1) Vision of the company

We want details of how you imagine the logistics area in the short and medium/long term,
detailing your organization chart. Assume that you will manage the operation of 1
distribution center per city in Mexico.

Answer:
Short Term:

From my point of view, the first 3 months will be to acquire knowledge and diagnosis,
getting to know the business from the ground up and understanding/absorbing its culture;
analyze the risks and opportunities defined in the strategic plans; understand the level of
internal control. At the same time, map communication channels, WOWs (Way of
working) and 1:1.

This is why, understanding the needs of the business, is essential to be able to map a solid
structure.

Organization structure:
Supply Chain
Head

Sr Logistics
Mngr

Business
Mxco Mty Gdl
Intelligence /
Coordinator Coordinator Coordinator
Finance
Long-term: At this stage I would present my suggestions to senior management to
improve some areas of opportunity, presenting action plans, responsible parties and a
schedule to execute both in the short and long term, doing a mirror exercise with the
current priorities already defined by the company operation area.
Following the simple thinking methodology, we must consider that we have a high-level
3PL, we must have our own team finish the executing strategic plan and guide them the
daily operation of the company.

Organization structure:
 Supply Chain
Head

Sr Logistics
Mngr

Bunsiness Mxco Gdl Mty

Intelligence / Supervisor Supervisor Supervisor
Finance

Transport Quality Transport Quality Transport Quality

Coordinator Coordinator Coordinator Coordinator Coordinator Coordinator

Inventory Inventory Inventory

Coordinator Coordinator Coordinator
2) Sizing of the operation
Dimension the m2 necessary to be able to handle an operation with the following
characteristics:
a) SKUs: 2,000
b) Consolidation: 80%
c) Frozen/refrigerated products: 20%
d) Day on hand: 15 days
e) Average sale per SKU: 5 units per day

Answer:
Taking as an example a standard measurement per piece of 10cm (height) x 20cm (width)
x 30cm (depth) = 0.006m3 * 150,000 products in stock for 15 days = 900 m3. This
translates to a total storage space of 9,000m2.
In addition to the above, it is necessary to consider an additional 10% space for Inbound
management, maquila or rework, return, quality, pick and pack and outbound.

What capabilities do you think are nice to have vs must have for DC operation?

Answer:
Nice to have:

Choose the 3pl based on cheaper one: Not always the cheapest supplier listed in a BID is
the one that will have the best operation. Being an emerging company, we have to bet on
the level of service provided, bet on operational efficiency and not neglect additional
costs.
Delegate 100% of the operation to the 3PL: although it is the most practical thing to do, if
we are building an area from scratch and we want to go to the next level, we must
manage and know the operation so that we can demand results from the supplier.

Push back from 3PL to avoid rush: one of the fears is losing one of the most important
providers, that is why many companies choose not to pressure the 3PL and let them act
according to their expertise.

Have a flat operation: having a flat operation without betting on changes where we focus
on the client and the growth of the company, can lead to leakage of money and additional
costs.

Must to have:

Cross-docking to save time: Some products are fast-moving, so we can adapt a temporary
area for those products that are going to go to the HUBS during the day.

good relationships with suppliers: as we identify the needs of the operation, we will build
a network of suppliers to take the operation to the next level.

standard measurements: we have to apply measurements for the tasks that are being
carried out through an effective ERP tool.

Use forecasting to plan resource allocation: communication between internal teams to

understand the volume, frequency of receipt and sales forecasts between each HUB, will
help us to have better negotiations between the 3pl and maintain a cost per cubic meter
through target.

Identify your KPIs: clarity on what we are going to implement, measure and monitor. KPIs
are the unspoken results of every operation.

Standardize processes: there are processes that are repeated by other areas, so we must
avoid unnecessary rework, that is why we have to create and map each process to create
efficiencies and bring savings.

Perform cycle counts: avoid doing only the annual count as much as possible, to have a
healthy operation we must stipulate with the 3pl to do cycle counts in determined
periods, at least 1 each quarter.
Implement ABC analysis: Identify products that have frequent turnover so that they can be
stored with easy access to reduce picking times. And those with little rotation will be
stored in the back or in a more distant area.
Avoid overstocking by audit and inventory management: One of the most expensive cost
in the warehousing is the overstock. We must get rid of excess and regularly re-slot
inventory we expect to go out.

Implement good WMS: have complete visibility to have good operational control. By
having the inventory updated on time, having the performance of the entire team and
obtaining real costs, it works for us. Help to have a correct traceability, avoid damages,
errors and above all bet on increasing the level of customer service.

3) 3PL Management
What SLAs would you establish in a relationship with a 3PL? How would you monitor
compliance? What would you do if they are not fulfilled?

The SLA will go in terms of the KPIs that we want to implement and the conditions of the
contract to manage, that is why I consider that in order to understand the needs of the
company, the costs to cover and accompany JOKR to a consistent growth, we will manage
an Open Book contract for an established term so that both parties adapt a work scheme
according to the needs of JOKR and the scope that the 3PL can offer, besides that I
consider it to be the most transparent contract that we could have according to the
estimated growth that we have.

I propose that we work through a forecast that is aligned with the Demand Planning and
sourcing team to define what the amounts to receive per month will be and which type of
product. with that we can propose to our 3PL how will be our following weeks of
operation. This forecast will be useful for the 3PL to tell us how many people will be
needed to operate, then we can get the average operational cost per box or piece to be
moved and the 3PL will be evaluated on that cost.
In other words, if with the shared forecast I am going to put 100 people and with that
operation it is going to cost me 3.91 MXN per box to move on average, that price is the
one agreed for the current month and in the end, we make the evaluation:

3PL metric: Goal 99%, minimum 98.5% and below critical status.
If the 3PL has 3 recurring months in critical condition, we would have to proceed with
early contract termination.

Important: this type of contract helps us to know in which part of the operation each cost
goes, it will help us to identify leaks, areas of opportunity in the operation and constant
monitoring of it. With this we will be able to make concise and more exact future savings
proposals, in addition to becoming familiar with the operation.
You have to consider that it is a startup and changes are always constant, so these should
not have a significant impact on additional costs.

4) Improvement of critical KPIs: OTIF, productivity and inventory accuracy

What are your ideas to control and improve these 3 indicators?

OTIF: so that we can offer a service to our internal customers (HUBS) it is necessary to
define a cutoff for receiving orders or orders so that it is linked: 1) to the updated
inventory in the WMS and 2) to the time we need to process, schedule and send orders in
a consolidated way to each HUB. Once the process is defined, let's evaluate how our initial
OTIF is to reach a minimum of 90% since JOKR is focused on delivery services and if we do
not comply with the HUBS, they will not be able to comply with the client either since the
product pull to offer may be less. Having controlled the percentage, we increase it
considerably until we reach an optimum of 95%.

Productivity: Being a company that handles mostly perishable products, I recommend

focusing a lot on the traceability that each product will have. With this, we are going to
make sure we have a constant movement of each one. We will evaluate:
• Merchandise registration time: with this we will ensure availability times in our WMS to
give our HUBS immediate output.
• Use of storage space: I propose that we use a Drive-Through storage scheme so that we
can follow the FIFO method effectively, but space is sacrificed and it is important to
monitor it to avoid unnecessary costs. In addition, we will also use shelves, refrigerators
and freezers.
• Assortment: we are going to need a certain number of departures per day to supply the
HUBS, that is why we will have control over how many orders we will make in each cut to
be able to supply on time, respecting the logistics route and avoid running out of any HUB
due to this planning.
• Financial: costs will be linked to productivity according to the proposed SLA. Stipulating:
Goal 99%, minimum 98.5% and below critical status.

Inventory accuracy: one of the main axes in the supply chain is inventory, since it indicates
in real time what you have, what you can buy in the future, what you do not sell, and so
on. This information is very useful to connect to Demand Planning and sourcing. And our
3PL is a key piece to provide this information so that we can control and evaluate through:
• ILA (Inventory Location Accuracy): this will help us avoid delays in the picking process
avoiding to have product out of location. We have several HUBS to stock per day so we
cannot waste time processing the products since it would also hit directly on OTIF.
• IRA (Inventory Record Accuracy): This will help us to match the 3pl's inventory with our
own. This part has to be very acidic to avoid product loss or large imbalances in inventory.
Being an inventory physically controlled by a 3PL and managed in the system, the metric
cannot be less than 99% and can reach levels of 99.5% so that the rest can be considered
as shrinkage.
I propose that cyclical counts be made on every quarter as minimum basis so that at the
end of the month the calculation is evaluated. The KPI will be run with weekly cuts.