FCPC Symposium

Supply Chain Think Tank Summaries

April 19, 2012

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»Summary of common issues across Supply Chain functions (across all Think Tank groups)

»Summary of Collaborative Opportunities»Examples of actions and results in various Food

and Consumer Products companies

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Common Issues across all groups» Cost management

» Impacts to cost and/or financial productivity» Information visibility and demand anticipation

» Access to upstream and downstream information that helps anticipate and absorb demand changes

» Supply chain strategy and planning» Supply chain structure and planning decisions that match supply to demand

» Performance measurement and information standardization» Understanding of performance and key supply chain information through

existence (or lack) of Key Performance Indicators (KPIs) or information standards

» Supply chain execution conflicts/mismatches» Anything that prevents the smooth flow of products/transactions within

and between functions

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Collaborative Opportunities»Effort to share planning data (especially downstream sales and

demand data) to anticipate demand spikes and improve planning accuracy

»Cooperative effort to jointly understand and improve supplier/customer factories – will lead to win/win savings, aligned expectations, KPI commonality, information standardization, etc.

» Jointly examine failures in supply chain execution processes to catch and solve defects within and across departments/functions

» Supply chain strategy sessions in which supplier/customer jointly make decisions on site locations, manufacturing and inventory strategies, use of third parties, etc.

»Define cross-supply chain KPIs and performance management to optimize the extended supply chain

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Colour coded affinity of common issues across all bullet points

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Common Issues across all groups»Cost management in a productivity-focused

environment»Information visibility and demand anticipation»Supply chain strategy and planning»Performance measurement and information

standardization»Supply chain execution conflicts/mismatches

Logistics »Order Size, Frequency, Supplier Mgmt.

Relationships, Velocity, Lead Time, Customer Expectations

» Lack of Visibility to Forward Demand»Cost of Fuel» Labour»Driver Shortages»Regulations

Logistics cont.»Truck Capacity»Asset Availability»Cost of Real Estate»Core Business Hours – Now 24/7»Network Design Challenges»Ability to Respond – 3PL»OTR vs. Intermodal»Delivery Performance/Carrier Metrics»Accessorial Charges

»Customer Base Expansion»Customer Fleet Mgmt. – Cost»Push vs. Pull – Over Production from Plants»In-Bound Unloading Schedules»Food Safety»Emergency Response Plan»Food Security»Cross-Border Regulations & Inspections»Package Design

Logistics cont.

Manufacturing » Forecast accuracy

» Inventory Carrying Cost» Production Costs

»Procurement»Transportation»Capitol expenditures for capacity

» Cost of poor Quality»Scrap»Rework»Downtime

»Maintenance costs and overhead

Manufacturing cont. »Throughput Efficiency» Lack of common production metrics across the

supply chain» Skilled labour shortage»Packaging costs»Design costs

»Especially running design changes

Warehouse »Retail Ready Packaging

»What is the true definition»How will this affect our future

» Forecasting models Vs Plant batch/run sizes»Basic fact we are always in the middle between

sales and production» Increasing demand in Customer freshness

requirements» SKU rationalization opportunities

Warehouse cont. » Lack of Industry Standards in Retail Demands

»Pack size»Order size»ASN requirements»Compliance fees»24/7 coverage»Labeling »Box Coding»Complex shipping specs and delivery requirements»Customer Pick-up

“Inside the Warehouse” » Skilled labour» Automate vs. Manual vs. Flexibility vs. Cost

»How do we determine the best solution» Operational efficiency

»Temperature controlled cost optimization»Maintenance costs»Cases per hour»Cost per case»Pick accuracy»Damage

» LIFO , FIFO and FEFO (First Expired First Out) how to organize

“Inside the Warehouse” cont. » Destruction Costs » Basic understanding that Warehousing is moving

from a “cost of doing business” to “need to optimize”» Consolidating opportunities, when and how. » Distribution Network Optimization » Possibilities to share resources

»Cost and over head is shouldered individually» Owning vs Partnering vs Multi-partner vs 3rd Party

Customer Service #1»Anything that prevents the smooth flow of products/orders»Outcome of any discrepancies caused by interruptions in

product/order flow (i.e. fines)»*Data integrity (general)»*Retailer fines process more aggressive and starting to

involve customer service – requires new skills in customer service

»Pricing mismatches (internal and external)»Mismatch of information between sales, category managers,

and customers regarding pricing, timelines, new product introductions

* High importance

Customer Service #1 cont.»Product availability and availability date – mix of

attendees have ATP. One-offs and small shortages particular issue. Often don’t know when product is short until after should have shipped

»Differences between customer forecasts and what was ordered leads to product allocations

»Booking customer appointments to deliver at customer. Some companies leave that task to carriers

Customer Service #1 cont.»Expediting due to:

» Customer replenishment setup» Forecasting errors

»Deduction management (difference between what’s received vs. what was ordered

»Reconciliation of all returns (store, distributor/DC) for various reasons (discontinuation, past shelf life, seasonal, quality, damage, pick error)

»Trade funds deduction vs. payment by check for invoices»Productivity major focus area

Customer Service #2»Scope of the discussion:

»Order-to-Delivery»Who is the customer?

»Retailers»With respect to the above, what are manufacturers

biggest pain points?

Customer Service #2 con’t»Brainstorm output unfiltered:

» Lack of technology at retailers»i.e. Dock Scheduling Softward

»Warehouse capacity»Number of doors»Warehouse space

» Incremental charges»Off-loading»Detention

Customer Service #2 con’t»Brainstorm output unfiltered (Con’t):

»Preferred carriers» Lack of communication within and across retailer

functions»i.e. Supply Chain vs. Merchandising

» Lack of communication across manufacturer functions»i.e. Sales vs. Supply Chain

»Manufacturers SC resources act as brokers, can influence but have no authority

Customer Service #2 con’t»Brainstorm output unfiltered (Con’t):

»Within manufacturers organization:»Lack of Sales visibility/accountability to Supply Chain

needs»Conflicting reward systems across functions (Sales

vs. Supply Chain)» Reactive efforts saps time of SC resources

»Prevents value-add customer service» Lack of common measures of success across trading

partners (Sales/Marketing/Manufacturing/Distribution)

Customer Service #2 con’t»Summary

1. Lack of common success measures across trading partners (functions)

2. Lack of alignment of reward systems across functions3. Lack of communication

»Across manufacturers functions»Across and within retailer functions

» Leads to inefficient use of manufacturer resources and less effective processes to serve the customer (retailer)