This document discusses using vendor managed inventory (VMI) to improve out-of-stock avoidance (OSA) and contribute to growth. It provides examples of how VMI has benefited companies like Danone Belgium and Billa, a retailer in Russia. Specifically: - VMI allows suppliers to manage a retailer's stock levels, using open data and placing orders. This can reduce total supply chain stock levels and the bullwhip effect while improving service levels. - Danone Belgium saw improved OSA results from using VMI. Billa also saw a 10% increase in OSA and 8.7% sales growth after implementing central ordering, a form of VMI. - VMI streamlines

1. VMI as technology to improve OSA and to contribute growth By Olga Khruscheva, SC Business Planning & Customer Integration Director, APICS CSCP

2. Content OSA as a subject for consideration How it might look like? What’s available to influence? How we do it… Do you feel the difference?

3. What is available on shelf?

4. Consumer behavior if wanted product is not on shelf Buys product later Doesn’t buy at all Buys other brand 17% 36% 8% Buys in other store Buys another flavor 19% 20% + = Retailer sales loss + = Supplier sales loss

5. Danone Belgium OSA Results

6. Are our products always available to our shoppers? Manufacturer Retailer

8. Open data

10. Reducing Bullwhip effect

11. Better service levelsFMCG Plant Raw material warehouse VMI

12. Why not apply VMI on Upstream part withsame benefits as upstream ? STORE WAREHOUSE OF SUPPLIER FMCG Plant

13. Improvement on the traditional Preseller model Sales Rep. (50 stores) Merchandiser (1-3 stores) KA Executive (20 stores) Order Creator (40 stores) SC SALES Stock taking Shelf FIFO control OSA, PPED Price Fridge POSM Promo Promo materials 4P Stock control Order Taking Assortment Promo management OOS VOLUME CONTROL OSA, PPED Order taking Stock FIFO control Price Fridge POSM Promo Promo materials CONTROL AND FOLLOW UP CONTROL AND FOLLOW UP CONTROL AND FOLLOW UP CONTROL AND FOLLOW UP Focus? Focus Focus Focus

14. Main changes in process Development, testing IT ordering tool Creating Central ordering team Creating Key Account executive team Merchandizers team Start stock counting After 6 weeks of history – start ordering

16. Innovations and changes develop our business

18. Distribution Centre Lineacom Principles Stock & Sales integration Sales Estimation based on Trends & Future Events (National/Regional) Order Validation/Modification based on Store Specificities

19. Order creation process Order-fax Order Enter stock and loss to the system Check stock count accuracy Create order based on history and promo Count stock and loss Send stock and loss information to OC Enter order to the customer’s system - Merchandizer - Order creator (OC) - SAP

20. Basic Forecasting principles Based on the cleaned sales history an estimation for the next sales period is made. This estimated sales is influenced by:

21. Basic Order principles

22. Basic Order principles

23. Forecasting

24. Basic Order principles

25. 725 -480 590 -225 -165 400 245 Delivery P2 Delivery P1 Proposed End Stck P2 Correction P1 Correction P2 Short Shelflife Short Shelflife Begin Stock P1 Sales Forecast Sales Forecast P1 P1 Quantity of Products already in Store Stock where Shelflife is too low to sell in Period -600 Short Shelflife Stock Correction Sales Order = (Sales Forecast)*(Safety stock Policy) – (Begin Stock + Delivery P1 – Short Shelflife Correction)

26. Basic Order principles

28. Dynamic & Automatic based on Sales Forecast (% of Period(s) to Cover)

29. Alignement with Business Strategy

31. Billa: something to compare 1. OSA in Billa stores w/o Central Ordering OSA 83,3% OOS 16,7% OSA 93,0% OSA 83,3% 2. OSA in Billa stores with Central Ordering OSA 93,0% OOS 7,0% OOS 16,7% OOS 7%

32. Billa: something to compare 16,7% 8,7% No central ordering Central ordering Vertical Growth in Billa, 2009 vs 2010

33. OSA is well contributed for growth

34. Thank you! Moscow, 2010