Wings And Legs Supply Chain Case Study

1. The combination of leanness and agility in Wings & Legs’ supply chain

Food industry can be chartered by low margin industry, while along with the shift of power from the manufacturer to the purchaser, the price and demand became flexible, and the product variety increased.

According to Christopher and Towill (2001), there are mainly three ways to combine lean and leagile. The first hybrid approach is the Pareto rule, which means that the dominant 20% of products should use leanness and make to stock. While the remaining 80% products with less share of revenue should use agility. The second hybrid approach is about using lean approach for the base level of demand, while for the peak season or flexible demand, manufacturer can use agility

and outside procurement. The third hybrid approach is setting up Customer Order Decoupling Point (CODP), and using leanness before the CODP point and using agility in the customisation process (Mason‐Jones, Naylor and Towill, 2000).
In order to set up the best strategy, the product type, market environment, and management challenges have to be well considered (Mason-Jones, Naylor and Towill, 2000). In other words, different products or product family manufacturer should set up different strategy (van Donk, 2001). Additionally, according to Christopher and Towill’s (2001) simulation experiment, as shown in table 1, if regardless of the overstock and remanufacture, leagility are more expensive in total cost than leanness and agility. Especially for industries like food industry who has low margin while big volume of product. Thus, if individual lean or agile strategy is enough for particular product family or demand level, there is no need for using leagility.

Table.1 Adopted from Christopher and Towill (2001)

In my own opinion, all three types of practice on combining leanness and agility can be used by Wings & Legs. To be more specific, according to 80/20 rules, Wings & Legs should use leagility for the 20% high revenue share product types, while for the remain 80% product types, Wings & Legs might keep on using the agile strategy for manufacturing. To be more specific, the agility for the 80% of product is to keep the chicken alive, and start butchering when purchase order comes. Downward of the 20% of product types, Wings and Legs can use lean strategy for the minimum fixed demand volume of big retailers, and use leagility for the flexible demand. At last, CODP can be set up for the flexible demand. The total strategy for Wings & Legs are shown in Figure 1.

Figure 1.

2. The choosing of material decoupling point
2.1 The current situation:
In the current situation, the Material Decoupling Point (MDP) is located downstream of two customization process, the packaging and labeling. This is the most traditional manufacturing approach for the food industry. According to Goldsby, Griffis and Roath (2006), the advantage of using such a leaner manufacturing is that the current situation gives the presence of pre-positioned inventory which will lead to better customer demand fulfilment and shorter lead time. And during the manufacturing, the current situation can achieve better economy of scale, in other words, lower total manufacturing cost if regardless of the remanufacturing and overstock. Additionally, make-to-stock is a very common approach in food industry (Soman, van Donk and Gaalman, 2004). Thus, the feasibility of using this MDP is high.
However, the disadvantage of this leaner approach is also very outstanding. Due to the forecast driven approach, the mix flexibility is very low, and the inventory volume is very high, which lead to the risk of overstock and low variability. Thus re-packaging and relabelling will happen if the stock of product variety and volume did not match the customer order. Which means the advantage of low manufacturing cost will be covered by the much higher remanufacturing cost. And because the perishability character of the food industry, the overstock can straight forward lead to loses.
2.2 Postponing the labelling operation
By postponing the labelling process, the risk of relabeling for different customer is significantly reduced.

And the labeling process is a very fast operation, which means that the lead time will not be so much increased. And with respect to the contamination risk of semi-finished meat product, postponing the labeling are low in risk. Thus, the feasibility of using postponing the labelling operation is very high.

However, comparing with the current situation, the lead time is longer, the manufacturing cost is a bit higher due to lower economic of scale in the labelling operation. Moreover, even though the inventory is reduced, the overstock problem of particular product types still exist. Which means that the repackaging process still very likely to happen. High remanufacturing cost remains the disadvantage point in this MDP position.

2.3 Postponing the packaging operation

By postponing the decoupling point, the risk of being out of stock and the risk of holding too much stock of products which are not required is significant lower (Ben Naylor, Naim and Berry, 1999). And the flexibility of product type is notably increased. While on the other hand, the lead time will be significantly longer, and the economics of scale in the packaging process is reduced. By making the trade-off between the pros and cons, setting up MDP upstream of the packaging process is the best

approach.
However, the serious fast perishability and the high risk of contamination due to large batch storage of semi-finished meat product makes this approach unfeasible. According to Mason-Jones and Towill (1999), as figure 2. Shows, even though the market winner for commodities is the price, the quality is one of the market qualifiers. Which means that, food industry cannot improve the cost competitiveness at the expense of quality. Thus, when taking the quality risk into consideration, the cost of quality risk largely out weight the cost of repackaging.

Figure 2. Adopted from Mason-Jones and Towill (1999)
2.4 Discussion and MDP position decision
According to van Donk (2001), product and market characteristics, and process and stock characteristics has strong influence in positioning the MDP. As figure 3. shows, process constraints and delivery service requirements have a downstream effect on the MDP, while the product market constraints and inventory cost consideration have an upstream effect on the MDP. By using these trade-offs, postponing both the packaging and labelling is the ideally best MDP position. However, due to the fast perishing speed and contamination risk of the semi-finished product, postponing the packaging is likely to be unfeasible. Moreover, due to the low margin in food industry and long payback time of investment, upgrading the large batch semi-finished product is not cost efficient. Thus, it is best and most feasible to locate the MDP between the packaging process and labelling process.

Figure 3. Adopted from According to van Donk (2001)

3. Information decoupling point
Information decoupling point (IDP) is where forecast driven and market driven information flows meet (Mason‐Jones and Towill, 1999). In the case there are two positions of the IDP. One is positioned at the poultry processor, while the other one move further upstream to the broiler house.
3.1 IDP in poultry position
In the poultry position, the ESOP data are passed through information system such as EDI system from the retailer up to the poultry processor, and the information will be use by all players downstream of the IDP to control their operations. For example, better response time, and better organised manufacturing in the poultry processor, which efficiently reduce the repackaging operation by having a more accurate demand information. Moreover, the butchering operation can also gain benefits. In here the EPOS data are used for future sales forecast.
3.2 IDP in the Broiler House
By moving the IDP further upstream, more productions and operations are activated by the EPOS demand information, which lead to faster reaction speed, more accurate manufacture planning, and more dynamic improvement (Mason-Jones and Towill, 1999). Furthermore, the IDP position does not influence lean and agile strategy decided by the MDP. As shown in figure 4., IDP can both help the downstream lean strategy located before MDP, and the downstream agility located after MDP. Mason‐Jones and Towill (1999) also proposed that in order to make the best use of IDP, IDP should move more upstream than MDP. Even if the MDP and IDP are in the same location, it is very wasteful and limits the effectiveness. In the Wings & Legs case, when the position of IDP move upstream to the broiler house, not only the poultry processor can be helped by the demand information, but also the breeding operation can use the demand information on improving their production to eliminate the impact from flexible demand on chicken meat. Moreover, the distribution between broiler house and poultry processor can also gain benefits.

Figure 4. Comparison of material and information decoupling point positions within a supply chain. Adopted from Mason‐Jones and Towill (1999)
3.3 Agility process improvement for the EPOS demand data
As forward article presented, suitable IDP can help the exchange of EPOS data.

However, instead of the lean approaches mainly making forecasts according to the EPOS data, the agile approach need to do more work. First of all, demand recording and forecasting. For instance the retailers should make records of the everyday demand and make forecasts of the future demand trend with the help of current demand data. By doing this, Promotions can be forehead noticed and the reaction speed can be improved. Secondly, the information system. The information system is the bridge between different upstream and downstream partners. Thus it is very important for the agility partners improve their information system to smooth the information transfer. For instance, electronic data interchange (EDI), radio frequency identification (RFID), and Distribution Requirements Planning (DRP) system are all good information systems for transferring the EPOS

data.