improving the supply chain - the european experience · – tesco, asda (wal-mart), j sainsbury,...
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April 2009Supply Chain Europe Limited , 1 Hayden Lane, Staverton, Cheltenham, Gloucestershire, GL51 0SR United Kingdom
Improving the supply chain - the European experience
Andrew MorganSupply Chain Europe Limitedin collaboration with theInternational Agri-Technology Centre Ltd
Slide 2
Introduction
• Andrew Morgan MPhil, CMILT (Dip)– Began logistics operations career in 1978
– Consulting projects since 1990 (Brazil since 1998)
– Author “Making the Brazil Connection – managing risk in the international food supply chain”
• Supply Chain Europe Limited– Founded in 2003
– Focus on supply chain improvement
– International agri-food chain expertise
• International Agri-Technology Centre Ltd– Established in 2003
– UKTI (government) sector team
– Responsible for promoting and developing international trade in the agri-food technology sector
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Slide 3
Agenda
• Sustainability• UK food retailer experience
• DHL Exel Supply Chain case study
• International supply chain
• Improving the supply chain
Slide 4
“ Sustainability is the catch-all term for repairing the negative aspects of economic progress over the last 40 years ”
- Professor Alan Braithwaite, Cranfield University• Intense focus on:
– Energy– Water– Emissions (CO2 and NO2)– Etc.
• Aspects include:– Good Agricultural Practice (Global GAP)– Freight Best Practice (UK Department for Transport)
• Vehicle fill• Empty running• Time utilisation• Deviations from schedule• Fuel consumption
Sustainability – the challenge
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Slide 5
Sustainability – from crop to consumer
Global.GAP standards
Slide 6
Sustainability – Brazil agriculture
© 2008 Supply Chain Europe Limited. All rights reserved.
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Slide 7
Sustainability – Brazil infrastructure
© 2008 Supply Chain Europe Limited. All rights reserved.
Slide 8
Agenda
• Sustainability
• UK food retailer experience• DHL Exel Supply Chain case study
• International supply chain
• Improving the supply chain
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Slide 9
UK food retailer experience – supply chain networks
• Shift of power from manufacturers to retailers– Tesco, Asda (Wal-Mart), J Sainsbury, Morrisons, etc.– Enabled by:
• New transport and materials handling technologies• New information and communications
technologies• Government deregulation
• Centralised networks– Less stock in system– Reduced overall cost– Improved on-shelf availability– Both outsourced and in-house regional distribution
centres (RDCs)• Sustainability
– Efficiency– Re-use / recycle / reduce waste– Focus on time-based performance– “Compress time and the costs look after themselves”– “Eliminate time-waste”
Slide 10
UK food retailer experience – use of balanced scorecards
CUSTOMERPEOPLE
OPERATIONSFINANCE
Pd 9VACANCIES
ABSENCE
LEAVERS<1YR SERVICE
SKILLS TO DO JOB - BRONZE
TEAM 5
NO OF COLLEAGUES ON OPTIONS
HALF YEAR & ANNUAL REVIEWS
LOST SALES CAGES
ORDER ACCURACY
AVAILABILITY (DEPOT TO STORE)
DELIVERY ON TIME
SAFETY AUDIT
REPORTABLE ACCIDENTS
UNITS PER MAN HOUR
TRANSPORT COST PER CASE
STORE TURNAROUND
STEP CHANGE - DELIVERY TO DATE
UNDERLYING COSTS
CAPITAL EXPENDITURE - FORECAST FOR YEAR
STEP CHANGE - FORECAST FOR YEAR
Pd 8
Pd 10
FAILURE TO ARRIVE
TRUNK ON TIME
DEPOT TURNAROUND
NO. OF TRUNKING LEGS
Retailer distribution centre (RDC) performance repo rting: Periods 8, 9, 10
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Slide 11
Agenda
• Sustainability
• UK food retailer experience
• DHL Exel Supply Chain case study• International supply chain
• Improving the supply chain
Slide 12
– background
UK grain sector opportunity:
Estimated logistics savings via improved efficiency of circa. £40m per year
• Rejected loads: £3m assuming average 3% rejections
• Waiting times: £15m assuming 10% reduction
• Consolidation: £15m from 10% saving in haulage costs
• Storage: £3m from strategic use of central stores, saving 10%
•Testing: £2m from reducing multiple testing
Plus a 10,000 tonne reduction in CO 2 emissions from 5% reduction in cereal miles. ‘Against the Grain’ 2006
Timelines:
• 2006: SCE ‘Business Transformation ’ project with Grainfarmers (UK’s largest farmer-controlled grain trading company)
• 2007: Preparation of DHL Business Case and Proposals with SCE support
• 2008: Grainfarmers and Centaur merge to form Openfield (with EFFP mediation)
• Nov 2008: DHL starts innovative value-sharing logistics contract with Openfield
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Slide 13
• Movements in 9 regions account for 55% of volume
• Average 470 movements per day
• 80% of deliveries average 30 tonne payload
• 80% of volume delivered to 15% of customers (89)
• 20% of hauliers handle 80% of volume
• 503 customers / 64 stores / 17 ports
Supply side Demand side
– understanding current activity
Findings included:
Slide 14
Lean Logistics Environment Continuous ImprovementOptimum Logistics Costs
Optimised Network
SC Systems Infrastructure
Leveraged Purchase
Levelled Supply
Standardised Processes
Visibility of Exceptions
Performance Measurement
Single Point of Ownership
Reliable Supply Chain
Improved Customer Service
Reduced Transport Spend
Improved vehicle utilisation
Minimised Carbon Emissions
Support for Optimal Grain Sourcing
Release of Management Time
Supply Chain Strategy
– supply chain vision
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Slide 15
Key features
� One core partner allows end-to-end supply chain integration
� Value creation central to Control Tower
� Breadth of services differentiates DHL
� Control tower allows greater optimisation, trade off analysis, better matching of supply & demand
Key benefits
� Standard processes and technology solutions
� Carrier management with traditional solutions underpinning the Control Tower
� Joint working groups pursuing best practice & continuous improvement
� Real national coverage provides visibility
� Holistic management of supply chain - greater agility, lower inventories & financial engineering
SupplierEnd
customer
monitoring & reportingend to end IT visibility
THE CONTROL TOWER
Strategic
Tactical
Operational
– control tower concept
Slide 16
Maltsters
FlourMillers
StarchManufacturer
FeedCompounders
Export
Farms
Central Store
Farm InputCompanies
1.7 mt
5.6 mt
3.0 mt
8.9 mt
CU
ST
OM
ER
SCentaur / Grainfarmers
Q
574 kt Moved17,524 Movements
574 kt Moved17,524 Movements
5.366 mt Moved224,628 Movements
Import
Q
Q
Q
3 Routes to market
Q 6 Quality checks
Avg Hauliers used 60+
Communication
Assumed annual rejectionrate of 7% - 15,723 dels
FCB volumes only
– farm inputs / primary supply chain
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Slide 17
– creating a new solution
SERVICES
Haulier and Supplier Management – Conformance to Process and Quality Standards
Management Reporting and KPI’s – Reporting of information used to manage the business and the Supply Chain itself
Data Management – Maintenance and improvement of the accuracy of static data .
CUSTOMERSCUSTOMERS
&
SUPPLIERS
Storage
Maltsters
Crushers
Millers
Export
Animal Feed
OUTBOUND
FreightLane
Selection
ReceiveOrder
OrderManagement
PlanTransport
InitiateTransport
DeliveryConfirmation
FreightValidation
Can we read it?Does it make sense?
Delivery Date Based Cumulative Demand CalculationsCollection Date Management
Explicit OrderQuantity Specified
Collection Date Specified
Optimise Combination ofFreight Cost and
Service Level Required
Confirm Collection with SupplierOptimise Vehicle Utilisation
Instruct Carrier
Receive Collection ConfirmationFrom Haulier Inbound
Receive Collection ConfirmationFrom Haulier Outbound
From Sites InboundValidate Haulier Invoice
Documents vs Tariff
Validate Haulier InvoiceFor Payment
Operational Records vs Tariff
FreightPayment
Slide 18
Pre-collection with farmer members
• Queries
• Matching sales contracts
Physical collection
• On-time
• Courtesy
• Cleanliness
Physical delivery
• On-time
• Courtesy
• Cleanliness
Post delivery with customers
• Invoicing
• Queries
Customer service measures include:
• Reliability
• % of collections ‘on time’
• Number of complaints – non-conformance
• Weight tickets on time
• % of deliveries ‘on-time’
• Time taken to answer queries
• Periodic surveys on specific issues
– customer service components
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Slide 19
– system overview
Management Information, Costs, Invoicing & Value Calculation
Loading &Arrival Times
Initial Delivery Confirmation, Weight & Passport information
Acceptance of Routes& Availability
Loading &Arrival Times
Orders – A to BCollection & Delivery
Windows Defined
Arrival Times
CustomersStores Ports
OrderReceipt
CarrierManagement
Planning &Optimisation Execute
DHL Control Tower
Network Modeling
Finance / KPI’s
Hauliers / Carriers / DHL
ForwardingTeams
SuppliersLoading &
Arrival Times
SupplierManagement
Greater collection and delivery restrictions reduce optimisation
Slide 20
Agenda
• Sustainability
• UK food retailer experience
• DHL Exel Supply Chain case study
• International supply chain• Improving the supply chain
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Slide 21
International supply chain – issues
Network infrastructure – Organisation – Process – Info rmation
© 2007, 2008 Supply Chain Europe Limited
How to create a sustainable supply chain?
Slide 22
International supply chain – walking the process
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Slide 23
Agenda
• Sustainability
• UK food retailer experience
• DHL Exel Supply Chain case study
• International supply chain issues
• Improving the supply chain
Slide 24
Improving the supply chain – finding new opportunities
• Business Network : around 10,000 members • Diverse : Brings together a broad range of industries, all
sectors and expertise – manufacturing businesses, technology providers, research centres, spin off co mpanies
• No limitation to size/capacity : All companies and organisations, regardless of size, turnover or capa city
• Demand led : Driven entirely by the requirements of its member companies
• Universal scope : Not limited to any particular type of resource, NISP deals with energy, expertise, logist ics, services, assets, transportation, waste, water, etc .
• Value added : Create new market opportunities - increasing the range of resources that have commercial value –innovation
• Changing business culture : IS becomes the norm
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Slide 25
NISP Database Synergy Grid
Improving the supply chain – NISP components
Slide 26
Whisky Distillery
Transfer waste heat to
neighbouring company for
agriculture or aquaculture
Donate to social enterprise for making furniture Use to smoke fishFuel source
Transfer to neighbouring company as alternative to using potable water
Convert and sell to local farmer for animal feed -fuel source
Backhaul with suitable materials
STEAM
DISTILLERY BY-PRODUCTS
OAK BARRELS
GREY WATER
TRANSPORT
Improving the supply chain – waste material or resource?
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Slide 27
A fruitful collaboration
One new business
• 38 acre greenhouse producing all year round• Successful reuse of waste heat• Reduction of 12,500 tonnes of CO2 emissions• £15 million private investment in region• 65 new jobs created
• £250,000 Business investment • 7,000 tonnes of waste diversion• £440,000 approx cost savings• 5,156 tonnes carbon savings• 18,500 tonnes of water saved• 10 business assisted and • 7 jobs created
Terra Nitrogen (UK) Limited &John Baarda Ltd
Improving the supply chain – NISP case study
Slide 28
Improving the supply chain – tools and techniques
• GIS models (with map databases)– Geographic information system
(GIS) to plot all locations; demand patterns; thematic mapping; territory allocation; etc
• CVRS models– Models for strategic vehicle routing
and scheduling; depot location; fleet size and mix; etc.
• Optimisation tools– Supply chain strategic optimisation
system to test alternative supply chain strategies, including modal choice
• Inventory models– Strategic inventory diagnosis and
modelling• and others
Minimum/Maximum/Target Capital Stock by Target Service Level
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
88% 90% 92% 94% 96% 98% 100%
Target Service Level
Sto
ck C
apita
l
Minimum
MaximumTarget
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Slide 29
Uses a standard convention and is designed to ident ify all the key steps in the chain – based on Excel the map can be r edrawn easily
Improving the supply chain – mapping the chain
© 2009 Professor Alan Braithwaite, Chairman LCP Consulting
Slide 30
Capture the emissions data at every stage and normalise to the unit of measure e.g. per 1000 litres, per Kg, per pack
© 2009 Professor Alan Braithwaite, Chairman LCP Consulting
Improving the supply chain – normalising the emissions
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Slide 31
Shows the Carbon build up along the chain –prototype data for
illustration only
Improving the supply chain – displaying the CO 2 build-up
© 2009 Professor Alan Braithwaite, Chairman LCP Consulting
Slide 32
Review
• Sustainability
• UK food retailer experience
• DHL Exel Supply Chain case study
• International supply chain
• Improving the supply chain
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Slide 33
Contact details
• Andrew Morgan MPhil, CMILT (Dip)– M +44 (0)7768 473120
• Supply Chain Europe Limited– T +44 (0)1242 681229
– www.supplychaineurope.com
• International Agri-Technology Centre Ltd– T +44 (0)2476 323961
– www.theiatc.org
Slide 34
Conclusion
Thank you!