RUNNING HEAD: SUPPLY CHAIN DESIGN AND MANAGEMENT 1

Supply Chain Design and Management

Unit 6 Assignment 1

November 19, 2015

Cindy Miller
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Analyze the differences between the current supply chain and the proposed turnkey strategy.

What will the change mean for suppliers and their roles? What will it mean for current employees

and their roles?

The current supply chain of Elizabeth Arden was suffering from over production due to having

over 9,000 SKU’s. The processes in place had not changed with the times of being more technically

advanced so they remained manual, cumbersome, and some processes provided no real value to the

workflow of the products.

Each division added their own twists to the forecasting model making the process difficult and

figures not accurate. The inaccuracies, “led to overestimation of necessary product as contingencies

accumulated with only 33 per cent of the top 100 stock - keeping units (SKUs) in FY 2006 forecasting

“well” (within plus or minus 25 per cent error), resulting in a total accuracy of only 70.5 per cent” (Gao,

2013).

Elizabeth Arden built a supply chain very dependent on the suppliers to provide the individual

components of fragrance, pump, box, glass, cellophane wrap and label that was then shipped to another

supplier to manufacture. Having no long term contracts or exclusive agreements with these suppliers left

Elizabeth Arden vulnerable to uncontrolled costs.

Under the turnkey strategy, the number of suppliers involved in the production process would be

reduced and “the suppliers that remained would be given additional responsibility for undertaking the

entire manufacturing process from materials procurement to product completion” (Gao, 2013). This will

provide the suppliers with the opportunity to closely partner with Elizabeth Arden and develop improved or

new products together. Having few suppliers provides the ability for the procurement team to streamline

their processes, monitor the suppliers for compliance to contracts, and negotiate better pricing on the

contracts. This will provide opportunities to some of the staff to change or expand their duties to include

creation of metrics and proposals for change.

Performing analysis on sales and determining what items were the top sellers and what items

were not performing and could be eliminated would reduce the strain on the supply chain. The

organization would be able to give more attention to the items providing profit to the bottom line.

There was an abundant number of hand-offs between departments that could cause delays in

production and shipping. The risk would be reduced by consolidating departments so that more

collaboration could be created and bring everyone together to share the same focus on the customer.

Consolidating gives the team members the chance to learn from others and gain experience through

cross-training.

Calculate the total financial impact for the re-engineering effort. What does this mean for Elizabeth

Arden and its shareholders?

Savings will certainly be made with the reduction of the number of types of products being

produced. The savings will impact the inventory on hand, the space needed for the additional storage,

cost of the manufacturer to change the production line, and cost of the component parts from the

suppliers. Between 2006 and 2007, inventory was reduced by $180 million.

By focusing on the high volume selling items, marketing is able to spread more ads to a greater

audience bringing in more sales.

A reduction in expenses associated to developing contracts with the suppliers that hold them

accountable to meeting our demand and owing us if they should not meet the demand.

There could be an increase in capital if it should be needed for Elizabeth Arden to assist suppliers

in building up their equipment to meet their production requirements. However, there is opportunity for

money to be made if the same equipment is used for other organizations during slow times of use for

Elizabeth Arden.

The improvements reduce the expenses dragging the organization down and add to the income.

More sales mean more income and improved stock prices that will attract more investors.
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Throughout the re-engineering effort, a critical partner inside the organization must always be aware

of the changes taking place and that partner is the legal department. Cosmetics are closely monitored

and must always maintain the safe standards set by the FDA. In reducing the suppliers those remaining

must be able to prove their work meets or exceeds the standards required. Screening of the suppliers

must be performed and constantly to ensure safety is always first. The supplier who is chosen because

they are the cheapest may cost the organization in the end if the product causes harm to the consumer.

Assume the role of Pierre Pirard, what would you do and why?

I would first look at the sales of the items we were producing and discontinue production on the

items that were not selling enough to justify the cost of making the product. Limiting the types of products

made will help to reduce the strain on the entire supply chain.

Next would be to look at the suppliers we engage with and meet with them to find out what kind of

contract can be created with them that is mutually beneficial. Discuss with them the possibilities of them

expanding their manufacturing to provide more of the finished product. If need be, work with them to

provide assistance in building up their machinery to be able to produce more of the finished product.

Look at where the warehouses are in relation to where we have the highest sales. Moving the

warehouses closer will reduce shipping costs. Researching the many ways of shipping to determine the

most economical such as local shippers, UPS, air, train, and ship. Building in to the contracts tiered

pricing dependent on the volume of product being shipped.

Another way of reducing shipping would come in the form of offering to online consumers the

option to pick their product up at the local store as opposed to shipping it to them. Elizabeth Arden will

not incur additional shipping costs because the purchase is included with product already going to the

local store. The customer does not incur a shipping charge and may purchase more product once in the

store and looking around. Research into the online sales and determining frequency may also bring

about more sales by offering automatic orders for the consumers.

Walk the gimba to meet with the team members and find out from them where they see the

bottlenecks and what they would do to stream line the supply chain. Giving the team members “buy-in”

on how the work is done makes them feel more appreciated and happier to come to work. Happy team

members are productive team members.

Resource

Gao, N., & Wood, D. (2013). Elizabeth Arden: Executing global supply chain re-engineering.

Richard Ivey School of Business Foundation. Boston, MA: Harvard Business Publishing.