Delivering Change in the Digital Economy:

The Value of Supply Chain Collaboration in SA FMCG

CGCSA Summit - September 2015
Paul Dickson
Agenda

1. Introduction and Objectives

2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to
solve?
4. Collaboration and Integrated Demand Planning:
“As-Is” versus “Best-in-Class”
5. So where should local FMCG players start?
Agenda

1. Introduction and Objectives

2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to
solve?
4. Collaboration and Integrated Demand Planning:
“As-Is” versus “Best-in-Class”
5. So where should local FMCG players start?
Introduction & Objectives
Questions we would like to address in this session

What value is targeted through

What is supply chain better supply chain collaboration
collaboration? and integrated planning?

What do we commonly see How can technology enable

when FMCG partners are not better collaboration between trade
effectively collaborating? partners?
Agenda

1. Introduction and Objectives

2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to
solve?
4. Collaboration and Integrated Demand Planning:
“As-Is” versus “Best-in-Class”
5. So where should local FMCG players start?
How can we define supply chain collaboration?
What is “Supply Chain Collaboration”, and what does it really mean?
“Collaboration is ….. a recursive process where two or more people or
organizations work together to realize shared goals” - (Wikipedia.org)

“Supply Chain Collaboration is the process of integrating supply chain planning

and execution activities across multiple trade partners, with the objective of creating
optimal and cost-effective logistics and inventory operations across all parties.”
- Resolve

“Collaborative Planning, Forecasting and Replenishment (CPFR) is a business

model that takes a holistic approach to supply chain management and combines the
intelligence of multiple trading partners in planning and fulfilling customer demand…
CFPR links sales and marketing best practices – category management, supply
chain planning and execution processes to increase availability while reducing
inventory, merchandizing, transportation and logistics costs.”
- Voluntary Inter-industry Commerce Standards) (VICS) Association
Agenda

1. Introduction and Objectives

2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to solve?
4. Collaboration and Integrated Demand Planning: “As-Is”
versus “Best-in-Class”
5. So where should local FMCG players start?
 What supply chain problem are we trying to solve?
A view on market opportunities in FMCG

There have been a

number of realities in
Collaborative demand
the South African
planning in FMCG The end result?
FMCG market, which
remains constrained
contribute to supply
chain inefficiencies

• Increased retailer
• Service levels are still
centralisation has • Parties operated in a
under pressure
created service issues reactive manner
• Inventory levels are
• Disconnect between • Service levels suffer
not optimal
internal parties, such • On-shelf availability
• Although retailers and
as buying and suffers
suppliers do
operations • Promotions are
collaborative
• Disconnect between occasionally
planning, this is not
suppliers, retailers ineffective
effectively executed
and transporters
Agenda

1. Introduction and Objectives

2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to solve?
4. Collaboration and Integrated Demand Planning: “As-Is”
versus “Best-in-Class”
5. So where should local FMCG players start?
 The Supply Chain Collaboration Landscape
The different functional areas for collaborative focus
• New product development
Strategic

• Range and store clustering

• Price and promotion
• Annual Marketing Strategy
Tactical

• Pre- and Mid- promotional planning and execution

• Marketing & Advertising requirements

Retailer
Stores Supplier
Retailer Factory
Warehouse
Retailer
Stores
Operational

Source
(or farm)

Supplier
Warehouse
eCommerce
Customers
 Current challenges in FMCG demand management
An observation on how the various entities plan demand flows & stockholding
Retailer Stores Retailer Warehouse Supplier Warehouse
DC DC DC
Order Order Order

` ` `
Sales Delivery Delivery Delivery

Forecast Forecast Forecast

Stock Stock Stock

on Hand on Hand on Hand
Replenishment Replenishment Replenishment
Plan Plan Plan

Replen. Stock on Replen. Stock on Replen. Stock on

Policy Safety Policy Safety Policy Safety
Order Order Order
Stock Stock Stock

Let’s investigate the impact of Demand, Supply and Lead-time variability on the
ability to optimise stock and service levels through the supply chain
 Current challenges in FMCG demand management
1. Demand Variability
Retailer Stores Retailer Warehouse Supplier Warehouse

70 % 60 - 70 % 30 – 40 %

• Customer sales are (by their very nature) difficult to predict with 100% certainty, given the trends
influenced by weather, seasons, natural, economic and other events.
• The accuracy of forecasts is questionable, given the above and also being cognisant that a forecast is
(traditionally) a static number
• A typical supply chain has multiple forecasts being used across all the numerous parties.
This means that everyone is working off a different plan!
 Current challenges in FMCG demand management
2. Supply variability
Retailer Stores Retailer Warehouse Supplier Warehouse

• The reality of multiple forecasts impacts the supplier’s ability to fulfil to actual demand.
• The supplier rarely has the ability to use real consumer demand to create a reliable fulfilment plan.
• Other operational related errors exist, and hamper the ability to service the retailer: warehouse,
transport, system and other influencing events
 Current challenges in FMCG demand management
3. Lead-time variability (leading to data latency)
Retailer Stores Retailer Warehouse Supplier Warehouse

Day 1 - 13 Day 3 - 14

Day 0 Day 2 - 14

Day 1 - 6 Day 3 - 14

• There are two types of lead-time variables: System related and physical.
• System lead-time means that the suppler may only get demand signals that are up to two weeks
late.
• This is a significant enabler of the “bull-whip” effect, which introduces cost and other
inefficiencies into the supply chain.
 How could this work differently?
A systems-enabled best class view
Retailer Stores Retailer Warehouse Supplier Warehouse
DC DC DC
Order Order Order

` ` `
Sales Delivery Delivery Delivery

Collaboration
Platform
Transport
1 Shared 2 Collaborative Replenishment Planning 3 Planning
Forecast
Technology-enabled collaboration
How should technology make this all happen?
Create visibility for all parties (Responsiveness)
Real time visibility to the total demand, supply, and capacity picture to be more
responsive to changes in demand, available capacity, and supply continuity issues.

Promote Process Orchestration (Effectiveness)

Provide the ability to manage and automate complex supply chain processes across
multiple tiers of partners, driving shared value and common metrics.

Reduce Information Latency (Speed)

Create the ability to plan, execute, and make decisions from real time information
shared across the supply chain.

Data Synchronization (Accuracy)

All partners working off of the same demand, supply, and capacity information. A single
version of the truth.

Single Version of the Truth (Transparency)

Ability to work together to identify root causes and operational process improvements
increasing productivity, efficiency, and perfect order performance.
Agenda

1. Introduction and Objectives

2. Supply Chain Collaboration: Definitions
3. What supply chain problem are we trying to solve?
4. Collaboration and Integrated Demand Planning: “As-Is”
versus “Best-in-Class”
5. So where should local FMCG players start?
 Where do local FMCG players start this journey?
Supply Chain Digest – Collaboration Maturity Model
Purchase Orders

Phase I:
Transaction Data,
Transaction Supplier Customer
EDI, Web
Automation
Invoices, ASNs

Manufacturing Schedules, On-hand inventory, POS Data

Phase II:
EDI and Web
Shared Supplier Customer
Self-Service
Operating Data
Better Decision Making

Re-engineered Business Processes, Shared Benefits

Phase III: Joint Planning, Web-

True Supplier Based Data Exchange, Customer
Closed Loop
Collaboration
Plans, Capacities,
Constraints
Source: Supply Chain Digest Copyright 2005
www.resolvesp.com 47 Landmarks Ave, Samrand resolvesp

pdickson@resolvesp.com 076 573 8096 @resolve_sp