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Converting your Warehouse Co-Packing Corner
into Integrated, Value-Added Services

Tom Kimball, Vice President, Head of Global Consumer Sector
Agenda




• Where the Story Begins

• Why is it Important?

• What can we Do?

• What have we Learned?

• Thought Leadership on Next Steps




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011   DHL | Page   2
It All Started in the Back of the Warehouse!




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011   DHL | Page   3
Sources of Co-Packing Activity


Overtime, the one-time requests have grown into day to day demands and
delivery. Flexibility and responsiveness have increased your COSTS!!!!


               Promotional                                  Alternative Selling Units
           Pricing / Giveaways                              Club Packs / Mass Merch.




        Plant Faulty or Re-work                               Market Withdrawals



CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                          DHL | Page   4
Co-Packing Activity Takes on All Shapes and Sizes


          Gift Pack                                     Blister Packing    Stickering




      Hamper / Basket                                  Shrink Wrapping     Re-packing




           Tagging                                          Price Coding   Promotional




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                               DHL | Page   5
Typical Co-Packaging Definition


  Supply Chain

                                    Primary                     Co-                        Retail
  Factory
                                    Packaging                   Packing                    Stores



                                  Shelf readying                Promotional               Channel specific
                                    a product                    activities                customization

  Examples
                                                                2 for 1 New




  Co-Pack                Packaging                           Materials                         WH &
                                           Sourcing                           Execution
  Value Chain             Design                            Management                      Distribution



CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                             DHL | Page   6
Global Market Size and Trends – Why Is It IMPORTANT?


                                       Global Market size & growth1)

                                       EUR 6bn                               EUR 8bn                                                   x%       Market CAGR 08-12
                                                              10%


                                          2008                                2012(E)



                                                                                                         14%                                  Observations
                                                                                               APAC
                                                                                               Market size: € 1.3 bn
                                                                                                                                        • Increasing revenue
                                     7%                               8%                                                                  and cost pressures
              North America                             Europe
                                                                                                                                          on large Consumer
             •   Market size: € 2.2 bn                 •    Market size: € 1.6 bn                                                         Sector companies
                                                                                                                                          is leading to
                                                                      8%                        high growth market:                         – Increasing
                                                                                                    China (30%),                              secondary
                                              25%          Middle East & Africa                   expected to take                            packaging to
                                                   Market size: € 0.3 bn                         over Japan, US as                            provide product
                             Central & Latin America                                             largest market by                            differentiation
                            •   Market size: € 0.2 bn                                                  2011
                                                                                                                                            – Shelf-Ready
      High
     Growth:                                                                                                                                – Postponement
      Brazil                                                                                                                                  Strategies
                                                                                                                                            – Eco-Friendly


*Source: 2008 numbers, Beroe Study, secondary packaging ~20% of CM&P, this definition includes complete range of management services from design to execution; DSC revenue:
all known Co-pack revenues (not Consumer sector only); Revenue in Europe not comprehensive, covers most large countries in the region

CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                                                                                   DHL | Page        7
What Are We Going to Do About It?


         Understand our SPEND, establish our VISION
         ………… and CONTROL our destiny.



                                                            Identify “Go to Market” requirements
                                        Stock Take          and current process capability.



                                                            Determine customer, sourcing,
                                          Strategy          responsiveness, postponement,
                                                            flexibility and investment

                                                            Define standards, measures, and
                                      Optimization          leverage best practice regionally or
                                                            globally



CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                    DHL | Page   8
Visioning a Transformation



                                                  Current                     Ideal




     Stock Take



       Strategy                       • No transparency            • Ultimate Transparency
                                      • No shared best practices   • Communities established
                                      • No focus & alignment on    • CORE Logistics Investment
                                        strategic directions       • Standardization of process
   Optimization                       • No Measurement or KPI      • Commonization of
                                                                     components


                                       “Out of Control” Spend !       Optimized Investment



CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                    DHL | Page   9
Transforming Your Network, Your Process, and Your Reach



                                        Less Customization   More Standardization


                                                             Replicable
                                    Uniquely
                                                             Best
                                    Tailored
     Stock Take                                              Practice
                                    Designs
                                                             Modules



       Strategy                     Quotation or             End-to-end
                                    Tender-driven            Solutions



   Optimization
                                     Local                   Global
                                     Designs                 Solutions




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                     DHL | Page 10
Co-Pack End-to-End Solution & Value Proposition


 Co Packing End-To-End Solutions

    Co-Pack                       Packaging                      Materials
                                                      Sourcing                  Execution    WH & D
    Value Chain                   Design                         Mgmt
    Packaging                                                                               Traditional
                                                                                            End-To-End
    Providers                                                                               DSC scope
                                                                                              Scope

    Supply Chain


 Supplier Core Activity                                     Value Proposition

 Packing providers are “asset-providers”:                   Reduced Cost through

                                                                  Lower packaging           SC Cost, m€
              No focus on total SC cost
                                                                  volumes
                                                                                                   -20%
                                                                  Efficient designs that
 3PL is a “non-asset” provider:                                   reduce labor cost
              Neutrality to materials results                     Efficient designs,
              in strong focus on total cost                       optimised for transport   2010    2011p


CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                            DHL | Page 11
What Can We Do?



                            A CALL TO ACTION WITHIN YOUR OPERATION




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011            DHL | Page 12
Define Your Packaging Scope and Required Services


• Primary packaging
  – Manufacturing
  – Filling, mixing & bottling
• Secondary packaging
  – Co-packing
  – Bundling
  – Labeling
  – Logistics compliance
  – Assembly
  – Kitting
• Design & Engineering
  – Packaging design and consulting
  – Printing services
• Procurement
  – Procurement of raw materials
  – Procurement of packaging materials

CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011   DHL | Page 13
Layout Design Is Critical for Efficiency


• Designated traffic flow for goods
• Dedicated Inbound / Outbound Staging Areas
• Proximity of Materials and Tools
• Temperature or GMP Specifications
• 24x7 CCTVs, Alarm System & Security
• Floor Materials or Ergonomic Designs
• Efficient / Effective Lighting
• Access to Employee Common Areas
• Fire Extinguishers, Emergency Exit Doors,
  Sprinklers
• Productivity Tracking System and KPI
  Reporting




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011   DHL | Page 14
Driving Results thru Measuring and Monitoring


      Productivity monitoring systems / KPI’s

• Can be simple and high level to begin                     Full Pallet
                                                               from
• Must be timely and actionable – by Shift, by Line         Production
                                                                          Cut open            Scan
                                                                          Shipper            Shipper
• Account for all activities and resources                                                   barcode




                                                                             Empty shipper
                                                                               into tray




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                              DHL | Page 15
What Have We Learned?


                     EVERY STEP COUNTS................SIMPLE THINGS WORK
                     DON’T BE AFRAID TO TRY.................STEAL WITH PRIDE
                               LOOK, LEARN, and REPLICATE!




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                      DHL | Page 16
BEST PRACTICE – Stretch Film Reduction


To reduce stretch film usage, we are developing a method of using board
belts as an alternative to stretch film in binding palletized product.
 Reduce                      Stretch film usage is not used→contributes to reduction of stretch film usage

 Recycle                     Made of recyclable polyester synthetic resin

 Reuse                       Over 1,000 times




      <Before>                                                         <After improvement>
      Stretch film                                                          Board belt




 Effect                      CO2 reduction: 0.45kg per 1 time usage

 Challenge                   Further price reduction and quality improvement, including method for pallet stabilizing

 Future Rollout              Deployment of solution for products with boxes similar to PC boxes


CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                                          DHL | Page 17
BEST PRACTICE – Eco Friendly Packaging


Some examples of eco-friendly packaging that enables environmental
improvements

 Bio-decomposition Soy-Ink printing:                        Utilization regene-
 plastic:                                                   rated plastic:
 decomposes to                  15% reduction from          using scrap PC
 water and CO2                  petroleum resin                                                  Customer Benefits
 spontaneously

 Bio-decomposition plastic      Soy-ink printing for        Regenerated plastic
                                                                                               Allow environmental
 bag (for mobile phone)         packaging                   utilization (for client server)     compliance due to CO2
                                                                                                reduction
                                                                                               Enable creation of a
                                                                                                better corporate image
                                                                                                (social responsibility)
                                                                                               Allow being first-mover in
                                                                                                eco-friendly packaging



 Bio decomposition cushion
 (for server)


Source: DSC JP Packaging Team

CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                                         DHL | Page 18
BEST PRACTICE – Transport Efficient Packaging


Reduction of packaging material and transportation cost by changing the packaging
method such as eliminating individual boxes to improve packaging efficiency
                            Individual Box
                                                            Pack in Outer Box       Packing Complete
                        (with Shock Absorber)


     Before




                                Wrap Products
                                                            Pack in Outer Box       Packing Complete
                                 with Air Cap

   After
Improvement




                                                                                Reduced box volume by 30%
Source: DSC JP Packaging Team

CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011                                       DHL | Page 19
Thought Leadership on Your Co-Packing Activity



                                            HOW MIGHT WE?




CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011   DHL | Page 20
21

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CSCMP 2011 europe tom kimball - dhl supply chain final

  • 1. Converting your Warehouse Co-Packing Corner into Integrated, Value-Added Services Tom Kimball, Vice President, Head of Global Consumer Sector
  • 2. Agenda • Where the Story Begins • Why is it Important? • What can we Do? • What have we Learned? • Thought Leadership on Next Steps CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 2
  • 3. It All Started in the Back of the Warehouse! CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 3
  • 4. Sources of Co-Packing Activity Overtime, the one-time requests have grown into day to day demands and delivery. Flexibility and responsiveness have increased your COSTS!!!! Promotional Alternative Selling Units Pricing / Giveaways Club Packs / Mass Merch. Plant Faulty or Re-work Market Withdrawals CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 4
  • 5. Co-Packing Activity Takes on All Shapes and Sizes Gift Pack Blister Packing Stickering Hamper / Basket Shrink Wrapping Re-packing Tagging Price Coding Promotional CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 5
  • 6. Typical Co-Packaging Definition Supply Chain Primary Co- Retail Factory Packaging Packing Stores Shelf readying Promotional Channel specific a product activities customization Examples 2 for 1 New Co-Pack Packaging Materials WH & Sourcing Execution Value Chain Design Management Distribution CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 6
  • 7. Global Market Size and Trends – Why Is It IMPORTANT? Global Market size & growth1) EUR 6bn EUR 8bn x% Market CAGR 08-12 10% 2008 2012(E) 14% Observations APAC Market size: € 1.3 bn • Increasing revenue 7% 8% and cost pressures North America Europe on large Consumer • Market size: € 2.2 bn • Market size: € 1.6 bn Sector companies is leading to 8% high growth market: – Increasing China (30%), secondary 25% Middle East & Africa expected to take packaging to Market size: € 0.3 bn over Japan, US as provide product Central & Latin America largest market by differentiation • Market size: € 0.2 bn 2011 – Shelf-Ready High Growth: – Postponement Brazil Strategies – Eco-Friendly *Source: 2008 numbers, Beroe Study, secondary packaging ~20% of CM&P, this definition includes complete range of management services from design to execution; DSC revenue: all known Co-pack revenues (not Consumer sector only); Revenue in Europe not comprehensive, covers most large countries in the region CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 7
  • 8. What Are We Going to Do About It? Understand our SPEND, establish our VISION ………… and CONTROL our destiny. Identify “Go to Market” requirements Stock Take and current process capability. Determine customer, sourcing, Strategy responsiveness, postponement, flexibility and investment Define standards, measures, and Optimization leverage best practice regionally or globally CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 8
  • 9. Visioning a Transformation Current Ideal Stock Take Strategy • No transparency • Ultimate Transparency • No shared best practices • Communities established • No focus & alignment on • CORE Logistics Investment strategic directions • Standardization of process Optimization • No Measurement or KPI • Commonization of components “Out of Control” Spend ! Optimized Investment CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 9
  • 10. Transforming Your Network, Your Process, and Your Reach Less Customization More Standardization Replicable Uniquely Best Tailored Stock Take Practice Designs Modules Strategy Quotation or End-to-end Tender-driven Solutions Optimization Local Global Designs Solutions CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 10
  • 11. Co-Pack End-to-End Solution & Value Proposition Co Packing End-To-End Solutions Co-Pack Packaging Materials Sourcing Execution WH & D Value Chain Design Mgmt Packaging Traditional End-To-End Providers DSC scope Scope Supply Chain Supplier Core Activity Value Proposition Packing providers are “asset-providers”: Reduced Cost through Lower packaging SC Cost, m€ No focus on total SC cost volumes -20% Efficient designs that 3PL is a “non-asset” provider: reduce labor cost Neutrality to materials results Efficient designs, in strong focus on total cost optimised for transport 2010 2011p CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 11
  • 12. What Can We Do? A CALL TO ACTION WITHIN YOUR OPERATION CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 12
  • 13. Define Your Packaging Scope and Required Services • Primary packaging – Manufacturing – Filling, mixing & bottling • Secondary packaging – Co-packing – Bundling – Labeling – Logistics compliance – Assembly – Kitting • Design & Engineering – Packaging design and consulting – Printing services • Procurement – Procurement of raw materials – Procurement of packaging materials CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 13
  • 14. Layout Design Is Critical for Efficiency • Designated traffic flow for goods • Dedicated Inbound / Outbound Staging Areas • Proximity of Materials and Tools • Temperature or GMP Specifications • 24x7 CCTVs, Alarm System & Security • Floor Materials or Ergonomic Designs • Efficient / Effective Lighting • Access to Employee Common Areas • Fire Extinguishers, Emergency Exit Doors, Sprinklers • Productivity Tracking System and KPI Reporting CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 14
  • 15. Driving Results thru Measuring and Monitoring Productivity monitoring systems / KPI’s • Can be simple and high level to begin Full Pallet from • Must be timely and actionable – by Shift, by Line Production Cut open Scan Shipper Shipper • Account for all activities and resources barcode Empty shipper into tray CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 15
  • 16. What Have We Learned? EVERY STEP COUNTS................SIMPLE THINGS WORK DON’T BE AFRAID TO TRY.................STEAL WITH PRIDE LOOK, LEARN, and REPLICATE! CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 16
  • 17. BEST PRACTICE – Stretch Film Reduction To reduce stretch film usage, we are developing a method of using board belts as an alternative to stretch film in binding palletized product. Reduce Stretch film usage is not used→contributes to reduction of stretch film usage Recycle Made of recyclable polyester synthetic resin Reuse Over 1,000 times <Before> <After improvement> Stretch film Board belt Effect CO2 reduction: 0.45kg per 1 time usage Challenge Further price reduction and quality improvement, including method for pallet stabilizing Future Rollout Deployment of solution for products with boxes similar to PC boxes CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 17
  • 18. BEST PRACTICE – Eco Friendly Packaging Some examples of eco-friendly packaging that enables environmental improvements Bio-decomposition Soy-Ink printing: Utilization regene- plastic: rated plastic: decomposes to 15% reduction from using scrap PC water and CO2 petroleum resin Customer Benefits spontaneously Bio-decomposition plastic Soy-ink printing for Regenerated plastic  Allow environmental bag (for mobile phone) packaging utilization (for client server) compliance due to CO2 reduction  Enable creation of a better corporate image (social responsibility)  Allow being first-mover in eco-friendly packaging Bio decomposition cushion (for server) Source: DSC JP Packaging Team CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 18
  • 19. BEST PRACTICE – Transport Efficient Packaging Reduction of packaging material and transportation cost by changing the packaging method such as eliminating individual boxes to improve packaging efficiency Individual Box Pack in Outer Box Packing Complete (with Shock Absorber) Before Wrap Products Pack in Outer Box Packing Complete with Air Cap After Improvement Reduced box volume by 30% Source: DSC JP Packaging Team CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 19
  • 20. Thought Leadership on Your Co-Packing Activity HOW MIGHT WE? CSCMP Europe 2011 Conference | Barcelona | 8-10 June 2011 DHL | Page 20
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