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Stanford Supply Chain Forum Stanford Supply Chain Forum


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Stanford Supply Chain Forum Stanford Supply Chain Forum

  1. 1. Stanford Supply Chain Forum February 9th DRAFT 1
  2. 2. Operationalizing the Vision: Where Supply Chain Intersects Strategy DRAFT 2
  3. 3. In the beginning… Stanford Supply Chain Forum 2005 3
  4. 4. The Tornado Sale Stanford Supply Chain Forum 2005 4
  5. 5. Enter Best Buy Stanford Supply Chain Forum 2005 5
  6. 6. Industry Consolidation Stanford Supply Chain Forum 2005 6
  7. 7. Evolving store concept Stanford Supply Chain Forum 2005 7
  8. 8. Infrastructure for growth Stanford Supply Chain Forum 2005 8
  9. 9. To Grow: Grab market share & gain new customers eCommerce International Musicland Acquisition High End Specialty Stanford Supply Chain Forum 2005 9
  10. 10. Best Buy Today • 780 North American stores • FY04 revenue: $24.5 billion* • 17% market share • No. 1 in consumer electronics, No. 2 in home office and entertainment software * Continuing operations Stanford Supply Chain Forum 2005 10
  11. 11. Strategy Inspired by Customers Stanford Supply Chain Forum 2005 11
  12. 12. Customer Centricity Capabilities Core competence: engaging and empowering our people Enabling competence: Recognizing a unique set of customer segments and building a set of activities to meet their unmet needs Talent Customer Efficient Branding Powered Driven Enterprise Stanford Supply Chain Forum 2005 12
  13. 13. $ EVA A Challenge Incremental NPV Store Age Stanford Supply Chain Forum 2005 13
  14. 14. Creating a Sustainable Competitive Advantage • People and experience • Unique competencies that are difficult to duplicate • Data, information and processes • Relationships, alliances and marketplace positioning Stanford Supply Chain Forum 2005 14
  15. 15. Store Readiness Plan • Leadership • Talent • SOP Stanford Supply Chain Forum 2005 15
  16. 16. Business Acumen Grow profits while we prepare “Entire company driving the Net Gross Margin % benefits” ASP Average Sales Price: Per unit UPT Units Per Transaction Close Rate Stanford Supply Chain Forum 2005 16
  17. 17. Accelerating Scale for Rollout 600-Store Plan 70-Store Plan Scale Segments Scaleable Learnings Segmentation Different Plan Top Talent Enablers / Infrastructure Training VPE Deployment CC Score carding Business Acumen SOP SOP Talent System Same Plan Talent System Leadership Leadership Stanford Supply Chain Forum 2005 17
  18. 18. Roadmap to “7 x 7” Op. Income Goal 7.0% 5.4% FY05 Q1 Best Buy Supply IT Strategic Customer FY07 (ttm) Canada Chain / Alliance Centricity Goal Sourcing Stanford Supply Chain Forum 2005 18
  19. 19. Best Buy Overview – About Best Buy • North America’s largest consumer electronics retailer in the $130B consumer electronics market • 2004 revenue: $24.5B • 2004 net income: $705M • Current market share – 19% • Currently operates over 750 stores • In 2005, will open 70 new large format 45K sq. ft stores and additional small format 20K sq. ft. store in select markets • Also operates 100+ Future Shop retail locations in Canada and 22 West Coast high-end Magnolia stores Stanford Supply Chain Forum 2005 19
  20. 20. Best Buy Overview – Corporate Strategy • For 2005, Best Buy will transform 80-110 stores to “Customer Centricity” formats which focus on specific market segments and regional demographics which will feature: – Tailored assortments – Increased staffing over traditional store headcount – Specialized services and offerings Stanford Supply Chain Forum 2005 20
  21. 21. Best Buy Overview – Corporate Strategy • Investing over $130M in technology for 2005 with significant investments in these supply chain areas: – Merchandising and space management systems – Forecasting and demand planning tools – Support of RFID vendor mandates and infrastructure – Call center and customer support enhancements – Supplier Innovation Initiatives including CPFR • Select locations will also be retrofitted with a Magnolia “store-within-a-store” section, including San Francisco and Costa Mesa Stanford Supply Chain Forum 2005 21
  22. 22. Best Buy Corporate Strategy – Growth and Profitability Goals • Achieve Revenue Growth Objectives – Double current revenue to achieve $50 billion by 2010 • Achieve 7X7 Target – Achieve 7% operating profit by the end of FY 2007 (March 2006 – Feb 2007) • Each of these goals presents significant challenges to the Best Buy supply chain organization Stanford Supply Chain Forum 2005 22
  23. 23. Best Buy Corporate Strategy – Supply Chain Implications Some of the Supply Chain Impacts … Impact of • Profitable Growth…Constrained Spending Growth • Agility and Flexibility • Extending Existing Infrastructure New Required • Flow Through Distribution Capabilities • Support “Direct to Home Initiatives” • Direct Import – Factory Gate Flow Management Service • Store / Shelf Ready Delivery Capability Requirements • Direct Store Delivery Initiatives • Reverse Logistics challenges Impact on • Cost • Competing Initiatives focusing limited investment • Inventory • Financial plans require reductions to fund expansions • People • New Skills and Training required to support requirements Stanford Supply Chain Forum 2005 23
  24. 24. The Intersection of Strategy and Supply Chain Supply Chain will help to enable the Customer Centric Supply Chain through the development of capabilities to support: • Tailored Market Assortment supporting customer segmentation focus • Speed and Response to enhance customer availability • Retail Ready and Shelf Ready capability to reduce in- store labor and improve in-stocks • Lower total cost of ownership Stanford Supply Chain Forum 2005 24
  25. 25. Integration across the Supply Chain Landscape Customer Focused Initiatives Delivered through Retail Operations Merchandising Product Supplier Planning and and Space Fulfillment Management Forecasting Management Stanford Supply Chain Forum 2005 25
  26. 26. A series of interrelated Supply Chain initiatives drive us to our future vision • Today we will focus on Product Fulfillment and Supplier Management Supply Chain/Merchandising: Functional View 1 2 3 4 Forecasting & Product Fulfillment Supplier Management Merchandising Replenishment • Flow Through • Supplier Performance • Assortment / Space • Forecast Accuracy Management Optimization • Replenishment/ Initiatives • Direct Import Acceleration • Collaborative Allocation • Price Optimization Planning and • Inventory Optimization • Lean Forecasting • Integrated Promotional Pilot/CA Planning • Network • Supplier Integration • PC Forecasting Pilot Rationalization and Execution • Merchandise Financial • RFID Strategy / Pilot Planning • Partner Innovation • Retek modules including ASO, • Transition • Entertainment Promote • System Shore-up Technology • Vendor scorecard and • Rules Based and • Retek modules portal Demand Based Pricing including RDF, Optimization (system Promote, RMS • Extension of CPFR • Upgrades to Order TBD) (Replenishment, Implementation Management and Allocation), AIP, RIO WMS systems • DemandTec (leased) and Planning Stanford Supply Chain Forum 2005 26
  27. 27. Product Fulfillment Initiatives: Direct Import Our concept of Direct Imports is to compress the supply chain, eliminating Our concept of Direct Imports is to compress the supply chain, eliminating redundant steps and closely managing the inbound fulfillment process. redundant steps and closely managing the inbound fulfillment process. Represents the Overlap which will be eliminated by direct import Vendor Controlled BBY Controlled 2 Node Supply Chain Asia De-consolidation Suppliers DC RDC/DDC Facto Store ry Redundant Activities ………………… BBY DI Supply Chain Asia De-Consolidation RDC/DDC Facto Store ry Stanford Supply Chain Forum 2005 27
  28. 28. Product Fulfillment Initiatives: Direct Import • Building “end-to-end” supply chain management capabilities from factory gate to our store • Integrating supporting technologies • Manage Purchase Orders • Book and Manage Transportation • Provide Supply Chain Visibility and Event Management • Providing linkage to Best Buy Merchant Organization for negotiation support and inventory management Stanford Supply Chain Forum 2005 28
  29. 29. Product Fulfillment Initiatives: Physical Flows A series of initiatives are being implemented and tested to support growth activities and newly required capabilities – Overall Network Rationalization to support Customer Centricity store alignment requirements – Cross-Dock and Flow Through Capabilities – Enabling efficient “direct-to-home” capabilities for major appliances and consumer electronics – Increasing consolidation and DC by-pass – Reductions of vendor to store direct shipments Stanford Supply Chain Forum 2005 29
  30. 30. Product Fulfillment Initiatives: RFID Best Buy is currently making significant investments in developing capabilities and infrastructure to support RFID for Distribution and Retail applications • Developed and released RFID Vendor Mandate to Best Buy’s Top 100 Vendors at the end of August ’04 • Release of RFID Technical requirements to Top 100 Vendors in December ’04 • Investing in Best Buy’s retail and distribution infrastructure to support full production of Pallet and Case tagging of product by May 2007 Stanford Supply Chain Forum 2005 30
  31. 31. Product Fulfillment Initiatives: Lean Operations Best Buy has initiatives led by the Supply Chain Organization to institutionalize a “Lean Culture” focused on quality and waste reduction • Lean Events have been conducted across the organization resulting in over $40M in savings for 2004 • Lean initiatives are taking hold as functional organizations train facilitators and integrate Lean behaviors in their organization • A full slate of Lean Events are planned for 2005 in Distribution and Store Operations Stanford Supply Chain Forum 2005 31
  32. 32. Product Fulfillment Initiatives: Entertainment Best Buy Supply Chain initiatives to support Entertainment distribution across Music, Video and Games will focus on initiatives focused on improving in-store selection and cost reduction • Vendor Managed Inventory capability to support direct to store delivery • Implementation of revised capabilities to improve overall distribution, assortment and selection of music integrating syndicated data and micro-market demographics • Improvements in returns and reverse logistics capabilities Stanford Supply Chain Forum 2005 32
  33. 33. Supplier Management Initiatives Best Buy is seeking to forge enhanced capabilities with suppliers across a number of initiatives • Supplier Performance Management • Development of shared metrics and scorecards • Collaborative Planning and Forecasting (CPFR) • Expand sharing of inventory and movement data to improve in-stocks, reduce inventory and returns • Supplier Integration and Execution/Partner Innovation • Seeking opportunities to jointly improve service, product cost and quality through innovative shared initiatives Stanford Supply Chain Forum 2005 33
  34. 34. Enabling the Supply Chain Strategy with “vanilla” technology Supply Chain • Import Enablement Technology • Retail Suite • Supplier Integration • Vehicle Routing • Supply Chain Event Management New Capability Design • Redesigned or improved Process Designs • Overall Supply Chain Capability Blueprint • Cross Capability / Organization Requirements Skills and People • New or Revised Job Requirements Development • Technology Skill Focus • Revised career progression and success models Integration of • Focus on interdependent / cross-functional capability Innovation design across: – Merchandising – Inventory Planning and Forecasting – Supplier Integration – Core Product Fulfillment areas including Transportation, Warehousing, Reverse Logistics Stanford Supply Chain Forum 2005 34
  35. 35. Tracking Performance: Shared metrics across all initiatives • Customer Availability • Perpetual Inventory Turn (Stock Turn) • Supply Chain % of Sales • Forecast Error • Inventory Growth % to Sales % Growth • Forward Days of Cover (DOS) • Stores • DC • OTRQ (On Time Right Quantity) • DC Cost / Outbound Unit Stanford Supply Chain Forum 2005 35
  36. 36. Alignment Challenges – Keys to Success • Executive Alignment • People • Business Knowledge • Internal and External Factors • Operating Systems • Corporate Strategy Stanford Supply Chain Forum 2005 36
  37. 37. Moving Forward • Insuring Success • Flexibility • Mid-Year / Mid-Strategy Corrections • International Focus • Investments - Capital, People and Technology • Maintaining Focus Stanford Supply Chain Forum 2005 37