delivering change in the digital economy: the value of supply chain collaboration in sa fmcg cgcsa...
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Delivering Change in the Digital Economy:The Value of Supply Chain Collaboration in SA FMCGCGCSA Summit - September 2015Paul Dickson
Agenda
1. Introduction and Objectives2. Supply Chain Collaboration: Definitions3. 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 Objectives2. Supply Chain Collaboration: Definitions3. 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 & ObjectivesQuestions we would like to address in this session
What is supply chain collaboration?
What value is targeted through better supply chain collaboration
and integrated planning?
What do we commonly see when FMCG partners are not effectively collaborating?
How can technology enable better collaboration between trade
partners?
1. Introduction and Objectives2. Supply Chain Collaboration: Definitions3. 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
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. Introduction and Objectives2. Supply Chain Collaboration: Definitions3. 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?
What supply chain problem are we trying to solve?
A view on market opportunities in FMCG
• Service levels are still under pressure
• Inventory levels are not optimal
• Although retailers and suppliers do collaborative planning, this is not effectively executed
Collaborative demand planning in FMCG
remains constrained
• Increased retailer centralisation has created service issues
• Disconnect between internal parties, such as buying and operations
• Disconnect between suppliers, retailers and transporters
There have been a number of realities in
the South African FMCG market, which contribute to supply chain inefficiencies
• Parties operated in a reactive manner
• Service levels suffer• On-shelf availability
suffers• Promotions are
occasionally ineffective
The end result?
Agenda
1. Introduction and Objectives2. Supply Chain Collaboration: Definitions3. 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?
The Supply Chain Collaboration Landscape
The different functional areas for collaborative focus
Retailer Stores
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Retailer Warehouse
Supplier Warehouse
Supplier Factory
Retailer Stores
Source (or farm)
eCommerce Customers
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ctica
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• New product development
• Range and store clustering
• Price and promotion
• Annual Marketing Strategy
• Pre- and Mid- promotional planning and execution• Marketing & Advertising requirements
Current challenges in FMCG demand management
An observation on how the various entities plan demand flows & stockholding
Sales
Replenishment Plan
Forecast
Replen. Policy Safety
Stock
Stock on Order
Stock on Hand
`Delivery
Replenishment Plan
Forecast
Replen. Policy Safety
Stock
Stock on Order
Stock on Hand
Delivery
DC Order
Retailer Stores Retailer Warehouse Supplier Warehouse
Replenishment Plan
Forecast
Replen. Policy Safety
Stock
Stock on Order
Stock on Hand
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
DC Order
`Delivery
DC Order
`
Current challenges in FMCG demand management
1. Demand Variability
• 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!
Retailer Stores
70 % 60 - 70 % 30 – 40 %
Retailer Warehouse Supplier Warehouse
Current challenges in FMCG demand management
2. Supply variabilityRetailer Stores
• 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
Retailer Warehouse Supplier Warehouse
Retailer Stores Retailer Warehouse Supplier Warehouse
Current challenges in FMCG demand management
3. Lead-time variability (leading to data latency)
Day 0
Day 1 - 6
Day 1 - 13
Day 2 - 14
Day 3 - 14
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
Sales`
Delivery Delivery
DC Order
DC Order
Retailer Stores
Collaboration Platform
Shared Forecast Collaborative Replenishment Planning
`Delivery
DC Order
Transport Planning
`
1 2 3
Retailer Warehouse Supplier Warehouse
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. Introduction and Objectives2. Supply Chain Collaboration: Definitions3. 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?
Where do local FMCG players start this journey?
Supply Chain Digest – Collaboration Maturity Model
Supplier CustomerTransaction Data,
EDI, Web
Phase I:TransactionAutomation
Invoices, ASNs
Supplier CustomerEDI and Web Self-Service
Phase II:Shared
Operating DataSupplier
Better Decision Making
Purchase Orders
Manufacturing Schedules, On-hand inventory, POS Data
Supplier Customer
Joint Planning, Web-Based Data Exchange,
Closed Loop
Phase III:True
CollaborationPlans, Capacities,
Constraints
Re-engineered Business Processes, Shared Benefits
Source: Supply Chain Digest Copyright 2005
