Supply Chain Management

An overview, for Iqra University Karachi

Syed Wajih Uddin
23/03/13

Agenda
> Introduction > Norms Setting > Background to the Supply Chain > Supply Chain concept and Benefits > Innovations > Q&A

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Personal Wajih Profile

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 Intl Sep 96 Mar 01, Audit Senior Amman and Pakistan

Grant Thornton Intl 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) 23/03/13

Session Norms
>Its a session not a speech...... >Open and interactive >No phones...... >Raise Hands for Q! Dont laugh if I cannot answer >Fun!

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Supply Chain (SC) Definition

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)
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Why implementing a Supply Chain approach...

Poor service

Not 1st. in class

Its all about Managing Expectations..

Empty shelves
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Poor forecasting

Impact of both areas on each other

Poor Poor Forecasting Forecasting

Customer Service Impacted Costs Out of Control

Incorrect Incorrect Stock Stock Levels Levels

Too Too Many Many Orders Orders

High High delivery delivery Costs Costs

Poor Poor Set Set up up of of Data Data

Errors Errors in in picking picking / / delivery delivery

Poor Poor Delivery Delivery / / Paper Paper Work Work

Cash Cash Collection Collection Impacted Impacted

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Key Operational Functions under One Umbrella & Streamlined

Supply Chain Concept

Demand Demand & & Supply Supply Planning Planning

Data Data Integrity Integrity

Order Order & & Query Query Mgmt Mgmt

Stock Stock Mgmt Mgmt

POS POS & & Display Display

Whousing Whousing & & Delivery Delivery

Invoicing Invoicing & & Cash Cash Collection Collection

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
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Demand / Supply Execution Cycle

Creates DC Demand
Store Demand Fulfillment (Customer DC)

In-Stock Levels dictate a suggested order Influence

Order Creation

EDI transaction to Company

Order Processing (CSC)

Consumer Take Away

Merchandising at store level

Store Store Receipt Receipt

Im Cu pac sto t a m t th er e Le ve l

Customer Logistics

Transit to Customers Stores

Customer DC Receipt

e t th a e nc a i l mp el o Order v C re er Le Shipment u s En stom (Company DC) Cu

Product Allocation to Order

Transit to Customer DC Internal / External Internal / External The Start Point Collaborative Effort Process Development & Management Enablers of the Process

Communication Communication Profiles Profiles Demand Demand Planning Planning Performance Performance Metrics Metrics

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Systems Systems Support Support

Demand Planning - Roles & Responsibilities

Customer Planning
Demand Planning Supply Planning
Business Information Management Warehousing

Execution

Order to Cash

& Distribution

Supplier > 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

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Customer

Execution

Supply Planning

Planning

Demand Planning Supply Planning

Business Information Management Warehousing

Order to Cash

& Distribution

Supplier

>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
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Organisational effectiveness

Long-term

Production Planning
MRP Material

Call-offs

Production

Scheduling
Supplier

Management

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S&OP is Joint Accountability

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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 Financial Behaviour Planning Marketing: than it is about systems the promotion
will sell 400
Debtor mgmt Supplier mgmt one consensus plan Demand Forecasting & Planning

we can sell 200

Customer Development:

Customer Development

Category

Manufacturing:

Finance:

Manufacturing Customer Service & Distribution

they will only sell 150

Source figure: Red Pepper. Modified E&Y 1999

we have budget of 300

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S&OP PROCESS AND MEETING FLOW

UNCONSTRAINED DEMAND OPERATIONAL FOREACST
Category Team Meeting (CTM) Supply and Demand Reconciliation Meeting (SDR) FINANCE C O N V E R S I O N

FEASIBLE SUPPLY PLAN

INPUTS

EXCO Meeting

BOARD Meeting

Demand Planning

GAP Analysis Supply&Demand Reconciliation & Closure APPROVAL

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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. 23/03/13

What is Customer Service?

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Our customer's) are not

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NOT this

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OR this

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But more like this

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What is customer service

CS Operations

Business Planning

Exceed customers expectations In chosen areas Consistently every time Exceed customers expectations In a few areas Consistently every time Get the basics right every time

CS Strategy

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UNDERSTAND what your customer wants And what you can give them

Meeting or exceeding expectations Its all about processes or is it?

Consistently meeting expectations is more important than occasionally exceeding them

Objectives Principles Processes Training

We wish to objectively measure our performance Confusion

We measureInterpretations, against customer needs Multiple Inflexibility

Order Capture Creative & Order Entry Chaos When taking order, record original need, then & Errors compare toComplexity stock availability

People trained well enough to know how to step outside the systems & 23/03/13 processes in order to meet the objectives & principles.

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

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Ritz Carlton Customer 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

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Understand your customer The Ritz remember things about you others do not

Standard sofa setting

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Special sofa setting

Customer Service Excellence

>What do customers want from leaders in CS.
> The Basics: Product Availability An efficient interface
GROWTH

> To Maximise Value: Efficient portfolio Cost effective replenishment process Minimal stock in system > Customer Service Innovation: How to make their SCs more effective Tailored solutions

CASH

COSTS

Our Customers needs are very similar but. every customer is unique, 23/03/13 and the same customer has different needs in different markets

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
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Order to Cash reliability

CS Operations Focused, customer

facing teams (& working hours)

Externally focused, loss oriented KPIs

Unconstrained, Inventory Planning externally focused Demand Planning Responsive, Sales & Operations integrated Supply Planning Planning Reliable, flexible, safe & competitive factories/suppliers International Standards Training Barcodes, Standardised Cross functional working, packaging Skills, Competencies

Business Planning/S&OP

CCFOT?
How well we are doing Highlights the overall losses to our customers
E x t e r n a l
Com m erc ial Is s ues 0.0% Cus tom er Is s ue 0.0% Forc e M ajeure/Legal 10.2%

CCFOT

Commerc ail Is s ue Cus tomer Is s ue For c e Majeure/Legal W a rehou s e&Tr ans por tation

1 I W arehous e& Trans portat 0.0% ion n t S toc k A vailability e r n 0.1% a O rder M anagem ent l
0% 1% 2%

2.5%

Sto c k A v a ilability Order Management

3%

4%

5%

6%

7%

8%

9%

1 0% 1 1%

Analyzed to determine the root causes & subsequent improvement actions

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How to measure CCFOT

CCFOT = Case fill 2. Total # of cases shipped 1. Total # of cases ordered (Original customer order) 1. 2. 3. Delivered cases and On time x 3. Total # of cases delivered on time 2. Total # of cases shipped

Total number of cases ordered should include all cases which the original customer ordered, regardless of their availability or the integrity of the order. Total # of cases shipped - are the cases which are shipped from the warehouse Total number of cases delivered on-time is based on the customers 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
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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
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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.

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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)

Excess Inventory

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 Safety Stock
Forecasting, S&OP, and Mfg. Parameters initiatives focus on reducing the targeted requirement by improving the underlying supply chain parameters

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 Pre-Build Inventory In-Transit

Inventory being loaded, unloaded, or transported.

1 The supply chain parameters on which the inventory requirements are based include CURRENT forecast accuracy, 23/03/13

forecast bias (if existent), manufacturing lead times, manufacturing deviation, transit times, deployment frequency.

ng Capital tends to GROW! continuous discipline & priority to man

Demand for Growth Relax terms Sell, sell, sell Customers power Service no OfS!

S&OP optimise demand & supply

Maintain board level Priority and pressure

Discipline on underlying processes

Suppliers Pay, Pay, Pay

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The Basics: Again!

1. 2. 3. 4. Is there a clear company program with a program leader? Does it have Chairmans commitment Is it presented at each board meeting Is the ownership, reporting and targeting clear?

1. For debtors 2. For stock 3. For creditors

5. Have responsibilities been allocated for each area? 6. Is there a separate wc meeting monthly with director involvement? 7. Are there clear improvement plans?

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 Logistics A Brief Background

Evolution of the 3PL Service Provider Supply Chain Planning Trends in the logistics industry

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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.

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Definition of Logistics
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

Supply Chain Supply Chain Management 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, thirdparty service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.
- Council of Logistics Management-

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Logistics Support - Full Service

Company
ERPs

LOGISTICS SERVICE
WAREHOUSING MANAGEMENT INBOUND CERTIFICATION OUTBOUND

Bonded Bonded WH WH

Common Common Stock Stock

External

Factory Factory Area Area

NATIONAL DISTRIBUTION

CUSTOM CLEARANCE

FORWARDING

SUBSUB CONTRACTING

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Trends in Logistics
Industry Trend
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

Logistics Solution

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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

Integrator Summary

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Service Providers Role in Supply Chain Management

Relationship Know-how
Single point of contact Knowledge management industry / supply chain

Consulting

Supply chain reengineering

Process consulting

IT analysis / implementation

Visibility
3PL/warehouse/ distribution management

Supply chain visibility connectivity / IT integration Event monitoring / exception management RFP, RFQ management / execution / financial service

Operational

Carrier / 3PL management

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Cross Docking
Business Objective
> Enhance Customer Service & Reduce Stock Loss Situation > To improve Economic Contribution by eliminating Inventory Location.

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

Methodology
> Cross docking of the shipments to Distributors Warehouses in the satellite markets. > To establish good business relationship with 3PLs

Lessons Learned
> Increase Shelf Availability in the markets > Better Inventory Management > Enhanced overall Customer Service

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 23/03/13 > Reduce Operation Cost and Head

Customer Marketing

Why, What, How, & Who.

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What is Customer Marketing?

OUR MISSION : Revolutionalize the Relevance of our Brands at Retail
Leverage our brands for the customer Customer as a communication channel

Customer Objectives

Brand Objectives

Shopper Insight

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Shopping = brand experience

Opportunity abounds

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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

End to End Demand to Supply

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Key Competencies Identified

Drive for results Customer focus

Building strategic working relationships Facilitating change

Communication

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Technical/professional skills/knowledge

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

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CPFR

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

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CPFR

Supply Chain SWOT

I N T E R N A L E X Strengths Opportunities T E R Weaknesses Threats N A L

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Personal Nabeel Profile

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)

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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
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Future Collaborative Commerce Will Also Be Founded on Data Benefits Synchronization

7. Collaborative Insight & Product Development 6. Collaborative Sales & Promotion Planning 5. Collaborative Supply Chain Management 4. Collaborative Transaction Management 3. Item Synchronization 2. Single Item Registry 1. Common Data Standards

Data Synchronization Foundation

Time/Degree of Trust and Complexity

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Source: GMA-FMI Trading Partner Alliance, Action Plan to Accelerate Trading partner Electronic Collaboration, AT Kearney Assessment, 2002

What is RFID
identification)

(Radio frequency

> 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)

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

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Value creation from RFID systems

Increase Revenue
Increase Market Intelligence Increase Market Share Increase Market Volume Reduce COGS Reduce SG& A
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

Increase Shareholder value

Increase Operating Income

Increase Capital Efficiency

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Increase Fixed Capital Turnover Increase Working Capital Turnover

Improved inventory turns Improved cash flow management Reduced slow moving / obsolete SKUs

Case Study VLG

Group)
Largest Furniture importer for Wal mart NO RFID experience VLG implemented RFID successfully Tagging a single model of bar stool

(Victory Land

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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