Logistics Operation Overview in FMCG Industry

CLoCS - ITB, 16 Januari 2010

AGENDA

Market & Demand

Supply Supply Chain – The Big Picture Chain

Logistics Service Operation Group Overview (CSOG)

Customer

Customer KPI Service – Distributors (GT)

Inventory Model (TZIM)

Towards Zero Initiatives

AGENDA Market & Demand Supply Supply Chain – The Big Picture Chain Logistics Service Operation Group Overview (CSOG) Customer Customer KPI Service – Distributors (GT) Inventory Model (TZIM) Towards Zero Initiatives .

9 13.3% Note: GRDP in Current Rp (including inflation 7%) Source: LPEM University of Indonesia .8 13.6% 11.32% 14% 5% 3% 1.9 12.25% 14% 28.46% 14% 22.50% 15% 20.2 17.0 12.62% 19% Sumatra 2010 •Population •GRDP (current Rp) •GRDP/Cap (Rp mn) % of Total CAGR (%) •GRDP (current Rp) •GRDP/Cap (Rp mn) 21% 23% 1. 9 8.9% 11.0% East Indo 2010 •Population % of Total CAGR (%) 2% 2% 1.8% Java 2010 •Population •GRDP (current Rp) •GRDP/Cap (Rp mn) % of Total CAGR (%) Bali & NT 2010 •Population •GRDP (current Rp) •GRDP/Cap (Rp mn) % of Total CAGR (%) 59% 60% 1.3% 22.79% 11% 7% 4% 1.MARKET & DEMAND Kalimanta n 2010 •Population •GRDP (current Rp) •GRDP/Cap (Rp mn) % of Tota l CAGR (%) Sulawesi 2010 •Population •GRDP (current Rp) •GRDP/Cap (Rp mn) % of Total CAGR (%) 6% 8% 1.

MARKET & DEMAND (2) Demand Potential Ranking among regions 2006 – 2010 based on growth. population & distribution of income (1) Region • Jakarta • Riau • North Sumatra • Nanggroe-Aceh D • West Sumatra • East Kalimantan • West Java • East Java • Central Kalimantan = Good = Not Good Population GDP per capita Expenditure per capita Distribution of income Ranking 1 2 3 4 5 6 7 8 9 Source: LPEM University of Indonesia . income per capita.

AGENDA Market & Demand Supply Supply Chain – The Big Picture Chain Logistics Service Operation Group Overview (CSOG) Customer Customer KPI Service – Distributors (GT) Inventory Model (TZIM) Towards Zero Initiatives .

SUPPLY CHAIN SUPPLY (Internal company) Reconcile? DEMAND (external company) $$$$$ Supplier PRODUCTION LOGISTICS COSTUMER Information Flow Product Flow .

we’ll able to meet customer requirements Manufacturing & distribution Sales & Marketing . we would provide excellent service” They both are “I don’t know what my customers will want in 3 months” “We can only be so flexible at reasonable cost “If manufacturing were more flexible.SUPPLY VS DEMAND: RECONCILE? Who is right ? “If Sales gave me an accurate forecast.

SUPPLY CHAIN Demand Planning Marketing SUPPLY (Internal company) Reconcile? DEMAND (external company) MPS Supplier PRODUCTION LOGISTICS COSTUMER Information Flow Product Flow .

Demand Planning / Forecasting Business Decision Model Strategic Plan Annual Plan Event Forecast Baseline Forecast Forecast Business Management Forecast New Product Demand drivers Demand Plan Supply 35 Demonstrated capability Supply Planning Volume Demand Series Baseline 30 25 20 15 Event Innovation Event Innovation Demand Demand .Supply Reconciliation Cash-up (Turnover & Costs) Sell Source / Make 10 5 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Accurate forecast means higher turnover & lower cost Demand Tracking Supply Tracking History Future .

AGENDA Market & Demand Supply Supply Chain – The Big Picture Chain Logistics Service Operation Group Overview (CSOG) Customer Customer KPI Service – Distributors (GT) Inventory Model (TZIM) Towards Zero Initiatives .

LOGISTICS OVERVIEW Supplier PRODUCTION LOGISTICS COSTUMER Information Flow Product Flow .

TYPICAL DISTRIBUTION NETWORK Area Demand COSTUMER 1 COSTUMER 2 Distribution Centre 1 Area Supply Area Demand COSTUMER 3 Distribution Centre 2 COSTUMER 4 Central Distribution Centre COSTUMER 5 Distribution Centre 3 Manufacturing Site (A) National Demand Manufacturing Site (B) National Supply COSTUMER 6 .

INBOUND LOGISTICS  Distribution Requirement Planning    Distribution Network Management How much stock to keep at every stock point  Inventory level  working capital How much stock to replenish   Distribution Centre 2 DRP calculation Warehouse Management  Stock Priority Management Capacity planning   Warehouse Management  Central Distribution Centre Stock keeping methods   Racking configuration Warehouse layout Docking capacity  unloading capacity Dispatch capacity  loading capacity  Throughput    Stock Flow Management   FIFO FEFO Back Of Factory Manufacturing Site (B)  Shipment / Delivery Execution Transport Provider Shipment / Delivery Execution Distribution Cost Saving Contigency Route Management  Transportation Management     .

DISTRIBUTION REQUIREMENT PLANNING Example: Forecast = 500 Safety Stock Projected On Hand Stock Transfer Order = 5000 = 3000 = 2500 STO = Forecast + SS – Proj OH CDC W0 W1 LT = 21 days DC W2 W3 .

OUTBOUND LOGISTICS  Customer Service  Customer Order   Purchase Order Replenishment Order   Replenishment Model Inventory Level  Order Fulfillment    Shipment / Delivery Execution Billing Process  Proof Of Delivery On Shelf Availability Casefill On Time KPI  Service Quality?   COSTUMER 2  Joint Initiatives   Service Improvements Efficiency Improvements Distribution Centre 1   Warehouse Management  Shipment / Delivery Execution Transportation Management     Transport Provider Shipment / Delivery Execution Distribution Cost Savings Contigency Route Management Service Quality: • How much? •Is it On time? •In Good Shape? •Easy to Unload? .

PURCHASE ORDER & DELIVERY Synchronization PO Electronic Data interface: • SKU/Desc •-Barcode • Price •Total PO • Completeness ERP Order Validation Expedition Report Send Expedition Report Order Processor PO Manual Order Entry PO Checking: • SKU/Description • Barcode • Price • Qty • Total PO Principal WHS Allocation Load Planning Send PO Delivery Monitoring / Daily Monitoring : • Est. Arrived • Delivery Qty • Fulfilment •Total PO DELIVERY Assembling & Loading Picking Customer/ Store .

REPLENISHMENT ORDER Replenishment Order = Stock Norm – Stock On Hand – Stock IT *Inventory model manages STOCK NORM level .

In-transit Stock FACTORY Supply ULI WHS MARKET • Generate Order • Parameter Setup • Database Shipment PRINCIPAL Daily Sales & Stock KPI: Service Quality CUSTOMER .REPLENISHMENT ORDER & DELIVERY Information Flow Intransit Data ERP System Custome Product Flow Order Product Order Sourcing Whs Sch. Date & Req. Date Etc.

AGENDA Market & Demand Supply Supply Chain – The Big Picture Chain Logistics Service Operation Group Overview (CSOG) Customer Customer KPI Service – Distributors (GT) Inventory Model (TZIM) Towards Zero Initiatives .

KEY PERFORMANCE INDICATOR The ability to deliver goods as customer ordered = SERVICE Delivery: •Lead Time as Planned? •Broken Product? •Theft? Arrival: •Is it On Time? •Qty as ordered? •In Good Shape? •Easy to unload? •Return? Distribution Centre Delivery COSTUMER Delivery: •Stock available as ordered? •Dispatched On Time? •Problem while stock picking? •Transportation available? •Any order revision? Major KPIs: 1. Cost . Service Quality 2.

Efficiency and On-time Losses together Internal Company reporting is consistent – CCFOT Reducing CCFOT loss areas would drive improvement of Customer Service KPIs CCFOT = Example Of CCFOT Loss: 4.MEASUREMENT    CCFOT(%) provides the Loss tree framework for capturing Service.40% 46.70% *Figures are not actual data .30% Qty Delivered On Time Customer Order 0.30% 0.30% 17.10% Stock Availability Warehousing & Transport Not Assigned Customer Related Commercial Issues Order Management 31.

AGENDA Market & Demand Supply Supply Chain – The Big Picture Chain Logistics Service Operation Group Overview (CSOG) Customer Customer KPI Service – Distributors (GT) Inventory Model (TZIM) Towards Zero Initiatives .

INITIATIVES Logistics is about Cooperation (Us…NOT you & i) .

INITIATIVES  Service Improvement       Electronic Data Interchange Advance Shipment Notification Integrated Promotion Activity Planning CPFR VMI On Shelf Availability Night Delivery – Holiday Delivery Palletized Delivery Distribution Bypass Backhauling Retailer Centralized Delivery Logistic Discount Agreement  Efficiency       .

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