TFC Kick Off Nebraska(1)

Kick Off

• 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

The Challenge

The roles

Finished productComponents

SRM Production CRM

Supply Chain

Purchasing Operations Sales

highestROI

RevenuePrice:

Customer satisfaction *Volume:Portfolio

* Customer satisfaction is calculated from flexibility, reliability, moq’s, leadtimes, offered shelf life, payment terms etc

CostsOperational costs

Improvement projects

InvestmentsInventory

Payment termsMachines

The performance

Individual targets

Role Based onPurchasing Lowest Purchasing priceOperations Lowest Operational

costsSupply chain Lowest Inventory valueSales Highest Revenue

• Three warehouses and overflow warehouses when needed• Two stage production: mixing and bottling•One bottling line and one mixer for all products (at the start)•MtS, leadtime customers of 1 day (delivery next day)

pallets

pallets

Finished product

Components

SRM Mixing CRM

The Fresh Connection’s supply chain

tankyard

Bottling

Assortment

• Two packaging types– Carton– PET bottle

• Three flavours– Orange– Orange C-Power– Orange/Mango

• Shelflife of finished products of 20 weeks

Shelf life

• If the shelf life agreement is 70%, the internal shelf life is 30%.

• Finished products are NOT distributed to that customer if the shelf life agreement is violated.

Shelflife is 20 weeks

Shelf life agreement= 70% Internal shelflife

Market

• Three customers

– Retailer Food & Groceries• 500 stores• Supply chain leader

– Retailer Land market• 300 stores• Discounter

– Chain of gas stations Dominick’s• 50 stores• Only PET bottles

Contract index

Price setting

• You cannot negotiate on sales/purchasing prices• Negotiate on supply chain performance (SLA’s)• This leads to a ‘contract index’• Contract index determines the sales/purchasing

price

• Example (sales)Promise Contract

indexBasic price Sales price

Much 1.1 € 1.5 € 1.65Little 0.9 € 1.5 € 1.35

Important elements

Delivery reliability

Availability components

Production reliability Service level

Leadtime Intake time Frozen period Order deadline

Delivery window

Finished productComponents

SRM Production CRM

Important elements (cont)

Contractindex

Trade unit Lot size Production frequency Trade unit

Contractindex

Bonus and penalty

Shelf life %

Finished productComponents

SRM Production CRM

QuickTour

Additional remarks

• Every round pictures half a year of TFC in a steady state. You don’t have to worry about fade in or fade out effects from one round to the next.

• Out of stock is not missed sales. The Fresh Connection works with backorders to their customers. So they are delivered at a later day.

• Graphs of inventory or demand in time are a snapshot of half a year out of a longer simulation period (to ensure predictable results).

The challenge

• Make this company profitable again• You can take 3,5 years (7 rounds) to do so• The sooner the better

Getting started

• Form a team and distribute roles

• Go to http://game.thefreshconnection.eu/2013 and log in with username/password

• Usernames and passwords are case-sensitive !

• During game SAVE new settings (‘deal’ in Purchasing and Sales)

Good luck