A.S. Watson's Supply Chain Management Case Study
A.S. Watson, like some technologically advanced retailers, uses a Geographic Information Management System (GIMS) for site selection, putting in a number of parameters, including the flow of people in the vicinity, the number of offices, the number of inhabitants, and so on, and combining them with information from maps to calculate the radiative effect of the selected store site. So, here is the case study of Watsons Supply Chain Management that I am going to share with you, welcome to read and browse.
A single-store supplier
Usually, we can provide resources for Watsons in accordance with the direct degree of division of the different levels of suppliers, all directly to Watsons to provide a variety of resources to the supplier will be defined as a single-store supplier of the first level, all the first level of suppliers to serve the first level of the first level of the first level of suppliers to be seen as their own direct customers. Suppliers who serve the first tier suppliers and regard the first tier suppliers as their direct customers, and thus indirectly provide resources to Watsons, are called the second tier suppliers of a single store, and so on; in the same tier, there can be more than one supplier providing resources to Watsons at the same time, and the suppliers who provide the main resources to Watsons, and who have a critical impact on Watsons' operations, are defined as the main suppliers. In this level, suppliers that provide auxiliary resources to Watsons and do not have a critical impact on Watsons' operations are defined as secondary or auxiliary suppliers; according to such a division, we have constructed a supplier system with Watsons as the core, and with various enterprises, organizations, institutions or individuals arranged in accordance with a certain hierarchy and relationship.
In this process, A.S. Watson is at the core, and all suppliers supply resources in different ways around the needs of a single store. The head office is the first level of supplier for Watsons as it is the direct provider of resources. Sales companies, wholesalers, and more indirectly, manufacturers and raw material suppliers, etc., become suppliers at the second and higher levels. Meanwhile, Watsons also needs inputs of capital, human resources, and other business-essential goods, equipment, facilities, etc., from the licensee in the construction and operation of Watsons, and thus the licensee and all other suppliers who directly provide various resources to Watsons become suppliers at the first level of suppliers, just as the head office does. First-tier suppliers. And for the licensee and other suppliers to provide services, and regarded as their own direct customers of enterprises, organizations, institutions and individuals, etc. have become the second level or higher level of suppliers; so, to Watsons as the core, the various levels of suppliers eventually formed a supplier system.
Supplier system in Watson's
For retailers like Watson's that emphasize product diversity and differentiation, fast replenishment is one of the components of their core competitiveness. According to Watson's staff, every night after closing time, Watson's supply chain system automatically collects orders from stores and calculates warehouse inventory. For out-of-stock goods, the information system will automatically send purchasing requirements to suppliers through the B2B platform linked to the suppliers; for goods that are already in stock, the system will automatically match the delivery information to the warehouse before the store opens on the next day, and the warehouse will then start shipping. Headquarters can know which shelves are out of stock in any store in the country, for this reason, we have strengthened the replenishment mechanism, in the case of the warehouse has the goods, the local stores need the goods through the IT system to confirm and information flow, half a day to ship.
For customers, Watsons is also enticing because of frequent promotions. For promotional goods, IT still provides strong support. According to Chen Jianji, in general, Watsons promotional goods beforehand to develop a rigorous promotional plan, including promotional methods, geographic and estimated sales volume. In this way, when ordering, they will take into account how the goods are distributed in stores across the country, and the IT system will provide the marketing department with the historical sales data of the relevant products to support the business department in formulating the distribution strategy.
Relationships with suppliers
Although the head office, Watsons, and other suppliers are the same as the first tier of single-store suppliers, and are the same distance away from Watsons in the supply chain, there is a hierarchical relationship between the three entities due to the differences in their nature and impact on the Watsons operation.
Typically, in a franchise system, the head office is in the position of system expansion, management monitoring and franchise element output, while Watsons is in the position of Watsons investor and operation manager, so the interaction between the head office and Watsons is extremely close, with both parties determining the rights and obligations to be assumed and fulfilled by each other through the peace treaty and **** with the construction of the franchised single store. In the day-to-day operation of A.S. Watson, the core resources required to sustain the operation of A.S. Watson are continuously invested by HQ and A.S. Watson. As such, HQ and the Franchisee are the main suppliers to Watsons.
Unlike HQ and licensees, other suppliers' inputs to individual stores are intermittent and ancillary in nature, and usually do not directly affect the final outputs of the stores - goods/services. Therefore, compared to the head office and licensees, other suppliers are relatively less important to the single store and are secondary or auxiliary suppliers to Watsons.
In summary, the following hierarchical relationship is formed among the headquarters, licensees and other suppliers due to their nature and the importance of their inputs in the whole process of single-store operation:
In terms of the use of the inputs of the suppliers: the franchise headquarters and licensees are the most important and direct first-tier suppliers affecting the supply of resources to Watsons. The resources they put in are of a continuous and fundamental nature, which directly affects the final output of Watsons. Other suppliers, although they are also first-tier suppliers to Watsons, are intermittent and ancillary in nature and do not directly contribute to Watsons' final output. Therefore, the headquarters and the licensee are in the core position of the first level of suppliers, with irreplaceable characteristics; other suppliers are in the secondary position of the first level of suppliers, with a large number of characteristics of high replaceability;
From the suppliers' own nature: the franchise headquarters is in the authorization of the franchise right to use the right to monitor the system, management of the core position of the franchisee to play a single-store The franchisee plays the role of a single-store manager who invests in and receives day-to-day operations monitored by the headquarters. Therefore, between the headquarters and the licensee, the headquarters always maintains a guiding role in the macro-development of Watsons, while the licensee focuses on the micro-management of the daily operations of Watsons; the other suppliers only appear as occasional ordinary business contacts in the operations of Watsons, and their role in the operations of Watsons is only auxiliary, so their influence is weak. /p>
In addition, if we look at the above three suppliers in the context of the entire franchising system, we will see that under the franchising conditions, the main suppliers to Watsons - the head office, the licensee, and Watsons - are all in the same franchising system, but at different levels of the system. Other suppliers are outside the franchise system. This is a significant feature of supplier relationships under franchising conditions. General business model, most of the single store and suppliers do not belong to the same system. Such as the general business model of clothing stores, its funds may come from a single store system outside the bank, merchandise purchased by the owner (Note: by a company directly opened by a single store should be regarded as the company's non-independent accounting agencies, merchandise from the company for the allocation) and so on. And the franchise single store funds, merchandise suppliers are within this franchise system.
Fourth, Watson's approach to supplier management
Watson's management of suppliers first need to distinguish between the nature of the supplier. According to the degree of influence of suppliers on the final output of Watson's suppliers can be simply divided into two parts. The first part is the headquarters and licensees, who are both suppliers to Watson's and belong to the same franchise system with Watson's, supplying resources to Watson's as well as directly participating in or influencing Watson's operation and management; the second part is the other suppliers, who belong to the franchise system outside of Watson's, and Watson's is purely a business relationship. A.S. Watson's approach to supplier management should be differentiated between these two groups of suppliers.
For the management of other suppliers, Watson's managers should first consider the differences in the rate of consumption of resources in the process of operation, and then adopt appropriate management methods. According to the difference in the rate of consumption of resources in the operation process, Watsons managers can simply categorize the resources provided by other suppliers into two types: consumable resources and durable resources. Consumable resources are resources that are consumed faster in the operation process and need to be replenished within a short period of time, such as office stationery and maintenance materials, etc. Durable resources are resources that are consumed slower in the operation process and can be used for a longer period of time after a single input without frequent replenishment, such as office equipment and water dispensers for employees. Obviously, the management of these two types of resources should be placed in the way of resource procurement.
V. Watson's supply management under franchising has the following obvious advantages
1) A single store and its main suppliers belong to the same system and are subject to its constraints:
Regardless of the business model of a single store, the definition of the supplier is a prerequisite for the management of the supplier. Typically, it is the nodes, organizations, institutions, or individuals that provide resources directly to Watsons and are located at the first level of the supply chain that are suppliers of significance to Watsons. Depending on the significance of these suppliers to Watsons' final output, Watsons has developed different management approaches. Under a franchise, the head office and the licensee are the main suppliers, exercising rights and obligations to Watsons as defined in the franchise contract, providing resources to Watsons and participating in the management of Watsons. A.S. Watson, on the other hand, plays a more cooperative and executive role in the operation of the business. A.S. Watson's role in the operation of the business is more one of cooperation and implementation, i.e. under the franchise conditions, A.S. Watson's is subject to the management of its suppliers (head office and licensee). The fact that A.S. Watson and its major suppliers are located within a system is a unique feature of the single-store-supplier relationship under franchise conditions. In contrast to the head office and suppliers, other suppliers are companies outside the franchise system to which the single store belongs and have a purely business relationship with Watsons. The resources they provide do not have a direct or critical impact on Watsons' operations, so the management of other suppliers, although as complex as supplier management in general, does not consume too much energy and cost for Watsons.
2) Watsons' supplier management is a two-way relationship system centered on information:
From the position of suppliers in the single-store SIPOC model, we can see that the role of suppliers is to provide stable, high-quality resources for Watsons' subsequent operational processes. The four central issues of resource management: timing, quantity, quality and stability of resource inputs require Watsons to keep in touch with suppliers at all times to control the actual status of resources in the supply and transportation process. Suppliers, especially the head office and licensees, also need to keep an eye on the operational status of Watsons. The head office keeps track of inventory and demand information through communication with individual stores and provides guidance to A.S. Watson in order to fulfill its obligations under the franchise contract and to promote the healthy development of the franchise system. The licensee, as the investor and the actual builder of Watsons, also needs to communicate with Watsons to fully grasp the actual status of Watsons' operation and deploy Watsons' resources. Therefore, the management of A.S. Watson's suppliers is a process of frequent and two-way exchange of information between suppliers and A.S. Watson's, in which A.S. Watson's and its suppliers reach the goal of monitoring and controlling their resources and reducing their operating costs. Under the franchise conditions, this two-way information communication between Watsons and its major suppliers is stipulated in the franchise contract and becomes the legal rights and obligations of both parties.
3) Franchising ensures that supplier management generates relatively more hidden revenue for Watsons:
In a typical store, supplier management is a complex and cumbersome task that consumes a lot of time and effort on the part of the manager and results in higher costs. However, under franchising conditions, supplier management becomes relatively simple. A.S. Watson's main supplier management work is carried out for the head office and the licensee, but in the implementation of the specific management work, A.S. Watson's plays more of an executive and cooperative role. Business dealings with other suppliers are secondary to resource management and do not consume much of Watsons' time and energy. As a result, the cost, time and effort of managing Watsons' suppliers under franchising conditions is much lower than that of a single store. From an opportunity cost perspective, these cost savings are the hidden benefits that the franchise model creates for Watsons.
4) Controlling the quality of private labels from raw materials
Watson's private labels have always been the focus of industry attention. For retailers, the quality of private labeling is especially important, mainly for OEM production; and for Watson's, the experience is to control the quality of private labeling from the raw materials.
According to the introduction, Watsons private label manufacturers are mostly other well-known brands in the market, in addition to having the relevant production qualifications and production experience, product quality and other aspects of the strict standards, they are often based on their rich experience to put forward constructive and innovative ideas, so that Watson's private label products can better meet the needs of consumers. A.S. Watson has an in-house quality management team that independently verifies all private label products. A.S. Watson's has very strict standards for suppliers of OEM products, not only for finished products, but also from the beginning of the procurement of raw materials; and for the testing of products, there are international standards and corporate standards of double verification.
5) quality management mechanism to ensure genuine sources
In addition to its own brand, Watsons also has a set of strict quality management mechanism for other brands in the store. It is understood that all products entering Watsons must be recognized supplier products, that is to say, the source of goods must be legitimate ? genuine goods? A.S. Watson has been reviewing the labels of products sold in accordance with national laws and regulations to ensure that the products sold comply with the relevant requirements and regulations, and requires suppliers to provide product testing reports issued by third-party testing organizations, and has a set of stringent quality management mechanisms for suppliers to ensure that the goods sold in Watson's stores are regular channel goods with relevant national retail licenses.?
However, many of the products sold by Watsons are skincare products, and everyone's skin is different and adapts differently to skincare products, which inevitably leads to usage problems. In this regard, Watsons will be how to deal with it? Tu Jiahui told reporters, ? If the consumer is using the products purchased at Watsons have problems, we are not first of all the return of the refund problem, but the health of the consumer, we must take him to a recognized medical institutions, to understand where this problem occurs. If these medical experts and doctors say that this is related to the product, we will immediately take this product off the shelves first.?
6) Tracking the supply chain for each product
To ensure product quality, Watsons has revealed that it will be investing more in its IT infrastructure to make it possible to track the supply chain path for each product. A.S. Watson said, ? We're also investing a lot in our IT infrastructure, and we want to be able to track every product that we sell at Watsons, when it comes out of the warehouse, when it arrives at the store, and when it's sold. We also need to strengthen our efforts to develop IT resources to track these products, so that we know when they are produced in the factory, when they go to the middlemen, when they go to the agents, when they come to Watsons stores, or when they come to our warehouses before they come to our stores," the company said. It has been revealed that Watsons currently has good cooperation with the relevant government departments and hopes that an IT platform can be developed first in the pharmaceutical category, ? so that we know when the drug is produced where, when it leaves the factory, when it arrives at the warehouse, when it arrives at one of our stores, and when it is sold to consumers. This challenge is not only in China, but also in foreign countries where many retailers are investing a lot of resources in this issue to improve service.
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