Improving the supply chain - the European experience · – Tesco, Asda (Wal-Mart), J Sainsbury,...

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1 April 2009 Supply Chain Europe Limited, 1 Hayden Lane, Staverton, Cheltenham, Gloucestershire, GL51 0SR United Kingdom Improving the supply chain - the European experience Andrew Morgan Supply Chain Europe Limited in collaboration with the International Agri-Technology Centre Ltd Slide 2 Introduction Andrew Morgan MPhil, CMILT (Dip) Began logistics operations career in 1978 Consulting projects since 1990 (Brazil since 1998) Author “Making the Brazil Connection – managing risk in the international food supply chainSupply Chain Europe Limited Founded in 2003 Focus on supply chain improvement International agri-food chain expertise International Agri-Technology Centre Ltd Established in 2003 UKTI (government) sector team Responsible for promoting and developing international trade in the agri-food technology sector

Transcript of Improving the supply chain - the European experience · – Tesco, Asda (Wal-Mart), J Sainsbury,...

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April 2009Supply Chain Europe Limited , 1 Hayden Lane, Staverton, Cheltenham, Gloucestershire, GL51 0SR United Kingdom

Improving the supply chain - the European experience

Andrew MorganSupply Chain Europe Limitedin collaboration with theInternational Agri-Technology Centre Ltd

Slide 2

Introduction

• Andrew Morgan MPhil, CMILT (Dip)– Began logistics operations career in 1978

– Consulting projects since 1990 (Brazil since 1998)

– Author “Making the Brazil Connection – managing risk in the international food supply chain”

• Supply Chain Europe Limited– Founded in 2003

– Focus on supply chain improvement

– International agri-food chain expertise

• International Agri-Technology Centre Ltd– Established in 2003

– UKTI (government) sector team

– Responsible for promoting and developing international trade in the agri-food technology sector

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Slide 3

Agenda

• Sustainability• UK food retailer experience

• DHL Exel Supply Chain case study

• International supply chain

• Improving the supply chain

Slide 4

“ Sustainability is the catch-all term for repairing the negative aspects of economic progress over the last 40 years ”

- Professor Alan Braithwaite, Cranfield University• Intense focus on:

– Energy– Water– Emissions (CO2 and NO2)– Etc.

• Aspects include:– Good Agricultural Practice (Global GAP)– Freight Best Practice (UK Department for Transport)

• Vehicle fill• Empty running• Time utilisation• Deviations from schedule• Fuel consumption

Sustainability – the challenge

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Slide 5

Sustainability – from crop to consumer

Global.GAP standards

Slide 6

Sustainability – Brazil agriculture

© 2008 Supply Chain Europe Limited. All rights reserved.

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Slide 7

Sustainability – Brazil infrastructure

© 2008 Supply Chain Europe Limited. All rights reserved.

Slide 8

Agenda

• Sustainability

• UK food retailer experience• DHL Exel Supply Chain case study

• International supply chain

• Improving the supply chain

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Slide 9

UK food retailer experience – supply chain networks

• Shift of power from manufacturers to retailers– Tesco, Asda (Wal-Mart), J Sainsbury, Morrisons, etc.– Enabled by:

• New transport and materials handling technologies• New information and communications

technologies• Government deregulation

• Centralised networks– Less stock in system– Reduced overall cost– Improved on-shelf availability– Both outsourced and in-house regional distribution

centres (RDCs)• Sustainability

– Efficiency– Re-use / recycle / reduce waste– Focus on time-based performance– “Compress time and the costs look after themselves”– “Eliminate time-waste”

Slide 10

UK food retailer experience – use of balanced scorecards

CUSTOMERPEOPLE

OPERATIONSFINANCE

Pd 9VACANCIES

ABSENCE

LEAVERS<1YR SERVICE

SKILLS TO DO JOB - BRONZE

TEAM 5

NO OF COLLEAGUES ON OPTIONS

HALF YEAR & ANNUAL REVIEWS

LOST SALES CAGES

ORDER ACCURACY

AVAILABILITY (DEPOT TO STORE)

DELIVERY ON TIME

SAFETY AUDIT

REPORTABLE ACCIDENTS

UNITS PER MAN HOUR

TRANSPORT COST PER CASE

STORE TURNAROUND

STEP CHANGE - DELIVERY TO DATE

UNDERLYING COSTS

CAPITAL EXPENDITURE - FORECAST FOR YEAR

STEP CHANGE - FORECAST FOR YEAR

Pd 8

Pd 10

FAILURE TO ARRIVE

TRUNK ON TIME

DEPOT TURNAROUND

NO. OF TRUNKING LEGS

Retailer distribution centre (RDC) performance repo rting: Periods 8, 9, 10

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Slide 11

Agenda

• Sustainability

• UK food retailer experience

• DHL Exel Supply Chain case study• International supply chain

• Improving the supply chain

Slide 12

– background

UK grain sector opportunity:

Estimated logistics savings via improved efficiency of circa. £40m per year

• Rejected loads: £3m assuming average 3% rejections

• Waiting times: £15m assuming 10% reduction

• Consolidation: £15m from 10% saving in haulage costs

• Storage: £3m from strategic use of central stores, saving 10%

•Testing: £2m from reducing multiple testing

Plus a 10,000 tonne reduction in CO 2 emissions from 5% reduction in cereal miles. ‘Against the Grain’ 2006

Timelines:

• 2006: SCE ‘Business Transformation ’ project with Grainfarmers (UK’s largest farmer-controlled grain trading company)

• 2007: Preparation of DHL Business Case and Proposals with SCE support

• 2008: Grainfarmers and Centaur merge to form Openfield (with EFFP mediation)

• Nov 2008: DHL starts innovative value-sharing logistics contract with Openfield

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Slide 13

• Movements in 9 regions account for 55% of volume

• Average 470 movements per day

• 80% of deliveries average 30 tonne payload

• 80% of volume delivered to 15% of customers (89)

• 20% of hauliers handle 80% of volume

• 503 customers / 64 stores / 17 ports

Supply side Demand side

– understanding current activity

Findings included:

Slide 14

Lean Logistics Environment Continuous ImprovementOptimum Logistics Costs

Optimised Network

SC Systems Infrastructure

Leveraged Purchase

Levelled Supply

Standardised Processes

Visibility of Exceptions

Performance Measurement

Single Point of Ownership

Reliable Supply Chain

Improved Customer Service

Reduced Transport Spend

Improved vehicle utilisation

Minimised Carbon Emissions

Support for Optimal Grain Sourcing

Release of Management Time

Supply Chain Strategy

– supply chain vision

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Slide 15

Key features

� One core partner allows end-to-end supply chain integration

� Value creation central to Control Tower

� Breadth of services differentiates DHL

� Control tower allows greater optimisation, trade off analysis, better matching of supply & demand

Key benefits

� Standard processes and technology solutions

� Carrier management with traditional solutions underpinning the Control Tower

� Joint working groups pursuing best practice & continuous improvement

� Real national coverage provides visibility

� Holistic management of supply chain - greater agility, lower inventories & financial engineering

SupplierEnd

customer

monitoring & reportingend to end IT visibility

THE CONTROL TOWER

Strategic

Tactical

Operational

– control tower concept

Slide 16

Maltsters

FlourMillers

StarchManufacturer

FeedCompounders

Export

Farms

Central Store

Farm InputCompanies

1.7 mt

5.6 mt

3.0 mt

8.9 mt

CU

ST

OM

ER

SCentaur / Grainfarmers

Q

574 kt Moved17,524 Movements

574 kt Moved17,524 Movements

5.366 mt Moved224,628 Movements

Import

Q

Q

Q

QQ

3 Routes to market

Q 6 Quality checks

Avg Hauliers used 60+

Communication

Assumed annual rejectionrate of 7% - 15,723 dels

FCB volumes only

– farm inputs / primary supply chain

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Slide 17

– creating a new solution

SERVICES

Haulier and Supplier Management – Conformance to Process and Quality Standards

Management Reporting and KPI’s – Reporting of information used to manage the business and the Supply Chain itself

Data Management – Maintenance and improvement of the accuracy of static data .

CUSTOMERSCUSTOMERS

&

SUPPLIERS

Storage

Maltsters

Crushers

Millers

Export

Animal Feed

OUTBOUND

FreightLane

Selection

ReceiveOrder

OrderManagement

PlanTransport

InitiateTransport

DeliveryConfirmation

FreightValidation

Can we read it?Does it make sense?

Delivery Date Based Cumulative Demand CalculationsCollection Date Management

Explicit OrderQuantity Specified

Collection Date Specified

Optimise Combination ofFreight Cost and

Service Level Required

Confirm Collection with SupplierOptimise Vehicle Utilisation

Instruct Carrier

Receive Collection ConfirmationFrom Haulier Inbound

Receive Collection ConfirmationFrom Haulier Outbound

From Sites InboundValidate Haulier Invoice

Documents vs Tariff

Validate Haulier InvoiceFor Payment

Operational Records vs Tariff

FreightPayment

Slide 18

Pre-collection with farmer members

• Queries

• Matching sales contracts

Physical collection

• On-time

• Courtesy

• Cleanliness

Physical delivery

• On-time

• Courtesy

• Cleanliness

Post delivery with customers

• Invoicing

• Queries

Customer service measures include:

• Reliability

• % of collections ‘on time’

• Number of complaints – non-conformance

• Weight tickets on time

• % of deliveries ‘on-time’

• Time taken to answer queries

• Periodic surveys on specific issues

– customer service components

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Slide 19

– system overview

Management Information, Costs, Invoicing & Value Calculation

Loading &Arrival Times

Initial Delivery Confirmation, Weight & Passport information

Acceptance of Routes& Availability

Loading &Arrival Times

Orders – A to BCollection & Delivery

Windows Defined

Arrival Times

CustomersStores Ports

OrderReceipt

CarrierManagement

Planning &Optimisation Execute

DHL Control Tower

Network Modeling

Finance / KPI’s

Hauliers / Carriers / DHL

ForwardingTeams

SuppliersLoading &

Arrival Times

SupplierManagement

Greater collection and delivery restrictions reduce optimisation

Slide 20

Agenda

• Sustainability

• UK food retailer experience

• DHL Exel Supply Chain case study

• International supply chain• Improving the supply chain

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Slide 21

International supply chain – issues

Network infrastructure – Organisation – Process – Info rmation

© 2007, 2008 Supply Chain Europe Limited

How to create a sustainable supply chain?

Slide 22

International supply chain – walking the process

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Slide 23

Agenda

• Sustainability

• UK food retailer experience

• DHL Exel Supply Chain case study

• International supply chain issues

• Improving the supply chain

Slide 24

Improving the supply chain – finding new opportunities

• Business Network : around 10,000 members • Diverse : Brings together a broad range of industries, all

sectors and expertise – manufacturing businesses, technology providers, research centres, spin off co mpanies

• No limitation to size/capacity : All companies and organisations, regardless of size, turnover or capa city

• Demand led : Driven entirely by the requirements of its member companies

• Universal scope : Not limited to any particular type of resource, NISP deals with energy, expertise, logist ics, services, assets, transportation, waste, water, etc .

• Value added : Create new market opportunities - increasing the range of resources that have commercial value –innovation

• Changing business culture : IS becomes the norm

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Slide 25

NISP Database Synergy Grid

Improving the supply chain – NISP components

Slide 26

Whisky Distillery

Transfer waste heat to

neighbouring company for

agriculture or aquaculture

Donate to social enterprise for making furniture Use to smoke fishFuel source

Transfer to neighbouring company as alternative to using potable water

Convert and sell to local farmer for animal feed -fuel source

Backhaul with suitable materials

STEAM

DISTILLERY BY-PRODUCTS

OAK BARRELS

GREY WATER

TRANSPORT

Improving the supply chain – waste material or resource?

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Slide 27

A fruitful collaboration

One new business

• 38 acre greenhouse producing all year round• Successful reuse of waste heat• Reduction of 12,500 tonnes of CO2 emissions• £15 million private investment in region• 65 new jobs created

• £250,000 Business investment • 7,000 tonnes of waste diversion• £440,000 approx cost savings• 5,156 tonnes carbon savings• 18,500 tonnes of water saved• 10 business assisted and • 7 jobs created

Terra Nitrogen (UK) Limited &John Baarda Ltd

Improving the supply chain – NISP case study

Slide 28

Improving the supply chain – tools and techniques

• GIS models (with map databases)– Geographic information system

(GIS) to plot all locations; demand patterns; thematic mapping; territory allocation; etc

• CVRS models– Models for strategic vehicle routing

and scheduling; depot location; fleet size and mix; etc.

• Optimisation tools– Supply chain strategic optimisation

system to test alternative supply chain strategies, including modal choice

• Inventory models– Strategic inventory diagnosis and

modelling• and others

Minimum/Maximum/Target Capital Stock by Target Service Level

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

88% 90% 92% 94% 96% 98% 100%

Target Service Level

Sto

ck C

apita

l

Minimum

MaximumTarget

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Slide 29

Uses a standard convention and is designed to ident ify all the key steps in the chain – based on Excel the map can be r edrawn easily

Improving the supply chain – mapping the chain

© 2009 Professor Alan Braithwaite, Chairman LCP Consulting

Slide 30

Capture the emissions data at every stage and normalise to the unit of measure e.g. per 1000 litres, per Kg, per pack

© 2009 Professor Alan Braithwaite, Chairman LCP Consulting

Improving the supply chain – normalising the emissions

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Slide 31

Shows the Carbon build up along the chain –prototype data for

illustration only

Improving the supply chain – displaying the CO 2 build-up

© 2009 Professor Alan Braithwaite, Chairman LCP Consulting

Slide 32

Review

• Sustainability

• UK food retailer experience

• DHL Exel Supply Chain case study

• International supply chain

• Improving the supply chain

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Slide 33

Contact details

• Andrew Morgan MPhil, CMILT (Dip)– M +44 (0)7768 473120

– E [email protected]

• Supply Chain Europe Limited– T +44 (0)1242 681229

– www.supplychaineurope.com

• International Agri-Technology Centre Ltd– T +44 (0)2476 323961

– www.theiatc.org

Slide 34

Conclusion

Thank you!