Supply Chain Metrics That Matter: A Focus on the Chemical Industry
Chemical Supply Chain
description
Transcript of Chemical Supply Chain
© TMK_Logichem 2010 1
Achieving Supply Chain Excellence
in the
Fast Moving Consumer Goods Industry
Thomas Müller-Kirschbaum
Düsseldorf, April 21, 2010
© TMK_Logichem 2010 2
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 3
Three Areas of Competence134 Years of Brand Success
Quality with Brands & Technologies
Laundry &Home Care
AdhesiveTechnologies
Cosmetics/ Toiletries
© TMK_Logichem 2010 4
Henkel Brands Performance around the Clock
© TMK_Logichem 2010 5
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 6
Laundry & Home CareProduct Portfolio
• Heavy-duty detergents
• Fabric softeners
• Laundry care products
• Dishwashing products
• All-purpose cleaners
• Scouring agents
• Floor and carpet care products
• Bath and WCcleaners
• Glass cleaners
• Kitchen cleaners
• Specialty cleaning products
• Air fresheners
• Insecticides for household use
© TMK_Logichem 2010 7
2009 Sales by business sector
Sales: 13,573 million euros
Corporate210 (2%)
Adhesive Technologies6,224 (46 %)
Cosmetics/Toiletries3,010 (22 %)
Laundry & Home Care4,129 (30 %)
in million euro
© TMK_Logichem 2010 8
2009 EBIT by business sector
Adhesive Technologies506 (36 %)
Cosmetics/Toiletries387 (27 %)
Laundry & Home Care530 (37 %)
in million euros
1) Adjusted for one-time charges/gains and restructuring charges
Adjusted1) operating profit (EBIT): 1,364 million euros
Excluding Corporate
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Supply Chain Design – Basis for SuccessKey Dimensions
One Global SC Organization with
• End-to-End Process Responsibility
(from the customer to the customer) and
• Full Vertical Integration
(Global – Regional – Local Level).
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Supplier Production AC / Warehouse
Market /Customer
Purchase to pay Order to cash
Demand / Order
Order Plan OrderPlan Demand
Source
Source
Make DeliverMake Deliver
Info
rma
tio
n f
low
Ma
teri
al
flo
wSupply Chain – End-to-End ProcessExtended View of the Value Chain
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Supply Chain – Key Elements Planning/Procurement, Production, Distribution
Planning& Procurement
Production Distribution
Moving 15,000 SKU
Plants
>40<30
Distribution Center
>150<120
10,000 Drop points
Single Suppliers
>2,900<1,400
past (2005)future (2012)
© TMK_Logichem 2010 12
Supply Chain Strategy PillarsFramework for Long-Term Action
Optimize total performance(Cost, Inventories, Service)
Design & implement an extended and
adaptive supply chain
Build on smart technologies,
processes and systems
Design & implement theright organizational setup
• Mass products vs. specialties:
decentralized vs. centralized production
• Fully exploit make-or-buy potential
• Integrated technology sites
• Interconnectivity Processes & Systems
• Smart complexity management
• Integration of customers & suppliers
• Process simplification
• Integrated supply-chain planning
• Permanent benchmarking
• End-to-end responsibility
• Talent management
• Clear governance
© TMK_Logichem 2010 13
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
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Assessment of FMCG Environment 2010+No Revolution, but Evolution happens
• Demand variability increases
• Complexity increase and drives late stage differentiation as well as adaptive supply chain designs
• Retailer power expected to rise; „smartest players in the value chain“
• Raw material prices continue to be volatile as resources remainscarce; importance of risk management along value chain increases
• Distribution cost increases stronger than processing cost
• Sustainability emerges a new competitive parameter
• Challenge of private label product offerings remains and grows
+ Supply chain capabilities become a strategic success factor
+ Human capital in supply chain is a current & future bottleneck
© TMK_Logichem 2010 15
The Future: Balance of Power movesRetailers invest to become the “smartest“ Players
A consultants view on the industry:Maturity of overall supply chain knowledge in FMCG
Uninformed
Going to School
Educated
Expert
Most informedSupply Chain
Participant
Suppliers
Manufacturers
Retailers
1980's Current 2012+
Source: AT Kearney (2008)
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Flexibility
Reliability
Speed
Cost & Capital Efficiency
Sustainability
Volatility in upstream / downstream markets
Consumer individualization / diversity
Changing customer specific supply chains
Perfect Order as KPI, OTIF is hygene factor
Full process transparency
Fast changing consumer & customer patterns
Customization of product offerings
Speed of innovation processes
Scarce resources / Energy conservation
Urbanization / Demographical concentration
Customer & supplier integration (e.g. VMI)
Volatility in downstream demand
1
2
3
4
5Su
pp
lyC
hain
Perf
orm
an
ce
Key Factors Supply Chain PerformanceChallenges 2010+ can be clearly identified
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Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 18
Overview
Integrated Supply Chain Organization
Strategic Network Design
Horizontal & Vertical Cooperation
End-to-End Supply Chain Planning
Smart Complexity Management
Sustainability Matters
KPIs
People make the Difference !
A
B
C
D
E
F
G
H
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Global Global SC Operations
Production Steering
Industrial Engineering
SHEQ
Planning & Logistics
Process Technology
Head of Local SC
Planning LogisticsHead of Plant(s)
Production/
Engineering
Industrial
EngineeringSHEQ
Planning
/Logistics
Local
Head ofRegional SC
Regional
Production Steering /Engineering
Industrial Engineering
SHEQPlanning & Logistics / Contract Manufacturing
Head ofGlobal SC
Integrated Supply Chain OrganizationExample Laundry & Home Care
A
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Strategic Network Design Example European Network Re-Design
• Population density drives
set-up
• Optimum distribution
distance to be respected
• Country borders do not
matter
• Minimum number of storage
stages for responsiveness
and sustainable efficiency
Own factories (2010)
�Produce & deliver close to customers & consumers
Population Density
Factory closed/sold (2005-2010)
B
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Strategic Network Design Example Warehouse Concept Eastern Europe
Achievements since 2006
• Avoidance of 200,000
transportation km /
70,000 liters diesel /
185,500 kg CO2 per year
• Double-digit reduction of logistics
costs
• Other positive impacts on service
levels, inventories and
responsiveness increasing quality
of our service to customers
Central Warehouse ViennaReduction of 3 warehouses
x xVienna
�Significant reduction of kilometers & CO2 emissions
x
Warehouses
Production Facilities
B
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Horizontal & Vertical CooperationExample HeCoRe
Joint deliveriesJoint warehouses
Savigny ~ 50% deliveries
St Quentin ~ 50% deliveries
MainPrinciples
Implemented
• Carrefour : 23 warehouses (full perimeter deployed)
• Auchan : 2 warehouses
• Galec : 2 warehouses (joint deliveries with Reckitt)
• Match : 2 warehouses
Benefits
���� Stock level
���� Service
level
• Increase of delivery frequency
• Improve service level
• Reduce transport costsWin-win-situation
C
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Allocation
To Plants
DistributionCenterDemand
DistributionCenter
Forecast
Sales
Forecast
End-to-End Supply Chain PlanningExample Improvement Potential DPQ / SFA
12
3
4
Production
Planning
5
Confirmation
to DistributionCenters
6
DC Replenish-
mentPlanning
7
ExpectedSales
CustomerOrders
D
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End-to-End Supply Chain PlanningExample Clear Rules exploit Potential of Tools
Monday Tuesday Wednesday Thursday Friday
CopackingPlanning
Stock Trans-fer Planning
Alert Mgmt
Distribution Center Replenishment
Production Planning
Contract Manufact Planning
Direct demands
Dependend demands
RemainingStock alerts
Directdemands
DC Forecastsand
Stock Alerts
D
Sales Forecast
Sales Orders
© TMK_Logichem 2010 25
Smart Complexity ManagementExample Late Customization of Liquids
going X-Box
Past
Now
Produkttanks A
FillingMixer
tank fortype
tank fortype
Filling
ContiPost-addition
XBoX
Mixer
Post-Addition of perfume, color, actives, salts, citric acid
● 1-Step process● Batch production● Slow process● More cleaning &
waste water
● 2-Step process● Continuous production● Fast change-over● Less cleaning &
waste water
Result: -70% in base formulas
First pilot 2004
E
© TMK_Logichem 2010 26
SustainabilityLeading Position in External Recognition
WWW.ETHISPHERE.COM
ETHICALWORLD‘S MOST
COMPANIES20
09
Germany’s most
sustainable brand
Henkel
WalMart
Sustainability Award
Member 2007/08
Member 2008/09
Member 2009/10
F
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Sustainability MattersCorporate CSR/Sustainability Targets for 2012
further reductionin
energyconsumption*
further reductionin
water consumption*
further reduction in
waste generated*
further reduction in
occupationalaccidents
Long-term target:Zero occupational
accidents.
–– 15 %15 % –– 10 %10 % –– 10 %10 % –– 20 %20 %
* Targets per metric ton of output. Base year: 2007
F
© TMK_Logichem 2010 28
Focus on Entire Value Chain
Rawmaterials
Washingmachine
production
Packagingand
transportRetail
Rawmaterials
Detergentproduction
Packagingand
transportRetail
Waste & recycling
Consumers
Contribution to carbon footprint in %:
Raw materials Production, packaging, transport, retail,
recycling
Consumer usephase
~ 70%~ 70%~ 10%~ 10%~ 20%~ 20%
© TMK_Logichem 2010 29
Performance based on Sustainability:
Leading through Focus on Total Value Chain and
Consumer Information
�Henkel products stand for innovative sustainable consumption
Raw Materials Production Packaging Transpor-tation
Purchasing ProductUsage
Disposal Total
Average scenario
30°C
60°C
1000
800
600
400
200
0
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How to Improve
Sustainable Consumption & Production
Less Energy Consumption
Global Carbon Cycle
Biodegradability
1
2
3
Biodiversity4
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SCI ~E • BIO • DIV
GWP
E: Efficiency in relative units of detergency
BIO: Biodegradability in total oxygen consumption
DIV: Biodiversity contribution in comparison to existing solutions
GWP: Global Warming Potential in g CO2 equivalent
Sustainable Consumption Index (SCI)
© TMK_Logichem 2010 32
Changesplanned
2005-2010
Changesrealized
2005-2008
KPI – Supply Chain KPI MasterWhat you measure is what you get!
• Integrated set of KPI linked to business strategy
• Basis for continuous improvement
• Bottom-up reconciliation and benchmarking
Total Supply Chain Costs (% of sales without materials) -150bp -220bp
Quality-in-the-box (%) +30% +30%
Incident Rate (accidents per 1 mill. working hours) -38% -48%
Service Level (%) +1.7% +1.5%
# SKUs -13% -20%
Inventories (% of sales) -6% -16%
Transport & Whse. Cost (EUR/ton) -2% -2%
Processing Cost (EUR/ton) (powder/liquid) -3% -10%
Headcount Productivity (tons per headcount and year) +19% +51%
G
© TMK_Logichem 2010 33
People make the Difference!Example for Developping & Retaining HR
���� Right organization template & governance
���� Less, but higher qualified resources
Succession Planning Levels 1 – 3
Talent Development Programme
Supply Chain Academy
Initiatives @ Supply Chain Henkel
H
1
2
3
© TMK_Logichem 2010 34
Agenda
Company
Business Sector & Supply Chain
Cheaper, Faster, Smarter: The Challenges
Responses
Key Take Aways
1
2
3
4
5
© TMK_Logichem 2010 35
Key Take Aways
• FMCG environment changes expected to
happen in an evolutionary way (basedon last 2-3 years experiences)
• Flexibility, Speed, Reliability and Efficiency are „Classic Challenges“joined by Sustainability being a competitive factor
• Strategic responses focus on structuraland process improvements as well as
clear metrics along the integrated supplychain process
• Technology is a must, People will be the
„true“ differentiator in Retail-FMCG
Supply Chains of the Future
Awarded by:
• Supply Chain Management Institute, European Business School
• PRTM Management Consultants
• Trade Magazine, Logistik Heute
Supply Chain Management Award