Ineffectiveness supply chain performance in johnson johnson vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business TANG HOA THUAN INEFFECTIVENESS SUPPLY CHAIN PERFORMANCE IN JOHNSON & JOHNSON VIETNAM MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: PHAN THI MINH THU Ho Chi Minh City – Year 2020 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business TANG HOA THUAN INEFFECTIVENESS SUPPLY CHAIN PERFORMANCE IN JOHNSON & JOHNSON VIETNAM MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: PHAN THI MINH THU Ho Chi Minh City – Year 2020 CONTENTS EXECUTIVE SUMMARY .1 CHAPTER 1: PROBLEM CONTEXT 1.1 Company background .3 1.1.1 Company introduction & organization chart .3 1.1.2 Key competitors of Johnson & Johnson products .6 1.1.3 Positioning strategy 1.1.4 Distribution Channel 1.2 Situation and symptom analysis 11 1.2.1 Symptom 1: Low operational sales performance 11 1.2.2 Symptom 2: Low customer service level 14 CHAPTER 2: PROBLEM IDENTIFICATION 18 2.1 Possible problems 18 2.1.1 The first tentative problem: High Mean Absolute Percentage Error (MAPE) 18 2.1.2 The second tentative problem: High Forecast BIAS 20 2.1.3 The third tentative problem: Low On Time IN Full (OTIF) 22 2.1.4 The fourth tentative problem: High turn-over rate 23 2.1.5 The fifth tentative problem: complexity internal process 24 2.2 The central problem 25 CHAPTER 3: CAUSE VALIDATION 28 3.1 Potential causes .28 3.1.1 Potential cause 1: Transportation failure 28 3.1.2 Potential cause 2: Customer service failure .29 3.1.3 Possible cause 3: Customer order un-expectation 31 3.1.4 Possible cause 4: Slow moving stock and obsolete (SLOB) 33 CHAPTER 4: ALTERNATIVE SOLUTION .37 4.1 Suggested Solutions 37 4.1.1 Solution 1: Enhance transportation service provider (2PL) performance 37 4.1.2 Solution 2: Disengage current transportation service vendor 38 4.1.3 Solution 3: Move to inhouse transporters 39 4.2 Solution comparation .39 4.4 Designed plan 42 CONCLUSION .44 Supporting documents 45 REFERENCE 52 LIST OF FIGURES Figure 1: Johnson & Johnson organization chart Figure 2: Supply Chain Department organization chart Figure 3: Johnson & Johnson consumer health products Figure 4: Top five suppliers in Fast Moving Consumer Goods (FMCG) industry Figure 5: Top competitors in consumer healthcare products .7 Figure 6: Gartner 2020 Supply Chain Top 25 Figure 7: Top competitors in consumer healthcare products .9 Figure 8: Distribution channel in Vietnam 10 Figure 9: Consumer distributor in Vietnam 10 Figure 10: Organic growth among top main competitors 14 Figure 11: Organic growth of main competitors 15 Figure 12: Deep-dive analysis of customer surveys .15 Figure 13: Distribution complaint based on category 16 Figure 14: MAPE monitoring between 2018 and Year to Date (YTD) Nov-2019 18 Figure 15: On Time In Full (OTIF) monitoring in 2019 22 Figure 16: Update cause and effect map of J&J Company by using literature review 25 Figure 17: Final update cause and effect map of Johnson & Johnson company by using literature review and data according to in-depth interview, primary and secondary data 27 Figure 18: The routine of information and transportation in a basic supply chain management 28 Figure 19: The percentage of late order .31 Figure 20: Distributor inventory (week) 34 Figure 21: Cause and Effect mapping 36 LIST OF TABLES Table 1: Key retails chain in Vietnam 11 Table 2: Reported sales by quarter – Unit: MM Dollar .12 Table 3: Reported sales by quarter – Unit: MM Dollar .12 Table 4: Reported sales by quarter – Unit: MM Dollar .13 Table 5: Reported sales by YTD – Unit: MM Dollar 13 Table 6: Deliver Service Excellence in 2019 .16 Table 7: Interpretation of typical MAPE values 19 Table 8: Forecast bias performance in 2019 20 Table 9: Turn over-rate in Supply Chain 23 Table 10: OTIF failure analysis FY-2019 .29 Table 11: Root cause analysis for MAPE & error bias 32 Table 12: SLOB expense monitoring and tracking 33 Table 13: Solution description comparation based on theory 39 Table 14: Feasible and Infeasible analysis 40 Table 15: Benefit and expected results 41 Table 16: Design plan and expected results 42 EXECUTIVE SUMMARY This thesis of “Ineffectiveness supply chain performance through customer service logistics and operational planning process (S&OP)” has been proposed and finished in four main parts: problem context, cause validation, alternative solutions, conclusion and supporting documents Chapter 1: Problem context contained company background beginning from industry general overall, company history and business competitors and the vision, mission and the organization structure of the firm in Ho Chi Minh Furthermore, in this session, the author has explored two (2) symptoms which are concerns of stakeholders of the company according to a wide variety of in-depth interview, surveys, primary and secondary data regarding company profits and loss, performance trending and tracking in supply chain division Chapter 2: Problem identification means that a problem mess had been faced according to all symptoms, organization results and problems as a general image Additionally, a key issue of ineffective supply chain organization structure was selected to be multiple resolutions as a central problem of company with the modification of its existence and critical factor The author shows ineffectiveness supply chain performance through customer service logistics and operational planning process (S&OP) should be central problem based on high MAPE, high BIAS and low OTIF indicators Chapter 3: After validating there possible problems and choosing the main issue of the firm, three potential causes of central problem noted down as transportation failure, customer failure, customer order unexpectation and slow moving stocks were carefully verification and determination so as to provide out multiple solutions which were representative in the sector Chapter 4: In this argument, the long-term solution is suggested to offer proper transportation issue at the change moment of business in the future In the parallel, there are there proposals 5|Page for Enhance transportation service provider (2PL) performance, disengage current transportation service vendor and move to inhouse service to tackle problem with digital application The final debate was named as the supporting documents to support all information and sources for the above three chapters It composed sections of in-depth interview transcript to justify central problem and selected solution In-depth interviews were widely used at various levels from many related departments of Johnson & Johnson (JNJ) Vietnam to select data and to analyze various perspective of the problem CHAPTER 1: PROBLEM CONTEXT 1.1 Company background 1.1.1 Company introduction & organization chart Johnson & Johnson is the USA international firm started in 1886 that manufactures medical devices diagnosis, drug and consumer goods industry Its popular stock is a component of the Dow Jones Industrial Average and the company is the top of 37 in the 2018 Fortune 500 magazine of the largest United States corporations by total revenue The company is one of the most valuable around the word Johnson & Johnson headquarter located in New Brunswick, New Jersey The cooperation has totally 250 branches with operations in 60 countries and products sold in over 175 nations Johnson & Johnson had sales volume of $81.5 billion during financial report 2018 in the word Mission: “For nearly 125 years Johnson’s® mission has been to create the gentlest baby products in the world Products so mild, they can be used for every age and stage of a baby’s life That is our standard of gentle But gentle isn’t only in our bottles, it is also in our heart” Johnson and Johnson Vietnam (LTD) is one of a part of Global Johnson and Johnson Its representative office is located at No Me Linh Vietbank Tower, Ho Chi Minh city It is a well-known and high-quality brand in consumer health sector for baby care industry such as bodywash, shampoo, wipe and baby powder… with organization chart as following areas: 7|Page Figure 1: Johnson & Johnson organization chart Deliver Operations division takes responsibility the flow of import products and services and includes all procedures that transfers from manufacturers upcoming local distributors The duties include in the active streamlining of a business's supply-side activities to give the best customer valuable and win the competitive advantage in heart of consumers Supply Chain division coordinates the logistics of all aspects of the supply chain which consists of five steps: • The strategy of planning • The capable of imported products or export • Producing (concentrated on efficient and effectiveness) • Shipping and warehouse • Products returned and destruction (for defective or unwanted products) Human Resource organization chart as following areas: Figure 2: Supply Chain Department organization chart Common consumer healthcare products including skin health products (NEUTROGENA; AVEENO, CLEAN & CLEAR…), OTC Products - TYLENOL and necessity healthy goods brands such as LISTERINE, BAND-AID, JOHNSON’S Figure 3: Johnson & Johnson consumer health products 1.1.2 Key competitors of Johnson & Johnson products In Consumer Products segment, other major companies include Unilever International, Nestle, Kimberly-Clark Corporation, and Procter & Gamble Among of competitors, Johnson & Johnson gains appropriately 10.4% of the total contribution in terms of sales volume Alternative solutions Feasible Infeasible Channel team - Being able to in years at least Finally, feasible solution is selected based on timeline, capability and cost The author would like to explore benefit and expected results of enhance transportation service provider (2PL) performance Table 15: Benefit and expected results Enhance transportation service provider (2PL) performance Benefit Expected results Avoid all potential problems by: Commitment to quality - Performance management Ensure the performance management/continuous of all related processes improvement by: for warehousing, inventory meet expectation by management, packing, putting more control transportation: - - Actively resolve when Set clear KPI for the performance does not performance meet target Generate daily and - - Minimize the damage to products - Delivery full-value products to customers Based on the regulations weekly reports; and and policy and service monthly scorecard to terms to measure the record 1/ complaints, service quality of services 2/ better performance - Review contracts and revise clauses where applicable - Disengage current transportation service vendor Deploy interpretive ranking Find the best one to select Select the highest quality 3PL vendor Benefit Expected results process (IRP) 4.3 Designed plan The author would like to proposal final solutions with timeline, project leader and estimated cost after analysis multiple solutions including benefits, cost and feasible … Table 16: Design plan and expected results Number of suggested 464 Deliver orders delivered orders Number of order 464 Deliver orders capture by FAREYE Expected result 2PL must record time delivery of 464 orders from FAREYE app Need to improve Not well controlled drivers who are not allocated and dedicated for full J&J account Challenging, action Challenging: DHL is not proactive to create new account for plans drivers, the app does not allow for IOS app to install But, most of drivers are using iphone to support for ISO installation Solutions: - On time training completion for new driver users - J&J will train for DHL Coordinator of TPT how to collect data from FAREYE to understand End to End process including incompletion deliver order weekly Action plan: - Proactively connect with sub-contractor to train for drivers in terms of responsibility how to use this app and record on system after each order - Every day, TPT coordinator will track and monitor the real time through FAREYE app Timeline months after KICK OFF project Estimated cost 50.000.000 VND for buying FAREYE app Person in charge Deliver Operations Lead (1 Head count) Customer Service Team (2 head count) CONCLUSION This thesis has focused on finding the main problem causing failure in pushing sales performance of customer logistic service recentlty It is obviously seen that MAPE, BIAS and OTIP from S&OP are central problems That’s what cause Deliver Service Issue such as late delivery, quantity, damaged issue Therefore, it requires everything support to drive ending business goals such as high customer service level and sales performance, buiding up strategic organization structure to enhance performance is given by key factors The purposes of this thesis is to state clearly and inform the real issue that is occuring at JNJ Vietnam in consumer sector After that, the company will take actions properly to give multiple solutions, next choose the best options based on impact assessment The author is understandable the issue and give resolutions based on facts and figures Finally, it is a positive way to gain the satisfaction of company as well as good foundation to create working motivation for employee who can enable to drive high business results such as high sales performance and good S&OP Supporting documents Primary or secondary data are key sources what are obtained in research Data and information gathered from primary source is for the purpose of problems solving Primary data is collected specifically It is supposed that secondary data provides alternatives for primary research and possibly solves research problems In this theory, both primary and secondary have been collected Secondary data obtains reliable resources from internal company like report and figures of Marketing, Supply Chain including Customer Logistic Service (CLS) and Warehouse Operations, and other supporting documents relative with sales performance as well as business model, working flow such as literature review, books, journal and research Then, all collected data was compared with reality in order to have specific information As for primary data, a qualitative approach was applied for this study because of limited timeframe and the ability to access to highly confidential information of the company as well as business partners The main method for collective qualitative data is in-depth interview The researcher conducted three rounds in-depth interview and one group interview for respondents of internal company Every in-depth and group interview took about from one or two hours, questionnaires were designed clearly and open-ended to get the valuable information In order to gain deeper insights of the phenomenon of the study, in-depth interview and group interview of respondents were carried on in the following order The first interview is in-depth discussion conducted for each of following five people as following areas: Transcript 1: Interviewee: Senior Customer Service Logistics Specialist – Mr Ly Nhat Vu Interview method: via Skype business (chatting) [Start] Hi Vu! I’m doing a project for my final thesis of ISB program about “Ineffectiveness Supply Chain Performance in JNJ Vietnam” I would like to ask you some questions for following questions Welcome your feedback and answers will be kept confidential Thank you for your participant Question 1: Could you please share with me the customer process at J&J? Answer 1: All right, after receiving orders from customers, our customer service will confirm orders if there is not out of stock After that, Customer service will prepare document, book truck and arrange delivery Question 2: Do you often face with difficulties when to arrange shipments? If yes, can you share me more details about this? Answer 2: A lot… Being a coordinator of Operations departments I faced with a lot of challenge encounter of deliver service issue such as late delivery, warehouse operations of wrong picking, quantity issue (shortage, surplus and wrong products) or wrong documentation Question 3: How you deal with challenge encounter? Answer 3: I have already reported these challenges to my boss who is coordinating with related departments to figure out the root causes It seems that it is not too much improvements Question 4: What factors cause those difficulties in your point of view? Answer 4: Demand accuracy is very importance to reduce destruction goods with slow moving products in the markets S&OP monthly meeting a lot of MAPE indicator However, there have not found the root cause to analyze the reason to inaccurate forecasting zone (>50%) Question 5: How does your company have to pay attention of wrong MAPE to fix the problem? How many percent of MAPE improvement since 2019? Answer 5: From my point of view, MAPE monitoring is not central focus of the company So, the outcome of MAPE is fluctuate but, the trend is always higher than 50% I still have not seen any clear action plan to go down 50% Transcript 2: Interviewee: Business Quality – Van Thi Hoang Lan – Modern Trade of Co-opmart Interview method: via Skype business (chatting) [Start] Hi Lan! I’m doing a project for my final thesis of ISB program about “Ineffectiveness Supply Chain Performance in JNJ Vietnam” I would like to ask you some questions for following questions Welcome your feedback and answers will be kept confidential Thank you for your participant Question 1: Could you please share with me the customer complaint process at J&J? Answer 1: Well, customer complaint handling at J&J is quite complicated and not quick to give resolutions as other competitors such as Unilever, P&G and Nestle Question 2: Do you often face with difficulties when to place orders? If yes, can you share me more details about this? Answer 2: The process is not clear caused I have had a lot of difficulties such as promotion programs, Minimum of Quantity (MOQ) and OTIF calculation I am really hard to handle deliver service issue for example, late delivery, wrong products delivery, out of stock and document issues such as invoice, packing list, and purchasing orders Question 3: How you deal with challenge encounter? Answer 3: I am always keeping the records of deliver service issue Then, I will monitor the track and trend to review in the management review and data for improvements Question 4: What factors cause those difficulties in your point of view? Answer 4: From my point of view, the way of communication between commercial and customer service is not clear in terms of strategy growth Out of stock is a good trend for sales performance However, it will be a failure to MAPA measurement in Supply Chain performance Question 5: Do you see any improvement? Answer 5: [laugh] it’s improved for this mistake and happened other issues, look like the common mistake in daily operations Sometimes, I heard from customer service that they are coordinating with global team to create Deliver Service Issue Transcript 3: Interviewee: Supply Chain Leadership Team Nguyen Thuy Huong – Planning Manager Tran Trong Tuan – Customer Logistics Service Manager Vu Dang Khanh – Recruitment Lead Phan Dan Tam – Head of Market Access Ruangwanich Samapong – Senior Planning Manager Interview method: via Skype business meeting I’m doing a project for my final thesis of ISB program about “Ineffectiveness Supply Chain Performance in JNJ Vietnam” I would like to ask you some questions for following questions Welcome your feedback and answers will be kept confidential Thank you for your participant Question 1: From the report of customer service survey with low rate and sales performance of consumer sector decline significantly in 2019? Ms Tam: There are sectors pharmaceutical, medical devices and consumer health sectors with high turn-over rate It causes difficulties for new employees to approach right system and process That is the reason to run a smooth procedure internally how to make proactive communications compared to competitors Ms Khanh: Khanh: Turn over rate in company is really high It is much higher than competitor in the same industry Mr Tuan: Yes, this becomes much more serious now – as we supply chain team need to improve customer satisfaction Question 2: Do you know why it happened for a long time but, still haven’t improved yet? Ms Huong: I think these problems are the result of both internal and external factors According to Ms Nguyen Thuy Huong, the leadership team wants to increase sales performance at least 11% in 2019 versus 2018 The strategic goal keeps continuing slowdown to the consumer sector to make a monthly budget as well as action plans how to meet the objective Next, action plans will be capture into a demand forecast If business head can’t be able to recognize how to achieve while the planning proceeding is accordingly As a result, it might be 3% gaps creation – it could lead to the conclusion as unclear However, according to and 3.5 months finished goods unrestricted shipping barrier becomes closure, if it seems to be no clear guidance, the demand planning must be revised downward If it is not modified is whereas the bias issue will happen Mr Tran Trong Tuan Customer Logistic Service Manager: OTIF does not achieve the target after transition distributors as well as transporters Transporters have not known customer rules and policy It caused delivery delayed, full shipment rejection at the end of cycle selling In addition, moving from authorized distributors to normal distributors is really challenge encounters New distributors not focus on full efforts for J&J products As a result of low customer service level, that is the reason to low on time in full indicator External factors: Not have alignment the process between internal and distributors such as planning forecast, OTIF calculation and the way of complaint handling Question 3: How is about forecast from JNJ to MAKE? Do you make it? Ms Huong: Planning team make it monthly based on sales plan from each distributor In fact, sales managers always receive that demand planning from distributors’ forecast and wrong MAPE and BIAS In addition, we also base on sales history and to set the standard quantity for each SKU Then, we make in our own forecast planning However, planning forecast from customers is incorrect and unreliable It is a result of surplus finished goods and high inventory in warehouse Ms Samapong: At first, we based on order history which recorded daily by operations team It shows all information of an order from customer information to product information From this report, we can know the average ordered quantity per month Secondly, we are managers who involve directly to sales activities so we can know which customers or which project need to be supported by factory such as urgent orders, huge quantity in limited time or even how long for a number we may get from customers So, I can’t forecast for all customers as I am not sure if they change their forecast because our products are easy to be replaced by other competitors Question 4: How is about the mistake on delivery? Why you think about this? Tuan: It happens most of modern trade customers They have many distribution centers in nationwide from South to North Normally, the main routes of carriers are from large and crowded towns for example, Ho Chi Minh -Level I city, Da Nang – City level II and Ha Noi capital Next, transporters will re-arrange the shipment as assigned address for delivery It is causing mistakes after many stops of delivery In any delay, we have to minimize the risks for customers by arranging the urgent shipments to them with shortage lead time REFERENCE (1) Morash EA, Clinton SR The role of transportation capabilities in international supply chain management Transportation Journal 1997 Spring;36(3):5-17 (2) Andrei Costea, on June 12, 2019 Posted in News Available from https://www.performancemagazine.org/kpi-supply-chain-slow-moving-stock/ (3) Hoffman KD, Kelley SW, Rotalsky HM Tracking service failures and employee recovery efforts The Journal of Services Marketing 1995;9(2):49 (4) Innis DE, La Londe B,J Customer service: The key to customer satisfaction, customer loyalty, and market share Journal of Business Logistics 1994;15(1):1 (5) Hanaa El Sayed, Supply Chain Key Performance Indicators Analysis, International Journal of Application or Innovation in Engineering & Management (IJAIEM), Volume 2, Issue 1, January 2013 (6) Stewart Gordon, Supply chain performance enchmarking study reveals keys to supply chain excellence Logistics Information Management; Bradford Vol 8, Iss 2, (1995): 38 (7) Chowdhury Abdullah, A M., & Hasan, M N., Factors affecting employee turnover and sound retention strategies in business organization: A conceptual view Problems and Perspectives in Management, 15(1), 63-71 (8) Tam, V W., & Le, K N (2018) Power spectral and bi-spectral study of factors affecting employee turnover Organization, Technology & Management in Construction, 10(1), 1727-1734 (9) Marlene Kuhn, Franziska Schaefer, Heiner Otten , Process complexity as a future challenge – a quality management perspective, The TQM Journal, ISSN: 1754-2731 (10) Sungil Kim and Heeyoung Kim, A new metric of absolute percentage error for intermittent demand forecasts, International Journal of Forecasting, 32(3):669-679 (11) Nazmul AK, Habib MA Evaluation of Preferences for Alternative Transportation Services and Loyalty towards Active Transportation during a Major Transportation Infrastructure Disruption Sustainability 2018;10(6):2050 (12) Levans MA Masters of Logistics: Transportation @ digital speed Logistics Management (2002) 2017 09;56(9):9 (13) Politis Y, Giovanis A, Binioris S Logistics service quality and its effects on customer satisfaction in the manufacturing companies’ supply chains Journal of Modelling in Management 2014;9(2):215-237 (14) Digital Transformation in Transportation and Logistics Market Size, Share & Industry Forecast 2018-2025 Web Newswire 2020 Jan 22 (15) Dr Jean-Paul Rodrigue and Dr Theo Notteboom, The Provision and Demand of Transportation Services (16) Carolyn M Brown,7 Tips for Rating and Evaluating Your Suppliers and Vendors, Apply industry proven metrics for measuring and improving vendor performance to drive your business's operations and profits (17) Nguyen Ngoc Duy Phuong, Tran Thi Dai Trang, Repurchase Intention: The Effect of Service Quality, System Quality, Information Quality, and Customer Satisfaction as Mediating Role ... ECONOMICS HO CHI MINH CITY International School of Business TANG HOA THUAN INEFFECTIVENESS SUPPLY CHAIN PERFORMANCE IN JOHNSON & JOHNSON VIETNAM MASTER OF BUSINESS ADMINISTRATION SUPERVISOR:... Guardian) as following the flows: Figure 8: Distribution channel in Vietnam Figure 9: Consumer distributor in Vietnam Source: J&J Supply Chain Vietnam Table 1: Key retails chain in Vietnam In summary,... provides the routine of information and inventory from points of origin in delivery Figure 18: The routine of information and transportation in a basic supply chain management Morash EA, Clinton SR (1)