Ecr talbot edwards 080930 final for day

Real Benefits from Pallet Standardization – A Case Study John Talbot – CEO, Logistics Consulting Asia David Edwards, General Manager – Business Development, Loscam Asia

The business
Background
Multinational FMCG manufacturer
National market leader in beverages
Product produced at multiple factories – mostly rural
Sales primarily in urban areas
Direct delivery to over 300,000 customers
Modern trade increasingly important (and demanding)

The business’ logistics challenges
Relatively low value product
Rural sources, but primary markets in towns/cities
Fuel costs rising (oil price & removal of subsidies)
Product damage in transit
Only 2-3 days pipeline inventory
Growth of modern trade
Logistics cost as high % of revenue
Maintenance of service levels

Solution: logistics capability development program
Logistics consultants have been supporting the business since 2005, managing a range of supply chain development projects:
Network analysis (optimal location for new plant lines)
Demand / production planning automation
Factory off-take time-slotting
Logistics skills development
Improved product care
Transport cost reduction
Factory & depot productivity
& performance upgrades
Supported by pallet standardization

Concept development thru piloting
Pool pallets and drive-in racking piloted at 1 factory and 1 depot
Key lessons:
ECR format preferred to hi-stack
Acceptance much higher where training more intense
Acceptance much higher when scale of pilot is substantial
(otherwise it has a nuisance factor)
ECR format opens opportunities for packaging cost reduction

Pallet standardization benefits sought
Reduce pallet acquisition costs
Utilize drive-in racking
Reduced transport costs & product damage
“ Soft Benefits”
Operational discipline
Customer service

1. Reduce pallet acquisition costs
Imperative to review “owned” pallets
Current 2-way (1220 x 1050) pallets
Too expensive (due to high damage rate and loss)
Undermine product care due to poor quality
Do not support installation of pallet racking
Cost of Capital (bank interest) increasing
Pallets are normally cannibalized for repairs destroying investment
Headcount and consumables required to repair pallets
Need redundant pallets for peak season
Avge 3 years life

2. Utilise Drive In Racking
Agreement that best alternative is 1200x1000 industry standard pallet “ECR Pallet”
Utilize drive-in racking
Increase storage capacity by 70%
Increase inventory build capacity

3. Reduce Transport Costs & Product Damage
Reduced transport costs
Compatibility with modern vehicles
Better vehicle utilization
Faster turn-around
Increase in direct deliveries to modern trade
Reduced product damage
Due to block-stacking
Due to timber/nail damage
Due to movement in transport

4. “Soft” Benefits
Operational discipline
Better handling practices
Safer work practices
Customer service
Better protection of product through to point-of-sale
Compatibility with modern trade standards

PHP INDO THAI Retail Market Maturity LEVEL OF SUPPLY CHAIN SOPHISTICATION INFLUENCE OF MODERN RETAIL TRADE HIGH LOW HIGH HKG SING MAL CHN IND VNM

Direct to Store – sustainability? SUPPLIER WAREHOUSE SUPPLIER WAREHOUSE Orders Transport

Centralised Distribution Driving Efficiencies SUPPLIER WAREHOUSE MODERN TRADE DC’S One consolidated order not one order per store SUPPLIER WAREHOUSE Pick by SKU not by individual store order Deliver on larger vehicles no manual handling More Trips Possible Priority Unload

RETAIL - Commercial benefits MODERN TRADE DC’S
Decide on one standard pallet for all & introduce standardization around that pallet
Velocity of product across docks & and for putaway and pick functions
Truck turnaround times and yard capacities
Supplier sponsored pallet hire
Outsource pallet function to professional mgt company
Reduce losses
Remove repair costs
Remove sorting

SUPPLIERS – Sales & CS
Reduction in Invoices/missed invoices
Reduction in collections
Reduced credits
Days outstanding/cash flow
Access to forecasting & sales data
Supplier incentives

SUPPLIERS – Supplier Operations
Picking task reduced
Wrapping, labeling, loading, paperwork reduced
Reduced number of loaders
Reduction in pallet usage
Pallets always available
Opportunity to modernise – suppliers suppliers, materials handling etc
SUPPLIER WAREHOUSE SUPPLIER WAREHOUSE

SUPPLIERS – Transportation
Reduction in transport - greater trucks turns
Priority Unloading – night time slots
Reduction in transport management task
Reduced transit damage
SUPPLIER WAREHOUSE 3 – 4 Hours LOADING 20 Minutes

Bottom Line
Savings in supply chain ~ 2 - 7%+
No disadvantage philosophy for suppliers
Total supply chain cost analysis critical
Loscam works with suppliers and transporters/3PL’s to ensure smooth transition
Modern trade influence getting stronger amongst SME’s – be prepared and achieve win win

Questions? Please contact us at … John Talbot - [email_address] David Edwards – david.edwards@loscam.com www.loscam.com www.lcalink.com

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Ecr talbot edwards 080930 final for day

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Ecr talbot edwards 080930 final for day — Presentation Transcript