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FRENCH
retailer Carrefour had a plan for a promotion
in its European outlets to sell a range
of products all for one euro apiece.
The operation would involve shipping
27 million pieces from China to be eventually
distributed to stores in 30 countries throughout
Europe. This presented a massive logistics
challenge.
They had no idea how to do it.
It all started with the company's marketing
team presenting the global sourcing division
with its promotion proposal. The promotion
in itself was nothing out of the ordinary.
A number of retailers big and small have
similar promotions the world over. What
makes Carrefour's case different was that
most companies that do this source the items
domestically.
But in Carrefour's case, the marketing
team wanted to source from China directly...
Retailers usually source directly from
local importers for new products, mass retail
products or fast-moving products. They simply
see what the importer has in stock and the
rest is history.
But Carrefour's marketing team's plan
to source directly from China presented
the global sourcing department with a potential
logistics nightmare as no retailer had attempted
this before.
The marketing team said they wanted to
get the goods from China, and then pack
them elsewhere. One idea was for a display
manufacturer with a warehouse in Istanbul
to package the goods in Turkey. From there
the goods would be shipped to Europe.
Sourcing from China was not the problem,
but the marketing team's proposal to then
package the goods in Turkey would have made
the operation very expensive. For the company
to source from China, then ship from Hong
Kong to Turkey for packaging the goods and
then reload the vessel in Istanbul for Europe
it would have cost more than three times
the amount of shipping the goods directly
from China to Europe. Were the company to
have gone ahead with this plan, they would
have essentially wiped out any profit from
the one euro promotion as they would not
have been able to cover the logistics costs.
A viable and profitable solution had
to be found.
 click image
to enlarge
Finding a solution to this dilemma was
not easy, primarily because in China retailers
were dealing mainly with freight forwarders,
which as their title suggests are not supply
chain experts.
If an international retailer were to
talk to a freight forwarder in China about
a proposal to mass produce cheap items on
the mainland for promotional sales in overseas
markets, the freight forwarder would not
be able to source the products, arrange
for them to be manufactured and collected
from the factory, packaged, declared through
customs, and delivered by ship and then
by road or rail to the end-user.
In short, freight forwarders are not
supply chain management experts, there primary
concern is to see that goods are loaded
and unloaded at the origin and destination
ports: end of story, but not in Carrefour's
case.
Another major stumbling block for Carrefour
was that many mainland factories were not
licensed to export the goods they produced,
but most of China's suppliers, as well as
overseas retailers, were generally not aware
that this problem could be overcome by enlisting
the services of a fully licensed import-export
firm on the mainland.
Acting as a go-between, a Chinese import-export
firm would be able to handle the importation
of materials to facilitate the production
and packaging of the goods in China, and
take care of the necessary shipping arrange-ments
for the finished products to be exported.
"They (retailers) don't have the
people or the knowledge in trading, supply
chain, or know how to deal with vendors,
not just logistics, how to deal with Customs,
suppliers for materials and displays - it's
not easy. It's not just a trading job as
it involves a lot of logistics," said
former Carrefour global supply chain manager,
and the man responsible for providing the
ultimate solution for the one euro logistics
challenge, Pascal Martin.
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