Delivering Change in the Digital Economy:
The Value of Supply Chain Collaboration in SA FMCG
CGCSA Summit - September 2015
Paul Dickson
Agenda
1. Introduction and Objectives
2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to
solve?
4. Collaboration and Integrated Demand Planning:
“As-Is” versus “Best-in-Class”
5. So where should local FMCG players start?
Agenda
1. Introduction and Objectives
2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to
solve?
4. Collaboration and Integrated Demand Planning:
“As-Is” versus “Best-in-Class”
5. So where should local FMCG players start?
Introduction & Objectives
Questions we would like to address in this session
What is supply chain
collaboration?
What do we commonly see
when FMCG partners are not
effectively collaborating?
What value is targeted through
better supply chain collaboration
and integrated planning?
How can technology enable
better collaboration between trade
partners?
Agenda
1. Introduction and Objectives
2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to
solve?
4. Collaboration and Integrated Demand Planning:
“As-Is” versus “Best-in-Class”
5. So where should local FMCG players start?
How can we define supply chain collaboration?
What is “Supply Chain Collaboration”, and what does it really mean?
“Collaboration is ….. a recursive process where two or more people or
organizations work together to realize shared goals” - (Wikipedia.org)
“Supply Chain Collaboration is the process of integrating supply chain planning
and execution activities across multiple trade partners, with the objective of creating
optimal and cost-effective logistics and inventory operations across all parties.”
- Resolve
“Collaborative Planning, Forecasting and Replenishment (CPFR) is a business
model that takes a holistic approach to supply chain management and combines the
intelligence of multiple trading partners in planning and fulfilling customer demand…
CFPR links sales and marketing best practices – category management, supply
chain planning and execution processes to increase availability while reducing
inventory, merchandizing, transportation and logistics costs.”
- Voluntary Inter-industry Commerce Standards) (VICS) Association
Agenda
1.
2.
3.
4.
Introduction and Objectives
Supply Chain Collaboration: Definitions
What supply chain problem are we trying to solve?
Collaboration and Integrated Demand Planning: “As-Is”
versus “Best-in-Class”
5. So where should local FMCG players start?
What supply chain problem are we trying to solve?
A view on market opportunities in FMCG
Collaborative demand
planning in FMCG
remains constrained
•
•
•
Service levels are still
under pressure
Inventory levels are
not optimal
Although retailers and
suppliers do
collaborative
planning, this is not
effectively executed
There have been a
number of realities in
the South African
FMCG market, which
contribute to supply
chain inefficiencies
•
•
•
Increased retailer
centralisation has
created service issues
Disconnect between
internal parties, such
as buying and
operations
Disconnect between
suppliers, retailers
and transporters
The end result?
•
•
•
•
Parties operated in a
reactive manner
Service levels suffer
On-shelf availability
suffers
Promotions are
occasionally
ineffective
Agenda
1.
2.
3.
4.
Introduction and Objectives
Supply Chain Collaboration: Definitions
What supply chain problem are we trying to solve?
Collaboration and Integrated Demand Planning: “As-Is”
versus “Best-in-Class”
5. So where should local FMCG players start?
The Supply Chain Collaboration Landscape
Tactical
Strategic
The different functional areas for collaborative focus
•
•
•
New product development
•
Range and store clustering
•
Price and promotion
•
Annual Marketing Strategy
Pre- and Mid- promotional planning and execution
Marketing & Advertising requirements
Retailer
Stores
Retailer
Warehouse
Supplier
Factory
Operational
Retailer
Stores
Source
(or farm)
Supplier
Warehouse
eCommerce
Customers
Current challenges in FMCG demand management
An observation on how the various entities plan demand flows & stockholding
DC
Order
DC
Order
Delivery
Replen.
Policy
Forecast
Stock
on Hand
Replenishment
Plan
Safety
Stock
`
Delivery
Delivery
Forecast
Stock
on Hand
DC
Order
`
`
Sales
Supplier Warehouse
Retailer Warehouse
Retailer Stores
Stock on
Order
Replen.
Policy
Forecast
Stock
on Hand
Replenishment
Plan
Safety
Stock
Stock on
Order
Replen.
Policy
Replenishment
Plan
Safety
Stock
Stock on
Order
Let’s investigate the impact of Demand, Supply and Lead-time variability on the
ability to optimise stock and service levels through the supply chain
Current challenges in FMCG demand management
1. Demand Variability
Retailer Stores
70 %
•
•
•
Retailer Warehouse
60 - 70 %
Supplier Warehouse
30 – 40 %
Customer sales are (by their very nature) difficult to predict with 100% certainty, given the trends
influenced by weather, seasons, natural, economic and other events.
The accuracy of forecasts is questionable, given the above and also being cognisant that a forecast is
(traditionally) a static number
A typical supply chain has multiple forecasts being used across all the numerous parties.
This means that everyone is working off a different plan!
Current challenges in FMCG demand management
2. Supply variability
Retailer Stores
•
•
•
Retailer Warehouse
Supplier Warehouse
The reality of multiple forecasts impacts the supplier’s ability to fulfil to actual demand.
The supplier rarely has the ability to use real consumer demand to create a reliable fulfilment plan.
Other operational related errors exist, and hamper the ability to service the retailer: warehouse,
transport, system and other influencing events
Current challenges in FMCG demand management
3. Lead-time variability (leading to data latency)
Retailer Warehouse
Retailer Stores
Day 3 - 14
Day 1 - 13
Day 0
Day 2 - 14
Day 1 - 6
•
•
•
Supplier Warehouse
Day 3 - 14
There are two types of lead-time variables: System related and physical.
System lead-time means that the suppler may only get demand signals that are up to two weeks
late.
This is a significant enabler of the “bull-whip” effect, which introduces cost and other
inefficiencies into the supply chain.
How could this work differently?
A systems-enabled best class view
DC
Order
DC
Order
Delivery
DC
Order
`
`
Sales
Supplier Warehouse
Retailer Warehouse
Retailer Stores
Delivery
`
Delivery
Collaboration
Platform
1 Shared
Forecast
2
Collaborative Replenishment Planning
Transport
3 Planning
Technology-enabled collaboration
How should technology make this all happen?
Create visibility for all parties (Responsiveness)
Real time visibility to the total demand, supply, and capacity picture to be more
responsive to changes in demand, available capacity, and supply continuity issues.
Promote Process Orchestration (Effectiveness)
Provide the ability to manage and automate complex supply chain processes across
multiple tiers of partners, driving shared value and common metrics.
Reduce Information Latency (Speed)
Create the ability to plan, execute, and make decisions from real time information
shared across the supply chain.
Data Synchronization (Accuracy)
All partners working off of the same demand, supply, and capacity information. A single
version of the truth.
Single Version of the Truth (Transparency)
Ability to work together to identify root causes and operational process improvements
increasing productivity, efficiency, and perfect order performance.
Agenda
1.
2.
3.
4.
Introduction and Objectives
Supply Chain Collaboration: Definitions
What supply chain problem are we trying to solve?
Collaboration and Integrated Demand Planning: “As-Is”
versus “Best-in-Class”
5. So where should local FMCG players start?
Where do local FMCG players start this journey?
Supply Chain Digest – Collaboration Maturity Model
Purchase Orders
Phase I:
Transaction
Automation
Supplier
Transaction Data,
EDI, Web
Customer
Invoices, ASNs
Manufacturing Schedules, On-hand inventory, POS Data
Phase II:
Shared
Operating Data
Supplier
EDI and Web
Self-Service
Customer
Better Decision Making
Re-engineered Business Processes, Shared Benefits
Phase III:
True
Collaboration
Supplier
Source: Supply Chain Digest Copyright 2005
Joint Planning, WebBased Data Exchange,
Closed Loop
Plans, Capacities,
Constraints
Customer
www.resolvesp.com
47 Landmarks Ave, Samrand
resolvesp
[email protected]
076 573 8096
@resolve_sp