Cost co – Supplier relation management techniques

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Costco's ways to reduces cost along it's supply chain, vendor managed inventory , Connection Hub's Drop-Ship Master application suite, Supplier relationship. Note : This presentation was done as internal evaluation for Management students at D.G Vaishnav, School of Management, Arumbakam, Chennai.

Transcript of Cost co – Supplier relation management techniques

  • 1. Cost Co A Supply Chain Study
  • 2. Products they sell
  • 3. Corporate Strategy of Cost CO :
  • 4. Cost Cos Supply chain process :Suppliers ---> Warehouses ---> Costco Depot ---> Customers
  • 5. Cost co 4 major supply chain factors:1. Delivery2. Quality3. Time4. Cost
  • 6. Delivery : Inventory Strategy For high demand items, Costco keeps a two week inventory andis able to replenish its stock efficiently. The lead time (time taken from when an order is placed to whenthe Costco truck pulls up at a warehouse) is about one week. Suppliers affect on-time delivery and fill rates. If they do not provide the components then needed ontime, then the inventory cannot be maintained or the orderdelivered on time.
  • 7. Quality : Quality can be measured in a number of ways. They are performance of the product (Or) service, conformanceto specifications (Or) customer satisfaction. Costco offers high quality products at affordable prices. It backs up its products with an unbeatable return policy. Costco has in place a quality assurance program and works withits suppliers to produce products that meet the needs of thecustomers as well as achieve customer satisfaction.
  • 8. Time : Time can be measured not only for an individual company butalso for the entire supply chain. It is important to consider the time it takes to get paid for aproduct once it is sold.We can do this by using the cash to cash cycle time Cash to cash cycle time = Days in inventory+ Days in accountsreceivable - Days in accounts payable. Research shows that by decreasing the cash- to - cash timeimproves a firms (Costco) profitability.
  • 9. Cost : From an operations point of view , it generally refers to theunit cost of the product or service. Unit cost is defined as the total manufacturing cost, includingmaterials, labor and overhead divided by the number of unitsproduced. Reducing costs in the supply chain improves the profitability ofCostco and influences the kinds of products and prices which theycan offer their customers.
  • 10. There is cost involved in:1. Sourcing products from suppliers ,2. shipping products from suppliers to Costco depots,3. Distributing products to warehouses and4. Storing products in inventory.These are just some of the costs in the supply chain.
  • 11. Ways to reduces cost along a companys supply chain:1. Allowing suppliers to manage inventory of their own products at Costco. This is what is known as a vendor managed inventory. The supplier is responsible for maintaining inventory levels and hiring staff to do this. This reduces Costcos labor cost.2. Costco also practices a new technique called "cross docking" which means most of Costcos inventory is kept in distribution centers, while the remaining goods (such as items to be consumed) are delivered directly to Costco stores.
  • 12. Supply Chain Management at Costco: Costco uses vender managed inventory as previously mentioned. They use ConnectionHubs Drop-Ship Master application suite,which allows them to rapidly integrate new suppliers into their existingsystem. This enables rapid orders based on Costco requirements. This allows Costco to maintain efficient supply chain managementwithout taking on any new inventory or risk through orders. ConnectionHub provides Costco with a single point of integrationin which it can contact and interact with its suppliers directly and withease.
  • 13. Supply Chain Management at Costco:Costco can create an wireless tags on each pallet of supplies that willbe able to be read by its distribution centers and automatically addthose goods to inventory.This would not only decrease time spent delivering goods, but it wouldstreamline inventorying all of the items delivered.