Analyzing Supply Chain Management … Research Paper
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Supply Chain Management
SUBWAY is currently the biggest fast food chain in the world that sells (chiefly) submarine sandwiches, with over 44,000 outlets across the globe. The chain has grown into the top choice for individuals and families looking for a quick but nutritious meal. Right from its establishment, co-founder Fred maintained a well-defined vision for Subway's future. As the franchise continues to progress, members are driven by Fred's passion for ensuring customers are delighted by the firm's made-to-order, scrumptious sandwiches and salads (Subway, n.d.).
While the franchise doesn't publicize itself as one of the many emerging 'lean' corporations, its sandwich shops appear to be employing a few basic principles of lean organization. For instance, Subway sandwiches are made to buyer demand. Customers receive the precise sandwich they desire at the precise time they desire it. Customers are processed one after the other in a single-piece or one-by-one flow. This technique immensely decreases sandwich overproduction and defective products (McMahon, 2010).
At meal times when the restaurant experience heavy customer traffic, Subway adopts the simple policy of teamwork. A number of employees assemble the sandwich in parts and pass it on to the next stage of sandwich production. Every worker is tasked with performing a definite sequence, often called 'standard work'. With regard to restaurant organization and layout, Subway sandwich areas are arranged in 'assembly line' form, right from taking customer orders to collecting money. Restaurants are provided with signs and pictures all along the process of sandwich assembly for supporting individual customer orders. All ingredients used in making a sandwich are displayed via clear-cut viewing panels along the line. This concept constitutes one of the elements of 5S organizations and visual factory (McMahon, 2010).
Sandwiches are made JIT (just-in-time); however, ingredients for the sandwiches need to be prepared beforehand. Because of a need for lengthier cycle times and freshness, restaurants bake bread, cut vegetables and slice cheese before opening stores. Ready raw materials are then stored in bins along assembly lines (i.e., at point of use). Ingredient placement takes place according to the order of sandwich preparation, thus establishing a standard whilst simultaneously error-proofing the sequence of sandwich preparation. The quantity of vegetables cut and ingredient location along the line depend on product popularity. For instance, tomatoes and lettuce are placed in various large bins, closest to "sandwich artists," whereas olives and hot peppers are placed further away in relatively smaller bins (McMahon, 2010).
Some raw materials (e.g., the meat) are kited for efficiency and accuracy. This enables Subway to prepare the exact same size of sandwich each time for 6-inch or 12-inch sandwiches in all of its restaurants. Also, the kits facilitate inventory control, enabling restaurant workers to know the quantity consumed for individual sandwiches, enabling an easy replenishment system (McMahon, 2010).
Further, Subway adopts FIFO (First-In-First-Out) and Kanban techniques as well. Sandwich artists finish off the lettuce leaves in assembly bins and only then do they refill the bin from the refrigerator. Older bins are consumed first, and the newest will be placed last. In other words, customers get the freshest ingredients and simultaneously, restaurant inventory doesn't spoil either (McMahon, 2010).
New trainees at Subway restaurants are trained from the point-of-view of customers. During orientation, new recruits are demonstrated the process of sandwich preparation while being made to stand in the customer's spot, affording them the customer's perspective (McMahon, 2010).
Independent Cooperative Incorporated (IPC) negotiates lowest prices for purchased services and goods, whilst enhancing quality and competitiveness, in addition to ensuring optimal value to the firm (i.e., SUBWAY) and its customers (IPC, n.d.).
How IPC was successful in making Subway's supply chain substantially greener and leaner is a rather interesting story. On paper, Subway is IPC's only customer, but in truth, it serves a number of masters (SupplyChainBrain, 2011). After all, Subway is a franchise, with IPC being the independent purchasing cooperative, servicing 32,000 Subway stores (SupplyChainBrain, 2011) (f5, n.d.).
The key to the success enjoyed by Subway is innovation. In the year 2008, the franchise bagged a hit through its foot-long five-dollar sandwich promotion. However, novel ideas are crucial to the efficient functioning of its supply chain. IPC saw this as a chance to drive better efficiencies in how IPC supplied Subway stores -- as well as, not incidentally, achieve more sustainable operations. Therefore, the company devised a strategic scheme for scrutinizing all supply chain process steps (SupplyChainBrain, 2011).
Subway sandwich ingredients (bread, meat, etc.) are all highly perishable, and typically require temperature-controlled transport. Consequently, speed is invariably of the utmost importance. Moreover, rapid growth in Subway stores (which tripled in number from 1995 to 2009) makes keeping pace with customer orders a difficult task (SupplyChainBrain, 2011).
One goal of Subway's strategic plan was increased reliance on quicker inventory turns and economical truckload transport. Early on, the aid of C.H. Robinson Worldwide -- the transport services provider -- was sought by the IPC in the analysis of Subway's dry distribution supply network. This exercise resulted in the consolidation of multiple dry-products SKU (stock keeping unit) shipments, for reducing the quantity of LTL (less-than-truckload) movements. IPC started adopting novel redistribution techniques for its quicker-moving refrigerated goods. Up till then, protein product vendors used to make items in a particular place, ship those to inventory, and lastly, move them to distribution centers. With every stage, it becomes more difficult for carriers to sustain a steady temperature, thus reducing shelf-life of products (SupplyChainBrain, 2011).
IPC approached two vendors, namely Millard Refrigerated Services and West Liberty Foods (WLF), for assistance with the creation of a redistribution network and a new facility for cold consolidation in Iowa. WLF operates as many as twenty-four distinct slicing rooms at this co-managed location. In an accompanying warehouse, Millard carries out the tasks of palletizing, shrink-wrapping and storing products prior to their shipment to distribution centers. In case of outbound shipments, C.H. Robinson's services are employed for exclusive utilization of truckload transportation. Subsequently, IPC has achieved better inventory turns, boosted product freshness, and prevented meat cross-contamination among slicing lines. IPC claims that "proteins' are, at present, 66% fresher when reaching Subway restaurants (SupplyChainBrain, 2011).
Another efficiency target for Subway was packaging. This activity also required a robust vendor partnership At C.H. Robinson's recommendation, IPC, in collaboration with SPG (Select Product Group) which supplies paper and packaging, got to work on creating a hi-tech distribution center for the region. IPC could, thus, reduce the quantity of individual products shipped to distribution centers from as many as 160 to only a dozen, whilst simultaneously boosting truckload quantity for outbound transport. IPC found that as much as 32% of its capacity of trucking went unutilized. By including straws, napkins and other lightweight items, it could cube out shipment loads and end this wastage (SupplyChainBrain, 2011).
Yet another source of Subway/IPC innovation was bread production and transportation. Speedy growth in Subway stores strained the previous system, and bakeries ran at 110% capacity during the summer. While IPC was aware of the fact that more bread plants were needed, the question of where to locate them had to be answered. Yet again, in collaboration with C.H. Robinson, IPC undertook an analysis of its existing distribution center and plant locations, and formulated several "what-if" situations for achieving lowest landed costs and creating the best-organized network. A new Southwest Baking-run bread plant was set up in Arizona's Tolleson city, deploying fully automated high-tech systems for facilitating greater volume flexibility and increased production. Other similar facilities were set up in Centralia, Washington, Austin, Texas, and Columbia, South Carolina. The newly-established network, having plants nearer the source, facilitates two-fold rise in bread-line capacity efficiencies by Subway's vendors and improves product quality. C.H. Robinson and IPC carry out an annual reevaluation of bread-sourcing, considering changes to manufacturing expenses, volume commitments, bakery capacity, cost/case and market demand (SupplyChainBrain, 2011).
In close collaboration with the franchise's product development and marketing departments, IPC supports new demand. For instance, Subway's foot-long five-dollar promotion increased sales by 20-percent. This increased bread usage by 48% during the promotion, together with an added 700,000 product cases delivered each week to the restaurants. Chainalytics and Massachusetts Institute of Technology experts were also a part of this in-depth study of the company's distribution network. These experts' reassurance and insights provided IPC with the incentive to collaborate with Subway manufacturers more closely; the manufacturers could, in turn, approach their banks to seek the required capital. The transportation management responsibility was allocated to C.H. Robinson. The logistics company employed its branch -- Transportation Management Center -- for overseeing relevant data management and business processes (SupplyChainBrain, 2011).
Sustainability continues to be a major concern for Subway and IPC. (Another responsibility assigned to Chainalytics was: measurement of Subway's carbon footprint in North America, in terms of distribution and transportation). Yearly environmental savings arising from the venture included corrugated cardboard (9.9 million pounds), plastic (4.6 million pounds), gasoline (14.1 million gallons), electricity (18.6 million kilowatts), and water (115 million gallons). The bottom line of Subway was positively impacted as well.… [END OF PREVIEW]
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