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TRANSCRIPT
2012 Supply Chain Benchmarking— Unlocking Value through Complexity
Management and Collaboration
February 6, 2013
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 1
Your presenters
Jeff Wray Partner The Boston Consulting Group [email protected]
Aaron Brown Partner
The Boston Consulting Group [email protected]
Elfrun von Koeller Project Leader The Boston Consulting Group [email protected]
John Phillips SVP, Customer Supply Chain
PepsiCo, Inc.
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 2
20 years of GMA Supply Chain benchmarking
1993 1996 1999 2003 2005 2008 2010 2012
GMA Supply Chain benchmarking
Inaugural Supply
Chain survey
1998 GMA/BCG
report on DSD
2005 Supply
Chain survey
2010 Supply
Chain survey
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 3
Why we benchmark our Supply Chains
Ø 3
D C YOU B A
+20%
Benchmark YOU
? +16%
2015E 2014E 2013 2012 2011 2010 2009
Get an objective performance
measurement and set targets Identify areas for improvement
Build the case for change
Understand trends
and start thought processes
1 2
3 4
YOU
+11%
Benchmark
+20%
+45% Opportunity 1
Opportunity 2
Opportunity 3
$
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 4
The 2012 benchmarking report
Interviewed >60 Supply Chain
executives
First ever Direct Store Delivery
(DSD) survey
Two deep dive topics
• Complexity management
• Trade partner collaboration
New this year Who we have spoken with
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 5
What are the key trends in grocery Supply Chains?
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 6
Six key trends in US grocery industry ...
Macro-economic
volatility
More discerning
consumers
Three growth
demographics
"No compromise"
consumer
Re-formation of
retail landscape
Rise of the
digital economy
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 7
... with significant impact on Supply Chains
Macro
demand forces
Technical
innovations
Evolving
infrastructure
Input factors
Political
influences
Sustainability
Grocery Supply Chain
Supplier Manufa-
cturing
Pack./
Distrib. Retailer
Complexity Collaboration
We focused on two key trends that are driving significant value for grocery manufacturers
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 8
Deep dive topics chosen for impact: $20–45B incremental profit opportunity
3–5% margin
improvement
Up to 5% sales lift
Collaboration Complexity management
1–3% margin
improvement
0.5–1.5% sales lift
$20–45B
incremental
profit across
industry
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 9
Who is in the audience?
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 10
What type of organization do you represent?
Retailer
Service provider
(including logistics)
Distributor
Grocery manufacturer
12345678
6%
44%
12%
38%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 11
What is your company's annual US revenue?
>$15B
$10–15B
$5–10B
<$1B
$1–5B
35%
18%
9%
9%
29%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 12
What temperature class(es) is your Supply Chain?
Ambient
Refrigerated
Pick all that apply. Remember to press "Send" after each selection
Frozen
48%
57%
67%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 13
What delivery system(s) do you use?
Warehouse delivery
Direct Store Delivery (DSD)
Pick all that apply. Remember to press "Send" after each selection
Wholesalers / Distributors 67%
50%
62%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 14
How has your Supply Chain performed?
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 15
How has your on-time delivery performance changed over the past two years?
Improved significantly
Improved somewhat
Stable
Declined significantly
Declined somewhat
Retailers: Rate your Suppliers' performance Suppliers: Rate your own performance
12%
5%
14%
23%
47%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 16
How have your case fill rates changed over the past two years?
4%
16%
38%
39%
4%
Retailers: Rate your Suppliers' performance Suppliers: Rate your own performance
Improved significantly
Improved somewhat
Stable
Declined significantly
Declined somewhat
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 17
How have your inventory levels changed over the past two years?
7%
14%
19%
48%
12%
Retailers/suppliers: rate your own performance
Significant reduction
Some reduction
Stable
Significant increase
Some increase
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 18
How have your costs changed over the past two years?
7%
30%
19%
34%
10%
Retailers/suppliers: rate your own performance
Significant reduction
Some reduction
Stable
Significant increase
Some increase
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 19
How has your forecast accuracy changed over the past two years?
3%
18%
40%
33%
6%
Retailers/suppliers: rate your own performance
Improved significantly
Improved somewhat
Stable
Declined significantly
Declined somewhat
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 20
17%
50%
25%
8%
10%
21%
15%
49%
5%
Change in grocery manufacturer service performance over the past two years
8%
15%
46%
31%
5%
24%
35%
32%
3%
Declined
significantly
Declined
somewhat
Stable
Improved
somewhat
Improved
significantly
Retailer perspective Grocery manufacturer perspective
On-time delivery rates Fill rates
12345678 12345678
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 21
Change in productivity metrics over the past 2 years
31%
23%
8%
15%
15%
53%
10%
8%
31%
8%
21%
21%
36%
21%
10%
28%
23%
33%
8%
Declined
significantly
Declined
somewhat
Stable
Improved
somewhat
Improved
significantly
21%
29%
50%
3% 13%
38%
38%
10%
Inventory
performance
Cost
performance Forecast accuracy
Retailer performance Grocery manufacturer performance
12345678 12345678 12345678
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 22
What does growing complexity mean for Supply Chains?
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 23
Increasing complexity a common concern
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 24
Product proliferation has failed to trigger growth
US CPG retail sales (Real $B)
2,000
1,500
1,000
500
0
US CPG new product introductions
2,000
1,500
1,000
500
0
2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001
New product introductions CPG market size
Many unsuccessful product launches remain in the marketplace today
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 25
High complexity evident across Supply Chain
Product complexity:
French Fries Channel complexity
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 26
Complexity reduction ≠ SKU rationalization
Unique product specifications
Formulations
Distribution methods
Bottom quartile
<10% of volume
Common approach: cut slow SKUs Many sources of complexity
Packaging specifications / formats
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 27
Five stages of complexity management
Projects
Program
Culture
• No
reduction
efforts
• Ad-hoc
reduction
projects
• On-going
complexity
reduction
• Corporate
culture of
simplicity
• Minimal
awareness
Limited
understanding
No action
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 28
Define the offering
Scale operations
Protect / grow
volume
Best practice: the "Handshake"
Consumer needs
Variety only
where it creates
consumer value
The Supply Chain view The integrated plan The market view
Supplier
complexity /
cost drivers
Retailer
complexity /
cost drivers
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 29
How does complexity impact your Supply Chain?
Declining forecast accuracy
Increasing warehouse labor costs
Pick the three biggest impacts. Remember to press "Send" after each selection
Other
Higher out-of-stocks
Increasing packaging / customization costs
Higher spoilage rates / reverse logistics costs
Increasing freight / logistics costs
Increasing space needs
1%
13%
23%
29%
31%
36%
39%
42%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 30
How would you describe your company's approach to complexity management?
6%
13%
54%
22%
5%
There is an on-going effort
to reduce complexity
One-off projects have
been implemented
The entire organization is
focused on simplicity
Little understanding
of complexity
Problem is well-known
but no action has been taken
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 31
Interview responses: most grocery manufacturers in project stage
Proportion of grocery manufacturers in each stage
Projects
Program
Culture
• Minimal
awareness
• No
reduction
efforts
• Ad-hoc
reduction
projects
• On-going
complexity
reduction
• Corporate
culture of
simplicity
Limited
understanding
No action
11% 15%
56%
15% 4%
69%
3% 13% 13%
3%
Interviews
Live polling
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 32
What projects have you initiated to reduce or manage complexity?
Pick all that apply. Remember to press "Send" after each selection
One-time SKU rationalization project
Charging for customization
Periodic SKU rationalization
Pushing customization downstream
Packaging / promotion format
harmonization
Other projects or initiatives
Warehouse consolidation
45%
39%
39%
29%
25%
15%
13%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 33
Lack of internal alignment
Poor understanding of costs
of complexity
Lack of robust NPD gate-
keeping
(Perception of) losing shelf
space / sales
Grocery
manufacturers Retailers
23%
55%
58%
65%
33%
67%
25%
50%
What are the biggest barriers that limit your ability to manage complexity?
Pick all that apply. Remember to press "Send" after each selection
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 34
Successful companies apply four key strategies
1 2 Gain internal alignment between
Supply & Commercial
Quantify and understand
incremental complexity costs
3 4 Only offer variety valued by
consumers
Develop strong supplier-retailer
alignment
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 35
How can the industry move ahead in collaboration?
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 36
Many barriers slow down progress in collaboration
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 37
Five stages of collaboration
Process
efficiency
Basic
effectiveness
Advanced
effectiveness
Joint value
creation
End-to-end
Supply Chain
integration
• Response to
problems
• Basic on-going
collaboration
• Either deeper
collaboration
OR internal
process
• Both deeper
collaboration
and internal
process
• One
integrated
Supply Chain
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 38
How has your level of collaboration with trade partners changed over the past 2 years?
Increased
5%
67%
29% Stayed the same
Decreased
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 39
Basic collaborative initiatives, e.g., VMI
and collaboration on forecasting
To what degree do you typically collaborate with trade partners?
18%
21%
25%
31%
4%
Either deeper collaboration (e.g., top-to-
tops) or robust internal process
Collaboration usually in response to
Supply Chain problems / basic EDI
Both sophisticated collaboration
and robust internal process
Integrated end-to-end Supply Chain
scaled across strategic partners
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 40
0%
15% 26%
52%
7%
33%
15% 24% 24%
3%
Interview responses: few manufacturers have progressed beyond advanced effectiveness
Interviews
Live polling
Proportion of grocery manufacturers in each stage
• Response to
problems
• Basic on-going
collaboration
• Either deeper
collaboration
OR internal
process
• Both deeper
collaboration
and internal
process
• One
integrated
Supply Chain
Process
efficiency
Basic
effectiveness
Advanced
effectiveness
Joint value
creation
End-to-end
Supply Chain
integration
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 41
Grocery
manufacturers Retailers
Cost savings
Improved relationships
Sales lift
Improved lead times /
speed to market
Reduction in out-of-stocks
Improved forecasting
Inventory reduction
Other
What are your primary objectives in collaborating with trade partners?
64%
67%
6%
14%
39%
42%
44%
58%
75%
50%
42%
67%
67%
0%
67%
83%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 42
Which collaborative initiatives have you implemented?
Pick all that apply. Remember to press "Send" after each selection
Value stream mapping / opportunity
identification process
Transportation optimization
Share out-of-stock data
Vendor-managed inventory (VMI)
Joint forecasting with partners
Optimize order quantities
Share retailer scan data (POS)
Supply Chain Top-to-Tops
24%
31%
34%
35%
44%
45%
48%
56%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 43
Building trust with partners
Sufficient resourcing
Senior leadership buy-in
Scorecard excellence
Independent facilitation
Significant, quantifiable impact
Identifying mutual benefits
Internal alignment
Grocery
manufacturers Retailers
What have you found to be the key enablers of successful collaboration with trade partners?
Pick the top three. Remember to press "Send" after each selection
22%
33%
39%
44%
47%
53%
14%
3%
64%
45%
0%
36%
18%
9%
18%
36%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 44
Lack of trust with trade partners
Difficulty quantifying savings
Under-resourcing
Data & technology issues
Difficulty scaling successes
Poor alignment, leadership buy-in
Poor scorecard performance
Difficulty sharing benefits
Grocery
manufacturers Retailers
Pick the top three. Remember to press "Send" after each selection
What have you found to be the biggest barriers to successful collaboration with trade partners?
14%
8%
5%
41%
32%
32%
30%
22%
25%
25%
0%
33%
17%
33%
67%
0%
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 45
Successful companies apply four key strategies
Trust Senior leadership commitment
Structured process & governance Mutual benefit
1 2
3 4
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 46
What is next?
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 47
Supply chain and DSD surveys
open until February 22nd
2012 GMA Supply Chain logistics
benchmark report will be
published in May
Next steps and timeline
2012 Supply Chain
Benchmark
Unlocking Value Through Complexity
Management and Collaboration
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 48
See how your Supply Chain stacks up
Topics Sample KPIs
Supply Chain
profile
• Top SC priorities • Size of operations • Outbound shipping
method
Costs • Cost / case • Freight costs / mile
Service level • New products • Spoilage / code date • % sales / profit in bottom
25% of SKUs
Warehouse /
Inventory
• Pick rate • Capacity utilization • Inventory on hand • Forecasting error
Portfolio
complexity
• New products • Spoilage / code date • % sales / profit in bottom
25% of SKUs
Collaboration • Collaboration activities
TPA Supply Chain Conference 2013 - Logistics Benchmarking - 122012_v3.pptx 0
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Total logistics costs as % of 2012 sales
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TPA Supply Chain Conference 2013 - Logistics Benchmarking - 122012_v3.pptx 0
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TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 49
Retailers … should we also include a retailer- focused benchmarking survey next year?
Yes. I would definitely participate
Yes, and I might participate
No, I am unlikely to participate 0%
55%
45%
Retailers
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 50
Thank you for participating!
To participate in the surveys or interviews please contact
Elfrun von Koeller
Project Leader
The Boston Consulting Group
Phone: (646) 448 7629
Email: [email protected]
For general questions regarding the benchmarking please contact
Jeanne Iglesias
Sr Director, Supply Chain and Technology
Grocery Manufacturers Association
Phone: (202) 295-3949
Email: [email protected]
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 51
Special thanks to the GMA Oversight Committee
• Kraig Adams, VP Customer Solutions, Large Store North & South, Coca-Cola Refreshments
• John Coyle, VP Customer Supply Chain, WhiteWave Foods
• Dennis Donelon, Senior Director Customer Supply Chain Integration, PepsiCo
• Timothy Fischer, SVP Supply Chain, Bumble Bee Foods
• Stuart Latta, VP Customer Delivery Systems, Nestle USA (DSD)
• John Phillips, SVP Customer Supply Chain & Logistics, PepsiCo (DSD)
• Jack Ryan, Director of Customer Logistics, Nestle USA
TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 52
Thank you
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