Famosa S.A .

1. Famosa S.A. Full Speed Supply Chain Jorge León Bello__Master GEPS

2. The company • Company name: Famosa S.A. • Location: Spain, Onil (Alicante) • Product offered: Toy industry sector (games, dolls, soft toys, puzzles, toys for babies, etc.) • Activity: Toy manufacturer and distribution company • Two main production locations: China and Spain • Employees: 700 Jorge León Bello__Master GEPS

3. Logistics factors at Famosa • Toys are strongly season products: sales are concentrated between 3 or 4 months. • Toys life cycles are very short: arrive at the sales point at the beginning of October and have become obsolete by the end of December. • Manufacturing process needs to be “stock to order” which implies high risks in stocking inventory. • Since China is its largest supplier and lead times are long, Famosa is dependent on the intensive use of forecasting. Jorge León Bello__Master GEPS

4. Problem Description IMBALANCED SUPPLY CHAIN: • In 2003 the company could not deliver orders effectively due to stock outs, ignorance of the existence of orders, lack of warehouse management and control tools, etc. Jorge León Bello__Master GEPS

5. Problem Description • Not structured production plan. • Operational and logistics costs were too high. • High level of capacity with huge semi-finished inventories. • Products suffered high rates of obsolescence. • Outsourcing in China used only as a source of components; products were still finished in Spain. • Production in Spain gave flexibility but incurred high cost inefficiency. • Distribution carried out from a single point only. • Dispatch of products packed loose, without using pallets. Jorge León Bello__Master GEPS

6. The solution REDESIGN OF THE SUPPLY CHAIN: • Changes in Organization and Information Technologies • Reactive planning processes • Collaborative planning with China • Total redesign of distribution network Jorge León Bello__Master GEPS

7. Changes in Organization and Information Technologies • Creation of and independent organization to manage a global and integrated supply chain to became more agile and capable in decision making. • Integration of the procurement process into operation management moving from a simple price negotiation to negotiation of business rules. • Integration of the operations in China into the company’s operations management, to improve quality and the reliability of production planning. Jorge León Bello__Master GEPS

8. Reactive Planning Processes • The main objective was to reduce the variability of forecasting accuracy due to market uncertainty. • This involved the creation of a planning department and transformation of speculative capacity (which involved purchase orders to enlarge capacity which ignored customer demand) into reactive capacity (which is more reliable). • Adaptation of the supply chain to the production cycles of the suppliers in China. Jorge León Bello__Master GEPS

9. Reactive Planning Processes • Lowering the lead time of products classified as very important, to permit product to be launched with significant changes implemented as late as possible. • Giving priority to launch products which have a lower impact if forecasting proves to be wrong. • Rewarding customers who confirm their purchasing intentions in advance. Jorge León Bello__Master GEPS

10. Collaborative Planning with China • Famosa decided to produce 80% of its end product in China. • The company’s relationships with suppliers are close: Famosa carries out production planning, and negotiates a Master Production Schedule with its given supplier, which launch its on Material Requirements Planning. • Famosa has at its disposal the capacity necessary during peak seasons and is able to postpone loading through a more efficient planning and negotiations process. Jorge León Bello__Master GEPS

11. Distribution Network Redesign IMPLEMENTATION OF CENTRAL AND REGIONAL DC´s: • Goods are dispatched direct from the DC in China to the market and to the central DC in Spain. • Some goods are also dispatched from Onil (Alicante) to important customers, and small orders from Madrid. • Famosa operates warehouses in all the principal European markets. Jorge León Bello__Master GEPS

12. Distribution Network Redesign CREATION OF A CONSOLIDATION CENTER IN CHINA: • The objective was to take advantage of logistics and fiscal benefits, including the potential of consolidating products from different suppliers. • The supply chain consolidation center is an export bonded warehouse. Jorge León Bello__Master GEPS

13. Distribution Network Redesign ADAPTATION OF LOGISTICS PROCESSES: • Adaptation of logistics processes to consumer goods sector standards: coding and labeling, Electronic Data Interchange EDI messages, barcodes and RFID in SAP and the use of pallets. Jorge León Bello__Master GEPS

14. Thanks for you attention! Jorge León Bello__Master GEPS