INDIVIDUAL CASE STUDY 2010
ASSIGNMENT COVER PAGE
Subject Code
OMGT2085
Subject Name:
INTRODUCTION TO
LOGISTICS AND SUPPLY
CHAIN MANAGEMENT
Location where you
study
RMIT SGS Campus
Title of Assignment
Individual Case Study (ICS)
File(s) Submitted
docx
Student name:
Tran Thi My Dung
Student Number
S3231518
Student Email
Address:
S3231518@rmit.edu.vn
Learning Facilitator
in charge:
Assignment due date
24/4/2010 8AM
Date of Submission:
24/4/2010
Number of pages
including this one:
19
Word Count:
(Main Content)
2706 Words
Late Submission
Approval
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INDIVIDUAL CASE STUDY 2010
Table of Contents
ASSIGNMENT COVER PAGE ..................................................................................................... 1
CHANNEL OF DISTRIBUTION FOR THE SUPPLY CHAIN OF HARLEY-DAVIDSON
IN VIETNAM ............................................................................................................................. 3
I.
Research and Analysis: ........................................................................................................... 4
1.1 Description: ........................................................................................................................... 4
1.2 SWOT analysis ..................................................................................................................... 5
1.3 Logistic and Supply Chains Management issues…………………………………………..8
II.
Strategy Proposal: ................................................................................................................... 9
2.1 Strategies: .............................................................................................................................. 8
2.1.1 Transportation – based third party logistics (3PL): ....................................................... 8
2.1.2 Collaborative planning, forecasting and replenishment (CPFR): ................................ 11
2.1.3 Postposement ...............................................................Error! Bookmark not defined.
2.2
Explanation of the Multi-criteria Decision Matrix ..........Error! Bookmark not defined.
2.3 Key Performance Indicators (KPIs): ....................................Error! Bookmark not defined.
2.4 Costs and Benefits of CPFR implementation: .....................Error! Bookmark not defined.
III.
References: ..........................................................................Error! Bookmark not defined.
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INDIVIDUAL CASE STUDY 2010
CHANNELS OF DISTRIBUTION FOR THE SUPPLY CHAIN OF HARLEYDAVIDSON IN VIET NAM
Magnet Supplier
Digital Sounder Supplier
Raw materials Supplier
Inbound Logistics
Honk Factory Ltd in Viet Nam
(Tier 1 Supplier -Klaxons)
3PL - Transportation
Harley-Davidson’s Warehouse
In Milwaukee, Wisconsin
Harley- Davidson in US
(Main Manufacturing and Assembling)
Outbound Logistics
Office and
Warehouse in
US
Maintenance, Repair
and Operating
Centers in US, Japan
and Europe
Distribution Center
of HarleyDavidson in US
Office and
Warehouse in
Europe
Distribution Center
of Harley-Davidson
in Europe
Retailers
End – Users
Retailer
Warehouse in
Japan
Distribution Center
of Harley –
Davidson in Japan
Retailer
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INDIVIDUAL CASE STUDY 2010
I.
Research and Analysis:
1.1
Description
Inbound Logistics:
Magnet, Digital Sounder and Raw Material Suppliers provide sub-components and raw
material for the Honk Factory in Viet Nam in order to produce klaxons for motorbikes and
motorcycles.
When the Honk Factory receives the orders from Harley–Davidson, USA (its requirement:
‘different honk classified different motorcycle models by different sounds’), the Honk Factory
begins producing customized klaxons. After finishing the components, they will be transported
to the Harley-Davidson warehouse in Milwaukee, Wisconsin by the third party logistics
company.
Next, finish klaxons in Harley-Davidson Warehouse will be delivered to Manufacturer of
Harley-Davidson in US, All these components will be checked for right quantity as well as
quality ( ensure there is no room errors) and then assemble different klaxons to their different
motorcycle models. Finished motorcycles will be sent to Motorcycle Testing Departments in US
before shipping to markets.
Outbound Logistics:
USA, Europe and Japan are three strong markets of Harley-Davidson. The finished
goods will be stored in warehouses in US, Europe and Japan. From warehouses, motorcycles
will be shipped to the American, European and Japanese Distribution Centers in order to
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INDIVIDUAL CASE STUDY 2010
package and continuous improvement engineering, then delivering complete products to the
retails. Finally, from retailers, Harley-Davidson motorcycles models with unique klaxons are
sold to end-users.
Maintenance, Repair and Operating Centers are located in three main markets: US,
Europe and Japan. These centers provide services for Harley-Davidson’s customers. They
maintain or repair motorcycles and sell spare parts such as klaxons, wheel and other motor
accessories.
1.2 SWOT Analysis
Strengths:

The Honk Factory has the cutting-edge technology in the klaxons for motorcycles and
motorbikes. ( digital-sound klaxons- 2cm x 2cm, with capturing various kinds of sound
and sound level higher 125 decibels).

Honk Factory has experience and skills in international colaboration. They won a big
size contract to produce the klaxons for Tata Motors, India.

Because of its small size operation, the labour costs were cheap so the factory can invest
more in impormation technology

Outsoucing the third party logistic companies, for example, transportation – based 3PL
and warehousing/distribution- based 3PL, with their specialization, Honk Factory can
concentrate on their core completency and reduce logistic costs, its supply chain be more
responsive.
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INDIVIDUAL CASE STUDY 2010
Weakness:

when contrasting logistic for transportation and warehousing, the Honk Factory is mostly
depended on third party providers so the status of inventory and the flow of goods might
be loss of control. In-transit inventory carrying cost and inventory risk cost ( stolen ,
obsolete cost) could be increased.

In production process, some equipments are broken down and need invest in the newest
of mordern equipment in order to increase production capacity.

Production capacity was not high and facing some difficulties on quality control.

Lack of interaction of information , for example, the factory designs klaxons to the order
and wait for the next ordering, here, the flow of information is one-side and it can reduce
the reposiveness in supply chain .
Opportunities:

According to Nguyen (2009), since entering the WTO in 2009, the activities in import
and export trades were sharply increase. Therefore, it leads to the strongly development
of 3PLs logistic in Viet Nam. As the result, Honk Factory has more choices to outsource
the third party logistic company which could provide a best supply chain performance for
the factory.

The Vietnamese economic has risen in 2009 ( GDP increase 5% to 7% compare in 2008).
This is an opportunity for the Honk Factory increases its market share in Viet Nam and
welcome more foreign investments.
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INDIVIDUAL CASE STUDY 2010

After WTO asscession, more international companies will enter to Vietnamese market,
setting up partnership and share technology as well as information with domestic
companies (‘Vietnam Firms urged to invest in Technology’ 2010). Therefore, Honk
Factory will be able to improve in its technology innovation and have opportunities to
win big-size contracts.
Thearts:

Lack of professional labour force in Viet Nam’s logistics and supply chain. To illustrate,
600 local companies involed logistics employ about 35,000 people but about 40% are
professional skill in logistics (‘Personnel shortage keeps logistics trade backward’ ,
2009).

Entering the WTO, the number of competitors has rising dramactically in Viet Nam, both
domestic and foreign competitors companies. The Honk Factory is not the exception, the
factory send time and money on its logistic system ( customer service), production and
information sercurity in order to have better performance.
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INDIVIDUAL CASE STUDY 2010
1.3Logistic and Supply Chains Management issues:
1. Order cycle time : the Harley-Davidson’s requirement for Honk Factory is ‘ consistent
order cycle time of two week or less”, however, order cycle time might be longer because
klaxons are customized components, it takes more time to find raw materials, design
customized klaxons, package and transport to specific location of Harley-Davidson in the
US.
2. Uncertainty in demand forcasting : lack of communication and no sharing information
between two players in supply chain might lead to unaccurate (wrong) demand
forcasting.
3. High cost of transportation : might due to the oil price increases in Viet Nam. Moreover,
there is a long distance between Viet Nam and USA, that means the cost of transportaion
is unavoidable and might be higher if using air cargo carrier to transport the finished
components.
4. High level of inventory holding: because of the uncertainty in demand forcasting, the
firm hold too much inventory, it leads to increase storage space costs, costs of holding
inventory and inventory risk costs.
5. Weak performance of customer service: due to the uncertain in order cycle time and not
have much experience in communication or exchange information.
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INDIVIDUAL CASE STUDY 2010
II.
Strategy Proposal:
Consider the issues of the supply chain of Harley-Davidson in Vietnam, there are three feasible
logistics and supply chain management strategies that could suggest to solve the problems:
Transportation – based third party logistics, collaborative planning, forecasting and
replenishment (CPFR) and Postponement.
2.1 Strategies
2.1.1 Transportation – based third party logistics (3PL):
Third-party logistics (3PLs) can be defined as the ‘outside provider who carry out some
logistics activities such as transportation, warehousing, distribution, financial services and so on
’(Coyle et al.2008). Also, these activities are not belonging to the company’s core business. In
this case, Transportation based third-party logistics is proposed for the supply chain of HarleyDavidson in Vietnam. Transportation based 3PLs uses the outsourced company who will
perform all parts of transportation activities involves the management of the way resource are
move to the areas where they are required (Coyle et al.2008).
Advantages:

The company can outsource the Transportation based 3PLSs to carry out all the
transportation activities (non- core business) so company can concentrate more on their
core business, improving effectiveness in their core competency.
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INDIVIDUAL CASE STUDY 2010

With their specialization, the transportation based 3PLs can deliver and manage the flow
of products to the right place, shorter lead time and reduce costs efficiency.
Disadvantages:

Dependence on third-party logistics operations and later loss of control over the
transportation activities. In case, if the company outsource an unqualified 3PLs, it will
brings huge effect to the company supply chain, for example, longer lead time, decrease
customers service and increase costs of carrying inventory.

Disagreement on the opinion or different perception of the service level of the 3PL
providers, conflict might occurs in collaboration.
Transportation –based 3PL is highly recommended to be use in the supply chain of
Harley-Davidson in Vietnam. Although the Vietnamese government has invested heavily in
upgrading its transport infrastructure, there is still occurs risks and high cost of transporting.
Today, the collaboration is very important and needed in supply chain management so outsource
the transportation based 3PL providers will help the Honk factory focus on their core business
(designing customized klaxons) and reduce logistics costs. The outside providers are specialized
and expert in packaging, delivering right product to the right customer, right condition, right
quality and quantity and shorter the order cycle time. With the long distance delivery ( from
Vietnam to Harley-Davidson warehouse in Milwaukee, Wisconsin), transportation based 3PL
providers can ensure the condition of inventory( klaxons) and help the Honk Factory to reduce in
transit inventory carrying cost and on time delivery. Overall, it improves the responsiveness in
the supply chain of Harley-Davidson in Vietnam
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INDIVIDUAL CASE STUDY 2010
2.1.2 Collaborative planning, forecasting and replenishment (CPFR)
CPFR is the collaboration process where combines the intelligence of supply chain trading
partners in the business planning, sales for forecasting and stock replenishment (Coyle et
al.2008). Using this approach, two or more parties in the supply chain include customer,
manufacturers and retailers are work together in order to come to agreements in planning and
improve forecasting by exchanging business information based on Web technology.
There are nine major steps in order to set up CPFR process so it is said that CPFR is a dynamic
process and need high level of integration in supply chain management.
. Nine steps in CPFR process model (Steermann, H 2003, p. 48).
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INDIVIDUAL CASE STUDY 2010
Advantages:

CPFR helps improve forecasting and match between supplier and demand. With reliable
and accurate demand forecast, the manufacture can make the product to order rather than
making them to inventory. Therefore, CPFR helps the supply chain to reduce costs of
holding inventory and out-of stock.

Strengthen the relationship between trading parties in supply chain by exchanging
information and sharing technology.
Disadvantages:

High cost of investing in IT system as well as cost of maintain and develop IT system.

The risk of sharing inaccurate information could affect the whole supply chain. It results
in wrong forecasting and increase unexpected costs.
Although the high cost of investing in information technology system is highly, CPFR
should be considered a best recommendation for the supply chain of Harley-Davidson for several
reasons. Firstly, with the accurate demand forecasting between manufacturer and supplier, the
Honk Factory will be able produce accurate amount of klaxons in order to match the demand, it
could reduce cost of material handling and inventory. Moreover, by exchange information, Honk
factory will know status of its klaxons in Harley-Davidson, US and if its components were stock
out, the supplier will replenish stocks in time in order to avoid costs of lost sales. CPFR improve
the customer services and responsiveness in the supply chain of Harley-Davidson in Vietnam.
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INDIVIDUAL CASE STUDY 2010
2.1.3 Postponement Strategy:
Postponement strategy ‘aims to delay some supply chain activities until customer demand order
is appeared in order to maintain cost and fast response’ (Coyle et al.2008). In specific,
postponement strategy is proposed for company, who produce customized products, the products
are in semi-forms and after receiving the orders they continue finishing the product quickly and
deliver to customers.
Advantages:

Improve competitiveness by providing customized products quickly.

Reduce cost of holding inventory and inventory risk costs (reduce risk of obsolescence).
Disadvantages:

Increase transportation cost, set up cost, cost of training and cost of re-engineering in
supply chain.

Economics of scale are lost due to the customized processes. Trade off between mass
production and customization in using postponement strategy.
Postponement strategy is also highly recommended for the supply chain of Harley-Davidson
in Vietnam. In case, the main role of the Honk Factory is designing klaxons to order, which are
all customized components so postponement strategy helps the factory to shorter order cycle
time , reduce holding high level of inventory , saving variable costs and have the fast response
logistics when receiving Harley-Davidson’s orders. Consequently, the factory can be more
competitive and better improve in customer services.
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INDIVIDUAL CASE STUDY 2010
2.2 Explanation of the Multi-criteria Decision Matrix
Strategy
Consistent
The
Transportatio
Level
of Customer
Order Cycle accuracy of n costs
holding
Service
Time
inventory
Performance
forecasting
Total
demand
0.2
0.35
0.15
0.2
0.1
1
9 (1.8)
3 (1.05)
8 (1.2)
5 (1)
8 (0.8)
33(5.85)
C.P.F.R
8 (1.6)
9 (3.15)
7(1.05)
9 (1.8)
9 (0.9)
42(8.5)
Postponement
9 (1.8)
6 (2.1)
3(0.45)
4 (0.8)
8(0.8)
30(5.95)
Transportation
–based 3PL
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INDIVIDUAL CASE STUDY 2010
The result of Decision Matrix shows that CPFR is the best strategy that could address all the
issues in the supply chain of Harley-Davidson in Vietnam. CPFR enhances the relationship
between trading parties supply chain, so it improves forecast and customer services in the supply
chain. By exchange accurate information, the Honk Factory will be able to reduce cost of
holding inventory as well as cost of stock out. Moreover, CPFR is the best
method to minimize the cost of lost sales of finished motorcycles or service parts of HarleyDavidson in the US and around the world because when sharing accurate information, goods will
be replenished at the right time when level
of inventory is end. Overall, CPFR helps to improve the responsiveness in the supply chain
of Harley-Davidson in Vietnam.
Transportation- based 3PL is the second effective logistics strategy to solve with these issues.
It helps the Honk Factory to reduce order cycle time, however, the demand forecasting cannot be
deal with this 3PLs provider.
Postponement seems very appropriate with the customized production of Honk Factory. It
helps to shorten order cycle time and improve the customer service in supply chain. However,
some logistic cost might incurred and affect the company’s finance.
One best practice Auto& Moto Industry example which approach CPFR successfully is
General Motor (GM), one of the largest automotive manufacturers in the world. In order to
increase the faster adapt and responsiveness of the supply chain, GM has implemented CPFP to
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INDIVIDUAL CASE STUDY 2010
its suppliers. The auto company establishes the strong buyer-supplier relationship base on an
IT framework. The parties in supply chain exchange sale information and technology through
Web technology so if wrong information was exchange, the suppliers will easily respond to the
manufacturer. The both parties can control inventory effectively and when end of level of
inventory, the suppliers will know the exactly amount of inventory needed to replenish. As the
result, the sale of GM absolutely increases, they has sold 30,109 units last year and the average
order cycle time was shortened from 174 days to 52 days and 70 percent turnover time reduction
(StanK, 1999)
2.3 Key Performance Indicators (KPIs)

Shortening order cycle time from 14 days (2 weeks) to 11 days in three months.

Control the quality of the finished klaxons to the Harley-Davidson by reducing from 48
to 40 defective parts per million or less in three months.
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INDIVIDUAL CASE STUDY 2010
2.4 Costs and Benefits of CPFR implementation:
Costs
Training costs
Benefits
$10,000
Improve
customer $60,000 projected annual
service
estimate
Investing in IT system and $ 15000
Minimize
inventory $40,000 projected annual
maintenance (EDI)
level
lost time when meeting and $ 6000 estimate
Improve in accurate of $ 20,000 projected annual
set up agreements
customer information ( estimate
estimate
accurate forecast )
Costs
of
information $ 5000
security
New computer equipment
$ 50,000
Increase
sale $ 80,000 projected annual
opportunities
estimate
Fast response logistics
$ 30,000 projected annual
( reduce order cycle estimate
time )
TOTAL
$86,000
TOTAL
$230,000
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INDIVIDUAL CASE STUDY 2010
The total benefits is greater than the total costs so CPFR should be implement in the supply
chain of Harley-Davidson in Vietnam.
In the costs analysis:

Training cost means cost of training employee how to using the IT system or software
(10 employee/10 days x $1000/each).

New computer equipment:
– Software (sales support & CRM) : $20,000
– 10 new computers: $2,000 each
– 1 server (web) : $6,000
– 2 printers : $ 2,000 each

Other costs: opportunity costs, security information.
In the benefits analysis:

Improved customer service (current customers): $60,000 (projected annual estimate)

Improved accuracy of customer information: $20,000 (projected annual estimate)

Improved management of the logistics:
a. Reduce inventory: $40,000 (projected annual estimate)
b. Increase in sale of components: $80,000 (projected annual estimate)
c. Shorten order cycle time: $30,000 (projected annual estimate)
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INDIVIDUAL CASE STUDY 2010
III.
Reference lists:

Coyle, J, Langley, C, Gibson, B, Novack, R & bardi, E 2009, Supply Chain
Management a Logistic Perspective, 8th edn, South-Western cengage, USA.

Nguyen, H 2009, ‘Expectations for Vietnamese 3PL service businesses’, Vietnam
Logistics Review (VLR), viewed 20 April 2010, <
http://vlr.vn/index.php?option=com_content&view=article&id=187%3Akyvongv
aodichvulogisticstheohuong3pl&catid=111%3Atng-hp&lang=en>.

‘Personnel shortage keeps logistics trade backward’ 2009, Vietnam Net, 22
November,
viewed
20
April
2010,
<
http://english.vietnamnet.vn/biz/200911/Personnel-shortage-keeps-logistics-tradebackward-880212/> .

Stank, T. P., Daugherty, P. J. & Autry, C. W. (1999), Collaborative Planning:
Supporting Automatic Replenishment Programs, Supply Chain Management, Vol.
4, Issue 2, pp. 75-85.

Steermann, H 2003, ‘A Practical Look At CPFR: The Sears-Michelin
Experience’, Supply Chain Management Review, July, pp. 46-53.

‘Vietnam Firms urged to invest in Technology’ 2010, All Business, 5 March,
viewed
21
April
2010,
<
http://www.allbusiness.com/trade-
development/economic-development-emerging-markets/14050638-1.html>.
19