Supply Chain Strategy for Halstead
Project Presentation
ISyE 6203 Transportation and Supply Chain Systems
Prof. John Vande Vate
April 24, 2012
Hang Li Naveen Nallappan Ronak Tali Shuting Xu Yanni Ping
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 INITIATIVES
Halstead 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.
PROJECT PROCESS
•
•
•
•
•
•
•
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.
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.
UNDERSTANDING THE CUSTOMER’S NEEDS
• 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.
WHAT CUSTOMERS REALLY WANT
Cost
Ecofriendliness
Fashion:
Fresh &
Unique
Customer
Service
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.
• SOB products are more
expensive than
Stocking Units and take
longer to get.
• The products' Fashion
>Service Quality> Ecofriendliness > 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.
SKU MANAGEMENT STRATEGY
• 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
PRODUCT LIFE CYCLE FOR THE SOB
9
Sales
Stocking Item
8
7
6
Upper Bound
5
Series 1 (NP)
Series 2 (NP)
4
Series 3 (NP)
3
Lower Bound
Series 4 (NP)
2
Series 5 (NP)
1
0
0
1
NP: New Product
2
3
4
5
6
7
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:
How far is the customer from the nearest
distribution center ?
• Adjust which product goes into which DC according to
the change of sales so as to reduce the distance
Is the product available in this DC?
• Appropriate replenishment size and cycle for different
products to improve the availability
• Reduce the processing time to enable fast ship-out
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
Help us in customer retention and possibly repeat
purchases
Creates a great channel to receive customer feedback
WHAT MAKES IT GOOD?
Concise,
clear and
fair. Easy to
access.
Considerate
replacement
and return
guarantee.
Easy access for
customers to ship
back products.
MISSION 2
Familiarize 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
VISION
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 SOB
To 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