Michelin

=MICHELIN =

At Michelin we continue to sell the highest quality product in the tire market with customer satisfaction always number one. We will always improve to continue to set the standard for not only our industry but customer service in general. Improvements under way are:

__SALES__
Developing an improved understanding of all product types to better supply the customers needs for different countries.

Increasing knowledge of service levels to meet customer expectations.

Benefits: improves service levels and knowledge of products and not just of selected tires for certain vehicles.

Clearer understanding equals product delivered on time, and customer needs being met per region.

__SYSTEMS__
Creating information systems for improved supply chains. Also more efficient systems for the planning and logistic departments.

Benefits: this will allow for better reaction time to market changes and decrease any challenge in the logistics.

Allows for better forecast models and cost savings that can be past down to the customer.

__COMMUNICATION__
There will be new communication technology and procedures put in place throughout supply chains in each country.

Benefits: This will improve decision making by not just manufacturing and sales, but also management. This will build a stronger operational structure to better service customer requests.

Goal: Logistics Development **Plan for 5 years**.

Sales manager: maintain a high service level as a competitive advantage. <span style="font-family: 'Times New Roman','serif';">Two markets: Original Equipment (OE) and replacement tires( RT) <span style="font-family: 'Times New Roman','serif';">OE: <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Production done on a **European basis**. Annual market share agreement made by automakers. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Auto Manufacturers make up the majority of the market <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Slight trend toward mounted tires. <span style="font-family: 'Times New Roman','serif';">RT: <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l6 level1 lfo2; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Customer demand varies by customer type. Sales distribution is particular to each county. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l6 level1 lfo2; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Extensive Distribution opposed to competitors selective distribution. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l6 level1 lfo2; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Develop image in of technical expertise, particularly heavy trucks. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l6 level1 lfo2; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Deferred order management is used. Meaning orders are **postponed**, most likely due to a bad supply chain.

<span style="font-family: 'Times New Roman','serif';">OE service levels not known. Preference given to OE deliveries over RT. **As shown below the RT market deserves to be just as important as the OE market. OE 19 vs RT 24.**


 * Axis of Typological Classification of Tire Products ||   ||
 * ||  ||   ||  RT  ||  Market  ||
 * || Class  ||  OE Market  ||  Large SDs  ||  Other SDs  ||
 * Category ||   ||   ||   ||   ||
 * Private Automobiles ||  A  ||  M4  ||  M3  ||  M2  ||
 * Private Automobiles ||  B  ||  M4  ||  M2  ||  M1  ||
 * Private Automobiles ||  C  || ||  M1  ||  M1  ||
 * Vans || ||  M3  ||  M2  ||  M1  ||
 * Motorcycles ||  A  ||  M2  ||  M1  ||  M1  ||
 * Agricultural Vehicles || ||  M2  ||  M1  ||  M1  ||
 * Wheels || ||  M4  ||  M1  ||  M3  ||
 * Casing Returns || || ||  M2  ||  M1  ||
 * Total ||   ||  ** 19 **  ||  13  ||  11  ||
 * Total RT ||   ||   ||   ||  ** 24 **  ||
 * M4>M1 ||   ||   ||   ||   ||
 * Delivery Times Taken Into Account ||   ||   ||
 * ||  ||   ||  RT  ||  Market  ||
 * || Class  ||  OE Market  ||  Large SDs  ||  Other SDs  ||
 * Category ||   ||   ||   ||   ||
 * Private Automobiles ||  A  ||  a  ||  c  ||  b  ||
 * Private Automobiles ||  B  ||  a  ||  c  ||  a  ||
 * Private Automobiles ||  C  || ||  a  ||  a  ||
 * Vans || ||  a  ||  b  ||  c  ||
 * Motorcycles ||  A  ||  a  ||  c  ||  c  ||
 * Agricultural Vehicles || ||  b  ||  c  ||  c  ||
 * Wheels || || ||  c  || ||
 * Casing Returns || || ||  d  ||  d  ||

**<span style="font-family: 'Times New Roman','serif';">Class A items **<span style="font-family: 'Times New Roman','serif';">, motorcycles and Private Automobiles have **longer lead times** than they should. <span style="font-family: 'Times New Roman','serif';">a being shortest < 24 hours. B <= 48 hours. C <= 3 days. d being longest <= 2 weeks.

**<span style="font-family: 'Times New Roman','serif';">Forecasting **

<span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l7 level1 lfo3; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Gets worse when dimension vs global forecast are made. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l7 level1 lfo3; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Difference between forecasting and actual results between 20% and 40%, overall volume may reach 20%. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l7 level1 lfo3; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Supply manager overestimates his needs in order to anticipate shortages. Total AD between 30% and 40% higher than total overall inventory. Bad forecasting. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l7 level1 lfo3; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">No supply manager function at the European level.

**<span style="font-family: 'Times New Roman','serif';">Current Planning Function **

<span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l8 level1 lfo4; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Manufacturing and distribution planning functions (MDP). <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l8 level1 lfo4; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">MDP draws up a Master production schedule for plant on weekly basis. The schedule is drawn up over a four-week period and **must** stick to the plan with a given leeway of **5% either side of a target.** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l8 level1 lfo4; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Suggest implementing and **ERP system** for planning functions.

**<span style="font-family: 'Times New Roman','serif';">Allocation function ** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l2 level1 lfo5; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">When shortages occur, they are spread out over sales offices to affect inventory coverage proportionally. **This is not effective.** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l2 level1 lfo5; text-indent: -0.25in;"> · **<span style="font-family: 'Times New Roman','serif';">Allocation takes place on a country basis. ** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l2 level1 lfo5; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Spare products are **allocated** according to optimization of **transportation cost**, cost of **residual** **inventory**, and **regularity of supplying**.

**<span style="font-family: 'Times New Roman','serif';">Inventory Management Function ** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l1 level1 lfo6; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Seasonal factors: Sales demand and capacity, and production toll adapting insufficiently well to short and medium-term production runs. **Sales forecast, seasonality not taken into consideration!!** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l1 level1 lfo6; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Sales demand does not make itself known, sales office cannot be sure at what moment in the month it will be delivered. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l1 level1 lfo6; text-indent: -0.25in;"> · **<span style="font-family: 'Times New Roman','serif';">Manager **<span style="font-family: 'Times New Roman','serif';"> is **not aware** of delivery times or the locations of product allocation carried out by **central program**. **<span style="font-family: 'Times New Roman','serif';">Distribution function ** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l1 level1 lfo6; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Local Computerized logistic information systems(country). <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l4 level1 lfo7; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Decision making spread out from country to country. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l4 level1 lfo7; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Processes vary enormously, no link to manufacturing and sales. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l4 level1 lfo7; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">No corresponding functions set up at the European level. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l4 level1 lfo7; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Most products are manufactured at one or two sites. **Cut-down on cross flow! See map and tables below.** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l4 level1 lfo7; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">OE can be **delivered directly** from production site **or** from **advanced inventories**. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l4 level1 lfo7; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">If majority of production is done in the home country, demand is easier to forecast, and transportation is less costly due to centralization in France. **<span style="font-family: 'Times New Roman','serif';">Sales Forecast ** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l9 level1 lfo8; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Seasonality not taken into consideration. Sales target monitored constantly. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l9 level1 lfo8; text-indent: -0.25in;"> · **<span style="font-family: 'Times New Roman','serif';">Current inventory **<span style="font-family: 'Times New Roman','serif';"> is **not included** into central logistics function plan **forecast**. **<span style="font-family: 'Times New Roman','serif';">Order Management ** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l3 level1 lfo9; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Could be done at regional level. But not by point of sale. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l3 level1 lfo9; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Avg inventory is high, and deliveries avg at 2.8 a day. <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l3 level1 lfo9; text-indent: -0.25in;"> · <span style="font-family: 'Times New Roman','serif';">Inventory managed visually in 30% of cases. **This is bad.** **<span style="font-family: 'Times New Roman','serif';">Inventory Management ** <span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l5 level1 lfo10; text-indent: -0.25in;"> · **<span style="font-family: 'Times New Roman','serif';">High inventory is because of 1. **<span style="font-family: 'Times New Roman','serif';">Logistics managers not used to managing their own inventory. 2. Number of items in inventory is high, 2,000 tire products and 5,000 products overall. 3. Terms of sale that manufacture offers during promo campaigns tend to stimulate bulk buying.

<span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l5 level1 lfo10; text-indent: -0.25in;">**<span style="font-family: 'Times New Roman','serif';">1. Train them. **

<span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l5 level1 lfo10; text-indent: -0.25in;">**<span style="font-family: 'Times New Roman','serif';">2. Cut down on dead-weight products. **

<span style="display: block; margin: 0in 0in 0pt 0.5in; mso-add-space: auto; mso-list: l5 level1 lfo10; text-indent: -0.25in;">**<span style="font-family: 'Times New Roman','serif';">3. Control promo campaigns and forecast for them properly. **