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Industrial Logistic Systems (Pty) Ltd
CUSTOMER FOCUSED CUSTOMER FOCUSED SUPPLY CHAIN STRATEGIESSUPPLY CHAIN STRATEGIES
July 2006
Industrial Logistic SystemsIndustrial Logistic Systems(Pty) Ltd(Pty) Ltd
Martin Bailey, Managing Director
Presented by:
25th Annual Southern African Transport Conference
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Industrial Logistic Systems (Pty) Ltd
MOST ORGANISATIONS SEE SUPPLY CHAINS AS A PAIN:
Not core business Does not drive sales / market shareEasy to outsourceAdds cost not value
“Many companies dismiss SCM solutions as it is irrelevant to their business needs because they don’t realise that the key to competitive advantage lies within managing the supply chain. Instead, companies often believe success is tied to product design or the ability to sell. Changing this mindset is the first hurdle in the SCM plan”,
Jim Kilpatrick, Deloitte Consulting
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Industrial Logistic Systems (Pty) Ltd
MOST GOVERNMENTS SEE SUPPLY CHAINS AS A PAIN:
Not core country needsDoes not economy / votes Adds cost not value
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Industrial Logistic Systems (Pty) Ltd
DOES IT ADD VALUE?
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Industrial Logistic Systems (Pty) Ltd
LETS ASSUME HAVING A GOOD SUPPLY CHAIN:
Can increase market shareDoes drive sales Provides competitive edgeIs core business
A world class supply chain?
RIGHT GOODS RIGHT TIME RIGHT COSTRIGHT PLACE
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Industrial Logistic Systems (Pty) Ltd
FOR COUNTRY - HAVING A GOOD SUPPLY CHAIN
Can decrease total cost to economyCan make country more competitive Provides competitive edgeIs core business of country
A world class supply chain?
RIGHT GOODS RIGHT TIME RIGHT COSTRIGHT PLACE
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Industrial Logistic Systems (Pty) Ltd
CUSTOMER SERVICE FOCUSED SUPPLY CHAINSThis presentation is all about:
Case studies – on customer focused supply chainsHow to achieve customer service focused supply chainsWhere world class business is going?
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Industrial Logistic Systems (Pty) Ltd
Customer Focused Supply ChainCASE STUDY
Reference: B Knichel
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Industrial Logistic Systems (Pty) Ltd
CUSTOMER FOCUS
Measuring REAL customer satisfactionAvailability
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Industrial Logistic Systems (Pty) Ltd
CUSTOMER FOCUSMeasuring REAL customer satisfactionAvailability Range
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Industrial Logistic Systems (Pty) Ltd
Customer Focus - Availability
Traditional methodsDC or vendor to store service levelStore out of stock ‘walks’Systemised lost sales calculation
New Methods Online shop‘Could you buy everything you wanted?’
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Industrial Logistic Systems (Pty) Ltd
CUSTOMER FOCUS - Availability
Traditional methodsDC or vendor to store service level: 98%Store out of stock ‘walks’: 97%Systemised lost sales calculation: 96.5%
New Methods Online shop‘Could you buy everything you wanted?’
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Industrial Logistic Systems (Pty) Ltd
CUSTOMER FOCUS - Availability
Traditional methodsDC or vendor to store service level: 98%Store out of stock ‘walks’: 97%Systemised lost sales calculation: 96.5%
New Methods Online shop: 92%‘Could you buy everything you wanted?’
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Industrial Logistic Systems (Pty) Ltd
CUSTOMER FOCUS - Availability
Traditional methodsDC or vendor to store service level: 98%Store out of stock ‘walks’: 97%Systemised lost sales calculation: 96.5%
New Methods Online shop: 92% ‘Could you buy everything you wanted?’: 75%
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Industrial Logistic Systems (Pty) Ltd
HOW DID THEY FIX THIS?
Total focus on customerContinuous customer surveysImplement customer corrective action (e.g. more tills, pleasant cashiers, better supply chain for fresher product, better supply chain for more range, better supply chain for more non-foods etc)
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Industrial Logistic Systems (Pty) Ltd
Deliver to Store
Total Supply Chain12.2%
Assemble Order
Supplier Production
& Packaging
?
Process Orders
Deliver to Depot
46%
Replenish Shelves
GatherData
Manage Store
Orders
Manage Supplier Orders
9% 19% 18%
5% 1% 1% 0.5%
Management &
Development0.5%
In 1996 Tesco took a different look at supply chain management
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Industrial Logistic Systems (Pty) Ltd
So what did they do
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Industrial Logistic Systems (Pty) Ltd
HOW DID THEY FIX THIS?
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Industrial Logistic Systems (Pty) Ltd
Less Touches
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Industrial Logistic Systems (Pty) Ltd
Less Touches
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Industrial Logistic Systems (Pty) Ltd
Least Touches
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Industrial Logistic Systems (Pty) Ltd
Least touches
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Industrial Logistic Systems (Pty) Ltd
Least Touches
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Industrial Logistic Systems (Pty) Ltd
Tesco profits break through £2bn Overseas expansion and non-food lines have boosted sales
Supermarket giant Tesco has become the first UK retailer to unveil annual profits of more than £2bn.
The UK's biggest supermarket chain posted underlying pre-tax profits of £2.03bn ($3.83bn), up 20.5% on 2004.
PRELIMINARY STATEMENT OF RESULTS 2005
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Industrial Logistic Systems (Pty) Ltd
A few local examples
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Industrial Logistic Systems (Pty) Ltd
Pick into rolltainer & move to dispatch
Technology Options
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Industrial Logistic Systems (Pty) Ltd
If you use rolltainers you don’t need cages
Technology Options
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Industrial Logistic Systems (Pty) Ltd
Traditional unload method
Technology Options
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Industrial Logistic Systems (Pty) Ltd
Once in the trade, use can be made of tail lifts to unload rolltainers
Tail lifts used throughout the world for many industries
Technology Options
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Industrial Logistic Systems (Pty) Ltd
Lots Touches
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Industrial Logistic Systems (Pty) Ltd
Lots People
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Industrial Logistic Systems (Pty) Ltd
PERCEPTIONS OF SERVICECAREFUL – DIFFERENT PEOPLE HAVE DIFFERENT PERCEPTIONS OF SERVICE:
EXAMPLE:
SA SURVEY – RETAIL INDUSTRY
1. Want to be treated with respect2. Want availability 3. Price
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Industrial Logistic Systems (Pty) Ltd
PERCEIVED SERVICE LEVEL
68%92%FMCG Supplier in RSA
Customers measurement of service
level
Their measurement of service
Organisation
Examples – South Africa:
How to measure actual service levels:
- Number items dispatch on time in full?- Shelf fill level at customer? - Final consumers perception of service level?
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Industrial Logistic Systems (Pty) Ltd
Service is not fill level from warehouse: Example:
Warehouse service level99.999% service
Maximum 30 min from order dispatched To courier (average 18 min)
Up to 24-hours to enter orderUp to 24-hours to approve creditUp to 24 hours to assign phones
Availability new phones often low
But
More Case Studies
Real service level Delivery in full on time from customer first contact
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Industrial Logistic Systems (Pty) Ltd
Lowest cost is not necessarily the Best Example:
Clothing Retailer
Warehouse / DC in Cape Town65% of customers in Gauteng
Low frequency delivery and distant supply leads to:
Long lead timeHigh back end stock roomsDifficulty in reverse logistics Lots of stock outsInability to do intelligent 1 for 1 replacement Off site stock rooms Minimal special orders from customersUnhappy stores Less happy customer
But:Cross dock facilities in Durban & Gauteng
Fixed route deliveriesWe think we have thelowest costsupply chain
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Industrial Logistic Systems (Pty) LtdMore Case Studies
When you stop being customer focused………..
M&S SERVICE LEVELS
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Industrial Logistic Systems (Pty) Ltd
Often Poor
No understanding of total supply chainManufacturers are driven by costsManufacturers are driven by manufacturingLack of service level agreements - Internal- External
AVAILABILITY IN SA?
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Industrial Logistic Systems (Pty) Ltd
Customer needs come firstInternal needs come first
Every day low pricesContinual special offers
Pull system Push systems
Focus on consumerFocus on customer
High availability High service levels
Appropriate costLowest cost
Speed and reliability from demandto customerQuicker delivery
CUSTOMER FOCUSED WISDOM TRADITIONAL WISDOM
REAL VALUECUSTOMER SERVICE IS ALL ABOUT:
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Industrial Logistic Systems (Pty) Ltd
MYTHS:Outsourcing will improve customer service Balanced scorecards / benchmarking will increase customer service Customer service can be achieved without spending on people and facility resources Less / more inventory will improve customer serviceEDI, e-logistics, e-data, e-business will improve customer service
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Industrial Logistic Systems (Pty) Ltd
CORE NEEDS FOR AN EFFICIENT SUPPLY CHAIN STRATEGY:
Intelligent business strategy Treat total supply chain to end userAppropriate infrastructures (facilities, kit and transport, IT, etc)People resources Customer focused strategy
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Industrial Logistic Systems (Pty) Ltd
WAYS THAT WILL IMPROVE SERVICE:Understand what your customers wantsMake sure it is not what you think he wants (or want him to want)Decide to what level you will satisfy these wants Integrate this into a logical business plan Set up a supply chain strategy to meet business plan Set up logical supply channels to marketSet up resources to meet supply chain strategy Always see big picture – not components
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Industrial Logistic Systems (Pty) Ltd
RESOURCES TO MEET SUPPLY CHAIN NEEDS:
Forecasting Inventory strategy Production / procurement planning Inbound strategy and resourcesStorage strategy and resourcesPicking, dispatch and transport strategies (outbound strategies)Delivery and merchandising strategies Payment strategiesPhysical and people resources3rd party resources Technology resourcesIT resources
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Industrial Logistic Systems (Pty) Ltd
RESOURCES TO MEET SUPPLY CHAIN NEEDS:
Not accepting bad decision makingNot accepting less than world classNot accepting “we are different” to anybody elseNot accepting stupidityNot accepting under funding
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Industrial Logistic Systems (Pty) Ltd
RESOURCES TO MEET SUPPLY CHAIN NEEDS:
Not accepting bureaucracyNot accepting corruptionNot accepting “it can’t be done”
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Industrial Logistic Systems (Pty) Ltd
SILLY MEASUREMENTS = SILLY RESULTS
CAN’T HAVE WORLD-CLASS SERVICE IF YOU CAN’T MEASURE / BENCHMARK
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Industrial Logistic Systems (Pty) Ltd
CONCLUSION
Most supply Chains are not customer focusedMost supply chains “worry” about service but:
Measure it badly
Are not prepared to spend money to improve
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Industrial Logistic Systems (Pty) Ltd
THE ENDReal Customer Focus begins at the top. It can only happen with visible, passionate, relentless, commitment by all