The Business Need for Speed to Customer. Being Right - Insight-driven Fast Innovation. Being Fast - Agile Supply Chain

Transcription

1 Speed to Customer: Being Right, Being Fast and Being Efficient 9 th October 2012 The Business Need for Speed to Customer Being Right - Insight-driven Fast Innovation Being Fast - Agile Supply Chain Being Efficient - Lean Supply Chain Summary 2

2 Product Innovation is a Top Priority for FMCG Companies 3 Responsive and Flexible Supply Chain 4

3 Lean Efficient Supply Chain 5 Consumer Insights / Concept Development Lack of definition Disconnected from consumer needs Sharpen brand positioning Raise brand awareness in emerging markets Product Development Low hit rates & reusability; slow time to market Lacking in private label penetration and overall assortment ownership New agendas to drive with supplier brands Distribution & Transportation Offshore slow cycle time Lack of visibility and flexibility Excess inventory Excess mark-downs & obsolescence Post-Sale Service and Feedback Typically ignored or not timely Often disconnected Concept & Planning Product Development Sourcing & Manufacturing Logistics Post-Sale Service Merchandizing & Support Category Strategy & Line Planning Lack of Process Rigor Slow to Move to Next Generation Disconnected plans Sourcing Inflexible Sourcing Strategy Lack of Purchasing Power Disconnected from Retail Strategy Lack of supplier integration Manufacturing Fragmented supplier base Disconnected planning from merchandising to space to supply Slow response time In-Store Merchandising Costly last mile of supply chain Not built for speed; built for efficiency Difficult / costly to change in store set-up 6

4 Bringing the right products to the right customers Being Right Manufacturer / Retailer Levers Market Share by being first to market with exclusive products Revenues through trend-right, innovative, customer-centric items and assortments Delivering the right products to customers when they want it and faster than the competition Being Fast Speed to the Customer Margin by offering the differential products that are always in stock OSA (On Shelf Availability) with supply chain speed and responsiveness Returns and Obsoletes by increasing promotion effectiveness and closeness to market Costs by streamlining processes and eliminating inefficiencies Operating in the leanest, most efficient manner possible Being Efficient Loyalty by being Right and Fast, excellence in customer service and issue responsiveness 7 The Business Need for Speed to Customer Being Right - Insight-driven Fast Innovation Being Fast - Agile Supply Chain Being Efficient - Lean Supply Chain Summary 8

5 Customer Insight Led With increasing focus on greater ownership or influence of their product portfolios, retailers need to develop actionable segmentation and identify the features and functions across their assortments (both private and branded) that drive the right value proposition that each segment is willing to pay for. Being Right Fast Innovation Powered Product development must be built on the premise of fast innovation to ensure being first to market with what customer will want to buy. Network Enabled Retailers should leverage their network of partners to continuously consolidate their product ideas and ensure viability based on their development cycles. 9 Capturing VoC : Reckitt Benckiser Uses consumer insights to extend product usage into other parts of the home NPD strategy aims at consumer needs for convenient & time saving cleaning products Leverages local R&D centers to gather local ideas, demographic, social trends Launched innovative products like Dettol fast mop, Air Wick, etc ignored by competitors VoC for product extension: Heinz Result The upside down ketchup bottle A consumer survey found that 25% stick a "knife in the bottle to start the ketchup flow, and 15% actually store it upside down. Heinz integrated this insight into product innovation. Voice vs. Heart of customer : Del Monte Del Monte sent anthropologists to observe mothers at home, making meals in the kitchen. VoC - 'I really want to prepare healthy food for my family HoC - Insights obtained from observation Mothers face challenges like kids pulling on their legs, less time available to prepare meals than planned for. Conclusion Del Monte develop healthy, convenient products, like easy-to-open packaged fruit and frozen fruit desserts to cater to the trade-offs & shortcuts adopted by Moms. VoC for market extension: Danone Launched its affordability initiative to expand its market share to the low-income consumers in Asia, Latin America and the Africa/ Middle East region Used consumer insights to develop products with lower price points, enhanced nutritional value and larger SKU sizes, without on compromising high standards for quality and food safety. The combination of convenience and affordability has paid off, as now 33 percent of Danone s sales are generated in developing countries. 10

6 Converting the right set of market and customer relevant ideas through a repeatable innovation process supported by the right operating model, people and tools Effectiveness Speed Right & Timely Products Right Idea Right Operating Model Quality and richness of insights, ideas and pipelines Identify the right growth opportunities Spotting market trends and understanding customer needs Ensuring the product meets the consumer needs Customizing products as per local needs Optimize Global R&D operations around a regional / local footprint Create distributed network of Innovation Centres and Innovation Shared Services Allocate skills base across geographies Balance Global - Local strengths and power of small entrepreneurs Structure process for global transmission Right Innovation Process Right People and Tools Processes to rapidly convert ideas into viable products Identify the right growth opportunities Spotting market trends and understanding customer needs Ensuring the product meets the consumer needs Customizing products as per local needs People, Tools & Infrastructure to foster systematic execution Maximize returns from the investment on innovation/r&d Fostering a culture of innovation Increasing pool of ideas Improve receptivity and success rate of product innovations 11 From Traditional Innovation R&D Model to Open Innovation & Value Delivery System to Open Innovation & Value Delivery System Key Considerations Identification of strategic partners Program governance model Determine levels of access to network for security Identification of key innovation metrics Legal considerations/ip control Cloud based networking Technology infrastructure and training Effective framing of challenges Participation incentives and mechanics Change management to help embed open innovation in company culture Open Innovation programs allow you to accelerate the commercialization of new products/services by incorporating the capabilities of external resources P&G s Connect + Develop enables them to share R&D with worldwide partners and bring great ideas to market. P&G has established active agreements with innovation partners 50% of product initiatives at P&G involve significant collaboration with outside innovators. 12

7 Shelf Poin t o fsale CG&S & Retail Digital camera / Smartphone KPI extraction Analytics In the next generation of Collaboration, companies will engage in Product Innovation but also in faster product introduction, shortening process cycles and time-to-market Joint Strategic Business Planning Operational Far Sighted Innovate Product Generate Demand Manage Supply Assure Execution Joint Product Development Widening the innovation funnel, and accelerating products through the funnel more quickly (succeed or fail quickly) Greater volume of better targeted new products, faster in consumer s hands Collaborative Customer Insights / Promotions Driving a single view of the consumer and leveraging the power of analytics via detailed customer segmentation to drive assortment and promotion decisions Localized assortments, better promotional offers / bundles / targeted communications, and optimized trade funds Cross-Enterprise Integrated Planning Reducing operating and working capital expense through a virtually vertical mindset with regard to base and promo forecasting of POS and time phased replenishment In-stock with just the right inventory levels and reduced markdowns In-Store Compliance / Demand Sensing Growing the business efficiently through last mile in-store execution driven through demand signal sensing and digital merchandising technology Store and shelf accurately reflects joint retailersupplier plans, with lowest labor costs ADMS Organizational Agility Product Lifecycle Management Tools Integrated Planning Tools Analytical Engines Retailer-CGS Data Repositories Collaborative Platform 13 The Business Need for Speed to Customer Being Right - Insight-driven Fast Innovation Being Fast - Agile Supply Chain Being Efficient - Lean Supply Chain Summary 14

8 Being Fast Integrated Planning Perpetual Sessions Agile Supply Chain Demand-Driven planning integrated to one version of the truth Operational Capabilities Moving from seasonalbased, sequential assortment, category management and product development activities to iterative, dynamic processes to rapidly bring new branded and private label products to market Visibility and Flexibility to monitor and coursecorrect effectively and efficiently in an ever changing world. Stockless product flow (flow thru) and Supplier Integration. 15 Strategic Intent Store Operations In Season & Exit Management Stock Accuracy Forecasting & Replenishment Operating Unit Planning Company Financial Planning Rolling Forecast Distribution Space Planning Assortmen t Planning Supplier Management Category Performance Reviews Merchandisi ng Key Tenets of Integrated Planning One Plan to which the company is executing. Tailored to distinctive supply/ demand characteristics Responsive to evolving demand signals Leveraging inventory management processes that are flexible and. Work from a common planning model and platform Driving accountability to results across the enterprise 16

9 Optimal Supply Chain Locations Cost/Benefit Analysis Optimal product flows: Optimal flow per product group or supplier Optimal logistic parameters: Production Costs Transport and warehouse costs Inventory Costs Required logistic capacities: How many DCs required Location of these DCs Size of these DCs Required operations (X-Dock etc.) Optimal inventory locations: Centralized vs. decentralized Detailed cost/benefit analysis: Inventory carrying costs Handling & transport costs Lost sales Detailed business case: Impacts on P&L, investment appraisal Enabling Speed Though an Optimized Network Ensure optimal product availability Integrate recently acquired companies and/or locations Decide lease renewal plans for existing facilities Support pull- versus push- distribution Meet or improve customer service levels Accelerate the flow through the supply chain Manage dealer service and/or fixtures Support new markets, products and capabilities Supply Chain Network Business Considerations Minimize facility running costs Reduce transport logistics costs Minimize inventory costs Improve distribution capacity utilization Forecast cost effective solutions considering future sales growth 17 Customer Insights/ Concept Management Category Strategy/ Line Plan Product Development Sourcing Manufacturing Distribution & Transportation In- Store Merchandizing Post Sales Service & Feedback From Sequential Linear process steps, typically executed once per season Examples: Trending colors are added to the assortment next season Customer feedback leads to next season adjustments to an accessory or how a collection is displayed Slow moving products leave the store only in the arms of customers after being heavily marked down In-Store Merchandising Distribution and Transport Post-Sales Service and Feedback Manufacturing Customer Category Strategy/ Line Plan Sourcing Concept Development Product Development To Iterative & Dynamic Process linkages throughout the value chain to respond dynamically to changing customer needs Examples: Trending colors are added to the assortment in the current season Customer feedback leads to in-season adjustments to an accessory or how a collection is displayed Slow moving products are cost-effectively transferred to other stores / regions or channels / dot-com and sold at a higher margin 18

10 Integrated Demand and Supply Chain Planning Segmented SC Planning Tailored demand planning & replenishment models by category (eg. For fashion short-lifecycles, vs. stable long lifecycles, vs. one-time products, ) Segmented SC in Fulfillment Tailored product flows (eg. Direct to store, stocked in supplier DC, in RDC, vs. flow through vs. cross dock,...) Strong analytics enable High Performers to ensure that the right decisions are being taken consistently/timely at the point of impact 19 Being AGILE requires both the capabilities and the culture to operate in a fundamentally different way 20

11 The Business Need for Speed to Customer Being Right - Insight-driven Fast Innovation Being Fast - Agile Supply Chain Being Efficient - Lean Supply Chain Summary 21 Results Oriented Culture Minimizing approval layers, accelerating decision-making, avoiding too many meetings, ensuring true decision making power is not aggregated at too few and too high of levels. Being Efficient Operational Effectiveness Awareness and understanding of endto-end implications of key decisions which may lead to inefficiencies across the value chain Lean Execution Avoiding poorly connected processes, information gaps, and operational silos which create waste and re-work and contribute to suboptimal cost structures. 22

12 Efficient Enterprise has to be Results Oriented and supported by rigorous Performance Management to align leadership and employees on what really matters Performance Management is a critical success factor in creating an Efficient Enterprise. It is the link between improvement activities and business performance Business Performance Performance Management Operational Improvement Cascade value-focused drivers throughout the organization Set stretch targets based on known opportunities Constantly review and enhance the performance + Known opportunities Stretch target + 23 After many years of success in manufacturing industries, Lean Six Sigma is finally catching on within the retail and consumer goods industries Lean Six Sigma (LSS) is a continuous improvement methodology that combines two of the most powerful improvement engines available to business today. 24

13 Examples of Lean at Leading Retailers Excessive Inventory A large retailer operated a group of stores in urban areas with high sales volume per square foot but little backroom space to hold inventory. The excess inventory squeezed into these spaceconstrained stores led to multiple handling of product, difficult inventory management, inefficient use of labor, frustrated associates and managers as well as negative impact on the customer experience. Without negatively impacting in-stock products or sales, the implemented Lean Six Sigma solutions reduced inventory by 8,800 units per store and weeks of inventory supply from 10.7 to 7.8 Kaizen: New Store Cost Reduction Over the course of a 1-week Kaizen event, a Lean Six Sigma team discovered more than 30 unnecessary components of the original design. They created a new construction process and timeline resulting in more than $5 million in annual savings and increased margin from earlier store upgrade openings. Accelerated improvement: Weekly insert process A large US retailer determined the advertising portion of the weekly insert took 14 work days to create. The defect rate with its current process exceeded 90 percent resulting in extensive rework. The team implemented solutions that reduced the cycle time from the first touch by advertising was reduced to four days, and the defect rate decreased to less than 5 percent. 25 The Business Need for Speed to Customer Being Right - Insight-driven Fast Innovation Being Fast - Agile Supply Chain Being Efficient - Lean Supply Chain Summary 26

14 Bringing the right products to the right customers Delivering the right products to customers when they want it and faster than the competition Operating in the leanest, most efficient manner possible Being Right Being Fast Being Efficient Operational Imperatives Customer-insight driven innovation and product development and Customer segment-based products Operating models to optimize Global vs. Regional needs Social Networking Strategy to capture Voice of the Consumer Tight Collaboration with Customers and Suppliers Faster innovation cycles and increased share of innovation in revenue growth Integrated / Collaborative Retailer - Manufacturer dynamic supply chain planning and execution processes Demand-sensing supply chain and segmented product flows PoS Sell-out data driven insight for planning and replenishment Customer--centric service models and responsive supply chain Actively manage the complexity out of the supply chain Shared Logistics and Dynamic Networks Optimal downstream cost to serve driven Routes to Market Upstream TCO approach Lean Manufacturing and MES / EMI actively managed Continuous spend visibility and supplier rationalization 27