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Chinfon

Projects. Consulting Budget Requirements. Market Research Budget Requirements. Staff. Timing. Chinfon. A.T. Kearney. Q3 ’97. Q4 ’97. Q1 ’98. Q2 ’98. Q3 ’98. Q4 ’98. (US$ 000). (US$ 000). Phase I 1. Improve customer service and plan other operational improvements

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Chinfon

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  1. Projects Consulting Budget Requirements Market Research Budget Requirements Staff Timing Chinfon A.T. Kearney Q3 ’97 Q4 ’97 Q1 ’98 Q2 ’98 Q3 ’98 Q4 ’98 (US$ 000) (US$ 000) Phase I 1. Improve customer service and plan other operational improvements 2. Develop auto package and cross-sell to existing customers 3. Align credit card portfolio and develop young family credit card 4. Develop information technology plan for lifestage marketing 5. Develop consumer banking risk management process and systems 6. Develop consumer banking organization Phase II 7. Develop newly wed card and home package 8. Implement changes to credit card operations Phase III 9. Develop young singles card 10. Develop consumer lending business processes 11. Develop established family card and investors package 125 125 125 80 80 80 125 125 125 125 30 30 30 30 30 4 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 0 1 1 1

  2. Octagon • AAA • BBB • CCC • AAA • BBB • CCC • AAA • BBB • CCC 111 222 888 • AAA • BBB • CCC • AAA • BBB • CCC Optimize component cost 333 777 666 444 555 • AAA • BBB • CCC • AAA • BBB • CCC • AAA • BBB • CCC

  3. Service/productSpecificationImprovement JointProcessImprovement VolumeConcentration StrategicSourcing Best PriceEvaluation RelationshipRestructuring GlobalSourcing • Conduct service/product value analysis and engineering • Substitute service/commitments • Pursue system buying alternatives • Consolidate number of suppliers • Pool volume across units • Redistribute volume among suppliers • Combine volume from different commodity categories • Reengineer joint processes • Share productivity gains • Integrate logistics • Support supplier operations improvement • Establish/develop key suppliers • Employ strategic alliances/partnering • Examine strategic make versus buy • Develop integrated supply chain • Compare “total” costs • Model “should-costs” • Renegotiate prices • Unbundle pricing • Expand supply base • Develop new suppliers • Profit from global supply/demand imbalances

  4. TBD Steering Committee Project coordinator Chinfon – Mr. Liu A.T. Kearney – Shanley Lee Phase I 1. Improve customer service and other card operations 2. Develop auto package and cross-selling 3. Align card portfolio, develop young family card 4. Develop lifestage marketing IT plan 5. Develop consumer banking credit risk management 6. Develop consumer banking organization

  5. Preliminary Illustrative Example DRAFT XXXX YYYY 1 XXXX 5 YYYY

  6. 5 6 3

  7. 4

  8. 5 6 3

  9. Chapter 1) SSSSSSSS • TTTTTTTTTT • AAAAA • BBBBB • CCCCC • UUUUUUUUUU • DDDDD • EEEEEE • FFFFFFF • Chapter 2) VVVVVVVV • GGGGGG • HHHHHH • IIIIIIIIIII • JJJJJJJJJJ • Chapter 3) WWWWWWW • KKKKK • LLLLLL • MMMMM • NNN • OOO • PPPP • Chapter 1) SSSSSSSS • TTTTTTTTTT • AAAAA • BBBBB • CCCCC • UUUUUUUUUU • DDDDD • EEEEEE • FFFFFFF • Chapter 2) VVVVVVVV • GGGGGG • HHHHHH • IIIIIIIIIII • JJJJJJJJJJ • Chapter 3) WWWWWWW • KKKKK • LLLLLL • MMMMM • NNN • OOO • PPPP

  10. Turnover per store (US$ million) Foreign supermarket Country / Name / Year of entry N umber of stores U.S.A. AA 1994 Japan BB 1984 HK CC 1995 Japan DD 1995 Dutch EE 1996 Foreign Mega-marts Japan FF 1996 French GG 1995 Local supermarket Shanghai HH Shanghai II

  11. XXX YYY AAA BBB Other (e.g., Marketing G&A, Profits, Fixed Costs) 15%-25% Purchased Materials 20%-55% Manufacturing 15%-20% Logistics 10%-20% abcde

  12. XXX YYY No. of Lines (million) Yearly growth rate (%) Abcde (units) Source: Hongkong Telecom annual reports

  13. The objective of building the sourcing database is to determine “who purchases what from who at what price” which provides the baseline for commodity sourcing teams Database Construction • Who Purchases? • Subsidiaries • Business units • What do we purchase? • Categories • Commodities • Whom do we purchase from? • Vendors Notes: (1) Efficiency Ratio Interest Expanse + Operating Income (2) Average Cost of Funds = Interest Expense _ Average Interest Bearing Liabilities Source: A.T. Kearney analysis

  14. A.T. Kearney & EDS High Strategy and Operating Capability Low High Technology Capability

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