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ECR Forum 2011 OSA Case

Danone Viktoria Central Store
         Ordering
Connecting Supplier and Retailer Supply Chains to improve

                  Shopper Satisfaction
Shopper Behavior
             in case of Out-of-Shelf


     Buys other         36%                                 Buys product
       brand                                       17%
                                                                later




Doesn’t buy at
                  8%
     all

                                                            Buys in other
                                                   19%         store
         Buys another
                          20%
            flavor

                                +   = Retailer sales loss

                                +   = Supplier sales loss
Ordering quality is the main reason of
shelf out of stock in Russian Retail

                                 Out of Stock due
                                     to in Store
                                 execution issues
      Out of                      : Service level,
                                  Merchandising
      Stock                              2%
     ordering
      quality
       16%




                Product
                on Shelf
                 82%

                           * according to ECR Russia FMCG 2010 Benchmark and
                                           Measurement by Danone
Fresh Dairy product category
             peculiarities


                                       Almost daily order /
           Fast moving goods
                                       delivery to the store

                                          Every minute counts
               Short shelf life
                                       from Supplier to shopper




Complexity of Management of fresh dairy in-store stock and shelve is
                           complex
What is Value proposal of
     Danone for Viktoria ?




  … to delegate to DANONE the
management of store replenishment
VMI to improve OSA


Key principles of VMI:
- Stock is managed by Supplier
- Open data
                                                             STORE
- Orders are made by Supplier




                                 WAREHOUSE OF SUPPLIER



                                                   Benefits:
                                                   - Stock reduction in total SC
             FMCG
                                                   - Reducing Bullwhip effect
             Plant                                 - Better service level
Danone developed Lineacom : a
specific software to support fresh
dairy product replenishment
We implemented a new sales force
                  organization focused on service and
                  excellence of in store execution
Traditional pre-sell                    New Model ‘Central Ordering’
       model
   Sales Rep.              Merchandiser          KA Executive      Order Creator
   (50 stores)              (1-3 stores)          (20 stores)       (40 stores)




      Order taking           Stock taking              Price        Stock control
  Stock  FIFO control    Shelf  FIFO control    Fridge  POSM     Order Taking
          Price                                       Promo          Assortment
    Fridge  POSM
                                                 Promo materials       Promo
         Promo
    Promo materials                      SALES                         SC
                                                                    management
                                                                        OOS
                           OSA, PPED                  4P              VOLUME
                                                                      CONTROL
                                                                   OSA, PPED
  CONTROL AND              CONTROL AND           CONTROL AND       CONTROL AND
   FOLLOW UP                FOLLOW UP             FOLLOW UP         FOLLOW UP




   Focus?                    Focus                Focus             Focus
Store Order creation process
        In store                      Danone Supply
                                          Chain
                          Order-fax                     Order




   Count stock and loss
   Send stock and loss         Enter stock and loss to the system
    information to OC             Check stock count accuracy
                               Create order based on history and
    Enter order to the                       promo
    customer’s system


- Merchandizer

- Order creator (OC)
- ERP
Danone order proposal is integrated
                  automatically to retailer system by EDI




                               1. Order proposal




Store ordering                2. Order response
   system
  Lineacom
                 ERP DANONE         EDI provider        ERP Viktoria
VMI Central Ordering helped dramatically to
       increase Sales by increasing OSA


                                                              in Victoria with
                                               2%
                                                             Central Ordering
             15%                                                   OSA 98%
                                                                   Out of stock 2%
                                               98%


             85%



Store without Central Ordering        VMI Central ordering

  in Victoria without
                                        OSA    Shelf OOS
   Central Ordering
       OSA 85%
         OOS 15%

                      OSA of Danone products in Victoria YTD2011
While reducing costs by improving by
             Execution of in Store Operations thanks
             to system integration
                                                                  Order proposal




                                                                  Order response

                                                          ERP DANONE      ERP Viktoria
   Main Operational
Improvements achieved                                     Danone         Victoria
     through VMI
  In store and back office order entry time decrease
                                                              X                    X
                         -50%


      Human mistakes due to manual order entry
                                                              X                    X
                      -100%

Elimination of returns caused by discrepancies in order
         between Danone & Viktoria ERP from                   X                    X
                         -100%


    Reduction of manual rework of delivery                    X                    X
        documents from 60% to 10%
a Supplier-Retailer Win- Win through
   Collaboration

            Collaboration



      VMI + System Integration


  Higher OSA + Better in Store
          Execution


Better Business together

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ECR Award 2011 Danone - Victoria

  • 1. ECR Forum 2011 OSA Case Danone Viktoria Central Store Ordering Connecting Supplier and Retailer Supply Chains to improve Shopper Satisfaction
  • 2. Shopper Behavior in case of Out-of-Shelf Buys other 36% Buys product brand 17% later Doesn’t buy at 8% all Buys in other 19% store Buys another 20% flavor + = Retailer sales loss + = Supplier sales loss
  • 3. Ordering quality is the main reason of shelf out of stock in Russian Retail Out of Stock due to in Store execution issues Out of : Service level, Merchandising Stock 2% ordering quality 16% Product on Shelf 82% * according to ECR Russia FMCG 2010 Benchmark and Measurement by Danone
  • 4. Fresh Dairy product category peculiarities Almost daily order / Fast moving goods delivery to the store Every minute counts Short shelf life from Supplier to shopper Complexity of Management of fresh dairy in-store stock and shelve is complex
  • 5. What is Value proposal of Danone for Viktoria ? … to delegate to DANONE the management of store replenishment
  • 6. VMI to improve OSA Key principles of VMI: - Stock is managed by Supplier - Open data STORE - Orders are made by Supplier WAREHOUSE OF SUPPLIER Benefits: - Stock reduction in total SC FMCG - Reducing Bullwhip effect Plant - Better service level
  • 7. Danone developed Lineacom : a specific software to support fresh dairy product replenishment
  • 8. We implemented a new sales force organization focused on service and excellence of in store execution Traditional pre-sell New Model ‘Central Ordering’ model Sales Rep. Merchandiser KA Executive Order Creator (50 stores) (1-3 stores) (20 stores) (40 stores) Order taking Stock taking Price Stock control Stock FIFO control Shelf FIFO control Fridge POSM Order Taking Price Promo Assortment Fridge POSM Promo materials Promo Promo Promo materials SALES SC management OOS OSA, PPED 4P VOLUME CONTROL OSA, PPED CONTROL AND CONTROL AND CONTROL AND CONTROL AND FOLLOW UP FOLLOW UP FOLLOW UP FOLLOW UP Focus? Focus Focus Focus
  • 9. Store Order creation process In store Danone Supply Chain Order-fax Order Count stock and loss Send stock and loss Enter stock and loss to the system information to OC Check stock count accuracy Create order based on history and Enter order to the promo customer’s system - Merchandizer - Order creator (OC) - ERP
  • 10. Danone order proposal is integrated automatically to retailer system by EDI 1. Order proposal Store ordering 2. Order response system Lineacom ERP DANONE EDI provider ERP Viktoria
  • 11. VMI Central Ordering helped dramatically to increase Sales by increasing OSA in Victoria with 2% Central Ordering 15% OSA 98% Out of stock 2% 98% 85% Store without Central Ordering VMI Central ordering in Victoria without OSA Shelf OOS Central Ordering OSA 85% OOS 15% OSA of Danone products in Victoria YTD2011
  • 12. While reducing costs by improving by Execution of in Store Operations thanks to system integration Order proposal Order response ERP DANONE ERP Viktoria Main Operational Improvements achieved Danone Victoria through VMI In store and back office order entry time decrease X X -50% Human mistakes due to manual order entry X X -100% Elimination of returns caused by discrepancies in order between Danone & Viktoria ERP from X X -100% Reduction of manual rework of delivery X X documents from 60% to 10%
  • 13. a Supplier-Retailer Win- Win through Collaboration Collaboration VMI + System Integration Higher OSA + Better in Store Execution Better Business together