Driving Growth and Improving Costs in Collaboration for One Supply Chain FMI-GMA Supply Chain Conference February 16, 2015 Mark Hersh Clorox Lisa Malvea Clorox Kevin Zweier CHAINalytics
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Why Collaboration Matters Our 2020 Strategy has aggressive goals requiring new thinking Deliver top third Total Shareholder Return Grow Net Customer Sales to the higher end of 3-5% per year Grow EBIT Margin 25-50 basis points per year Grow Overall Market Share and partnering with others will help deliver our targets. The marketplace where we compete is getting more complex and diverse. We are all trying to solve the same problems. We believe partnering with our retailers and suppliers will result in integrated solutions and more transformational value for both parties. 2
Serving our consumer base is becoming more challenging Many are extremely value conscious Multiculturalism requires right product designs Aging population in the U.S. Consumers outside of the U.S. have different needs Technology gives consumers access to an incredible amount of real time data Shopping patterns and preferences are becoming more diverse 3
Market place continually changes and adds complexity Retailers demanding lower working capital, increased differentiation, and improved profitability Explosion in new channels and store formats Amazon continues to grow exponentially Increasing supply/demand imbalance Clorox has entered several new channels 4
Voice of Customer Why Is VOC Important? Listen to hear and understand Customer s Voice Learn from all voices: Consumer, Shopper, Customer, Supplier, Competition Incorporate wants/needs into business rhythm for plans/resources Ask/Listen/Learn Voice of our Customer Strategic Direction Objectives & Priorities Capability Needs Now & Future Clorox Gap vs. Needs Assess Model Analytics to identify ways to improve performance cost, efficiency, growth Refresh & Recap Accountable for continuous improvement Activate via Planning Process Build & Create Operationalize Measure 5
Supply Chain Advisory Services Base Operations Transformational Change Buy > Make > Ship Proactive Analytics on Base Operations Trusted Partners Joint Value Creation Improvement Services Store Display, Inventory, OSA Scorecards & Proactive Problem Solving Improving Sales & Profitability 6
Agile Inventory, an Improvement Service Peanut Butter Approach Growth Planning Process Sales not optimized in top stores Too much inventory in bottom stores Layered, dynamic and disciplined Smart inventory to the right stores 7
Value Stream Mapping Lite Improve the process from start to finish Reduce/eliminate waste and remove time Become more agile, responsive and cost-effective 8
One Supply Chain Think as One Company around supply chain Suppliers Clorox Suppliers + Clorox + Customer Customer 9
Joint Warehousing & Co-Shipping Multiple Manufacturers Consolidate Warehousing Multiple Manufacturers Ship to Same Retailer 10
Learnings & Insights Voice of Customer Listen to Hear and Understand your Customers with discipline/cadence Incorporate their voice into your operating plans TAKE ACTION Refresh plans annually based on new information Supply Chain Advisory Services with Retailers Base Operations: a Must with/before Improvement Services + Transformational Jointly commit to partner, learn & create value together Discipline + Diligence to drive iterative improvement with accountability One Supply Chain Use transparency to drive wins across the supply chain Requires a new level of communication Utilize End to End Metrics to improve OSA and Profitable Growth 11
Path Forward Adopt Voice of Customer cadence to improve plans Apply Supply Chain Advisory Services to improve partnering, sales & profitability across One Supply Chain Advance Agile Inventory with more partners Employ Value Stream Mapping Lite to create joint value Identify and employ end-to-end Metrics to improve OSA for Shopper/Consumer Continue looking for opportunities to improve efficiencies and grow topline 12
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Driving Growth and Improving Costs in Collaboration for One Supply Chain
WHO IS CHAINALYTICS? 18 of Gartner s TOP 25 supply chains 80 of 5 TOP 10 RETAIL 7 TOP 10 FOOD & BEVERAGE 6 TOP 10 CPG the FORTUNE 500 5 TOP 10 PAPER & PACKAGING ATLANTA BANGALORE MILAN MINNEAPOLIS HELSINKI SINGAPORE STOCKHOLM SYDNEY 67 % of consultants WITH DEGREE FROM TOP SUPPLY CHAIN SCHOOL * 8 GLOBAL offices $ 23 BILLION FREIGHT spend captured in FMIC GREAT SUPPLY CHAIN PARTNER SupplyChainBrain 8 11 YEARS Gartner 2013 COOL VENDOR in supply chain services Supply & Demand Chain Executive PROS TO KNOW 15
FACT-BASED TRANSFORMATION Strategic Alignment Performance Improvement Transformation Descriptive & Diagnostic Analytics Predictive & Prescriptive Analytics Intelligence Networks Decision Support Technology 16
OUR COMPETENCIES Supply Chain Design Integrated Demand & Supply Planning Sourcing & Supplier Management Packaging Optimization Supply Chain Operations Transportation Service Supply Chain 17
FREIGHT MARKET INTELLIGENCE CONSORTIUM Chainalytics FMIC provides market rates for transportation at the lane level Current FMIC Models MODEL MEMBERS SPEND TL & IM (N.A.) 102 $18B TL (Europe) 10 1B LTL (U.S., CAN) 24 $600MM Ocean 16 $283MM MODEL MEMBERS SPEND TL for 3PLs 15 $2B LTL for 3PLs 3 $168MM Performance Reports (ALL MODES) What is my overall cost position to the market? How are my carriers performing against the market? Rate Estimators (TL & LTL) What are estimated costs for lanes in which I am not operating today? Are there opportunities to convert from collect to prepaid freight? Market Intelligence (ALL MODES) In what direction will rates trend in the future? What are members paying for freight costs outside of linehaul and fuel? 18
FMIC TRUCKLOAD MEMBER DEMOGRAPHICS Largest TL and Intermodal benchmark consortium in North America, providing apples-toapples comparison of costs by lane and service Model Statistics (as of July 2014) $18.2 Billion in transportation spend 16 Million truckloads 102 Members with TL spend ranging from $5MM to 500MM Includes U.S., Canada and in/out of Mexico 7 Models (Dry, Temp-Control, Intermodal, Flatbed, 3 Short Haul) Equivalent to about 7% of the total North American for-hire TL market Industries by Transportation Spend Food & Beverage $9.5B (52.36%) Members by Annual Spend >$200MM 24 $100-200MM 31 Retail $3.6B (19.89%) Paper/Packaging $1.7B (9.51%) Consumer Goods $1.7B (9.43%) Industrial/Other $1.6B (8.81%) <$50MM 22 $50-100MM 25 19
HOW OUR CUSTOMERS USE COLLABORATION Using analytics to identify opportunities to collaboratively transport products from multiple CPG manufacturers to a retailer Investigating opportunities for operational feasibility 0 Utilizing 3rd party to manage and execute the collaborative shipping and cost allocation process Reducing cost-to-serve while increasing velocity 20
LIFECYCLE OF TRANSPORTATION SOURCING EVENT Getting Ready Rate Collection & Communication Post Awarding Scenario Analysis These areas have the biggest impact on savings. These areas typically get all the focus. 21
CHALLENGES OF A CONSORTIUM SOURCING EVENT Getting Ready Rate Collection & Communication Post Awarding Scenario Analysis Finding the right partners Agreeing on how to approach the market Confidentiality Agreeing on bid structure and carriers Dealing with huge carrier bases Finding synergies across the networks that can truly be realized Awarding together or separate and ensuring savings opportunities are realized 22
WHAT IS LANE MATCHING? C A D Typically two large shippers working together to find cross-network collaboration opportunities Chainalytics is typically brought in after partnership is established, but we have matched companies up as well Both parties typically agree to allow Chainalytics to expose some rate information so lane matches are cost justified and the savings communicated B 23
LANE MATCHING OBSERVATIONS The one way carrier market is an efficient pricing mechanism Backhaul lane matching continues to be an incremental opportunity Most opportunity will materialize where one of the potential partners has underutilized fleet assets May potentially be pursued as contract carriage opportunity by the fleet operating partner There may be an opportunity for 3PL transportation partners to act as the coordinator between the interested parties The Devil is in the Details these opportunities can only be explored by direct conversation between the parties with matching geographies and frequencies. 24
THANK YOU! Kevin Zweier kzweier@chainalytics.com +1 (484) 604-1634