Customer tailored logistics

Abstract

The purpose and main problem of this thesis is to describe the supply chain, in a system with great distances between production and sales units, and explain how to solve logistics problems and increase sales by focusing on the customers' needs.

Customers in Southeast Asia and Australia are annoyed with the construction equipment industry. Volvo CE is in an unfavourable competitive position, although it is the leader in terms of product quality. It is the service that causes Volvo problems. Volvo CE is weak on such service-related factors as parts availability, after-sales service, financing, and product availability. Service-related factors are more important than product-related. Concerning the information flow we have found that forecasting is rigid, order systems are not fully integrated, and communication between different entities is inadequate. Transportations are complicated and time consuming, the level of machines in inventory is too low, which makes for long lead-times. Parts management is sometimes uncoordinated, service levels are lower than the main competitors', and sales companies are reluctant to share parts between them.

We believe that the current structure with one warehouse in Singapore, serving the Southeast Asian market, and one in Sydney, covering the Australian market, should be kept. Increase inventories of both products and spare parts, to increase the service level. Employ the concept of one-warehouse-thinking, and integrate information systems between the different units; plants, sales companies, and dealers. Install a central control authority, responsible for co-ordinating parts distribution world-wide. Volvo CE needs to make the following improvements in order to improve their competitive position: 1. Parts availability, 2. Product availability, 3. Price, 4. After-sales service The `sell one build one' concept is difficult to employ in a system with great distances between production and sales units. This is especially true in an industry characterised by big, bulky products, low volumes, and few and expensive transportation alternatives. If the customers' differentiation level is relatively low, it is recommended to have some stock closer to the customers.