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painful, costly, and risky from a business perspective, but it was absolutely critical to success. Explains Watson, If we had tried to do this on the side with a small project team, it would never have worked and we d never be seeing the benefits we are now.
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Avon began by creating a centralized planning function a critical priority. Explains John Kitchener, head of the supply chain in Europe, There was no way Avon would achieve its growth targets without a centralized planning group that could see demand and inventory levels across the region and react very, very quickly. First, Avon had to create a common database. The team spent many months putting in place standardized product codes, descriptions, and other information so that each country was speaking the same language. The database gave Avon visibility into sales trends and inventory so that managers could look across the region and see what was happening from both demand and supply perspectives. The company also installed Manugistics supply chain planning and scheduling system to support integrated planning and coordination across the whole European region. To leverage this new capability and manage the growing complexity of the busiAvon put in place a ness, Avon put in place a regional planning group empowered to make decisions about regional planning service levels, inventory, and costs based on group empowered a bird s-eye view of the whole supply chain. Other decisions regarding the new organito make decisions zation, roles, and responsibilities were put about service levels, on hold until later. The next critical step was to redesign inventory, and costs. the entire supply chain in a way that made sense operationally. Using the Supply-Chain Operations Reference-model (SCOR), the team identified the key changes to plan, source, make, and deliver the supply chain processes that were most integral to Avon s business. Avon kept a manufacturing plant in Germany but consolidated other production into its plant in Poland. This helped in two ways. First, it expanded manufacturing capability in the heart of Avon s emerging markets. And second, it delivered major cost efficiencies, mainly due to the lower cost of labor. Avon also created a centralized inventory hub in Poland near the production facility to service the company s branches throughout Europe.
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With end-to-end visibility in place and a newly streamlined supply chain, Avon was able to make truly dramatic changes to its business.
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Once Avon was able to see the supply chain as a whole, decisions that didn t seem to make sense from a purely functional standpoint suddenly were shown to deliver substantial and often unexpected benefits. For instance, Avon had considered the idea of labeling bottles itself instead of having suppliers preprint them, a postponement strategy that would delay the final decision about what language to put on a product until sales trends were clearer. For years, marketing had resisted this idea, convinced that the look of the products would suffer. Manufacturing wasn t interested in adding to its overhead cost structure either because the function was run as a cost center. From a financial standpoint, the postponement strategy didn t seem to make sense. The added equipment and labor costs involved in making labels and affixing them to bottles likely would offset any savings. All the accountants were telling us it was the wrong thing to do, says Watson. It was only when Avon stepped back and looked at the supply chain as an end-to-end process that the true benefits of the postponement strategy became clear. From a sourcing standpoint, Avon would only have to buy one plain bottle for shampoo or lotion instead of five or six language variations. Avon s manufacturing plants could make one long production run instead of repeatedly switching bottle stock. And customer service would improve sharply because the branches could be more responsive. Now, when inventory runs out in a given market, the warehouse can respond quickly by labeling products with the right language and loading up a truck. The postponement strategy delivered improvements in cost, efficiency, and service all along the supply chain. Yet the strategy seemed counterintuitive until Avon assessed the trade-offs in cost, flexibility, and cycle time across the total supply chain. Very closely linked to the postponement strategy is a new inventoryhub strategy. Explains Kitchener, The postponement strategy works well, but only in conjunction with a distribution hub that lets us quickly push products out to the markets. Avon s two manufacturing plants supply the
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Avon created a centralized inventory hub in Poland to service the company s branches throughout Europe.
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