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International Supply Chain Education Alliance International Supply Chain Education Alliance
CREATING SHARED VALUE
- Sustainable Competitive Advantage in Supply Chain
Naquib Khan and Ejazur Rahman 18-19 June 2012
AGRIBUSINESS SUPPLY CHAIN – Creating Opportunities through Partnering…
International Supply Chain Education Alliance
AGENDA...
• CREATING SHARED VALUE – Sustainable Competitive advantage
• BASIC CONCEPT OF SUPPLY CHAIN
International Supply Chain Education Alliance
Preface
• What is the hidden lever that can impact the total business performance of any company? What do the best performing companies like Toyota, Wal-Mart, McDonald’s and Dell know that the rest of the business world hasn’t yet realized fully?
• The answer may surprise many of us here: “Supply Chain Management”.
International Supply Chain Education Alliance
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International Supply Chain Education Alliance
What is Supply Chain Management
Supply Chain Management includes planning and
management of all stages that are involved directly or
indirectly in fulfilling customer request. 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.
(Source: http://cscmp.org/aboutcscmp/definitions.asp)
International Supply Chain Education Alliance International Supply Chain Education Alliance
What is a Supply Chain
International Supply Chain Education Alliance
• The objective of every Supply Chain is to maximize the overall value generated
• Value : The difference between what the final
product is worth to the customer and the costs the supply chain incurs in filling the customer’s request.
• Value is strongly correlated with supply chain
profitability (also known as supply chain surplus)
International Supply Chain Education Alliance
The Objective of a Supply Chain
International Supply Chain Education Alliance International Supply Chain Education Alliance
Cycle View of Supply Chain Process
Customer Order Cycle
Customer
Retailer
Distributor
Manufacturer
Supplier
Replenishment Cycle
Manufacturing Cycle
Procurement Cycle
•The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain. • Supply Chain processes can be broken down into the following four process cycles –
•Customer order cycle •Replenishment cycle •Manufacturing cycle •Procurement cycle
International Supply Chain Education Alliance
On-shelf Availability
Freshness, Quality, Packaging
Value for money
Yes, if you are superior
to competition in terms of:
WILL THEY PREFER AND PICK-UP YOUR PRODUCTS EVERY TIME…..?
Consumer mindset
International Supply Chain Education Alliance
COMPETITIVE ADVANTAGE…
1. Superior on-shelf availability and quality
2. End-to-end optimization of costs
3. Superior responsiveness to market dynamics
RELIABILITY
COST
SPEED
• Process integration
• Process efficiency & effectiveness
But How..?
International Supply Chain Education Alliance
Supply Chain is an integrated chain
of business processes, which drives the
business towards meeting consumers’
demand efficiently & effectively.
LOOK AT THE DEFINITION….
International Supply Chain Education Alliance
THE SUPPLY CHAIN CONCEPT IS VERY SIMPLE...
... but hard to implement in practice
International Supply Chain Education Alliance
FROM ‘FARM TO FORK’ – a lot of stages in Supply Chain...
• Process integration
• Process efficiency & effectiveness
Each stage is critical to have ultimate ‘End to End’…
International Supply Chain Education Alliance
FOUNDATION OF SUPPLY CHAIN….
International Supply Chain Education Alliance
SUPPLY CHAIN HAS TWO BASIC ELEMENTS…
1. Information
2. Products & Materials
Supply Chain cannot function properly without any one of them.
‘FUND’ - another element which is required everywhere
International Supply Chain Education Alliance
THE CLASSICAL FLOW MODEL : Physical Supply and Demand Information Flows
ENSURING SUPPLY XYZ Company
Demand & Supply
Planning
Purchasing
Manufacturing
Customer Service &
Distribution
Sales & Marketing (Supply Part)
Distributor/ Operator
Suppliers Consumer
Flow of Products and Materials
Demand Information Flow
Too many interfaces
International Supply Chain Education Alliance
Shoppers/
Manufacturing
Sources of Supply
Supplier
Procurement
Demand & Supply
Planning
Sales & Marketing
Customer Service &
Distribution
Distributor /Operators
EFFECTIVE SUPPLY CHAIN PROCESS DRIVES THE WHOLE BUSINESS EFFICIENTLY….
USUALLY PART OF SUPPLY CHAIN
Consumers
SUPPLY CHAIN STARTS AND ENDS AT CONSUMERS…
International Supply Chain Education Alliance
17
INTEGRETED SUPPLY CHAIN REQUIRES END-TO- END ALIGNMENT FLOW OF PRODUCTS & INFORMATION….
Engine
Consumer &
Customer Insight
Innovation &
Renovation
Demand Planning
Supply Planning
Shoppers &
Consumers
Downstream
Central DC
Regional DC
Regional DC
Direct to Consumer
Direct to Store
Master Wholesaler
Wholesaler
Retailer Warehouse
Physical Retail Stores
Trade Customers, Distributors &
Operators
Order Management & Physical Logistics
Purchasing
Suppliers &
Service Provider
s
Inter-Market Supply
Affiliated Factory
Domestic Factory
Co-Packers
Manufacturing
Factory to Customer
Upstream
International Supply Chain Education Alliance 18
THE 4 SUPPLY CHAIN MANAGEMENT PRINCIPLES…
Optimise simultaneously : Costs, Service/Freshness, Agility
Multi-Functional Supply Chain Processes
Continuous Improvement Driven by Key Performance Indicators (KPI)
Involve all 4 Management and Systems Levels (Strategic, Tactical, Transactional and Physical)
1
2
3
4
?
SUPPLY CHAIN PROCESS IS GOVERNED BY….
International Supply Chain Education Alliance
AGENDA...
• BASIC CONCEPT OF SUPPLY CHAIN
• CREATING SHARED VALUE – Sustainable Competitive advantage
International Supply Chain Education Alliance
CREATING SHARED VALUE (CSV)…
For a company to be successful over time and create value for shareholders, it must also create value for the society…
International Supply Chain Education Alliance
Compliance With all applicable laws and internal regulations
Sustainability Development which meets the needs of the present without compromising the ability of future generations to meet their own needs
CSV ENCOMPASSES SUSTAINABILITY AND COMPLIANCE…
Creating Shared Value is a business strategy, where: (a) shareholders interest and society’s interest strongly intersect and (b) value creation can be optimized for both
International Supply Chain Education Alliance
WE CAN WORK IN DIFFERFENT AREAS…
Leading the thinking
Leading by doing
Leading the dialogue
NUTRITION TRAINING
WATER
RURAL DEVELOPMENT
For Example:
International Supply Chain Education Alliance
SUSTAINABILITY-3R: Reduce, Reuse and Recycle…
• Engage with farmers to promote, support and invest in good water management practices.
• Also engage in water preservation activities with local stakeholders, and share best practice for sustainable water use.
International Supply Chain Education Alliance
SUSTAINABLE COMPETITIVE ADVANTAGE: …working with farmers / suppliers…
• To build Capacity, Skill developement , Knowledge sharing and Technology transfer
• To ensure ‘Consistent
Quality’ of supply • To establish supply links
with ‘Fair Price’ strategy to ensure ‘Value addition’ and ‘Agility’
Creating Shared Value: Optimized value creation
PARTNERING:
International Supply Chain Education Alliance
Services 50%
Agriculture 21%
Industry 29%
6.3% 5.9%
4.6%
FY‘10 GDP USD 99.8 Billion
4.4%
5.2% 5.4%
6.5%6.2%
5.7%6.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1991-95 1996-00 2001-05 FY 07 FY 08 FY 09 FY 10p
GDP growth rate
CONSISTENT GDP GROWTH
HUGE OPPORTUNITIES & POTENTIALS IN BANGLADESH….
International Supply Chain Education Alliance
WE NEED TO DEVELOP RESPONSIVENESS…
e.g. Nestlé Environmental sustainability: 2011 highlights
• Greenhouse gas (GHG) emissions reduced by 17% since 2001. • Water withdrawals reduced by 58% per tonne of product since 2001. • Energy consumption reduced by 42% per tonne of product since 2001. • Renewable energy consumption is 12% of total energy consumption. • Water discharges reduced by 64% per tonne of product since 2001.
International Supply Chain Education Alliance
• Physical test
• Chemical test
• Microbiological test
• Vitamin test
• Mineral test
• Allergen test
QUALITY ASSURANCE FOR FOOD INDUSTRIES REQUIRES FOLLOWING TESTS…
• Heavy Metal, Contaminants
• Microbiological
• Melamine test
• Vitamin, Mineral test
• Authenticity test
• Radiation test
• Pesticide, Antibiotics
• GMO, Micotoxin
• Patulin, Dioxin & PCBs
• Fatty acid Profile
• MCPD
• Boron, Tin , Antimony
International Supply Chain Education Alliance
FOOD SAFETY MANAGEMENT SYSTEMS MUST BE IN PLACE….
8 Mandatory Elements :
• Good Manufacturing Practice (GMP)
• HACCP
• Pathogen Monitoring of Production Environment
• Quality Monitoring Scheme (QMS), covering CCPs, OPRPs and all other monitoring activities related to FPL
• Instrument Calibration, for all instruments used for monitoring CCPs, OPRPs.
• Release System
• Traceability, Lot Identification, Coding
• Recall and Crisis Management
Additional requirements:
• Management Commitment to Food
Safety
• Regulatory Compliance Including
labeling information to
customer/consumer
• FSSC/ ISO 22000 & PAS 220
Compliance
International Supply Chain Education Alliance
QUALITY ASSURANCE AT DIFFERENT STAGES IN FOOD INDUSTRIES……
Raw Materials:
– Vendor approval procedure stringent procedures to be in place
– Natural Resources in Raw Materials :
• Sourcing raw materials from selected suppliers, to be collected from secured firm
• Working with Farmers / suppliers • Higher monitoring on deliveries
- Pesticide Residues & HM • ~ 200 type of Pesticides & 9 HMs are screened.
- Antibiotics & Micotoxins • ~ 50 type of Antibiotics & Micotoxins are screened
International Supply Chain Education Alliance
Monitoring:
– Sampling plans ensure commitment to declaration. e.g. one NIDO fortified packs has ~ 30 nutrients in declaration, we ensure to meet them consistently.
– Chemical contaminants are also monitored.
e.g for a Infant Cereal variant ~ 21 contaminants are tested
QA IN FOOD INDUSTRIES: Continuous monitoring is vital…
International Supply Chain Education Alliance
LIVE EXAMPLE – Creating Opportunities through Partnering…
Nestlé - Requires Honey
Proshikha - Supply Honey
and
Private sector NGO
How Private sector and NGO can work together…
International Supply Chain Education Alliance
Start up:
– Proshika Management agreed on our requirements and Gap assessment done for the whole honey prod. chain
– Made development plan from cultivation of land till
delivery of honey to Nestlé Factory
Proshikha - Honey Supply
How PROSHIKHA is partnering with Farmers to collect Honey and Process Honey…
International Supply Chain Education Alliance
Farmers Development:
Cultivators and agriculture officers of the area were gathered and gave way forward regarding:
Use of fertilizer on the basis of soil analysis Limit pesticide usage on their crops (visited by bees)
Scientific proof of increase crops production due to cross
pollination by honey bees
Proshikha - Honey Supply
International Supply Chain Education Alliance
Crop and Fruit production will be
increased.
Healthy and quality seed
production.
Increased oil production from the
oil seeds.
Substantial income by way of honey production in addition to crop production.
Merits of Bee keeping for the farmers:
Proshikha - Honey Supply
International Supply Chain Education Alliance
Bee Keeper were trained on:
Herbal Bee population treatment instead of antibiotic Hygienic Bee colony maintenance during off season
Honey extraction technique to get maximum output without
affecting the Bee colony
Hygienic preservation of honey till delivery to Proshika
Proshikha - Honey Supply
International Supply Chain Education Alliance
APIARY IN MUSTARD FIELD…
• .
Proshikha - Honey Supply
International Supply Chain Education Alliance
Development of Proshika:
Proper storage of Raw honey Change of processing technique to increase shelf life and
ensure better quality & food safety
Improve overall environment of the manufacturing facility
Analysis facility and monitoring of honey at different stages
Proshikha - Honey Supply
International Supply Chain Education Alliance
THEREFORE, CREATING SHARED VALUE – a Sustainable Competitive Advantage in Supply Chain…
From ‘Farm to Fork’
International Supply Chain Education Alliance International Supply Chain Education Alliance International Supply Chain Education Alliance
THANK YOU
AGRIBUSINESS SUPPLY CHAIN – Creating Opportunities through Partnering…
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