The Fresh Connection 1. Introductions Hans Kremer, CPIM, CIRM, CSCP, partner of Involvation...

The Fresh Connection

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Introductions

• Hans Kremer, CPIM, CIRM, CSCP, partner of Involvation Interactive

• Involvation Interactive is a spin off of Involvation, a consultancy firm specialized in supply chain design and control based in The Netherlands

• In 2008 they developed The Fresh Connection

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Introduction round

• Who are you?

• Your background, company and role?

• What is your experience with The Fresh Connection?

• What are your expectations?

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The program

The Train-the-Trainer program covers

• How the simulation software works

• Learning points of the simulation

• Coaching tips for struggling teams

• Available support material

• Back office functionalities and support

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09.00 - Introductions & Kick off11.00 - Short break11.10 - Round 1 of The Fresh Connection12.30 - Evaluation Round 1 and introduction SC Strategy 13.00 - Lunch14.00 - Round 2 of The Fresh Connection15.15 - Evaluation Round 2 and introduction S&OP15.45 - Short break16.00 - Round 3 of The Fresh Connection17.00 - Evaluation of Round 317.15 - Wrap up of the day17.30 - End

Program day 1

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09.00 - Kick off09.15 - Introduction SCRM and round 4 of TFC10.30 - Evaluation Round 410.45 - Short break11.00 - All role settings/decisions in TFC11.30 - Introduction of Market Dynamics, CO2 and round 5 of TFC12.45 - Lunch13.45 - Evaluation of Round 514.00 - Back office: calculation, scores, users, reports15.00 - Intro External collaboration and round 6 of TFC16.00 - Evaluation of Round 616.15 - Evaluation and Certification16.45 - Wrap up17.00 - End

Program day 2

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Votingsession

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• 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

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Finished productComponents

Supply Production Distribution

VP Supply Chain

VP Purchasing VP Operations VP Sales

The Roles

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Assortment

• Two packaging types– 1L carton– 0.3L PET bottle

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

• Shelf life of finished products is 20 weeks

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• Three warehouses and overflow warehouses when needed• Two stage production: mixing and bottling• Bottling line(s) and mixer(s) for all products• 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

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Shelf life

• If the shelf life agreement is 75%, the internal shelf life becomes 25%

• In other words, if the customer is promised a remainder of shelf life of 15 weeks at the moment of delivery, inventory of finished products may not rise higher than 5 weeks

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

Shelf life is 20 weeks

Shelf life agreement= 75% Internal shelflife

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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

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Contract index

Price setting

• You cannot negotiate directly 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 index Basic price Sales price

Much 1.1 1.50 1.65

Little 0.9 1.50 1.35

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highestROI

highestROI

RevenuePrice:

Customer satisfactionVolume:Portfolio

CostsOperational costs

Improvement projects

InvestmentsWorking capital

EquipmentBuildings

Performance evaluation

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QuickTour

testgig3 16

• Make this company profitable again• You have one round (half a year) to prove you

can do this job

• How?• We make pairs of two people• Each pair has one vote• Hand out ABCD forms• Majority rules

• All roles are played in a very limited format

The Challenge –The Start

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Where do we start?

A. PurchasingB. OperationsC. SalesD. Supply chain management

Results

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A. Current supplier, no changeB. Current supplier, high qualityC. More reliable supplier, high quality and FTLD. Nearby top supplier, high quality and FTL

Purchasing - PET

Trio (current) Trio (high quality) Plantin Philyp Jones

Leadtime in days 10 10 15 5

Service level % 94% 94% 96% 98%

Certified No No Yes Yes

Price (contract index) 0.9620 0.9660 0.9860 1.022

Component price 0.0289 0.0290 0.0296 0.0307

Price (relative) 100 100.4 102.5 106.2

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A. Current supplier, payment term 4 weeks

B. Current supplier, payment term 6 weeks (contract index + 0.21%)

C. Current supplier, payment term 8 weeks (contract index + 0.51%)

D. Current supplier, payment term 2 weeks

(contract index – 0.13%)

• Interest rate is 15% annuallyBack to roles

Purchasing - Oranges

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A. Warehouse size 750 pallet locations

B. Warehouse size 1,000 pallet locations

C. Warehouse size 1,250 pallet locations

D. Warehouse size 1,500 pallet locations

• Inhouse: 200 per location per year• Overflow: 3 per location per day

Operations –Inbound Warehouse

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A. Increase speed

B. Go to three shifts

C. Introduce SMED

D. Introduce preventive maintenance

• Increase speed, costs: 15 K, 10% more speed• Extra shift, costs: 200 K annually• SMED, costs: 10 K, 30% less changeover time• Prev maintenance, takes 3 hours/week, 50% less

downtimeBack to roles

Operations – Bottling

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A. Shelf life for all customers to 70%

B. Shelf life for all customers to 75%

C. Shelf life for all customers to 80%

D. Shelf life for all customers to 85%

• Every 5% increase gives 75 K extra revenue• Every 5% increase means 1 week less time internally

Sales – Shelf life

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A. Service level for all customers to 90%

(- 545k)

B. Service level for all customers to 92.5%

(- 119k)

C. Service level for all customers to 95%

(current promise)

D. Service level for all customers to 97.5%

(+ 68k)

Sales – Service level

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Back to roles

A. Frozen period to 4 weeks

B. Frozen period to 3 weeks

C. Frozen period to 2 weeks

D. Frozen period to 1 week

SCM – Frozen period

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A. All products every day

B. All products every two days

C. All products every week

D. All products every two weeks

SCM –Production frequency

Back to roles

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Which raw material do you want to give a batchsize of 1 week ?

A. Carton

B. PET bottle

C. Orange

D. Vitamin C

SCM – Batch sizeraw materials

Back to roles

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Predictable financial results are important.What do you expect for the next half year?

A. Increase of the ROIB. Decrease of the ROI

Results

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Get Started

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Strategy into actionLevels in version 2013

Theme Sales SCM Operations Purchasing

Level 1 ReliabilityService level

Order deadlineShortage rule

Safety stocks# Shifts

# Pallet locations# FTE

Delivery windowDelivery reliability

Level 2 Batches and frequencies

Shelf lifeTrade unit

Lotsizing in production and purchasing

SMEDIncrease speed Trade unit

Level 3 Speed and quality Payment terms Frozen period

Intake timePreventive

maintenanceSolve breakdowns

trainingRaw materials

inspection

Supplier selectionPayment terms

QualityTransport mode

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Extensionsin version 2013

Theme Sales SCM Operations Purchasing

Extension a S&OPPromotional pressureCategory management

ForecastingProduction interval

toolResource selection Dual sourcing

Extension b External collaboration

Promotion horizonVMI

Outsourcing warehouse (MCC)

Inflate PETVMI

Supplier development

Extension c CO2 footprintSustainabilty

CO2 sla Decrease of water usage

Decrease of energy usage

Decrease of start up productivity loss

Extension d KPIs and targets KPI selection KPI selection KPI selection KPI selection

Extension e Supply chain risk management

Risk eventsRelaunch (horizon) Scenarioplanner

Tracking & tracingQuarantineRisk events

Pooling warehouse FTE

Contract durationSupplier development

Dual sourcingRisk events

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• Divide roles within your team• 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)

• Calculating results is done centrally

Getting started

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Good luck!

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