Thanks to provided knowledge in this course, we can conduct this report providing an overview of a Management Information Systems MIS course focused on the Supply Chain Management SCM pr
INTRODUCTION
The Heineken Company
Figure 2 The Products of Heineken
Heineken, a brewing powerhouse with a legacy dating back to 1864, has evolved into a global force, known for iconic beer brands such as Heineken, Amstel, Tiger, Sol, Strongbow, and Birra Moretti Operating in over 70 countries, the company's commitment to delivering quality beverages has made it a beloved choice worldwide
In Vietnam, the Vietnam Brewery Limited Company (Heineken Vietnam) stands tall as a major player in the beer industry Established in 1991 as a joint venture between Saigon Trading Corporation (Satra) and Heineken Asia Pacific, the company has experienced remarkable financial growth The first quarter of 2021 saw a 20% increase in revenue, reaching VND 4.4 trillion, accompanied by a substantial pre-tax profit of VND 1.1 trillion
Heineken Vietnam's strategic investments in advanced manufacturing technology are exemplified by a USD 6 million state-of-the-art beer production facility established in 2021 This underscores the company's commitment to innovation and efficiency
The significance of logistics and supply chain management in Heineken's success cannot be overstated The merger of Heineken Vietnam Brewery Company Limited and Heineken Hanoi Brewery Company Limited reflects the strategic importance of these operational facets Through meticulous supply chain optimization, Heineken enhances customer service, trims operational expenses, and strengthens its financial standing The company's expanded logistics and supply chain operations in Vietnam contribute not only to local employment, supporting over 158,000 jobs, but also to environmental sustainability, aligning with Heineken's responsible business practices highlighted in the 2017 Sustainability Report
Heineken's journey in Vietnam encapsulates a harmonious blend of brewing excellence, strategic investments, and a commitment to responsible business practices, solidifying its position as a leader in the global beverage industry.
Management Information Systems (MIS) of Heineken
The application of an Information Management System, particularly Supply Chain Management (SCM), into the business model of Heineken Company has proven to be a strategically sound decision, yielding substantial benefits for the organization By incorporating SCM, Heineken has enhanced its ability to manage and optimize various elements of its supply chain, leading to increased efficiency and streamlined operations This application has facilitated real-time monitoring and coordination across the entire supply chain, from production to distribution As a result, Heineken has experienced improved inventory management, reduced lead times, and minimized operational costs The strategic implementation of SCM has not only increased the overall effectiveness of Heineken's supply chain but has also contributed to the company's competitiveness in the market by ensuring a more agile and responsive approach to changing market demands and dynamics.
LITERATURE REVIEW
Definition Supply Chain Management
APICS, the global association for supply chain management professionals, defines supply chain management as: “The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.” Step 1 - Design: Identify key supply chain partners, determine the optimal network structure, and design processes for efficient flow Consider factors such as product characteristics, demand variability, and lead times
Step 2 - Planning: Forecast demand, create production and procurement plans, optimize inventory levels, and establish communication channels with suppliers and customers Planning should also account for potential disruptions and risk mitigation strategies
Step 3 - Execution: Procure materials, manufacture products, and coordinate the movement of goods from suppliers to manufacturers to distributors and, ultimately, to customers Real-time visibility and communication are crucial during execution to address any unforeseen issues promptly
Step 4 - Control: Implement control mechanisms to track performance metrics, monitor inventory levels, and ensure quality standards are met Establish procedures for handling exceptions and deviations, and continuously evaluate and adjust the supply chain processes for optimal performance
Step 5 - Monitoring: Use key performance indicators (KPIs) to track the effectiveness of the
Regularly analyze data to identify trends and areas for optimization, and implement continuous improvement initiatives.
How Supply Chain Management Works
Supply chain management represents an ongoing effort by companies to make their supply chains as efficient and economical as possible Typically, SCM attempts to centrally control or link the production, shipment, and distribution of a product By managing the supply chain, companies can cut excess costs and needless steps and deliver products to the consumer faster This is done by keeping tighter control of internal inventories, internal production, distribution, sales, and the inventories of company vendors
SCM is based on the idea that nearly every product that comes to market does so as the result of efforts by multiple organizations that make up a supply chain Although supply chains have existed for ages, most companies have only recently paid attention to them as a value-add to their operations
2.1 5 Phases of Supply Chain Management:
Planning: To achieve optimal results in Supply Chain Management (SCM), the process typically commences with meticulous planning aimed at aligning supply with customer and manufacturing demands Companies must proactively anticipate their future needs, considering factors such as raw materials, manufacturing stages, equipment capacities, and staffing requirements Enterprise Resource Planning (ERP) software is often employed by larger businesses to facilitate the coordination of this planning phase
Sourcing: The effectiveness of SCM heavily relies on robust relationships with suppliers Sourcing involves collaborating with vendors to procure materials essential to the manufacturing process While sourcing requirements may vary across industries, the overarching goals of SCM sourcing are to ensure that raw materials meet manufacturing specifications, vendor prices align with market expectations, the vendor can provide emergency materials, and the vendor has a proven track record of timely and quality deliveries For industries dealing with perishable goods, supply chain management becomes particularly critical, requiring careful consideration of lead times and the supplier's capacity to meet demands
Manufacturing: The core of the supply chain management process lies in manufacturing, where companies utilize machinery and labor to transform raw materials received from suppliers into the final product This phase may encompass sub-tasks such as assembly, testing, inspection, and packaging Companies must remain vigilant during manufacturing, addressing issues like waste or deviations from original plans promptly For instance, if a company exceeds planned raw material usage due to inadequate employee training, corrective measures must be taken
Delivery: Upon completion of the manufacturing process and finalizing sales, the next step is ensuring the timely, safe, and cost-effective delivery of products to customers Effective SCM involves establishing robust logistic capabilities and delivery channels, including contingency plans for alternative distribution methods in case of transportation disruptions, such as record snowfall in distribution center areas
Returns: The SCM process concludes with product support and managing customer returns Handling returns, often referred to as reverse logistics, is crucial for addressing customer dissatisfaction or product-related issues Companies must possess the capability to receive returned products, issue correct refunds, and use returns as valuable feedback to identify and rectify defects or design flaws Addressing the root cause of customer returns is essential for the success of the supply chain management process, preventing persistent issues and improving overall customer satisfaction
2.2 4 parties and 3 flows in a supply chain:
There are 3 types of main flows that happen in any supply chains:
Product flow: happens all the way from the upstream (suppliers) to the downstream (retailers, customers) In addition, if there is any returns for any reason, there will be a reverse flow of product in the opposite direction to the forward flow
Payment flow: happens from downstream to upstream Payment is typically made after the buyer receives the product and inspects it, at which point the funds return to the provider Occasionally, money moves in the opposite direction from supplier to customer in the form of a debit
Information flow: happens both ways in the supply chain since organizations will need to share different type of information with each other so that the whole supply chain can make better decisions to improve overall performance
Figure 3 Key Supply Chain Management Processes
2.3 What makes an excellent supply chain?
There are 5 pillars of an excellent supply chain:
Organization design: Success in the supply chain requires a well-organized company The organization should have the appropriate personnel in the appropriate positions and should be in line with the overarching company objectives
Process: The supply chain process should be efficient and effective This means that the right steps should be taken in the right order to get products from suppliers to customers as quickly and cheaply as possible
Systems and Technology: Systems and technology serve as the backbone of the supply network, integrating processes and ensuring that all stakeholders operate from the same source of real-time data
People: The people who work in the supply chain are essential to its success Skilled employees are equipped to effectively manage and optimize supply chain operations They also have Possessing a strong process orientation and an understanding of the end-to-end supply chain as a cohesive entity
Supply chain metrics: A comprehensive system of performance metrics is employed to evaluate performance against established benchmarks, enabling the identification of areas for reinforcement and improvement
2.4 What are the main KPIs of a supply chain?
KPIs in supply chain management are measurable values that are used to track and evaluate the performance of a supply chain The figure 5 mentioned 5 sections:
Reliability: The capacity to fulfill task requirements effectively and efficiently
Responsiveness: is the ability of a supply chain to meet customer demand quickly and accurately The KPIs in this category include on-time in full delivery, quality pass rate, and forecast accuracy Agility: is the ability of a supply chain to respond to changes in customer demand or market conditions quickly and effectively The KPIs in this category include product mix flexibility and adaptability
What is Warehouse management ?
Warehouse management refers to the process of efficiently controlling and overseeing the operations within a warehouse It involves the systematic management of inventory, storage, and movement of goods within a warehouse facility to ensure optimal utilization of space, accurate tracking of inventory, and timely fulfillment of orders
There are several key aspects of warehouse management:
Inventory Control: Warehouse managers are in responsible for keeping correct inventory records, monitoring stock levels, and providing that products will be available when needed To optimize stock levels, this entails tasks like receiving, examining, and storing incoming inventory as well as performing frequent stock audits and putting inventory management systems in place
Storage Optimization: In order to maximize storage capacity and enable the smooth flow of goods, effective warehouse management requires establishing and organizing the warehouse's layout This entails choosing appropriate storage solutions (such as pallet racking and shelving), putting effective picking and replenishment plans into practice, and making use of space-saving tactics to reduce waste and enhance accessibility
Order Fulfillment: Accurate and effective processing of customer orders is the responsibility of warehouse managers This include selecting the appropriate goods from the shelves of the warehouse, safely packing them, and organizing the shipping or delivery procedure Order accuracy is increased and processing times are decreased by automating and streamlining these procedures with the help of warehouse management systems
Warehouse Operations: Warehouse managers supervise a range of operational tasks in the warehouse, such as receiving and shipping merchandise, handling returns and exchanges, maintaining machinery and equipment, and making sure safety rules are followed They might also be in charge of allocating duties, supervising a group of warehouse employees, and offering training to guarantee efficient operations
Technology Integration: Warehouse management has been greatly enhanced by the integration of technology This helps managements improve efficiency, accuracy, and productivity within the warehous e.
What is the SAP EWM platform?
The SAP EWM (Extended Warehouse Management) offers a range of benefits that can greatly enhance your warehouse management processes With SAP EWM, you can automate your entire warehouse management, leading to accurate stock forecasting This automation helps streamline operations, reduce errors, and improve overall efficiency Additionally, SAP EWM allows you to optimize movements and transportation within your warehouse, ensuring that goods are efficiently transported from one location to another By making optimal use of storage space, SAP EWM helps you maximize your warehouse capacity and minimize wasted space Furthermore, SAP EWM facilitates smooth operations across all departments involved in shipping, transportation, relocation, and warehousing This comprehensive solution integrates various processes, enabling seamless coordination and collaboration among different teams Overall, SAP EWM empowers businesses to achieve efficient and effective warehouse management, leading to improved productivity and customer satisfaction
The benefits from SAP EWM:
Firstly, costs reduction thanks to optimized usage of warehousing space and efficient resource management
Secondly, increased speed of warehouse operations and improved throughput Thirdly, improved warehousing services and better customer experience
The last one is reduced returns and lower reclamation costs.
METHODOLOGY
Data collection method
In this report, we use “The one-to-one interview” to evaluate the MIS of Heineken, especially the Supply Chain Management System The reason why this study conducted individual interviews is because it allows for in-depth exploration of the participants' experiences and insights Furthermore, by conducting individual interviews, we can gather rich and detailed data about the participant's thoughts, feelings, and actions The data for this study includes 2 types: primary data and secondary data By using 2 kinds of data, we can easily compare them and find out which strategies are suitable for each situation.
Primary data
First of all, in order to complete this study in the most specific way, I will define research objectives as the objectives should be shown clearly to ensure that the study can be focused and relevant Secondly, I will collect relevant data through interviews and existing documents to supplement and strengthen my research model and hypotheses After collecting enough data, I use appropriate statistical methods to analyze the data and have a detailed insight of the relationship between employee motivation and job performance Finally, analyzed data will be synthesized and the conclusion will be drawn based on the findings
1 Is there any importan information or insights about Heineken's suppl chain that you think would be important to know?
Technology plays a pivotal role in our supply cha management We employ advanced data analytics, de forecasting models, and inventory management tool optimize production, reduce waste, and ensure availability of our products This technological integrati enables us to achieve greater efficiency and responsive in meeting consumer demands
2 How often does the warehouse go throug inventory checks and audits?
Conducting regular inventory checks and audits is cru for several reasons Firstly, it helps us maintain accu records of our stock levels, ensuring that we always h the right products available for our customers Second allows us to identify any discrepancies or potential iss promptly, such as missing or damaged items By doing we can quickly rectify any problems and minimize a delays in our supply chain Our inventory checks invo physically counting and verifying the stock on ha against our records
3 How is the warehous organized to ensur efficient storage and retrieval of products?
First and foremost, our warehouse follows a caref planned layout that maximizes space utilization a streamlines operations We employ a combination manual and automated processes to ensure efficiency
To begin with, we categorize products based on t characteristics, such as size, fragility, and expiration d This enables us to assign proper storage locations handling protocols for each item We also implemen robust inventory management system that tracks availability, quantity, and location of every product in re time
In terms of spatial organization, we employ a system approach by dividing our warehouse into different zo and aisles This zoning strategy helps us group sim products together for easy retrieval and minimi unnecessary movement Additionally, we label all zon aisles, and sections clearly, which allows employee locate products quickly and accuratel y.
4 How does Heineken optimize warehouse management to minimiz storage waste and increa supply efficiency?
With this problem, we must learn with releva departments to make the most accurate forecasts supply plans possible using advanced technologies supply planning methods to predict market demand addition, we also use investment tracking and wareho management technologies and these systems help us accurate information about inventory and man warehouse operations effectively
5 Can you tell us about an recent innovations o improvements made to th warehouse operations?
Firstly, we have implemented advanced technology automation systems to streamline our wareho processes This includes the adoption of state-of-th inventory management software that allows us to track monitor our stock levels with increased accuracy efficiency It enables us to minimize errors, redu wastage, and optimize our inventory levels to m customer demands effectively
Furthermore, we have integrated RFID (Radio Freque Identification) technology into our warehouse operatio This technology has significantly improved our invento tracking capabilities With RFID tags attached to o products and pallets, we can easily track their movem and location within the warehouse
However, despite our implementation of technology a methods in warehouse management, we have not optimized this process, and there are still significant c incurred in the warehouse department
6 How does Heineken monitor and evaluate supply chain performance
We establish KPIs to evaluate supply chain performa on key criteria such as inventory transit times, or accuracy and responsiveness Measuring and trac these metrics period helps us detect and resolve prob as they arise We must also evaluate our partners suppliers according to our own criteria to ensure qualit maintained at the best possible level From there we work closely with supply chain partners to sha information and monitor performance
7 Is there a multi-sourcing strategy? How to reduc risks from dependence on single source of supply?
As we mentioned before, we must always establish lo term relationships with suppliers and diversifying o supply is inevitable This helps us ensure a stable su and quality of raw materials before entering the produc stage
8 How does Heineken maintain product quality during transportation an storage?
Our products are packaged and canned carefully Du transportation to ensure the temperature is always suitable level without affecting the quality of the be Transportation times must be optimized so that prod are not exposed to unwanted external conditions addition, we must train our employees and deliv partners to ensure they meet the quality and sa standards set by Heineken
9 Is there an emergency pla and rapid recovery whe there is an incident in th supply chain?
We always have emergency plans and quick recove deal with supply chain incidents such as delivery dela environmental impacts or technical difficulties W establish planning processes to ensure emerg measures are implemented and supply operations recover quickly We must assess the possible ri resulting from developing a response plan, training emergency response team to create effec communication systems and coordinating with relev partners
10 How does Heineken integrate sustainability into its supply chain management?
At Heineken Vietnam, we hope through our product and business activities to create motivation for posi changes With significant contributions to the lo economy, creating jobs and supporting businesses in supply chain, we want to grow in parallel with t development of the local community, creating val common for the economy and contribute to building transparent and competitive business environmen promote domestic investment.
Secondary data
According to the data analysis and processing process we have found through academic journals, company reports and publications, online resources, and especially the previous interview we have done, we assume that there are several difficulties in the Heineken supply chain management system Particularly, they have stuck with the Warehouse Management Information System This greatly affects the process of preserving and transporting products to customers completely As a result, instead of quite a good system in supply chain management, there are still several problems that we have mentioned Based on the evaluation, we will provide some solutions to make this system better.
MIS IMPLEMENTATION IN HEINEKEN'S SUPPLY CHAIN
Design
Heineken's supply chain design is meticulously crafted to align with the company's strategic objectives The design phase involves identifying key partners, establishing an optimal network structure, and defining efficient processes Heineken considers various factors such as product characteristics, demand variability, and lead times to create a robust and responsive supply chain design
1.1 What are the components of the supply chain for Heineken?
The supply chain for Heineken, like that of any beverage company, involves several key components
Procurement: This component involves sourcing raw materials required for brewing beer For Heineken, critical raw materials include barley, hops, yeast, and water Procurement teams work with suppliers to ensure a steady and high-quality supply of these ingredients
Production: This is where the brewing process takes place It includes mashing, fermentation, maturation, and packaging of the beer Heineken has numerous breweries worldwide where these processes occur
Distribution: Once the beer is brewed and packaged, it needs to be distributed to various locations, including wholesalers, retailers, bars, and restaurants Efficient distribution is crucial to ensure the availability of Heineken products in the market
Warehousing: Warehouses play a critical role in storing both raw materials and finished products Heineken maintains warehouses strategically located in different regions to support its production and distribution network
Transportation: Effective transportation is essential for moving raw materials to the breweries and finished products to distribution points Heineken uses various modes of transportation, including trucks, ships, and sometimes trains, depending on the location and scale of operations
Inventory Management: Managing inventory levels is crucial to ensure that the right amount of beer is available when and where it's needed Advanced forecasting and inventory management systems are often employed to optimize this component
Quality Control: Maintaining the quality and consistency of Heineken's products is paramount Quality control processes are integrated into every stage of the supply chain, from raw material inspection to final product testing
Demand Planning: Accurate demand forecasting helps Heineken anticipate market needs and plan production accordingly This involves analyzing market trends, historical sales data, and other factors that influence beer consumption
Supplier Relationships: Building solid relationships with suppliers is essential to ensure a reliable supply of raw materials and other inputs This can include long-term contracts and partnerships
Sustainability and Environmental Initiatives: Many companies, including Heineken, are increasingly focused on sustainability This involves efforts to reduce the environmental impact of the supply chain, such as energy-efficient operations, waste reduction, and sustainable sourcing practices
Compliance and Regulations: Heineken must adhere to various local and international regulations related to alcohol production, labeling, and distribution Compliance with these regulations is an integral part of the supply chain
Technology and Information Systems: Modern supply chains rely on advanced technology and information systems to track inventory, monitor production processes, and optimize logistics This includes the use of Enterprise Resource Planning (ERP) systems and other software tools 1.2 What are the different firms involved in the supply chain and their objective?
Figure 6 Heineken Supply Chain Model
The objective in the supply chain of Heineken Vietnam, like any other company, would typically include ensuring a smooth flow of products from manufacturing to consumers while minimizing
Suppliers: Suppliers in Heineken Vietnam's supply chain play a role in providing raw materials and components necessary for beer production Suppliers aim to provide a consistent and reliable source of raw materials, such as malt, hops, barley, and packaging materials, to meet Heineken Vietnam's production needs Besides that, suppliers also strive to maintain high-quality standards, timely deliveries, and competitive pricing to meet Heineken's demand They make an effort to establish long-term partnerships with Heineken, fostering trust and collaboration to optimize efficiency and reduce costs
Factory or Company: Ensuring a sufficient and continuous supply of vital inputs for manufacturing is the main goal of the Heineken factory In order to meet the needs of its brewing operations, Heineken strives to maintain ideal inventory levels of raw ingredients such as water, yeast, hops, and malts Heineken can prevent stockouts and production interruptions and ensure a smooth and continuous manufacturing process by constantly monitoring inventory levels and forecasting future needs In addition, the Heineken company focuses on ensuring the quality and freshness of raw materials by the quality control processes, including inspections, testing, and proper storage conditions to preserve their quality attributes
Manufacturers or Producers: The central objective is to efficiently and consistently produce Heineken beer in accordance with the company's established recipes and quality standards It is crucial to guarantee the beer's consistency in taste and quality To uphold the high standards associated with the Heineken brand, stringent quality control procedures are in place In order to reduce waste, energy use, and production costs while preserving product quality, they must also maximize efficiency in the brewing process
Distributors or Wholesalers: Distributors or wholesalers purchase products in bulk from world, we distribute our beverages We distribute our alcoholic beverages to customers in both emerging and developed areas through partnerships and acquisitions, our operational companies and subsidiaries, wholesalers, retailers, pubs, hotels, taprooms, and bars
Retailers: Retailers are the final stage of the supply chain, where products are sold directly to consumers They operate physical stores, e-commerce websites, and other retail outlets Moreover, retailers want to give outstanding services while exceeding customer expectations in order to maximize satisfaction.
Planning
2.1 Planning for the entire supply chain
In the planning phase, Heineken forecasts demand, develops production and procurement plans, and optimizes inventory levels The company establishes effective communication channels with suppliers and customers, anticipating potential disruptions Heineken's planning also incorporates risk mitigation strategies, ensuring a proactive approach to challenges that may arise during the execution phase
Heineken has developed a comprehensive plan to optimize their supply chain, encompassing detailed steps as follows:
Demand Analysis: Heineken conducts meticulous analysis of market demand, particularly during significant events like year-end holidays This includes a detailed evaluation of consumer trends and predicting sudden spikes in demand to prepare for such occasions They applied the pull/push strategies model to Heineken to confidently forecast and plan its inventory levels, ensure a stable supply of materials to maintain uninterrupted production processes and can be more responsive to customer demand, reduce excess inventory costs, and streamline its operations for maximum efficiency This approach helps the company maintain a competitive edge in the highly dynamic and competitive beer industry while also aligning with modern sustainability goals
Strategic Location and Distribution Planning: Heineken strategically plans the positioning and distribution of products within the supply chain Decisions regarding strategic storage locations, distribution structures, and transportation systems are made to ensure efficiency and effectiveness
Appropriate Technology Application: Heineken selects technology platforms such as Magento Commerce and AWS(Amazon Web Services) to support their supply chain processes This emphasizes the role of technology in enhancing efficiency and flexibility within the supply chain
Optimizing Order Placement Systems: In deploying the Corporate D2C system, Heineken focuses on optimizing the order placement process The company may utilize Magento Order Management to efficiently manage orders from business customers, ensuring accuracy and rapid response times
Planning for Unexpected Situations: Heineken goes beyond basic planning by establishing preventative measures and responses to unexpected situations Strengthening flexibility within the supply chain enables the company to face and swiftly respond to unforeseen fluctuations
2.2 Heineken meticulously planned the optimization of each stage in their supply chain
Demand Analysis: Heineken initiates a thorough analysis of market demand, especially during significant events such as year-end holidays This includes a detailed evaluation of consumer trends and forecasting sudden increases in demand to prepare for these events
Supplier Management: Establishing and maintaining strong relationships with suppliers to ensure a stable and high-quality supply by implementing Supplier Relationship Management (SRM)
Production Planning: Heineken determines the production schedule based on demand predictions and various factors like raw materials, machinery capacity, and workforce Additionally, Heineken utilizes the Enterprise Resource Planning (ERP) system to plan production, synchronizing processes from order placement to actual manufacturing
Quality Management: Ensuring high quality throughout the production process and applying quality control standards Implementing a Quality Management System to ensure that all products meet quality standards
Optimizing Warehouse Management: Heineken focuses on optimizing warehouse management to minimize storage costs and ensure products are always ready for distribution by integrating intelligent warehouse management systems such as Warehouse Management System (WMS)
Technology Utilization: Applying intelligent warehouse management systems and RFID technology (Radio-Frequency Identification) to track and enhance performance and accuracy 2.2.4 Distribution:
Transportation Planning: Heineken defines distribution strategies, including transportation schedules and delivery vehicles Utilizing a Transportation Management System (TMS) to plan and monitor the transportation of goods from the factory to distribution points
Partnering with Transport Providers: Collaborating closely with transportation partners to ensure safe, efficient, and timely deliveries
Building Strategic Partnerships: Heineken develops relationships with retailers to ensure effective product display and sales Utilizing Customer Relationship Management (CRM) to track and manage relationships with key retailers
Promotion and Marketing: Planning to reach the end consumer group by deploying promotion and marketing strategies to enhance awareness and demand from consumers Additionally, applying strategic promotion and marketing management software to monitor campaign performance and enhance customer interaction.
Execution
After having meticulously devised a comprehensive plan, Heineken proceeded to implement its supply chain management methodology through one of specific strategies However, we suggest that Push/pull/ push-pull Strategy is one of the better strategies to operate its business most efficiently
Figure 7 Heineken push and pull strategy in supply chain model
Figure 8 Heineken Supply Chain Process Push Strategy –
Heineken's product, being a staple in the grocery category, exhibits relatively low demand uncertainty Consequently, Heineken can confidently forecast and plan its inventory levels, ensuring a stable supply of materials to maintain uninterrupted production processes
The push strategy can be applied to the initial stages of their supply chain because uncertainty in the push portion of the supply chain is relatively small, Service level is not an issue, so the focus can be on cost minimization, which helps Heineken utilize resources better such as production and distribution capacities while minimizing inventory, transportation, and production costs
This may encompass the production of barley and hops, the primary ingredients for brewing beer Heineken can maintain inventories of these materials (corks, bottles, barrels, labels, ) and execute beer production according to a schedule based on long-term forecast planning These stages operate based on forecasts rather than actual customer demand Establish a business process that describes the beer production process and pack These two processes form the company's core business
Therefore, before Heineken procedure the raw materials and brews the beer, then the packaging the beer from the brewing process and the ingredients, Heineken starts by accurately forecasting demand for its beer products:
Demand Forecasting (Sales & Operations Planning): the department that determines the amount of beer to brew and pack batches for production in a week(such as based on historical data) This helps in planning production and packaging schedules efficiently
Planning departments: Based on the demand forecasts, Heineken can plan its production schedules in advance This means producing a certain quantity of beer based on long-term forecasts rather than waiting for specific orders This helps in reducing setup time and streamlining production
Production plans: can be split or consolidated to reduce setup time, switch and optimize production This blueprint includes process orders for the brewery and for packaging Different production strategies will be applied here On the one hand, the brewhouse, packaging, beer light and filtration are activated by a push process
After Heineken calculates the required production levels to meet market demand based on long- term demand forecasting and procedure the raw materials, they initiate large-scale production in accordance with the predetermined plan Heineken benefits from substantial economies of scale due to its extensive global beer production This substantial scale of production results in a reduction in the average production cost per unit The adoption of a push strategy is especially advantageous in this scenario, as it capitalizes on the advantages of this scale, facilitating efficient mass production and inventory management Heineken has effectively implemented the push strategy in the following scenarios:
Inventory Control in the United States: Heineken Zoeterwoude, as previously mentioned, manages inventory for the U.S market They make transportation decisions to the U.S based on U.S inventory levels This approach aids inventory management, enhances supply chain integration, and guarantees product availability in the U.S market
Reducing Order Cycle Times: In the U.S market, Heineken has successfully employed collaborative forecasting and related technology to shrink order cycle times from 12 weeks to 4 or
5 weeks This improvement has heightened customer responsiveness, minimized lead times, and ensured the freshness of products
At Heineken, distributors enter forecasting recommendations and replenishment orders into their own subpages within the planning system, known as HOPS (Heineken Operations Planning System), onto the total planned time in stages for additional orders Distributors may make changes to the plan as local conditions change These changes are available in real-time at the Heineken brewery in Europe, which can then adjust production and delivery schedules to correspond to actual demand
Heineken applies the push portion of the supply chain before the beer product reaches the final packaging stage (outbound warehouse) The process starts after the beer is bottled, and the next step is getting it to distributors The quantity of beer sent out depends on how much each customer wants This part of the process can be either “pushed” (based on the brewery's production schedule) or “pulled” (based on customer orders) Not all beer is bottled right away Some breweries, like Heineken Zoeterwoude in the Netherlands, manage their inventory strategically They oversee the stock for specific markets, like the US Depending on the level of beer inventory in the US, they adjust the shipments to meet demand This is known as “Buy into Warehouse” and it serves to maintain control over the US inventory
Figure 9 Heineken Supply Chain Process Pull Strategy –
By implementing a pull supply chain model, Heineken can be more responsive to customer demand, reduce excess inventory costs, and streamline its operations for maximum efficiency This approach helps the company maintain a competitive edge in the highly dynamic and competitive beer industry while also aligning with modern sustainability goals
Heineken's production and distribution process is applied with many modern and highly automated technologies, but before the customized production process can take place, all order processing must be done manually with approval
When there is an order, the planning department at Heineken Zoeterwoude, following the SCOR model, will consider two different policies for three different large customers First, “make-to- stock” for the Dutch and American markets And second, “make to order” (pull policy) This policy is made for customers who order customized products and for small quantities When a batch is started production, a new process order is created and when a batch is finished, the process order ends
Control
Analysis of Implementation by Heineken:
Performance Metrics Tracking: Heineken likely implemented advanced tracking systems and software to monitor key performance metrics throughout their supply chain This includes real- time visibility into order fulfillment, delivery times, and other relevant metrics
Inventory Monitoring: Control mechanisms are likely in place to monitor inventory levels effectively Automated systems, such as Warehouse Management Systems (WMS), may be utilized to track stock levels, manage replenishment, and ensure optimal inventory turnover
Quality Standards Adherence: To maintain product quality, Heineken may have implemented control mechanisms at various stages of the supply chain This could include quality control checks during manufacturing, adherence to transportation and storage conditions, and monitoring of product conditions during distribution
Procedures for Exceptions and Deviations: Heineken likely established clear procedures for handling exceptions and deviations in the supply chain This could involve automated alerts for anomalies in performance metrics, triggering rapid response protocols to address issues promptly
Continuous Evaluation and Adjustment: Continuous improvement is a cornerstone of effective supply chain management Heineken may regularly evaluate performance data, seeking areas for enhancement Adjustments to processes, technologies, or partnerships could be made to optimize overall supply chain performance
Technology Integration: Heineken may have integrated advanced technologies such as Internet of Things (IoT) devices, RFID (Radio-Frequency Identification), and data analytics to enable real-
Collaboration with Partners: Effective control also involves collaboration with suppliers, distributors, and other partners Heineken likely maintains open communication channels, sharing relevant data and insights to collectively address challenges and improve the overall supply chain
Risk Management: Control mechanisms would likely include risk management strategies This could involve scenario planning, developing contingency plans for potential disruptions, and ensuring resilience in the face of unexpected events
→ It's important to recognize that the specifics of Heineken's implementation would require access to proprietary and up- -date information The beverage industry, in general, places a high value to on supply chain efficiency, given the perishable nature of many products and the need for timely deliveries to meet consumer demand.
Monitoring
In the monitoring phase, Heineken utilizes key performance indicators (KPIs) to assess the efficiency of the supply chain
ROE of Heineken is higher than the average rate of Food and beverage industry with 12.03%
→ Heineken’s ability to use capital from shareholders effectively
Heineken Company has total assets of 58428 million Euro Every year, the Heineken company generates a profit after tax of 3535 million Euro At this time the ROA ratio is 6.1% That means
1 dong of assets, Heineken company generates 0.061 Euro of profit after tax
With APT=2.44, Heineken can pay off effectively its supplier expense and other short-term debt
The ART ratio shows that in 2021, account receivables must be rotated 6.55 times This means on average about 360 (days) / 6.55 = 55.73 days for the company to collect the debt Help make an assessment on the ability to collect debts of Heineken or the effectiveness of credit granting at Heineken company at the present time
For the food and beverage industry, INVT is relatively important as this item will become obsolete inventory Therefore, with INVT =4.64, Heineken is selling goods very quickly and the demand for Heineken products is very large In addition, it also shows Heineken's ability to effectively manage inventory
5.6 Property, plant, and equipment turnover (PPET):
High turnover indicates that assets are being used efficiently and large amounts of revenue are generated using a small number of assets That means with a million Euro investment, Heineken can get 1.77 million Euro in revenue
It takes more than 283 days for Heineken to pay the Accounts Payable to the supplier However, Heineken takes a long time to get paid by customers about 79 days on average Goods stay in –Heineken's warehouse for quite some time nearly 54 days on average –
SCM - WAREHOUSE PROBLEM IDENTIFICATION
Warehouse process flow
Figure Heineken Warehouse management process flow 10
Supplier: Warehouse receives products from Heineken’s factory
Goods Received Note: Upon the arrival of the goods, a goods received note (GRN) is created This document includes information such as the supplier's details, the quantity of goods received, and any relevant purchase order numbers
Goods Received: The goods are physically received by the warehouse team at Heineken They verify the quantity of goods delivered against the information provided in the GRN
Scanning: The received goods are then scanned using barcode or RFID technology This step helps in tracking and inventory management
Inspect Quality: The warehouse team inspects the quality of the received goods They ensure that the products meet the required standards and are in acceptable condition
Putaway: After quality inspection, the goods are stored in the appropriate storage locations within the warehouse This process is known as putaway, where the items are allocated their designated spots based on factors like product characteristics, sales velocity, and temperature requirements
Warehouse: Once the putaway is completed, the goods are considered to be in the warehouse They are now available to be included in the inventory and used for customer orders or further processing
Overall, Heineken's inbound warehouse process involves receiving goods, verifying their quantity, scanning them for tracking purposes, inspecting their quality, and finally storing them in the appropriate location within the warehouse for future use
Heineken's outbound warehouse process involves several steps:
Warehouse: This is where the products are stored and managed The outbound process begins from the warehouse
Pick: In this step, specific products are chosen and picked from the warehouse based on customer orders or other requirements
Scan: The pickled products are then scanned using barcode or RFID technology This scanning process helps in tracking the movement of the products and maintaining accuracy in inventory management
Quality Inspection: After scanning, the pickled products undergo a quality inspection This step ensures that the products meet the company's quality standards and are in perfect condition for delivery to the customer
Invoice: Once the quality inspection is complete, an invoice is generated for the specific customer order The invoice includes details such as the quantity, price, and any additional charges
Customer: Finally, the product is packaged, ready for delivery, and dispatched to the customer The customer receives the product based on the order and pays the invoice amount.
Heineken’s warehouse management system problem statement
Despite implementing various strategies such as integrated Intelligent Warehouse Management Systems to optimizing warehouse operations, through on-site surveys, utilizing planning documents, process flow analysis, and objective evaluations from Heineken, it has been identified that the company still facing particularly in terms of warehouse cost and the expansion and enhancement of its warehousing operations
In essence, the challenge lies in the potential ripple effect on the company's financial performance High warehouse costs and soaring raw material expenses result in an elevated cost structure for the finished product In a competitive market like the beer industry, where consumer choices are influenced by factors like price, quality, and brand reputation, an increase in the cost of the final product may adversely impact Heineken's competitive advantage
The majority of managers suggested the following areas were most inefficient:
Putaway and replenishment (45 per cent)
Figure 11 The warehouse manager’s challenges
In Heineken, Numerous modifications are occurring in the warehouse, which are improving procedures on a variety of levels Heineken is seeking avenues for expansion and enhancing the effectiveness of its warehousing operations Flowing to technology advancements that frequently result in the development of new storage solutions, warehouse performance may be continually enhanced It's true that fresh inventions and trends are driving a continuous evolution in the warehouse sector For every company, maintaining a competitive edge is imperative In truth, businesses that maintain their competitiveness also pledge to satisfy customers and prioritize expansion
Figure Management Warehouse system problem 12
IMPROVEMENT SCM - WAREHOUSE FOR COMPANY
Improvement suggestion
Firstly, the assessment of Heineken's Key Performance Indicator (KPI) choices Since KPIs represent the foundation of performance, they are examined first It is crucial for businesses to employ trustworthy KPIs in order to assess their success First, the KPIs that the business utilizes to gauge A list and explanation of the various warehousing processes' performances will be provided As a result, a review of the literature will be done to find KPIs pertaining to warehouse performance This will serve as the theoretical foundation for future standards Benchmarking allows you to assess the quality of a chosen Heineken product based on KPIs while also learning about the business tactics of other organizations
The benchmarks' findings will display the parallels and discrepancies between the criteria and Heineken's KPIs As of right moment, By using SAP software in the management process, it is feasible to provide Heineken with some guidance on how to enhance warehouse management procedures in order to save expenses, improve convenience, and improve customer satisfaction and the advantages when they applying warehouse management based on using SAP EWM, SAP ERP, and SAP PI platforms
Secondly, the performance of the procedures and ways to make them better The relevant information will be obtained from Heineken's database and the literature for each of the ensuing points First, the internal Heineken warehouse procedures that need the greatest labor will be investigated This will indicate the procedures that the techniques ought to cover Next, We'll publish and explain the breakthroughs and trends for the labor-intensive processes that will provide a preliminary idea of the possible future actions for Heineken's warehouses
Thirdly, how well the various solutions fit with the procedures of the business To do this, an analysis of their suitability for the business's procedures will be conducted To get insight into the set of criteria used to evaluate it, a literature search will be conducted on technologies Following that, the tendencies discovered in the project's second portion will be assessed using the earlier discovered The results of this evaluation will lead to the selection of one or more methods that will enhance the efficiency of the warehouse operations of the chosen firm.
Improvement by performance measurement theory
The performance metrics for Heineken are the Key Performance Indicators (KPIs) that Heineken employs to assess the effectiveness of its warehouses and which are detailed in the Logistics KPIs Manual The Logistics KPIs Manual consists of a collection of KPIs that are linked to the Green Diamond and are essential, as well as optional Process Performance Indicators (PPIs) & Alerts
By combining the four key drivers of the company growth, profitability, capital efficiency, and sustainability and responsibility it symbolizes the company's aspirations Logistics KPIs track the effectiveness of transportation, warehousing operations, or both together Because the emphasis in this case is on measuring warehouse operations, only the KPIs that are related to warehouse performance, that is, to the overall performance of the warehouse and transportation have been examined All indicators, the Logistics KPIs Manual is the source of all the indicators included in this section
Businesses use key performance indicators (KPIs) to track their advancement toward a certain objective They serve as a foundation for decisions on operational and strategic enhancement The fundamental measurements are required KPIs that showcase an operating company's (OpCo) site's performance Every nation where Heineken is sold an organization that possesses warehouses is called an OpCo, and each warehouse inside this OpCo is called a site They are required as they enable worldwide deployment and guarantee adherence to internal and external reporting requirements
Of the seven KPIs stated warehouse performance, the combined performance of the warehouse and the transportation Every KPI falls under one of the Green Diamond's driving categories.This section's particular information was purposefully withheld and kept confidential At Heineken, warehouse performance is essential, and finding new ways to improve it is a daily research topic The “winning theory” of Heineken, the Green Diamond, which represents the company’s objectives and ambitions, frames this research The four pillars of this theory are: Growth, Capital efficiency, Sustainability and responsibility
2.2 Alerts and Indicators of Process Performance:
Unlike KPIs, PPIs and Alerts are optional, hence providing their data is not required PPIs are operational accomplishment targets that provide information about more detailed data that is centered on individual procedures Any divergence from the desired improvement targets is brought to light through alerts Both of them are utilized while working on improvements in particular business sectors and depending on company goals PPIs and Alerts are divided, like KPIs, among the four sections of the Green Diamond This section's particular information was purposefully withheld and kept confidential
Financial Productivity Utilization Quality Cycle time
Receipt processing time per receipts
Putaway Putaway cost per line Putaway per man-hour % Utilization of putaway labor and equipment
% Perfect put- aways Putaways cycle time (per putaway)
Storage Storage space cost per item
Inventory per square foot % Locations and occupied % Locations without inventory discrepancies
Picking cost per order line
Order lines picked per man-hour
% Utilization of picking labor and equipment
% Perfect picking lines Order picking cycle time (per order)
Shipping Shipping cost per customer order
Orders prepared for shipment per man-hour
% Perfect shipments Warehouse order cycle time Table 1 Warehouse Key Performance Indicators
In general, the three main KPIs to take into account when starting with the financial category are labor expenses, inventory costs, and shipping costs In addition, three KPIs stand out in terms of productivity and usage: picking productivity, receiving productivity, and inventory space use
Next, five KPIs for the quality category stand out a little bit: Product damage rate, perfect order, accurate order delivery, on-time delivery, and accurate storage In conclusion, when it comes to the time category, the following five KPIs are nearly indistinguishable from one another: order lead time, reception processing time, warehouse order cycle time, order picking time, and put- away time In general, it may be concluded that the price, output, and making use of warehouses are essential to enhancing performance These three areas allude to the Heineken Green Diamond's profitability section, where a number of predefined measures are in place A visual depiction of every KPI category that has been addressed can be found in Tables 2, 3, 4, and 5
Table 3 Productivity and Utilization KPIs
2.3 Evaluation of the KPIs for Heneiken:
The Heineken's warehouse's efficiency, evaluation of Heineken's required KPIs aims to provide a picture of the company's performance and efficiency measurement methods, as well as their primary differences from those reported in other case studies and the literature Since required KPIs are the ones that must be reported, while PPIs are optional, the focus is on mandatory KPIs
Beginning Heineken's KPI definition lists seven warehouse-related KPIs that are required While this figure may appear low, there are seven more warehouse KPIs that are noted when compared to the data that was obtained from Danone To remain manageable and pertinent, the number of KPIs may be condensed This is due to the possibility of discouragement if there are an excessive number of required KPIs to be completed each month (or at the frequency stated) This can have a negative impact on accurate performance reporting and therefore lessen their dependability Thus, Heineken employs the appropriate amount of KPIs approach and obliquely helps with KPI fill-in
The KPIs used by Heineken to measure the performance of their warehouse align with the literature and case studies referenced in this thesis Table 7 demonstrates that Heineken has implemented KPIs across the four categories identified in the literature Comparatively, the number of KPIs in Heineken's mandatory list is considered average when compared to Danone Both companies also prioritize safety in the working environment However, a discrepancy is observed in Heineken's focus on quality within their logistics KPIs Unlike the other case studies, Heineken only dedicates one mandatory KPI to quality In contrast, literature and case studies emphasize the importance of KPIs such as Product shipped damage free, On-time shipment, and Accuracy order delivery in measuring operational quality at various levels Product shipped damage free indicates the quality of operations and alerts to excessive product damage On-time shipment measures supply chain performance and punctuality in order shipping Accuracy order delivery reflects the number of error-free orders
The performance of Heineken's processes by incorporating warehousing trends and innovations The research focuses on analyzing KPI trends to improve the selection of KPIs at Heineken, shedding light on areas of the process that are currently overlooked This presents an opportunity to identify weaknesses in the process and subsequently enhance its performance The findings indicate that other companies employ multiple KPIs to measure quality from various perspectives, which is supported by the literature In contrast, Heineken only utilizes one quality KPI It is recommended that Heineken consider incorporating additional quality KPIs to assess process performance from different angles, potentially identifying weaknesses and ultimately improving overall performance
Figure Warehouse activities as a percentage of total cost 13
On-time Ready to Ship ✔
Dock- -Stock Cycle time, in to
Percent of Oders with On-time
Improvement by SAP platform
The key function of SAP EWM (Extended Warehouse Management) impact to the
The SAP EWM offers a range of key functions that when applying SAP EWM to Heineken, it offers a range of key functions that can greatly enhance warehouse management processes
Firstly, SAP EWM enables full automation of internal, incoming, outgoing, and support processes for various types of storage facilities such as distribution centers, production warehouses, transit warehouses, and consolidation centers This automation streamlines operations, reduces errors, and improves overall efficiency
Secondly, SAP EWM provides built-in optimization functions for cyclic loading, stocking, slotting, and packaging These functions help optimize warehouse resources and personnel management, increasing performance and efficiency Additionally, SAP EWM allows for time tracking and monitoring of various characteristics such as weight, volume, quantity, and distance for each operation, providing valuable insights for analysis and decision-making The system also supports the maintenance of time and cost/price tariffs, enabling the calculation of prices for 3PL customers and wages for warehouse personnel Moreover, SAP EWM supports pick-by-voice technology, enhancing the accuracy and speed of order picking processes It also offers full automation of warehousing operations' calculation and assignment of tasks to RF terminals, further streamlining operations
Lastly, SAP EWM seamlessly integrates with a multitude of automated warehousing equipment, ensuring smooth communication and coordination between the system and the equipment Overall, SAP EWM provides Heineken with a comprehensive solution to optimize warehouse operations, improve efficiency, and enhance overall performance.
CONCLUSION
In conclusion, we try our best to conduct this report which content the evaluation of Heineken in SCM system It is clear that Heineken's supply chain management (SCM) system is a complex and sophisticated operation that has both strengths and weaknesses On the one hand, Heineken's SCM system is highly efficient and effective, and it has helped the company to achieve significant cost savings and improve its customer satisfaction On the other hand, Heineken's SCM system is also complex and expensive, and it can be difficult to manage Additionally, we have identified pros and cons of this systems by conducting the interview with the Heineken’s staff, analysing these
Therefore, we have provided recommendations for Heineken’s warehouse management to improve the process in efficiency and effectiveness way.
R EFERENCES
1 Jason Fernando (October 20, 2023) Supply Chain Management (SCM): How It Works & Why It's Important Retrieved November 28, 2023 from https://www.investopedia.com/terms/s/scm.asp#:~:text=The%20five%20most%20critical
%20phases,costs%20and%20avoiding%20supply%20shortages
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