Supply Chain Conference 2010 Executive Summary

ExEcutivE Summary
12th – 14th October 2010 • Berlin, Germany

www.tcgfsupplychain.com

WHat iS tHE CONSumEr GOODS FOrum?
the Consumer Goods Forum (CGF) is a global, parity-based industry network, driven by its members. it brings together the CEOs and
senior management of over 650 retailers, manufacturers, service providers and other stakeholders across 70 countries and reflects the
diversity of the industry in geography, size, product category and format. Forum member companies have combined sales of Eur 2.1
trillion.
the Forum was created in June 2009 by the merger of CiES - the Food Business Forum, the Global Commerce initiative (GCi) and the
Global CEO Forum. the Consumer Goods Forum is governed by its Board of Directors, which includes 50 manufacturer and retailer CEOs
and Chairmen.
the Forum provides a unique global platform for knowledge exchange and initiatives around five strategic priorities – Emerging trends,
Sustainability, Safety & Health, Operational Excellence / New Ways of Working together and Knowledge Sharing & People Development
– which are central to the advancement of today’s consumer goods industry.
the Forum’s vision is: “Better lives through better business”. to fulfil this, its members have given the Forum a mandate to develop
common positions on key strategic and operational issues affecting the consumer goods business, with a strong focus on non-competitive
process improvement. the Forum’s success is driven by the active participation of the key players in the sector, who together develop
and lead the implementation of best practices along the value chain.
With its headquarters in Paris and its regional offices in Washington, D.C., and tokyo, the CGF serves its members throughout the
world.
For more information, please visit www.theconsumergoodsforum.com

WHat iS tHE SuPPLy CHaiN CONFErENCE?
the Supply Chain Conference is the meeting place for Supply Chain & Logistics executives in the retail and consumer goods industry.
the objective is to anticipate future trends and challenges, share practical experiences, including benefits found and lessons learned.
Participants have many opportunities to network and exchange views on the top-of-mind issues that are discussed during the
conference.

2 Supply Chain Conference 2010 - ExECutivE Summary

the Supply chain Committee
Delighting the Consumer. acting as One.

► TONY VENDRIG, Executive vice President Business ► KERRY McNAIR, Director, Global Supply Chain, Walmart
Development, aHOLD EurOPE, the Netherlands Group, tHE COCa-COLa COmPaNy, uSa
(Committee Co-Chairman) ► ANDREAS MÜNCH, member of the Executive Board, Head of
► JOHN S. PHILLIPS, vice President, Customer Supply Chain & Department Logistics & it, miGrOS, Switzerland
Logistics, PEPSiCO, uSa ► STEFANO PIETRONI, Network Design Planning & Sourcing
(Committee Co-Chairman)
Director, BariLLa, italy
► PETRA ALBUSCHUS, Senior vice President Logistics, iCa ► JIM RADIN, vice President – Global Supply Chain Operations,
Sverige aB, Sweden
mC COrmiCK & CO., iNC., uSa
► MARK AYLWIN, managing Director – BOOKEr DirECt, ► GERHARD ROUX, Group Chief information Officer/ Supply
united Kingdom
Chain, tHE Dairy Farm, Singapore
► TONY BORG, vice President - Head of Corporate Supply
► JOZE SADAR, Senior Executive Director, Category
Chain, NEStLÉ GrOuP, Switzerland
management, Logistics and internal Production, mercator
► RICK CICCONE, Chief Supply Chain Officer / integrated Supply Operations Slovenia, mErCatOr GrOuP, Slovenia
Chain, mC CaiN FOODS, uSa ► NUNO SERENO, Supply Chain Director, JErONimO martiNS,
► KEVIN DOUGHERTY, Group vice President, Chief Supply Chain Portugal
Officer, tHE KrOGEr CO., uSa ► YANNIS SKOUFALOS, vice President Product Supply Global
► MARTIN GLEISS, Supply Chain & Logistics manager, SPar, Operations, PrOCtEr & GamBLE, uSa
austria ► ANTOINE VANLAEYS, Supply Chain Director, L’Oréal
► DIRK HOLBACH, Global Supply Chain Operations, Laundry and Consumer Product Division, L’OrÉaL, France
Home Care, HENKEL KGaa, Germany ► MICHAEL WHITING, Director, Global Strategic Operations,
► TAKAO IWAMOTO, President, ÆON Global SCm Co. Ltd., JOHNSON & JOHNSON, uSa
Japan
► SHARON JESKE, Director, Operational Excellence, tHE
Special Advisors to the Committee
CONSumEr GOODS FOrum
► VALENTIN ELISTRATOV, vice President Business Development
► GREG KETCHUM, Senior vice President, Global Supply Chain
international Supply Chain, EmEa, DHL ExEL, Germany
Strategy, KELLOGG COmPaNy, uSa
► JACKY GERVIS, Co-Chief Executive Officer, Fm Logistic,
► LUC KOENOT, Senior vice President Supply Chain & it,
France
DELHaiZE GrOuP, Belgium
► HERBERT KUENG, Director Customer Service & Logistics
CEEma, KraFt FOODS iNtErNatiONaL, austria

Supply Chain Conference 2010 - ExECutivE Summary 3

tuesday 12 October rd
Store tour Programme
kindly sponsored by

Supply Chain Conference 2010 - ExECutivE Summary

Participants were warmly welcomed by


Wednesday 13 October rd
Welcome to the Supply Chain
Conference 2010

Tony Vendrig, Executive vice President, Business
Development, ahold Europe, the Netherlands and
Co-Chairman of the Supply Chain Committee
John S. Phillips, vice President, Customer Supply
Chain & Logistics, PepsiCo, uSa & Co-Chairman of the
Supply Chain Committee

O
pening the conference, tony vendrig welcomed 190
participants from 28 countries to Berlin. Some 42% of
participants were retailers and 15% were manufacturers.
vendrig said the conference was a unique opportunity for
“learning best practices and expanding our knowledge base”. He
added that it was valuable to “get a feel for what your colleagues
are facing”.

What’s New about your association?
Jean-Marc Saubade, managing Director, the Consumer Goods Forum

t
he Consumer Goods Forum is work accessible to all companies, for the good of the industry. “We
not “one more association” work on things that can only happen when we unite,” Saubade
but rather, the vehicle through underlined. these include, among others, food safety, sustainable
which the industry can finally speak packaging and carbon measurement, stripping cost from the
in one voice. Launched in June 2009, supply chain and information sharing and are arranged under five
in New york, with the fusion of CiES strategic pillars:
–the Food Business Forum with the
1. Emerging trends
Global Commerce initiative and the
Global CEO Forum, the body aims to 2. Sustainability
drive unified collaborative action on 3. Safety & Health
non-competitive issues. “the CEOs of 4. Operational Excellence / New Ways of Working together
your companies were sitting on too 5. Knowledge Sharing & People Development
many boards and going to too many
meetings, in which they were talking about the same things,” the Forum is not a lobby but nonetheless aligns itself strategically
Saubade explained. “at the same time, the industry is not talking with lobbying groups in the regions, such as Gma, Fmi, Errt,
in one voice. We are not in the driving seat.” EuroCommerce and so on. “We still need to influence legislation
in various countries,” Saubade asserted. the connection in the
the Consumer Goods Forum members have combined sales of Eur regions is made via local Efficient Consumer response (ECr)
2.1 trillion: an organisation with enormous collective influence. groups. the Forum also aligns with GS1: global projects need
the board of directors brings together the CEOs and chairmen of global standards. the idea is to avoid duplication and pursue a
25 retailers and 25 manufacturers. the board positions cannot be single industry agenda.
delegated, so the decisions are made by the people who can “really
get things done”. Driven by its vision of “Better Lives through
Better Business,” the Forum has a mandate to make collaborative


Back to Basics – the German Market
Welcome to Germany
Jörg Pretzel, CEO, GS1 Germany

G
S1 Germany took an audit on emerging legislation has been passed enforcing compliance in
trends in the German market in 2006 and sustainability, energy efficiency and emissions, use of
used the findings to create a roadmap. renewable energies, consumer health, data protection
megatrends include demographic shifts (today and track and trace. Global requirements along the
20% of the population is over 65; by 2060 same lines will lead to new targets for all involved
it will be 30%), globalisation and ecological parties. Sustainable logistics will have an important role
developments. among the more focused trends to play and cooperative logistics solutions are central
is the explosion of mobile internet technology, to success, such as share use of infrastructure and the
driving new consumer mindset. there is increasing bundling of goods. increased urbanisation throws up
use of price comparison software in store, for logistics challenges. “City hubs are needed,” Pretzel
example. a multi-channel offer is expected, with says. “you can’t drive a 7 ton truck into the city.”
a single seamless brand experience. Consumers
GS1 holds that is only possible to
are asking for price, quality, health and wellness,
meet these challenges by taking a
sustainability, virtual and extended information and
collaborative approach between retailers
support for mobile technologies. the challenge is to
and manufacturers; it endorses the
find the right balance between cost-efficiency and
ECr approach to collaborative process
these shopper expectations.
improvement.
technology is also enabling a more collaborative approach
to data exchange, organisation and processes. in Germany,

Challenges of the German retail Landscape by metro Cash & Carry
Arnd Riehl, Chief Operations Director, metro Cash & Carry Deutschland GmbH, Germany

m
etro Cash & Carry accounts for 50% of metro Group’s revising its space allocation to achieve the right ratio of food,
business. the German market is saturated with retail non-food, fresh and dry; it has optimised strategic and destination
space and characterised by fierce competition. there is departments and improved customer flow. When it came to
constant downward price pressure”, driven by the discount sector. assortment, metro intensified its focus on “destination categories”
Consumer behaviour has changed: there is declining customer to strengthen the uSP: a concentration on freshness and quality,
loyalty, “hybrid behaviour” (e.g. high-low shopping), a “spend- mass merchandising and innovation. it targeted its core Hotel,
now” mentality. this is coupled with increased mobility and a restaurant and Café customer group with an augmented range
transparent marketplace due to the availability of comparative of private label products, under the Horeca Select brand and
price information on the internet. introduced some SKus under the premium private label brand Fine
metro Cash & Carry’s reaction to Food Finestro. to attract new customers it introduced innovative
these market changes has been to “go new products to the assortment, such as gourmet meats by region
back to basics”. the company has been and strengthened the own brand offer via promotions. Own brand
restructured to focus on: assortment, share increased by 2% within a year.
customer orientation, stores and
to better cater to Hotel, restaurant & Café customers’ need
service. the company is investing Eur
for convenience, a drive in concept was developed. Customer
100 million in the modernisation of
order goods by phone or e-mail and collect them at the drive-in
all its stores. Since 2005 it has been
location. metro is also working on a new fresh fish platform for Q4
2010: run and organised by metro, the platform will incorporate
a modern logistics hub in Frankfurt and eliminate third-party
vendors, leading to 48-hour reduction in lead times and improved
quality. But with Hotel restaurant & Café customers it is not
enough to sell food. metro offers a complete service including
shop fits, consultancy and finance.


Back to Basics – On-shelf availability
Fresh at albert Heijn: an integrated Customer-Driven replenishment
and Production
Peter van Kralingen, vice President replenishment, albert Heijn, the Netherlands

N
ine out of the ten most-scanned products at ahold banner create a demand forecast (the more
albert Heijn are from the fresh category. “Our customers years you run the software the more
come for fresh,” Peter van Kralingen says. “if the fresh is not comparative data there is, hence
available we will lose our customer.” in fresh, albert Heijn works self-learning). Central replenishment
one-to-one with dedicated suppliers in a long-term commitment. integrates this with actual store
albert Heijn operates 835 outlets across five formats. it serves orders and checks against KPis. it then
them with 13 million cases a week via an integrated, centralised feeds the data on to the warehouse
ordering system, in which POS data drive just-in-time deliveries management system (WmS), which
and allow low stock levels. there are three national warehouses for generates an inventory report. the
chilled and ambient and four regional combination warehouses. complete set of data then
Lead times range between nine to 18 hours: “We can react on flows to the supplier’s
customer behaviour within nine hours,” Kralingen confirms. Shelf ErP system to drive
availability and store appearance are the KPis. it was necessary to production. the variables,
move to a centralised system to remove complexity from stores. such as weather, are
“We want to make it easy, to take work out and let the store critical comparing
focus on the customer.” that means conducting the entire supply perceived demand
chain from shelf back to supplier. the replenishment process at generated by POS against
HQ is therefore entirely responsible for product availability and forecast demand and modified accordingly: “When it’s 25 degrees
appearance in stores. outside, you need lots of Coca-Cola, not so much sauerkraut.”
Kralingen emphasises that it’s a team effort: “Consumer behaviour
the “self-learning” system takes POS data from stores and
is the starting point in our thinking, processes and integrated
integrates it with other indicators such as seasons, events,
systems. together with our suppliers, we make it happen.”
promotions, weather forecasts and historic demand patterns to

information Substitutes Stock -the Parfümerie Douglas’ Way of Supply
Chain management
Jörg Strüning, Head of Organization, Parfümerie Douglas GmbH, Germany

D
ouglas is a decentralised group need to comply with approved use of order channels (via EDi) and
of 1,220 stores in 22 countries. bundle orders at the specified times. the 3PLs must have a flexible
the company values the regional employee deployment, offer synergies in deliveries and use of
autonomy that decentralisation brings logistical floor space and provide excellent handling of high-value/
to store managers, but direct store sensitive products. it is essential to link EDi processes, including
delivery (DSD) and manual buying the use of SSCC (NvE in Germany) barcodes, with suppliers to
at store level was adding cost and reduce manual data recording and duplication of effort, to ensure
complexity. the company wanted rapid data exchange. more than 90% of transactions are already
to remove DSD, but did not want being handled by EDi. Orders for 91 of Douglas’ largest suppliers
to manage a central (88% of orders) go via EDi (SaF Superstore), with e-mail used
warehouse, which was for smaller suppliers that are not yet EDi compliant. 69 suppliers
considered a misfit provide EDi invoices (85% of all invoices). implementation
for a decentralised of SaF Superstore brought sustainable inventory reduction
group. the solution while cutting out-of-stock rates. the use of SaF Superstore for
was integrated cross purchasing requires joint action from all the industry partners:
docking, managed via “Close contact with ECr was very important to make the whole
the company intranet. process a success.” For partners, the process brought the following
under this model, store deliveries are always handled by cross benefits: improved top seller availability, increased sales in top
docking. imports and private brands are handled using their own seller segment, reduction of returns, bundling effects, optimised
warehouses and can then either pass through cross docking or capacity planning and preventing serious demand fluctuations.
go direct. Efficient handling of cross docking however, places Douglas’ logistics strategy won two awards: the 2006 GS1-ECr
stringent requirements on all partners. Suppliers need excellent award and the 2009 GS1 Corporate award, in recognition of its
product availability and delivery reliability. they must also be systematic development of the ECr approach.
compliant with the cross docking delivery terms. Douglas stores


Back to Basics – Sustainable Transportation
National transportation Optimization
Thomas Paroubek, SCm -Coordinator of m-industry-Group, migros, Switzerland

m
igros is a Swiss retailer and manufacturer. it faced and delivery time slots, national transport optimisation for all
increased prices pressure from national competition players, procurement, procurement transports organised by
and competition from neighbouring countries. a general migros (factory gate pricing), increase of 5-10% in capacity,
increase in transportation costs due to rising taxes put additional optimisation direct/transit (train for longer distances),reduction
strain on the business. the company set an objective, therefore, to in delivery frequency and renegotiation of cargo contracts.
reduce national transportation costs by 10% or CHF 40 million. an 4. Commitment: savings verified with all parties, principles
internal team was set up in collaboration with a third jointly established, agreed and signed. a signature
party, to implement a five-point process: helps to achieve a higher level of commitment. this,
1. as-is analysis: all movement data was recorded however, requires a critical mass of signatories.
for one year, giving certainty when calculating 5. Control: measuring, reporting of savings.
savings. “When you have facts and data, you can “Because of the constant controlling, transport
argue against the ‘we have always done it like this’ optimisation always remained on the agenda.”
mentality.”
the move brought annual savings of CHF 45 million,
2. Outline concept: all possible savings measures above the 10% target. However measures alone will
were scoped at this early stage and a number of not ensure success. Success factors
scenarios were submitted to the management board. include: senior management buy-in,
“Political discussions came into the equation,” reliable basis for figures and simplicity
Paroubek admitted. of measures, communication and
3. Detailed concept: Nine concrete measures permanent involvement of all the
were proposed: optimisation of distribution transports, parties.
optimisation of migros/3PL trucks, adaptation of supply

Sustainable transport at Delhaize
Tanguy t’Serstevens, vice President retail Support Services Supply Chain, Delhaize Group, Belgium

D
elhaize Belgium handles 85% of its logistics itself, delivering lower emissions than diesel or gasoline, along with a 50-75% noise
1.2 million cases a day to 800 stores. the logistics network is reduction and an rOi in five years. another key project has been to
characterised by a high level of centralisation (exceptions are transfer the silent technology to the DC environment.
fresh bread, Coca -Cola and newspapers). the challenge
meanwhile, GPS trailer locators are used to see the
the company faced was twofold: firstly, it needed to evolve
location of any truck in real time, across Europe. Part
its logistics operation to handle smaller stores with a
of the same system is a temperature monitoring
smaller drop size, handle shorter expiry dates and reverse
functionality which generates a warning if the cold
logistics. Secondly, it wanted to address carbon footprint,
chain is ruptured and shows where the rupture
waste and recycling. Some years prior, it had introduced
occurred. a fuel meter generates and alarm in case
a semi-automated warehouse for non-food and Health
of fuel theft and door sensors detect and report
Beauty Care, voice picking in all its traditional warehouses
back if the trailer is opened outside a warehouse
and started using rFiD tracking on crates. Now Delhaize
or store: key moves in detecting fraud. the “blue
has deployed a semi-automated warehouse
box” system is being rollout out to fresh in 2011
for “ultra fresh” products, using rainwater
and to dry in 2012.
harvesting and solar power.
Dock scheduling has brought a better DC workload,
in transport, double deck trailers increased
helping resource forecasts and bringing down
load capacity by 60% and took trucks off the
waiting times, while missions are managed by a
road. the trailers, with adjustable floors, allow
GPS board computer. Drivers must accept missions
Delhaize to maintain different temperatures
and register them as completed. Delhaize can see
in each section. the rOi came in less than
in real time who is available and in which location. this allows
two years and these are now being rolled out. Noise is also an issue.
geofencing and central dispatching: “a very controlled and efficient
“it is more and more difficult to get the authority to deliver at night,”
process”. the future promises a far more optimised approach to
t’Serstevens said. However, the research institute of the Dutch
transport in Europe. the current model of truck-only direct linear
ministry of Economic affairs, SenetrNovem, has a noise reduction
flows with partial loads will be replaced by a circular “milk run” in
project and certification scheme called Piek. through this, Delhaize
which both deliver and bring back. Flow consolidation will allow up
was able to deploy “silent” technologies, achieve certification and
to four suppliers in the same trailer and maximise load.
obtain the necessary authorisation to make urban deliveries at
night. a move to compressed natural gas as a fuel produces far

Networking at Supply Chain Conference 2010

Supply Chain Conference 2010 - ExECutivE Summary

Practical Ways in turkey to minimize transportation Costs
from DC to Stores
Osman Dogrucu, Distribution Director, tescoKipa, turkey

t
escoKipa in turkey supplies 45 3. Faster deliveries.
hypermarkets and 76 Express 4. Less fragmentation.
stores via a single DC in izmir,
a port on the aegean coast. Even the first being a function of the second, tescoKipa is using
though the stores are concentrated in insulation blankets to maintain varying temperatures within the
Western turkey, this still means long same vehicle, allowing it to consolidate fills. it has also moved to
journeys to supply stores up to 962 km double decker trucks, allowing 20% more fill.
away. transportation is, then, a huge the company could achieve greater business continuity, higher
cost and challenge for the growing service and more stable costs by using its own fleet exclusively.
business. adding However, it is hard to source funding for such an investment in
to the brew are times of financial crisis. it would also force tescoKipa to bear the
high fuel prices costs of down time. using third party logistics providers (3PL)
– “We use the exclusively would take away these risks but add others, such as
most expensive the risk of 3PL bankruptcy, less visibility on root causes of cost
fuel in the world.” and lower service quality. the breakthrough solution? use both,
tr a n s p o r t a t i o n with a 60-40 split in favour of wholly-owned. using a number
costs are unstable of 3PLs will distribute the risk. this solution maximises the gains
in turkey and from both approaches while minimising the disadvantages. the
many drivers are unqualified. Equally important is the impact of mixed transport approach saved tescoKipa uSD 195,000 in 2009.
transportation on CO2 emissions. tescoKipa has set itself the goal the move has brought shorter delivery times, more fleet capacity,
of becoming carbon neutral by 2050 and reducing emissions per shorter driver hours, a flexible delivery schedule, cheaper fuel
case delivered by 50% before 2012. to do this, the company is prices, less vehicle maintenance costs, stable Km prices and a
following a rule called 4F: stable own driver cost. the whole 4F plan brought total savings
1. Less fuel. of uSD 768,000 in 2009. a second DC in istanbul and a third in
ankara are being considered.
2. more fill.

Sustainable urban Delivery and yamato’s Focus on the Last Centimetre
Katsuhiko Umetsu, account Executive, Business Development/Global Customer Solutions, yamato transport
Co., Japan

t
he yamato transport Company in Japan moves 3.8 parcels a in step: “yamato covers all over Japan like capillary vessels,” umetsu
day. it strives for ultimate customer satisfaction by focusing says. the company delivers 1.3 billion parcels and operates 6,293
on the “last one centimetre” of a parcel’s journey from sender delivery centres and 260,920 collection agents. Customers can
to recipient. its business model is based on the conviction that drop off a parcel almost wherever they
high quality service as a starting point will drive volume; volume like, so widespread are the collection
will drive density of operation, leading to profitability, which can points. However, despite its volume
be reinvested in service quality. Service quality manifest as: increases, yamato has set itself tough
emissions targets. Some of the ways
1. Customers choose their own delivery time from six two-hour
it has set about reducing emissions is
windows per day.
to dispatch parcels by foot, by bike,
2. in the event of absence, customers call their driver directly by bus and subway. “Our employees
to arrange a re-delivery. yamato offers a quick response and get healthy,” umetsu explained. and,
no-fee holding. about that last
3. Focus on “personal delivery” rather than home delivery. centimetre: “We
are not merely
as a result, yamato was ranked 8th overall among high quality
delivering a
service companies by a Japanese ministry of Economy, trade &
parcel to an
industry consumer survey, just below amazon. it ranked third for
address. We are
“perceived quality” and second for “customer expectation”. this
bringing a touch
satisfaction, umetsu maintains, is driving volume growth, up from
to a person.”
34.6% year on year in 2005 to 38.7% in 2009. Density is increasing


the Future Value Chain
insights into the Future value Chain 2020
Nigel Bagley, Director, industry affairs, unilever, united Kingdom

t
he Future value Chain was launched in 2006, to “get 1. increased urbanisation: new approaches to
30 to 40 people in a room to explore trends”. Nigel logistics and store formats are needed.
Bagley describes it as “self-driven, not a consultant
2. aging population: older people have different
report”. the project, facilitated by consultancy firm
needs – more single-person households require
Capgemini, focuses on creating a ten-year vision of the
a rethink on pack sizes.
future, updated every two years. thus 2006 brought the
2016 value Chain and subsequent reports have produced 3. increased consumer technology: Bagley
the 2018 and 2020 value Chains. the 2016 project focused on the opportunities for brand-retailer
threw up three areas for work: the collaboration around Qr codes, a barcode-like
future supply chain, the sharing of format, which can be scanned by consumers’
business information and data via smart phones to reveal much richer data than
GS1 standards and “New Ways of the uPC/EaN, such as traceability information,
Working together” – a roadmap for brand-building promotions and so on.
implementing collaborative work.
4. the rising cost of carbon fuel: what does this
Bagley says that boards engaged
mean when the average uS consumer drives 20
with the 2016 report and used the
miles to a store and 20 miles back?
Future value Chain to drive their
agenda. By 2010, the programme had evolved into a process for Bagley said four global industry strategic objectives had been
“building strategies for a new decade”. the identification of trends agreed via the programme: make our business more sustainable,
leads to the setting of objectives, which demand the development optimise a shared supply chain, engage with technology enabled
of tactics. Emerging trends highlighted as coming from the consumers and serve the health & wellbeing of consumers. “We
program include: are comfortable that the Consumer Goods Forum has a range
of projects in place to help deliver on these,” Bagley said. He
added that manufacturers and retailers “need to fully support the
industry programmes that are underway globally, regionally and
locally”.

conference Moderators

Petra Albuschus, Senior vice President Logistics, Luc Koenot, Senior vice President Supply Chain & it,
iCa Sverige aB, Sweden Delhaize Group, Belgium


Networking Dinner


thursday 14 October th

Back to Basics – Supply Chain Efficiency
Supply Chain Efficiency means investing in accuracy and trust
Marko Cedilnik, Executive Director of Logistics, mercator, Slovenia
Rok, Gajšek, Logistics Project manager, mercator, Slovenia
Srečko Bukovec, Director of Projects, mercator Operations Slovenia, mercator, Slovenia

t
hrowing money at problems is not working. the way to evolve if not, the picker will have to correct the mistake. the sticker,
is to re-engineer basic processes. this requires an investment therefore, becomes “a symbol of proven accuracy”. that means
in trust, the team from mercator argue. People will trust when managers see it, they can trust it. the process convinced
what they can understand, which means the best solutions are store managers to omit the double check and free up their staff
the simplest ones. mercator set an objective to raise the accuracy time. it also eliminated the human error factor, both at the DC
level of goods control. Store managers had not been confident and the store. as a result, more than 500 full time employees have
in the delivery process and were double checking each order been able to focus their attention on customers instead of the
received, taking up labour time. the solution was to use “end back room.
control with scales”, or EaN scan followed by
weight control.
this means you need to know the weight of
each SKu in the warehouse, along with the
tare weights of the roll cages used. But once
this data is known, the weight of each SKu is
linked to its EaN. this allows the system to
calculate the weight of an order in advance.
When goods are picked and loaded onto a roll
container at the DC, the picker will weigh the
completed order. if the calculated weight
and the actual weight match then a barcode
sticker is generated and the order can proceed.
Marko Cedilnik, Executive Rok, Gajšek, Logistics Srečko Bukovec, Director
Director of Logistics, Project manager, mercator, of Projects, mercator
mercator, Slovenia Slovenia Operations Slovenia,
mercator, Slovenia


Supply Chain Efficiency at Food Discounters
Mirko Warschun, Partner, Head of Consumer industries & retail Practice DaCH, a.t. Kearney GmbH, Germany

t
he noted efficiency of discounters’ supply chains is driven and keeps labour costs minimal. the
by both the structural and non-structural advantages of high density of the store network
the format. Structural advantages include a tightly focused also means that shorter distances are
assortment and a large number of highly standardised outlets, required for replenishment. that store
leading to a high-density network that is easy to supply. On the layouts are standardised worldwide
non-structural side, shelf-ready packing (shelf-ready packing at allows for efficient replenishment
discounters is close to 100% versus around 37% in non-discount) logistics; indeed the layout is driven
leads to efficient and cost-effective replenishment. Separate by the needs of efficient logistics and
presentation costs around 2.5-3% of net sales, while shelf-ready not the reverse.
packing brings this down to 1.5-2%. On-pallet display reduces this
However, the boundaries
to 0.8-1%. a consistent “no-frills” approach, smart innovations
between discount and
and focused investment in the supply chain add into these. the
“non-discount” retailers
limited number of SKus makes for very high productivity and
are now blurring, as
stock turn. aldi Süd, for example, has a sales density of Eur 9,964
both sides learn from
per square metre, compared to Eur 3,722 at an average sized
and mimic each other.
supermarket (1,500 square metres). this is by far the strongest
For example, more and
driver of efficiency from a supply chain perspective: the discounter
more traditional grocers
benefits from a lower production cost and higher buying power
are practicing SKu rationalisation, increasing the share of private
per SKu, due to scale. there is a higher likelihood of full truckloads
label in the assortment, focusing on low price and adopting
with this model and more use is made of cross docking, leading
channel-specific logistics. meanwhile discounters are adding
to less complexity for storage and warehouse management. the
brand names, extending their ranges and spending more on
discounter also achieves higher labour productivity by flexible
marketing. Warschun warns that both sides should avoid blurring
roles in store and efficient stocking methods. there is higher space
the line too far, since each model has a differential advantage
productivity due to the high stock turn, meaning less backroom
with consumers.
storage is required. this strips cost from the replenishment process

Paltac’s Five-Nine (99.999%) Logistics Service Level
Toshiyuki Sakai, Executive Director, Chief information & Logistics Officer, Paltac Corporation, Japan

J
apanese wholesaler Paltac moves
Health Beauty Care and Over
the Counter pharmacy products taKEaWayS
across Japan via 15 regional DCs,
supplying 4,000 drugstores and
convenience stores and provides 1. the technologies and processes to create the Future
in-store merchandising solutions. value Chain already exist.
toshiyuki Sakai said that Japanese
wholesalers were specialists in 2. regional differences created local knowledge that
handling multiple formats, can be shared and used to create future business
in creating services models.
customised to individual 3. High service levels create new business opportunities
stores and in shared and cost is not always the critical factor.
services. Paltac eliminated
all non-value added 4. Cooperation and collaboration is more important
activities throughout its than ever.
supply chain and achieves
99.999% service accuracy through EDi based transactions, while
picking is double checked by scanning JaN/itF barcodes and uses an automated carton cutter and automated replenishment
measuring weight. its systems are custom-made. at receiving, system. at the picking and loading stage the employee uses a
actual receipt data is checked against aSN data. For case picking, picking cart with a weight checking function and passes this to a
Paltac uses an automated storage and retrieval system. Labels are robot (atOm) that sorts the pieces into plastic totes. many of the
added automatically when cases are picked. the loader works with supporting technologies were developed and patented by Paltac,
a computerised sorting system (aDELS) operated by a footswitch which means they are 100% fit for purpose.
that won’t allow mistake to progress. For piece picking, Paltac


Operational KPis Leading to Cost Excellence internally and Externally
François Olsthoorn, Head of Physical Distribution CEEmEa, Procter & Gamble, Switzerland

a
breakthrough in cost control light system created productive competition. the intervention
proved to be a game changer for exceeded targets within a few months and ultimately brought
Procter & Gamble. the Central & cost improvements of 130%. the drivers of cost were:
Eastern Europe, middle-East & africa
1. Sub-optimal truck fill.
(CEEmEa) region is logistically complex
and highly challenging, comprising 100 2. Kilometres driven.
developed and developing markets, 3. Contract compliance.
with highly variable taxes, duties 4. Pallet fit and pallet cost.
and regulations. Procter & Gamble 5. Demurrage charges for delayed shipments.
operates 48 DCs across the region,
coordinating more 6. Percentage of outside storage.
than 70,000 inter-site 7. Percentage of local sourcing.
truck moves a year 8. Productivity.
and 20,000 shipping
operations. However, the six KPis applied were:
since 2004, costs had 1. Cube fill rate: optimal fill reduced trips, taking one in four
begun to escalate out trucks off the road.
of control: up 5% the 2. Contract compliance: hauliers on a contractual rate across
first year, 13% in the second year and up 21% in 2007/8. “We had the region eliminated cost variation and favouritism.
no understanding of the drivers of the cost increases,” Olsthoorn
3. % Ex-plant shipments.
admits. “We had some theories but they were not good enough.
there was a clear business need for intervention.” 4. vehicle turnaround times.
5. % Outside storage.
the company began an operation to define and improver the
drivers of cost and applied six performance indicators, which were 6. DC productivity.
reported monthly. internal visibility of performance via a traffic-

Learnings in Supply Chain
Deutsche Post DHL Group GoHelp Program: Logistics Excellence
for the relief Supply Chain
Kathrin Mohr, Program manager Disaster response teams, Deutsche Post DHL, Germany

H
elping people after disasters depends on organisations. in Chile, 75 volunteers packed 10,300
a functioning supply chain. However this relief bags from unsorted goods that arrived at
is rarely the case. the relief supply chain is Santiago airport.
characterised by simultaneous deliveries, unsorted
Looking forward, DHL has a program called Get
goods and a lack of consignees at the destination
airports ready for Disaster (GarD). applying
airport. this leads to significant bottlenecks following
the lessons the DtLs have learned over various
the unloading of aircraft, which hamper the onward
deployments, the mission is to prepare airports for
transportation of aid. Deutsche Post DHL’s Disaster
managing disaster situation and avoid bottlenecks
response teams (Drts), which number around
by training local government
200 volunteers across the company, reduce these
employees and airport personnel.
bottlenecks by sending specially trained logistics
Key to the success of DHL’s
experts to handle goods at airports. Working in
Disaster response team has been
cooperation with the uN office for the Coordination
the support and recognition of
of Humanitarian affairs the teams deploy to disasters
top management and mutually
such as the earthquakes in Haiti and Chile. at Haiti, 36
beneficial partnership between the
DHL volunteers handled 2,000 tons of relief goods over
company and the united Nations.
three weeks and provided support to more than 25 relief


Lessons in Sustainable Sourcing
David McLaughlin, vice President and managing Director: agriculture, World Wildlife Fund, uSa

B
y 2050 the world’s population is set to stand at it’s important therefore to focus energies. the first
3 billion or more, with 70% living in cities. and step is to carry out a supply chain risk assessment in
while income is expected to increase by 2.9 four thematic areas:
times, consumption could double and food demand
1. Supply risk.
in particular could triple. Developing countries are
likely to dominate trade, David mcLaughlin believes, 2. Environmental risk.
as most of the growth is likely to come from the 3. Social and political risk.
poorest countries. How will agriculture deliver? 4. Economic and financial risk.
WWF estimates that current demand
alone is using 1.3 times what the planet this is critical in providing a roadmap and setting
can sustain in terms of natural resources. a framework to engage suppliers. the second step
Economic growth in developing countries is to evaluate sourcing structures and move from
is good in terms of quality of life, but a transactional model to a transformational model.
has a consumption impact. Expressed in it’s vital to align incentives, create partnerships,
economic terms, we are currently using share resources and find mutual benefits, creating
the Earth’s capital and not the interest. longer-term contracts with fewer spot purchases.
By the mid 2030s we will need two a transactional structure exposes brands to multiple risks,
planets if we continue business as normal. “the replenishment especially around traceability. the third step is to recognise that
system is failing completely and it’s the week before Christmas,” you have a role, even if your volumes are small compared to other
mcLaughlin said. players. your voice can have significant impact and your customers
and employees expect it. By partnering with WWF to adopt
Sadly, many companies are either still unaware of the issues or sustainable practices, companies can increase their productivity
uncertain of where to begin. Some believe that sustainability and reduce their costs. a partnership with Chiquita, for example,
equals a higher cost and resist change in the procurement process. brought productivity gains of +27% and cost savings of -12%.

cherry on the Cake
attitude is What Determines altitude
Miles Hilton-Barber, Blind adventurer

Z
imbabwe-born Hilton-Barber lost his sight out of the blue at you some life principles i’ve stumbled
21, the result of a congenital condition. He had joined the air across as a blind man,” he said. “there
force, hoping to be a pilot. Blind, the options seemed greatly are many sighted people who are
diminished. However, he did not want to spend his life “weaving blind to their potential. i’m trying to
dog baskets”. He wanted to be a pilot. So he did. “Quality of life,” give them vision.”
he says, “is not what happens to you, but what you do with what
Hilton-Barber’s Life Principles:
happens to you.” He became the first blind pilot to undertake a
55-day, 21,000 kilometre microlite flight from London to Sydney. 1. Start with your goals and dreams,
to succeed, he employed revolutionary speech-output technology, not with your circumstances.
accompanied by a sighted co-pilot, and raised money for blind 2. Fear is only False
charities. to achieve, he says, “you need to start with your goals Evidence appearing real.
and dreams, not with your circumstances”. 3. you are only as big as the
this was only the beginning for Hilton-Barber. His philosophy was dreams you dare to live.
that “you can use of energy worrying or you can do new things”. 4. all achievers are
if you want to grow, it’s important to step out of your comfort dreamers, but not all
zone: “the last time you did a new thing is the last time you grew”. dreamers are achievers.
With these thoughts in mind, Hilton-Barber – among many other 5. Successful people are those who go through bad things, and
adventures – man-hauled a sledge 250 miles across antarctica, persevere.
climbed Kilimanjaro and mont Blanc, became the first blind aviator
to break the sound barrier and to participate in a drag-racing 6. unity is the key: there is no room for backbiting. your future
event, cage-dived with Great White Sharks and raced 150 miles depends on mutual interdependence.
across the Sahara on foot. in each event he was accompanied by 7. “Never judge a man until you’ve walked a mile in his shoes.
his friend Jon. in the process, he learned a lot about himself and that way, when you do judge him, you’re a mile away and you’ve
his capabilities, and about teamwork and success. “i’m now giving got his shoes.”


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