Supply Chain Management :11/04/2009 Supply Chain Management An overview, for Iqra University Karachi Syed Wajih Uddin


Slide 2:11/04/2009 Introduction Norms Setting Background to the Supply Chain Supply Chain concept and Benefits Innovations Q&A Agenda


Slide 3:11/04/2009 Personal Profile Wajih Second Religion is Cricket! Management Accountant / Consultant by profession. ACMA, APA, CFC,M.COM, B.COM Career Highlights Vohra & Co Feb 95- Aug 96, Associate Consultant Project Accounting and MIS (internship) Ernst & Young Int’l Sep 96 – Mar 01, Audit Senior Amman and Pakistan Grant Thornton Int’l Sep 01- April 02, Supervisor Business Assurance Services Gillette May 02 – Aug 03, Customer Services Executive Gillette Sep 03 – Feb 05, Value Chain Leader Pakistan Gillette March 05 - July 05, Regional Value Chain Manager, Pakistan & South Asia Unilever, LJA, Aug 05-Present, Production Planning & Customer Services Manager (Current)


Slide 4:11/04/2009 Its a session not a speech...... Open and interactive No phones...... Raise Hands for Q! Don‘t laugh if I cannot answer ? Fun! Session Norms


Slide 5:11/04/2009 Modern SC View An effective SC ensures high level of Customer Service at optimum level of working capital and cost! So simple yet extremly demamding...... Business Partners/SC view an efficient supply chain that ensures products are on the shelf, available for sale, when Shoppers come to buy them ... all the time! (ECR) Supply Chain (SC) Definition


Why implementing a Supply Chain approach... :11/04/2009 Why implementing a Supply Chain approach... Its all about Managing Expectations……..


Slide 7:11/04/2009 Customer Service Impacted Costs Out of Control Impact of both areas on each other


Key Operational Functions under ‘One Umbrella’ & Streamlined :11/04/2009 Key Operational Functions under ‘One Umbrella’ & Streamlined Supply Chain Concept Demand & Supply Planning Data Integrity Order & Query Mgmt Whousing & Delivery Invoicing & Cash Collection Stock Mgmt POS & Display CUSTOMER FOCUSSED Supply Chain is integration of our business processes and organisations around “the entire demand and supply chain” in servicing our customers and managing our inventories


Slide 9:11/04/2009 Systems Support Demand Planning Performance Metrics Profiles Internal / External The Start Point – Collaborative Effort Process Development & Management Enablers of the Process Creates DC Demand Merchandising at store level Transit to Customer’s Stores Transit to Customer DC Product Allocation to Order EDI transaction to Company In-Stock Levels dictate a suggested order Store Receipt Customer DC Receipt Order Shipment (Company DC) Order Processing (CSC) Order Creation Store Demand Fulfillment (Customer DC) Consumer Take Away Influence Ensure Compliance at the Customer Level Impact at the Customer Level Customer Logistics Communication Internal / External Demand / Supply Execution Cycle


Demand Planning - Roles & Responsibilities :11/04/2009 Demand Planning - Roles & Responsibilities Creation of a Base Forecast Based on distributor stock, GIT, Lead times, and MS provided that IMS forecast is updated by TMMs (Market/Sales intelligence) Establishing Communication Channels with TMMs Partnership with TMMs, providing analytical support and challenging where applicable Ensuring Forecast Integrity Ensuring forecast is cleansed and integrity in terms of coding, quantities and market relevance is achieved. Ensuring Forecast Consistency Ensuring through planning that the forecast is consistent across lags to get to stable and accurate forecast. Reporting Reporting DP KPIs (FA and bias) as well as major failures and root cause analysis


Supply Planning :11/04/2009 Supply Planning Inventory management and parameters Deployment planning to DCs Planning promotions/co-packing Planning product customisation New Products co-ordination Excess stock Phase-in/phase-outs OOS and expediting MPS - master production scheduling Stock allocation


Slide 12:11/04/2009 Long-term Production Planning MRP Material Call-offs Production Scheduling Supplier Management Organisational effectiveness


Slide 13:11/04/2009 S&OP is Joint Accountability


S&OP is a means of aligning targets, objectives and actions across functions :11/04/2009 Financial Planning Demand Forecasting & Planning Category Customer Service & Distribution Manufacturing Customer Development Supplier mgmt Debtor mgmt one consensus plan Source figure: Red Pepper. Modified E&Y 1999 S&OP is a means of aligning targets, objectives and actions across functions S&OP takes a businesses sales & marketing ambitions, supply possibilities, customer needs and financial goals and balances them to create a single, achievable plan S&OP is the way the business takes decisions Improving S&OP is more about Leadership and Behaviour than it is about systems


S&OP PROCESS AND MEETING FLOW :11/04/2009 S&OP PROCESS AND MEETING FLOW


Initiatives to enhance Customer Service and align demand with supply… :11/04/2009 Initiatives to enhance Customer Service and align demand with supply… SKU rationalization and profitability analysis Root cause analysis To address problems relating to customer services in general and First Time Fill Rate failures Its primary aims were two fold: to diagnose the various issues affecting Backorder volume to cure these and prevent them from recurring (CPFR) Collaborative planning, forecasting and replenishment A “holistic” approach to supply chain management, implemented through process discipline An opportunity to go ‘upstream’ (supplier) as well as ‘downstream’ (customer) CRP - VMI (Vendor Mgmt inventory) & Continuos replenishment process.


What is Customer Service? :11/04/2009 What is Customer Service?


Our customer's) are not :11/04/2009 Our customer's) are not


NOT this :11/04/2009 NOT this


OR this :11/04/2009 OR this


But more like this … :11/04/2009 But more like this …


What is customer service :11/04/2009 What is customer service Get the basics right … every time Exceed customer’s expectations … In a few areas …Consistently … every time Exceed customer’s expectations … In chosen areas … Consistently … every time UNDERSTAND what your customer wants … And what you can give them


Meeting or exceeding expectationsIt’s all about processes … or is it? :11/04/2009 Meeting or exceeding expectationsIt’s all about processes … or is it? Consistently meeting expectations is more important than occasionally exceeding them Complexity & Errors Creative Chaos Multiple Interpretations, Inflexibility Confusion


Tesco Lotus Customer Service :11/04/2009 Tesco Lotus Customer Service Car-parking opens early “We will do anything the customer needs … & then work out the costs later” No hassle refund … from any branch


Ritz CarltonCustomer Service Excellence :11/04/2009 Ritz CarltonCustomer Service Excellence Malcolm Baldrige Award twice more than any other service division entrant J.D. Power & Associates 4th strongest brand in the world 51% of guests are repeat guests


Understand your customerThe Ritz remember things about you others do not :11/04/2009 Understand your customerThe Ritz remember things about you others do not


Slide 27:11/04/2009 What do customers want from leaders in CS…. The Basics: Product Availability An efficient interface To Maximise Value: Efficient portfolio Cost effective replenishment process Minimal stock in system Customer Service Innovation: How to make their SC’s more effective Tailored solutions Our Customers’ needs are very similar but…. every customer is unique, and the same customer has different needs in different markets GROWTH COSTS CASH $ Customer Service Excellence


Conclusions :11/04/2009 Conclusions Customer Service is a key business driver 2 essential keys to this Understanding our customers & managing the relationship Getting the basics right Your role in this Think of the customer Help implement the basics S&OP CS Operations


CCFOT? :11/04/2009 CCFOT? CCFOT How well we are doing


How to measure CCFOT :11/04/2009 CCFOT = 2. Total # of cases shipped 1. Total # of cases ordered (Original customer order) Case fill Delivered cases and On time Total number of cases ordered should include all cases which the original customer ordered, regardless of their availability or the integrity of the order. 2. Total # of cases shipped - are the cases which are shipped from the warehouse 3. Total number of cases delivered on-time is based on the customer’s requirements ( i.e. the requested delivery date, as agreed with/provided by the customer) - Orders “picked-up” by the customer should be measured against on-time pick-up. - If specific delivery dates are not agreed with the customer, then standard delivery lead times should be utilised. - Late pick-ups by the customer will therefore impact CCFOT How to measure CCFOT


Why is important to know Cost to Serve :11/04/2009 Why is important to know Cost to Serve Context - I: Variability has increased with inventory and capacity as shock absorbers: Demand Variability Product proliferation Promotional / promoted goods Supply Variability Outsourcing is increased Longer lead times Inventory ownership pushed back to suppliers Innovation cycles became shorter thus visibility on and reduction of pipeline stock becomes increasingly important


Why is important to know Cost to Serve :11/04/2009 Why is important to know Cost to Serve Context - II: Over the past years: Customers are more professional, bigger, know better what they need and want. Competition is working hard to please them Not knowing how much it costs, can mislead us to do everything to everyone. Past experiences in measuring cost to serve proved that a high percentage of unprofitable orders are in the Top Customers.


In order to compute excess inventory, it is first necessary to determine how much FG stock is needed to achieve targeted service levels given the current supply chain. To do so, each inventory component must be evaluated. :11/04/2009 In order to compute excess inventory, it is first necessary to determine how much FG stock is needed to achieve targeted service levels given the current supply chain. To do so, each inventory component must be evaluated. Total Current FG Inventory (by key component) Inventory being loaded, unloaded, or transported. Inventory required to cover demand uncertainty (forecast error) and supply uncertainty during lead time Inventory required to cover periods between production or replenishment Inventory required to cover demand in excess of capacity (due to seasonality, factory shutdowns, etc.) Cycle Stock Safety Stock In-Transit Pre-Build Inventory Excess Inventory Forecasting, S&OP, and Mfg. Parameters’ initiatives focus on reducing the targeted requirement by improving the underlying supply chain parameters Inventory exceeding the targeted requirements computed based on CURRENT supply chain parameters1 Inventory Needed To Achieve Target Service Levels (given CURRENT supply chain parameters)1 1 The supply chain parameters on which the inventory requirements are based include CURRENT forecast accuracy, forecast bias (if existent), manufacturing lead times, manufacturing deviation, transit times, deployment frequency.


Slide 34:11/04/2009 Demand for Growth Relax terms Sell, sell, sell Customers’ power Service “no OfS!” Suppliers Pay, Pay, Pay Working Capital tends to GROW! Needs continuous discipline & priority to manage S&OP optimise demand & supply Maintain board level Priority and pressure Discipline on underlying processes


The Basics: Again! :11/04/2009 The Basics: Again! Is there a clear company program with a program leader? Does it have Chairman’s commitment Is it presented at each board meeting Is the ownership, reporting and targeting clear? For debtors For stock For creditors Have responsibilities been allocated for each area? Is there a separate wc meeting monthly with director involvement? Are there clear improvement plans?


Slide 36:11/04/2009 Logistics – A Brief Background Supply Chain Planning Trends in the logistics industry Evolution of the 3PL Service Provider


The history of Logistics :11/04/2009 The history of Logistics Logistics is a relatively new word used to describe a very old practice: the supply, movement and maintenance of an armed force both in peacetime and under operational conditions. NAPOLEON famously said an army marches on its stomach. Clearly military personnel need to eat well to perform well. But what Napoleon was really getting at with this maxim was the importance of the supply line. Logistics - getting food, clothes, and spare parts to the front - is often what makes or breaks a conflict. The truth of this was illustrated by Napoleon himself when, in June 1812, he tried (and failed) to invade Russia with a force of 500,000 men. Because the Russians removed most of the food and crops in advance, Napoleon's army couldn't live off the land as they had in previous campaigns.


Definition of Logistics :11/04/2009 Definition of Logistics “…the process of planning, implementing and controlling the efficient, effective flow and storage of goods and services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirement.” - Council of Logistics Management Logistics Supply Chain Management “Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.” - Council of Logistics Management-


Logistics Support - Full Service :11/04/2009 Logistics Support - Full Service


Trends in Logistics :11/04/2009 Trends in Logistics Logistics costs are rising driven by: Shorter order-to delivery times Higher service level expectations (on-time delivery, order completeness & service levels) Increasing demand for customized supply chain solutions (e.g. co- packing, pallet heights) Overall inventory reduction Initiatives to drive down costs Increasing direct shipments from plant to reduce transport costs Postponement of customization to improve flexible use of goods utilization Moving delivery platforms (cross docks) closer to the customer to reduce transport costs Share facilities to reduce overhead and improve asset efficiency Using IT to provide network visibility and dynamic management Industry Trend Logistics Solution


Integrator Summary :11/04/2009 Integrator Summary


Service Providers Role in Supply Chain Management :11/04/2009 3PL/warehouse/ distribution management Event monitoring / exception management RFP, RFQ management / execution / financial service Carrier / 3PL management Supply chain reengineering Process consulting IT analysis / implementation Supply chain visibility connectivity / IT integration Knowledge management industry / supply chain Single point ofcontact Relationship Know-how Consulting Visibility Operational Service Providers Role in Supply Chain Management


Cross Docking :11/04/2009 Cross Docking Business Objective Enhance Customer Service & Reduce Stock Loss Situation To improve Economic Contribution by eliminating Inventory Location. Methodology Cross docking of the shipments to Distributor’s Warehouses in the satellite markets. To establish good business relationship with 3PLs Results Better Customer Service as the replenishment of the Distributor's Warehouse is done from bigger pool of the stocks. One Window Operations for all the operational activities Reduce Operation Cost and Head Count Costs Nil Benefits Reduction of the Economic Contribution - Improvement of the PFO Reduction of the Operation Cost Reduction of the head count Annual Savings would be over $ M Lessons Learned Increase Shelf Availability in the markets Better Inventory Management Enhanced overall Customer Service


Customer Marketing :11/04/2009 Customer Marketing Why, What, How, & Who.


What is Customer Marketing? :11/04/2009 What is Customer Marketing? OUR MISSION : Revolutionalize the Relevance of our Brands at Retail


Opportunity abounds… :11/04/2009 Opportunity abounds…


Common & shared Key metrics to measure CS :11/04/2009 Common & shared Key metrics to measure CS Fill Rates Forecast Accuracy Inventory Levels On Time Shipment & Delivery Order Accuracy Invoice Accuracy Cash Collection DSO Cost to serve Cycle time


Key Competencies Identified :11/04/2009 Key Competencies Identified


What should our expectations be :11/04/2009 What should our expectations be Understand that the industry and retailers are moving quickly towards collaboration Take the opportunity to be “proactive” and “demonstrate” customer focus by being a part of this move, rather than a follower Demonstrate the benefits of collaboration by driving customer fill rates faster with those customers with which we collaborate, than with those we do not Track sales growth performance Reduce inventory holding requirements for those same customers faster than for others Back-up CPFR


What needs to happen in order to realize these expectations :11/04/2009 What needs to happen in order to realize these expectations Demonstrate the ability to “execute” the collaborative process - internally and externally Support with process and systems changes necessary to accomplish the goals Ensure a “shared” ownership within Gillette to succeed; build a multi-functional team to oversee implementation Commit the resources required to ensure success - people/heads and $’s Roll out to a critical mass of customers - top down - to maximize the benefits Back-up CPFR


Supply Chain SWOT :11/04/2009 Supply Chain SWOT Opportunities Weaknesses INTERNAL EXTERNAL


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Slide 54:11/04/2009 Personal Profile Nabeel BCS, MCP, ACSA, ITIL Foundation, Career Highlights Bahrain Defense force 94-96, Network Administrator Hi-Tech Business Machines Pvt Ltd, 96-98 Customer Services Manager Etech group of Companies 98 -2001 Country Manager Technical Gillette Pakistan Ltd. 2001 – 2005, A. Regional IT Manager Al Tuwairqi Group of Companies , 05- Present Group IT Manager ( KSA)


How can we do it :11/04/2009 How can we do it Standardization Data synchronization Common Standards for Electronic Commerce Standardized performance measurements Automation RFID Automatic store orders EDI transactions Hand held terminals Data sharing / communication standards


Future Collaborative Commerce Will Also Be Founded on Data Synchronization :11/04/2009 Future Collaborative Commerce Will Also Be Founded on Data Synchronization Benefits Source: GMA-FMI Trading Partner Alliance, Action Plan to Accelerate Trading partner Electronic Collaboration, AT Kearney Assessment, 2002


What is RFID (Radio frequency identification) :11/04/2009 What is RFID (Radio frequency identification) RFID is a generic term for technologies that use Radio waves to automatically identify individual items. RFID e.g Vehicle identification Tracking Security / Access controls ( office bldg key cards)


Uses of RFID :11/04/2009 Supplier Retailer Efficient production Planning Faster demand response Automated Inventory count Faster receiving & shipping Better quality Inspection Distribution centre Automated Inventory count Faster receiving & shipping Better quality Inspection Store / Club Reduced out of stocks Theft prevention Automatic checkout Uses of RFID


Value creation from RFID systems :11/04/2009 Value creation from RFID systems Increase Shareholder value Increase Revenue Increase Operating Income Increase Capital Efficiency Increase Market Intelligence Increase Market Share Increase Market Volume Reduce COGS Reduce SG& A Increase Fixed Capital Turnover Increase Working Capital Turnover Increased Retail promotion effectiveness Improved available inventory at retail Reduce losses from theft Reduced inventory handling costing Reduced warehouse, distribution & transportation costs Improved customer services Reduced write-offs and waste Improved inventory turns Improved cash flow management Reduced slow moving / obsolete SKU’s


Case Study VLG (Victory Land Group) :11/04/2009 Case Study VLG (Victory Land Group) Largest Furniture importer for Wal mart NO RFID experience VLG implemented RFID successfully Tagging a single model of bar stool VLG was not included in top 100 suppliers of Wal-Mart VLG using Wal mart retail supplier website for supply planning


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