Supply Chain Strategy for Halstead Project Presentation

ISyE 6203 Transportation and Supply Chain SystemsProf. John Vande Vate

Hang Li Naveen Nallappan Ronak Tali Shuting Xu Yanni Ping

April 24, 2012

About the company: One of the leading players in the flooring business. Into the flooring business for more than 50 years. Products include Resilient flooring, Stone Vanity Tops and Kitchen Tiles. Chief supplier to The Home Depot where its sells the popular “Allure”

brand of tiles. International wing – Vertex Sister concern – Metroflor : supplies industry grade flooring to

geographically based distributors. Facilities in USA : Calhoun, GA / Compton, CA / Secaucus, NJ Sales/marketing/supply chain decisions driven from USA offices and

production operations driven from Asian offices.

THE HALSTEAD-VERTEX GROUP

Home Depot Stocking Special Order Business

Metroflor

Vertex International

HALSTEAD’S GREEN INITIATIVESHalstead aims to lead the flooring industry by being the most environmental friendly company by various measures

LEED certified buildings Green Supply Chain Cradle to cradle policy – Recycling measures

RECYCLING

HALSTEAD & HOME DEPOT

• Sells Vinyl flooring through The Home Depot (USA & Canada) exclusively.

Two channels for sales:

• Stocking skus – Products are sold off the shelves of HD. HD acts like an import buyer for these skus.

• Special Order Business – Products are ordered by customers who walk into HD or order online at thehomedepot.com

SPECIAL ORDER BUSINESS (SOB)What is SOB?

1. Some products are not sold off the shelves but are displayed for customers to place orders for these.

2. These orders fetch higher margins but the trade-off is that Halstead pays for inbound shipments and inventor costs for SOB skus.

But the Special Order Business is very lucrative and has a great growth potential.

SPECIAL ORDER BUSINESS (SOB)Why SOB?1. Customer preference changes over time. We need

to keep pace.2. Influence customer's taste through newer designs.3. Higher margins (win-win for both Halstead and HD)4. Customer recognition and hence build our brand.5. A good avenue to test new products.

PROJECT SCOPE

Devise strategy for growth of the Special Order Business.

• Draft the Vision for company, Vision for SOB, Mission and Goals to achieve them.• Chart out a Supply Chain Strategy to achieve the above.

• Collect information about operations and capabilities.• Understand Halstead’s direction, goals and needs.• Frame Vision for Company.• Develop a Vision for SOB to support company’s vision.• Draft Mission statements on how to achieve the SOB Vision.• Understand what SOB customers look for.• Clearly define the goals on how to satisfy these customers

needs while accomplishing the Mission which ultimately does justice to the Vision.

PROJECT PROCESS

VISION FOR COMPANY

• Our Version: To be the market leader in the flooring

industry by continuously bringing innovative and desirable products to customers, and simultaneously sustain and improve our green-initiatives and environmental friendly processes.

VISION FOR SPECIAL ORDER BUSINESS

• Our Version: To build a leading brand emphasizing

innovation and sustainability to meet changing customer tastes and influence customers’ preferences.

• Evolving customers, varying architects’ tastes and new market trends.

• We have so little information about customers’ need, because of the HD tie which restricts us.

• Unpredictability increases as tastes of consumers are varied and cannot be quantified.

For now, we make some assumptions of what a customer would expect from SOB.

UNDERSTANDING THE CUSTOMER’S NEEDS

Fashion:Fresh & Unique

Customer Service

Cost

Fasion: How well it looks--fresh or unique?Customer Service: Lead Time --fast?Eco-friendliness: How safe is it in our homes and for the earth.

Eco-friendliness

WHAT CUSTOMERS REALLY WANT

• SOB products are more expensive than Stocking Units and take longer to get.

• The products' Fashion >Service Quality> Eco-friendliness > cost

MISSION 1

>> Build a customer-centric supply chain with reduced lead time to manage fresh & unique products

>> Goals:• Sku Management ： Supply customers with desirable SOB products, by

introducing a well-defined sku category refreshing system based on life cycle.

• Customer Service: Customer Service: In response to customers’ variable requests, build a fast and easy service reflected in lead time reduction and a well-thought-out return policy.

MISSION 1 – GOAL #1 SKU MANAGEMENT

Mission 1: Build a customer-centric supply chain with reduced

lead time to manage fresh & unique products.

Goal #1 -- Sku Management: Provide customers with desirable SOB products, by

introducing a well-defined sku category refreshing system based on life cycle.

• Same inventory position initially

• Adjust the inventory position based on sales performance – By introducing fresh skus – keep fresh– By keeping the skus– keep skus variable – By cutting – reduce inventory

SKU MANAGEMENT STRATEGY

PRODUCT LIFE CYCLE FOR THE SOB

Sales

NP: New Product

Upper Bound

MISSION 1 – GOAL #2 CUSTOMER SERVICE

Mission 1: Build a customer-centric supply chain with reduced

lead time to manage fashionable & innovative products.

Goal #2 – Customer Service:

Customer Service: In response to customers’ variable requests, build a fast and easy service reflected in lead time reduction and a well-thought-out return policy.

LEAD TIME REDUCTION

Factors for fast delivery:

RETURNS POLICY

>> A good returns policy will help us in our vision of being the most recognized brand as:

More confidence to our buyers when adopting more innovative products in the Special Order Business

Creates a great channel to receive customer feedback

Help us in customer retention and possibly repeat purchases

WHAT MAKES IT GOOD?

MISSION 2Familiarize our customers with our re-cycling initiatives and partner with

them to help protect our environment and promote re-cycling.

Goals :1. Implementing a successful reverse-supply chain to cater to re-cycling

initiatives increase the collection points steadily till every customer has easy access to collection point as much as stores.

2. Providing customers with "Re-cycling vinyl floors 101" and a list of collection points where they can bring back used floors.

3. Send periodic flyers and e-newsletters to customers to update them about new green practices and long term commitment.

4. Packaging with green material.5. Social Media: Facebook, Twitter

SUMMARY

VISIONTo be the market leader in the flooring industry by continuously bringing innovative and desirable products to customers, and simultaneously sustain and improve our green-initiatives and environmental friendly processes.

VISION FOR SOBTo build a leading brand emphasizing innovation and sustainability to meet changing customer tastes and influence customers’ preferences.

MISSIONS Build a customer-centric supply chain with reduced lead time to manage fresh & unique products .Goals: Sku Management, Customer Service

Familiarize our customers with our re-cycling initiatives and partner with them to help protect our environment and promote re-cycling.Goals: Solid Reverse-Supply chain