Supply Chain Innovation. Driving Costs Down and. Service Levels Up!

Transcription

1 Driving Costs Down and. Service Levels Up!

2 Background Our story began at this meeting 1 year ago Reached out to several of our CPG Trade Partners Nestle Purina Petcare wanted to explore opportunities Started with a phone call, led to core team meetings Initially we explored every link in our join Supply Chains Identified biggest opportunities where we could make an impact

3 Breaking Down Barriers Between the two companies We had to develop trust that we both wanted to improve Within our own organization Price Chopper s Supply Chain Organization was new Opportunities touched all areas of our organizations Finance Merchandising Supply Chain Operations Information Technology Developed common metrics Turns, Service Level, Lead Time Case Pick, DOH, Inventory Cost Supply Chain Warehousing / Distribution Outbound Transportation Warehouse Procurement Store / Retail Procurement Inbound Traffic Control

4 The Opportunity Solid alignment helps to discover the opportunity VMI Partnership established Turns & Service goals EDI orders & invoicing reduces discrepancies that slow the process Base Service Options minimizes activities during fulfillment 100% Customer Pickup transportation improves on-time performance Built Trust with some quick Wins Implemented EFT qualifying for our Efficient Business Incentive Reduced lead-time on our Litter Business saving on inventory investment Identified an increase in case pick activity on Wet Pet Food Primary focus was on improving inventory turns Increased Case Pick activity in order to increase turns Leading to an increase in handling expense for NPP and Price Chopper Increasing dock - $0.20/cs Increasing number of put-always - $3.00/UL Increasing the potential for damage Reducing the Warehouse Incentive dollars - $0.01/cs

5 The Opportunity 100 Service was trending down * Turns were trending up Case Pick was trending up 6/8/09 6/29/09 7/20/09 8/10/09 8/31/09 9/21/09 10/12/09 11/2/09 11/23/09 12/14/09 1/4/10 1/25/10 2/15/10 *as high as 38.9% AVG Turns Service Level % (Goal 97) Case Pick % Turn Goal (35)

6 Our Process: How we went about it Identified the optimal order quantity for Case Picked SKU s Developed an Economic Order Quantity (EOQ) model Conducted simulation based on an 18 week order cycle Break-even analysis concluded that the optimal EOQ of 5 AWI Simulation provided order recommendations at SKU level Increased order frequency for higher velocity SKU s EOQ model provides list of focus SKU s Spreading items across multiple orders in the pipeline Increased turn on fast movers off-set the impact of the case picked items Projected impact on KPI s Increase in AVG Turns to 50+ Reduce Case Pick to >3% - Nestle Purina saves equally on Case Pick cost Restore Service to 97%+ and improve consistency

7 Results Presented findings to the Core Team Generated support from Procurement to increase AWI to 5 weeks Leveraged VMI capability to implement, track and communicate progress EOQ process implemented May 3 rd aligning all (3) Metrics Service 98.8% (7/1-12/26/10) Annual Turns 39.2% (30.2 YAGO) * 2.3 Case Pick down 80% 1/3/10 2/3/10 3/3/10 4/3/10 5/3/10 6/3/10 7/3/10 8/3/10 9/3/10 10/3/10 11/3/10 12/3/10 *as low as.3% AVG Turns Service Level % (Goal 97) Case Pick % Turn Goal (35)

8 Results Resulted in a Win-Win Reversed Negative Trends Reduced Variability Provided Financial Benefit Reduced Handling Expense Improved Warehouse Utilization Improved Inventory Turns & Investment Improved Service Consistency Enabled Price Chopper to lower COGS with lowest pricing option Positioned to further reduce lead-time on the Wet Pet Food Business

9 Price Chopper vs. Their Peers (52 weeks) 50 Turns 40 After Service Level Before 30 94% 95% 96% 97% 98% 99% 100% 20 10

10 Comparing NPP vs. Their Peers (Q1 vs Q2-4) 50 Turns After Q Before Q1 Service Level 30 94% 95% 96% 97% 98% 99% 100% 20 10

11 Next Steps Established a foundation for future initiatives Inventory Optimization Improve promotional effectiveness with collaborative forecasting Improve Retail In-stock Positions Establish Item Level Service Goals to further improve service Supply Chain Capabilities Implement ASN Receiving to increase efficiency and accuracy Reduce lead time below (4) Days Best in 24 hours Unsaleables Improvement Improve the Deleted Item process to reduce shrink Drive process and packaging improvements, begin with the end in mind Collaborative Efforts Exchange E-POS data to manage the Last 100 ft Joint Scorecard tracking and shared learning