The Fresh

Connection
Egge Haak
The Challenge

The Fresh Connection

is a producer of fruit juices
In NW Europe
suffering severe losses in the last year
because of poor performance

A new management team has been appointed

The assignment is to make the company profitable
again
By making strategic and tactical choices

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The Value Chain

VP Supply Chain

Components Finished product

Supply Production Distribution

VP Purchasing VP Operations VP Sales

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Assortment

Two packaging types

1L carton
0.3L PET bottle

Three flavors
Orange
Orange C-Power
Orange/Mango

Shelf life of finished products is 20 weeks

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Shelf life

Shelf life agreement= 75% Internal shelflife

Shelf life is 20 weeks

If the shelf life agreement is 75%, the internal shelf life

becomes 25%
In other words, if the customer is promised a remainder of
shelf life of 15 weeks at the moment of delivery, inventory
of finished products may not rise higher than 5 weeks
Finished products are NOT distributed to a customer if the
shelf life agreement is violated

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Market

Three customers

Retailer Food & Groceries

500 stores
Supply chain leader

Retailer Land market

300 stores
Discounter

Chain of gas stations Dominicks

50 stores
Only PET bottles
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Contract index

Price setting

You cannot negotiate directly on sales/purchasing prices

Negotiate on supply chain performance (SLAs)
This leads to a contract index
Contract index determines the sales/purchasing price

Example (sales)
Promise Contract index Basic price Sales price
Much 1.1 1.50 1.65
Little 0.9 1.50 1.35

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Performance evaluation

Costs
Operational costs
Improvement projects

highest
ROI

Revenue Investments
Price: Working capital
Customer satisfaction Equipment
Volume: Buildings
Portfolio

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 Quick
Tour

testgig3 10
The Challenge
The Start

Make this company profitable again

You have one round (half a year) to prove you
can do this job

How?
We make pairs of two people
Each pair has one vote
Hand out ABCD forms
Majority rules

All roles are played in a very limited format

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Where do we start?

A. Purchasing
B. Operations
C. Sales
D. Supply chain management

Results
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Purchasing - PET

A. Current supplier, no change

B. Current supplier, high quality
C. More reliable supplier, high quality and FTL
D. Nearby top supplier, high quality and FTL
Trio (current) Trio (high quality) Plantin Philyp Jones

Leadtime in days 10 10 15 5

Service level % 94% 94% 96% 98%

Certified No No Yes Yes

Price (contract index) 0.9620 0.9660 0.9860 1.022

Component price 0.0289 0.0290 0.0296 0.0307

Price (relative) 100 100.4 102.5 106.2

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Purchasing vitamin C

A. Single source with current supplier (Seitan Vitamins)

B. Dual source with All Vitamins
C. Dual Source with Yoboma
D. Dual source with SYI

Seitan All Vitamins Yoboma SYI

Vitamins
Location China France India Amsterdam
Leadtime in days 60 20 40 4
Certification no yes yes no
Delivery reliability 90% 96% 95% 98%
Price (contract index) 0,966 1,038 1,006 1,058

Price (relative) 100 107,5 104,1 109,5

Supplier management costs 10k a year Back to roles

Operations
Inbound Warehouse

A. Warehouse size 750 pallet locations

B. Warehouse size 1,000 pallet locations
C. Warehouse size 1,250 pallet locations
D. Warehouse size 1,500 pallet locations

Inhouse: 200 per location per year

Overflow: 3 per location per day

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Operations
Bottling

A. Increase speed
B. Go to three shifts
C. Introduce SMED
D. Introduce preventive maintenance

Increase speed, costs: 15 K, 10% more speed

Extra shift, costs: 200 K annually
SMED, costs: 10 K, 30% less changeover time
Prev maintenance, takes 3 hours/week, 50% less
downtime
Back to roles
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Sales Shelf life

A. Shelf life for all customers to 70%

B. Shelf life for all customers to 75%
C. Shelf life for all customers to 80%
D. Shelf life for all customers to 85%

Every 5% increase gives 75 K extra revenue

Every 5% increase means 1 week less time internally

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Sales Service level

A. Service level for all customers to 90%

(- 545k)
B. Service level for all customers to 92.5%
(- 119k)
C. Service level for all customers to 95%
(actual promise)
D. Service level for all customers to 97.5%
(+ 68k)
Back to roles
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SCM Frozen period

A. Frozen period to 4 weeks

B. Frozen period to 3 weeks
C. Frozen period to 2 weeks
D. Frozen period to 1 week

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SCM
Production frequency

A. All products every day

B. All products every two days
C. All products every week
D. All products every two weeks

Back to roles
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Results

Predictable financial results are important.

What do you expect for the next half year?

A. Increase of the ROI

B. Decrease of the ROI

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 How to
improve?
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Learning by experience
The Fresh Connection

A cross functional
learning experience
Around managing the
supply chain
To create a lasting
learning effect
And building strong
To create alignment by tapping into the full learning &
development potential of your people:
teams

Class room learning

Bridging the gap from
Learning from colleagues strategy to execution
Learning by doing
Creating alignment

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 as catalyst for the magic learning cycle

A cross functional
Experience learning experience
Micro worlds
Around managing the
supply chain
To create a lasting
Apply Magic Reflect
learning effect
Circle
And building strong
teams
Bridging the gap from
Conceptualise
strategy to execution
Creating alignment

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 Egge Haak
+31-653662562
e.haak@involvation.nl

Prinsenlaan 3
3732 GN DE BILT
THE NETHERLANDS
+31 (0)30 - 2217766
www.involvation.com