Finished Goods Supply Chain Operations

FG Supply Chain consists of all activities involved in movement, storage and distribution of Finished Goods from the Delivery point of Plant to the Point of Sale.

In the case of global supply chains, supply chain management gets more complicated with the variations arising out of different countries regulations and logistical practices.

Computer Hardware supply chain is a good example for students and SCM professionals to understand the dynamics. The life cycle of computers is very short, and frequently models and technology keeps changing all the time. This factor needs to be kept in mind while drawing up the supply chain strategy for Finished Goods to ensure that obsolete inventory does not clog the pipeline and that the inventory maintained is lean.

Manufacturing practices have changed drastically over the last decades. With the help of ERP systems, manufacturing has JIT system of manufacturing.

Computer manufacturers have established the strategy of setting up assembly plants in various countries to service global markets. Computer manufacturing is built on two models. While certain fast moving desk tops are built on BTS - Build to Stock model, most of the laptops and other products are manufactured on Build to Order Model, wherein manufacturing of a batch quantity is taken upon confirmation of orders from the customers.

HP has multiple business divisions managing different product lines. While one division manages PSG Group - Printer and Consumables section of the product, two other divisions separately manage laptops, desktops and servers. Manufacturing of all the products is spread across various countries for each of these products. Common Supply Chain Division and Logistics services departments manage the functions of all business divisions.

Managing multiple product lines under common logistics network provides challenges in ensuring process compliance. To add to the complexity, a set of DeskTop or Laptop includes the main module assembled at HP Plant and other items like monitors, keyboard, mouse, etc which are bought out from third party vendors.

Third party vendor items are supplied to the designated FG warehouses that are managed by 3 part Logistics Providers and held as HP inventory. Finished goods are received similarly from HP Plants across countries.

Normal Supply Network consists of 3PL Owned Country Depot in each country and further regional distribution centers and stocking points which ship out goods to distributors who maintain their logistical network to reach to the customer point of delivery.

On receipt of all items at the warehouse, process is designed to kit or bundle all the items together, re-label the cartons at the distribution center and move out as one item.

Such an activity involves managing inventory processes where the items are received as individual items with SKU description and after the kitting or bundling is done, all SKUs get converted into a separate SKU as the final product. The inventory management and transaction of conversion needs to be managed both at the warehouse level in the warehouse management system and simultaneously in HP Systems.

In few cases the bought out items are kept in stock at the warehouse as vendor managed inventory belonging to the vendor and only at the time of kitting, the transfer of ownership happens using a sale. In such cases, the 3rd Party Logistics provider maintains HP inventory and Vendor inventories in the same system and managed operations accordingly.

In FG Distribution, ensuring FIFO is essential for all items and capturing serial numbers at the point of dispatch from distribution center to ensure updating in warranty tracking database.

A culture of drilling down processes, active participation and interaction with 3PL service provider with frequent audits and training goes a long way in ensuring that service levels are met by the 3PL service provider which reflects on the SCM division’s performance too.