chemical supply chain
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'Achieving Supply Chain Excellence in the Fast Moving Consumer Goods Industry'By Thomas Müller-KirschbaumLogiChem 2011 will be the event's tenth anniversary and an opportunity for the most senior chemical supply chain & global logistics directors from the European chemicals community to come together once again share experiences, make new contacts and benchmark the latest chemical supply chain initiatives. Not only will LogiChem 2011 be a chance for the chemical industry to reminisce about the last ten years but an opportunity to shape the next decade. To celebrate a decade of LogiChem, there will be an exciting three day programme filled with networking opportunities in our new location, Antwerp.TRANSCRIPT
© TMK_Logichem 2010 1
Achieving Supply Chain Excellence
in the
Fast Moving Consumer Goods Industry
Thomas Müller-Kirschbaum
Düsseldorf, April 21, 2010
© TMK_Logichem 2010 2
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 3
Three Areas of Competence134 Years of Brand Success
Quality with Brands & Technologies
Laundry &Home Care
AdhesiveTechnologies
Cosmetics/ Toiletries
© TMK_Logichem 2010 4
Henkel Brands Performance around the Clock
© TMK_Logichem 2010 5
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 6
Laundry & Home CareProduct Portfolio
• Heavy-duty detergents
• Fabric softeners
• Laundry care products
• Dishwashing products
• All-purpose cleaners
• Scouring agents
• Floor and carpet care products
• Bath and WCcleaners
• Glass cleaners
• Kitchen cleaners
• Specialty cleaning products
• Air fresheners
• Insecticides for household use
© TMK_Logichem 2010 7
2009 Sales by business sector
Sales: 13,573 million euros
Corporate210 (2%)
Adhesive Technologies6,224 (46 %)
Cosmetics/Toiletries3,010 (22 %)
Laundry & Home Care4,129 (30 %)
in million euro
© TMK_Logichem 2010 8
2009 EBIT by business sector
Adhesive Technologies506 (36 %)
Cosmetics/Toiletries387 (27 %)
Laundry & Home Care530 (37 %)
in million euros
1) Adjusted for one-time charges/gains and restructuring charges
Adjusted1) operating profit (EBIT): 1,364 million euros
Excluding Corporate
© TMK_Logichem 2010 9
Supply Chain Design – Basis for SuccessKey Dimensions
One Global SC Organization with
• End-to-End Process Responsibility
(from the customer to the customer) and
• Full Vertical Integration
(Global – Regional – Local Level).
© TMK_Logichem 2010 10
Supplier Production AC / Warehouse
Market /Customer
Purchase to pay Order to cash
Demand / Order
Order Plan OrderPlan Demand
Source
Source
Make DeliverMake Deliver
Info
rma
tio
n f
low
Ma
teri
al
flo
wSupply Chain – End-to-End ProcessExtended View of the Value Chain
© TMK_Logichem 2010 11
Supply Chain – Key Elements Planning/Procurement, Production, Distribution
Planning& Procurement
Production Distribution
Moving 15,000 SKU
Plants
>40<30
Distribution Center
>150<120
10,000 Drop points
Single Suppliers
>2,900<1,400
past (2005)future (2012)
© TMK_Logichem 2010 12
Supply Chain Strategy PillarsFramework for Long-Term Action
Optimize total performance(Cost, Inventories, Service)
Design & implement an extended and
adaptive supply chain
Build on smart technologies,
processes and systems
Design & implement theright organizational setup
• Mass products vs. specialties:
decentralized vs. centralized production
• Fully exploit make-or-buy potential
• Integrated technology sites
• Interconnectivity Processes & Systems
• Smart complexity management
• Integration of customers & suppliers
• Process simplification
• Integrated supply-chain planning
• Permanent benchmarking
• End-to-end responsibility
• Talent management
• Clear governance
© TMK_Logichem 2010 13
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 14
Assessment of FMCG Environment 2010+No Revolution, but Evolution happens
• Demand variability increases
• Complexity increase and drives late stage differentiation as well as adaptive supply chain designs
• Retailer power expected to rise; „smartest players in the value chain“
• Raw material prices continue to be volatile as resources remainscarce; importance of risk management along value chain increases
• Distribution cost increases stronger than processing cost
• Sustainability emerges a new competitive parameter
• Challenge of private label product offerings remains and grows
+ Supply chain capabilities become a strategic success factor
+ Human capital in supply chain is a current & future bottleneck
© TMK_Logichem 2010 15
The Future: Balance of Power movesRetailers invest to become the “smartest“ Players
A consultants view on the industry:Maturity of overall supply chain knowledge in FMCG
Uninformed
Going to School
Educated
Expert
Most informedSupply Chain
Participant
Suppliers
Manufacturers
Retailers
1980's Current 2012+
Source: AT Kearney (2008)
© TMK_Logichem 2010 16
Flexibility
Reliability
Speed
Cost & Capital Efficiency
Sustainability
Volatility in upstream / downstream markets
Consumer individualization / diversity
Changing customer specific supply chains
Perfect Order as KPI, OTIF is hygene factor
Full process transparency
Fast changing consumer & customer patterns
Customization of product offerings
Speed of innovation processes
Scarce resources / Energy conservation
Urbanization / Demographical concentration
Customer & supplier integration (e.g. VMI)
Volatility in downstream demand
1
2
3
4
5Su
pp
lyC
hain
Perf
orm
an
ce
Key Factors Supply Chain PerformanceChallenges 2010+ can be clearly identified
© TMK_Logichem 2010 17
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 18
Overview
Integrated Supply Chain Organization
Strategic Network Design
Horizontal & Vertical Cooperation
End-to-End Supply Chain Planning
Smart Complexity Management
Sustainability Matters
KPIs
People make the Difference !
A
B
C
D
E
F
G
H
© TMK_Logichem 2010 19
Global Global SC Operations
Production Steering
Industrial Engineering
SHEQ
Planning & Logistics
Process Technology
Head of Local SC
Planning LogisticsHead of Plant(s)
Production/
Engineering
Industrial
EngineeringSHEQ
Planning
/Logistics
Local
Head ofRegional SC
Regional
Production Steering /Engineering
Industrial Engineering
SHEQPlanning & Logistics / Contract Manufacturing
Head ofGlobal SC
Integrated Supply Chain OrganizationExample Laundry & Home Care
A
© TMK_Logichem 2010 20
Strategic Network Design Example European Network Re-Design
• Population density drives
set-up
• Optimum distribution
distance to be respected
• Country borders do not
matter
• Minimum number of storage
stages for responsiveness
and sustainable efficiency
Own factories (2010)
�Produce & deliver close to customers & consumers
Population Density
Factory closed/sold (2005-2010)
B
© TMK_Logichem 2010 21
Strategic Network Design Example Warehouse Concept Eastern Europe
Achievements since 2006
• Avoidance of 200,000
transportation km /
70,000 liters diesel /
185,500 kg CO2 per year
• Double-digit reduction of logistics
costs
• Other positive impacts on service
levels, inventories and
responsiveness increasing quality
of our service to customers
Central Warehouse ViennaReduction of 3 warehouses
x xVienna
�Significant reduction of kilometers & CO2 emissions
x
Warehouses
Production Facilities
B
© TMK_Logichem 2010 22
Horizontal & Vertical CooperationExample HeCoRe
Joint deliveriesJoint warehouses
Savigny ~ 50% deliveries
St Quentin ~ 50% deliveries
MainPrinciples
Implemented
• Carrefour : 23 warehouses (full perimeter deployed)
• Auchan : 2 warehouses
• Galec : 2 warehouses (joint deliveries with Reckitt)
• Match : 2 warehouses
Benefits
���� Stock level
���� Service
level
• Increase of delivery frequency
• Improve service level
• Reduce transport costsWin-win-situation
C
© TMK_Logichem 2010 23
Allocation
To Plants
DistributionCenterDemand
DistributionCenter
Forecast
Sales
Forecast
End-to-End Supply Chain PlanningExample Improvement Potential DPQ / SFA
12
3
4
Production
Planning
5
Confirmation
to DistributionCenters
6
DC Replenish-
mentPlanning
7
ExpectedSales
CustomerOrders
D
© TMK_Logichem 2010 24
End-to-End Supply Chain PlanningExample Clear Rules exploit Potential of Tools
Monday Tuesday Wednesday Thursday Friday
CopackingPlanning
Stock Trans-fer Planning
Alert Mgmt
Distribution Center Replenishment
Production Planning
Contract Manufact Planning
Direct demands
Dependend demands
RemainingStock alerts
Directdemands
DC Forecastsand
Stock Alerts
D
Sales Forecast
Sales Orders
© TMK_Logichem 2010 25
Smart Complexity ManagementExample Late Customization of Liquids
going X-Box
Past
Now
Produkttanks A
FillingMixer
tank fortype
tank fortype
Filling
ContiPost-addition
XBoX
Mixer
Post-Addition of perfume, color, actives, salts, citric acid
● 1-Step process● Batch production● Slow process● More cleaning &
waste water
● 2-Step process● Continuous production● Fast change-over● Less cleaning &
waste water
Result: -70% in base formulas
First pilot 2004
E
© TMK_Logichem 2010 26
SustainabilityLeading Position in External Recognition
WWW.ETHISPHERE.COM
ETHICALWORLD‘S MOST
COMPANIES20
09
Germany’s most
sustainable brand
Henkel
WalMart
Sustainability Award
Member 2007/08
Member 2008/09
Member 2009/10
F
© TMK_Logichem 2010 27
Sustainability MattersCorporate CSR/Sustainability Targets for 2012
further reductionin
energyconsumption*
further reductionin
water consumption*
further reduction in
waste generated*
further reduction in
occupationalaccidents
Long-term target:Zero occupational
accidents.
–– 15 %15 % –– 10 %10 % –– 10 %10 % –– 20 %20 %
* Targets per metric ton of output. Base year: 2007
F
© TMK_Logichem 2010 28
Focus on Entire Value Chain
Rawmaterials
Washingmachine
production
Packagingand
transportRetail
Rawmaterials
Detergentproduction
Packagingand
transportRetail
Waste & recycling
Consumers
Contribution to carbon footprint in %:
Raw materials Production, packaging, transport, retail,
recycling
Consumer usephase
~ 70%~ 70%~ 10%~ 10%~ 20%~ 20%
© TMK_Logichem 2010 29
Performance based on Sustainability:
Leading through Focus on Total Value Chain and
Consumer Information
�Henkel products stand for innovative sustainable consumption
Raw Materials Production Packaging Transpor-tation
Purchasing ProductUsage
Disposal Total
Average scenario
30°C
60°C
1000
800
600
400
200
0
© TMK_Logichem 2010 30
How to Improve
Sustainable Consumption & Production
Less Energy Consumption
Global Carbon Cycle
Biodegradability
1
2
3
Biodiversity4
© TMK_Logichem 2010 31
SCI ~E • BIO • DIV
GWP
E: Efficiency in relative units of detergency
BIO: Biodegradability in total oxygen consumption
DIV: Biodiversity contribution in comparison to existing solutions
GWP: Global Warming Potential in g CO2 equivalent
Sustainable Consumption Index (SCI)
© TMK_Logichem 2010 32
Changesplanned
2005-2010
Changesrealized
2005-2008
KPI – Supply Chain KPI MasterWhat you measure is what you get!
• Integrated set of KPI linked to business strategy
• Basis for continuous improvement
• Bottom-up reconciliation and benchmarking
Total Supply Chain Costs (% of sales without materials) -150bp -220bp
Quality-in-the-box (%) +30% +30%
Incident Rate (accidents per 1 mill. working hours) -38% -48%
Service Level (%) +1.7% +1.5%
# SKUs -13% -20%
Inventories (% of sales) -6% -16%
Transport & Whse. Cost (EUR/ton) -2% -2%
Processing Cost (EUR/ton) (powder/liquid) -3% -10%
Headcount Productivity (tons per headcount and year) +19% +51%
G
© TMK_Logichem 2010 33
People make the Difference!Example for Developping & Retaining HR
���� Right organization template & governance
���� Less, but higher qualified resources
Succession Planning Levels 1 – 3
Talent Development Programme
Supply Chain Academy
Initiatives @ Supply Chain Henkel
H
1
2
3
© TMK_Logichem 2010 34
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 35
Key Take Aways
• FMCG environment changes expected to
happen in an evolutionary way (basedon last 2-3 years experiences)
• Flexibility, Speed, Reliability and Efficiency are „Classic Challenges“joined by Sustainability being a competitive factor
• Strategic responses focus on structuraland process improvements as well as
clear metrics along the integrated supplychain process
• Technology is a must, People will be the
„true“ differentiator in Retail-FMCG
Supply Chains of the Future
Awarded by:
• Supply Chain Management Institute, European Business School
• PRTM Management Consultants
• Trade Magazine, Logistik Heute
Supply Chain Management Award