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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.
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.
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