Consumer Goods Innovation and Customer Best Practice | OPTIMUS 2015 Atlanta
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Bobby Miller from ORTEC gave a presentation on best practices for consumer goods companies to address costs, sales revenue, and physical capital asset utilization. He discussed how 60-70% of costs are driven by the extended supply chain and how companies can improve freight visibility and consolidation to reduce costs. He also emphasized how sales revenue depends on product availability and described how demand forecasting and predictive analytics can increase availability. Finally, he outlined how supply chain planning impacts the utilization of factories, warehouses, and transportation assets and provided examples of optimization solutions.
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Consumer Goods Innovation and Customer Best Practice | OPTIMUS 2015 Atlanta
- 1. Consumer Goods Innovation and Customer Best Practice Break Out Bobby Miller Global Consumer Goods Chief Strategist ORTEC @bobbymilleriv www.ortec.com bobby.miller@ortec.com
- 2. © ORTEC Slide 2 The Goal Shareholder Value Economic Profit Net Income Cost 60-70% of cost driven by extended supply chain Sales Revenue Depends on Product Availability Assets Working Capitol Inventory is managed by supply chain Physical Capitol Supply chain determines the utilization of factories, warehouses, transportation assets and space at retailer The Supply Chain drives the heartbeat of the company
- 3. Group Deliveries Pre-Fabricated Box Dimensions UPS & Fedx Box Dimensions ORTEC Box Optimization ORTEC Carton Optimization Innovation Sales Order Line Item 1 Sales Order Line Item 2 Sales Order Line Item 3 Sales Order Line Item 4 Sales Order Line Item 5 Line Item 2 Line Item 1 Line Item 3 Line Item 4 Line Item 5 A Leading Medical Device Company
- 4. © ORTEC Slide 4 Best Practice to address Cost in the extended supply chain • Who purchases your goods? • Net cost of freight line itemed in invoice? • Is yours a delivered price (freight cost rolled into material purchase price) • Do you know what you are paying for the freight? Cost 60-70% of cost driven by extended supply chain
- 5. © ORTEC Slide 5 Best Practice to address Cost in the extended supply chain Delivered Freight Transportation Cost embedded in purchase price High Cost Low freight utilization, No freight visibility Little to no multi P.O consolidation Static Freight Transportation Cost line itemed in Invoice Little to no freight visibility. Low freight utilization Dynamic P.O.s generated by receiving plant. Consignee manages carrier. Lowest cost Consolidation of P.O. across the horizon Route Optimization used Cost 60-70% of cost driven by extended supply chain Raw Material Load Building
- 6. © ORTEC Slide 6 Best Practice to address Cost in the extended supply chain Cost 60-70% of cost driven by extended supply chain
- 7. © ORTEC Slide 7 Best practice to address sales revenue requires product availability at warehouse and/or at shelf • Do you know what was sold yesterday? • Do you know what was OOS at the shelf? • Do you have latency in the process? • Do you forecast daily and plan for optimal inventory? • Does the retailer themselves have low service levels? Sales Revenue Depends on Product Availability
- 8. © ORTEC Slide 8 Sales revenue requires product availability • Demand Sensing Predictive Analytics • Pattern Recognition • Demand Signal repositories • Point of Sale Signals • Predictive Replenishment Sales Revenue Depends on Product Availability
- 9. © ORTEC Slide 9
- 10. © ORTEC Slide 10 S Group Profile • Retailer • 10 Billion in revenue • 35,000 employees in Europe • 1,600 Retailer Stores Sales Revenue Depends on Product Availability
- 11. © ORTEC Slide 11 S Group Case Objective: Increase revenue through better customer service Challenges: • POS Demand Volatility • Weekends, Lunch Time, End of Day Solution: Demand Forecasting Predictive Analysis • Performs analysis of “big data” POS • Predicts future POS demand and generates automated optimal shifts and staff schedules Sales Revenue Depends on Product Availability
- 12. © ORTEC Slide 12 S Group Case Benefits Achieved Increased service levels – out of stock shelves, short cash out queues Cost reduction (profit / margin increase) – reduced unnecessary over- time, outsourcing, and overstaffing Revenue has increased due to quality of service level Sales Revenue Depends on Product Availability
- 13. © ORTEC Slide 13 Best practice to address Physical Capitol asset utilization Physical Capitol Supply chain determines the utilization of factories, warehouses, transportation assets and space at retailer Retail Customer Orders VMI Customer Replenishments Commercial Customer Orders Retail Mega Customer Orders Interplant Distribution Replenishments Supplier Purchase Orders Increased Complexity Collaborative Consolidation Orders Low Value Cartonized Orders High Simple Difficult The many ways to increase utilization
- 14. © ORTEC Slide 14
- 15. © ORTEC Slide 15 Best practice to address Physical Capitol asset utilization Cartonization, Raw Material, Stock Transfers Retail Orders, VMI DSD, Routing & WM Execution Load Building Business Process Application A Leading Medical Device Company
- 16. © ORTEC Slide 16 Best practice to address Physical Capitol asset utilization Transportation & Labor Forecasting
- 17. © ORTEC Slide 17 Predicting Transportation Capacity
- 18. Thank you. Did you miss something? Get the OPTIMUS apps. Bobby Miller Global Consumer Goods Chief Strategist @bobbymilleriv www.ortec.com bobby.miller@ortec.com