Accenture APAC Supply Chain Innovations 2011

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Accenture APAC Supply Chain Innovations 2011

  1. 1. Copyright © 2011 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Innovations in Supply Chain – CG&S and EHT Industry perspective in APAC region November 2011
  2. 2. Copyright © 2011 Accenture. All rights reserved. 2 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  3. 3. Copyright © 2011 Accenture. All rights reserved. 3 Emerging markets are changing the balance of economic power and present a tremendous opportunity for Global Manufacturers Traditional Globalization flowed from developed markets to emerging markets but the flow is now reversing with emerging markets expanding into developed markets   China is projected to catch up with US GDP by 2048   In 2005, emerging economies accounted for half of the world’s GDP for the first time since the industrial age   By 2020 Asia is projected to contribute 43% of World’s GDP   India and China to remain highest percentage of new jobs by 2020 Snapshot to Emerging Markets Potential Source: Economist Intelligence Unit. Relative size of Big 4 economies New Jobs in the World Economy (% of world net increase 2005-20)
  4. 4. Copyright © 2011 Accenture. All rights reserved. 4 CG&S and EHT industry in emerging markets is expected to grow 4 times faster than advanced nations   Emerging markets forecast a ~ 8% GDP growth, much higher than developed markets ~ 2%   Since 1990, Emerging markets have registered average underlying sales growth of 9% per annum   CG&S Industry growth rates for North America & Western Europe are forecasted to be well below the industry average   Emerging markets will account for the vast majority of growth of mobile phones, PCs and TVs over the next five years   Many emerging-market multinationals used the downturn to strengthen their position – e.g. China’s Huawei expanded aggressively, becoming the world’s second-largest telecoms equipment manufacturer Segment growth rates till 2014 Avg FMCG growth rate Source of growth of E&HT products, 2010-2015 (number of units, %) Source: Euromonitor International 2010, World Bank and IMF 34% 17% 12% Developed economies Emerging economies 66% TVs PCs 83% Mobile phones 88% Source: Economist Intelligence Unit
  5. 5. Copyright © 2011 Accenture. All rights reserved. 5 Growing Middle class and increase in per capita expenditure in emerging markets are fuelling the growth in market demand Haves Have lots Have nots 2010 2.9 0.9 2020 1.9 2.7 2.0 -1.0 +0.7 +1.1 Change RisingAffluence High GDP Growth Rising Per Capita Income Rising Affluence Rising per Capita Expendit ure High Industry Growth 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2009 2010 2011 2012 2013 2014 India China S.E. Asia Africa South America Per capita expenditure US$  India and China not included in SE Asia  Africa consists of all African continent countries Source : Planet Retail 2.0 Emerging economies contributes to a major share of growth and revenues for CG&S and EHT companies. Billions of people in emerging markets 5 yr CAGR in Emerging Markets 12 % 10% 10% 20% 14% Source : Unilever Annual Report
  6. 6. Copyright © 2011 Accenture. All rights reserved. 6 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  7. 7. Copyright © 2011 Accenture. All rights reserved. 7 •  Very attractive global market •  Large number of intended new entrants, particularly in the retail space •  Poor infrastructure •  Entry to WTO, increased competition JAPAN •  Market deregulation •  Increase level of imports •  Retail price wars •  Efficiency drives •  Re-structuring supply chain networks and long standing distributor models •  Mature and tight margins •  Very intense competitive retail market •  Efficiency drives continued market penetration •  Increasing level of imports •  Good growth •  Chaebol “taming” •  Increasing deregulation/Free Trade region and Singapore as Tax Efficient Hub •  Market “shake-out” •  Good growth, competition up •  Large number of new entrants •  Increasingly sophisticated buyers •  Vietnam’s entry •  ASEAN/AFTA Preferential tariffs 0%-5% on most items Source: Accenture thought leadership research: “Asia Pacific Supply Chain Challenges and Opportunities” GREATER CHINA KOREA Australia/New Zealand ASEAN Key APAC Market Trends
  8. 8. Copyright © 2011 Accenture. All rights reserved. 8 Several forces are impacting the key trends of companies in APAC Allied (Technology & Governance Forces) Trading Partner Forces Internal Forces Market Forces Key Trends   Globalization   Collaboration   Seamless Supply Chain   Compliance   Demand Driven Flow •  Flexible government policies •  Increase in Governance aspects •  Free trade vs. Fair trade •  Immature offshore infrastructures •  Real time information •  Technology standardization •  Globalization & liberalization of economies •  Operation cost pressures •  Thrust on organic/ inorganic growth •  Supply Commoditization •  Demand based value chain •  Focus on core competency-shifting non core services in the upstream side •  Focus on services and value added products •  Focus on innovation •  JV’s/Organic/Inorganic relationship •  Shift in the value chain •  Offshore to co-locate with manufacturers •  Cost vs. Service vs. Quality •  Supply Chain spanning across internal functions and trading partners •  Reliance on operational flexibility, responsiveness and productivity •  Thrust on R&D •  Time to Market Logistics Challenges Retail Market Challenges Logistics Costs as percentage of GDP : China- 15-16%, India- 11-13% and Indonesia- 14% India –   Only 47% of roads are paved in India   70% of seaborne trade handled by 2 of 12 major ports   Fragmented transportation market dominated by small truck owners China –   The quality of transport infrastructure in its vast inland areas is inferior compared to the more developed coast   Heavy dependence on roads- road transport accounts for 75% of total freight volume The logistics management cost component in India is as high as 7% -10% against the global average of 4% - 5% of the total retail price Organized retail in APAC markets India 5% China 20% Indonesia ~30% •  Low initial investment & employment opportunities are reasons for prevalent unorganized retail •  Reaching the local shops across various market tiers require multilayered distribution resulting in higher distribution costs Amateur Logistics and Fragmented retail markets are key forces impacting emerging markets
  9. 9. Copyright © 2011 Accenture. All rights reserved. 9 Operating efficient supply chain and Distribution Network in APAC Markets is hindered by multiple challenges In the emerging markets, almost 2X money spent on logistics costs as a % of GDP compared to advanced nations Lack of paved roads and highways; underdeveloped rail network, ports, air ports and communication infra restricts quick turn around time Communication infrastructure Different tax structure and multiple tax incidences in one of the emerging markets is forcing companies to tailor distribution and warehousing strategies to optimize on tax incidence Restrictions on FDI to invest in retail sector in few emerging economies Mom n Pop stores dominate when compared to advanced nations Emerging economies poses a challenge to cover dispersed locations with varying level of consumer pattern across several market tiers Diverse geographies Amateur logistics Fragmented retail markets Differential tax regimes and commercials Inadequate infrastructure Imposing local regulations
  10. 10. Copyright © 2011 Accenture. All rights reserved. 10 Source: Euromonitor June 2009 China: •  China's one child policy means that the proportion of the population over 65 will rise sharply by 2020, from 9.1% in 2008 to 12.4% in 2020; •  China will experience a population bulge, with those born before the 1979 policy reaching their peak consumption level around 2020. However, the ageing population will put pressure on social services Consumer Demographics display different trends within countries of emerging economies of the world Implications for FMCG •  Even within emerging economies, there will be strong differentiation in consumer demands in different markets •  India & Brazil markets will continue to remain “Youth” dominant •  China & Russia will increasingly require products catering to an ageing population, as discussed earlier India: •  India will also experience an ageing population, but its high population growth means that it will still have a large youth population, with those below 15 years of age totaling 26.7% of the population in 2020, the highest amongst the BRIC •  This will translate into an important emerging consumer market, which can be targeted as they begin working life Russia: •  Russia's population is declining, partly owing to emigration, but also to a low fertility rate and low male life expectancy •  Russia will therefore suffer doubly, from an ageing population and a shrinking overall population. •  By 2020 Russia will have the largest proportion of over 65s at 14.4% of the total population •  The proportion of females in the population will be notably larger in Russia than the other BRIC countries at 54.3% of the total population in 2020.
  11. 11. Copyright © 2011 Accenture. All rights reserved. 11 Trends specific to countries within APAC poses unique supply chain challenges that necessitates local innovation Very High High Medium Low Very Low The unique constraints of the developing markets lead to challenges which have an impact on the supply chain performance parameters Distribution cost as a % of product cost Distribution lead times Forecasting Accuracy Inventory turns China India Malaysia Indonesia South Korea Thailand Vietnam Parameters in above graph across geographies indicate there is a huge opportunity in improving supply chain efficiencies through innovation
  12. 12. Copyright © 2011 Accenture. All rights reserved. 12 To tackle these multiple challenges Supply Chain is an important catalyst for growth in emerging markets (according to CxO Surveys) Source: IMF 0 2 4 6 8 10 Risk Mitigation Tax Optimizatoin Market Access Cost Reduction When asked “Which of the following factors is influencing potential emerging markets operations” “strategy change? It was found that Market access is the most often cited driver of potential changes to operations and distribution models in key markets When asked “Which of the following does your site regard as their top 3 objectives “ It was found that about 70% of respondents indicate that Improved Customer Service Levels as one of the top 3 objectives in India Source: PRTM Source: E&Y Most respondents believe it is “very important” or “important” for the supply chain to help achieve the following imperatives Revenue growth (97%), effectively managing total delivered cost (92%), procurement efficiency and effectiveness (92%), product innovation (87%) and manufacturing excellence (87%). 43% 37% 38% 39% 46% 32% 54% 50% 54% 48% 46% 54% 2% 12% 7% 11% 8% 12% 1% 1% 1% 2% 1% 2% Revenue Growth Product Innovation Procurement Efficiency and Effectiveness Manufacturing excellence Effectively managing total delivered cost Meeting corporate social responsibility and carbon reduction targets
  13. 13. Copyright © 2011 Accenture. All rights reserved. 13 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  14. 14. Copyright © 2011 Accenture. All rights reserved. 14 Supply Chain Issues Early Indicators   Strategy and operations linkage   Significant process and organizational changes   Need to manage PD across multiple collaboration partners   Complex standardization requirements   Slow time-to-market   Design defects in manufacturing   Low new product success rate   Fluctuations in demand and inaccurate forecasting   Lack of coherence in planning and execution   Non optimized inventory levels   Sub-optimal planning and management of network capacity   Consistent forecast misses and errors   Supply and Demand planning not coordinated   excess inventory, obsolete inventory, and incidence of stock outs   Imbalance in priorities between achieving best cost/ service and minimizing impacts to operations   Limited collaboration with suppliers   Higher direct and indirect operating costs   Lack of holistic sourcing strategy   Indirect spend growth out of sync with business growth   Fragmented spend spread across multiple business units   Increasing raw material & commodity costs   Production capacity not aligned with changing demand trends   Shortage of skilled labor forces   Stringent production quality standards   Collaborating with contract manufacturers   Manufacturing mix decisions – local vs. global   High COGS   Low ROA and production overcapacity   Increasing labor and production cost variances   Minimal data sharing/visibility of operations   Unreliable quality performance and adherence to specs   Customer requirement for shorter delivery lead times   Volatile fuel/transportation costs   Extremely large carrier base   Misalignment between distribution network and customer base   Underperforming on-time shipment metrics   Increasing transportation and warehousing costs   Low utilization of preferred carriers   Dropping customer satisfaction levels Develop   PD/NPD lead time   Innovation   Operations Plan   Supply plan   Demand Plan   Inventory Management Source   Sourcing   Procurement Ops   Inbound Logistics Deliver   Order Management   Distribution   Outbound Logistics   Reverse Logistics Make   Engineering   Manufacturing   Assembly The leaders in Emerging Markets need to innovate to address specific issues across these supply chain key areas to gain competitive advantage
  15. 15. Copyright © 2011 Accenture. All rights reserved. 15 Global Sourcing Strategies Quality Service and Quality Production Flexibility + Cost of Manufacture / Supply Product Centric Efficiency Centric Customer Centric Multi Chain Strategy Portfolio Strategy Multi Partner Strategy Plan, Make + Fulfill Innovate + Source Customer + Service Manage Profitable Growth Flexibility Push versus Pull Networks Total Cost to Serve Information versus Assets Serving New Markets Managing Complexity Sustainability Strategy These Supply Chain Innovations should be centered around three key areas: Customer, Product & Efficiency
  16. 16. Copyright © 2011 Accenture. All rights reserved. 16 Supply Chain Success Stories – Develop Phase   Tata Nano is an incredible example of innovation in PD. The concepts such as Frugal Engineering wherein the components and designs were developed using existing platforms   This innovation in PD was complemented with collaborative approach between Tata and suppliers to develop components and optimize the cost of the car Frugal Engineering-An innovation in PD   ITC in India blends Aashirvaad atta differently for different regions in India based on regional tastes and preferences.   The company launched Aashirvaad Select for the northern market, Aashirvaad MP Chakki for the west and Aashirvaad for the east. ITC used its e-Choupal initiative to source 18 different grades of atta. ITC Aashirvaad – Different flavors catering to different regions Develop   How do we make our PD group aligned with supply chain   How do we reduce new product development lead time?   How do we execute seamless coordination of PD with Manufacturing?   How do we effectively manage the new product development process?   How do we become self reliant to design new products?   How can we launch new products earlier than competition?   How do we design high quality products aligned to customer’s requirements   P&G recognizes Chinese customers’ needs and potential and segments market carefully. A brand offers different products oriented at different customer classes.   E.g., in China, Olay offers a series of product oriented on both medium-high and medium-low market while in many other countries oriented only on medium-low market.   The extended product line increased market share. The sales in China helped Olay become P&G’s 13th brand achieving sales above $1 billion one year earlier Re-segmentation aligned to China market needs
  17. 17. Copyright © 2011 Accenture. All rights reserved. 17 Supply Chain Success Stories – Plan Phase   MSIL offers 11 car models with 150 variants for almost all customer segments. 55% market share in Indian market   Lately MSIL is emphasizing on fuel efficiency, reliability, responsiveness and flexibility in supply chain   The first in the automotive industry to focus on rural supply chain. More than 10% of sales are coming from Rural market and this market needs a different approach in supply chain. MSIL has successfully penetrated this market by emphasizing on dealers and distribution network   India’s car market is expected to grow at a CAGR of 16% on the next 5 years. This unprecedented growth requires OEMs to launch the products in the respective categories aligned fully to customer’s requirements and taste.   Product development has emerged as the key differentiator for OEMs to penetrate the Indian market. The OEMs have begun developing R&D centers within India to design and develop the cars. GM has made investments in engineering center in Bangalore to serve Powertrain requirements for entire APAC market. A sustained market leadership with critical focus on Supply Chain (Mfg/Sourcing/ Distribution) Product Development-key for competitive advantage Plan   How can we make the supply chain more responsive and flexible?   How can we improve customer service level and consistency?   How can we improve the customer demand visibility & forecast accuracy?   How can we improve inventory performance without impacting customer service levels?   How can we improve Master Production Plan compliance?   How can we ensure optimum network capacity planning and management?   How can we service customers more profitably?   How can we tailor our business streams based on customer segmentation?   Big Bazaar and Futrure Bazaar is a part of Future group and has around 12 million square feet of retail space in over 71 cities and towns and 65 rural locations across India.   FutureBazaar.com an e-arm of the parent group provides an integrated shopping experience and highly responsive supply chain to customers wherein they are able to buy products online from any of their businesses such as Big Bazaar , eZone, Pantaloon etc. Redefining Supply Chain in the Indian market
  18. 18. Copyright © 2011 Accenture. All rights reserved. 18   Maruti maintains a spare Just-In-Time inventory which is replenished on an hourly basis.   Maruti has 250 plus Tier-I vendors and 20 global suppliers who ensure this continuous supply   Its vendors are connected to the company’s much-lauded e-nagare system, which is an electronic supply chain system, through which the vendors inform the company on a day-to- day basis of diverse requirements and provision of supplies. Once informed of desired supplies, the vendors deliver the material to the factory doorstep. Supply Chain Success Stories – Source Phase Innovative Supply Chain footprint in India   Dabur has conducted e-sourcing auctions of projects worth close to Rs 150 crore. Dabur uses the same concept to source products like herbs, honey, spices and even packaging.   Today Dabur has not only managed to save costs by close to 8 percent but has also managed to bring in transparency in the complex, fragmented market for herbs.   The aggressive bidding by many vendors has cut costs massively and company sources say that Dabur has already saved close to Rs 2.5 crore by adopting e-sourcing practices. E Sourcing – A strategic Initiative Source   How can we collaborate with our suppliers?   How can we reduce indirect and direct material cost?   How should we more effectively leverage global / low-cost sourcing?   How can we improve compliance to contracts and policies?   How can we improve supplier performance and management of raw materials?   How can we improve commodity management strategies?   How can we ensure alignment of procurement strategy, organization, processes and metrics? Maruti’s “very slim, trim and robust” value chain model   India’s retail market comprises of mostly unorganized players with organized market constituting only 6% of market share. Around 40% of raw products is wasted due to lack of cold storage and stringent supply chain processes   Wal-Mart jointly with Bharti are emphasizing on ‘Cash and Carry’ business in the Indian market. Wal-Mart is persistently focusing on effective supply chain network by expanding supplier base through training on supply chain practices. This resulted in 20% cost savings for both of them
  19. 19. Copyright © 2011 Accenture. All rights reserved. 19 Supply Chain Success Stories – Make Phase Make   How can we optimize our manufacturing processes?   How can we improve utilization of production capacity?   Should the manufacturing strategy be regional or global in nature?   Should we employ a single source or multi- source plant manufacturing strategy?   How should we leverage low-cost production opportunities?   How can we consolidate manufacturing footprint?   How can we identify improvement opportunities?   How can improvement opportunities be identified, evaluated, and implemented?   How should we manage contract manufacturing capacity? Manufacturing innovation to cater to local constraints   Faced with growing criticism regarding its very high consumption of water ,Coca Cola in India revamped its manufacturing processes to prevent wastage and optimize usage of water.   The plants aim at efficient & effective use of water during beverage manufacturing process by continually improving the infrastructure, monitoring & controlling the consumption of water at individual areas & imparting awareness to associates.   The water conservation strategy is centered on the 4R approach (reduce, reuse, recycle and recharge).   The Coca-Cola system in India has improved its water use efficiency (water usage ratio) by over 25 percent since 2005   ITC’s Mangaldeep is already the second-largest national agarbatti brand, riding on the success of two sub-brands, ‘Madhur 100’ and ‘Yantra’. Sector analysts peg the agarbatti market at around Rs 1,800 crore, and growing at 8-10 per cent yearly.   Around 10-11 small firms are engaged in contract manufacturing the agarbattis and together they supply about 180-200 million sticks per month to ITC.   These are marketed through half a million retail outlets that distribute ITC’s other products. The sticks are available at a price between 8 paise and Re 1, with urban and rural markets contributing equally to the turnover. Contract Manufacturing – A strategic Initiative
  20. 20. Copyright © 2011 Accenture. All rights reserved. 20 Supply Chain Success Stories – Deliver Phase Deliver   How can we improve distribution network performance?   How can we rationalize our DC network?   How can we improve distribution centers cost and service performance?   How can we leverage volume to manage transportation costs and service?   Coca Cola India employs direct to market strategy in metros where it services around 4 million outlets through company owned infrastructure thus enabling high service levels   Also Coca Cola leverages its direct to market data to know and hence categorize and profile its customers, leading to analytical decisions deriving higher returns. Coca Cola “Direct To Market” HUL’s Project Shakti   Project Shakti was launched by HUL in 2000 in partnership with non governmental organizations, banks and government.   Women in self-help groups across India are invited to become direct-to-consumer sales distributors for Hindustan Lever’s soaps and shampoos.   The company provides training in selling, commercial knowledge and bookkeeping to help them become micro-entrepreneurs   Gillette optimized its cost to serve by relocating its pack centers to Baddi (Tax holiday zone) there by significantly reducing the cost to serve its customers through reduced taxes and utilizing low cost manpower. Gillette Cost to Serve Strategy
  21. 21. Copyright © 2011 Accenture. All rights reserved. 21 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  22. 22. Copyright © 2011 Accenture. All rights reserved. 22 World’s most economical refrigerator-Godrej Chotukool Supply Chain Success Stories – Develop Phase Develop   How do we make our PD group aligned with supply chain   How do we reduce new product development lead time?   How do we execute seamless coordination of PD with Manufacturing?   How do we effectively manage the new product development process?   How do we become self reliant to design new products?   How can we launch new products earlier than competition?   How do we design high quality products aligned to customer’s requirements   At $ 45 as against iPad’s $ 499 this tablet PC is the most economical in the world.  Sporting a 7-inch touch screen, Aakash runs on Android 2.2 operating software. According to specifications, it has a high-definition video co-processor for good multimedia experience.  Frugal engineering along with economies of scale is expected to make this product financially viable in the market. Aakash-India’s low cost answer to the iPad   At $ 69 Godrej Chotukool is the world’s most economical refrigerator.  Chotukool does not have a compressor. The refrigerator weighs only 7.8 kg, runs on a cooling chip and a fan similar to those used to cool computers.  The operational cost is low: the refrigerator consumes half the power consumed by regular refrigerators.  The Chotukool was co-designed with village women to assure its acceptability   Micromax is a fastest growing mobile handset firm in India with ~7% market share   The strategy focuses on innovation, design and technology to tap the growing mobile handset market   Micromax considers PD as a cornerstone for bringing the innovative product in this market   The product innovation includes differentiated approach by long battery life, dual GSM capability, low-cost QWERTY phones, universal remote control and gaming phones Innovative product approach
  23. 23. Copyright © 2011 Accenture. All rights reserved. 23 Supply Chain Success Stories – Plan Phase  Based on keen customer insight and fine customer segmentation, Nokia launched a service called LifeTools -Providing farmers in India, China and Indonesia with real time commodity market data.  By providing this the service Nokia commands tremendous brand loyalty in a market where the majority of phones are non smart phones  The aim is to service this massive consumer segment profitably and also provide a service which will improve the livelihood of the farmers.  Already over 15 million people have signed up to pay Nokia $ 1.35 a month for this information. Nokia Life tools Haier  Engineer’s in Chinese company Haier noticed that the pipes in their washing machines were getting clogged because customers were using the machine to wash vegetables.  While other companies put warning stickers on their machines advising customers not to wash vegetables in the washing machine ,Haier tweaked their machines, added bigger pipes and encouraged this new innovative use if the washing machine  They also designed a washing machine which could be used to make goat’s cheese.   By adapting products to the needs of the customers and having a keen insight on consumer behavior ,Haier was able to become a leading player in the highly competitive consumer electronics industry. Plan   How can we make the supply chain more responsive and flexible?   How can we improve customer service level and consistency?   How can we improve the customer demand visibility & forecast accuracy?   How can we improve inventory performance without impacting customer service levels?   How can we improve Master Production Plan compliance?   How can we ensure optimum network capacity planning and management?   How can we service customers more profitably?   How can we tailor our business streams based on customer segmentation?
  24. 24. Copyright © 2011 Accenture. All rights reserved. 24 Supply Chain Success Stories – Source Phase   By centralizing the procurement function in all its 115 factories LG has been able to gain tremendously because of increased visibility and better deals with the suppliers .   By buying aluminum instead of higher-priced copper for the guts of electrical goods such as home appliances, purchasing officers saved $25 million annually.   The cost-cutting saving them $2 billion annually helped LG get through the global downturn better than many competitors.   These innovations have enabled the company to reduce cost of many of its consumer products. For example, it was able to reduce the cost of its best selling touch screen phone (LG Cookie)by 30%. Source   How can we collaborate with our suppliers?   How can we reduce indirect and direct material cost?   How should we more effectively leverage global / low-cost sourcing?   How can we improve compliance to contracts and policies?   How can we improve supplier performance and management of raw materials?   How can we improve commodity management strategies?   How can we ensure alignment of procurement strategy, organization, processes and metrics? LG Electronics Flextronics   A major contract manufacturing company based in China ,Flextronics makes cell phones ,X-box game consoles ,PC’s and other hardware in 13 factories.   Almost every chemical, component, plastic, machine tool, and packing material Flextronics needs is available from thousands of suppliers within a two-hour drive of the site   That alone makes most components 20% cheaper in China than in the U.S   By effectively collaborating with suppliers and ensuring that material cost is reduced Flextronics enjoys considerable low cost advantage.
  25. 25. Copyright © 2011 Accenture. All rights reserved. 25 Supply Chain Success Stories – Make Phase   Initially known only as low cost manufacturing locations primarily because of abundance of cheap labor ,APAC countries are improving their manufacturing processes to attain high levels of quality and efficiency.   Samsung has effectively used the philosophy of Six Sigma to improve its manufacturing processes and attain high levels of quality. Samsung Make   How can we optimize our manufacturing processes?   How can we improve utilization of production capacity?   Should the manufacturing strategy be regional or global in nature?   Should we employ a single source or multi- source plant manufacturing strategy?   How should we leverage low-cost production opportunities?   How can we consolidate manufacturing footprint?   How can we identify improvement opportunities?   How can improvement opportunities be identified, evaluated, and implemented?   How should we manage contract manufacturing capacity?   The Micromax phones are designed by the in-house research and development team, as is the embedded software. Manufacturing is outsourced to about 11 factories in Taiwan, South Korea and China.   Micromax has recently invested in setting up a plant in Himachal Pradesh, India as it feels outsourcing manufacturing completely leaves the door open for supply- side uncertainties.   By effectively leveraging low cost production opportunities while mitigating the risk involved and by streamlining the manufacturing process to ensure reduced new product development times, Micromax has innovatively managed to make its mark in the competitive handset manufacturers market . Micromax
  26. 26. Copyright © 2011 Accenture. All rights reserved. 26 Supply Chain Success Stories – Deliver Phase   Faced with Loss of Market Share and decline in margins due to Very low visibility for secondary sales causing stock outs and high cash lock up ,Motorola decided to revamp its distribution network in India   It removed the National Distributor and introduced a Direct to Town Distributor (DTTD) and Direct to Retail (DTR) model.   With initiatives likes Collaborative forecasting and online ordering they were able to overcome their business challenges. Motorola Deliver   How can we improve distribution network performance?   How can we rationalize our DC network?   How can we improve distribution centers cost and service performance?   How can we leverage volume to manage transportation costs and service?   Nokia created a new channel named “Fulfillment Distributor” in China.   In this mode Nokia’s sales people promote to the end retailers directly while the distributors act as a platform of delivery, money flow and service.   In Guangdong the sales increased by 40% through this mode. And Nokia successfully extended battlefield to tier 3 and tier 4 cities. Innovative Channel Strategy
  27. 27. Copyright © 2011 Accenture. All rights reserved. 27 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  28. 28. Emerging Markets are the Innovation Laboratories and giving rise to “Reverse Innovation” 28© 2011 Accenture. All rights reserved. “Reverse innovation," the concept encompasses any innovation that is adopted first in the developing world and then migrates into mature markets. - World’s cheapest water purifier Swacch means clean in Hindi. Tata launched the water purifier – Tata Swacch targeting the rural market in India with the cheapest water purifier in the market. The product does not require running water, power or boiling and uses paddy husk ash as a filter. It also uses silver nanotechnology. It can give purified water enough to provide a family of five drinking water for a year. The company feels it will open a whole new market. – eKOCool. Introduced eKOCool, a chest cooler operating on solar energy with a capacity to store about 4 dozen 300 ml glass bottles. The innovation also charges a mobile and solar lanterns. Coca-Cola has plans to pilot the innovation in different cities in India and may be it will introduce it in other developed countries as well. – Kurkure and Aliva Kurkure is a INR 700 Cr successful brand in India over a decade. PepsiCo planning to launch particularly in west Asia. Made from corn, rice and gram flour, zero per cent trans fats and no cholesterol, Rs-3 small packs for pushing sales in the lower-tier towns.  Glocalization involves adapting to local market preferences rather than truly innovating  Some of the most compelling innovations of our time are poised to emerge not in the U.S. or other developed countries but in emerging markets such as China and India  Because of the rapid growth in demand and scale in emerging markets, like Brazil, China and India, the opportunity to create local, customized solutions is much more pronounced – Tata Motors – Tata Nano While companies like Ford set up its global automobile platform in India and catered to the niche premium segments in India, Tata introduced the Tata Nano for the price conscious consumer in India in 2009. Tata plans to launch Tata Nano in Europe and U.S. subsequently.
  29. 29. Copyright © 2011 Accenture. All rights reserved. 29 Examples of Reverse Innovation in EHT Industry GE MAC 800 •  The machine is the field model that GE Healthcare developed for doctors in India and China in 2008. •  These were Introduced in the US market at $2500 or at 80% markdown from products with similar capabilities. Xerox Innovation Hub • Xerox Innovation hub launched in Chennai, India in 2010-the first such venture in the developing world. • The aim is to tie up with local entrepreneurs and institutions to identify and leverage innovations which can be introduced globally. Nokia 1100 • Launched with the tagline- “Made in India”- it had a built in flashlight, a dust proof non slippery grip, and was lightweight and had a small size. • The phone was an instant success in the developed world as well because of its durability and long battery life.
  30. 30. Copyright © 2011 Accenture. All rights reserved. 30 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  31. 31. Copyright © 2011 Accenture. All rights reserved. 31  Organizational divisions  Budgeting process  Inconsistent goals, objectives, measurements  Cultural differences Flows •  Physical •  Services •  Digital •  Information •  Financial •  Legal Demand Order to delivery Service/Return ….to value delivery systemBarriers Plan Buy Make Move From Supply Chain… Ecosystem Partners The key is to redefine the supply chain as a value delivery system With this broader perspective, companies can identify a greater number of opportunities to innovate and improve performance. In addition, by seeing the interconnections among these elements, they are less likely to sub optimize the whole by optimizing one of the parts.
  32. 32. Copyright © 2011 Accenture. All rights reserved. 32 Seven Supply Chain imperatives (Value deliver systems) combine to drive high performance Companies that excel in above seven areas will be better positioned to develop, source, manufacture and distribute superior products at lower relative costs; increase revenue, profit and shareholder value faster than competitors; and more effectively anticipate customer needs and meet them profitably ∑ Segmented Design Adapted to Characteristics Value Delivery System Approach Dreamers Efficient Under- Performers Losers Optimize global operating model Clear Value Creation System Thinking: Fit with business Strategy Selective investment for mastery IT focused on insight and responsiveness Process Execution powered by high performance culture Doing: Ability to Execute High Performance ∑
  33. 33. Copyright © 2011 Accenture. All rights reserved. 33 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  34. 34. Copyright © 2011 Accenture. All rights reserved. 34 End to End Solutions provided by Accenture to tackle key challenges in APAC CG&S Industry Digital Consumer Services Channel & Revenue Management Services Speed to Consumer Services Integrated Business Services ERP Transformation Services
  35. 35. Copyright © 2011 Accenture. All rights reserved. 35 Accenture can help creating a differentiated distribution capability for emerging markets, that enables firms overcome challenges and grow their revenues, margins and market share Accenture’s Response and Value DeliveredDistribution Challenges We help clients select the right distribution model and channel partner, which means they can better serve their end customers and extend their reach—and profitability—in new and existing markets.   Solutions: Distributor Selection Criteria; Distribution Model-Maturity Assessment; Baselining & Benchmarking We help clients optimize their product portfolio, which reduces complexity and distribution costs, and also allows them to focus on those SKUs that matter most.   Solutions: Portfolio optimization; SKU rationalization; Product complexity management; Channel & retailer assortment optimization We help clients examine every aspect of their distribution capabilities to identify opportunities to reduce their cost to serve.   Solutions: Logistics PMO; 3P – IPO; Sales and operations planning; Inventory optimization; Network optimization; Demand and supply planning We help clients Integrate their infrastructures and applications with those of their distributors to provide greater visibility into inventory levels, sales data and customer trends, and to enable more effective management and control of the distribution network.   Solutions: Infrastructure optimization & management; Application portfolio strategy; Application development & maintenance; Industrialized global ERP deployments; SAP upgrade; ERP value realization We help clients apply analytics to gain valuable and actionable insights into the distribution network’s costs, effectiveness and ability to serve the end customer.   Solutions: Supply chain analytics; Channel & revenue management analytics services; Business intelligence; BPO services for analytics   Geographical diversity & reach   Logistical maturity   Long lead /transit times   Service levels for remote markets   Cost-effective Reverse Logistics   Distributor Exclusivity   Distributor’s investment capability   Serving remote markets   Distributor Performance Management   Visibility of Distributors’ Inventory & Sales   Visibility of POS data and Consumer buying trends   Product Proliferation   Multiple Pack-sizes and Price points   Combative Pricing   Data availability   Accurate inventory deployment   Detecting changes in demand trends 3 1 2 4 5
  36. 36. Copyright © 2011 Accenture. All rights reserved. 36 End to End Solutions provided by Accenture to tackle key challenges in APAC EHT Industry
  37. 37. Copyright © 2011 Accenture. All rights reserved. 37 Content Overview and growth story of CG&S and EHT in APAC region Key Challenges in Supply Chain in APAC Region Innovations in CG&S to tackle key challenges in Supply Chain Innovations in EHT to tackle key challenges in Supply Chain Reverse innovation and examples Framework for Efficient and Innovative Supply Chains in APAC Accenture tailor made innovative solutions for APAC region Appendix
  38. 38. Copyright © 2011 Accenture. All rights reserved. 38 Supply Chain Cost followed by Optimized Distribution Network and Right Selling Cost are the levers preferred by……………………………… Company Country Cost to Serve advantages India P&G in India identified that cost to serve for its products for Rural segment will not create economic value and hence realigned the market and distribution strategy for Urban market through traditional and modern trade. India Cost to Serve exercise uncovered the breakdown of costs incurred in supply of products to its customers previously treated as black box and helped the organization to evaluate Investment profitability and CTS Vs Investment of all the Trade accounts. This reduced the company’s increasing spend on emerging Modern Trade affecting the Total Business Operating Profit . India Gillette optimized its cost to serve by relocating its pack centers to Baddi (Tax holiday zone) there by significantly reducing the cost to serve its customers through reduced taxes and utilizing low cost manpower. China In China, P&G analyzed that cost to serve will not be able to sustain competitive pricing in rural and mid-tier markets. Hence, P&G decided not to target rural markets and moved to “Design to Cost” concept in mid-tier . China Colgate acquired a substantial stake in local Chinese toothpaste company Sanxio and discovered a 30% cost advantage and reduced costs by some 60% through localizing production and accessing distributor chain of Sanxio. China Coca Cola China plans to improve packaging material efficiency per liter of product sold by 7% from 2008 baseline.
  39. 39. Copyright © 2011 Accenture. All rights reserved. 39 …….CG&S companies to reduce overall Cost-to-Serve in APAC Markets Company Country Cost to Serve advantages Indonesia Unilever keep improving its distribution by developing distribution center in Cibitung and renovate its distribution centers in other cities to better leverage economy and scale and to reduce stock outs during long public holiday such as Lebaran. Indonesia Kalbe Farma own its distribution & logistics company, Enseval Putera Megatrading which also distributes non- Kalbe Farma products. By strengthening its distribution infrastructure, Kalbe Farma will gain advantage of improved distribution network, better product accessibility and improved working capital position. Indonesia Starting in 2010, HM Sampoerna has expanded its business activities to include direct sales and distribution, gaining efficiencies from the distribution network. PT Handal Logistik Nusantara is the subsidiary of Sampoerna that handle the sales and distribution. Indonesia Garudafood outsource its distribution via SNS Integrated Consumer Goods Distributor. SNS has numerous of depos that serve hundreds and thousands of customer outlets throughout Indonesia. SNS also has a join venture operation with sub distributors that operate from Aceh to Papua, thus increase the geographical coverage of the distribution. Indonesia Indofood has one of the most extensive distribution network in Indonesia. It owns the distribution center as well as outsource some of the distribution activity to third party. Its strategy is to include many stock points in high density market area such as retail outlets and traditional market to serve geographical needs at the shortest time.
  40. 40. Copyright © 2011 Accenture. All rights reserved. 40 Company Product Portfolio Optimization Strategy Leading in Men’s grooming products, introduced Menz Facewash targeting the Metropolitan Man and men’s cosmetics market . Introduced Minute Maid Orange and Nimbu and Maaza Aam Panna under Non-carbonated beverages segment. Parle recently introduce the Baked chips through product differentiation in waffers market and use its far reach of existing distribution channels of biscuits. Responding to trend shift from carbonated to health drinks, Parle sold Thumbs Up to Coca Cola. P&G launched bargain-priced Tide Naturals in India. It now offers laundry detergents at three distinct performance and pricing levels, delivering a solid value that is now affordable for more than 70% of Indian consumers. Marico expanded its “Saffola” Low cholesterol Cooking oil portfolio by adding Saffola Tasty oil, Saffola Salt, Saffola functional foods and oats. Started Business with low cost “Vada Pav” and expanded portfolio with variants like cheese and Schezwan according to varying customer tastes. It also introduced beverages like Lassi, Mango Lassi and Fountain Pepsi leading to improvement in revenues. CG&S companies have successfully expanded product portfolio to capture local tastes/habits/preferences in APAC Markets (India Examples)
  41. 41. Copyright © 2011 Accenture. All rights reserved. 41 CG&S companies have successfully expanded product portfolio to capture local tastes/habits/preferences in APAC Markets (China Examples) Company Product Portfolio Optimization Strategy   Introduced four Minute Maid flavors in China--orange, pink grapefruit, tropical fruit, and grape with aloe vera pulp   Launched Yuan Ye ("original leaf"), a ready-to-drink tea In 2008, generated 19% overall volume growth in China for Coca Cola Altered product formulation of Oreo cookie to suit local tastes   Research showed that Chinese consumers found them too sweet, while Indonesian consumers preferred a sweeter cookie Oreo is now the #1 selling packaged cookie in China • Introduced Head & shoulders specifically to address the dandruff problem of the Chinese consumer. It was priced 3 times higher than the local brands • ‘New Crest’ was launched 8 yrs after Crest as a differentiated pricing strategy P&G Market Share 5.18% with Head & Shoulders- 25% of Chinese Shampoo Market Owns Nescafe, Nan and Maggi brands in China and has also acquired local brands Totole, Haoji and Dasha Posted sales of ₤2.1bn in 2010
  42. 42. Copyright © 2011 Accenture. All rights reserved. 42 CG&S companies have successfully expanded product portfolio to capture local tastes/habits/preferences in APAC Markets (Indonesia Examples) Company Product Portfolio Optimization Strategy   Entered water purification business with new introduced brand ‘Pureit’, safe drinking water solution without the needs of electricity and gas   Launched Pond’s Gold Radiance and enhance customer development by opening Pond’s Institute   Launched 3 variants of Magnum ice cream which produced 2010 sales 20x above that of 2009 In 2010, acquired PT Sara Lee Indonesia Tbk to be operated under Unilever sales & distribution Altered product formulation of cookies to suit local tastes   Research showed that Indonesian consumers preferred a sweeter cookie, variants of Oreo cookie has been introduced   Introduced new brand that accommodate chili tasted cookie Oreo is one of the fast selling packaged cookie in Indonesia • Kalbe Farma is diversified pharmaceuticals which also expand the product offering to Consumer Health and Nutritional segment. • Well known consumer brand such as Tipco, Fatigon Hydro, Extra Joss and Prenagen Kalbe Farma’s Consumer Health and Nutritional are 39% out of total Kalbe market share Owns Kit and other Home Hygiene Products such as Baygon, Autan, Bayfresh and Bayclin Penetrate its product portfolio through marketing campaign nationwide Acquired PT Megasari Makmur group to expand portfolio enter the Household insecticides, wet tissues and air freshener Market in Indonesia Portfolio Expansion strategy

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