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CONTENTS
Product concept ...................................................................................................................................................... 3
The 7 R’s of Sniverse Logistics ............................................................................................................................. 4
Sniverse Supply Chain Overview ............................................................................................................................. 5
Make or Buy Decision...................................................................................................................................... 5
Partner Selection ................................................................................................................................................. 5
Mass customisation vendors ........................................................................................................................... 5
3PL Partners – Transport & Distribution Based 3PL ........................................................................................ 5
Inventory ................................................................................................................................................................. 6
Logistics organization .............................................................................................................................................. 7
Overall Logistics .................................................................................................................................................. 8
Inbound Logistics ................................................................................................................................................ 8
Production Logistics ............................................................................................................................................ 9
Outbound Logistics ............................................................................................................................................. 9
Reverse logistics ................................................................................................................................................ 10
Marketing Strategy ............................................................................................................................................... 11
Product Development strategy ......................................................................................................................... 11
Pricing strategy.................................................................................................................................................. 12
Distribution strategy (Place) ............................................................................................................................. 12
Promotion Strategy ........................................................................................................................................... 12
Sample Brochure ........................................................................................................................................... 13
Controls and communication ................................................................................................................................ 13
Control System .................................................................................................................................................. 13
Logistics Information and communication systems .......................................................................................... 13
Order Processing ............................................................................................................................................... 13
Shipment Tracking............................................................................................................................................. 13
Transport plan ....................................................................................................................................................... 14
Performance measurement .................................................................................................................................. 15
Customer service............................................................................................................................................... 15
Key performance indicators .............................................................................................................................. 16
Product Development ................................................................................................................................... 16
Purchasing ..................................................................................................................................................... 16
Production ..................................................................................................................................................... 16
Logistics ......................................................................................................................................................... 16
Works Cited ........................................................................................................................................................... 17
Product concept 3
Mass customized sneakers for 3 regions (United States / Western Europe/ South East Asia) basically provided
by outsourcing to a mass customisation partner. (Note: customisation is easier if printing technology is used,
then users can upload their own prints etc and these can be printed on their shoes)
The designs available for customization will be limited but provide the customer options to create their own
designs where they can choose through an online order system:
These designs will be promoted as limited edition designs that keep changing every 3 months, to keep the
product line fresh.
We are going to fulfil the Sniverse demands from our costumer with the exact same requirements that they
have ordered through the online store; what they see is what they get.
We are going to deliver these Sniverse sneakers to customers with its quality being controlled. So we will
prevent sneakers being sent with defective soles, ripped laces, etc. There is also a possibility for our customers
to return the sneakers that they ordered if the quality is not up to specification.
The Sniverse sneakers will be delivered with the desired quantity to customers. The quantity of sneakers the
customers will receive will be the same as their demands.
Customers ordering the Sniverse sneakers will receive their order within the specified delivery time. Depending
on the location where customers ordered, the delivery times can vary from one to three weeks.
The order will be sent to the address that the customers specified. We will use existing logistics handler
companies that are experienced and trusted to arrange a door to door delivery to satisfy our Sniverse
customers.
We will have different customizations that customers can choose to modify their Sniverse sneakers ranging
from all kinds from models and patterns that suit every group of customers.
Our Sniverse sneakers will be priced at a reasonable price where the majority of different consumer groups can
afford. Since we are targeting costumers from an age group as early as twelve years old, which are yet to have
full time jobs, we will price our sneakers in a way that this age group perceived them as an affordable sneakers.
Sniverse Supply Chain Overview 5
Sales
Sneakers Assembly Outbound Logistics
Wholesalers
Raw Materials
Returned Sneakers
- Ethylene vinyl
acetate (EVA)
- Liquid silicone, or
polyurethane foam
- Carbon rubber
Online
- Nylon weave with Others resellers
plastic slabs
Returned Sneakers Inventory Returned Sneakers
Hence, production is outsourced to mass customisation vendor (see zazzle.com) through a licensing
arrangement and transport to 3PL providers (like DHL, UPS etc.).
PARTNER SELECTION
MASS CUSTOMISATION VENDORS: zazzle.com (manufacture custom t-shirts, sneakers, gifts etc for several
customers)
We suggest the following pre-screen criteria on which to make a partner selection:
- Time to produce – most customisation vendors are able to produce the order within 1 day
- Flexibility
- Wide supplier base
- Vendor managed inventory services for raw materials, components and reverse logistics
INVENTORY
There will be two inventory types on handling the Sniverse Sneakers. The first inventory is to store the
raw materials for making the sneakers. The second inventory is to hold returned sneakers by
customers because of several reasons (wrong specification, defective, etc) temporarily before they are
re-sorted and placed in retail stores in a discounted price. We will segregate the inventory by using the
ABC analysis (Langley, Coyle, Novack, & Bardi, 2009) into classes so that we can group raw materials
for sneakers that sell fast, in order to better manage the inventory. The inventory will be stocked with
raw materials in bulks, to maximize the economies of scale since buying in bulks will decrease the bulk
price. There will be cases where we will deliberately overstock raw materials for sneakers that are
bound to have a price increase to enjoy the improved margins between old raw material prices and
the new sneakers price.
Since we are adopting an approach where customers only order the sneakers online, and the sneakers
will be shipped from one factory, this factory where the inventory will be located will be placed in
Guangzhou, China where we can employ local labour that are less expensive than those in, for
example Europe or in North America. There will be a lot of transportation options available since
Guangzhou is located near the coast and near Hong Kong, so the availability of air cargo and ship cargo
will be sufficient for components supplier and 3PL partners to manage logistics to and from the
Sniverse factory. To maximize profit, we can use the grid technique or approximation to determine the
best place to put inventory by placing it nearer to the market so the transportation cost are
minimized.
With respect to reorder systems, since production is outsourced, decisions regarding the reordering
system rest with them. We however recommend a replenishment system, where raw materials are
ordered by the customisation partner as and when their stocks fall below a certain level, taking into
account lead-times.
The push pull boundary lies at the store of inventory or raw materials at the assembly plant. Until this
point, raw materials are ordered through forecasting expected demand. Hence raw materials are
pushed into the store. However the product is only assembled when a customer places an order for it.
When this occurs, the raw materials are pulled out of the inventory.
Logistics organization 7
SNIVERSE
Sniverse Inventories and Production
Outbound Sales
Inb
Components oun
d Lo
Logistics
Logistics Partners Global Sniverse
gist Raw Returned
ics Sneakers
Materials Sneakers Returned Returned Customers
Assembly Sneakers
Inventory Inventory Sneakers
Raw Materials
PUSH PULL
LOGISTICS ORGANIZATION
As a company that manages a sneaker’s brand where most of the overall process are outsourced to third
parties. The figure below will describe the organization chart of our company.
SNIVERSE CEO
Legal Assistants
Representative
The managers will manage the contracts that the company have with outsourcing partners. Product managers
will be responsible for maintaining the quality of the raw materials and the finished sneakers. Logistics
manager will manage the transportation of the raw materials and the contracts with 3PL partners that manage
the outbound and reverse logistics. Technical manager is maintaining the website for selling the sneakers
online.
Logistics organization 8
OVERALL LOGISTICS
The overall logistics matters such as contracts with suppliers and 3PLs will be handled by the logistics
department in the Sneakers Company.
•Materials needed to make the sneaker's components will be transported to factories that are
Raw
Materials
responsible for making sneaker's components
Supplier
•Finished components will be transported to the factory where these componets will be stiched
Component together in order to make sneakers
s Supplier
•In the sneaker's factory, components will be stored in the inventory ready to be used for
Inventory
making sneakers that the customers ordered
•Finished sneakers are transported from the factory to the logistic partner's warehouse ready to be
Logistics shipped to the customer's address by land, sea, or air.
Partner
•Customers will receive the sneakers from the logistic partners. in case the customers are not satisfied
with the sneakers, they will have to send the sneakers back to the sneakers factory through the logistic
Customers partners
•Returned sneakers will be transported by logistic partners back to the sneakers factory to be stored in
Logistics the inventory for further processing
Partner
•returned sneakers will be inspected for defects and then sold to new customers or retailers with
Inventory
discounted price
INBOUND LOGISTICS
Raw materials
Components
Raw will be Components
will be
transported to Component stored in
Material factories to Suppliers
transported to Inventory inventory to
Suppliers the Sneakers
make make sneakers
factory
components
- The raw materials needed to make sneakers components explained above are produced in different
countries in different continents. These materials will be shipped by the raw material suppliers using land,
sea, or air transportation. The transportation contracts are done between the raw material suppliers and
the component suppliers.
Logistics organization 9
- Once the raw materials are processed into sneaker components, the component suppliers will ship these
components using land, sea, or air transportation to the sneakers factory. The transportation contract is
between the component suppliers with the sneakers factory.
- Components received by the factory from the component suppliers will be stored in the factory’s inventory
to be used later when customer orders sneakers that uses these components.
PRODUCTION LOGISTICS
The production process occurs in sequential stages and is labour intensive, for a typical Nike sneaker
(CNBC, 2010). Using a simpler sneaker design helps reduce several of these processes for faster and
cheaper production.
Raw Skiving of
computerized Metal quality
materials to stitching
brand
detection control
logo
components
OUTBOUND LOGISTICS
- The factory will make the sneakers from the components stored in the inventory according to customer’s
specifications. These sneakers will be picked up by 3PL partners from the factory to their own warehouses.
Logistics organization 10
The contract between the sneakers factory and the 3PL partners is demanding that the 3PL partners picked
up finished sneakers from the factory and brought them to their own warehouse and also to ship these
sneakers to customer’s address worldwide.
- From 3PL warehouses, sneakers will be shipped by 3PL partners to distribution centres nearest to the
customer’s address by land, sea, or air transportation. From the distribution centres, 3PL partners still have
the responsibility to ship these sneakers to the doorstep of customers.
- Customers will receive their sneakers within the promised delivery time. Delivery time can vary based on
the distance between the sneakers factory and the customer’s address.
REVERSE LOGISTICS
Since customers order online, we also provide them with a return means through our return policy:
R ETURN P OLICY :
1. The product must be returned to the vendor address within 30 days of receipt in the original
packaging.
2. If the product is faulty, or not according to order specifications, the customer will be credited the cost
of the product as well as shipping costs for the return.
3. The customer will be credited within 30 days of the return.
• Notes reason
Vendor for return On resale,
• sorts returns- sneakers are
Returns sneakers (customiza
Customer to return address tion
product not Inventory sent to new
faulty are customer
partner) resold/ placed through 3PL
in stock
P ROCESS :
1. Once the product is returned to the mass customization partner it is put into inventory until resale
occurs. If the returned stock in the inventory increases, all items in the inventory are placed on sale
through the online portal. In this way the returned sneakers are diverted back into the forward
logistics chain.
2. The reason for the return is noted to keep track of performance measures.
3. If the sneakers are returned due to faulty order processing (wrong colour, style etc.) the item is placed
for sale online (perhaps at a discount).
4. If the faults increase beyond acceptable levels, which are not in keeping with our quality standards,
the customization vendor incurs a penalty.
5. If the sneaker quality is faulty, the ‘brand’ logo is removed and the sneakers are donated or disposed.
Marketing Strategy 11
F LEXIBILITY
The plan for this product line rests on the fact that customers are willing to wait a certain period (3 weeks) for
their custom-made sneakers to be delivered. The plan is equipped to handle certain scenarios, should they
occur:
V OLATILE DEMAND
Since the business is designed in such a way that the customer ‘pulls’ the product, we avoid large inventories of
the finished product. In terms of materials and components needed to build the sneaker, the items are stocked
in inventory based on demand forecasting based on prior sales and seasonal variations (Christmas etc.) Since
the reorder system is based on replenishment methods, where the components and materials are reordered
when stocks fall to a certain level (we also have safety stock), we anticipate that the model can handle demand
fluctuations to an extent.
S UPPLY S HORTAGE
If we face shortage in the supply of components for certain sneaker models, we try and influence customer
buying decisions through dynamic pricing and promotions (Tang, 2006). This would largely be dependant upon
informed marketing decisions. For example, for sneaker models that face a shortage of components, we
announce longer lead times or higher prices, whereas for other options that do not have a supply shortage we
announce limited availability discounts and so on to influence customers into choosing these models.
In order to better manage the supply of raw materials and components we choose a mass customisation
partner who has a flexible supplier base and thus in the case of a shortage of components or raw materials
from one supplier, there is an alternative.
MARKETING STRATEGY
The marketing strategy is based on the 4Ps of marketing – product, price, place and promotion. The strategy
for each of these is elaborated below.
- Customer Co-creation
The idea is to engage the customer in the design process and let them make their own Sniverse sneaker – to
provide them with design ownership. This is done through the online portal containing a design palette or
configurator that enables the customer through the various stages in designing their own sneaker. It comes
with a visual aid that helps them see their choices reflected in the sneakers (Piller & Kumar, 2006).
Benefits from the logistics perspective include lower product returns or exchanges since the customer makes
their own shoes depending on what they choose, reduced inventory carrying costs and staffing, and ability to
gain information about customer desires more easily that helps in relationship management and brand loyalty
(Piller & Kumar, 2006).
Marketing Strategy 12
- Designer editions
We consider the possibility of adding designer collections to the product line, through limited edition sneakers
created by designers that are placed on the website. These sneakers are available at a premium price and for a
short period. These products are not available for customisation but can be directly purchased online.
PRICING STRATEGY
Pricing strategies are determined by several factors such as cost, competitors, and target customers and so on.
We focus on a product line and price range similar to Keds and Converse. We offer prices to match competitor
prices. A dynamic pricing strategy is suggested for promotions, limited editions and designer lines.
- Upper
- Tongue
- Insole
- Lining
- Eyelets
- Laces
- Midsole
These options are limited compared to the plethora of options offered by competitors which can frustrate a
customer and deplete customer interest in the long run (Piller & Kumar, 2006). Customers get to choose only
from a set of available colours and patterns for each of these parts. The aim is to keep changing the colours and
patterns available as options for the specified parts of the sneaker every 4 months.
The payment is done through credit card, direct transfer or through a PayPal account.
The product is then delivered to the customer through our 3PL provider with 3 weeks lead time.
PROMOTION STRATEGY
Interest Events: Promotion is through interest events at schools, universities etc – design competitions etc.
Online advertising: Other possibilities include promotional discounts for ‘loyalty’ Sniverse customers who sign
up at the website for product newsletter and offers. We also consider targeted online marketing as a
promotional strategy. There is also the possibility for the customer to save their designs through a unique
identification code that can be accessed by other customers.
Controls and communication 13
Celebrity Endorsement: We endorse certain celebrities in different countries to promote the sneaker brand.
SAMPLE BROCHURE
A sample brochure for the Sniverse product ideally contains:
-Price range
CONTROL SYSTEM
The current logistical system is the MRP system (we assume that our production partner uses MRP). Since most
of the Sniverse activities are outsourced to the production partner, except for design aspects, we recommend
that no changes be made to the system. Moving to ERP based control would require enterprise wide change.
ERP also uses MRP principles for planning and replenishment as the background and hence there is no
requirement to change to ERP unless partners also use the same ERP system (Rushton, Croucher, & Baker,
2006).
ORDER PROCESSING
With respect to order processing, the business plan already suggests the use of a web-based order placement
by the customer (Rushton, Croucher, & Baker, 2006). This can also be used to check stocks in place. There is the
possibility for the customer to then track their orders online through their unique customer code, provided to
them when they placed the order.
SHIPMENT TRACKING
Next, transport based 3PLs already use RFID tracking services (DHL, 2008). This could be linked to the order
placement site, to let the customer track their shipment. In case RFID tracking is unavailable on certain routes,
then regular barcode based tracking will be used (Rushton, Croucher, & Baker, 2006).
Transport plan 14
TRANSPORT PLAN
Transportation of raw materials
The transportation fleet needed to transport raw materials to the sneaker component manufacturers will be
managed by raw material suppliers. Cargo trucks ranges from a straight truck configuration to 5-axle tractor
semitrailer configuration are used in the road and cargo ships to transport raw materials through the sea. The
selection criteria for the raw material transportation are cost and capability. Since the demand for raw
materials will be in a large quantity, transportation by air is not financially viable since in order to transport
large amount of materials using air will incur a huge amount of cost. Also ground transport can handle large
amount of cargo with less cost involved.
- transit time
- reliability
- accessibility
- security
Since transit time is important in order to fulfil order lead time, transportation by air will be used because it is
fast and the amount of orders originating from the same area will not be that large so transporting them by air
will not be too expensive. Reliability is important to make sure that customers received their orders on time, so
using well known 3PL partners such as DHL and UPS can ensure the reliability criteria. Insurance coverage will
be used accompanying the sneakers to ensure the sneakers security and small vans will be used by 3PL
partners in order for an easy access to customer address to deliver the sneakers.
Performance measurement 15
Documentation
Documentation will be used to maintain the shipping of raw materials to finished sneakers. Raw material
supplier will use Invoice document to charge the components supplier for the shipment and components
supplier will also use invoice documents to charge the sneakers factory for the shipment of components.
Bill of lading will be used by 3PL partners obtained from the sneakers factory while shipping the finished
sneakers to customers. Claims document can be used by recipients of the shipment in case that they want to
recoup monetary losses to the shipper because the shipper fails to protect the shipment and the goods are
damaged.
PERFORMANCE MEASUREMENT
CUSTOMER SERVICE
Customer service plays an important part of the business model for customised sneakers. One of the key
aspects of delivering mass customised sneakers is that there is a larger lead time than the traditional method of
buying sneakers in a retail outlet. In order to compete with other brands of customised shoes, delivery needs
to occur within the specified time period.
We propose a dynamic delivery period depending on regions, ranging from 1 week to 3 weeks, depending on
where the customer is based. Supply problems will be tacked through dynamic pricing and discounts, as
elaborated earlier.
Sneakers can be customised through a customer friendly, easy to use configurator, that enables users to save
their designs and preferences for better customer service in the future.
PRODUCT DEVELOPMENT
We measure two aspects to make product development a dynamic process based on customer feedback:
Since two forms of product development are proposed (customer co-creation and designer editions), it is
important to monitor the sales percentage of designs created through each of these methods.
Reasons for product returns related to design, material quality etc. are fed back into the product development
process to maintain the quality of the sneakers (this links the reverse logistics system to product development).
This way, any potentially serious issues with the sneakers can be recognised early, pre-empting reputation
damage.
PURCHASING
-Supplier default
Supplier defaults (shipment delays, material quality on delivery) result in longer lead times for product delivery
and could result in lost sales or customer dissatisfaction. This would especially be a problem during peak
demand periods and will hence need to be monitored.
PRODUCTION
-Return reasons are also used to check for production related issues. This is used to ensure that the mass
customisation provider maintains appropriate quality levels
LOGISTICS
-Delivery delays/ lost shipments
Customer complaints based on delayed deliveries will be tracked to ensure that sneakers are delivered within
the specified time period. This is done to ensure on-time delivery and also to prevent lost shipments. The
responsibility can be transferred to 3PL transport partners through contract agreements.
<Works Cited 17
WORKS CITED
CNBC. (2010). Retrieved December 1, 2010, from Swoosh Inside Nike:
http://www.cnbc.com/id/22742572/?photo=23
DHL. (2008, August 18). Retrieved Decemeber 1, 2010, from DHL and METRO Group start largest RFID rollout in
France: http://www.dhl.com/en/press/releases/releases_2008/logistics/180808.html
Jenn Abelson . (2010, May 29). The Boston Globe. Retrieved November 8, 2010, from Local sneaker firms are
making it in Indonesia:
http://www.boston.com/business/articles/2010/05/29/local_sneaker_firms_are_making_it_in_indonesia/
Keds. (2010). Retrieved May 7, 2010, from Design Your Own Keds Shoes:
http://www.kedscollective.com/design-your-own/women
Langley, J., Coyle, J. J., Novack, R. A., & Bardi, E. J. (2009). Managing Supply Chains: A Logistics Approach. South-
Western.
Piller, F., & Kumar, A. (2006). Mass customization: providing custom products and services with mass
production efficiency. Journal of Financial Transformation, Special Issue on "The Finance Factory" , 125-131.
Rushton, A., Croucher, P., & Baker, P. (2006). The Handbook of Logistics and Distribution Management. London:
Kogan Page.
Tang, C. S. (2006). Robust strategies for mitigating supply chain disruptions. International Journal of Logistics:
Research and Applications Vol. 9, No. 1 , 33–45.