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Route to Market & Supply Chain Blog

FMCG Regional Supply Chains ; Swiss Legal Entities & Local Op-Cos

Posted by Dave Jordan on Tue, Feb 14, 2012

In Europe at least, there is a fashion for creating a new supply chain legal entity and housing it in a friendly canton in Switzerland. The prime benefit is tax although operational and efficiency savings are often claimed to offset the nasty sounding “tax avoidance” motivation. Certainly, you cannot just put your name above a shed, buy an as-is desk from Ikea, install a phone and employ an office –sitter and meet the undoubted Swiss tax benefit requirements.

Supply Chain Operations in SwitzerlandYou really do have to locate your supply chain organisation in the tax beneficial location. This means the relocation of potentially large numbers of offices, employees and their families which is a challenge in itself but how does such a change affect the operation of the regional supply chain?

In theory the new Swiss legal entity takes ownership for the sourcing, supply planning and making, partial delivery logistics and support service elements of the chain and the actual stock until a 3rd party sale occurs. The satellite operations essentially concentrate on demand planning, secondary logistics and customer service from local distribution centre to customer. Sounds simple yet you still have to maintain one unbroken chain and frankly, customers do not see nor care about some far away alpine, snow-topped tax advantage.

The local face to the customer will always enjoy the wrath of retailers when product is delayed or unavailable or of poor quality and that is irrespective of whatever corporate model is in place. The local people still have to take the blame for problems which may have occurred in a factory in a different hemisphere. However, the key is ensuring the entire chain really is one slick and seamless operation from start to finish AND all the players feel part of the same team. You must have shared objectives with KPIs and equal pain and gain in the wallet at year end or failure is inevitable.

A centralised supply chain legal entity raises the importance of the local op-co S&OP working within a regional S&OP managed by the new supply chain entity. Only one working is simply not good enough. If you can generate a living team spirit in groups bound by shared objectives and integrated S&OP then you are more likely to have a supply chain ticking like a quality timepiece rather than cheese dripping off a fondue fork. Which is yours?

Tags: Customer service, FMCG, Dave Jordan, S&OP, Forecasting & Demand Planning, Logistics Management

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