A Report Submitted on the Field Visit of Kohler (Thailand) as Part of the Course Strategic Supply Chain Management (SM80.

9023)

SUBMITTED BY
Christian Riisager (112846) Pishenbay Umirbekov (113417) Muhammed Shafiq (113118) Anantaa Pandey (114386) Chayaphol Vichitpunt (114425) Panipak Thipthiangthae (114547) Tooba Masood Awan (114453) Nipu Kumar Nath (112889)

Brief business background of Kohler (Thailand)

a. Brief company background globally and in Thailand Answer: Kohler Co. was started in 1873 by John Michael Kohler who primarily began producing cast iron and steel tools for farmers. After expanding to produce sanitary ware and due to its success, it expanded to international markets. Currently, there are 44 factories worldwide that the Asia- Pacific region.

manufacture bathroom and kitchen-ware for customers in the U.S.A, many countries in Europe

In 2002, Kohler was established in Thailand when it bought 100% of the shares of Karat

Sanitary-ware Public Company Limited, a well established sanitary ware manufacturer. With

Six production facilities in Kang Khoi district in Saraburi, Kohler (Thailand) has been known to Kohler is twice that of their competitors in Thailand.

have the highest production capacity in Asia (54,000 tons per year). The production capacity of

Despite challenges in adopting the SC management process, it has been able to have a stable and efficient service to customers all around the world. b. Type of business (Thailand only)

Kohler (Thailand) adopted the supply chain management fairly recently (around 3 years ago).

growth. It is planning to open a seventh plant in Thailand with the objective of providing better

Answer: Kohler, Thailand is a well-established sanitaryware manufacturing. There are currently boasts six production plants, located in Saraburi province, on an area of approximately 800,000 Moreover, the plants have a total production capacity of 54,000 tonnes per year, making the company the largest sanitaryware manufacturer in Asia. square metres. In addition, it has 40 permanent plants employees and 60 plants outsource people.

c.

Products (Thailand only)

Answer: Kohler (Thailand) has mainly been manufacturing toilets, urinals lavatories, bathtubs, rimming, under counter, wall hung, rain showerheads, grab & slide bars, floor drains, hose supplies, shower columns and sinks.

kitchen cabinets, faucets, drains, waste traps, hand showers, flush valves, stop valves, squats, self-

d. Target markets (Thailand only) Answer: Kohler Thailand exports sanitary ware products to member countries in the ASEAN with no import duty and exports mainly to the U.S.A in the West. It exports its products to respective retailers in the U.S.A in less than 60 days and takes around 2 days to deliver within retailers.

Thailand. Around 52.7% of its products are exported and the remaining is supplied to domestic

Kohler, Thailand markets, its products separately under two brands namely Kohler and Karat. The Kohler brand is targeted at the high-end market which delivers export to 99.5% in USA and Europe area. However, the Karat label is geared towards the medium to low-end sector which support in Thailand and export to China.

Knowledge gained from the field-visit observations

a. Brief overview information about the plant. Answer: Kohler (Thailand) Public Company Limited currently has six production plants with ten warehouses in campus, located in Saraburi Province, on an area of approximately 800,000 square

meters. Four of the plants have a total production capacity of 54,000 tons (approximately 4 million

pieces), making the company the largest sanitary ware manufacturer in Asia. To optimize capacity and increase productivity, the company is already in the process of planning its seventh plant. commitment to provide high-quality sanitary ware to customers all over the globe. Expected to double the companys production capacity, the expansion reflects the companys

Kohler (Thailand) Public Company Limited markets its products separately under two brands: geared towards the medium to low-end sector.

Kohler and Karat. The Kohler brand is targeted at the high-end market, while the Karat label is The visited plant 7 (there is no plant sixth due to the bad meaning of the number) mainly produces per year, and all the products from this plant is only made to order. (make) and delivery (deliver). Answer: Kohler Co. is doing great in order to synchronize with its efficiency optimization strategy as it has achieved 13% cost reduction (50 million Baht / Annum) since 2010 and still of their Supply Chain at each of its level. Key observations in this regard are as follows:

the high-end products that is exported to the U.S.A. The total capacity of plant 7 is one million pieces

b. Key processes in the plant operations from inbound materials (source), production

working for the same goal with the help of passionate team and updated technology. Field visit

adds further knowledge to this as it clears the picture that how they are managing the functions Raw Materials are outsourced and suppliers deliver these as per demand made by Kohler Co. All suppliers are from local market of Thailand and nothing is imported from other countries. China Clay and Ball Clay are obtained from Southern of Thailand; Silica Sand is same province Saraburi where the manufacturing plant is working. supplied by Eastern of Thailand; and Feldspar, Sodium Silicate and Barium Carbonate are

arranged from Central of Thailand. However, supplier for Sodium Carbonate locates in the Kohler Co. uses Build to Order (BTO) approach for exports and Build to Forecast (BTF) approach for domestic market and benchmarks Supply Chain Operations Reference (SCOR) Software (TMS). Model in order to achieve its strategic fit. Inventory flow is designed to work on First-in First-out (FIFO) basis and Logistics operations are managed by Transportation Management Kohlers production process involved Slip making (preparation of ball slip by mixing of all materials), mould making, casting, clay inspection, spraying, drying and leak test. It is priority. ensured that efficiency approach is followed at each stage while keeping the quality at Most of products are exported to United States, as its the major target market. Hence, done with the adaptation of Delivery Due List (DDL) Process. Delivery of Products is made products are designed and manufactured as per demand. Outbound Shipment Planning is

through ships. Once DDL is run and a list of deliveries is created that can be shipped to
c.

New knowledge that you learn from the visit.

customers, shipments are created for them.

Answer: The supply chain department at Kohler is new and facing various types of problems to

maximize their performance. The top management of Kohler decided few years back to implement inventory holding cost etc.) without disturbing the target service level. Kohler Thailand is also trying

the concept of supply chain management in order to reduce total supply chain cost (logistics, to implement supply chain management strategies but facing problems like, a mix of both make to order and make to stock strategy, capacity distribution, local and international customers, lack of

knowledge sharing, lack of strategic partnership in logistics, goods distribution management etc. consolidated orders and having a supply chain without distribution centers (for local customers). chain management a few years ago and they also have set their SC targets for next few years.

This mix of operations strategies makes difficult for Kohler to implement any specific supply chain strategy. Also Kohler is facing more logistics cost by using Milk run distribution system for non Though the situation is not ideal yet but Kohler is in much better position than it was without supply The most important point that we observed from this visit is that real situations are always complex and much difficult to handle. The supply chain management is not only about managing of goods and information but actually the decisions and support of management in implementing supply chain supply chain. concepts and it is impossible to implement without, support of management, collaboration of various departments with-in an organization and collaboration among various members of the

Supply chain management

a. What are the roles of the supply chain function in the organization? Answer: Kohler Co. is committed to lawful, ethical and fair practices in all operations, and they conduct business with suppliers who share that commitment. They expect their suppliers to obey

minimum international fair labor practices that require them to treat workers fairly, provide a safe of Conduct. Certification is required once every five years. Kohler Co. must approve any product or process changes having the potential to affect the fit, form or function of the products purchased. and healthy work environment and protect environmental quality as set forth in the Supplier Code

suppliers by utilizing Electronic transaction processes. Kohler Co. has deployed Electronic Data they have enabled a Supplier Web Portal that provides suppliers access to current long-term fair and honest dealing to all others with whom they do business, including employees, forth in their Code of Conduct.

Kohler Co. is continually striving to improve upon its communication and business efficiency with Interchange (EDI) to replace many of their paper or fax based communication methods. In addition,

planning requirements, product inventory levels, open purchase orders, blocked invoice reports

and payment status inquiries on-demand. Kohler Co. expects its suppliers to extend principles of to them that their business practices are lawful, ethical and in compliance with the principles set

sub-contractors and suppliers. Kohler Co. will only do business with suppliers who have certified

As per Kohler, Thailand will take on a bigger role in manufacturing and product development, consumers in the region, such as hand spray and cold-water faucet. Since the beginning of this duty. Kohlers production capacity is now two times bigger than their closest competitor in Thailand. particularly for the Southeast Asia market, especially for some niche products used only by year, Thailand has exported sanitary ware products to member countries in ASEAN with no import

b. How much does supply chain management impact the companys performance (in terms of long-term economic performance)? Answer: Kohler, Thailand uses Warehouse Management System (WMS) 4001, Bare Ware Movement Storage 4000 (Biggest in Asian company), E-Kanban Process for Crated Finished Good Storage 4050. They adopt Delivery Due List (DDL) process for Outbound Shipping Planning. Shipment of products is done through Auto Consolidator. Shipment Load Planning or ZSLPS is a Customized Kohler Co. transaction to view and plan shipments. ZSLPS is used to select shipments in various states and move them through the various statuses of the shipment. Warehouse cost/ Chain flow consists of Financial flow and Information flow. Their supply chain consists of cross functional teams (Horizontal & Vertical). They have improved the current SAP towards best operations is 2 days and 60 days respectively. practices (TMS, WMS, and Contact Management) and also enhanced their Value Engineering in Net sale reduced to 13% from 2010. Cost savings of 50 million Baht/year is achieved. Their Supply

terms of Packaging, Slip, and Glaze & Component. Their lead time for domestic and international

c.

What are the key issues in managing supply chain in the companys business?

Answer: There seems to be little in particular that distinguishes the key issues related to supply chain management of sanitary ware manufacturing and distribution from those of other management is relatively simple since: manufacturing industries. In the case of Kohler Thailand one might argue that supply chain Kohler Thailand consists of one single industrial complex where all products for both the domestic and the foreign markets are produced. Kohler thus does not have a number of of supply chain management. warehouses and distribution centers spread around the country to add to the complexity Kohler's products are produced using relatively few different kinds of raw material. Sanitary ware consists for the most part of various sorts of ceramic compounds and toilets, sinks, bathtubs, bidets, etc. are produced using if not the same raw materials then nearly production is another factor that diminishes supply chain complexity and thus has a positive impact on its management requirements. identical raw materials. The limited number of different kinds of raw materials needed for

The key issue to be addressed concerning supply chain management in a manufacturing business like Kohler Thailand is coordination of inbound and outbound distribution channels. Since most of the products produced by Kohler Thailand is headed for the export market a large outbound logistics apparatus needs to be in place to accommodate the bulky shipments of goods that service providers for transportation of goods from Kohler's manufacturing plant in Saraburi to designated markets. Once the freight carriers arrive at their destination a new fleet of trucks

sanitary ware constitutes. This includes truck transportation procured through various transport marine docks where the goods are loaded on to freight carriers that ship the goods abroad to their are needed to transport the goods to their next destination, whether it is retailers or warehouses/ distribution centers. Kohler may not be responsible for transportation of the products once they have left Thailand but the operation nevertheless requires coordination and cooperation with business partners further down the supply chain. All in all a logistical challenge that calls for attention. For the domestic market the logistics may be less complicated since only truck

transportation is required but even so coordination of activities is critical for a smooth operation. An equally smooth operation is a necessity when it comes to the inbound distribution, namely maintain production capability so they must always be at hand. Coordination of supply quantities and transportation service providers as well as a healthy relationship to raw material suppliers the procurement and transportation of raw materials. Raw materials are obviously needed to

will help bring down the overall cost of raw materials and even more importantly, ensure they never run out. d. What are the key success factors in managing the supply chain in the companys business? the sector, Kohler started its Thailand operation in 2002 by purchasing 100% shares of Karat Answer: Taking advantage of the ASEAN Free Trade Agreement (AFTA) and increasing potential in

Sanitary ware Public Company Limited, a well-established sanitary ware manufacturer. The companys name was duly changed to Kohler (Thailand) Public Company Limited. After the medium to low-end sector.

acquisition, the company marketed its product separately under two brands: Kohler and Karat.

The Kohler brand is targeted at the high-end market, while the Karat level is geared towards the Kohler Thailands success story in terms of supply chain lies in its supply chain drivers which are: Information, Facilities, Inventory, Transportation and Sourcing.

concept get into strategic partnership with suppliers of raw material, which meant to Kohler purchasing it in a reasonable price (Kohler is the largest manufacturer of toilet and kitchen accessories in ASEAN) plus inbound transportation cost managed by suppliers.

quality play main role in product competitiveness in the market. Kohler understanding this

Sourcing- is the main basis of production and on time delivery of raw material as well as

supply so that it can operate beyond its economies of scope and scale. Kohler has 6 plants of cycles happen in facility starting from raw material until finished goods.

Facilities- mainly measures the capacity of firm, and more or less determines firms product

of production comes to plant 7. The annual capacity of facilities is 54,000 tons. All production Inventory-one of the most important components of business and supply chain as well. In

production facilities namely: plant 1, plant 2, plant 3, plant 4, plant 5, plant 7. The largest portion

Apparently Kohler strategy being more responsive and follows push strategy. However time delivery sometimes also in full.

Kohler inventory management is operated by bare warehouse and central warehouse systems. management team does forecasting of demand but, still keeps enormous amount in warehouse until

order is received. This strategy helps to react quickly to demand of customers, resulting in just in Transportation- is another key driver in case of efficient usage supply chain surplus gets

bigger in amount. Availability of different modes drives cost of transportation down, as the

competition is severe in the market. Kohler Thailand enjoys advantages of transportation as inbound transportation is done by suppliers, while outbound is outsourced.

Thailand has a marine route to external markets plus truck transportation mode is well developed to provide with products of Kohler to any corner of Thailand. However, as we mentioned above, Information. Valid and accurate information mitigates forecast errors of demand, helps to

avoid mismatch between supply and demand, and in the end tackle better bullwhip effect. be higher than lost opportunity. But information flow within the company is remarkable especially in processing of products and inventory management. increased as a result.

of information is quite risky. Therefore Kohler tends to share information where its interest will

Kohler shares some information with its counterparts however in business being open in terms

Kohler Thailand operates with these instruments quite well so that overall supply chain surplus

e. Argue whether it is a strategic fit between the companys supply chain strategy and the
business or corporate strategy. Answer: Kohler Thailand segmented markets into 2 parts one for internal consumption the other for external. Having a vast number of inventory in warehouse, plenty of production facilities and strategic partnership with suppliers, we assume that Kohler is trying to be more responsive rather than efficient. All supply chain drivers set so that it fits and aligns with responsiveness strategy. complex to predict market trends. So it is recommended to share information among the Kohler strategy of the firm. However, it is all for internal market, unlike internal external market usually complicated and network (as Kohler has a business almost in every continent) to be more consistent with business We have observed (via website only) some project that Kohler is participating or have participated; most of them are related to construction works. Especially in Thailand most of the construction works belongs to hotel business. So the base for business of Kohler is construction works whether it base line, and set strategy responsive or efficient so that the firm finds itself in profit. is big projects or small scale till households. Therefore it is better analyze time to time particular

References
I. III. IV. II. http://www.nationmultimedia.com/business/Kohler-focused-on-leadership-and-talent30181032.html http://www.thaivest.com/kohler-plans-thai-production-base http://www.kohler.co.th/ http://www.kohler.com/corporate/supplier/conducting-business.html http://www.kohler.com/corp/supplier/SupplierCodeofConduct.pdf http://www.bangkokpost.com/58years/kohl.html http://www.kohlerthai.com/products_collection.php

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VII.

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