SCL HUB June 2016

1. 1
Reducing end to end supply chain
costs by improving customer service
Mike Dicken
June 2016

2. Introductions
Mike Dicken (22years FMCG)
Industries
Fabric and Home Care (P&G)
Cosmetics (Avon)
Food and Fresh Produce (Dairy Crest/Muller)
Functions
Manufacturing
Procurement
Supply & Demand Planning including IBP
Muller Milk and Ingredients
Business Overview
> 3.5 billion litres of milk per annum
Combination of Muller Wiseman Dairies and
Dairy Crest dairies
Fresh Potted Cream and Bottled Milk both
branded and private label
Flavoured milk drinks both branded (FRijj)
and private label
Bulk Ingredients including cream and
skimmed milk powder

3. Purpose
1. Know your true end to end supply chain constraints
2. Cycle time versus lead time
3. Family Planning
4. Supply chain efficiency over production efficiency, setting the right Minimum
Order Quantities
5. The combined effect of “3 x 4”
Key principles
To show that no matter whether it is Fairy Liquid, Cosmetics, Milk or Cheese the same
supply chain principles have been applied to deliver IN FULL service levels > 99.9%
whilst eliminating waste and reducing overall end to end supply chain costs

4. Are these principles relevant to your (FMCG)
supply chain ?
Case Study 1
Long Shelf Life
Big Volumes
150 sku’s
Pan European
Retailer Driven
Case Study 2
Long Shelf Life
1000’s of skus
Highly volatile
High product churn
Seasonal
32 markets
Catalogue Driven
Case Study 3
Short shelf life
100’s of sku’s
1,000’s of collection
and delivery points
Limited volatility
Single Market
Multi Channel
1. Consecutive perfect
service weeks
2. Inventory < 3 days
3. Cost down (million)
1. Consecutive perfect
service weeks
2. Inventory 75% down
3. Cost down (millions)
1. Consecutive perfect
service weeks
2. Inventory < 1 day
3. Cost down (millions)

5. Know your true end to end supply chain
constraints:
In bound materials: Flow Mapping
Flow mapping is about understanding your supplier’s supply chain through a
collaborative approach
It is about being able to answer the following questions
 How do they make the products they supply me with
 What are their product change over times and types
 How do they plan and schedule the production of my materials
 How much stock are they holding on my behalf of finished product, starting
materials and work in progress
 Think of it as taking a photograph of their end to end inventory levels, their internal
lead times and manufacturing constraints
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions

6. Flow Mapping
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions
Polymer
Garwolin
Master Batch
Northampton Collection
Point
Cardboard
5 to 10 days
5 - 10 days
0 - 2 wks
10 days
Orders to
?
0
?
1 or 2 same day
deliveries / wk
3rd Party Spraying
NW England - name not shared
50,000 MPQ
> 8% scrap lvls
Lead time?
Lead time?
Lead time?
Total spraying lead time
is 2 - 3 wks + 2 days Qc
time on return
0 - 10
Change over time = 30 mins
approx
MPQ = 6 days !!!!!!!!
Scrap rate not shared / not known
Demonstarted 85% efficiency
capacity = 8,400 per day
Stanton Hill
6 to 7 days
12 days to order masterbatch and
plan production
12 days is allowed which includes 5 days Qc
1 or 2 same day
deliveries / wk
2% scrap
lvls ??
2% scrap
lvls ??

7. Flow mapping
Common Observations
 High levels of finished goods stock but no investment in basic starting material inventory
 Up to 80% of lead time was actually time spent at the back of the queue
 Each manufacturing step is planned separately so there were multiple queues
 Customer specifications were out of line with supplier technology e.g. asking for 7
colours from a 6 colour machine
Common Fixes
 Support your supplier in implementing safety stocks of starting materials that are
specific to yourself
 The use of rolling capacity reservations
 Implementation of pull systems (Kanban, min-max, buffer)
 Asking the question, as a customer how are we adding cost ?
 Grouping products with similar production processes to minimise total change over time
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions

8. Sample results
 Reduction of decorated glass lead time from 28 weeks to < 2 weeks
 Reduction of plastic tube lead time from 8 weeks to < 1 week and a 20% cost
reduction
 More than doubling a supplier’s bottle capacity eliminating the need to pre-
build stocks on a seasonal product
 Converting an under utilised blow moulder to meet actual demand, eliminating
the need to transport 100,000’s of empty bottles per annum
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions
We’ll now turn our attention to our internal
supply chain
Flow mapping

9. Cycle time versus lead time
Lead times are frequently quoted, but what do we mean by lead
time. Is it ….
 Time from receiving an order to delivery from stock?
 Or from receiving an order to planning production, making and finally delivery?
 Time to order the necessary materials, make and deliver ?
 Should I include time spent waiting for a production / delivery slot ?
Rather than focusing on lead times, to build supply chain agility we need to focus on cycle
times
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions

10. Cycle time
 Cycle time is the time between two consecutive productions of the same product
 In cosmetics the unit of time may be weeks, for fairy liquid days and for milk hours but the
principle is the same
 It is a function of batch size (minimum run length or order quantity) and volume
 Supply chain can influence volume and determine batch size
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions
=
52 weeks
# prodns / yr
Cycle time =
Annual volume
Batch size
# prodns / yr =
Cycle time versus lead time

11. Annual volume
How can supply chain effect annual volume ?
The answer is family planning
 In all the case studies, the minimum run lengths were being quoted at SKU level i.e. a
particular product with a particular label for specific market(s)
 In each instance the first step was to recognise that a label change was not the key
constraint but size changes or product recipe changes were bigger considerations
 By identifying the key constraint, we were then able to group products together into
families
 We then made a conscious decision to plan products at family level
 Within milk for instance, whilst we increased the number of sku change-overs we
dramatically reduced the number of bottle size and milk type changes, increasing
capacity, reducing inventory and reducing wastage and improved service
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions
Cycle time versus lead time

12. 12
Minimum Run Lengths
 Minimum run lengths are determined by the change over time between different product
families and the run speed
 As a rule of thumb, as a minimum you want to produce for 3 to 4 times the amount of time it
took to do the change over
 Running beyond that has minimal incremental benefit
 Reducing minimum run lengths and batch sizes has an immediate benefit on reducing cycle
times and improving supply chain agility
Cycle time versus lead time

13. 13
Agility by design: The combined effect of Family Planning and Reducing Minimum
Run Lengths
Impacted by Family
Planning
Impacted by
reducing minimum
run lengths and/or
batch size
The combined effect

14. 14
Agility by design: The combined effect of Family Planning and Reducing Minimum
Run Lengths
Without Family Planning
(At SKU Level)
• Family size = 1
• Annual volume = 100,000
• Batch Size* = 20,000 pieces
• Prodns / year = 5
• Cycle time = 10 weeks
With Family Planning
(At LIQUID Level)
Family size = 5
Annual volume = 500,000
Batch Size* = 20,000 pieces
Prodns / year = 25
Cycle time= 2 weeks
The combined effect

15. 15
Agility by design: The combined effect of Family Planning and Reducing Minimum Run
Lengths
1 hour change over time
Run for 7 hours
• Family size = 5
• Annual volume = 500,000
• Batch Size* = 20,000 pieces
• Prodns / year = 25
• Cycle time = 2 weeks
30 minute change over time
Run for 2 hours
Family size = 5
Annual volume = 500,000
Batch Size* = 6,000 pieces
Prodns / year = 90
Cycle time = 0.5 weeks
By effecting annual volume and Batch Size we reduced cycle time from
10 weeks to 2 weeks to ½ week !!!
Net impact is increased agility and improved service levels & less inventory
The combined effect

16. Case Study 1
Long Shelf Life
Big Volumes
150 sku’s
Pan European
Retailer Driven
Case Study 2
Long Shelf Life
1000’s of skus
Highly volatile
High product churn
Seasonal
32 markets
Catalogue Driven
Case Study 3
Short shelf life
100’s of sku’s
1,000’s of collection
and delivery points
Limited volatility
Single Market
Multi Channel
Results

17. Case study 1
 18 consecutive weeks at 100% service in full
 Reduced the minimum order quantity at sku level to the equivalent of c. 10 minutes manufacturing
time
 Inventory across Europe < 3 days
Case study 2
 Increased piece fill rate from 90% to > 99.5%
 Paved the way to reduce obsolescence stock generation by $100million per annum
Case study 3
 Routinely deliver in full service rates of 99.999% on products that have < 24 hours stock
 Increased capacity equivalent to a new filling line
 Reduced annual wastage by £million’s
 Reduced end to end supply costs by removing the costs associated with forcing customer service
Friday, July 06, 2012 Dicken Agile Supply Chain Solutions
Results

18. This is how we deliver …
Zero Shorts
Zero Short codes
One Plan
Optimum end to end cost
0
0
1
£
PEOPLE

19. 19
Reducing end to end supply chain
costs by improving customer service
Mike Dicken
June 2016