SLIDE

SUPPLY CHAIN
MANAGEMENT

CASE STUDY:
1. Gateway and Apple
1. Why did Gateway choose not to carry any finished-product inventory at its retail stores?
Why did Apple choose to carry inventory at its stores?
Gateway:
- Gateway's strategy focused on reducing costs by avoiding finished-product inventory at retail stores.
Instead, it operated on a build-to-order model, manufacturing PCs only after customers placed orders.
This approach allowed Gateway to customize products to customer specifications, reducing the risk
of overstock or obsolescence in a rapidly changing tech market.
- However, this strategy likely created delays for customers who had to wait for their customized PCs
to be manufactured and shipped, which reduced the appeal of in-store shopping.
Apple:
- Apple chose to carry inventory at its stores to enhance the customer experience. Apple’s products
are known for their sleek, universal designs with limited customization, which simplifies inventory
management.
- Having inventory in-store allowed Apple to provide immediate product availability, which improves
customer satisfaction and encourages impulse purchases. Apple’s ability to forecast demand
accurately and limit product variety minimized the risks of overstock and obsolescence.
2. Should a firm with an investment in retail stores carry any finished-goods inventory?
Yes, carrying some finished-goods inventory is often beneficial for retail stores, especially if
customer satisfaction and quick delivery are priorities. Finished-goods inventory enables immediate
fulfillment of customer needs, reduces wait times, and can improve brand loyalty.
Characteristics of products suitable for finished-goods inventory:
- Standardized products with predictable demand (e.g., consumer electronics like Apple's products).
- High-margin products that justify the carrying costs.
- Products with relatively long shelf lives or low obsolescence risk.
Characteristics of products best manufactured to order:
- Highly customizable or specialized products (e.g., Gateway's build-to-order PCs).
- Products with high obsolescence risks or rapid technological changes.
- Low-volume or niche-market products.
3. How does product variety affect the level of inventory a retail store must carry?
Increased product variety significantly increases the complexity of inventory management. A store
with a wide range of products must hold more inventory to meet diverse customer preferences. This
can lead to:
- Higher storage costs.
- Increased risk of obsolescence or unsold inventory.
- Challenges in forecasting demand for each variation.
To manage high product variety effectively, companies can adopt strategies such as:
- Limiting in-store inventory to the most popular configurations (as Apple does).
- Utilizing build-to-order or modular product design to reduce finished inventory while still offering
variety.
4. Is a direct selling supply chain without retail stores always less expensive than a supply chain
with retail stores?
Not always. While a direct selling supply chain avoids costs associated with physical retail stores
(e.g., rent, utilities, staff), it may incur other costs that offset these savings:
- Higher logistics and shipping costs for individual deliveries to customers.
- Increased customer acquisition costs due to the absence of a physical presence.
- Potential loss of sales from customers who prefer in-person shopping experiences.

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Conversely, retail stores can generate additional value:
- Enhance brand visibility and customer experience.
- Encourage impulse purchases and upselling opportunities.
- Build stronger customer relationships through hands-on interactions.
The cost-effectiveness of each model depends on the company's product type, target audience, and
competitive positioning.
5. What factors explain the success of Apple retail and the failure of Gateway country stores?
Apple's success:
- Customer Experience: Apple Stores provide a premium, hands-on shopping experience,
showcasing products in a clean, engaging environment.
- Inventory Strategy: Apple balances inventory availability with minimal variety, ensuring
customers can buy products immediately without excessive carrying costs.
- Brand Appeal: Apple's strong brand identity and product ecosystem drive customer loyalty and
high foot traffic.
- Strategic Locations: Apple chooses high-traffic, prestigious locations that align with its premium
brand image.
Gateway's failure:
- Lack of Immediate Fulfillment: Gateway’s stores did not carry finished products, which likely
frustrated customers who wanted instant purchases.
- High Operating Costs: Opening a network of physical stores added significant costs, but Gateway
failed to generate enough revenue to justify these investments.
- Weak Brand Presence: Unlike Apple, Gateway lacked a strong brand identity or ecosystem to
draw customers into stores.
- Misaligned Strategy: Gateway's build-to-order model conflicted with the traditional retail
expectation of immediate product availability.

2. Zara
1. What advantage does Zara gain against the competition by having a very responsive supply
chain?
Zara’s responsive supply chain provides several competitive advantages:
- Fast adaptation to trends: Zara’s short design-to-sales cycle (4–6 weeks) allows it to respond
quickly to changing customer preferences and emerging fashion trends. Competitors typically take
months to launch new designs, which gives Zara a significant first-mover advantage.
- Reduced inventory risk: By producing smaller batches and replenishing frequently, Zara
minimizes the risk of excess inventory and markdowns, which are common in the fashion industry.
- High full-price sales: Zara sells most of its products at full price, unlike competitors that rely
heavily on discounts to clear unsold stock. This boosts profitability and enhances its brand perception.
- Customer loyalty: Frequent updates to merchandise (up to 75% every three to four weeks)
encourage customers to visit stores regularly, creating a sense of urgency to purchase before items
sell out.
2. Why has Inditex chosen to have both in-house manufacturing and outsourced
manufacturing? Why has Inditex maintained manufacturing capacity in Europe even though
manufacturing in Asia is much cheaper?
Combination of in-house and outsourced manufacturing:

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- In-house manufacturing: Inditex retains control over time-sensitive and uncertain-demand
products, enabling faster response to market trends and higher flexibility.
- Outsourced manufacturing: Predictable, high-volume products are outsourced to low-cost
locations (e.g., Asia) to reduce production costs.
Maintaining manufacturing capacity in Europe:
- Speed and flexibility: European factories are closer to Zara’s primary markets, allowing faster
production and replenishment compared to Asian manufacturers.
- Demand uncertainty: Products with uncertain demand require quick turnaround times to avoid
missed opportunities, making local manufacturing essential.
- Quality control: In-house manufacturing in Europe enables better oversight of production quality
for Zara's rapidly changing designs.
While Asian manufacturing is cheaper, Zara prioritizes agility and responsiveness, which are better
achieved through its European operations.
3. Why does Zara source products with uncertain demand from local manufacturers and
products with predictable demand from Asian manufacturers?
Uncertain-demand products:
- Local manufacturers provide short lead times and greater flexibility, allowing Zara to respond to
unpredictable demand without overproducing.
- Zara can quickly adjust production volumes or designs based on real-time sales data and customer
preferences.
Predictable-demand products:
- Predictable products (e.g., basic apparel) are typically high-volume and less time-sensitive, making
them suitable for cost-efficient production in Asia.
- Longer lead times from Asia are less of a concern for products with stable and forecastable demand.
This strategy ensures Zara balances cost efficiency with responsiveness.
4. What advantage does Zara gain from replenishing its stores multiple times a week compared
to a less frequent schedule? How does the frequency of replenishment affect the design of its
distribution system?
Advantages of frequent replenishment:
- Aligned with customer demand: Frequent shipments allow Zara to closely match inventory with
real-time sales trends, reducing stockouts or overstock situations.
- Freshness of inventory: New arrivals every week create excitement and urgency for customers to
visit stores regularly.
- Reduced markdowns: With smaller, more frequent shipments, Zara avoids overstocking and
reduces the need for end-of-season sales.
Effect on distribution system:
- Zara’s frequent replenishment requires highly efficient distribution centers (DCs) that can process
and ship orders quickly.
- Distribution centers are strategically located near major markets to minimize shipping times.
- Zara’s logistics infrastructure ensures shipments to European stores within 24–36 hours and to other
regions within 48 hours, enabling its fast replenishment strategy.
5. Do you think Zara’s responsive replenishment infrastructure is better suited for online sales
or retail sales?
Zara’s infrastructure is currently better suited for retail sales, but it can also support online sales
with adjustments. Here's why:
Retail sales:

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- Zara’s physical stores benefit from frequent replenishment, ensuring a dynamic inventory that drives
in-store traffic and impulse purchases.
- Real-time inventory updates allow store managers to align stock with customer preferences,
enhancing the shopping experience.
Online sales:
- For online channels, Zara’s infrastructure supports efficient fulfillment by quickly restocking
distribution centers with trending items.
- However, online sales require additional capabilities, such as advanced order-picking systems and
last-mile delivery optimization, which Zara may need to further develop to compete with online-first
retailers.
Ultimately, Zara’s infrastructure provides a strong foundation for both retail and online sales, but its
fast replenishment system is particularly effective in driving in-store engagement and maintaining a
competitive edge in physical retail.

3. W.W. Grainger and McMaster-Carr

1. How many DCs should be built, and where should they be located?
Number of DCs: The number of distribution centers (DCs) depends on:
- The geographic distribution of customers.
- Demand density in key regions.
- Service level goals (e.g., same-day or next-day delivery).
Location:
- DCs should be located in regions with high demand density to minimize delivery times and
transportation costs.
- A network optimization model can be used to determine ideal locations by balancing proximity to
customers and suppliers.
- Consider placing DCs near major logistics hubs (e.g., airports, highways, ports) to facilitate quick
and cost-effective transportation.
2. How should product stocking be managed at the DCs? Should all DCs carry all products?
Stocking strategy:
- High-demand or frequently ordered products should be stocked at all DCs to enable rapid
fulfillment.
- Low-demand or specialized products can be stocked at fewer, strategically located DCs to reduce
inventory holding costs.
Segmentation:
- Use an ABC classification system:
+ A items (high-demand): Stocked in all DCs.
+ B items (moderate-demand): Stocked in select DCs based on regional demand.
+ C items (low-demand): Centralized stocking in one or two DCs.
Stocking all products at all DCs is typically inefficient and increases inventory costs.
3. What products should be carried in inventory, and what products should be left with the
supplier to be shipped directly in response to a customer order?
Products to carry in inventory:
- High-demand, fast-moving items to ensure quick order fulfillment.
- Products with predictable demand patterns.
- Items critical for customer operations (e.g., maintenance essentials) to avoid downtime.

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Products left with suppliers:
- Low-demand or infrequently ordered products.
- Bulky or high-value items with high holding costs.
- Products that are highly customizable or made-to-order.
This hybrid model reduces inventory costs while maintaining service levels.
4. What products should W.W. Grainger carry at a store?
Store inventory strategy:
- Essential items with high turnover and broad appeal (e.g., basic tools, safety gear).
- Products frequently needed urgently (e.g., repair parts for critical machinery).
- Regionally tailored items based on local demand patterns.
Low-demand or specialized products can be made available for in-store pickup via online ordering,
reducing the need for store stocking.
5. How should markets be allocated to DCs in terms of order fulfillment? What should be done
if an order cannot be completely filled from a DC? Should there be specified backup locations?
How should they be selected?
Market allocation:
- Allocate markets to the closest DC to minimize shipping costs and lead times.
- Use a dynamic allocation system that considers real-time inventory levels and transportation
constraints.
Backup locations:
- Yes, there should be backup DCs for partial fulfillment or stockouts.
- Backup DCs can be selected based on:
+ Proximity to the primary DC.
+ Availability of the required product.
+ Transportation efficiency.
If neither the primary nor backup DCs can fulfill an order, consider direct shipment from the supplier.
6. How should replenishment of inventory be managed at the various stocking locations?
Replenishment strategy:
- Use a demand-driven replenishment model, such as just-in-time (JIT), to minimize overstocking.
- Implement an automated inventory monitoring system that triggers replenishment when stock
reaches a reorder point.
- Replenish fast-moving products more frequently to avoid stockouts.
Consider collaborative planning with suppliers to improve replenishment efficiency.
7. How should Web orders be handled relative to the existing business? Is it better to integrate
the Web business with the existing business or to set up separate distribution?
Integration vs. separate distribution:
Integration:
- Leverage existing DCs and stores for Web order fulfillment to maximize efficiency and minimize
costs.
- Offers customers the flexibility of in-store pickup or direct delivery.
Separate distribution:
- Suitable if Web orders have unique requirements (e.g., smaller order sizes, faster delivery times).
- Could require dedicated e-commerce fulfillment centers.
In Grainger’s case, integration is likely more cost-effective, given the extensive store network and DC
infrastructure already in place.
8. What transportation modes should be used for order fulfillment and stock replenishment?

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Order fulfillment:
- Use ground shipping for most orders to balance cost and speed.
- For urgent orders, consider air freight or same-day courier services.
- Offer customers tiered shipping options based on urgency and price sensitivity.
Stock replenishment:
- Use truckload or rail for replenishment of DCs and stores, as these are cost-effective for large
shipments.
- For international replenishment, use ocean freight for cost efficiency and air freight for high-
priority items.

4. Toyota
1. Where should plants be located, what degree of flexibility should each have, and what
capacity should each have?
Plant Location:
- Place plants in key regions with large or growing markets (e.g., North America, Europe, Asia) to
reduce transportation costs and meet local demand effectively.
- Consider proximity to suppliers and availability of skilled labor.
Flexibility:
- A balance between specialized plants (low cost, high efficiency for local markets) and flexible
plants (capable of producing for multiple markets).
- Include flexibility to shift production between markets during demand fluctuations or crises.
Capacity:
- Align with forecasted demand for each market. Overcapacity can lead to high fixed costs, while
undercapacity risks unmet demand.
2. Should plants be able to produce for all markets?
Pros:
- Enables responsiveness to demand changes.
- Reduces risk from local disruptions (e.g., natural disasters, economic downturns).
Cons:
- Higher costs for flexible equipment and staff training.
- Complexity in managing operations.
Suggestion:
- Develop a hybrid strategy:
+ Some plants are produced for local markets.
+ Others are "global hubs" capable of serving multiple regions during emergencies.
3. How should markets be allocated to plants?
Factors to consider:
- Cost efficiency: Allocate based on proximity to minimize transportation costs.
- Capacity: Match plant capacity with market demand.
- Risk diversification: Avoid over-reliance on a single plant for a large market.
- Market trends: Assign growing markets to plants with room for expansion.
Example: A European plant serves Europe, while an Asian plant can serve both Asia and Oceania if
needed.
4. What kind of flexibility should be built into the distribution system?
Key elements of flexibility:
- Multi-modal logistics: Use diverse transport modes (air, sea, rail) to adapt to disruptions.

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- Cross-docking: Minimize inventory and ensure faster deliveries.
- Regional warehouses: Enable rapid response to demand spikes.
- IT systems: Implement advanced forecasting and tracking systems for real-time adaptability.
Example: During the 2009 recall, flexibility could have allowed rapid rerouting of replacement parts
to affected regions.
5. How should this flexible investment be valued?
Valuation methods:
- Real Options Analysis: Assess flexibility as an investment option that provides the ability to adapt
to future uncertainties.
- Cost-Benefit Analysis: Compare the additional cost of flexibility (e.g., equipment, training) with
potential savings from risk mitigation and improved responsiveness.
- Scenario Analysis: Evaluate flexibility's value across different scenarios (e.g., economic crises,
demand surges).
Intangible benefits:
- Improved brand reputation and customer loyalty from reliable supply and quick responses.
6. What actions may be taken during product design to facilitate this flexibility?
Design standardization: Use common parts across multiple models to simplify production and
inventory management.
Modular design: Create products with interchangeable modules, allowing for easier customization
across markets.
Supplier collaboration: Involve suppliers early to ensure parts are designed for global compatibility.
Robust quality testing: Prevent issues like the 2009 recall by rigorously testing parts for reliability.
Digital twin technology: Simulate production and distribution scenarios to identify flexibility needs
during the design phase.

5. Amazon
1. Why is Amazon building more warehouses as it grows? How many warehouses should it
have, and where should they be located?
Why build more warehouses?
- Reduce delivery times: Warehouses closer to customers allow faster shipping, improving customer
satisfaction.
- Lower shipping costs: By decreasing the distance between warehouses and customers, Amazon
reduces transportation expenses.
- Support demand growth: Expanding product categories and increasing sales volume require more
storage space.
How many warehouses?
- Balanced approach: Enough to meet demand and delivery speed goals without excessive operating
costs.
Use demand forecasting to determine the number of warehouses needed in each region.
Location strategy:
- Proximity to demand centers: Major urban areas where customer density is high.
- Transportation hubs: Near ports, highways, and airports to streamline inbound and outbound
logistics.
- Strategic global spread: A mix of regional, national, and local fulfillment centers to support
domestic and international markets.

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2. Should Amazon stock every product it sells?
No, not all products should be stocked:
- Low-demand or niche items: These can be shipped directly from suppliers or third-party sellers
(drop-shipping model).
- Bulky or perishable items: Items like furniture or fresh produce may be better suited to on-demand
inventory.
What to stock:
- High-demand products (fast-moving items).
- Products with high margins or requiring rapid delivery.
- Seasonal items during peak periods.
3. What advantage can brick-and-mortar players derive from setting up an online channel?
Advantages:
- Expanded reach: Online stores allow retailers to sell beyond physical store locations.
- Convenience: Customers can shop anytime, increasing sales opportunities.
- Data collection: Online channels provide valuable insights into customer behavior and preferences.
- Omnichannel synergy: Integration with physical stores (e.g., in-store pickup or returns) enhances
customer experience.
4. How should they use the two channels to gain maximum advantage?
Omnichannel strategy:
- Leverage strengths of each channel:
+ Physical stores for immediate purchases, hands-on experiences, and brand visibility.
+ Online stores for wider assortment, convenience, and data-driven personalization.
- Seamless integration: Enable features like "buy online, pick up in-store" (BOPIS) or "reserve
online, try in-store."
- Dynamic pricing: Use online data to adjust in-store pricing and promotions to match demand
patterns.
5. What advantages and disadvantages does the online channel enjoy in the sale of shoes and
diapers relative to a retail store?
Shoes:
- Advantages:
+ Wider variety of brands, styles, and sizes.
+ Convenience for customers who prefer shopping from home.
+ Customer reviews to guide purchase decisions.
- Disadvantages:
+ Fit issues requiring higher return rates.
+ Limited ability to "try before you buy."
Diapers:
- Advantages:
+ Convenience for recurring orders via subscription services (e.g., Amazon Prime).
+ Competitive pricing due to bulk buying.
- Disadvantages:
+ Shipping costs may be high for low-margin, bulky products.
+ Immediate needs may not be met if delivery is delayed.
6. For what products does the online channel offer the greater advantage relative to retail
stores? What characterizes these products?
Products with greater online advantage:

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- High variety and customization needs: Electronics, books, and apparel.
- Recurring purchases: Diapers, groceries, and household essentials (via subscriptions).
- Rare or niche products: Items with low availability in physical stores.
- Digital products: E-books, music, and software.
Characteristics:
- High searchability: Easy to browse and compare online.
- Long shelf life: Non-perishable products.
- Compact size: Easy to store and ship.
- Data-driven buying: Products where customer reviews and specifications guide decisions

6. Macy’s: Omni-Channel Retailing

1. Should online orders be filled from stores or fulfillment centers?
Fulfillment centers (FCs):
- Advantages:
+ Centralized inventory management improves efficiency and reduces stockouts.
+ High automation lowers operational costs.
+ Better suited for large or bulk orders.
- Disadvantages:
+ Longer delivery times, especially for customers far from the FC.
+ Higher transportation costs for last-mile delivery.
Stores:
- Advantages:
+ Faster delivery for local customers using a “ship-from-store” model.
+ Enables same-day or next-day delivery options.
+ Reduces excess inventory at stores by fulfilling online orders.
- Disadvantages:
+ Less efficient than FCs due to limited space and staff.
+ Risk of inventory conflicts between in-store and online customers.
Recommendation:
- Use a hybrid model:
+ Fulfillment centers handle large or non-urgent orders.
+ Stores fulfill local, urgent orders to balance efficiency and speed.
2. How should store inventories be managed in an omni-channel setting?
Key strategies:
- Integrated inventory system:
+ Enable real-time inventory visibility across all channels (online, in-store, fulfillment centers).
- Dynamic allocation:
+ Allocate inventory based on demand patterns in each channel and region.
+ Replenish store inventory dynamically based on online and in-store sales trends.
- Safety stock levels:
+ Maintain buffer stock to prevent stockouts in high-demand periods or during promotions.
- Prioritize high-demand SKUs:
+ Focus on stocking fast-moving items in stores while keeping slow-moving or niche products
at fulfillment centers.
3. Should returns be kept at a store or sent to a fulfillment center?

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Keeping returns at stores:
- Advantages:
+ Faster processing for restocking and resale locally.
+ Improved customer experience with convenient in-store returns.
- Disadvantages:
+ Limited store space can become overwhelmed with return volumes.
+ Inventory tracking may become more complex.
Sending returns to fulfillment centers:
- Advantages:
+ Centralized processing improves sorting and redistribution.
+ Easier to inspect and repackage items for resale or refurbishment.
- Disadvantages:
+ Higher transportation costs for moving items back to the FC.
+ Longer processing times, delaying availability for resale.
Recommendation:
- Hybrid approach:
+ Handle returns for immediate resale (e.g., popular items) at stores.
+ Send other returns (e.g., damaged or seasonal products) to fulfillment centers for processing.

LIÊN HỆ VIỆT NAM

1. Gateway and Apple Case Study
Connection to Vietnam:
- Supply Chain Hub: Vietnam has become a key player in electronics manufacturing, hosting global
giants like Apple, Samsung, and LG. For a company like Gateway, which relied on assembling
products and struggled with inventory management, Vietnam could have been a cost-effective
manufacturing base with its growing infrastructure and skilled labor.
- Retail Opportunities: Vietnam's rising middle class and increasing technology adoption offer
opportunities for tech retailers like Apple to expand stores in major cities such as Ho Chi Minh City
and Hanoi.
- Key Insight: Vietnam’s mix of affordable manufacturing costs and a growing consumer base
mirrors the importance of having a localized and responsive supply chain for success in retail and
manufacturing.
2. Zara Case Study
Connection to Vietnam:
- Textile Manufacturing: Vietnam is a top exporter of textiles and apparel, providing both low-cost
manufacturing and quality assurance. Zara’s strategy of sourcing predictable products from Asia
aligns with Vietnam's strengths in producing bulk, standardized garments efficiently.
- Rapid Growth in Retail: With increasing urbanization and fashion-conscious consumers in
Vietnam, Zara has a significant opportunity to tap into Vietnam’s retail market. The fast fashion
model, responsive to local trends, aligns well with the dynamic nature of Vietnamese consumers.
- Distribution: Vietnam’s central location in Southeast Asia makes it an ideal logistics hub. Zara
could leverage Vietnam's proximity to other ASEAN countries for quick replenishment.
3. W.W. Grainger and McMaster-Carr Case Study
Connection to Vietnam:

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- Industrial Growth: Vietnam’s booming industrial sector, including electronics, construction, and
manufacturing, creates a high demand for Maintenance, Repair, and Operations (MRO) products.
W.W. Grainger and McMaster-Carr could expand their operations to serve Vietnam’s growing
factory network.
- Distribution Centers: Vietnam’s strategic location near major shipping routes and its improved
port infrastructure (e.g., Hai Phong, Cat Lai) make it an ideal base for regional DCs to supply
Southeast Asia.
- E-commerce Growth: Vietnam’s rising e-commerce sector could support McMaster-Carr’s direct
shipping model, where customers order online, bypassing physical retail stores.
- Supply Chain Support: Many global manufacturers source from Vietnam. Grainger and
McMaster-Carr can strengthen their supply chain by partnering with Vietnamese suppliers for
products like industrial tools and equipment.
4. Broader Lessons for Vietnam’s Economy
Vietnam can take cues from these case studies to optimize its supply chain and market strategies:
- Building Responsive Supply Chains: Zara’s success underscores the importance of
responsiveness. Vietnam can develop faster logistics networks to serve regional and global markets.
- Balancing Local and Global Manufacturing: Inditex’s hybrid model of local (Europe) and
outsourced (Asia) manufacturing is a lesson for Vietnamese firms seeking to serve diverse markets.
- E-commerce Integration: Grainger and McMaster-Carr’s reliance on online platforms
demonstrates the value of integrating digital channels into supply chain strategies, a growing trend in
Vietnam.
- Retail Expansion: Like Apple, foreign brands can leverage Vietnam’s growing consumer market
by offering tailored products through a mix of online and physical stores.
- Skilled Labor Utilization: Companies can capitalize on Vietnam’s young, skilled workforce, as
highlighted in industries like textile manufacturing and technology assembly.
Vietnam as a Strategic Partner for Global Supply Chains
- Cost Efficiency: With rising labor costs in China, Vietnam offers a competitive alternative.
Companies like Zara and Gateway could achieve significant savings while maintaining quality.
- Growing Consumer Base: Apple, Zara, and Grainger can benefit from Vietnam’s middle-class
growth and increasing purchasing power.
- Free Trade Agreements (FTAs): Vietnam’s participation in FTAs such as the CPTPP and EVFTA
reduces trade barriers, benefiting global companies.
4. Toyota Case Study
Connection to Vietnam:
- Automotive Supply Chain in Vietnam:
Vietnam is becoming a hub for automotive manufacturing and assembly (e.g., VinFast). Toyota's
strategies, such as local production and "global complementation," could guide Vietnam in balancing
domestic and export demand.
- Production Flexibility:
With Vietnam participating in regional trade agreements (like RCEP), adopting flexible supply chain
strategies, as Toyota does, can help local manufacturers cater to global markets.
- Localization Challenges:
Similar to Toyota, companies in Vietnam must decide how much to localize production versus
relying on imported parts. This decision impacts cost, speed, and risk management.
5. Amazon Case Study
Connection to Vietnam:

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- E-commerce Growth:
Vietnam’s e-commerce sector (e.g., Shopee, Lazada, Tiki) is growing rapidly, mirroring Amazon's
journey. Amazon's warehouse and distribution strategies could inspire Vietnamese e-commerce
companies to improve last-mile delivery.
- Warehouse and Fulfillment Centers:
As e-commerce demand grows in Vietnam, setting up strategically located fulfillment centers (like
Amazon's) can reduce delivery times and costs, especially for rural areas.
- Omni-channel Opportunities:
Amazon's shift toward physical stores aligns with trends in Vietnam, where companies like VinMart
integrate online and offline shopping experiences.
6. Macy’s Case Study
Connection to Vietnam:
- Omni-channel Retail in Vietnam:
With retailers like Aeon, VinMart, and Co.op Mart entering e-commerce, Macy’s omni-channel
model can inspire seamless integration of online and offline channels.
Example: "Click and collect" services (order online, pick up in-store) are becoming popular in
Vietnam and mirror Macy’s approach.
- Store Inventory Management:
Vietnam’s retail stores often struggle with managing inventories for both online and in-store
customers. Learning from Macy’s could help local businesses improve their logistics and reduce
stockouts.
- Returns Management:
Vietnamese e-commerce faces challenges in handling returns efficiently. Macy’s strategy of allowing
returns to stores or fulfillment centers can be adopted to enhance customer satisfaction.

LOGISTICS OPERATORS MODEL

1PL (First-Party Logistics):
- Definition: In a 1PL model, the business (shipper) handles all aspects of the logistics operations
internally. The company owns and manages its own transportation and logistics resources.
Key Characteristics:
- Direct Ownership: The company owns and operates its own transportation assets (e.g., trucks,
ships, warehouses).
- In-House Logistics: All logistics activities are managed internally by the company, including
transportation, warehousing, and inventory management.
- No Outsourcing: The company does not rely on any third-party logistics providers for the
management of transportation or warehousing.
Example: A manufacturing company that owns its own fleet of trucks and manages its own
distribution network. The company directly handles the shipment of goods from the factory to the
customers without using any external logistics providers. (Viettel)
2PL (Second-Party Logistics):
Definition: In a 2PL model, the business (shipper) works with a logistics provider (2PL) to perform
specific transportation and logistics functions. The 2PL is typically responsible for transportation but
does not manage other aspects of logistics like warehousing or inventory management.
Key Characteristics:
- Ownership of Assets: Unlike 1PL, a 2PL provider owns the physical transportation assets (e.g.,
trucks, ships, planes) and provides transportation services for the company.

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- Transportation Focus: The 2PL is typically focused on moving goods from point A to point B,
without offering full logistics services such as warehousing or inventory management.
- Outsourcing Transportation: The company relies on a third-party service provider for the
transportation of goods but may still handle warehousing, order fulfillment, and inventory
management internally.
Example: A company that uses a freight forwarder or shipping company (like DHL or Maersk) to
transport goods but still handles other logistics functions, such as warehousing or packaging, in-
house. (Vietnam Airlines Cargo provides air transport for goods but doesn’t manage warehousing or
inventory systems.)
3PL (Third-Party Logistics)
Explanation:
3PL providers offer outsourced logistics services to support part of, or the entire logistics process,
such as transportation, warehousing, inventory management, and distribution. Businesses partner with
3PLs to streamline operations, reduce costs, and improve efficiency.
Key Characteristics:
- Service-Oriented: Focuses on executing specific logistics tasks like shipping, storing, or handling
goods.
- Flexible Solutions: Businesses can select from a range of services depending on their needs.
- Specialized Expertise: Often have deep expertise in areas like freight management or order
fulfillment.
- Limited Control: The business retains some oversight but delegates operational execution to the
3PL.
Example: A retail company outsources its warehousing and distribution to DHL, which stores
inventory and ships products to customers on behalf of the retailer.
4PL (Fourth-Party Logistics)
Explanation:
4PL providers are logistics integrators that manage the entire supply chain on behalf of a company,
including coordination of 3PL services. They act as a single point of contact, overseeing and
optimizing all aspects of logistics and supply chain strategy.
Key Characteristics:
- Strategic Role: Focuses on supply chain design, management, and integration rather than just
execution.
- Technology-Driven: Often uses advanced supply chain technologies to ensure end-to-end visibility
and optimization.
- Single Point of Contact: Simplifies communication by managing all logistics providers and
stakeholders.
- Higher Control and Responsibility: Takes full responsibility for the entire supply chain's
performance.
Example: A manufacturing company hires Accenture as a 4PL provider to oversee all logistics
operations, from selecting 3PLs to managing inventory, transportation, and overall supply chain
efficiency.
5PL (Fifth-Party Logistics)
5PL is an advanced logistics model that builds on the services of 3PL and 4PL, offering a more
integrated and strategic approach to supply chain management. A 5PL provider focuses on managing
and optimizing the entire supply chain, integrating technology, and offering a comprehensive solution

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that encompasses multiple logistics service providers (such as 3PLs and 4PLs) to meet the client’s
business objectives.
Key Characteristics of 5PL:
Comprehensive Supply Chain Integration:
- 5PL providers manage and coordinate all aspects of the logistics and supply chain, not just
transportation or warehousing, but also more strategic functions like procurement, supply chain
network design, and IT infrastructure.
- They are responsible for integrating multiple 3PLs, 4PLs, and sometimes even 2PLs to create a
cohesive and efficient logistics system.
Technology-Driven Solutions:
- 5PLs are often technology-driven, utilizing advanced software, cloud-based platforms, and data
analytics to optimize the entire supply chain, manage inventory, track shipments, and provide real-
time visibility for their clients.
- These providers may use big data, AI, and machine learning to forecast demand, predict supply
chain disruptions, and automate decision-making.
End-to-End Supply Chain Management:
- 5PL offers a holistic approach to supply chain management, handling everything from
procurement, inventory management, and transportation logistics to demand planning and
customer service.
- They act as a bridge between companies and their logistics needs, optimizing not just logistics
operations but also the way companies interact with suppliers, manufacturers, and end customers.
Customized Solutions for Complex Supply Chains:
- 5PLs tend to serve large enterprises or businesses with complex, global supply chains that require
end-to-end visibility and management across various geographies, industries, and stakeholders.
- They may also provide multi-modal transportation, inventory management, and cross-border
logistics coordination.
Services Offered by 5PL Providers:
- Advanced logistics and supply chain strategy: Developing long-term, integrated solutions that
improve the overall efficiency and sustainability of the supply chain.
- IT integration: Offering software solutions to improve logistics visibility, automation, and
collaboration across multiple parties in the supply chain.
- Vendor and supply chain partner management: Coordinating and managing relationships with
multiple logistics providers (3PLs, 4PLs, 2PLs, and other third-party vendors).
- Supply chain consulting: Providing expert advice and solutions tailored to optimizing specific
supply chain functions.
- Real-time tracking and visibility: Using technology to track products and shipments in real-time,
providing visibility across the entire supply chain.
Example of a 5PL Scenario:
Suppose a global electronics company needs to streamline its operations and improve the efficiency
of its supply chain. The company might use a 5PL provider to: (DHL Supply Chain / Maersk
Logistics & Services)
- Integrate and manage its multiple logistics partners (3PLs for warehousing, 2PLs for transportation,
etc.).
- Provide real-time data analytics to optimize demand forecasting, inventory management, and
transportation routes.

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- Use cloud-based platforms to coordinate supply chain activities across various regions, minimizing
disruptions and enhancing decision-making.
- Offer end-to-end visibility from suppliers in China to customers in the US, ensuring all steps are
managed seamlessly.
Advantages of 5PL:
- Holistic Management: Manages the entire supply chain ecosystem with a single point of contact.
- Cost Efficiency: Optimizes the supply chain to reduce costs and improve efficiency.
- Technology Integration: Uses advanced IT, data analytics, and automation for better visibility and
responsiveness.
- Global Reach: Supports international logistics and supply chains across multiple regions.
Disadvantages of 5PL:
- Complexity: Managing a large, integrated system can be complex.
- High Costs: Initial technology and system implementation costs can be high.
- Dependency on Providers: Heavy reliance on the 5PL provider, which could lead to disruptions if
they face issues.

LIÊN HỆ VIỆT NAM

1PL (First-Party Logistics)
Connection with Vietnam:
- Many small and medium-sized businesses (SMBs) in Vietnam still rely on 1PL. For example, local
farmers or manufacturers handle transportation and delivery themselves, often using basic vehicles
like motorcycles or trucks.
- Traditional models in rural areas still use this approach due to limited access to professional
logistics services.
2PL (Second-Party Logistics)
Connection with Vietnam:
- Local Transportation Companies: Vietnam has a vast network of trucking and shipping providers,
such as Viettel Post or Vinafco, which act as 2PLs by offering transport services to businesses.
- This is common for exporters shipping goods to nearby countries like China, Japan, or South Korea.
3PL (Third-Party Logistics)
Connection with Vietnam:
- Vietnam has seen significant growth in 3PL services due to the rise of e-commerce and global trade.
Examples in Vietnam: DHL Supply Chain Vietnam, DB Schenker, and local providers like
Gemadept Logistics offer comprehensive 3PL services to companies like Lazada or Shopee for
warehousing and delivery.
- The growth of industrial parks, especially in regions like Bình Dương and Đồng Nai, has further
boosted 3PL demand.
4PL (Fourth-Party Logistics)
Connection with Vietnam:
- Still emerging in Vietnam but gaining traction as businesses seek greater supply chain efficiency.
- Multinational companies (e.g., Nike, Samsung) operating in Vietnam often work with 4PL providers
like Accenture or CEVA Logistics to manage their complex supply chains.
- Vietnam’s push to become a regional logistics hub encourages companies to adopt 4PL solutions for
streamlined operations.
5PL (Fifth-Party Logistics)
Connection with Vietnam:

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- In its infancy in Vietnam but poised to grow due to the government’s push for digital transformation
(as seen in the National Digital Transformation Program).
- Some startups and companies are exploring AI-driven logistics platforms and blockchain for supply
chain transparency.
Example: Logivan, a Vietnamese logistics tech company, connects truckers with businesses through
an AI-based platform, hinting at the 5PL approach.
Vietnam's logistics sector is evolving quickly, and as infrastructure improves (e.g., ports, highways,
digital systems), the country is becoming a more prominent player in global supply chains.

THE WORK OF LOGISTICS

(1) Order processing
- The processing of these orders involves all aspects of managing customer requirements, including
initial order receipt, delivery, invoicing, and collection. The logistics capabilities of a firm can only
be as good as its order processing competency.
- The key objective is to balance components of the logistics system to achieve the desired service
level at the lowest total cost.
- The importance of accurate information/ fast information exchange.
(2) Inventory
- The inventory requirements of a firm are directly linked to the facility network design and the
desired level of customer service, fill rate
- Logistics systems should be designed to achieve customer service goals while maintaining the
lowest possible financial investment in inventory, the goal is to achieve maximum inventory turnover
- Core customer segmentation
- Product profitability: 80/20 or Pareto principle
- Transportation integration
- Time-based performance
- Competitor performance
(3) Transportation
- Performance indicators: (1) cost, (2) speed, and (3) consistency
- Logistical systems should utilize transportation that minimizes total system cost. This may mean
that the least expensive method of transportation may not result in the lowest total cost of logistics
- A critical aspect of selecting the most desirable method of transportation is to balance speed and
cost of service (two-way relationship)
- Transportation lacks consistency, inventory safety stocks are required to protect against service
failure, impacting both the seller’s and buyer’s overall inventory commitment difficult for planning
and optimization/ economies of scale
(4) Warehousing, materials handling, and packaging
- How products be received, moved, stored, sorted, and assembled to meet customer order
requirements
- Receipt, processing and disposal of returns and damaged inventory, reverse logistics.
(5) Facility network

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