2012 supply chain benchmarking unlocking value through ... · pdf file2010 supply chain survey...

2012 Supply Chain Benchmarking— Unlocking Value through Complexity

Management and Collaboration

February 6, 2013

TPA Supply Chain Conference 2013 - Supply Chain Benchmarking - 02 06 13_vf.pptx 1

Your presenters

Jeff Wray Partner The Boston Consulting Group [email protected]

Aaron Brown Partner

The Boston Consulting Group [email protected]

Elfrun von Koeller Project Leader The Boston Consulting Group [email protected]

John Phillips SVP, Customer Supply Chain

PepsiCo, Inc.


20 years of GMA Supply Chain benchmarking

1993 1996 1999 2003 2005 2008 2010 2012

GMA Supply Chain benchmarking

Inaugural Supply

Chain survey

1998 GMA/BCG

report on DSD

2005 Supply

Chain survey

2010 Supply

Chain survey


Why we benchmark our Supply Chains

Ø 3

D C YOU B A

+20%

Benchmark YOU

? +16%

2015E 2014E 2013 2012 2011 2010 2009

Get an objective performance

measurement and set targets Identify areas for improvement

Build the case for change

Understand trends

and start thought processes

1 2

3 4

YOU

+11%

Benchmark

+20%

+45% Opportunity 1

Opportunity 2

Opportunity 3

$


The 2012 benchmarking report

Interviewed >60 Supply Chain

executives

First ever Direct Store Delivery

(DSD) survey

Two deep dive topics

• Complexity management

• Trade partner collaboration

New this year Who we have spoken with


What are the key trends in grocery Supply Chains?


Six key trends in US grocery industry ...

Macro-economic

volatility

More discerning

consumers

Three growth

demographics

"No compromise"

consumer

Re-formation of

retail landscape

Rise of the

digital economy


... with significant impact on Supply Chains

Macro

demand forces

Technical

innovations

Evolving

infrastructure

Input factors

Political

influences

Sustainability

Grocery Supply Chain

Supplier Manufa-

cturing

Pack./

Distrib. Retailer

Complexity Collaboration

We focused on two key trends that are driving significant value for grocery manufacturers


Deep dive topics chosen for impact: $20–45B incremental profit opportunity

3–5% margin

improvement

Up to 5% sales lift

Collaboration Complexity management

1–3% margin

improvement

0.5–1.5% sales lift

$20–45B

incremental

profit across

industry


Who is in the audience?


What type of organization do you represent?

Retailer

Service provider

(including logistics)

Distributor

Grocery manufacturer

12345678

6%

44%

12%

38%


What is your company's annual US revenue?

>$15B

$10–15B

$5–10B

<$1B

$1–5B

35%

18%

9%

9%

29%


What temperature class(es) is your Supply Chain?

Ambient

Refrigerated

Pick all that apply. Remember to press "Send" after each selection

Frozen

48%

57%

67%


What delivery system(s) do you use?

Warehouse delivery

Direct Store Delivery (DSD)


Wholesalers / Distributors 67%

50%

62%


How has your Supply Chain performed?


How has your on-time delivery performance changed over the past two years?

Improved significantly

Improved somewhat

Stable

Declined significantly

Declined somewhat

Retailers: Rate your Suppliers' performance Suppliers: Rate your own performance

12%

5%

14%

23%

47%


How have your case fill rates changed over the past two years?

4%

16%

38%

39%

4%

Retailers: Rate your Suppliers' performance Suppliers: Rate your own performance


Improved somewhat

Stable


Declined somewhat


How have your inventory levels changed over the past two years?

7%

14%

19%

48%

12%

Retailers/suppliers: rate your own performance

Significant reduction

Some reduction

Stable

Significant increase

Some increase


How have your costs changed over the past two years?

7%

30%

19%

34%

10%


Significant reduction

Some reduction

Stable

Significant increase

Some increase


How has your forecast accuracy changed over the past two years?

3%

18%

40%

33%

6%



Improved somewhat

Stable


Declined somewhat


17%

50%

25%

8%

10%

21%

15%

49%

5%

Change in grocery manufacturer service performance over the past two years

8%

15%

46%

31%

5%

24%

35%

32%

3%

Declined

significantly

Declined

somewhat

Stable

Improved

somewhat

Improved

significantly

Retailer perspective Grocery manufacturer perspective

On-time delivery rates Fill rates

12345678 12345678


Change in productivity metrics over the past 2 years

31%

23%

8%

15%

15%

53%

10%

8%

31%

8%

21%

21%

36%

21%

10%

28%

23%

33%

8%

Declined

significantly

Declined

somewhat

Stable

Improved

somewhat

Improved

significantly

21%

29%

50%

3% 13%

38%

38%

10%

Inventory

performance

Cost

performance Forecast accuracy

Retailer performance Grocery manufacturer performance

12345678 12345678 12345678


What does growing complexity mean for Supply Chains?


Increasing complexity a common concern


Product proliferation has failed to trigger growth

US CPG retail sales (Real $B)

2,000

1,500

1,000

500

0

US CPG new product introductions

2,000

1,500

1,000

500

0

2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

New product introductions CPG market size

Many unsuccessful product launches remain in the marketplace today


High complexity evident across Supply Chain

Product complexity:

French Fries Channel complexity


Complexity reduction ≠ SKU rationalization

Unique product specifications

Formulations

Distribution methods

Bottom quartile

<10% of volume

Common approach: cut slow SKUs Many sources of complexity

Packaging specifications / formats


Five stages of complexity management

Projects

Program

Culture

• No

reduction

efforts

• Ad-hoc

reduction

projects

• On-going

complexity

reduction

• Corporate

culture of

simplicity

• Minimal

awareness

Limited

understanding

No action


Define the offering

Scale operations

Protect / grow

volume

Best practice: the "Handshake"

Consumer needs

Variety only

where it creates

consumer value

The Supply Chain view The integrated plan The market view

Supplier

complexity /

cost drivers

Retailer

complexity /

cost drivers


How does complexity impact your Supply Chain?

Declining forecast accuracy

Increasing warehouse labor costs

Pick the three biggest impacts. Remember to press "Send" after each selection

Other

Higher out-of-stocks

Increasing packaging / customization costs

Higher spoilage rates / reverse logistics costs

Increasing freight / logistics costs

Increasing space needs

1%

13%

23%

29%

31%

36%

39%

42%


How would you describe your company's approach to complexity management?

6%

13%

54%

22%

5%

There is an on-going effort

to reduce complexity

One-off projects have

been implemented

The entire organization is

focused on simplicity

Little understanding

of complexity

Problem is well-known

but no action has been taken


Interview responses: most grocery manufacturers in project stage

Proportion of grocery manufacturers in each stage

Projects

Program

Culture

• Minimal

awareness

• No

reduction

efforts

• Ad-hoc

reduction

projects

• On-going

complexity

reduction

• Corporate

culture of

simplicity

Limited

understanding

No action

11% 15%

56%

15% 4%

69%

3% 13% 13%

3%

Interviews

Live polling


What projects have you initiated to reduce or manage complexity?


One-time SKU rationalization project

Charging for customization

Periodic SKU rationalization

Pushing customization downstream

Packaging / promotion format

harmonization

Other projects or initiatives

Warehouse consolidation

45%

39%

39%

29%

25%

15%

13%


Lack of internal alignment

Poor understanding of costs

of complexity

Lack of robust NPD gate-

keeping

(Perception of) losing shelf

space / sales

Grocery

manufacturers Retailers

23%

55%

58%

65%

33%

67%

25%

50%

What are the biggest barriers that limit your ability to manage complexity?



Successful companies apply four key strategies

1 2 Gain internal alignment between

Supply & Commercial

Quantify and understand

incremental complexity costs

3 4 Only offer variety valued by

consumers

Develop strong supplier-retailer

alignment


How can the industry move ahead in collaboration?


Many barriers slow down progress in collaboration


Five stages of collaboration

Process

efficiency

Basic

effectiveness

Advanced

effectiveness

Joint value

creation

End-to-end

Supply Chain

integration

• Response to

problems

• Basic on-going

collaboration

• Either deeper

collaboration

OR internal

process

• Both deeper

collaboration

and internal

process

• One

integrated

Supply Chain


How has your level of collaboration with trade partners changed over the past 2 years?

Increased

5%

67%

29% Stayed the same

Decreased


Basic collaborative initiatives, e.g., VMI

and collaboration on forecasting

To what degree do you typically collaborate with trade partners?

18%

21%

25%

31%

4%

Either deeper collaboration (e.g., top-to-

tops) or robust internal process

Collaboration usually in response to

Supply Chain problems / basic EDI

Both sophisticated collaboration

and robust internal process

Integrated end-to-end Supply Chain

scaled across strategic partners


0%

15% 26%

52%

7%

33%

15% 24% 24%

3%

Interview responses: few manufacturers have progressed beyond advanced effectiveness

Interviews

Live polling

Proportion of grocery manufacturers in each stage

• Response to

problems

• Basic on-going

collaboration

• Either deeper

collaboration

OR internal

process

• Both deeper

collaboration

and internal

process

• One

integrated

Supply Chain

Process

efficiency

Basic

effectiveness

Advanced

effectiveness

Joint value

creation

End-to-end

Supply Chain

integration


Grocery


Cost savings

Improved relationships

Sales lift

Improved lead times /

speed to market

Reduction in out-of-stocks

Improved forecasting

Inventory reduction

Other

What are your primary objectives in collaborating with trade partners?

64%

67%

6%

14%

39%

42%

44%

58%

75%

50%

42%

67%

67%

0%

67%

83%


Which collaborative initiatives have you implemented?


Value stream mapping / opportunity

identification process

Transportation optimization

Share out-of-stock data

Vendor-managed inventory (VMI)

Joint forecasting with partners

Optimize order quantities

Share retailer scan data (POS)

Supply Chain Top-to-Tops

24%

31%

34%

35%

44%

45%

48%

56%


Building trust with partners

Sufficient resourcing

Senior leadership buy-in

Scorecard excellence

Independent facilitation

Significant, quantifiable impact

Identifying mutual benefits

Internal alignment

Grocery


What have you found to be the key enablers of successful collaboration with trade partners?

Pick the top three. Remember to press "Send" after each selection

22%

33%

39%

44%

47%

53%

14%

3%

64%

45%

0%

36%

18%

9%

18%

36%


Lack of trust with trade partners

Difficulty quantifying savings

Under-resourcing

Data & technology issues

Difficulty scaling successes

Poor alignment, leadership buy-in

Poor scorecard performance

Difficulty sharing benefits

Grocery


Pick the top three. Remember to press "Send" after each selection

What have you found to be the biggest barriers to successful collaboration with trade partners?

14%

8%

5%

41%

32%

32%

30%

22%

25%

25%

0%

33%

17%

33%

67%

0%


Successful companies apply four key strategies

Trust Senior leadership commitment

Structured process & governance Mutual benefit

1 2

3 4


What is next?


Supply chain and DSD surveys

open until February 22nd

2012 GMA Supply Chain logistics

benchmark report will be

published in May

Next steps and timeline

2012 Supply Chain

Benchmark

Unlocking Value Through Complexity

Management and Collaboration


See how your Supply Chain stacks up

Topics Sample KPIs

Supply Chain

profile

• Top SC priorities • Size of operations • Outbound shipping

method

Costs • Cost / case • Freight costs / mile

Service level • New products • Spoilage / code date • % sales / profit in bottom

25% of SKUs

Warehouse /

Inventory

• Pick rate • Capacity utilization • Inventory on hand • Forecasting error

Portfolio

complexity

• New products • Spoilage / code date • % sales / profit in bottom

25% of SKUs

Collaboration • Collaboration activities

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Total logistics costs as % of 2012 sales

A CB C2

0

D HGFE OI J K L M

10

20

P Q R S T U V W X Y Z A2 B2 D2

30

Your company


Retailers … should we also include a retailer- focused benchmarking survey next year?

Yes. I would definitely participate

Yes, and I might participate

No, I am unlikely to participate 0%

55%

45%

Retailers


Thank you for participating!

To participate in the surveys or interviews please contact

Elfrun von Koeller

Project Leader

The Boston Consulting Group

Phone: (646) 448 7629

Email: [email protected]

For general questions regarding the benchmarking please contact

Jeanne Iglesias

Sr Director, Supply Chain and Technology

Grocery Manufacturers Association

Phone: (202) 295-3949

Email: [email protected]

mailto:[email protected]

mailto:[email protected]


Special thanks to the GMA Oversight Committee

• Kraig Adams, VP Customer Solutions, Large Store North & South, Coca-Cola Refreshments

• John Coyle, VP Customer Supply Chain, WhiteWave Foods

• Dennis Donelon, Senior Director Customer Supply Chain Integration, PepsiCo

• Timothy Fischer, SVP Supply Chain, Bumble Bee Foods

• Stuart Latta, VP Customer Delivery Systems, Nestle USA (DSD)

• John Phillips, SVP Customer Supply Chain & Logistics, PepsiCo (DSD)

• Jack Ryan, Director of Customer Logistics, Nestle USA


Thank you

bcg.com | bcgperspectives.com

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