procurement value in powering the global supply chain 2 sgci confidential information. february 23,...
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This document contains proprietary and confidential information of Saint-Gobain Containers, Inc. (SGCI) and is being provided to you by SGCI for your use only. You may not
copy, modify, distribute, disclose or otherwise communicate any part of the information contained in this document to any third party without SGCi’s express approval.
Peter J. WaltersVice President, Purchasing & Distribution
February 12, 2010
Procurement Value in Powering the Global Supply Chain
Slide 2
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Gre
eti
ng
s
Greetings on Abraham Lincoln’s 201st Birthday! We Hoosier’s claim him as our own… He lived most of his formative years here. His father opposed slavery and Indiana was a free state. He moved his family here…
The topic I am privileged to speak to you on today is of HUGE value. This is best illustrated by a recent experience I had while speaking to a group of 3rd grade students at the Charlotte, NC International School. I was explaining the value of recycling glass containers…
Explained that for every 10% increase in recycled content we achieved a 4 to 5% energy savings. A little 8 year old autistic boy asked how much recycled material we were using and I told him…
He got out his pencil and paper and began feverishly writing and yelled at the top of his lungs… This is HUGE! You’re getting 45% energy cost savings. Why don’t you do this everywhere???
Here is some background on my industry and my company
Slide 3
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Worldwide Glass Container Market• Approximately 325 glass factories worldwide
• Operating with 500 furnaces, 2000 machines
• Output of approximately 65,000,000 metric tons
• Output of an estimated 180 billion containers (26 for every person in the world)
North America
South America
Europe
Asia
Australia
Source: Estimates
Slide 4
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain Packaging - Paris, France45 glass factories worldwide
Operating in 12 countries with 98 furnaces , 294 machines
15,500 employees
26 billion bottles and jars manufactured every year
Sales of $5.0 billion in 2008
Slide 5
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
A little history . . .
King Louis XIV
Palace of Versailles
Slide 6
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010Design Presentation / 2002
Page 6
The Gallery
of Mirrors
Name / Date of Presentation
Page 6Slide 6February 23, 2010 SGCI Confidential Information. Do Not Copy or Disclose without SGCI’s Permission.
This document contains proprietary and confidential information of Saint-Gobain Containers, Inc. (SGCI) and is being provided to you by SGCI for your use only. You may not
copy, modify, distribute, disclose or otherwise communicate any part of the information contained in this document to any third party without SGCi’s express approval.
U.S. Glass Container Industry
Slide 8
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
North American Glass Container Manufacturing Plants
Manufacturing Plants
Owens-Illinois
Saint-Gobain
Anchor Glass
Others
Slide 9
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
U.S. Glass Container Industry 2009 Overview
Wine
6%
Carb Bev
2%
Non-Carb
Bev
6%
Spirits
4%
Food
17%
Beer
59%
FAB
4%
Non-Food
Jars
2%
Other
9%
Anchor
19%
SGCI
27%O-I
45%
Marketplace of 232 million gross or 8.4 million metric tons
Source:U.S. Dept of Commerce
Slide 10
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Weaknesses
Mature workforce
Plant locations sometimes create a freight disadvantage
Flexible plant & machine configuration
Cost structure affected by plant location –
east & west
Strengths
Glass is pure, sustainable, 100% recyclable
and has a premium image. No toxicity issues
Flexible plant & machine configuration
Value added services and operations
As part of CSG, we have the ability to make investments to achieve customer needs
Market leader in product design and development
Current Strategic Position
Threats
EPA initiatives at both state and federal level
could have impact on cost structure
Return of high inflation and energy price volatility
Continued movement to alternative packaging
Economic conditions leading consumers
towards substitutes
Opportunities
Best practice and WCM opportunities
Expand value added capabilities
Expand into non-traditional markets
Develop low volume QTM process
Execute recycled material strategy
Slide 11
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Glass – A Sustainable Package
Protects the Product
Excellent shelf life
Maintains true taste
Protects the Environment
Made with renewable resources
100% recyclable
Recycled glass use reduces energy resources for melting and producing containers
Protects the Consumer
Glass is rated GRAS by the FDA “Generally regarded as safe,” meaning no requirements for minimum parts per thousand imparted to the product inside
Slide 12
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Consumer Preferences in PackagingTotal MarketBased only on those consumers expressing a preference
Best Purity
78%
2%
6%14%Best Quality
73%
2%4%
21%
82%
2%
4%12%
Source: GPI and Newton Marketing & Research
Preserves Food in
Healthiest FormGlass
Plastic
Metal
Paper
Slide 13
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Consumer Preferences in PackagingTotal MarketBased only on those consumers expressing a preference
Environmentally Safe
62%
18%
3%
30%
Best Shelf Life
62%
12%23%
3%
89%
4%
5%2%
Source: GPI and Newton Marketing & Research
Most True Flavor
Glass
Plastic
Metal
Paper
Slide 14
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain Containers2009 Glass Manufacturing Locations
13 plants throughout the U.S.
1MM square ft. of DC serving Napa Valley
Produce 2.4 million Mtons of glass in ten glass colors
Sales to all product families
Consider services and quality to be key attributes
Slide 15
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain ContainersTop Customers
Anheuser-Busch
B & G Foods, Inc.
Bacardi-Martini
Bay Valley Foods
Beech Nut Nutrition
Bronco Wine
Campbell Soup Company
Carriage House Companies
Constellation Brands
Crown Packaging
*In alphabetical order
Diageo
J M Smucker Company
Jackson Family Wines
Kraft Foods Global, Inc.
McIlhenny Company
Mount Olive Pickle
Pepsi Bottling Group
Red Gold
Ste-Michelle Wine Estates
The Wine Group
Unilever
Slide 16
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
ECO SeriesTM Revolution Package
Marketed as having :
50% of the bottle weight
50% of the environmental impact
50% of the price.
Significant reduction in the carbon footprint for the package
Competes against imported wines
Produced in Seattle , WA and Madera , CA
2009 Clear Choice Award WinnerWine category - Bronco Wines [Down Under]
Slide 17
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
New 48 ounce glass jar size for Tostitos
Extends the product line for the customer
Excellent start-up with Frito Lay
Produced at Henderson, NC
2009 Clear Choice Award WinnerFood Category - Tostitos
Slide 18
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Product packaging changed from plastic tubs to elegant flint glass packaging.
New spreadable cheese addition to the Zionsville, IN based dairy
Produced at Dolton, IL
2009 Clear Choice Award WinnerConversion Recognition - Traders Point Creamery
This document contains proprietary and confidential information of Saint-Gobain Containers, Inc. (SGCI) and is being provided to you by SGCI for your use only. You may not
copy, modify, distribute, disclose or otherwise communicate any part of the information contained in this document to any third party without SGCi’s express approval.
Manufacturing Process
Slide 20
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Inside a Saint-Gobain Containers Plant
Commitment to
double the recycled
content in our
products in the next
five years – achieve a
50% recycled
material rate.
This will enable a 20-
30% reduction in
GHG emissions.
SGCI and eCullet,Inc.
celebrated the start-
up of a new on-site
recycling plant at
Seattle in September
Installation of energy
efficient furnaces and
emission control
devices.
Deployment of the
most efficient
furnaces in the world
Significant
improvements in NOx,
SOx and Particulates.
Use of XPAR
infrared
inspection
equipment to
analyze hot
containers
exiting the
bottle making
machines
Self-
manufactured
glass forming
machines
designed for
specific volumes
and product mix
Achieving some
of the best cycle
times and
efficiencies in the
industry
Partnerships
with EPA
Energy Star
and Climate
Leaders
Programs
Named
Energy Star
Partner of the
Year for Mfg.
Slide 21
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Inside a Saint-Gobain Containers Plant
Controlled container
annealing to enhance
container strength.
Several coating options
delivered with precise spray
systems to reduce abrasion.
Extensive use of the latest in
container inspection
equipment such as squeezers,
plug gauging, thinwall &
check detection, sidewall &
sealing surface inspection.
Containers has the first ISO
22000 (Food Safety) certified
plant in the U.S.
Automated palletizing
systems used to improve
quality and reduce the labor
component.
Strapping and wrapping
systems designed to
protect the package.
Slide 22
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Key Costs
Batch
Materials
19%
Energy
17%
Outside
Storage
2%
Molds
2%
Supply and
Repair
Parts
8%
Packaging/
Labels
13%
Labor/
Benefits
31%
Freight to
Customer
8%
Slide 23
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain ContainersBest Practices – What We Have Learned
Experience has taught us that “huge value” can be extracted from professional procurement best practices
SBU’s with consolidated, focused strategic professional procurement should see a minimum of 8-10% cost improvement with the introduction of “best in class” procurement practices
Continued execution of progressive procurement practices should produce a minimum of 3% cost improvement/reduction year over year
Our business identified conservative savings of 3.1% on a $900M addressable spend directly attributable to a global procurement strategy, independent of market indexes in 2009. This was achieved after many years of strategy refinement.
Slide 24
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain ContainersKey Factors of Success to Deliver Outstanding Savings
Hire high-potential people in purchasing
Integrity
Intellect
Energy
Expansive Vision
Team players
Use appropriate technology
Database management for consolidation of diverse business
Extract direct from financial systems where possible
WebEx for regular team communications globally
Get a senior management mandate for full cross divisional participation. (Educate senior management with good data to get full buy-in)
Savings are maximized when procurement professionals are involved earlier in the process
Slide 25
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Cost savings are maximized when professional
purchasers are involved earlier in the process
Follow up
Supplier
choice
Supplier selection RFI - RFP
Negotiation
&
contract
Specification
of the needs
Time
Savings
30 %
20 %
10 %
Slide 26
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain ContainersStrategy for Success
Consolidated purchasing with key subject matter expert professionals embedded throughout the organization vs. the old modelof centralized purchasing from only one location
Inventory Human Resources > Procurement Professionals, Engineers, End Users, Finance, IT
Assign Category Managers > i.e. MRO, Lift Trucks, Corrugated Packaging, Railroads, Van Freight, Lehrs, Refractories, etc.
Create Cross-Functional Teams form throughout the business based on expertise
Build the Global Database: Volumes/Prices/Suppliers –Forecast of the Categories
Analyze the Database Make Assignments
Slide 27
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain ContainersStrategy for Success
Team’s focus:Optimize specifications
Globalization of the spend
Standardization
LCC sourcing opportunities
Introduction of new suppliers
Partnership with our strategic suppliers
Renegotiation of existing contracts
Purchasers must be able to act as business partners: i.e. work with technical teams and challenge technical specifications and status quo
Execution and contract compliance
Communication of results
Slide 28
SGCI Confidential Information.
Do Not Copy or Disclose without SGCI’s Permission.February 23, 2010
Saint-Gobain ContainersThree Illustrations
I. Cullet
• Produce good data through cross-functional collaboration
• Challenge status quo
• Develop diverse solutions from new technology to legislative agendas
• Celebrate results including sustainability
• Huge savings
II. Corrugated Packaging
• Many diverse businesses in SGCNA – many “sacred cows”
• Huge effort…hired third party for Data Management
• Consolidated volumes be region
• Team representing each SBU
• E-Commerce RFP to begin the refinement process
• Huge savings with process improvement
III. Centralized Load Tendering
• Outbound freight procurement process totally re-engineered
• 250,000 full truckloads of glass containers
• Goal: Improve on-time delivery and lower $100M annual freight cost
This document contains proprietary and confidential information of Saint-Gobain Containers, Inc. (SGCI) and is being provided to you by SGCI for your use only. You may not
copy, modify, distribute, disclose or otherwise communicate any part of the information contained in this document to any third party without SGCi’s express approval.
Sustainable Commitment from a
leading company
“Glass is the most favorable packaging material for a
sustainable economy. Saint-Gobain Packaging already
offers eco-designed packaging, generating value for its
customers and the well-being of consumers.”
Glass:
100% Collected – 100% Recycled