asia ecr p-g china-metro supply chain performance improvement project-7

Member of METRO Group

P&G-Metro SC Performance Improvement Project

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METRO in China

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The Cash & Carry business concept for professional customers groups

e.g.

- Hotels

- Restaurants

- Caterer

- Cafes/bars

HORECAe.g.

- Small Retailers

- Generalists

- Specialists

�Drug Stores

�Petrol Station Shops

�Kiosks

- Special food

sales formats

e.g.

- Administrations

/Institutions

- Industry

- Service companies

- Freelancer

- Authorities

CBUTRADERHORECA TRADER CBU

� The service level of logistic relating to CFR, OOS, etc. are critical in C&C, because the professional shoppers are doing business with C&C.

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• Metro Procurement Logistics (PAXD) network

built up with 3 cross docking centers in Shanghai,

Guangzhou, and Beijing, generating 8.1% indirect

flow share in Dec 2007.

• P&G have Regional Distribute Centers in

Shanghai (East), Guangzhou (South), Beijing

(North), Tianjin (North), Chengdu (Center & West)

to cover Metro orders.

Current SC Network

SC Network (DF&NF) Y2007

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P&G-Metro SC Performance Improvement Project--Objective

Overall improved supplier performance and more

(Metro and Supplier ‘win-win’)

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P&G-Metro SC Performance Improvement Project-- Deliverables

Increased Fill Rate

Decreased Late Delivery

ImprovedGoods availability

Increased Sales & GP

CustomerSatisfaction

P&G SC Performance Improvement

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� Background

• Metro and P&G supply chain jointly agreed that Fill Rate is a priority KPI opportunity in China given Metro’s rapid growth in the market.

• Before the project kick off(Jan07-Jun07), Metro Fill Rate has been 60.3% nationally, that means about 40% of Metro order can not besupported by P&G, without having an aligned root cause.

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METRO Supply Chain Supplier Scorecard

Principle: MCC Buyer integrates SC Supplier Score Card in normal operational business process, monitors & improves it together with P&G. Tracking Sheet is submitted to Metro SCM for monitoring.

Monthly MonthlyMonthly MonthlyMonthly

Metro SCM Metro SCM

Involve Buyer & P&G

Buyer & P&G

Involve SCM if needed

Buyer

Involve SCM

WH

EN

WH

OP

RO

CE

SS

KPI needImpro-vement

KPI / Scorecard Creation

KPI / Scorecard Distribution to Buyer / P&G and Analysis

Contactwith P&G, discuss reasons, define action plan, targets.

Follow-up KPI Development

Buyer & P&G

Involve SCM if needed

Alig

nmen

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� Project Proposal – General Working Process

* Implement penalty process

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KPIs Formula Remark

Fill Rate % (Ord Qty - Short Qty) / Ord Qty

KPI measures the share of articlesdelivered correctly concerning quantities.Only short deliveries have a negativeinfluence (no over deliveries).

Lead-time Reliability(Late) %

Late Delivered Qty / Total Delivered QtyKPI measures the share of articlesdelivered late in the concerning period. Tooearly deliveries are not considered.

Avg. Lead-time Goods Receiving Date - Order Generating DateKPI measures the average lead timebetween order and delivery.

Stock Coverage Avg. Daily Stock Qty / Avg. Daily Sales QtyKPI answers the question, which timeframe(days) is covered with the actual stock.

P&G-Metro SC Performance Improvement Project-- Tools- KPIs/ Scorecard Definition

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KPIs KPI Value Scoring ScoreFill Rate (in % ) 84.7% (84.7%-60%)*2.5*50 30.9LTR-Too Late Deliveries (in %) 19.7% (40%-19.7%)*2.5*30 15.2Order To Delivery LT (in days) 3.0 (20/6)*(1/3)*6 6.7Total Score 52.8

KPIs Weight

Fill Rate (in % ) 50 (value - 0.6) *2.5 *weightLTR-Too Late Deliveries (in %) 30 (0.4- value)*2.5*weightOrder To Delivery LT (in days) 20 ((weight/6)*(1/value)*6* Value of the KPI

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For the time being the focus of the scoring is on order related KPIs only (Fill Rate, LTR - Too Late Deliveries, Order To DeliveryLead-time)

100 600 40

Limits Scoring FormulaFull Score No Points

Scoring Concept

Example of Scoring sample report

P&G-Metro SC Performance Improvement Project-- Concept and Example

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� Execution

• Dedicate one P&G Logistics Manager to work with Metro SCM and HQ Buyer/Store Operation to jointly gain a deep understanding of store operation processes.

• Developed a set of Hypotheses on the key factors and root causesleading to low FR in each bucket and developed a set of solutions to address the root causes.

• The 4 stores (ZB, SZ, TJ, GZ) were selected for the pilot based on the relatively low level of promotion pack Fill Rate, then deploy nationally.

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� Pilot Stores

• The chart above shows Metro FR data for the 4 pilot stores during Jan-Jun07, the average FR is only 60%, TJ store even have 27% FR before.

0%10%20%30%40%50%60%70%80%90%

100%

Jan07 Feb07 Mar07 Apr07 May07 Jun07

ZB CS TJ GZ

� ZB is in Shanghai

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� Root Cause

• During the pilot project period (Jul07), service defects in the 4 stores significantly declined from 22.35% to 6.3% on “Promotion pack over allotment order”. Highlight has been the “CS store”, which could be reduced to 0 defect rate on “over allotment order”.

• Meanwhile, during the pilot period, for open allocation day order, we established a tracking to every store order, no store over inventory amount

when placing order, which greatly meet our target.

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� Results

• During the pilot project period (Jul07), service defects in the 4 stores significantly declined from 22.35% to 6.3% on “Promotion pack over allotment order”. Highlight has been the “CS store”, which could be reduced to 0 defect rate on “over allotment order”.

• Meanwhile, during the pilot period, for open allocation day order, we established a tracking to every store order, no store over inventory amount

when placing order, which greatly meet our target.

05

101520253035404550

All(Jan-Jun)

All Jul GZ(Jan-Jun)

GZ Jul CS(Jan-Jun)

CS Jul ZB(Jan-Jun)

ZB Jul TJ(Jan-Jun)

TJ Jul

Over allotment during allocation period Open allotment day

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FR Improvement Project Phase I Review-- Fill rate improvement CY2007

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� FR improved from previous 60%(Jan-Jul 07 average) vs current 76%(Aug07-Feb08 average), 16% improvement already.�

� Promotion pack unfilled rate decrease 50% after process implement.�

� In Feb08, we got historical high FR data as 82%.�

� FR project was successfully put in Global M&M and P&G joint 2007 annual report as the first China supply chain golden case.�

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Contact Details

Metro: Mr. Denny Yang – Head of SCM [email protected]. Jin Lan – Metro China [email protected]. Xu Bin –Flow and Demand Manager of [email protected]. Nellie Wu – SCM [email protected]

P&G: Ms. Terry Tang – Metro Team CBD [email protected]. Kim Kehoe – P&G Customer Logistic [email protected]. Grace Li – Metro Team logistic [email protected]. Philip Cai – Metro Team Category Management Account [email protected]

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Backup

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Supplier KPI / Scorecard

SupplierABC

OrderQty

PlannedDelivery Date

GR-Date GR-quantity

GR (excludingover delivered

Qty)

LateDelivered

QtyArt. 1 100 15.07.05 15.07.05 120 100 0Art. 2 100 15.07.05 14.07.05 100 100 0Art. 6 100 21.07.05 22.07.05 40 40 40Sum 240 40

Leadtime Reliability Late% = Late Delivered Qty / Total Delivered Qty (over delivery excluded)Leadtime Reliability Late% : 40/240 = 16.7%

SupplierABC

Order quantity GR quantity Overdelivery

Shortdelivery

Art. 1 100 120 20 0Art. 2 110 80 0 30Art. 3 100 0 0 100Sum 310 200 20 130

Fill Rate shortfall% = (Ord Qty - Short Qty) / Ord Qty (over delivery excluded)Fill Rate shortfall% : (310-130)/310 = 58.1%

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Supplier KPI / Scorecard

SupplierABC

Order SendingDate

Goodsreceiving Date

LeadTime

Order line 1 01.03.2006 05.03.2006 4 days

Order line 2 08.03.2006 15.03.2006 7 days

Order line 3 21.03.2006 27.03.2006 6 days

Average Lead Time in Days = (4+7+6)/3 = 5.6Lead-time = Goods Receiving Date - Order Generating

SupplierABC

Avg. Stock inMU

Avg. Sales inMU

Art. 1 50 2

Art. 2 50 3

Art. 3 100 5

Stock coverage = 200/10 = 20 daysStock coverage = Avg. Stock in MU / Avg.

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asia ecr p-g china-metro supply chain performance improvement project-7

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