Supply Chain Conference 2010 Executive Summary

12th – 14th October 2010 • Berlin, Germany

www.tcgfsupplychain.com

E x E c u t i v E S u m m a r y

Supply Chain Conference 2010 - ExECutivE Summary2

WHat iS tHE CONSumEr GOODS FOrum? the Consumer Goods Forum (CGF) is a global, parity-based industry network, driven by its members. it brings together the CEOs and senior management of over 650 retailers, manufacturers, service providers and other stakeholders across 70 countries and reflects the diversity of the industry in geography, size, product category and format. Forum member companies have combined sales of Eur 2.1 trillion.

the Forum was created in June 2009 by the merger of CiES - the Food Business Forum, the Global Commerce initiative (GCi) and the Global CEO Forum. the Consumer Goods Forum is governed by its Board of Directors, which includes 50 manufacturer and retailer CEOs and Chairmen.

the Forum provides a unique global platform for knowledge exchange and initiatives around five strategic priorities – Emerging trends, Sustainability, Safety & Health, Operational Excellence / New Ways of Working together and Knowledge Sharing & People Development – which are central to the advancement of today’s consumer goods industry.

the Forum’s vision is: “Better lives through better business”. to fulfil this, its members have given the Forum a mandate to develop common positions on key strategic and operational issues affecting the consumer goods business, with a strong focus on non-competitive process improvement. the Forum’s success is driven by the active participation of the key players in the sector, who together develop and lead the implementation of best practices along the value chain.

With its headquarters in Paris and its regional offices in Washington, D.C., and tokyo, the CGF serves its members throughout the world.

For more information, please visit www.theconsumergoodsforum.com

WHat iS tHE SuPPLy CHaiN CONFErENCE?the Supply Chain Conference is the meeting place for Supply Chain & Logistics executives in the retail and consumer goods industry. the objective is to anticipate future trends and challenges, share practical experiences, including benefits found and lessons learned. Participants have many opportunities to network and exchange views on the top-of-mind issues that are discussed during the conference.

Supply Chain Conference 2010 - ExECutivE Summary 3

the Supply chain CommitteeDelighting the Consumer. acting as One.

► TONY VENDRIG, Executive vice President Business Development, aHOLD EurOPE, the Netherlands (Committee Co-Chairman)

► JOHN S. PHILLIPS, vice President, Customer Supply Chain & Logistics, PEPSiCO, uSa (Committee Co-Chairman)

► PETRA ALBUSCHUS, Senior vice President Logistics, iCa Sverige aB, Sweden

► MARK AYLWIN, managing Director – BOOKEr DirECt, united Kingdom

► TONY BORG, vice President - Head of Corporate Supply Chain, NEStLÉ GrOuP, Switzerland

► RICK CICCONE, Chief Supply Chain Officer / integrated Supply Chain, mC CaiN FOODS, uSa

► KEVIN DOUGHERTY, Group vice President, Chief Supply Chain Officer, tHE KrOGEr CO., uSa

► MARTIN GLEISS, Supply Chain & Logistics manager, SPar, austria

► DIRK HOLBACH, Global Supply Chain Operations, Laundry and Home Care, HENKEL KGaa, Germany

► TAKAO IWAMOTO, President, ÆON Global SCm Co. Ltd., Japan

► SHARON JESKE, Director, Operational Excellence, tHE CONSumEr GOODS FOrum

► GREG KETCHUM, Senior vice President, Global Supply Chain Strategy, KELLOGG COmPaNy, uSa

► LUC KOENOT, Senior vice President Supply Chain & it, DELHaiZE GrOuP, Belgium

► HERBERT KUENG, Director Customer Service & Logistics CEEma, KraFt FOODS iNtErNatiONaL, austria

► KERRY McNAIR, Director, Global Supply Chain, Walmart Group, tHE COCa-COLa COmPaNy, uSa

► ANDREAS MÜNCH, member of the Executive Board, Head of Department Logistics & it, miGrOS, Switzerland

► STEFANO PIETRONI, Network Design Planning & Sourcing Director, BariLLa, italy

► JIM RADIN, vice President – Global Supply Chain Operations, mC COrmiCK & CO., iNC., uSa

► GERHARD ROUX, Group Chief information Officer/ Supply Chain, tHE Dairy Farm, Singapore

► JOZE SADAR, Senior Executive Director, Category management, Logistics and internal Production, mercator Operations Slovenia, mErCatOr GrOuP, Slovenia

► NUNO SERENO, Supply Chain Director, JErONimO martiNS, Portugal

► YANNIS SKOUFALOS, vice President Product Supply Global Operations, PrOCtEr & GamBLE, uSa

► ANTOINE VANLAEYS, Supply Chain Director, L’Oréal Consumer Product Division, L’OrÉaL, France

► MICHAEL WHITING, Director, Global Strategic Operations, JOHNSON & JOHNSON, uSa

Special Advisors to the Committee

► VALENTIN ELISTRATOV, vice President Business Development international Supply Chain, EmEa, DHL ExEL, Germany

► JACKY GERVIS, Co-Chief Executive Officer, Fm Logistic, France


tuesday 12rd OctoberStore tour Programme

kindly sponsored by



Participants were warmly welcomed by


Wednesday 13rd October

Tony Vendrig, Executive vice President, Business Development, ahold Europe, the Netherlands and Co-Chairman of the Supply Chain Committee

John S. Phillips, vice President, Customer Supply Chain & Logistics, PepsiCo, uSa & Co-Chairman of the Supply Chain Committee

Opening the conference, tony vendrig welcomed 190 participants from 28 countries to Berlin. Some 42% of participants were retailers and 15% were manufacturers.

vendrig said the conference was a unique opportunity for “learning best practices and expanding our knowledge base”. He added that it was valuable to “get a feel for what your colleagues are facing”.

What’s New about your association?Jean-Marc Saubade, managing Director, the Consumer Goods Forum

the Consumer Goods Forum is not “one more association” but rather, the vehicle through

which the industry can finally speak in one voice. Launched in June 2009, in New york, with the fusion of CiES –the Food Business Forum with the Global Commerce initiative and the Global CEO Forum, the body aims to drive unified collaborative action on non-competitive issues. “the CEOs of your companies were sitting on too many boards and going to too many

meetings, in which they were talking about the same things,” Saubade explained. “at the same time, the industry is not talking in one voice. We are not in the driving seat.”

the Consumer Goods Forum members have combined sales of Eur 2.1 trillion: an organisation with enormous collective influence. the board of directors brings together the CEOs and chairmen of 25 retailers and 25 manufacturers. the board positions cannot be delegated, so the decisions are made by the people who can “really get things done”. Driven by its vision of “Better Lives through Better Business,” the Forum has a mandate to make collaborative

work accessible to all companies, for the good of the industry. “We work on things that can only happen when we unite,” Saubade underlined. these include, among others, food safety, sustainable packaging and carbon measurement, stripping cost from the supply chain and information sharing and are arranged under five strategic pillars:

1. Emerging trends2. Sustainability3. Safety & Health4. Operational Excellence / New Ways of Working together5. Knowledge Sharing & People Development

the Forum is not a lobby but nonetheless aligns itself strategically with lobbying groups in the regions, such as Gma, Fmi, Errt, EuroCommerce and so on. “We still need to influence legislation in various countries,” Saubade asserted. the connection in the regions is made via local Efficient Consumer response (ECr) groups. the Forum also aligns with GS1: global projects need global standards. the idea is to avoid duplication and pursue a single industry agenda.

Welcome to the Supply Chain Conference 2010


Welcome to GermanyJörg Pretzel, CEO, GS1 Germany

GS1 Germany took an audit on emerging trends in the German market in 2006 and used the findings to create a roadmap.

megatrends include demographic shifts (today 20% of the population is over 65; by 2060 it will be 30%), globalisation and ecological developments. among the more focused trends is the explosion of mobile internet technology, driving new consumer mindset. there is increasing use of price comparison software in store, for example. a multi-channel offer is expected, with a single seamless brand experience. Consumers are asking for price, quality, health and wellness, sustainability, virtual and extended information and support for mobile technologies. the challenge is to find the right balance between cost-efficiency and these shopper expectations.

technology is also enabling a more collaborative approach to data exchange, organisation and processes. in Germany,

legislation has been passed enforcing compliance in sustainability, energy efficiency and emissions, use of renewable energies, consumer health, data protection and track and trace. Global requirements along the same lines will lead to new targets for all involved parties. Sustainable logistics will have an important role to play and cooperative logistics solutions are central to success, such as share use of infrastructure and the bundling of goods. increased urbanisation throws up logistics challenges. “City hubs are needed,” Pretzel says. “you can’t drive a 7 ton truck into the city.”

GS1 holds that is only possible to meet these challenges by taking a collaborative approach between retailers and manufacturers; it endorses the ECr approach to collaborative process improvement.

Challenges of the German retail Landscape by metro Cash & CarryArnd Riehl, Chief Operations Director, metro Cash & Carry Deutschland GmbH, Germany

metro Cash & Carry accounts for 50% of metro Group’s business. the German market is saturated with retail space and characterised by fierce competition. there is

constant downward price pressure”, driven by the discount sector. Consumer behaviour has changed: there is declining customer loyalty, “hybrid behaviour” (e.g. high-low shopping), a “spend-now” mentality. this is coupled with increased mobility and a transparent marketplace due to the availability of comparative

price information on the internet. metro Cash & Carry’s reaction to these market changes has been to “go back to basics”. the company has been restructured to focus on: assortment, customer orientation, stores and service. the company is investing Eur 100 million in the modernisation of all its stores. Since 2005 it has been

revising its space allocation to achieve the right ratio of food, non-food, fresh and dry; it has optimised strategic and destination departments and improved customer flow. When it came to assortment, metro intensified its focus on “destination categories” to strengthen the uSP: a concentration on freshness and quality, mass merchandising and innovation. it targeted its core Hotel, restaurant and Café customer group with an augmented range of private label products, under the Horeca Select brand and introduced some SKus under the premium private label brand Fine Food Finestro. to attract new customers it introduced innovative new products to the assortment, such as gourmet meats by region and strengthened the own brand offer via promotions. Own brand share increased by 2% within a year.

to better cater to Hotel, restaurant & Café customers’ need for convenience, a drive in concept was developed. Customer order goods by phone or e-mail and collect them at the drive-in location. metro is also working on a new fresh fish platform for Q4 2010: run and organised by metro, the platform will incorporate a modern logistics hub in Frankfurt and eliminate third-party vendors, leading to 48-hour reduction in lead times and improved quality. But with Hotel restaurant & Café customers it is not enough to sell food. metro offers a complete service including shop fits, consultancy and finance.

Back to Basics – the German Market


Fresh at albert Heijn: an integrated Customer-Driven replenishment and ProductionPeter van Kralingen, vice President replenishment, albert Heijn, the Netherlands

Nine out of the ten most-scanned products at ahold banner albert Heijn are from the fresh category. “Our customers come for fresh,” Peter van Kralingen says. “if the fresh is not

available we will lose our customer.” in fresh, albert Heijn works one-to-one with dedicated suppliers in a long-term commitment. albert Heijn operates 835 outlets across five formats. it serves them with 13 million cases a week via an integrated, centralised ordering system, in which POS data drive just-in-time deliveries and allow low stock levels. there are three national warehouses for chilled and ambient and four regional combination warehouses. Lead times range between nine to 18 hours: “We can react on customer behaviour within nine hours,” Kralingen confirms. Shelf availability and store appearance are the KPis. it was necessary to move to a centralised system to remove complexity from stores. “We want to make it easy, to take work out and let the store focus on the customer.” that means conducting the entire supply chain from shelf back to supplier. the replenishment process at HQ is therefore entirely responsible for product availability and appearance in stores.

the “self-learning” system takes POS data from stores and integrates it with other indicators such as seasons, events, promotions, weather forecasts and historic demand patterns to

create a demand forecast (the more years you run the software the more comparative data there is, hence self-learning). Central replenishment integrates this with actual store orders and checks against KPis. it then feeds the data on to the warehouse management system (WmS), which generates an inventory report. the complete set of data then flows to the supplier’s ErP system to drive production. the variables, such as weather, are critical comparing perceived demand generated by POS against forecast demand and modified accordingly: “When it’s 25 degrees outside, you need lots of Coca-Cola, not so much sauerkraut.” Kralingen emphasises that it’s a team effort: “Consumer behaviour is the starting point in our thinking, processes and integrated systems. together with our suppliers, we make it happen.”

information Substitutes Stock -the Parfümerie Douglas’ Way of Supply Chain managementJörg Strüning, Head of Organization, Parfümerie Douglas GmbH, Germany

Douglas is a decentralised group of 1,220 stores in 22 countries. the company values the regional

autonomy that decentralisation brings to store managers, but direct store delivery (DSD) and manual buying at store level was adding cost and complexity. the company wanted to remove DSD, but did not want

to manage a central warehouse, which was considered a misfit for a decentralised group. the solution was integrated cross docking, managed via the company intranet.

under this model, store deliveries are always handled by cross docking. imports and private brands are handled using their own warehouses and can then either pass through cross docking or go direct. Efficient handling of cross docking however, places stringent requirements on all partners. Suppliers need excellent product availability and delivery reliability. they must also be compliant with the cross docking delivery terms. Douglas stores

need to comply with approved use of order channels (via EDi) and bundle orders at the specified times. the 3PLs must have a flexible employee deployment, offer synergies in deliveries and use of logistical floor space and provide excellent handling of high-value/sensitive products. it is essential to link EDi processes, including the use of SSCC (NvE in Germany) barcodes, with suppliers to reduce manual data recording and duplication of effort, to ensure rapid data exchange. more than 90% of transactions are already being handled by EDi. Orders for 91 of Douglas’ largest suppliers (88% of orders) go via EDi (SaF Superstore), with e-mail used for smaller suppliers that are not yet EDi compliant. 69 suppliers provide EDi invoices (85% of all invoices). implementation of SaF Superstore brought sustainable inventory reduction while cutting out-of-stock rates. the use of SaF Superstore for purchasing requires joint action from all the industry partners: “Close contact with ECr was very important to make the whole process a success.” For partners, the process brought the following benefits: improved top seller availability, increased sales in top seller segment, reduction of returns, bundling effects, optimised capacity planning and preventing serious demand fluctuations. Douglas’ logistics strategy won two awards: the 2006 GS1-ECr award and the 2009 GS1 Corporate award, in recognition of its systematic development of the ECr approach.

Back to Basics – On-shelf availability


National transportation OptimizationThomas Paroubek, SCm -Coordinator of m-industry-Group, migros, Switzerland

migros is a Swiss retailer and manufacturer. it faced increased prices pressure from national competition and competition from neighbouring countries. a general

increase in transportation costs due to rising taxes put additional strain on the business. the company set an objective, therefore, to reduce national transportation costs by 10% or CHF 40 million. an internal team was set up in collaboration with a third party, to implement a five-point process:

1. as-is analysis: all movement data was recorded for one year, giving certainty when calculating savings. “When you have facts and data, you can argue against the ‘we have always done it like this’ mentality.”2. Outline concept: all possible savings measures were scoped at this early stage and a number of scenarios were submitted to the management board. “Political discussions came into the equation,” Paroubek admitted.3. Detailed concept: Nine concrete measures were proposed: optimisation of distribution transports, optimisation of migros/3PL trucks, adaptation of supply

and delivery time slots, national transport optimisation for all players, procurement, procurement transports organised by migros (factory gate pricing), increase of 5-10% in capacity, optimisation direct/transit (train for longer distances),reduction in delivery frequency and renegotiation of cargo contracts.4. Commitment: savings verified with all parties, principles

jointly established, agreed and signed. a signature helps to achieve a higher level of commitment. this, however, requires a critical mass of signatories.5. Control: measuring, reporting of savings. “Because of the constant controlling, transport optimisation always remained on the agenda.”

the move brought annual savings of CHF 45 million, above the 10% target. However measures alone will

not ensure success. Success factors include: senior management buy-in, reliable basis for figures and simplicity of measures, communication and permanent involvement of all the parties.

Sustainable transport at DelhaizeTanguy t’Serstevens, vice President retail Support Services Supply Chain, Delhaize Group, Belgium

Delhaize Belgium handles 85% of its logistics itself, delivering 1.2 million cases a day to 800 stores. the logistics network is characterised by a high level of centralisation (exceptions are

fresh bread, Coca -Cola and newspapers). the challenge the company faced was twofold: firstly, it needed to evolve its logistics operation to handle smaller stores with a smaller drop size, handle shorter expiry dates and reverse logistics. Secondly, it wanted to address carbon footprint, waste and recycling. Some years prior, it had introduced a semi-automated warehouse for non-food and Health Beauty Care, voice picking in all its traditional warehouses and started using rFiD tracking on crates. Now Delhaize has deployed a semi-automated warehouse for “ultra fresh” products, using rainwater harvesting and solar power.

in transport, double deck trailers increased load capacity by 60% and took trucks off the road. the trailers, with adjustable floors, allow Delhaize to maintain different temperatures in each section. the rOi came in less than two years and these are now being rolled out. Noise is also an issue. “it is more and more difficult to get the authority to deliver at night,” t’Serstevens said. However, the research institute of the Dutch ministry of Economic affairs, SenetrNovem, has a noise reduction project and certification scheme called Piek. through this, Delhaize was able to deploy “silent” technologies, achieve certification and obtain the necessary authorisation to make urban deliveries at night. a move to compressed natural gas as a fuel produces far

lower emissions than diesel or gasoline, along with a 50-75% noise reduction and an rOi in five years. another key project has been to transfer the silent technology to the DC environment.

meanwhile, GPS trailer locators are used to see the location of any truck in real time, across Europe. Part of the same system is a temperature monitoring functionality which generates a warning if the cold chain is ruptured and shows where the rupture occurred. a fuel meter generates and alarm in case of fuel theft and door sensors detect and report back if the trailer is opened outside a warehouse or store: key moves in detecting fraud. the “blue box” system is being rollout out to fresh in 2011 and to dry in 2012.

Dock scheduling has brought a better DC workload, helping resource forecasts and bringing down waiting times, while missions are managed by a GPS board computer. Drivers must accept missions and register them as completed. Delhaize can see

in real time who is available and in which location. this allows geofencing and central dispatching: “a very controlled and efficient process”. the future promises a far more optimised approach to transport in Europe. the current model of truck-only direct linear flows with partial loads will be replaced by a circular “milk run” in which both deliver and bring back. Flow consolidation will allow up to four suppliers in the same trailer and maximise load.

Back to Basics – Sustainable Transportation


Networking at Supply Chain Conference 2010




tescoKipa in turkey supplies 45 hypermarkets and 76 Express stores via a single DC in izmir,

a port on the aegean coast. Even though the stores are concentrated in Western turkey, this still means long journeys to supply stores up to 962 km away. transportation is, then, a huge cost and challenge for the growing

business. adding to the brew are high fuel prices – “We use the most expensive fuel in the world.” transportat ion costs are unstable in turkey and

many drivers are unqualified. Equally important is the impact of transportation on CO2 emissions. tescoKipa has set itself the goal of becoming carbon neutral by 2050 and reducing emissions per case delivered by 50% before 2012. to do this, the company is following a rule called 4F:

1. Less fuel.2. more fill.

3. Faster deliveries.4. Less fragmentation.

the first being a function of the second, tescoKipa is using insulation blankets to maintain varying temperatures within the same vehicle, allowing it to consolidate fills. it has also moved to double decker trucks, allowing 20% more fill.

the company could achieve greater business continuity, higher service and more stable costs by using its own fleet exclusively. However, it is hard to source funding for such an investment in times of financial crisis. it would also force tescoKipa to bear the costs of down time. using third party logistics providers (3PL) exclusively would take away these risks but add others, such as the risk of 3PL bankruptcy, less visibility on root causes of cost and lower service quality. the breakthrough solution? use both, with a 60-40 split in favour of wholly-owned. using a number of 3PLs will distribute the risk. this solution maximises the gains from both approaches while minimising the disadvantages. the mixed transport approach saved tescoKipa uSD 195,000 in 2009. the move has brought shorter delivery times, more fleet capacity, shorter driver hours, a flexible delivery schedule, cheaper fuel prices, less vehicle maintenance costs, stable Km prices and a stable own driver cost. the whole 4F plan brought total savings of uSD 768,000 in 2009. a second DC in istanbul and a third in ankara are being considered.

Sustainable urban Delivery and yamato’s Focus on the Last CentimetreKatsuhiko Umetsu, account Executive, Business Development/Global Customer Solutions, yamato transport Co., Japan

the yamato transport Company in Japan moves 3.8 parcels a day. it strives for ultimate customer satisfaction by focusing on the “last one centimetre” of a parcel’s journey from sender

to recipient. its business model is based on the conviction that high quality service as a starting point will drive volume; volume will drive density of operation, leading to profitability, which can be reinvested in service quality. Service quality manifest as:

1. Customers choose their own delivery time from six two-hour windows per day.2. in the event of absence, customers call their driver directly to arrange a re-delivery. yamato offers a quick response and no-fee holding.3. Focus on “personal delivery” rather than home delivery.

as a result, yamato was ranked 8th overall among high quality service companies by a Japanese ministry of Economy, trade & industry consumer survey, just below amazon. it ranked third for “perceived quality” and second for “customer expectation”. this satisfaction, umetsu maintains, is driving volume growth, up from 34.6% year on year in 2005 to 38.7% in 2009. Density is increasing

in step: “yamato covers all over Japan like capillary vessels,” umetsu says. the company delivers 1.3 billion parcels and operates 6,293 delivery centres and 260,920 collection agents. Customers can drop off a parcel almost wherever they like, so widespread are the collection points. However, despite its volume increases, yamato has set itself tough emissions targets. Some of the ways it has set about reducing emissions is to dispatch parcels by foot, by bike, by bus and subway. “Our employees get healthy,” umetsu explained. and, about that last centimetre: “We are not merely delivering a parcel to an address. We are bringing a touch to a person.”

Practical Ways in turkey to minimize transportation Costs from DC to StoresOsman Dogrucu, Distribution Director, tescoKipa, turkey


insights into the Future value Chain 2020Nigel Bagley, Director, industry affairs, unilever, united Kingdom

the Future value Chain was launched in 2006, to “get 30 to 40 people in a room to explore trends”. Nigel Bagley describes it as “self-driven, not a consultant

report”. the project, facilitated by consultancy firm Capgemini, focuses on creating a ten-year vision of the future, updated every two years. thus 2006 brought the 2016 value Chain and subsequent reports have produced the 2018 and 2020 value Chains. the 2016 project threw up three areas for work: the future supply chain, the sharing of business information and data via GS1 standards and “New Ways of Working together” – a roadmap for implementing collaborative work. Bagley says that boards engaged with the 2016 report and used the Future value Chain to drive their agenda. By 2010, the programme had evolved into a process for “building strategies for a new decade”. the identification of trends leads to the setting of objectives, which demand the development of tactics. Emerging trends highlighted as coming from the program include:

1. increased urbanisation: new approaches to logistics and store formats are needed.

2. aging population: older people have different needs – more single-person households require a rethink on pack sizes.

3. increased consumer technology: Bagley focused on the opportunities for brand-retailer collaboration around Qr codes, a barcode-like format, which can be scanned by consumers’ smart phones to reveal much richer data than the uPC/EaN, such as traceability information, brand-building promotions and so on.

4. the rising cost of carbon fuel: what does this mean when the average uS consumer drives 20 miles to a store and 20 miles back?

Bagley said four global industry strategic objectives had been agreed via the programme: make our business more sustainable, optimise a shared supply chain, engage with technology enabled consumers and serve the health & wellbeing of consumers. “We are comfortable that the Consumer Goods Forum has a range of projects in place to help deliver on these,” Bagley said. He added that manufacturers and retailers “need to fully support the industry programmes that are underway globally, regionally and locally”.

the Future Value Chain

conference Moderators

Petra Albuschus, Senior vice President Logistics, iCa Sverige aB, Sweden

Luc Koenot, Senior vice President Supply Chain & it, Delhaize Group, Belgium

Networking Dinner




Supply Chain Efficiency means investing in accuracy and trustMarko Cedilnik, Executive Director of Logistics, mercator, Slovenia Rok, Gajšek, Logistics Project manager, mercator, Slovenia Srečko Bukovec, Director of Projects, mercator Operations Slovenia, mercator, Slovenia

throwing money at problems is not working. the way to evolve is to re-engineer basic processes. this requires an investment in trust, the team from mercator argue. People will trust

what they can understand, which means the best solutions are the simplest ones. mercator set an objective to raise the accuracy level of goods control. Store managers had not been confident in the delivery process and were double checking each order received, taking up labour time. the solution was to use “end control with scales”, or EaN scan followed by weight control.

this means you need to know the weight of each SKu in the warehouse, along with the tare weights of the roll cages used. But once this data is known, the weight of each SKu is linked to its EaN. this allows the system to calculate the weight of an order in advance. When goods are picked and loaded onto a roll container at the DC, the picker will weigh the completed order. if the calculated weight and the actual weight match then a barcode sticker is generated and the order can proceed.

if not, the picker will have to correct the mistake. the sticker, therefore, becomes “a symbol of proven accuracy”. that means when managers see it, they can trust it. the process convinced store managers to omit the double check and free up their staff time. it also eliminated the human error factor, both at the DC and the store. as a result, more than 500 full time employees have been able to focus their attention on customers instead of the back room.

thursday 14th October

Back to Basics – Supply Chain Efficiency

Marko Cedilnik, Executive Director of Logistics, mercator, Slovenia

Rok, Gajšek, Logistics Project manager, mercator, Slovenia

Srečko Bukovec, Director of Projects, mercator Operations Slovenia, mercator, Slovenia


Supply Chain Efficiency at Food DiscountersMirko Warschun, Partner, Head of Consumer industries & retail Practice DaCH, a.t. Kearney GmbH, Germany

the noted efficiency of discounters’ supply chains is driven by both the structural and non-structural advantages of the format. Structural advantages include a tightly focused

assortment and a large number of highly standardised outlets, leading to a high-density network that is easy to supply. On the non-structural side, shelf-ready packing (shelf-ready packing at discounters is close to 100% versus around 37% in non-discount) leads to efficient and cost-effective replenishment. Separate presentation costs around 2.5-3% of net sales, while shelf-ready packing brings this down to 1.5-2%. On-pallet display reduces this to 0.8-1%. a consistent “no-frills” approach, smart innovations and focused investment in the supply chain add into these. the limited number of SKus makes for very high productivity and stock turn. aldi Süd, for example, has a sales density of Eur 9,964 per square metre, compared to Eur 3,722 at an average sized supermarket (1,500 square metres). this is by far the strongest driver of efficiency from a supply chain perspective: the discounter benefits from a lower production cost and higher buying power per SKu, due to scale. there is a higher likelihood of full truckloads with this model and more use is made of cross docking, leading to less complexity for storage and warehouse management. the discounter also achieves higher labour productivity by flexible roles in store and efficient stocking methods. there is higher space productivity due to the high stock turn, meaning less backroom storage is required. this strips cost from the replenishment process

and keeps labour costs minimal. the high density of the store network also means that shorter distances are required for replenishment. that store layouts are standardised worldwide allows for efficient replenishment logistics; indeed the layout is driven by the needs of efficient logistics and not the reverse.

However, the boundaries between discount and “non-discount” retailers are now blurring, as both sides learn from and mimic each other. For example, more and more traditional grocers are practicing SKu rationalisation, increasing the share of private label in the assortment, focusing on low price and adopting channel-specific logistics. meanwhile discounters are adding brand names, extending their ranges and spending more on marketing. Warschun warns that both sides should avoid blurring the line too far, since each model has a differential advantage with consumers.

Paltac’s Five-Nine (99.999%) Logistics Service LevelToshiyuki Sakai, Executive Director, Chief information & Logistics Officer, Paltac Corporation, Japan

Japanese wholesaler Paltac moves Health Beauty Care and Over the Counter pharmacy products

across Japan via 15 regional DCs, supplying 4,000 drugstores and convenience stores and provides in-store merchandising solutions. toshiyuki Sakai said that Japanese wholesalers were specialists in

handling multiple formats, in creating services customised to individual stores and in shared services. Paltac eliminated all non-value added activities throughout its supply chain and achieves

99.999% service accuracy through EDi based transactions, while picking is double checked by scanning JaN/itF barcodes and measuring weight. its systems are custom-made. at receiving, actual receipt data is checked against aSN data. For case picking, Paltac uses an automated storage and retrieval system. Labels are added automatically when cases are picked. the loader works with a computerised sorting system (aDELS) operated by a footswitch that won’t allow mistake to progress. For piece picking, Paltac

uses an automated carton cutter and automated replenishment system. at the picking and loading stage the employee uses a picking cart with a weight checking function and passes this to a robot (atOm) that sorts the pieces into plastic totes. many of the supporting technologies were developed and patented by Paltac, which means they are 100% fit for purpose.

taKEaWayS

1. the technologies and processes to create the Future value Chain already exist.

2. regional differences created local knowledge that can be shared and used to create future business models.

3. High service levels create new business opportunities and cost is not always the critical factor.

4. Cooperation and collaboration is more important than ever.


Operational KPis Leading to Cost Excellence internally and ExternallyFrançois Olsthoorn, Head of Physical Distribution CEEmEa, Procter & Gamble, Switzerland

a breakthrough in cost control proved to be a game changer for Procter & Gamble. the Central &

Eastern Europe, middle-East & africa (CEEmEa) region is logistically complex and highly challenging, comprising 100 developed and developing markets, with highly variable taxes, duties and regulations. Procter & Gamble operates 48 DCs across the region,

coordinating more than 70,000 inter-site truck moves a year and 20,000 shipping operations. However, since 2004, costs had begun to escalate out of control: up 5% the

first year, 13% in the second year and up 21% in 2007/8. “We had no understanding of the drivers of the cost increases,” Olsthoorn admits. “We had some theories but they were not good enough. there was a clear business need for intervention.”

the company began an operation to define and improver the drivers of cost and applied six performance indicators, which were reported monthly. internal visibility of performance via a traffic-

light system created productive competition. the intervention exceeded targets within a few months and ultimately brought cost improvements of 130%. the drivers of cost were:

1. Sub-optimal truck fill.2. Kilometres driven.3. Contract compliance.4. Pallet fit and pallet cost.5. Demurrage charges for delayed shipments.6. Percentage of outside storage.7. Percentage of local sourcing.8. Productivity.

the six KPis applied were:

1. Cube fill rate: optimal fill reduced trips, taking one in four trucks off the road.2. Contract compliance: hauliers on a contractual rate across the region eliminated cost variation and favouritism.3. % Ex-plant shipments.4. vehicle turnaround times.5. % Outside storage.6. DC productivity.

Deutsche Post DHL Group GoHelp Program: Logistics Excellence for the relief Supply ChainKathrin Mohr, Program manager Disaster response teams, Deutsche Post DHL, Germany

Helping people after disasters depends on a functioning supply chain. However this is rarely the case. the relief supply chain is

characterised by simultaneous deliveries, unsorted goods and a lack of consignees at the destination airport. this leads to significant bottlenecks following the unloading of aircraft, which hamper the onward transportation of aid. Deutsche Post DHL’s Disaster response teams (Drts), which number around 200 volunteers across the company, reduce these bottlenecks by sending specially trained logistics experts to handle goods at airports. Working in cooperation with the uN office for the Coordination of Humanitarian affairs the teams deploy to disasters such as the earthquakes in Haiti and Chile. at Haiti, 36 DHL volunteers handled 2,000 tons of relief goods over three weeks and provided support to more than 25 relief

organisations. in Chile, 75 volunteers packed 10,300 relief bags from unsorted goods that arrived at Santiago airport.

Looking forward, DHL has a program called Get airports ready for Disaster (GarD). applying the lessons the DtLs have learned over various deployments, the mission is to prepare airports for managing disaster situation and avoid bottlenecks

by training local government employees and airport personnel. Key to the success of DHL’s Disaster response team has been the support and recognition of top management and mutually beneficial partnership between the company and the united Nations.

Learnings in Supply Chain


Lessons in Sustainable SourcingDavid McLaughlin, vice President and managing Director: agriculture, World Wildlife Fund, uSa

By 2050 the world’s population is set to stand at 3 billion or more, with 70% living in cities. and while income is expected to increase by 2.9

times, consumption could double and food demand in particular could triple. Developing countries are likely to dominate trade, David mcLaughlin believes, as most of the growth is likely to come from the poorest countries. How will agriculture deliver? WWF estimates that current demand alone is using 1.3 times what the planet can sustain in terms of natural resources. Economic growth in developing countries is good in terms of quality of life, but has a consumption impact. Expressed in economic terms, we are currently using the Earth’s capital and not the interest. By the mid 2030s we will need two planets if we continue business as normal. “the replenishment system is failing completely and it’s the week before Christmas,” mcLaughlin said.

Sadly, many companies are either still unaware of the issues or uncertain of where to begin. Some believe that sustainability equals a higher cost and resist change in the procurement process.

it’s important therefore to focus energies. the first step is to carry out a supply chain risk assessment in four thematic areas:

1. Supply risk.2. Environmental risk.3. Social and political risk.4. Economic and financial risk.

this is critical in providing a roadmap and setting a framework to engage suppliers. the second step is to evaluate sourcing structures and move from a transactional model to a transformational model.

it’s vital to align incentives, create partnerships, share resources and find mutual benefits, creating longer-term contracts with fewer spot purchases.

a transactional structure exposes brands to multiple risks, especially around traceability. the third step is to recognise that you have a role, even if your volumes are small compared to other players. your voice can have significant impact and your customers and employees expect it. By partnering with WWF to adopt sustainable practices, companies can increase their productivity and reduce their costs. a partnership with Chiquita, for example, brought productivity gains of +27% and cost savings of -12%.

attitude is What Determines altitudeMiles Hilton-Barber, Blind adventurer

Zimbabwe-born Hilton-Barber lost his sight out of the blue at 21, the result of a congenital condition. He had joined the air force, hoping to be a pilot. Blind, the options seemed greatly

diminished. However, he did not want to spend his life “weaving dog baskets”. He wanted to be a pilot. So he did. “Quality of life,” he says, “is not what happens to you, but what you do with what happens to you.” He became the first blind pilot to undertake a 55-day, 21,000 kilometre microlite flight from London to Sydney. to succeed, he employed revolutionary speech-output technology, accompanied by a sighted co-pilot, and raised money for blind charities. to achieve, he says, “you need to start with your goals and dreams, not with your circumstances”.

this was only the beginning for Hilton-Barber. His philosophy was that “you can use of energy worrying or you can do new things”. if you want to grow, it’s important to step out of your comfort zone: “the last time you did a new thing is the last time you grew”. With these thoughts in mind, Hilton-Barber – among many other adventures – man-hauled a sledge 250 miles across antarctica, climbed Kilimanjaro and mont Blanc, became the first blind aviator to break the sound barrier and to participate in a drag-racing event, cage-dived with Great White Sharks and raced 150 miles across the Sahara on foot. in each event he was accompanied by his friend Jon. in the process, he learned a lot about himself and his capabilities, and about teamwork and success. “i’m now giving

you some life principles i’ve stumbled across as a blind man,” he said. “there are many sighted people who are blind to their potential. i’m trying to give them vision.”

Hilton-Barber’s Life Principles:

1. Start with your goals and dreams, not with your circumstances.2. Fear is only False Evidence appearing real.3. you are only as big as the dreams you dare to live.4. all achievers are dreamers, but not all dreamers are achievers.5. Successful people are those who go through bad things, and persevere.6. unity is the key: there is no room for backbiting. your future depends on mutual interdependence.7. “Never judge a man until you’ve walked a mile in his shoes. that way, when you do judge him, you’re a mile away and you’ve got his shoes.”

cherry on the Cake

For more information on the Supply Chain Conference: www.tcgfsupplychain.com

Thank you to our sponsors for their valued contribution to the Supply Chain Conference 2010:

Supply Chain Conference 2011Do not miss the

11th - 13th October 2011 BARCELONA