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International Supply Chain Education Alliance International Supply Chain Education Alliance

CREATING SHARED VALUE

- Sustainable Competitive Advantage in Supply Chain

Naquib Khan and Ejazur Rahman 18-19 June 2012

AGRIBUSINESS SUPPLY CHAIN – Creating Opportunities through Partnering…

International Supply Chain Education Alliance

AGENDA...

• CREATING SHARED VALUE – Sustainable Competitive advantage

• BASIC CONCEPT OF SUPPLY CHAIN


Preface

• What is the hidden lever that can impact the total business performance of any company? What do the best performing companies like Toyota, Wal-Mart, McDonald’s and Dell know that the rest of the business world hasn’t yet realized fully?

• The answer may surprise many of us here: “Supply Chain Management”.


?


What is Supply Chain Management

Supply Chain Management includes planning and

management of all stages that are involved directly or

indirectly in fulfilling customer request. Importantly, it

also includes coordination and collaboration with

channel partners, which can be suppliers,

intermediaries, third-party service providers, and

customers. In essence, supply chain management

integrates supply and demand management within

and across companies.

(Source: http://cscmp.org/aboutcscmp/definitions.asp)


What is a Supply Chain


• The objective of every Supply Chain is to maximize the overall value generated

• Value : The difference between what the final

product is worth to the customer and the costs the supply chain incurs in filling the customer’s request.

• Value is strongly correlated with supply chain

profitability (also known as supply chain surplus)


The Objective of a Supply Chain


Cycle View of Supply Chain Process

Customer Order Cycle

Customer

Retailer

Distributor

Manufacturer

Supplier

Replenishment Cycle

Manufacturing Cycle

Procurement Cycle

•The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain. • Supply Chain processes can be broken down into the following four process cycles –

•Customer order cycle •Replenishment cycle •Manufacturing cycle •Procurement cycle


On-shelf Availability

Freshness, Quality, Packaging

Value for money

Yes, if you are superior

to competition in terms of:

WILL THEY PREFER AND PICK-UP YOUR PRODUCTS EVERY TIME…..?

Consumer mindset


COMPETITIVE ADVANTAGE…

1. Superior on-shelf availability and quality

2. End-to-end optimization of costs

3. Superior responsiveness to market dynamics

RELIABILITY

COST

SPEED

• Process integration

• Process efficiency & effectiveness

But How..?


Supply Chain is an integrated chain

of business processes, which drives the

business towards meeting consumers’

demand efficiently & effectively.

LOOK AT THE DEFINITION….


THE SUPPLY CHAIN CONCEPT IS VERY SIMPLE...

... but hard to implement in practice


FROM ‘FARM TO FORK’ – a lot of stages in Supply Chain...

• Process integration

• Process efficiency & effectiveness

Each stage is critical to have ultimate ‘End to End’…


FOUNDATION OF SUPPLY CHAIN….


SUPPLY CHAIN HAS TWO BASIC ELEMENTS…

1. Information

2. Products & Materials

Supply Chain cannot function properly without any one of them.

‘FUND’ - another element which is required everywhere


THE CLASSICAL FLOW MODEL : Physical Supply and Demand Information Flows

ENSURING SUPPLY XYZ Company

Demand & Supply

Planning

Purchasing

Manufacturing

Customer Service &

Distribution

Sales & Marketing (Supply Part)

Distributor/ Operator

Suppliers Consumer

Flow of Products and Materials

Demand Information Flow

Too many interfaces


Shoppers/

Manufacturing

Sources of Supply

Supplier

Procurement

Demand & Supply

Planning

Sales & Marketing

Customer Service &

Distribution

Distributor /Operators

EFFECTIVE SUPPLY CHAIN PROCESS DRIVES THE WHOLE BUSINESS EFFICIENTLY….

USUALLY PART OF SUPPLY CHAIN

Consumers

SUPPLY CHAIN STARTS AND ENDS AT CONSUMERS…


17

INTEGRETED SUPPLY CHAIN REQUIRES END-TO- END ALIGNMENT FLOW OF PRODUCTS & INFORMATION….

Engine

Consumer &

Customer Insight

Innovation &

Renovation

Demand Planning

Supply Planning

Shoppers &

Consumers

Downstream

Central DC

Regional DC

Regional DC

Direct to Consumer

Direct to Store

Master Wholesaler

Wholesaler

Retailer Warehouse

Physical Retail Stores

Trade Customers, Distributors &

Operators

Order Management & Physical Logistics

Purchasing

Suppliers &

Service Provider

s

Inter-Market Supply

Affiliated Factory

Domestic Factory

Co-Packers

Manufacturing

Factory to Customer

Upstream

International Supply Chain Education Alliance 18

THE 4 SUPPLY CHAIN MANAGEMENT PRINCIPLES…

Optimise simultaneously : Costs, Service/Freshness, Agility

Multi-Functional Supply Chain Processes

Continuous Improvement Driven by Key Performance Indicators (KPI)

Involve all 4 Management and Systems Levels (Strategic, Tactical, Transactional and Physical)

1

2

3

4

?

SUPPLY CHAIN PROCESS IS GOVERNED BY….


AGENDA...

• BASIC CONCEPT OF SUPPLY CHAIN

• CREATING SHARED VALUE – Sustainable Competitive advantage


CREATING SHARED VALUE (CSV)…

For a company to be successful over time and create value for shareholders, it must also create value for the society…


Compliance With all applicable laws and internal regulations

Sustainability Development which meets the needs of the present without compromising the ability of future generations to meet their own needs

CSV ENCOMPASSES SUSTAINABILITY AND COMPLIANCE…

Creating Shared Value is a business strategy, where: (a) shareholders interest and society’s interest strongly intersect and (b) value creation can be optimized for both


WE CAN WORK IN DIFFERFENT AREAS…

Leading the thinking

Leading by doing

Leading the dialogue

NUTRITION TRAINING

WATER

RURAL DEVELOPMENT

For Example:


SUSTAINABILITY-3R: Reduce, Reuse and Recycle…

• Engage with farmers to promote, support and invest in good water management practices.

• Also engage in water preservation activities with local stakeholders, and share best practice for sustainable water use.


SUSTAINABLE COMPETITIVE ADVANTAGE: …working with farmers / suppliers…

• To build Capacity, Skill developement , Knowledge sharing and Technology transfer

• To ensure ‘Consistent

Quality’ of supply • To establish supply links

with ‘Fair Price’ strategy to ensure ‘Value addition’ and ‘Agility’

Creating Shared Value: Optimized value creation

PARTNERING:


Services 50%

Agriculture 21%

Industry 29%

6.3% 5.9%

4.6%

FY‘10 GDP USD 99.8 Billion

4.4%

5.2% 5.4%

6.5%6.2%

5.7%6.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1991-95 1996-00 2001-05 FY 07 FY 08 FY 09 FY 10p

GDP growth rate

CONSISTENT GDP GROWTH

HUGE OPPORTUNITIES & POTENTIALS IN BANGLADESH….


WE NEED TO DEVELOP RESPONSIVENESS…

e.g. Nestlé Environmental sustainability: 2011 highlights

• Greenhouse gas (GHG) emissions reduced by 17% since 2001. • Water withdrawals reduced by 58% per tonne of product since 2001. • Energy consumption reduced by 42% per tonne of product since 2001. • Renewable energy consumption is 12% of total energy consumption. • Water discharges reduced by 64% per tonne of product since 2001.


• Physical test

• Chemical test

• Microbiological test

• Vitamin test

• Mineral test

• Allergen test

QUALITY ASSURANCE FOR FOOD INDUSTRIES REQUIRES FOLLOWING TESTS…

• Heavy Metal, Contaminants

• Microbiological

• Melamine test

• Vitamin, Mineral test

• Authenticity test

• Radiation test

• Pesticide, Antibiotics

• GMO, Micotoxin

• Patulin, Dioxin & PCBs

• Fatty acid Profile

• MCPD

• Boron, Tin , Antimony


FOOD SAFETY MANAGEMENT SYSTEMS MUST BE IN PLACE….

8 Mandatory Elements :

• Good Manufacturing Practice (GMP)

• HACCP

• Pathogen Monitoring of Production Environment

• Quality Monitoring Scheme (QMS), covering CCPs, OPRPs and all other monitoring activities related to FPL

• Instrument Calibration, for all instruments used for monitoring CCPs, OPRPs.

• Release System

• Traceability, Lot Identification, Coding

• Recall and Crisis Management

Additional requirements:

• Management Commitment to Food

Safety

• Regulatory Compliance Including

labeling information to

customer/consumer

• FSSC/ ISO 22000 & PAS 220

Compliance


QUALITY ASSURANCE AT DIFFERENT STAGES IN FOOD INDUSTRIES……

Raw Materials:

– Vendor approval procedure stringent procedures to be in place

– Natural Resources in Raw Materials :

• Sourcing raw materials from selected suppliers, to be collected from secured firm

• Working with Farmers / suppliers • Higher monitoring on deliveries

- Pesticide Residues & HM • ~ 200 type of Pesticides & 9 HMs are screened.

- Antibiotics & Micotoxins • ~ 50 type of Antibiotics & Micotoxins are screened


Monitoring:

– Sampling plans ensure commitment to declaration. e.g. one NIDO fortified packs has ~ 30 nutrients in declaration, we ensure to meet them consistently.

– Chemical contaminants are also monitored.

e.g for a Infant Cereal variant ~ 21 contaminants are tested

QA IN FOOD INDUSTRIES: Continuous monitoring is vital…


LIVE EXAMPLE – Creating Opportunities through Partnering…

Nestlé - Requires Honey

Proshikha - Supply Honey

and

Private sector NGO

How Private sector and NGO can work together…


Start up:

– Proshika Management agreed on our requirements and Gap assessment done for the whole honey prod. chain

– Made development plan from cultivation of land till

delivery of honey to Nestlé Factory

Proshikha - Honey Supply

How PROSHIKHA is partnering with Farmers to collect Honey and Process Honey…


Farmers Development:

Cultivators and agriculture officers of the area were gathered and gave way forward regarding:

Use of fertilizer on the basis of soil analysis Limit pesticide usage on their crops (visited by bees)

Scientific proof of increase crops production due to cross

pollination by honey bees



Crop and Fruit production will be

increased.

Healthy and quality seed

production.

Increased oil production from the

oil seeds.

Substantial income by way of honey production in addition to crop production.

Merits of Bee keeping for the farmers:



Bee Keeper were trained on:

Herbal Bee population treatment instead of antibiotic Hygienic Bee colony maintenance during off season

Honey extraction technique to get maximum output without

affecting the Bee colony

Hygienic preservation of honey till delivery to Proshika



APIARY IN MUSTARD FIELD…

• .



Development of Proshika:

Proper storage of Raw honey Change of processing technique to increase shelf life and

ensure better quality & food safety

Improve overall environment of the manufacturing facility

Analysis facility and monitoring of honey at different stages



THEREFORE, CREATING SHARED VALUE – a Sustainable Competitive Advantage in Supply Chain…

From ‘Farm to Fork’

International Supply Chain Education Alliance International Supply Chain Education Alliance International Supply Chain Education Alliance

THANK YOU

AGRIBUSINESS SUPPLY CHAIN – Creating Opportunities through Partnering…

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