Creating Value in Your Supply Chain
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1 Creating Value in Your Supply Chain
2 My Approach Today Very brief background on Sun-Rype Evaluating your Supply Chain Assessing functional areas Change Q&A
3 Sun-Rype has Deep Roots & Strong Branches Who we are Who we are What we re proud of What we re proud of Where we re heading Where we re heading Regional co-op in From the lush Apple growing region known as the Okanagan valley Privately held company owned by the Jim Pattison Group. North American company with production facilities in Kelowna, BC Washington State #1 Juice brand in Western Canada with a 26 share #2 Fruit processor in western North America World class manufacturing facilities with rigorous attention to Safety and quality detail Building a brand that resonates with Consumers Closely matching consumer trends with an extensive innovation pipeline
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6 What if.. Total Annual Costs = $100 MM Low 1% $1MM Medium 2.5% $2.5MM High 5% $5 MM Very High 7.5% $7.5 MM Nirvana 10% $10 MM Is More Possible?
7 Evaluating Your Supply Chain
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9 Defining Your Supply Chain Assessing your Supply Chain should start with an end to end view of performance over time. Challenge is many company s do not organize against this principle. Solution is to engage senior management to support the assessment.
10 Establish the Right Project Team The right team is critical to effectively completing assessments. In addition to the functional subject matter experts, consider including: Finance HR IT External support where necessary
11 Establish Your Scope and Objectives at the Beginning
12 Agree on Your Guiding Principles
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15 Assessing Functional Areas
16 Benchmarking KPI s Purchasing Assess performance over time versus one year. Key metrics to review: Purchase prices (transportation costs in / out) Inbound shipment accuracy / on-time performance Quality metrics Inventory levels Innovation Negotiation performance Manufacturing Schedule attainment / ontime performance Manufacturing efficiency Quality First Pass Cost / unit Waste / yields
17 Inventory Planning Weeks of supply Inventory Turns Obsolescence Inventory aging write-offs Forecast accuracy Logistics Cost per cwt / unit / ton / kg On-time delivery performance Damages Returns Integrated inbound / outbound cost performance Customer fines / fees
18 Customer Supply Chain Case Fill Rates Ensure your service metrics align with how your customers measure your performance Where possible, obtain direct feedback on your performance from your Customers Assess how well your Customers are getting your goods to market On-time delivery
19 PPM All components of the program must be implemented to deliver cost reductions. Leading Practices Planning/ Project Management Leadership / Change Management Metrics / Scorecard Zero Based Budgeting ZBB Process Standardization Innovation 19
20 ZBB The Traditional View A method of budgeting in which all expenditures must be justified each new period, as opposed to only explaining the amounts requested in excess of the previous period s funding funding would have a base at zero. A department would have to show why its funding efficiently helps the organization toward its goals. (Investopedia.com)
21 ZBB A Different Approach While continuing to build budgets from zero each year, this expanded methodology to manage, control, and reduce costs based on the creation of shared responsibilities with well-defined owners and deep understanding of expenses key drivers (cost and consumption).
22 Facility 1 Facility 2 Facility 3 Facility 4 Facility 5 Facility 6 Total ZBB A Different Way of Looking at Costs Entities Packages Travel Implementation of Best Practices People Maint. Services TOTAL Accountability 22
23 Changes to Roles Key to Define Roles and Package Owners Responsible for setting policies on spending within a defined package Establishes cost targets, leveraging key benchmarks Monitor performance against targets Spread best practices Senior leaders in the business (e.g. Corporate Vice President) Responsibilities Entity Owners Responsible for building activity based budgets as per the spending policies Runs the business to deliver against budget expectations Implementing best practices Typically the owner of the operation (e.g. Facility Director, Plant Manager) 23
24 Benchmarking: Creating comparisons based on activity drivers versus total dollars Comparison of like sites using activity metrics to benchmark costs. Focus on facts that drive costs Objective is to identify best practices for application across the business.
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26 Spending Policies: Direction to the business on how money will be spent in the business Example from a large distribution company Fuel a) Policies Fuel purchases must be made through the approval supplier (Shell). In the event the approved supplier does not appropriately service a particular geography, national procurement must be consulted to negotiate contracts with alternate suppliers. Approvals for exceptions will be made by the Package Owner All drivers must complete mandatory training for cost effective fuel consumptions. b) Budget Guidelines: All tractors will have speeds governed to a maximum of 100 km/hr Cost challenge for sites that have actual km/l lower than the total fleet (based on prior year) average = 20% improvement. Cost challenge for sites that have actual km / L better than the national fleet average = 10% improvement.
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28 Spending Policies: Direction to the business on how money will be spent in the business Example from a large manufacturing company: Buildings and Facilities Maintenance Materials a) Policies All spare parts and maintenance purchasing must have the direct involvement of an approved buyer. All entities (Canada/USA) must first look to source spare parts through National Supplier Agreements. b) Budget Guidelines: Reduction have been applied to plants with above average $/sqft. Cost challenge for the upcoming budget year = 20% reduction. Facilities with less than the average cost / sq = 5% reduction. Enter maintenance budget in the proper cost center newly created in the dropdown list on the template.
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32 Complexity What do we do with all this data? Less than $50K $50K - $250K $50K - $250K Time to Implement
33 Establish an Implementation Plan Once the plan has been finalized, establish senior level ownership Set clear targets and implementation timing Ensure there is a follow-up plan Celebrate successes
34 Some Thoughts on Change
35 The Rules of the Game have Changed! Customers Increasing service expectations New Retail Formats Consolidation Environmental Social responsibility Emerging expectations Changing technology Consumers Value/Quality Expectations Convenience and Variety Healthy Products Shareholders Increased profitability expectations Quarterly focus with long term, sustainable growth expectations. Demands A Performance Breakthrough Competitors Want your customers! Industry Consolidation Focused and Agile Aggressive & Good Suppliers Commodity markets highly volatile. Strategic Partnerships People Expectations for growth and development Criticality of top talent Technology Rapidly Changing Real Time Information Drive towards total supply chain visibility 35
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38 My Change Management Epiphany 1 Mile 2 Miles 38
39 Change Management: Success is not a Slam Dunk Senior level support imperative Install the process into your culture Invest in the right level of technology Disciplined commitment to follow the process Recognize the importance of training (for senior leaders as well) Recognize performance. And non performance. 39
40 Before we finish. Let s go Beyond Nirvana! Year 1 Year 2 Year 3 Year 4 Fixed Costs Mktg. & Sales 40
41 Perseverance "Press on: nothing in the world can take the place of perseverance. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent." 41
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