Rolling Out a Community-Based Transportation Management System: Dean Foods Case Study. VP Distribution & Logistics Dean Foods Fresh Dairy Direct

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1 Rolling Out a Community-Based Transportation Management System: Dean Foods Case Study Presented By: Lee Falk VP Distribution & Logistics Dean Foods Fresh Dairy Direct

2 Forward Looking Statements The following statements made in this presentation are forward looking and are made pursuant to the safe harbor provision of the PrivateSecurities Litigation Reform Act of 1995: statements relating to (1) projected sales (including for individual segments, for specific product lines and for the company as a whole), profit margins, net income, earnings per share, and covenant compliance (2) our growth strategy, including acquisitions and the integration of such acquisitions, (3) our branding initiatives (4) our integration, innovation, and research and development plans, (5) our cost-savings initiatives, and (6) plans to improve our balance sheet. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in this presentation. Financial projections are based on a number of assumptions. Actual results could be materially different than projected if those assumptions are erroneous. Sales, operating income, net income and debt covenant compliance, financial performance and adjusted earnings per share can vary based on a variety of economic, governmental and competitive factors, which are identified in our filings with the Securities and Exchange Commission, including our Forms 10-K and 10-Q (which can be accessed on our website at or the website of the Securities and Exchange Commission at Our ability to profit from our branding initiatives depends on a number of factors including consumer acceptance of products. All forward looking statements in this presentation speak only as of the date of this presentation. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in our expectations with regard thereto or any changes in the events, conditions or circumstances on which any such statement is based. Certain non-gaap financial measures contained in this presentation, including adjusted diluted earnings per share, free cash flow, consolidated adjusted operating income and consolidated adjusted net income, have been adjusted to eliminate the net expense or net gain related to certain items identified in our press releases. A full reconciliation of these measures calculated according to GAAP and on an adjusted basis is contained in such press releases, which are publicly available on our web site at Forward Looking StatementsSlide from CAGNY or Q3 Pres

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4 Cultured 5% Other Fluid Dairy 8% Other 2% Distributors 7% Other 8% Retailers 64% Other Beverages 5% Convenience Stores 7% Ice Cream 9% Food Service 14% Fresh Milk 71%

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6 5,800 company-owned routes 100+ Third Party Haulers 160,000 locations served 200 million miles a year 41.5 million diesel gallons

7 Dean Foods, Fresh Dairy Direct Distribution Facilities Map

8 Dean Foods Fresh Dairy Direct Supply Chain DSD Customer Dean Branch DSD Customer Raw Milk Suppliers Dean Food Plant Direct Ship DSD Customer DSD Customer DSD Customer Packaging Ingredients Frozen Refrigerated Warehouse DSD Customer DSD Customer Purchase for Resale PFR DSD Customer Dean Culture Plant Dean Fluid Plant Warehouse Customer

9 Dean Foods Supply Chain Complexity 1 year days 14 days (Less) Complexity (More) Fluid Milk Cultured Products ESL Ice Cream

10 Dean Foods Supply Chain Resource Allocation "Opportunity Costs" $62.5 Million $50,000,000 $2,500,000 $5,000,000 $5,000,000 Warehousing Morningstar 3 PL Freight Freight Inbound Interplant Direct Store Delivery

11 Dean Foods Supply Chain Current Technologies DMS RMS JDE Norand HHC Sale Data Warehouse CRP / EDI / ASN Web Based Ordering Scan Based Trading Maintenance Dossier Manhattan WMS JDE WMS Manugistics Forecasting Xata Onboard GPS Sky Bitz Trailer Tracking LeanLogistics TMS Fuelmaster UPS Routing Suite

12 CPG Headwinds: Commodities Keep Rising in Cost Bulk Diesel US to institute further sanction action again Iran Rumor of SPR release by US/UK could provide short term relief - will not trump risk from Iran Demand from China appears very strong Corn Ethanol economics have softened corn demand Assumed higher yields and expanded acreage expected to pressure price Concern over China import demand for U.S. corn

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15 Branded Margin ($$$) Private Label Margin ($) The Rocks - Inefficiency / Inventory / Assets

16 $300+ Million over next 3 to 5 years DSD Distribution Procurement WhiteWave Conversion Network Optimization

17 Dean Foods Distribution Network Key Focus NVA Eliminate Non Value Adds Excess Capacity Branches Miles NVA Labor Economic Drop Sizes

18 Technology Investments to Drive Distribution Savings On Board GPS Routing Software

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21 Prior Process Outside Hauling Current Annual Spend = $70 Million Local Management Manual Tendering Process Manual Appointment Scheduling Manual Invoice Review/Audit Process Difficult to validate current efficiencies, as well as identify potential savings opportunities without accurate data and business intelligence

22 Goals and Objectives Utilize an integrated TMS to Improve Operational Efficiency, Reduce Transportation Costs, and Support Future Growth Automate, Standardize, and Improve Transportation Management Identify and Implement Best Practices in Transportation Develop and Document SOPs & KPIs Create Synergies with WhiteWave and Morningstar for Collaboration and Cost Savings Opportunities Optimize Freight to Attain Savings Implement a Paperless Invoice Approval and Payment Process Establish Database for Reporting Improve Customer Service

23 Why LeanLogistics for Dean Foods No Capital Requirements (SaaS platform) Ease & Ability to interface with multiple OTC Systems Proven Track Record in CPG / Beverage Channels Favorable Carrier Acceptance Minimal Internal IT Support Community Based TMS enables Dean Enterprise WhiteWave Foods Platform and Morningstar Platform both on Lean

24 TMS ROI Estimate Reviewed 1,500+ Shipments Identified 71 Independent Lanes Determined Average Shipment Costs/Lane Compared rates to LeanLogistics industry benchmarks Identified 10.9% Savings on Procurement Projected additional savings through process automation and resource re-allocation

25 Observations and Opportunities Comprehensive List of Saving Opportunities 2% 2% 4.4% 1.5% 11% Optimization Dock Scheduling Efficiency Gains Routing Guide Compliance Appointment Scheduling Tendering Visibility/Exception Mgmt Continuous Move Self-Billing Paperless Match Pay Exception-based audit Assessorial Mgt Visibility Proactive Reporting KPI Mgt Performance Metric Procurement

26 New Process Outside Hauling Centralize Freight Management Tactical Strategic Automate Process Freight Tendering Appointment Scheduling Carrier and Rate Verification Procurement Standardize Processes & Procedures Vendor Management Periodic Review Process

27 27 Visibility Sample Reports Lane Summary Report: Lane Detail Report: Accessorial Report:

28 Current State & Future Plans Current State Phase 1 = 3 Ice Cream Plants & 2 Ice Cream DCs Phase 2 = All Remaining Ice Cream Plants Phase 3 = Fluid Milk & Cultured Plants Future Plans Phase 4 = Inbound Freight Phase 5 = Internal Assets & Private Fleet

29 Benefits of Using TMS Increased Visibility Direct Access to Key Data Centralized Control Standardized Processes & Procedures Improved Vendor Management Scorecards Utilized Business Intelligence & Benchmarking Supported Pre-Shipment Rate Verification Automated/Electronic Invoicing Enhanced Compliance

30 Results To Date Improved Collaboration among SC Partners Increased Efficiency of Transportation Team Achieved $1MIL+ in Savings (to date) LeanSource Procurement Freight Consolidation Miscellaneous Rate Reductions Reduction in field Dispatchers Significant Reduction in back office and manual processing of invoices Returnable Asset savings

31 Change Putting it in Perspective

32 Food Industry: Population growth will offset declines in per capita consumption and maintain category sales volume New Product Innovation and Brand Investment will maintain or mitigate branded volume decline, but will mot stem tied to private label Mature/Commodity Food product classes will remain topline challenged The Lean, Lowest Landed Cost Supply Chain is a Mandate The company that executes & manages CHANGE urgently (& judiciously) WINS!

33 Dean Foods Fresh Dairy Direct One Dean Team Providing Effective & Relevant Tools to the Field Equals Achieving Cost Leadership in the Diary Industry Today & Tomorrow

34 Questions?