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Coe Customer Supply Chain Manual

Coe Customer Supply Chain Manual

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Customer Supply Chain

Center of Excellence:
CUSTOMER SUPPLY
CHAIN MANUAL
Birgit Patterer, CEEMA
Pablo Platero, LA
Egi Situmorang, AP
Contents (1)
Part 1:
CUSTOMER SERVICE BASICS:
• Introduction to CS&L
• Customer Service
• Order to Cash Overview
• Web Order
• Customer Supply
Part 2:
MODERN TRADE:
• Modern Trade Overview
• Global Retailers Overview
• Customer Collaboration
• Best Practices
Contents (2)
Part 3:
TRADITIONAL TRADE:
• Traditional Trade Summary
• Why distributors are important to our business
• 6-Step Process Distributor Development *
• Real life examples
• Platforms relevant for Distributor Development
Part 4:
GENERAL INFORMATION:
• Useful Websites and Links
• CS&L Career Planning
* Focus on Supply Chain elements
Customer Supply Chain Manual:
PART 1:
CUSTOMER SERVICE BASICS
Introduction to CS&L
• 11 brands with more than $1 billion in revenue
• 70+ brands with more than $100 million in revenue
• 40+ brands over 100 years old
• 80% revenue from #1 share positions
Kraft Foods is the world‟s second largest food company
and is #1 in global Confectionery and Biscuits.
6
Kraft Foods Developing Markets have a huge potential for business
growth with millions of customers and billions of consumers.
Latin America Region
Central & Eastern Europe,
Middle East & Africa Region
Asia Pacific
Region
LA HQ:
Miami, Florida
CEEMA HQ:
Vienna, Austria
AP HQ:
Singapore
Worldwide HQ:
Northfield,
Illinois
7
“The goal of Supply Chain Management is to link
the marketplace, the distribution network, the
manufacturing process and the procurement
activity in such a way that customers are serviced
at higher levels and yet at a lower total cost.”
Martin Christopher
Logistics and Supply Chain Management
(1992)
Supply Chain Management is about
synchronizing the entire chain.
Purchase Orders
Trucks
Warehouses
Changing a paradigm or stereotype: CS&L consists of
much more than only trucks, warehouses and orders.
Product Flow
Consumer Purchase Information
CS&L has been expanding its scope according to the business
needs and the level of maturity of each business unit.
Suppliers Factory Kraft Customer Store Consumer
Warehouse Warehouse
Historical scope
Scope last 7/8 years
Scope last 3/4 years
CS&L Scope
 Manage Inventory,
S&OP process and I2M
 Forecasting
 I2M
 Inventory
Management
 Replenishment
planning
 Manage physical
network
 Inbound / Outbound
Finished Goods,
 In / Out Copacking,
 Warehousing,
 Transportation
 Manage the order entry
 and fulfillment
complete and on time
 Order taking and
processing,
 Co-managed Inventory,
 Client master files Mgt,
 ECR Supply initiatives,
Role :
Activities :
CS&L Mgr
Logistics Operations Customer Service Product Supply
Country/Area Mgr
Region CS&L Dir
The core functions within CS&L:
PS, LO, CS, PCM *), Business Process / Data Management *)
S
t
r
u
c
t
u
r
e

i
n

C
E
E
M
A
*) Note: Some regions have a slightly different structure. Click on the right tab to see the example
Regional CS&L
Management
CS&L also supports countries through the
regional leaders and the COEs
Customer Service &
Logistics
Management
Country
Priorities
Functional
Leadership
Best Practices
& Tools
Product Supply
COE
Customer Service
COE
Logistics Operations
COE
Customer Service & Logistics
North America
Logistics Operations
Trade maturity and product sourcing complexity drive
evolution and progress of the countries‟ core functions
From To
 Local Production Sourcing
 Product Scheduling
 Inventory Control
 Multi-country and external
Manufacturing
 Demand and Forecast
Management
 Project Management with
category / sectors
 Total Inventory Management
Customer Service & Logistics
Country
Customer Service Product Supply
From To
 Ad hoc distribution
 Local suppliers and bids
 Distribution network design
 Leverage global 3PL supplier
 All Finished goods incl Interco
Customer Service & Logistics
Country
Logistics Operations
Customer Service Product Supply
Trade maturity and product sourcing complexity drive
evolution and progress of the countries‟ core functions
Logistics Operations
From To
 Order Processing
 Ad-hoc product allocation
 Order to Cash Management
 Collaborative Forecasting
 Quota Management / Promo
 Customer Relationship Management
(Kraft Plus CS&L tools)
 Customer Supply Chain
 Distributor Development
Customer Service & Logistics
Country
Customer Service Product Supply
Trade maturity and product sourcing complexity drive
evolution and progress of the countries‟ core functions
Customer Service
Customer Service plays a
strategic role within CS&L
Imagine if…
… you have to serve your customer
with your eyes covered.
… you have to understand your
customers, but they speak in a
language you cannot comprehend.
… you don‟t know what your
customers expect from you.
How good do you think the service
you provide is going to be?
Customer Service has evolved from purely transactional
business toward value added processes
Purely Transactional Process
Value Added Process
Orders generation
Reception
Customer
OTC Process
Preparation &
Invoicing
orders
delivery
Orders generation
Data Sharing
Joint Business Plan
Reception
Customer
OTC Process
Understand Customer Requirements
Full trucks completion
Full pallets suggestion
Backhauling / Customer pick up
Centralized deliveries
POS out of Stock identification
Distributor Development
VMI
CPFR
KPIs Analysis
Preparation & Invoicing
Transactional data sharing
Efficient delivery
Kraft Replenishment Suggestion
Orders
Customer Relationship
General Agreement of Logistic Terms
and Conditions
Transactional business is handled by Back Office,
value added processes by Front Office
Customer
Supply
Front office
Back office
Order
Planning
Order To Cash Overview
•Manage Customer Data
•Manage Pricing
•Process Sales Orders
•Manage Contracts
•Manage Customer Web
Order Management
The Order To Cash Process comprises everything
from an order to the related revenue
1: Order
Management
2: Order
Fulfillment
3: Revenue
Management
•Order Fulfillment for
Warehouse, Product
Supply and
Transportation
•Order Fulfillment for
Housekeeper (Methods
and Applications)
•Manage Allocations &
Global ATP
•Manage Accounts
Receivables
•Manage Credit
•Manage Cash Application
•Manage Billing &
Adjustments
•Manage Disputes / Claims
•Manage Rebates
•Manage Customer
Data
•Manage Pricing
•Process Sales Orders
•Manage Contracts
•Manage Customer
Web Order
Management
An accurate order starts with correct Customer Master Data
1: Order
Management
Manage Customer Data
Description:
• Setting up the Customer Master
• Extending Customer into a Sales Area
• Adding a contact person
Key Benefits:
• Accurate master data records
• Fewer changes to sales orders
• Faster processing time
Roles:
•Master Data Team
•Customer Service Clerks
•Credit Management
Integration:
Master Data is customer-related information that defaults into
sales orders when they are placed
•Manage Customer
Data
•Manage Pricing
•Process Sales Orders
•Manage Contracts
•Manage Customer
Web Order
Management
1: Order
Management
Manage Pricing
Description:
• Creating Pricing Condition Records
• Maintaining Pricing Condition Records
• Generating Pricing reports
Key Benefits:
• Fewer changes to sales order
• Processing time for Accounts Receivables decreases
Roles:
•HQ Master Data
•HQ Methods & Applications
•Field Customer Service Coordinators
•Credit
Integration:
Pricing takes into account any special deals, discounts and
allowances above and beyond the list price. These are applied
to sales orders to arrive at the correct customer price.
An accurate order continues with correct Pricing
•Manage Customer
Data
•Manage Pricing
•Process Sales
Orders
•Manage Contracts
•Manage Customer
Web Order
Management
1: Order
Management
Process Sales Orders
Description:
• Process incoming sales orders
• Managing sales orders by exception – releasing blocks,
completing sales orders
• Correcting pricing
Key Benefits:
• Accurate sales orders creating accurate invoicing
• Fewer changes to billing documents
• Accounts Receiving processing time decrease
Roles:
•Customer Service Coordinator
•CSC Trainer
•CSC Team Lead
•E-commerce Manager
Integration:
Sales orders fulfill customer demand for product. Correct
product and quantities ensures proper shipping and customer
satisfaction for accurate order fulfillment and later accounts
receivable processing.
Accurate order processing ensures correct billing
•Manage Customer
Data
•Manage Pricing
•Process Sales Orders
•Manage Contracts
•Manage Customer
Web Order
Management
1: Order
Management
Manage Contracts
Description:
• Create and maintain contracts for customers
• Generate reports to track the fulfillment of contracts
Key Benefits:
• Accurate sales orders creating accurate invoicing
• Fewer changes to billing documents
• Accounts Receiving processing time decrease
Role:
•Financial Analyst
Integration:
Customers receive discounted pricing for specified quantities of
materials over a designated period of time. Correct pricing
must follow through to billing documents for expedited
Accounts Receivable processing.
Accurate contract management ensures customer satisfaction
•Manage Customer
Data
•Manage Pricing
•Process Sales Orders
•Manage Contracts
•Manage Customer
Web Order
Management
1: Order
Management
Manage Customer Web Order
Management
Description:
• Kraft process whereby external customers may place orders
via a web portal to Kraft’s internal order management system
•EZOrder has been replaced by Web Shop’s EZOrder-Plus
Key Benefits:
• EZOrder-Plus allows customers to view total order list pricing
once an order is placed, which reduces pricing discrepancies
Roles:
•External Customers
•Kraft Sales Force
•Kraft E-Commerce Managers
•Kraft Customer Service Coordinators
•Kraft Help Desk Support
Integration:
EZOrder communicated with the Kraft legacy. EZOrder Plus
takes this ability and communicates with SAP.
REMARK: Not available resp. needed in all countries / regions.
Web Ordering facilitates the customer‟s
order placement process
Order Fulfillment
Order Fulfillment for Warehouse,
Product Supply and Transportation
Description:
•Inter- / Intra-company Movements
•Process Returns in the Warehouse
•Perform Outbound Processing without OM
•Manage Transportation
•Receive Finished Goods in a Non-SAP Facility
•Manage Finished Goods Inventory and Adjustments
•SAP IDoc Error Management and Handling
•Interface Management
Key Benefits:
•Impact of Catalyst on organizational roles
•Interface points and data flow between SAP and legacy
Product Supply, Warehouse and Transportation planning tools
Roles:
•OF Process Overview
•Inventory Management Reporting
Integration:
Legacy Warehouse, Product Supply and Transportation
systems (MATRICS/KWIC, COD, ICOM, and OTM) will
interface with SAP to ensure seamless integration of
information and processes. Legacy systems will be phased out
during future Catalyst releases.
2: Order
Fulfillment
•Order Fulfillment
for Warehouse,
Product Supply and
Transportation
•Order Fulfillment for
Housekeeper
(Methods and
Applications)
•Manage Allocations &
Global ATP
Order Fulfillment
Order Fulfillment for Housekeeper (Methods
and Applications)
Description:
•Inter- / Intra-company Movements
•Process Returns in the Warehouse
•Perform Outbound Processing without OM
•Manage Transportation
•Receive Finished Goods in a Non-SAP Facility
•Manage Finished Goods Inventory and Adjustments
•SAP IDoc Error Management and Handling
•Interface Management
Key Benefits:
• Impact of Catalyst on organizational roles
•Interface points and data flow between SAP and legacy Product
Supply, Warehouse and Transportation planning tools
Roles:
•Logistics Execution Housekeeper
•Inventory Management Reporting
•Category Administration
Integration:
Legacy Warehouse, Product Supply and Transportation systems
(MATRICS/KWIC, COD, ICOM, and OTM) will interface with SAP to
ensure seamless integration of information and processes. Legacy
systems will be phased out during future Catalyst releases.
2: Order
Fulfillment
•Order Fulfillment for
Warehouse, Product
Supply and
Transportation
•Order Fulfillment
for Housekeeper
(Methods and
Applications)
•Manage Allocations &
Global ATP
Order Fulfillment
Manage Allocations & Global ATP
Description:
•New product launch allocation-early ship (listings & exclusions)
•Seasonal/special pack finished good product allocation
•Divested business
•“Official” Finished Good Product Allocation
•Each event requires a clear understanding of the level in which
we plan to allocate product to the customer – WH region, WH
Sub-Group, FS Region, or Ship-to.
Key Benefits:
•New tool for allocations
•New terminology
•Material Master Data maintenance
Roles:
•GATP
Integration:
•Allocations are created and maintained in SCM. Then, they are
moved from the planning area to the APO Available to Promise
(ATP) server.
•The data is then called and passed back to the main SAP ECC
server.
2: Order
Fulfillment
•Order Fulfillment for
Warehouse, Product
Supply and
Transportation
•Methods and
Applications
•Manage Allocations
& Global ATP
Revenue Management
Manage Accounts Receivables
Description:
Some of the responsibilities of A/R include:
•Account Research
•Journaling (offset debits and credits for clearing)
•Clearing residual items
•Item resets and reversals
Key Benefits:
•The recording of accounting data of all customers
•Postings in AR and GL keep both always in balance
•Tools to monitor open items, account analysis, and
due date lists.
Roles:
•AR Processor
•AR Manager
Integration:
Begins the process of settling AR invoices that is
continued by Managing billings, Disputes, Rebates and
Credit
3: Revenue
Management
•Manage Accounts
Receivables
•Manage Credit
•Manage Cash Application
•Manage Billing
•Perform Billing Adjustments
•Manage Disputes and
Claims
•Manage Rebates
Revenue Management
Manage Credit
Description:
Managing Credit includes :
•Customer Master & Credit Master
•Perform Credit Line Review
•Process Blocked Sales Documents
•Manage Credit Exposure
•Review Credit Management Reports
•Imaging and Credit Association
Key Benefits:
•Credit limit reviews reduce delivery delays
•A proactive approach to customer credit limits reduce the
number of blocked orders
•Customer credit levels can be maintained by individual
account - Credit level can be adjusted for seasonal business
•More real-time reporting tools
Roles:
•Credit Manager
•Credit Processor/Analyst
Integration:
Accounts Receivables (New Customer, Customer fails credit
check, maintenance of the customer master)
3: Revenue
Management
•Manage Accounts
Receivable
•Manage Credit
•Manage Cash Application
•Manage Billing
•Perform Billing
Adjustments
•Manage Disputes and
Claims
•Manage Rebates
Revenue Management
Manage Cash Application
Description:
•Managing Cash Applications includes;
Validating the cash clearing account
•Reviewing and processing lockbox exceptions
•Reviewing lockbox posting
•Resolving unprocessed payments through manual posting
using SAP transactions
Key Benefits:
•Central data depository for all customer information
•Customer notes to be entered by all processors
•Customer information to be viewed and edited by all
•Deletions tracked by system and user ID
Roles:
•Cash Application Manager
•Cash Associate
•CDO Finance
Integration:
Credit and Accounts Receivables
3: Revenue
Management
•Manage Accounts
Receivable
•Manage Credit
•Manage Cash
Application
•Manage Billing
•Perform Billing
Adjustments
•Manage Disputes and
Claims
•Manage Rebates
Revenue Management
Manage Billing
Description:
• Identification and release of blocked billing documents
•Creation and Maintenance of billing documents
•Release of billing documents blocked for payment to
accounting
•Correction of invoices due to retroactive price changes
Key Benefits:
• Daily review and correction of billing log errors
•Ability to apply blocks at both the master data and transaction
level
•Terms Effective Date is now the date the customer picks up
the product and takes ownership
Roles:
•Financial Controls – BTC (Bill to Cash)
•Financial Controls – Field
•Customer Service Coordinator – Supply Chain
Integration:
Goods receipts and delivery orders are reviewed and analyzed
to prevent creation of incorrect invoices. Corrective actions
can be taken, applied blocks removed and documents released
for processing.
3: Revenue
Management
•Manage Accounts
Receivable
•Manage Credit
•Manage Cash Application
•Manage Billing
•Perform Billing
Adjustments
•Manage Disputes and
Claims
•Manage Rebates
Perform Billing Adjustments
Description:
•Identification of required billing adjustments
•Creation of required sales orders to complete the adjustment
•Creation of required follow-on documentation
Key Benefits:
•Creation of new sales order will trigger all required document
flow
•Proper authorization required to create new sales documents
•Exception only handling of issues will reduce time from
identification of a billing issue to resolution and receipt of
payment from customer
Roles:
•Financial Controls – BTC (Bill to Cash)
•Financial Controls – Field
•Customer Service Coordinator – Supply Chain
Integration:
•Manage Billing
•Manage Disputes and Claims
3: Revenue
Management
•Manage Accounts
Receivable
•Manage Credit
•Manage Cash Application
•Manage Billing
•Perform Billing
Adjustments
•Manage Disputes and
Claims
•Manage Rebates
Revenue Management
Manage Disputes and Claims
Description:
•Manage customers disputes, deductions and complaints.
•The creation, monitoring, escalation, assignment, work-flow
notifications, closing and writing-off of the Dispute Cases.
Key Benefits:
•Report on a post to General Ledger Accounts
Report on and post to Cost Centers
Roles:
•Accounts Receivable Processors
Accounts Receivable Managers
Integration:
•Portal
•FSCM
•FI Legacy Systems (KARS, A/P Workflow, Tax Robot, LIS/
LPR, Vista, COGS, Matrics)
•Sales Systems (KOSTARS, STHS )
3: Revenue
Management
•Manage Accounts
Receivable
•Manage Credit
•Manage Cash Application
•Manage Billing
•Perform Billing Adjustments
•Manage Disputes and
Claims
•Manage Rebates
Revenue Management
Revenue Management
Manage Rebates
Description:
•Maintain Rebate Agreements for Post-Pay Programs
•Settlement of Rebate Agreement
- Issuance of credit / check
- Issuance of statement billing
•Retroactive Rebate Processing
Key Benefits:
•Ability to make refunds for legitimate reasons
•Streamlines process and reduces manual effort
•Separation of non-compatible roles/SOX compliance
Role:
•Financial Controls BTC
Integration:
•Data Maintenance
- Create Rebate Agreements
- Create Pricing Conditions
•Financial Accounting
- Maintain accrual balances for rebates
- Rebate settlements create credit/debit entry to A/R
account
3: Revenue
Management
•Manage Accounts
Receivable
•Manage Credit
•Manage Cash Application
•Manage Billing
•Perform Billing
Adjustments
•Manage Disputes and
Claims
•Manage Rebates
Web Order
EDI stands for Electronic Data Interchange.
EDI is the computer-to-computer exchange of business documents
between companies.
This model was generally adopted by the big retailers in both the
Developed and Developing Markets. However …
EDI Messages facilitate the data exchange between
Kraft and our customers / suppliers
Example: Orders by month in Latin America
Source: GCI Survey 2009
Order by Month % of EDI orders
ARGENTINA 6383 46%
URUGUAY 380 21%
BRAZIL 9207 38%
CARICAM 1326 43%
MEXICO 7800 70%
PERU 940 60%
ECUADOR 3836 20%
VENEZUELA 4542 9%
Total Latin America 34414 41%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
ARGENTINA URUGUAY BRAZIL CARICAM MEXICO PERU ECUADOR VENEZUELA
not EDI
EDI
However, in the Developing Markets a big percentage of the
business is based on Distributors who have very limited
possibilities to use EDI technology.
take
type
Sales takes the order personally.
Sometimes, orders come by telephone.
Some customers fax their orders, or
E-mail them
Generally Customer Service
people type the orders into the
system.
Sometime Sales people type
them into Siebel (Saturn project).
Manual order taking is the most common process
in Developing Markets
ERP
Web Order
Tool
(Customer, Item, Price) PRICAT?
ORDERS
Order Entry
(Web form or standard Excel)
Order Validation
Order Tracking
Return request
CUSTOMERS or
SALES REP
Order Status
1
2
5
6
4
4
7
The proposal is to create a Web environment where customers
can log in and create their orders to be integrated automatically
into the Kraft ERP System.
8
Return order
9
A Web Order Tool can facilitate the order taking
process and reduce manual errors
42
Some solutions implemented in LA have already proven
to work well and generate efficiencies
 24 hours operation
 Very easy to use
 Totally integrated with Kraft ERP system
 On-line Logistic Catalog
 Category filters and product availability visualization
 Ability to save favorite orders
 Ability to manage order suggestions
 Order upload from Excel files
 Desired delivery date input by customers
 On-screen pallet / layer converter to help user
 Updated on-line order status for customers
 Quota management
 Generates standard EDI orders
 Mail confirmation circuit (i.e. to Sales persons)
Basic Interfaces needed between Kraft ERP
and Web Order
ERP
(JDE-PRISM-SAP)
PURCHASE ORDERS
RETURN REQUEST
PAYMENT ADVICE (COLLECTION)
PRICAT (items – customers – prices)
LIST OF INCLUSION/EXCLUSION
QUOTAS (maximum quantity available)
ORDER STATUS
INVOICES
6
WEB ORDER
TOOL
7
8
1
2
3
4
5
Interfaces detail in Back-up
1
2
3
4
5
6
7
8
PRICAT: Master data for items, customers and prices.
LIST OF INCLUSION & EXCLUSION: Will allow the identification of which product would
be shown or hidden for each customer.
QUOTAS: Maximum quantity of each SKU each customer can buy. This is prepared to
avoid a few customers taking all when the offer is limited (i.e. by production restrictions).
ORDER STATUS: To show customers the status of each pending order while it goes
through the OTC process. Detailed line by line.
INVOICES: Line by line detailed to allow customers‟ returns and payment declaration.
PURCHASE ORDERS: Line by line PO.
RETURN REQUEST: Return (negative) line by line order.
PAYMENT ADVICE: The customer or Sales person informs that a certain invoice was paid
detailing amount paid, transaction number, method of payment (bank, cash, etc).
Interfaces details
Usage of a Web Order Tool brings advantages
for Kraft and our customers
List of potential benefits for both Kraft and our distributors:
(Benefit stream may vary from country to country)
Benefits to Kraft:
• Significantly reduce cost of Sales and Customer Service (less Call Center / Data entries incoming
communication)
• Reduce manual workload, less errors due to typing
• Eliminate manual update of Customer Order Form
• Significant decrease of customer refusals, occuring due to typing errors
• Smoother, faster and more efficient order process with less manual intervention
• Reduce workload due to less order changes
• VMI process simplification (Customer can review and approve order proposal online)
• Sales reps focused on sell out business rather than loading orders on Siebel / other systems
• Reduce pricing discrepancies
Benefits to Customers:
• Totally cost-free solution
• Place comments about receipt online and speed up claims resolution process
• Able to track all orders through the web portal, leading to greater customer satisfaction
• Able to optimize orders (ie. full pallets / layers), leading to optimized unloading and warehousing
• Ability to visualize product status and make changes online (i.e. substitute SKUs)
• 24/7 available portal for order entry and tracking
• Kraft OTC Process transparency
Brazil Mexico Peru /Ec Venezuela
Headcount
Cost of the people assigned to the order entry process (including call center). Company
cost of each person must include salary plus taxes and other charges related to the
employees (i.e. lunch, training, etc) 16,836 $ 41,508 $ 18,545 $ 45,080 $
Systems (fill in only in the case you foresee a system optimization)
Annual Cost of keeping system working support the current manual or "semi-automatic"
order entry process. - $ 260,000 $ - $ 250,000 $
Siebel
Refusals
Costs of the reverse logistics - $ - $ - $ - $
Cost of the out-in at the warehouse - $ ? - $ - $
Cost of the labor to process the return and generate the credit note. - $ 9,455 $ 1,265 $ - $
Logistics
Increase in the full layer / full pallet orders for giving on line visibility to customers 16,350 $ - $ - $ 74,186 $
Increase order to reach full truck load - $ 12,298 $ - $
Waste
Write off reduction as by giving visibility of available products to Sales - $ 191,250 $ - $ - $
TOTAL 33,186 $ 502,212 $ 32,108 $ 369,266 $ 936,773 $
Savings (USD)
Benefits Example
Example extracted from the business case prepared for LA
Plan to Cash Training:
http://lcs.kraft.com/elearning/plan_to_cash/index.asp#top
Module 1: Introduction
Module 2: Data Quality
Module 3: Supply Chain Planning
Module 4: Ordering Product
Module 5: Order Fulfillment
Module 6: Product Shipping and Receiving
Module 7: Financial Processing
Web Order:
Supply Guidelines:
This document provides a framework for Kraft to collaborate with our Distributors. The main objective is to
establish clear roles and responsibilities for the two parties and to manage expectations as we look to build
sustainable long term relationships with Distributors.
More information about this chapter
Customer Supply
Managerial alignment with Customers: moving from the
fragility of a butterfly to the hardness of a diamond.
Sales
Supply Chain
Marketing
Finance
Sales Support
The old butterfly scheme
Supply Chain
Marketing
Finance
Stores execution
Procurement
Ventas
Supply Chain
Marketing
Finance
Sales Support
The diamond scheme is a more modern, efficient and
strong way to approach our customers
Procurement
Supply Chain
Marketing
Finance
Stores execution
The role of Customer Supply
Customer Supply is the part of CS in charge of meeting the customers
in representation of the CS&L area.
Generally it‟s structured by channel and customers but this may vary
according to the size of the business.
Manager,
Customer Service
Analyst MT – Customer 1
Manager,
Customer Supply MT
Manager,
Customer Supply TT
Manager,
Order Planning
Order Support & master files
Order Process
Analyst MT– Customer 2
Call Center
Analyst MT – Customer 3
Analyst MT – Other customers
Analyst TT
Analyst TT
ORGANIZATION EXAMPLE
The role of Customer Supply
Traditional Trade Modern Trade
Customer visits
Logistic Agreements
Dispatch frequencies to customers optimization
Service KPIs calculation
OTC process follow up – action during exceptions
Data alignment with customers
Order pattern Analysis & Cost to Serve
Training to distributors Logistic Agreements (EBP)
Distributor assessments Information sharing (EDI – GDS)
Development plan for distributors VMI –CMI - CPFR
VMI – CMI OSA analysis
KIDS
Typical list of tasks:
Basic Customer Service KPIs
= CFR% X 100
E Cases received by customer
E Cases ordered
=
Qty of orders dispatched complete
Total qty of orders
OSC%
X 100
=
IA%
[E Invoices - E Credit Notes
E Invoices
Considering only the Credit Notes generated by discrepancies in price or quantity between what the customer ordered and what he received
X 100
Qty of orders delivered on time
Total qty of orders
OT%
=
X 100
Customer Supply Chain Manual:
PART 2:
MODERN TRADE
Modern Trade Overview
Modern Trade: An overview
• The Modern Trade share in Developing Markets continues to grow.
Business with international customers is growing above average growth.
New Modern Trade formats (e.g. Discounters) are increasing.
Their rapid expansion over the last years has created an extremely face-paced
and dynamic market environment for the Retail sector. This growth is not without
challenges, however.
• Modern Trade requires capabilities in several core
areas to win in this changing environment (see right).
• The extensive display of products, an increased
level of merchandising, the changing nature of
promotions and the continuous bevy of newly
launched products, stimulate a continuous shift
in the consumer‟s product preferences – thus
affecting unanticipated swings in the brands‟
Market Shares.
• Modern Trade expects from their suppliers:
- Excellence in Supply Chain Management
- Delivery of operational efficiencies
- High service levels
- Innovative programs for joint business growth
Hypermarkets / Superstores
& Supermarkets
Discounters
Cash&Carry/Warehouse Clubs
Drugstores
Department Stores
Market Outlets
Kiosks / Pavillions
Small Grocery Stores
C-Stores & Petrol Stations
Duty Free Stores
Other
(Bakeries, Delicatessen, etc.)
Retail Channels
from 100 m² to > 5.000 m²; 7.000 – 70.000 SKUs
from 400 m² to > 1.500 m²; 900 – 1.500 SKUs
> 5.000 m²; appr. 4.000 SKUs
from 35 m² to 400 m²; up to 1.500 SKUs
varying size; focus on non-food
< 100 m²; limited assortment
10 - 50 m²; very limited assortment
< 40 m²; limited assortment
200 – 1.000 m²; limited food assortment
varying size; special SKUs
59
Modern Trade – some store examples
60
Modern Trade – more store examples
Differences between Modern Trade
and Traditional Trade Retailers
MT Retailer TT Shop Owner
Profit oriented Revenue oriented
Growth oriented Survival oriented
Economies of scale Economies of shelf
Has a business plan Has day-to-day money
Visits trade fairs Visits wholesalers
Regular meetings … Regular visits …
… in an office … in his shop
… looking at data. … looking around.
Goes home after
work.
May sleep in his shop.
Global Retailers Overview
Top Ten Global Retailers
POS RETAILER NAME in BN US$
1 Walmart (USA) 428,490
2 Carrefour (France) 152,343
3 Metro Group (Germany) 104,216
4 Tesco (UK) 97,538
5 AEON (Japan) 95,803
6 Schwarz Group:Lidl (Germany) 86,269
7 Seven & I (Japan) 86,193
8 Kroger (USA) 83,075
9 Rewe Group (Germany) 79,977
10 Costco (USA) 79,123
(Source: Planet Retail)
(Figures: FY 2009)
#1 Walmart: $428.5Bn
VISION: Respect for the individual, Service to our customers, Striving
for excellence
Strategy: Number 1 or 2 in market, lowest price in market
– EDLC to deliver EDLP
– Win, Play, Show
– Fast, Friendly, Clean
– Multi format retailing
Focus Areas: 1. US / 2. UK, CAN, MEX / 3. Bra, Rus, Ind, China
MISSION: Save money, live better
#2 Carrefour: $152.3 Bn
VISION: Making Carrefour the preferred retailer wherever it operates
Strategy: Achieving organic, sustained, profitable growth in excess of the
broad market growth rate by:
– Client-oriented culture: getting to know our customers better in order to
serve them better
– Transformation: increasing agility, execution quality and
competitiveness
– Innovation: regaining initiative and leadership
Focus Areas: 1. France 2. Spain, Italy, Belgium 3. Developing Markets
MISSION: At the heart of our customers lives
#3 Metro: $104.2Bn
VISION: high-performance, international retail company focused on
sustainable, profitable growth
• Binding corporate principles that apply to all sales divisions as well as joint
business goals and concepts for achieving goals
• The shared commitment of profitable growth and the pursuit of market
leadership in each segment
• The international focus of the METRO GROUP and an intense commitment
to innovation as supporting pillars of business success
Strategy: SHAPE 2012, ensuring profitable growth
– Customer orientation
– Position and expansion
– Efficient processes and structures
Focus Areas: 1. The Individual Sales Divisions
MISSION: Decentrally as possible, as centrally as necessary
#4 Tesco: $97.5 Bn
VISION: Multi Format retailing to drive sustainable & profitable growth
Strategy:
• To be a successful international retailer
• To grow the core UK business
• To be as strong in non-food as in food
• To develop retailing services - such as Tesco Personal Finance, Telecoms
and Tesco.com
• To put community at the heart of what we do
Focus Areas: 1. UK 2. Asia 3. USA
MISSION: Create value for customers to earn their lifetime loyalty
Other Global Customers
• Aldi (German): $74.8bn, #1 discount, #11 Global, 90% Food
17 Countries – Europe, USA, Australia
• Auchan (French): $74.5bn, #2 Fra, #12 Global, 69% Food
16 countries - South & Central Europe,
North Africa, Russia, China, Vietnam
• Casino (French): $70.3bn, #3 Fra, #1 Brazil, 71.7% Food
20 countries - LA, N&W Africa, France,
Germany, SE Asia
• Ahold (Dutch): $60.7bn, #1 Sweden, #20 Global, 89% Food
10 Countries – USA, Scandinavia, Baltics
Customer Collaboration
Customer Collaboration
Personal Commitment
Shared Decisions
Shared Risk
Speaks as One
Cooperation
Understanding customer business needs
Link solutions to customer needs
Creativity and insight
Proactive sharing of information
Foundation
Product and service knowledge
Listening skills
Responsiveness
Act responsibly
Reliability
Key steps for an effective
Global Customer Management
2) Prepare Customer Segmentation
1) Understand the Customer
(Vision, Priority, Strategy,
Needs, Metrics, SC structure)
3) Sell and Align With Customers
(Customer contact, JBP, Joint
KPIs/Scorecard)
4) Develop joint Solutions /
Initiatives (Roadmap)
5) Execute Initiatives & track progress
(Monthly KPI/project review)
5 steps to plan, implement and track Supply Chain
initiatives with Modern Trade
Foundational Developing Advanced / Strategic
Fusion - EDI
OSA
C2S + EB
Distributor Management (VMI)
Network Design
RFID
Market development stage
CPFR/JEM
KIDS
Tools to be developed and implemented as enablers,
according to market maturity, customer needs, and
Route-to-Market strategy
GDS – Industry Standards
JVC
Scorecard
Example for scorecard criteria:
Their definition and assessment
TOPIC DEFINITION CRITERIA ASSESSMENT
Sales Maturity
Indicates the openness of the Sales
team in relation to Customer Supply
(internal relation at Kraft)
0
No contact between Customer Supply and KAM
1
CS knowing some commercial tactics regarding the account, No supply contact with client.
2
CS knowing some commercial strategy regarding the account, Supply contact with client.
3
Full independency to contact client for Supply Chain topics
Client
Collaborative
Style
Refers to the customer's openness to
work in collaboration with Kraft
0
No collaboration with client apart from Order to cash topics
1
Basic collaboration at logistic level (KPIs, SKU Data exchange)
2
Supply Collaboration for more advanced programs (CMI/VMI/CPFR, OSA)
3
Commercial and Logistic Collaboration, Joint Business Plan including Logistic and Commercial
projects.
Meeting
Customer
Frequency of meetings with customer
(weekly / 15 days / monthly) to
discuss project development and
follow up, replenishment process,
skus management, etc.
0
No contact at supply level
1
Time to time contact
2
Monthly meetings at supply level (incluye T2T)
3
Joint Value Creation meetings between companies.
Joint review de
KPI's:
Joint reeview of KPIs with customer
oriented to agree and align the
measurement, understand the
reasons and set corrective action
plans.
0
Client doesn´t calculate KPIS
1
No common KPIs review
2
Sharing of KPIs from time to time, methodology & result not aligned.
3
Monthly comparison meetings, methodology/results aligned including gap analysis and corrective
action identification.
Forecasting/CPF
R
Indicates if the customers calculates a
forecast and how it is used internally
or by Kraft for the replenishment
process.
0
Forecasting not in place in the client, Replenishment of client based on historical sales, Forecasting at
Kraft based on Client/sku Sell in
1
Forecasting in place in the client, Replenishment of client based on forecasting, Forecasting at Kraft
based on Client/sku Sell in
2
Forecasting in place in the client, Replenishment of client based on forecasting, Forecasting at Kraft
based on Client Forecast
3
Forecasting of client made in collaboration with Kraft, Forecasting /production of Kraft based aligned to
client Forecasting
Visility Stores
Information shared by the customer
with POS data by store and by sku
(inventory and sales)
0
No information available
1
Some data from time to time (wekly, monthly), not complete information (ex. No data regarding daily
sales or transits)
2
Daily Data sharing, not complete information (ex. No data regarding daily sales or transits)
3
Daily Data sharing, automated and complete, including store sales, transit, inventories, safety stock,
etc.
Promotional
Process
Level of co-ordination between
customer and Krat for promotional
events.
0
Not in place
1
JEM in place for big Events to distribution centers, no responsibility for store replenishment.
2
JEM in place for big Events to distribution centers, Kraft responsibility for store replenishment.
3
All Functions -commercial/logistic- involved in initial forecasting quantity and replenishment process.
OSA: On Shelf
Availability
Level of information (transactional ,
physical or both) of the OOS at stores
and level of collaboration of the
customer for improvement of this KPI.
0
No iniative / no measurement
1
Pilot or on going measurement not shared with client.
2
Pilot or on going measurement shared with client, no corrective actions setting in place.
3
On going measurement with jointly decided actions following -up
Example for customer segmentation
and Supply Chain initiatives
Examples for Customer Development Programs
Fundamental Programs
• Internal sales alignment
• Report fill rate
• Report Days on Hand
• WM supply terminology
understood e.g. Assembly,
Order Type
• Regular Supply Review
• WM/Kraft Route to
Market understood
• Defined roles for WM &
Kraft Supply
• Deliver acceptable KPI’s
• Direct delivery to WM
• Order pattern understood
• Manual data alignment
• Retail Link access & use
• Understand vendor
scorecard
• Commence 30/60/90
collaboration meetings
• X Docking/Assembly used
Development Programs
• EDI Orders used
• Joint agreed KPI’s &
CS&L customer plan
• Supply priorities in JBP
• Review lead times
• Reduce inventory level
• Forecast by customer
• EDI Invoicing
• Fill Rate Bridge Complete
• Global Replenishment
System Implemented
• Access to CPFR tool in
retail link
• Cost to serve understood
• Logistics Discount/EBP
• Gold standard CPFR
• Packaging scorecard
complete
• Backhaul or CPU
• PO Transformation
implemented
Aspirational Programs
• Understand WM 5 year
country supply chain focus
• Flow Decision Tool Used
• Global Data Synch
• Joint Value Creation
• No touch orders
• 7 day order processing
• 24 hour lead time
• KIDS 2 Forecasting
• One truck
• One Inventory
• One Shelf/Shelf centred
supply chain
• One Network/ Integrated
Network Plan
• One product
• RFID technology /EPC
Strategic Programs
• Joint Event Management
process in place
• Local SCB member
• Optimize inventory
• Electronic item file
exchange
• Measure OTD or MABD
• Logs terms driven by CTS
• AS2 replaces EDI
• Display ready pack/ PDQ’s
• OSA measurement
• Phantom Inventory pilot
• Strategic sustainability
• Jt CPFR/Replenishment
Analyst in WM
• Increase freshness
• Implement ASN for delivery
• 7 Day delivery
• Implement OSA solutions
• Retail ready packaging
77
Example 1:
Russia Strategic Development Model: Modern Trade
Fundamental programs
• Alignment internal
position
• Move from scheme sales –
buyer to scheme leading by
sales & buyer
• Scorecard definition
• R2M review and
agreement
• Cost to Serve
Development
• EDI
• TLT review and
optimization
• Product freshness
improvement
• JBP:
• Scorecard
• CFR
improvement
• Reduce /
optimize
inventory level
• C2S
Strategic
• GDS
• CPFR / VMI, including
JEM (promo activities
evaluation)
• OSA monitoring and
improvement
• Shelf ready packages
•Promotional planning
• Supplier collaborative
board (top2top)
Aspirational
• One network
• JVC
• Understand and
influence on
Customer‟s Supply
Chain strategy
• KIDS
• RFID
Development programs vary between Modern Trade
and Distributors, according to customers„ capabilities.
Fundamental Programs
• Internal sales alignment
• Track and Report KPI’s
• Regular Supply Review
• Local KA/Kraft Route to
Market understood
• Manual data alignment
• Understand vendor
scorecard
• Collaboration meetings
Development Programs
• EDI full cycle
• Joint agreed KPI’s &
CS&L customer plan
• Supply priorities in JBP
• Review lead times
• Reduce inventory level
• Access to CPFR tool
• Cost to serve understood
Aspirational Programs
• Understand 5 year
strategic plans for
replenishment,
transport/DC’s, supply
chain, technology
• Global Data Synch
• No touch orders
• Category management in
“HOT” zone based on Kraft
expertise
• 24 hour lead time
• Joint Value Creation
• Collaborative forecasting
on Kraft factory level
•RFID
Strategic Programs
• Optimize inventory level
• Display and deliver ready
pack
• OSA in “HOT” Zone
Example 2:
Russia Strategic Development Model: Local Key Accounts
Development programs vary between Modern Trade
and Distributors, according to customers„ capabilities.
79
Example 3:
Russia Strategic Development Model: Traditional Trade
Fundamental programs
• Internal alignment sales/
CS&L
•Distributor assessment (2
times a year)
•(Manual) master data
alignment
•Excel order tool
•Order schedule (fixed
order/delivery days
•Sales Force Automation
Basics
•Order size/structure
agreement
•Web order tool
•EDI order
implementation (b2b
or internet EDI)
•SFA implementation
•Joint agreed KPIs
•Distributors‟ data
(stock, sell out) on
weekly basis
Developing
•KPI alignment with
distributors
•Annual T2T supply
meeting
•Regular meetings with
customers
•Agreed development
pans & roadmaps
•Promotional planning
•Distributors‟ data
(stock, sell out) on daily
basis
•Distributor scorecard
•EDI rolling out of
DESADV, RECADV,
Invoice, Sales &
Invent.Reports
•Distributors P&L
agreement
•Cost to serve
Strategic
•Distributors as a part
of Supply chain
•Collaborative
Forecasting
•Joint Event
Management
•VMI
Customer initiatives should be monitored
with a Project Tracker
Country
Supply Chain Priority Project Owner/ Leader Project Description Project Objective Key Milestones Estimated Benefits Next steps Deadline
CHINA Optimize Inventory Rosaline/ Stephanie Optimize Inventory Improve DOH metrics without sacrifice Instock Understand current inventory structure and identify
opportunities for reduction
Improve DOH Review Master files
and Identify problem
SKU
Q1-Q4
Constantly Monitoring of Instock and DOH
Measure the impact of this change and the impact
on business
Joint Event
Management
Collaboration
Rosaline/ Stephanie Work Collaboratively with Sales and
WM on promotion planning
Improve availability for promotional items and
manage DOH
Work with Sales team to work out a joint event
management process
More accruate forecast to
increase sales without
higher DOH
Work out a joint event
management process
with sales
Q1-Q4
Involve into promotion planing and translate the
promotion effect and sales strategy into promotion
forecast
Review the process and work out the COE
regularly
Tactical Sustainability
- Local EDI
- Customer Pick
Up/Backhaul
Rosaline/ Stephanie Understand the capbility of local EDI
and determine wether implement it.
Make the best of local EDI to improve the order to
cash process efficiency.
Get the EDI go-live schedule Improve order to cash
process efficiency.
Get the schedule of
Local EDI go-live
Q4
Indentify which function could be used by Kraft and
bring benefit to Kraft.
Share EDI info. with the related dept and collect
the comments on implenmenting EDI from them.
Discuss the feasibility with the related team.
Customer Pick Up Pilot Find a way to improve sustainability without big
impact on daily business
Prepared plan and processes and align internally Improve sustainability CPU proposal to WM Q1
Agreement with WM on process and Rate
Launch pilot and follow up
Evaluate the benefit and impact on business
Customer Pick Up Roll Out Evaluate CPU pilot and expand to other RDC Prepared plan and processes and align with WM Improve sustainability Evaluation on Pilot Q1-Q4
Roll out to all WM DC
Measure the impact of this change and the impact
on business
C2S reduction
GRS - Global
Replenishment
Solution
Rosaline/ Stephanie The Implementation of GRS in
Walmart China
Pay attention to the progress on the GRS
implemention in WM
Get the related info. from Replenishment team Improved supply chain
efficiencies
Follow up the
Implementation of GRS
and manage the impact
Q2
Follow up and understand the impact on us
Attend related training if there is any training for
Supplier
Best Practices
82
Customer Collaboration:
Best Practices and their definitions
• Electronic Data Interchange (EDI)
• Global Data Synchronization (GDS)
• Cost To Serve (C2S)
• Efficiency Bracket Pricing (EBP)
• Key Performance Indicators (KPI)
• Joint Value Creation (JVC)
• Vendor Managed Inventory (VMI)
• Collaborative Planning, Forecasting and Replenishment (CPFR)
• Kraft„s Integrated Demand Signal (KIDS)
83
Implementation of EDI messages offers multiple benefits
EDI provides speed:
EDI is the tool that can enable businesses to achieve increases in speed,
with accompanying decreases in document cycle time.
EDI improves accuracy:
Electronic transfer of data eliminates the need for copying data from one
paper document to another, or for keying the data into a business
application screen. With manual data transfer, errors are likely. In the
typical manual purchase order, a person enters or copies information
from the paper form at least once. With EDI, improved accuracy is
obtained in several different ways:
• Electronic data is usually derived from a database, where data has
been subject to prior validation.
• Electronic documents are transferred accurately, regardless of size. If
transmission of a large document is not successful, users can invoke re-
transmission procedures rapidly.
• Even if several different parties process the electronic document, with
each party adding data to the existing document, none has the ability to
alter previously entered information.
84
Implementation of EDI messages offers multiple benefits
EDI provides security:
The communication via Value Added Network (VAN) or directly via Internet
(AS2) allows to exchange electronic data between sender and recipient in a
reliable, secure and traceable way. The VAN handles all transfer of
information from the sender‟s mailbox into the receiver‟s mailbox. This
allows trading partners to be certain that they can freely exchange
information but at the same time they can avoid giving direct access to
their own internal systems.
Benefits for Kraft:
Reduced manual workload through electronic documents import (e.g.
ORDER).
Less errors than by manual order entry.
Less returns through more exact ordering.
Benefits for the customer:
More reliable communication, faster document flow, no retype errors.
Reduced manual workload through electronic documents import (e.g.
INVOIC).
Mutual benefits:
Improved customer service through quicker order placement and fulfilment.
Less errors through joint Master Data alignment.
85
EDI share is highly diverse across Kraft regions,
and also across countries within the same region
(Source: GCI Survey 2009.)
You want to get started, and don„t know how?
Here„s a guide.
June 2010
CS&L CENTER OF EXCELLENCE:
EDI ORDER Implementation -
Why to do it, and how to start.
Birgit PATTERER
Manager Customer Supply Chain
Development, CEEMA
Implement customer facing data exchange tools (EDI-Web Order-GDS) to drive
efficiency and business visibility.
Objective
Evolution
Stages
Foundational Developed Advanced
MS Office files (ie. txt, xls,
mdb files loaded into an
application). Used for:
Master Data Alignment, Order
Process, Inventory reports,
Sales Out, etc.)
EDI is basically used for order
entry purposes.
Kraft EDI Standard or
Kraft Web tool mostly used for
order process (ie. Order
Receipt, Shipping Advice, etc.)
but also to make public Kraft
master data for customers.
EDI/Web limits manual
intervention, reduces costs and
enhances value added CS&L
activities.
GDS used for interactive
exchange and alignment of
master files with customers.
Master Data Alignment,
including pricing and
promotions, using GDS
enabling high level of visibility
and speed to shelf.
EDI & Web Order Processing
fully automated – paperless
process implemented.
Order receipt, confirmation,
Advanced Shipping Notice,
Dispatch Advise, Receipt
Advise, EDI invoicing, payment
Advise from customer etc...
Reduce data entry administrative cost, avoid double order entry, improve service level,
improve collaboration with customers and speed to shelf. Align master files and reduce
/ eliminate price disputes.
Benefits
All channels and customers. Depends heavily on technological capabilities.
Scope
Best practice definition
Customer Information Linkage: EDI, GDS, …
(Back to Best Practices overview.)
87
EBP: Use Efficiency Bracket Pricing to optimize
trade investments and manage Net/Net pricing.
Prevent unexplainable gaps in Terms & Conditions (T&C) among
Retailers.
Prevent financial threats because of retrospective demands from
customers.
Prevent inconsistency of T&C structure between categories and
clients.
Prevent unexplainable gaps in shelf prices in the market.
Reduce administrative complexity with heavy manual rework in
Customer Service.
Prevent possible legal and compliance issues.
88
EBP: Terms & Conditions are structured in various buckets
Temporary Price
Adjustment
Efficiency
Buckets
Payment
Terms
Business
Building
Other
Allowances that are generally given to reflect changes in raw
materials without changing the list price.
Includes the deals that are linked to Supply Chain and
administration. These deals must be set up in line with a
strict set of guidelines and principles.
Includes the agreed payment terms and the deals linked to
them.
Includes all the deals that we give to a retailer and that serve
to grow our business. Only the deals that are fully reflecting
the Pay For Performance principle can be included here.
Includes all the deals that are not impacting the sell-out as
they are granted to the retailer without a real return or
benefit for Kraft. Our Vision is that this bucket should be kept
at the lowest possible level and ideally deleted.
89
C2S: Cost To Serve is an enabler for cost transparency
which can drive efficiency and profitability
throughout the Supply Chain.
Cost To Serve provides support in budgeting, network changes and
evaluation of supplier competitive offers in tenders.
Scenario modeling capabilities open possibilities to identify out-of-the-
box solutions, and assist in the understanding of cost trends and
drivers.
Its collaborative framework can be used to define customer P&Ls and
support collaboration with global Log Ops for efficient unit load design.
Cost To Serve is a strong negotiation tool in our toolbox for the
developing Modern Trade environment, enabling proactivity and speed
in response to customers‟ requests.
Cost To Serve will impact transportation, enabling a clearer visibility of
transportation-related costs.
Overall, the Cost To Serve concept enables harmonization of business
processes, cost budgeting, and logistic contract structures such as
Efficiency Bracket Pricing.
90
C2S: Cost To Serve is an enabler for cost transparency
which can drive efficiency and profitability
throughout the Supply Chain.
Cost drivers:
Transportation:
Lane rates, truck load, delivery frequency, order size and structure
Warehousing:
Weight, pallet, cases, picking ratio
Waste:
Direct costs, promotional, Seasonals
Administration:
Overheads
Order To Cash:
Claims, returns
EB PRICING / COST TO SERVE
Develop a common process to track and optimize “Cost to Serve” for country level
organizations, enable EB pricing and ultimately creating a sustainable competitive
advantage in the market through collaboration with customers.
Objective
Evolution
Stages
Foundational Developed Advanced
Ad hoc undertaking with
selected C2S elements (ie
outbound only).
Order pattern analysis
calculations in place.
Understanding of tariff rate
structure increase impacts.
Manual model to validate 3
PL charges.
Offline C2S excel based
measurement tool used for
reporting.
Limited customer influencing,
using only partial cost
information
Limited customer ordering
efficiency (selected customers
only).
Limited or no supply chain
collaboration in place
Formalized C2S solution installed &
generating data using all C2S variables.
Auto data feeds from base ERP systems
at order level.
Aggregated data by customer, product,
channel, period.
Sharing of data with customer base to
unlock efficiencies based on C2S
scorecard reports.
Benchmarking across customer and
channels.
Scenario capabilities used to simulate
customer-specific costs further used as
support in logistic discount / admin rebate
(EB) negotiations with customers
EB pricing being used with select
customers, rewarded for reaching targets.
Supply chain collaboration in place
leading to creating greater price
separation and reducing supply chain
costs
C2S solution installed, best practices in
place, country experts leveraging and
evolving model, savings delivered.
Leveraging of scenario capabilities to
chase productivity initiatives and support
customer/supplier negotiations.
CS&L teams driving industry
competitive advantage via supply
chain cost intelligence.
EB standardized automated process
including logistic discounts in invoice.
End to end supply chain approach
through customer integration leading to
cost reduction. Partnering for revenue
and profit growth with customers
Benchmarking across countries and
potentially industry.
Reducing Kraft total system costs
-Improve service and cost, achieve EB accurate agreements leading to competitive advantage
-Better leverage customer price structure and improve ROI.
-Drive out costs via benchmarking across customers, markets and channels.
Benefits
-Accurate information available in ERP or any other support system
-Commitment to end to end supply chain; visibility and efficiency across supply chain
Scope
Best practice definition
(Back to Best Practices overview.)
92
KPI: Key Performance Indicators are used to assess our
service levels and to support improvement plans
1
.
Fill Rate
KPI measures the share of
articles delivered correctly
concerning quantities. Only
short deliveries have a negative
influence (no over deliveries).
2
.
Lead Time Reliability –
Too Late Deliveries
KPI measures the share of
articles delivered late in the
concerning period. Too early
deliveries are not considered.
3
.
Order to Delivery Lead
Time
= date of delivery – date of order generation
KPI measures the average lead
time between order and delivery.
4
.
Stock Coverage
KPI answers the question, which
timeframe (days) is covered with
the actual stock.
5
.
Stock Service Level
KPI measures the share of days
with stock and sales compared
to all sales days in the
requested period.
6
.
Customer Returns
KPI measures the number of
returned goods, though
evaluating the quality of
products.
100 *
_
deliveries short - quantities order

quantities order
¿
¿ ¿
=
100 *
_ _ _#
_ _ _ _ #

units delivered total
units delivered late too
¿
¿
=
colli in sales store daily of average
colli in period of level stock daily of average
=
supplier per articles of # total
issues quality to due returned articles of #
=
100 *
days sales #
sales no and stock no with days of #
- 1
|
|
.
|

\
|
=
93
KPI: Key Performance Indicators are used to assess our
service levels and to support improvement plans.
7.
Rate of pre-labeling by
supplier
KPI measures the number of
products not being labeled
properly by the supplier.
8. Invoice Accuracy
KPI measures the share of
invoices considered as correct in
reference to all invoices received
from supplier
9.
EDI Process Type
Availability
ORDERS; INVOIC; DESADV; DESADV NVE;
RFID; SINFOS; RECADV
KPI measures the EDI capability
of a supplier, per certain
message types.
supplier per articles of # total
labeled proberly not or not articles of #
=
supplier from received invoices of # total
rejected) (not correct as consideres invoices #
=
(Back to Best Practices overview.)
Joint
Value
Creation
Creating a culture of collaboration and innovation
between Kraft and its Customers
Brainstorming
Prototyping
Analogous
Observations
95
What is a “JVC” workshop
A methodology
For collaboration and innovation
Using a defined process and toolkit
Designed in collaboration with the
“empathic design” firm IDEO
Widely recognized best practice
 Inaugural GMA (Grocery Manufacturer
Association) Innovation Award Winner
 CSCMP (Council of Supply Chain
Management) Award Winner
 ECR Europe
 GMA IS/LD Conference
 GMA “New Ways of Working Together”
Conference
 Ten Faces of Innovation by Tom Kelley
 Penn State University Masters Program
 Stanford University Masters Program
 Copenhagen Business School
 Numerous periodicals such as Time
Magazine, Fast Company, and
Business Week have referenced the
work
Widely applied with consistently strong results
 65 Customer Workshops worldwide
over past 5 years
 40 Internal Workshop
 All Top 10 Customers in the U.S.
 Top 3 Customers in Canada
 Top 2 Customers in UK
 Other Customer activity in Europe,
Latin America, Asia as well
98
A 6 Step Process for Driving Collaboration
and Innovation (1 or 2 Day Programs)
1. Alignment
2. Empathy
3. Sense Making
4. Brainstorming (Divergent and
Convergent)
5. Prototyping
6. Action Plan
99
1. Alignment
 Understanding the “as is” condition
 Discuss and Align Strategies and Goals
 Compare motivations for session
 Cover off ground rules for session
A 6 Step Process for Driving Collaboration
and Innovation (1 or 2 Day Programs)
100
2. Empathy
 At the beginning of the innovation
journey, we identify problems and
opportunities, and seek inspiration for
solutions from various sources.
 We look to stories and observations to
inspire us to design better experiences
for people
 Analogous Observations – Visiting other
industries to observe parallel or like
process. Real examples (there have
been 80 globally) have included;
• Blood Bank
• Car Manufacturer
• Newspaper
• Ice Cream Store
• Milk Delivery Service
• Hotel Cafeteria
• Brewery
• Airport Baggage Claim System
• Coupon Redemption Centre
• Flower Shop
• Traffic Control Centre
• Green Market
• EBay Super Seller
• Grain Mill
A 6 Step Process for Driving Collaboration
and Innovation (1 or 2 Day Programs)
101
3. Sense Making
 Sense Making is the act of making sense
of what we‟ve seen and heard during
the Empathy activity
 Drawing conclusions and analogies from
the observations made in the Empathy
phase
 “Scrapbooking” of findings as a group
 Connecting the dots and finding
relevance to what we observed in our
own industry or relationship
 It‟s a process that takes us from
inspiration to ideas, from stories to
solutions
 By aggregating, editing and condensing
down what we‟ve learned, sense making
enables us to establish a new
perspective and identify opportunities
for innovation
 Sense Making is crucial to providing a
good direction for the rest of the
A 6 Step Process for Driving Collaboration
and Innovation (1 or 2 Day Programs)
102
4. Brainstorming
 A multi layered Divergent and
Convergent Process – going from the
many to the core
 To many people, brainstorming is
synonymous with an undisciplined
conversation
 We‟ve found that conducting a really
good brainstorm involves lots of
discipline and takes preparation
 While brainstorming, you should be
fearless in coming up with out of the
box ideas, because it‟s often the far
reaching ideas that lead to
breakthrough solutions
1
Vision
Actions Divergent
Brainstorming
Convergent
Brainstorming
500
Ideas
6 “Burning”
Platforms
16
1
4
3 2
6
5
A 6 Step Process for Driving Collaboration
and Innovation (1 or 2 Day Programs)
103
5. Prototyping
 Prototypes are often thought of as a
way to test whether a concept works or
as a way of validating a concept
 We like to think of prototypes as
something broader
 They can be tangible as in products, or
more business processed focused
 They are disposable tools that are used
throughout the concept development
process, both to validate ideas and to
help us generate them
A 6 Step Process for Driving Collaboration
and Innovation (1 or 2 Day Programs)
104
6. Action Plan Development
 Implementation is an iterative process
that will likely require many prototypes
and mini-experiments to perfect the
solution and support system
 This process invites us to work in the
belief that new things are possible, and
that you can evolve both the solutions
that you deliver and the way your
organization is designed simultaneously.
 An action plan activity will provide time
to plan mini-experiments that will be
executed after the workshop by
participants
 In each case, we ask that the teams go
out and implement a version (small
pilot) of their prototypes within 45 days
to gain insight
A 6 Step Process for Driving Collaboration
and Innovation (1 or 2 Day Programs)
105
 We employ the use of a Graphic
Recorder to capture all activities and
dialogue from start to finish of our JVC
Workshops
 All participants are provided with a
“reduced size” version which becomes
the roadmap for our relationship moving
forward
Integration of Visualization
Joint Value Creation
To develop a culture of Supply Chain Innovation and Collaboration between Kraft
Foods and its Customers, focusing on strategic alignment, visibility and joint growth.
Objective
Process?
Instead of working in a vacuum, we are now working collaboratively on
what matters most to our customers and in the most efficient manner.
Benefits
Can be adapted for direct customers or used for internal alignment.
Scope
•Senior managers in cross-functional teams from both Kraft and the retailer
gather for a two-day open innovation session.
•Together they take a holistic approach to the entire supply chain from
manufacturer‟s plant to store shelf and explore breakthrough rather than
incremental ideas.
•The methodology employs divergent and convergent brainstorming, including
such applications as graphic visualization, analogous observations, and
prototyping to support the focus on innovation.
•The end result is a shared short, medium and long term roadmap to drive
growth.
Best used with strategic customer or partners, when seeking to make
step changes in supplier/retailer relationship with desire to move
business forward (win/win).
When?
Best practice definition
(Back to Best Practices overview.)
107
VMI: The Vendor Managed Inventory process enables
to optimize inventory levels and lower costs.
Share daily POS and inventory data at store level.
Analyze and optimize the customer„s buying patterns.
Establish efficient replenishment processes.
Thus optimize inventories, reduce warehouse space, transportation
costs, out of stocks and waste.
Vendor- / Co-Managed Inventory
Develop an efficient customer replenishment process that results in optimal customer
inventories, improved Service Level and generates logistics efficiency.
Objective
Evolution
Stages
Foundational Developed Best In Class
Timely Info exchange (sell
out and inventories).
Data accuracy validation.
Inventory and service level
target alignment.
Processes performed
manually (Excel).
Customer sends order
based on Kraft proposal.
Well defined customer
inventory and replenishment
parameters.
Semi-automated process
with system tool being used
for turn replenishment, but
promotions pushed manually.
CMI process linked with
OTC system (Interface) and
with customer (web-EDI)
 Senior Management Buy-in:
Sales focused on sell-out and
CS&L driving replenishment
process.
Sales focused on sell out,
communication of promo
(planning + quantities) and
managing customer relation.
True VMI practice (no
customer intervention).
Price list change smoothing
(no impact on customer
inventory).
Measurable service level and
efficiency improvements.
Integration of VMI into S&OP
process.
MT: increase Service Level, reduce logistics costs, improve cash flow, Visibility.
TT: improve inventory management, cash flow and service to consumers.
Benefits
VMI-lite (EWR) solution for Emerging Markets (TT)
VMI applicable for MT Customers
Scope
Best practice definition
(Back to Best Practices overview.)
109
CPFR: Collaborative Planning, Forecasting and Replenishment is a
further tool to optimize inventories and reduce out of stocks.
CPFR is a concept that aims to enhance Supply Chain integration by
supporting and assisting joint practices.
CPFR seeks cooperative management of inventory through joint
visibility and replenishment of products throughout the Supply Chain.
Information shared between suppliers and retailers aids in planning and
satisfying customer demands through a supportive system of shared
information.
This allows for continuous updating of inventory and upcoming
requirements, making the end-to-end Supply Chain process more
efficient.
Efficiency is created through the decrease expenditures for
merchandising, inventory, logistics, and transportation across all trading
partners.
(Back to Best Practices overview.)
110
KIDS: Shared demand data is a cornerstone toward a
customer-focused, demand-driven supply network.
Historically, the customer demand signal has been defined as the
customer‟s purchase order while data sharing from Retailer to
Manufacturer was limited to customer warehouse level insight
(VMI). Over the past few years, several Retailers have invested in the
capability to share store level data on a daily basis. Wal-Mart has been
the clear leader in this area as they have offered the Manufacturing
community access to a wide variety of daily information not previously
available.
With visibility all the way through to the store checkout, we can add
more power to our partnership.
By using actual customer demand data, we can discover distribution
voids, target out of stocks, optimize replenishment, improve forecasting
and promotional execution, and plan and execute against real market
intelligence.
A winning scenario for any Retailer!
(Back to Best Practices overview.)
Customer Supply Chain Manual:
PART 3:
TRADITIONAL TRADE
Distributor Development –
It„s all about Collaboration
Traditional Trade Summary
• Traditional Trade in Developing Markets is a 1.8 trillion US$ market; with 15.4 mio. stores
(Nielsen) it represents 99% of the store universe in Developing Regions.
• With about 3.2 US$bn revenue and a growth of 43% (‟08 vs. ‟06), Traditional Trade stores
in Developing Regions are KI‟s most valuable customers, e.g. revenue is 8 times higher
and growth 11pp higher than KI‟s business with WalMart.
• Efficiently building quality distribution in TT stores in a multi-stage Route-to-Market is both
the key challenge as well as one of the biggest growth opportunities in Developing Regions.
• While Kraft Foods is in line with or even outperforming main competitors in TT distribution
in key markets, analysis shows that double digit revenue growth in key countries through
further extension of quality distribution is a realistic goal.
• There are five key enablers to exploit distribution potential:
• Affordable portfolio at relevant price points
• Strengthened distributor networks
• Optimized direct outlet coverage
• Upgraded POS Excellence
• Leverage Best Practices between KI Regions / Countries supported by newly
established KI Sales TT Council
* KI Sales Traditional Trade Council, 2009. Figures do not include Cadbury’s.
Why distributors are
important to our business
Traditional Trade is an important segment
in Developing Regions
• 1.8 trillion US$ in size in Developing Regions; 15.4 mio. small stores (around
25–60 sqm, but can range between 7–100sqm).
– LA: 151 bn US$ 1.8 mio stores
– CEEMA: 429 bn US$ 1.2 mio stores
– AP: 1235 bn US$ 12.4 mio stores
• Usually called kiosks, pavilions, small food or grocery stores, food specialists;
has also other format names based on country or region.
• Includes selling stands which are part of an Open Market.
• Selling a very limited portfolio with a focus on food.
• Independently owned, decisions are taken on outlet level; not part of a chain.
• Usually located in residential areas to serve daily needs.
• Usually over the counter Sales; although sometimes self-service with one check-
out.
• Long Route-to-Market; the store sources goods from a wholesaler and/or from a
distributor.
• Sells small, affordable units.
* KI Sales Traditional Trade Council, 2009. Figures do not include Cadbury’s.
115
95 95
90
84
79
70
68
67
64
62
61
58
57
56
55
52
50
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
India Egypt Vietnam Morocco Ukraine Indonesia Russia Turkey Venezuela China Romania Argentina Philippines Thailand Mexico Brazil Malaysia
% Traditional Trade % Modern Trade
Sources : AC Nielsen / M+M / IGD / Public Presentation to Investors
Channel mix 2006 per region - ACN
Traditional Trade is big and important
for Developing Markets
MT and TT retailers are different in almost everything
MT Retailer TT Shop Owner
Profit oriented Revenue oriented
Growth oriented Survival oriented
Economies of scale Economies of shelf
Has a business plan Has day-to-day money
Visits trade fairs Visits wholesalers
Regular meetings … Regular visits …
… in an office … in his shop
… looking at data. … looking around.
Goes home after
work.
May sleep in his shop.
117
Traditional Trade - Store Types
Kiosk in Russia
Kiosk in Argentina
Abarrote in Mexico
Mercearia in Brazil
Mom‟s & Pop‟s in China
Floating shop in Cambodia
Open market of Angola
Sari-Sari in the Philippines
118
1. Traditional Trade development is a high priority on their agenda.
2. Relevance is driven by years in market, scale and portfolio (categories).
3. Power brands are a key success factor.
4. Innovation focused on satisfying local needs / tastes and tackling nutrition
issues. (deficiencies of energy/calories, protein, iron, zinc, iodine, and vitamins)
5. “Less is more”: focused portfolio.
6. Availability, Visibility and Affordability are commonalities in all strategies.
7. “Distribution, Merchandising and Pricing” is the mantra of POS Execution.
8. Solid sales and distribution systems: strong distributor network, high
discipline behind processes, effort focused on sustainable goals, large sales
teams in the street, simplicity in operations.
Our peer FMCG / Competitors put strong focus
on Traditional Trade
* KI Sales, Winning in Traditional Trade Seminar 2007
Retail
Shopper Consumer =
Extending quality distribution is both challenge and key
opportunity in the “long” Route-to-Market in Traditional Trade
Food Stores/ Self
service stores
Hypermarkets/
Supermarkets
Kiosks / Groceries/
Pavilions
Others e.g. Open
Markets
Kraft Foods
Wholesalers
Consumer
Sales Reps (pre-selling)
Merchandisers
Sales Reps (van-, pre-selling)
Merchandisers
Key Account Managers
Distributor Managers
Distributors
Sub-distributors
* KI Sales Traditional Trade Council, 2009.
Strong distributor management is one of the key factors to
further build quality distribution in Traditional Trade…
• Offer relevant portfolio at affordable price points
• Strengthen Distributor Network
• Optimize outlet coverage
• Upgrade POS excellence
• Leverage TT best practices across regions and countries
(supported by KI Sales TT Council)
* KI Sales Traditional Trade Council, 2009.
Region/Country No of distributors Ratio covered TT
stores/distributor
„06 „08 Index „06 „08
LA
Brazil
1‟953 1‟543 79 464 706
237 261 110 849 985
CEEMA
Russia
358 331 92 1263 1358
125 84 67 543 536
AP
China
962 1‟001 104 222 410
900 861 96 17 19
Total KI 3273 2‟875 88 480 678
Very diverse distributor networks across KI regions,
consolidation is on-going in all regions
Internal data – Best estimates
AP: w/o Australia, Japan, S. Korea, Thailand, Vietnam, India
CEEMA: w/o MEA DM, Central Asia
* KI Sales Traditional Trade Council, 2009. Figures do not include Cadbury’s.
Source: AC Nielsen 2006 Benchmarking study for TT
Distributors are our “face” to the Trade
…these become Kraft Foods opportunity even
if the stores are served by Distributors
Distributor SWOT analysis
Strengths
• Network to & relationship with
traditional trade (TT), where most
consumers shop
• Cost to cater to TT
Weaknesses
• Scale  limited resources
• Lack of skills required
• Lack of access to best practices:
process, technology
Threats
• Trade dynamics  financial
pressures
• Failure to upgrade people,
process, tool/technology to match
Principal‟s pace  competitive
disadvantage
Opportunities
Distributor-Principal collaboration
to develop Distributors capability
to jointly improve
• revenue
• supply chain cost
• cash flow/CCC
• service to trade
Thus, Distributor Development is a must
to “Grow and Win with Customers”!
Distributors are important to us, but they have room
for improvement and face some threats
Objective:
A win-win partnership between Kraft Foods and Distributors
with sustainable profitability and growth for both
Cross functional
Collaboration
Kraft Foods-Distributor Shared Goals:
• Revenue growth via improved Service level to Distributors and their retail customers
• Improved Cash Conversion Cycle via improved inventory management and forecasting
• Eliminated non-value added supply chain Cost (warehousing, transportation, waste)
• Improved customer satisfaction
Distributor Development is a win-win partnership to
improve capability and deliver joint benefits
But..HOW?
Distributor Development:
The 6-Step Process
The “6 Steps Process” was introduced to improve
Distributors Supply Chain Capability
“6 Step Process”
to plan,
implement, track
and improve
Distributor
Supply Chain
Development
initiatives
1. Internal
Alignment
& Planning
2.
Distributor
Capability
Assessme
nt
3. Develop
Programs/
Roadmap
Planning
4. Sell
to/Get
Distributor
Commitme
nt
5.
Execution
& Tracking
6.
Celebrate
Success &
Continual
Improvem
ent
126
Kraft is striving for continual improvement by leveraging global best practices internally
and externally.
 Revenue Growth
 Reduced Cost to Serve
 Improved CCC
 Customer Satisfaction
Best Practices/Tools can be found at
http://teamwork.na.kraft.com/sites/Distributor%20Supply%20Chain%20Development/default.aspx
INTERNAL ALIGNMENT & INITIAL PLANNING
Align each roles Align success
measures
Prioritize target
Distributors
Draft Project
plan
Get BOM
support!
127
Internal Alignment: Design Distributor Development
as part of our “Go-to-Market” strategy
1
Sales:
•Lead the cross-functional
Team
•Customer planning/forecast
•Coverage, availability,
visibility
•DMS/SFA/Sales tools
CS&L:
•Order mgt
•Inventory mgt
•Demand planning
•Warehouse
practices
Finance:
•TDs financial
health
•Capital for
growth
•Terms &
Condition (T&C)
Distributor:
•Resources (people,
WH, office, truck
fleet)
•Management
support
•Capital for growth
•Investments
(capability, system,
etc)
- Time line
- Meeting frequency
- Rules of Engagement
with Distributor
- Project Tracker
- Team Bulletin/web site
- Team training plans
Sales Finance
CS&L
Joint KPIs (example)
• Revenue
• Service level
• Inventory level
• Forecast accuracy
• Cost to serve
• Customer
satisfaction
PREFERRED
STRATEGIC
TRANSACTIONAL
Basic service & partnership
Supply Chain Collaboration
- Distributor Development
programs: Basic 
Intermediate  Advanced
Integrated Supply
Chain initiatives
Distributor segmentation
model – click here
Be well prepared prior
to the Assessment
-Send advance notice
-Prepare Questionnaires form
-Bring known/available data
-Market visit prior to meeting
128
Distributor Capability Assessment: Explore areas
of opportunity where we can add value
2
Practices Classification See only top Distributors (50%Vol/Rev) NO
Distributors Scorecard - LH Sales & Marketing Sdn Bhd Volume weighting NO
Total Quantity of Distributors 1
Malaysia
Area Practice Basic Intermediate Advanced
Warehouse Capacity Base Warehouse Capacity Suf f icient Warehouse Capacity
Quality & Safety requirements Quality & Saf ety Control Awareness Quality and saf ety requirements
WH, storage, handling, and transport
expectations
Training & Audit Distributor Training Audit plan
Inventory management Inventory control Manual Lot control & traceability Advanced WMS
OOS Management Stock rotation, ageing stock OOS tracking on "A" products OOS tracking on f ull assortment
POSM storage POSMstorage
Waste Management Damaged goods control Waste management Ef f icient Waste management
Delivery to Distributor Delivery to Distributor Deliveries as to agreed leadtimes Scheduled deliveries Central DCdelivery
Delivery to Trade Ef f ective Delivery Ef f ective Delivery with Route Planning
Cost to serve Cost to serve calculation Cost to serve disclosed to Kraf t
Truck fleet Good Truck Fleet Condition Perf ect Truck Fleet Management
Trade complaints Trade complaints Trade complaints prevention
Forecasting Promotional input f or the f orecast Marginal baseline input f or the f orecast Collaborative f orecasting
Distributor Stock Management Limited Distributor stock level inf ormation Distributor Inventory level overview Distributor stock management and control
Sales phasing Sales phasing monitored Sales phasing aligned to IMS
Order generation Kraf t Sales Teaminvolved Collaborative process
Order management Regular orders Co-managed inventory Vendor Managed inventory
Order entry Automated order entry EDI Orders
Order analysis Order pattern analysis EB agreement
Payment Satisf actory payment history Strict adherence Clear payment history
System capabilities Limited systemcapabilities Advanced systemcapabilities High systemcapabilities
Product data alignment Manual product data alignment Electronic product data transf er Electronic data catalogue
Distributor Inventory Information
Sharing
Manual Inventory report Detailed stock data, timely delivered Automatic Inventory report
Distributor Sales Information
Sharing
Top line sales data Detailed sales data, timely delivered Automatic IMS report
KPIs Shared KPIs Calculate KPI f romDistributor to trade
Management alignment Ad hoc f unctional meetings Business teams
Legal contract Logistics requirements in the contract Supply Chain perf ormance
Staff training and development Staf f Position descriptions Staf f evaluation Staf f Training program
Organizational Aspects
Warehousing and Inventory
management
Demand planning and
Forecasting
System capabilities,
information exchange, KPIs
and reporting
Order & Supply
Distribution to retail
Joint on-site Assessment
-Show empathy, not finding faults
-Remind the intent for continual
improvement
Use Assessment Tool
(Questionnaires form)
-Focus on descriptors, request for
evidences
-Rate level of capability,
-Take notes of improvement areas
Document Assessment
results in the Distributor
Capability Scorecard
Take notes of
continual
improvement
for next cycle
Assessment
Area Practice Level 1 = Basic Level 2 = Intermediate Level 3 = Advanced
Warehouse Capacity Base Warehouse Capacity Sufficient Warehouse Capacity Exceeded Warehouse Capacity
Racking & pick phase System Basic Racking Good Racking Complete Racking
Material Handling Equipment (MHE)
used
Basic MHE Sufficient MHE Perfect MHE
Sanitation & Pest Control Program Basic Cleanliness Good Cleanliness Perfect Cleanliness
Fire & Security Program Basic Fire & Security Good Fire & Security Excellent Fire & Security
Quality and Training Requirement Quality & Training Control Awareness Quality and Training Requirements WH, Storage, Handling, and Transport Expectations
Operating Procedure Simple Process Complete Process Strong Process
Inventory Management Inventory Control Manual Lot Control & Traceability Advanced WMS
Inventory Accuracy Inventory Count Inventory Accuracy Inventory Accuracy – IA >98%
Aging Stocks Management & OOS
Tracking
Stock Rotation OOS Tracking on "A" Products OOS Tracking on Full Assortment
Point of Sale Material Handling Basic POSM Storage Good POSM Storage Complete POSM Storage
Waste Management Damaged Goods Control Waste Management Efficient Waste Managemenrt
Delivery to Distributor Deliveries as to Agreed Leadtimes Scheduled Deliveries Central DC Delivery
Delivery to Trade Basic Delivery Effective Delivery Effective Delivery with Route Planning
Cost to Serve Basic Cost to Serve Calculation Cost to Serve Calculation Cost to Serve Disclosed to Kraft
Truck Fleet (own / outsource) Truck Fleet Condition Good Truck Fleet Condition Perfect Truck Fleet Management
Trade Complaints Trade Complaints Trade Complaints Trade Complaints Prevention
Forecasting Promotional Input for the Forecast Marginal Baseline Input for the Forecast Collaborative Forecasting
Distributor Stock Management Limited Distributor Stock Level Information Distributor Inventory Level Overview Distributor Stock Management and Control
Sales phasing Inconsistent Monitoring of Sales Phasing Sales Phasing Monitored Sales Phasing Aligned to IMS
Order Generation Kraft Sales Team Involved Collaborative Process Automation of Replenishment Order
Order Management Regular Orders Co-Managed Inventory Vendor Managed Inventory
Order Entry Automated Order Entry EDI Orders
Order Analysis Order Analysis Order Pattern Analysis EB Agreement
Payment Satisfactory Payment History Strict Adherence Clear Payment History
System Capabilities Limited System Capabilities Advanced System Capabilities High Performing Capabilities
Product Data Alignment Manual Product Data Alignment Electronic Product Data Transfer Electronic Data Catalogue
Distributor Inventory Information
Sharing
Manual Inventory Report Detailed Stock Data, Timely Delivered Automatic Inventory Report
Distributor Sales Information Sharing Top Line Sales Data Detailed Sales Data, Timely Delivered Automatic IMS Report
KPI (For Distributor) KPI’s Shared KPI’s Calculate KPI from Distributor to Trade
Management Alignment No Functional Meetings Ad Hoc Functional Meetings Business Teams
Legal Contract Logistics Requirements in the Contract Logistics Requirements in the Contract Supply Chain Performance
Experience Basic Distributorship FMCG Medium Distributorship FMCG Advanced Distributorship FMCG
Staff Training and Development Staff Position Descriptions Staff Evaluation Staff Training Program
System capabilities,
information exchange,
KPIs and reporting
Organizational Aspects
Warehousing and
Inventory management
Demand planning and
Forecasting
Order & Supply
Transportation and
Delivery
Example for distributor capabilities assessment
Area Practice Basic Intermediate Advanced
Warehouse Capacity Base Warehouse Capacity Sufficient Warehouse Capacity Exceeded Warehouse Capacity
Racking & pick phase System Basic Racking Good Racking Complete Racking
Material Handling Equipment (MHE)
used
Basic MHE Sufficient MHE Perfect MHE
Sanitation & Pest Control Program Basic Cleanliness Good Cleanliness Perfect Cleanliness
Fire & Security Program Basic Fire & Security Good Fire & Security Excellent Fire & Security
Quality and Training Requirement Quality & Training Control Awareness Quality and Training Requirements WH, Storage, Handling, and Transport Expectations
Operating Procedure Simple Process Complete Process Strong Process
Inventory Management Inventory Control Manual Lot Control & Traceability Advanced WMS
Inventory Accuracy Inventory Count Inventory Accuracy Inventory Accuracy – IA >98%
Aging Stocks Management & OOS
Tracking
Stock Rotation OOS Tracking on "A" Products OOS Tracking on Full Assortment
Point of Sale Material Handling Basic POSM Storage Good POSM Storage Complete POSM Storage
Waste Management Damaged Goods Control Waste Management Efficient Waste Managemenrt
Delivery to Distributor Deliveries as to Agreed Leadtimes Scheduled Deliveries Central DC Delivery
Delivery to Trade Basic Delivery Effective Delivery Effective Delivery with Route Planning
Cost to Serve Basic Cost to Serve Calculation Cost to Serve Calculation Cost to Serve Disclosed to Kraft
Truck Fleet (own / outsource) Truck Fleet Condition Good Truck Fleet Condition Perfect Truck Fleet Management
Trade Complaints Trade Complaints Trade Complaints Trade Complaints Prevention
Warehousing and Inventory
management
Transportation and Delivery
Example for distributor capability scorecard
• Analyze
Assessment
results
• Create action plan
for chosen
initiative/s
• Prioritize initiatives
based on biggest
benefits (Customer
satisfaction, financial,
de-complexities,
compliances, etc)
• Summarize capability
level & development
needs
• Draft potential
initiatives
• Estimate benefits for
each of initiative
• Align plans with Sales /
Customer Team/Cross-
function
• Get Management buy in
 resources, time line
• Integrate plans into
Joint Business Plan
(JBP)
Plan Distributor Development Programs:
Focus on few, big initiatives
3
Analyze Data
Identify
Opportunities
Prioritize
Initiatives
Develop
Roadmap
Sign-off Plans
Route to Market & Network Design
Distributor Development Areas
Distributor Selection / Contractual Supply Guidelines
Distributor “Supply Chain” Assessment
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Segmentation
Practices/
Platforms
Strategic Consultative / Preferred Transactional
Warehousing &
Inventory
Management
Advance capabilities:
-Advanced Warehousing quality
-WMS implementation
-Basic-intermediate level on Warehousing quality
-Intermediate level on inventory control, accuracy,
ageing/OOS stock tracking and POSM handling
-Efficient Waste Management (advanced level)
Introduce to basic / ”must-
have” requirements
Transportation
& Delivery
-Transparent Cost to serve
-Trade complaints prevention program
-Basic – Advanced Delivery & Truck fleet level
-Basic – Intermediate Trade complaints handling
Delivery from KF and to
customers as to agreed
leadtimes
Demand
Planning &
Forecasting
Collaborative forecasting -Joint forecasting
-Transparency on IMS and stock level
-Sales phasing = IMS phasing
Monitoring of sales phasing
Order & Supply -Vendor Managed Inventory and
automated order replenishment based
on IMS and agrees stock boundaries
-Efficiency Bracket (EB)
-Collaborative order generation
-Co-Managed Inventory (CMI)
-EDI ordering
-Order Pattern Analysis
-Payment: no delays
-Basic ordering process/too;
-Adherence to Payment
term
System
Capabilities,
Information
Exchange,
KPIs and
Reporting
-Advanced system capability (EDI
beyond ordering, GDS, SFA)
-KPIs to include Distributor to Trade
-Good system capability (DMS linked with KF‟s for product
data update, IMS and inventory reports)
-Transparent KF-Distributor joint KPIs
-Manual product data
update and IMS and
inventory reports
Organizational
Aspects
-Joint Business Team to explore “new
ways of doing” for supply chain
efficiency
-Joint effort for Staff training &
development (full access to “Distributor
Academy”)
-Regular business planning & reviews
-Supply chain requirements in Legal contract
-Ad-hoc Staff training & development
-Remote engagement/
contact
Recommended Supply Chain initiatives
considering Distributor Segmentation
133
JBP Presentation
JBP Workshop Signing of JBP Commitments
BEEHIVE
2010
Customer
Team
Workshop Presentation
Get Distributor commitment on action plans
via “Good Selling” and JBP process
4
Project Plan - LHSM, Malaysia
Country
Supply Chain
Priority
Project
Owner/ Leader Project Objective Project Description
To reduce manual calculation of
replenishment orders
Orders &
Supply
John Chiow /
Evangelyn
To improve in order efficiency &
reduce manual intervention of
order process
MALAYSIA
(LHSM)
Quality &
Safety
John Chiow /
Evangelyn
Ensure LHSM is aware of Kraft
warehouse quality & safety
requirements and comply with
the "Major QPE requirement"
Delivery to
Distributors
John Chiow /
Evangelyn
To provide better delivery service
to LHSM
Ensure LHSM warehouse
personnel are aware & complying
with Kraft's requirements on areas
of product safety, pest control and
temperature
Waste
Mangement
To analyse the reason for trade
return and implement action plans
to reduce waste
To reduce trade returns from
LHSM
John Chiow /
Evangelyn
To ensure delivery is within the
window time and inventories
delivered are stacked properly
SWOT
Analysis
Joint Goals &
Business Strategy
Kraft:
TD:
Kraft:
TD:
Strategy
#1
Strategy
#2
Supply Chain action plans built into JBP will ensure
aligned goals, strategy and resources availability
Joint Action
Plans
Ensure Resources Availability
135
Execution & Tracking: Execute plans excellently
to maximize benefits delivered
5
-Hands-on
-Knowledge Transfer
for Program Continuity
-Leverage available
process, tool, experts
globally
-Project Tracker +
Regular Review
-Contingency Plans, if
Needed
Keep the Focus on Delivering the
Benefits
Pay as
you go
 Link to tools
Celebrate Success: “Keep the
Winning Momentum”
• Internal Kraft Foods:
– Informal
– Learning Trip
– Recognition
– Award
• Distributor
– Informal
– Award
Continual Improvement:
“Continually Raise the Bar to
Grow and Win with Customers”
• Internal Kraft Foods:
– Benchmarking (Internally, vs. Industry)
– Subject Matters Expert/COE
– Region-Country-COE Linkage
• Distributor:
136
Celebrate successes and plan for continual improvement
6
How do we
improve this next
year to “green” to
be the customer’s
preferred supplier?
Examples for initiatives and benefits generated
Region Country Initiatives (focus area) Benefits
AP Malaysia Warehousing, Waste
Management, Inventory
Management in 2 pilot TDs
Reduced man-hours on order processing and picking, reduced trade return (waste) by
more than 50%, improved inventory accuracy leads to lower OOS
Indonesia Improved delivery pattern
to key TDs control 40% of
total BU revenue
3-5% revenue growth due to improved CFR from 70% to 90+, better truck utilization,
improved TDs on-time payment1-2 days CCC impact
Philippines CMI and JBP with all TDs 2-3% revenue growth, better truck utilization, shortened order/payment cycle1 day
CCC impact
LA Argentina Warehousing improvement Several Distributors’ warehouses were modified in order to be in compliance with basic
/ advanced requirements.
Brazil VMI - DPS programs 9 Distributors are being supplied directly from plant generating warehousing and
transportation savings by USD 0.2 MM.
Mexico Capabilities assessment The Capabilities assessment Scorecard has been the key for the development of the
Octopus Distributors network delivering an improved service to the points of sale.
CEEMA Ukraine Improve order pattern of
key TDs
Annual transport savings of 60 TUSD generated due to increase of minimum order size
Russia Reduction of customer
claims / Warehousing
Improved customer claims handling by speeding up leadtimes for original documents
return from 3PL to KF. Increased picking accuracy by promoting layer picking with key
TDs
For Distributors
• Improved service
level
• Optimized inventory
level
• Customized solution
fulfilling their needs
 revenue growth,
customer satisfaction
• Improved Cash
Flows
For Sales
•Focus to drive
sell-out and in-
store presence
•Get dedicated
support team to
satisfy Customers
•Shared
accountability to
deliver Company
goals on revenue,
cost, cash
•Experience cross
functional
learning
For CS&L
•Shared
accountability to
deliver Company
goals on revenue,
cost, cash
•Visibility to
Customers to
enable driving
end to end supply
chain excellence
•Experience cross
functional
learning
For Finance
•Shared
accountability to
deliver Company
goals on revenue,
cost, cash
•Improved Cash
Conversion Cycle
•Experience cross
functional
learning
Cross-functional Distributor Development
generates benefits for ALL
Meeting and being engaged directly with the
distributor is fun and has to be created as fun…
In Summary
• Kraft Foods has an amazing product portfolio, but one of the
challenges is how to reach the huge potential of shoppers and
consumers.
• Distributors play an important role in the Distribution Network,
primarily to reach Traditional Trade, but their capability has to be
developed by leveraging our best practices and experts.
• The “6 Steps Process” is a practical Distributor Development
Step-by- Step Process, and will evolve for continual
improvement.
• Distributor Development delivers significant benefits to all
parties, to include Financials (Revenue growth, Cost reduction,
Cash Flow improvement), Customer Satisfaction, Process De-
complexity, Employee Satisfaction, and Fun!
139
140
We have gained plenty of insights.
Action time has come now!
Customer Segmentation Method
• The common method used for segmentation is primarily based on
value, i.e. top 10, top 20, or top 100 etc., based on revenue sold.
• KI Sales created a “Customer Segmentation Model”, applied for
Distributor segmentation by considering three elements:
– Value
– Skill
– Will (Willingness to collaborate)
And the scoring is easy: Each criteria will receive a score
between 1-3, with 3 always being the highest score.
141
Customer Segmentation Model: A Formula for
winning with all customers (and distributors)
(Value + Skill + Will) = (People + Time + Money)
External
Distributor
Internal
Kraft
An Excel tool has been developed as a guide to assist in the
Distributor segmentation process.
Customer Classifications
• Transactional – Treats us on equal terms with all other
vendors. Total focus is on price, sees no value in services we
offer other than product or is too small to warrant any
personalized attention.
• Preferred – Some special treatment or higher expectations
usually derived from scale or importance of our brand.
• Consultant – Actively seeks our advise in generating
incremental demand, efficient supply of products or use of
insights.
• Strategic B2B – Involves us in the strategic planning of the
business and provides insights not really shared with other
competitors.
Back
Best Practices/Tools can be found at
http://teamwork.na.kraft.com/sites/Distributor%20Supply%20Chain%20Development/default.aspx
Tools are available at “Distributor Supply Chain Development” Site to
enable CS&L to deliver improved Service, Cost and Cash
List of available tools (1)
Folder Title of Tool Tool description
Step 1 – Internal Alignment Start Distributor Supply Chain Development with
internal alignment
-
Step 2 – Understand the
Distributor
2a. Customer Survey Customer Service Survey Model Survey to get Distributor feedbacks on Customer service Dept, Distribution
channel, Kraft products, Claims/adjustments/CN, Distributor – trade, Other
process/inputs  Country could select relevant topics
Customer Service Survey Model - Spanish Same as above (in Spanish)
2b. Distributor Supply Chain
Capability Assessment
Distributor Capability Assessment -Questionnaires
(master)
Questionnaires used to gather information from each Distributor to define
their Supply Chain capability level  Country could choose Supply Chain
areas to focus on
Distributor Capability Assessment -Questionnaires
(Spanish)
Same as above (in Spanish)
Input your Distributor Capability Assessment into this
Scorecard
Capability Scorecard where capability level of each Distributor for each
Supply Chain area (Basic – Intermediate – Advance) inputted
Distributor Capability Scorecard 2010 (NEW) Updated version of Distributor Capability Scorecard with more practices
Step 3 – Create
Development Roadmap
Use this Roadmap template to document Distributor
Supply Chain initiatives
A simple template where we can document Supply Chain areas to work on,
success measures, initiative leader/owner and detailed initiatives by month
3a. Warehousing &
Inventory Management
Global Warehousing, Handling, Storage, Re-packing
and Transportation Quality Expectations
Kraft Global standards Country can choose relevant parts of to implement
with Distributors
Distributor Warehouse Capacity CALCULATOR Simple excel tool to calculate warehouse capacity for different temperature
tier of products
Warehouse Auditing Checklist Checklist can be used for Distributor warehouse audit aligned with Kraft
standard
Distributor Warehousing Practices Poster A simple 10 poster type good warehousing practice for Distributor to follow
Folder Title of Tool Tool description
3b. Demand Planning &
Forecasting
Forecasting Overview An overview explains how important forecasting to ensure product
availability at lowest cost possible and 6 forecasting drivers
Distributor Basic Forecasting Tool Simple forecasting tool based on past 12 month IMS trends used in manual
CMI process
3c. Order & Supply CMI - Introduction A “white paper” explains CMI/VMI implementation with Distributors in Kraft
Foods (benefits, platform, process)
CMI General Overview (folder) VMI Country assessment, VMI process template, VMI project plan example,
Distributor selection criteria for VMI, KPIs to track success, Protocol
document
CMI Process using Excel (folder) CMI calculation file V2: excel CMI tool which applies EWR5 (VMI-Lite)
concept
CMI Process using VMI-Lite Application (folder) Contact and links to Kraft Foods‟ VMI-Lite (automated CMI tool) sites
CMI Process – Real Live examples and Success
Stories (folder)
A sharing of CMI in the Philippines
3d. Retail Distribution Distributor Truck Fleet Quality Requirements Some requirements on trucks, product handling (during loading, unloading,
delivery) and employee personnel Distributors need to follow when
transporting Kraft Foods products to trade/retail
3e. Information System,
KPIs and Reporting
Capabilities
KPI Summary for Distributor Management v1.0 List of “minimum to have” KPIs Distributor to track (why important,
formula)
Step 4 – Alignment with
Distributor
Leverage Supply Guidelines to bind alignment with
Distributors on Supply Chain Capability development
Original complete Supply Guidelines that can be integrated with Distributor
contract to bind alignment with Distributors on Supply Chain initiatives
Supply Guidelines – V16.3 – LA,
Supply Guidelines – V16.3 – LA Spanish
Modified Supply Guidelines, tailor-fitted with specific LA needs (in English
and Spanish
List of available tools (2)
Folder Title of Tool Tool description
4a. Selling the Initiatives to
Distributor
Persuasive Selling Format (PSF) tool for CSL A Guide how to use PSF concept to develop presentation to Distributors
4b. Joint Business Planning Distributor JBP template v1 A template to develop Kraft Foods-Distributor JBP, includes Supply Chain
initiatives
Step 5 – Execute and Track
5a. Project Tracking &
Evaluation
Project Tracker form to monitor progress on
Distributor Supply Chain projects
A simple form to monitor progress on Distributor Supply Chain projects/
initiatives
5b. Distributor Capability
Scorecard
Track Distributor Supply Chain Capability with this
Scorecard
Capability Scorecard template that will allow us to track progress on Supply
Chain capability level by Distributor and provides total pictures at Country
or Region level
Distributor Capability Scorecard 2010 (NEW) Updated version of Distributor Capability Scorecard with more practices
Step 6 – Celebrate Success Celebrate success and recognize winning performance Guiding principles and examples of Reward programs
List of available tools (3)
Customer Supply Chain Manual:
PART 4:
GENERAL INFORMATION
CS&L: Useful Websites and Links
Customer Service & Logistics Website:
http://intranet.na.kraft.com/sites/CSL/Pages/Default.aspx
Global I2M Website:
http://intranet.na.kraft.com/sites/I2M/Pages/Default.aspx
Sales & Operations Planning Website:
http://lcs.kraft.com/tools/s&op/default.asp
Customer Service COE Website:
http://teamwork.na.kraft.com/sites/Customer%20Service%20COE/default.aspx
Joint Value Creation:
http://teamwork.na.kraft.com/sites/Customer%20Service%20COE/jvc/default.aspx
Distributor Supply Chain Development:
http://teamwork.na.kraft.com/sites/Distributor%20Supply%20Chain%20Development/defaul
t.aspx
Customer Logistics COE and BPM:
http://teamwork.na.kraft.com/sites/globalproductsupplycoe/default.aspx
Kraft Foods Acronyms:
http://wikis.na.kraft.com/sites/KraftAcronyms/Wiki%20Pages/S.aspx
Good Career Planning can deliver top-tier results
Career Planning Principles:
• Development is a career-long process and is most effective when it
includes diverse experiences and focuses on doing the work of the
organization
• Career development is a shared responsibility between the manager,
the employee and functional leaders
• It is important to gain and demonstrate full experience to drive
development of relevant competencies & skills before moving from one
assignment to the next
• Critical experiences and competencies will continue to evolve as the
needs of the organization change; employees must continually review
and adapt their career plans
• Employees must keep their skills and experiences relevant to business
needs
To deliver top-tier results, Kraft must continue to pursue the strategy of
Building a High Performing Organization.
“When you do well, Kraft Foods does well. As you improve your skills and expand your
capabilities, both you and the company benefit.” Irene Rosenfeld
Career Framework is based on people‟s experience
• Building capabilities through experiences
• Mastery of skills and competencies before moving up to the next
potential assignment
• Gaining experience that adds up to or improves one‟s capability
(movement does not always equate to promotion)
• Developing broad leadership skills that ensure success in a
variety of jobs
• Providing the right balance of technical and non-technical
experiences
Your development is a key priority for both you and Kraft. Realizing your
potential drives your job satisfaction and engagement. The CS&L Career
site provides some of the key ingredients you need to help you create
your own recipe for career success. The tools and information on this site,
combined with the guidance and support of your manager and others, will
help you define and pursue experiences that advance your career goals
and make your job richer and more satisfying. As you explore and
navigate through the site, you might want to consider taking the following
approach to get you started:
- Look back at your career by completing the Career Planning Template.
- Look forward and use the tools and information on the site to educate
yourself and take ownership of your career.
- Discuss and confirm your aspirations with your manager and agree on
what the next steps will be.
http://lcs.kraft.com/career_exp/default.aspx
Check out the CS&L Career Experiences Website
Check out the available Training Resources
• Internal:
– CS&L Academy 89+ courses http://lcs.kraft.com/csl_academy/
– CS&L Functional & Technical
http://hr.kraft.com/map/competencies/functional/custServLogistics/default.htm
– Leadership Competency http://hr.kraft.com/map/competencies/
• External:
– APICS Classes & Certification
http://intranet.na.kraft.com/sites/CSL/AreasandFunctions/ProdSuppCOE/Pages/ToolBox.aspx
– CSCMP: Council of Supply Chain Management Professionals
• On-line Certification Programs http://cscmp.org/Default.asp
– Bundle approach
– Manager recommended/approved
• On-line Supply Chain Management 101
• Applicable Webinars

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