(a batch processing information system).

PLACE ACTION

Retail
outlet

RDC

Food

supplie

Cheese and desserts collected ; then he
stores, preserves, processes and packs the
cheese.

Advantages and

disadvantages of this

information system

• Retail orders processed and inventory
controlled by the batch-mode information
system (convenient for the food supplier).

• A long time needed for the personnel to
plan the production (cost).

• Plans made by hand and are relying on
experiences

plans more or less well done (by
instance generating purchasing orders)

New needs

• A need to generate orders automatically (inventory
levels could be used).

• A need to forecast demand thanks to the last six
weeks’ data.

• A need to forecast product waste data.

The potential of an automatic ordering system was
studied by a research project.

Currently, until the new automatic ordering system
will be reliable, the production plan is made by
hand.

2.4. Organisation structure

First Level

Director

Second Level
Managers

General manager

RDC manager

Marketing manager

Third Level
Labourers

= 200 persons

III.SC uncertainty and sources

of SC uncertainty (1)

SC performance gaps, uncertainties and

sources of the uncertainties identified

Increase of the

efficiency

High inventory levels in
the SC

III. SC uncertainty and sources

of SC uncertainty (2)

Performance
gaps =

Stock outs

Writte offs

III. SC uncertainty and sources

of SC uncertainty (3)

Relevant performance
indicators =

Inventory levels

Number of out
stocks

Product freshness

Integral SC
costs

Formulation and verification of cause-effect models in
order to identify the main sources of SC uncertainty
(workshops with key employees).

III. SC uncertainty and sources

of SC uncertainty (4)

Generated at retail outlets, orders are punched into
the outlet information system. Before being sent to
the food supplier by fax, orders are processed
automatically at the retailer RDC. Then the order is
manually entered into the food supplier’s
information system. Picking lists are generated and
the number of picked items is entered into the
information system once more during order picking.

Each order is processed three times

Data errors

More time
required

Supply uncertainty

® uncertainties for the
retailer

• uncertainties for
both

Supply uncertainty

Quantitative
aspects :

® Volume of goods received at retail outlets
are not often checked (mainly because the
supplier takes care of the number of kilos
delivered and not of the number of pieces) or
checked after shelves are filled, which is
hardly feasible

® When shortages are observed the supplier
is directly contacted instead of the RDC
resulting in wrong onvoices.

Qualitative
aspects :

· Products are stored too long due to :

FIFO principle not applied at order
picking

Too many products ordered due to
minimal order batch sizes, a not optimal
order procedure, forward buying or
wrong forecast due to a long forecast
horizon

· Supply delivery performance disagreement
because of

different measures.