Reinventing partnership with warehouse team members We help companies enter new markets and expand in existing markets For GS1 Malaysia Supply Chain & Logistics Summit By Lee Choon Kein, General Manager Concorde Hotel Shah Alam, Kuala Lumpur, Malaysia, 8 October 2013 New-Generation Suppl y Chains: Engine for Growth We serve more than 13,000 customers in Malaysia, ensuring that our clients products are visible on the shelves at all times Helping companies to grow their busi ness in new and existi ng mar kets Provi ding busi ness partners with the knowledge, advice, relationships, and onthe-ground logistics to reach their indivi dual growth goals Expanding their access to knowl edge, their sourcing base, revenue opportunities, and ultimately, their market shares This is what we define as Market Expansion Ser vices Page 3 Agenda with a comprehensive portfolio of services Executive summary : DKSH Malaysia Labour challenges faced by distribution centres (DC) How do we meet the challenges? Case study: increasing DC productivity by implementing KPI incentives Smart partnership Q&A Page 2 Page 4
Over 100 years history in Malaysia DKSH has been conducting business in Malaysia for over 100 years Originally operating under the name of Diethel m, the first branch office was set up in 1923 in Penang Today, DKSH has grown fr om strength to strength with its main office based in Petaling Jaya, Selangor with 21 regional offices nationwide Our industry expertise Four highly specialized Business Units A long history of entrepreneurship and bridging cultures Page 5 Page 7 DKSH Holdings (Malaysia) Berhad Capillary distribution network to Page 6 Page 8
Marketing and Distribution Serv ices selected suppliers Distribution facilities Four ISO certified distribution centres Eight regional warehouses Over 600,000 square feet of total warehouse space Over 60,000 pallet capacity Ambi ent, air-conditioned, chilled and frozen storage New HEC distribution centre to be completed in 2013 Through our state-of-the-art infrastructure, we professionally store, transport and distribute products to the market place Page 9 Page 11 Agenda Executive summary : DKSH Malaysia Labour challenges faced by distribution centres (DC) How do we meet the challenges? Case study: increasing DC productivity by implementing KPI incentives Smart partnership Q&A Page 10 Page 12
The challenges How do we meet the challenges? Page 13 Page 15 Agenda 7S concept ( 七常法 ) in the warehouse Executive summary : DKSH Malaysia Labour challenges faced by distribution centres (DC) How do we meet the challenges? Case study: increasing DC productivity by implementing KPI incentives Smart partnership Q&A Sort/Sisih/ 常組織 sort through an area removing unnecessary items Set in order/susun/ 常整頓 arrange necessary items for easy and efficient access Shine/Sapu/ 常清潔 clean ever ything Standardize/Seragam/ 常規範 create guidelines for keeping area organized, clean & visual management Sustain/Sentiasa/ 常自律 educating, communicating & maintaining the standards Safet y/selamat/ 常安全 ensur e safe working condition to prevent accident Securit y/sekuriti/ 常保衛 ensure tight control on security measure Page 14 Page 16
7S audit 7s audit team p erforming warehouse audit Cultivate DKSH corporate values Staff performance of all levels are appraised based on DKSH Corporate Values Page 17 Page 19 DKSH corporate values Continuous work improvement Our corporate values describe and articulate the unique culture of D KSH. As such, they provide us guidance to set priorities in our daily work life and shape our behavior. SCM cost savings performance vs. target 2013 project completion summary (accumulative) Page 18 Page 20
Pick face & space utilization improvement Increasing team members productivity by implementing KPI Incentive at consumer goods distribution center in Klang, Selangor Distribution Center Key facts Total Area of Distribution Center Total Storage Area 131,000 sqm 55,000 sqm Ambient Storage Capacity 49,638 pallets Air-conditioned Storage Capacity 4,678 pallets Office & Staff Facilities 2,220 sqm Docks 88 units CGL, Klang High Level Storage 7 levels for pallets (10.2 meters to top beam) Our distribution center in Klang, Selangor Address: Lot 10394, 10451, 10452 Jalan Sungai Jati, 41200 Klang Standard Pallets 1.2m x 1.0m Emergency Power Supply Rated for continuous with on site fuel reserved Operated 1998 since: Ownership: Rental/Leased Fire Protection System Localized hose reel & hydrant Full roof & in rack sprinkler system Page 21 Page 23 Agenda KPI incentiv e to boost productivity Executive summary : DKSH Malaysia Project Background Labour challenges faced by distribution centres (DC) How do we meet the challenges? Case study: increasing DC productivity by implementing KPI incentives Smart partnership Q&A Objecti ve: The objecti ve of the KPI incentive scheme is to i mprove the producti vity of the warehouse operations with the current wor kforce. Methodolog y: The method identified is to introduce a KPI pr ogram where either i ndi viduals or entire sections are gi ven a certain goal to achieve. If the goal is achieved, management will then reward the individual or section personnel in the form of monetary rewards. Scope: The program will be introduced to the pickers as pilot run (to improve pick rate). Eventuall y, it coul d cover all empl oyees in the reach truck drivers, and checkers directly related to the warehouse operation. Page 22 Page 24
Qualifying criteria Cost saving analysis 1. The Incenti ve is payable for wor k perfor med over a minimum of 20 wo rkings days over a 26 wor king days in a month. Each of the 20 wor king days will be based on 8 working hours. 2. The picking error rate must not exceed the targeted percentage and is to be verified by checker. 3. There must be NO MHE accident and housekeeping must be of reasonable standard. 4. A top-up amount will be awarded to the employee if he wor ks a full 20 wor king days without MC, absenteeism & emergency l eave during the month. Late reporting to wor k more than 3 times will also cause the employee to be disqualified. 5. The Management may revi ew and incr ease the KPI as and when necessar y to further increase the productivityof the operations. 6. The Management also reser ves the right to cancel or cease the KPI Incenti ve if it is not well received by the staff accordingly. Productivity Details as at June 2012 Benchmark Total Picker 117 Total line picked/month 289894 Pick Rate (line picked / picker worked hour) 11 Improved Pick Rate Target Tier Incentive Scheme Details Workhour Comparison Cost Saving Pick Rate Improvement % Improved Pick Rate Improvement Incentive Top-Up incentive Workhour required (Current) Workhour required (After) Workhour Savings Nett CoS - Incentive - Top Up Annualised Saving Estimate Tier 1 20% 13.2 MYR 100 MYR 50 26354 21962 4392 MYR 17,586 MYR 211,032 Tier 2 35% 14.85 MYR 150 MYR 50 26354 19521 6833 MYR 31,264 MYR 375,168 Tier 3 50% 16.5 MYR 200 MYR 50 26354 17569 8785 MYR 41,030 MYR 482,360 POTENTIAL SAVING PER YEAR RM482,360 Page 25 Page 27 Selection of target measurement What is the correct measurement for Pickers achievement? 1. Pick Rate: Number of carton picked per worked hour 2. Pick Rate: Number of line picked per worked hour Pick rate after KPI incentiv e roll out in July 2012 88% Total carton Picked Total Li ne picked Total Hour Picked Rate Eg.1 100 1 1 100 ctn / hr Eg.2 100 10 1 100 ctn / hr Eg.3 100 1 1 1 line/ hr Eg.4 50 1 1 1 line / hr Pick rate by line is selected based on the assumpti on of picki ng time is 70-30 between traveling and picking, and most of our pickings are loose. Av erage pick rate Page 26 Page 28
Cost saving analysis - actual Medical leaves taken Jan 12 to YTD Aug 13 Before Incentive After Incentive Page 29 Page 31 Pickers headcount Jun 12 to Jul 13 Agenda No of pickers Executive summary : DKSH Malaysia Labour challenges faced by distribution centres (DC) How do we meet the challenges? Case study: increasing DC productivity by implementing KPI incentives Smart partnership Q&A Source: CGL Pickers Productivity report Page 30 Page 32
Extrinsic and intrinsic motivation Smart partnership Low Extrinsic Moti vation High Well Rewarded Deficiency Needs Fulfilled Obliged Feel Li ke Taken For Granted Low Initiati ves Trouble! Committed A sense of Belonging Self Discipline High Job Satisfaction Inner Self Needs Fulfilled Physiological Needs Ar e Not Fulfilled Smart Partnersh ip Index Productivity Index Values Index (Intrinsic + Extrinsic) Productivity Index Values Index (Staff Extrinsic & Intrinsic Motivation) Total Productivity Management Target of Productivity X 100% Staff Values Index (Questionnaire Survey) Management Target of Staff Values Index Low Intrinsic Moti vation High Page 33 Page 35 Extrinsic, intrinsic motivation & productiv ity Smart partnership Low Intrinsic & Extrinsic Moti vation High High Motivati on but Low Producti vity Low Motivation & Low Producti vity High Motivation & High Productivity Low Motivation but High Productivity Objective of Smart Partnership Strive to achieve a Smart Partnership index of 100%. Smart Partnership Below 100% Indicate that productivity is not on bar with staff motivation ( extrinsic and intrinsic). Need to identify reasons of low productivity. Implement improvement projects. Smart Partnership Above 100% May be good for company in short term but not sustainable in l ong ter m. Staff could feel demotivated and productivity would plummet. To maintain or i mprove producti vity further, staff extrinsic and intrinsic motivation must not be neglected. Low Pr oductivity High Page 34 Page 36
Smart partnership surv ey done in June 2012 (before implementing KPI incentive) Smart partnership surv ey done in Feb 2013 (after implementing KPI incentive) Extrinsic M oti vati on 1 (Very Bad) (Sangat Teruk) 2 (Bad ) (Ter uk) 3 (Average) (Sederh ana) 4 (Go od) (Baik) 5 (Very Go od) (Sangat Baik) Tota l Sample Average Score Extrinsic M oti vati on 1 (Very Bad) (Sangat Teruk) 2 (Bad ) (Ter uk) 3 (Averag e) (Sederh ana) 4 (Go od) (Baik) 5 (Very Go od) (Sangat Baik) Tota l Sample Average Score What do think of y our pay as c ompared to the mark et? 1 (Pendap at an da te ntan g gaji a nda sek aran g be rban ding p asara n?) Is your work commens urate to your work? 2 (Adakah gaji and a setim pal de ngan k erja anda ) How is the b onus p aid to y ou? 3 (Bagaimana bonus dibayar k epada anda?) Is there any inc entive / reward for good performance? 4 (Adakah t erda pat a pa- apa ins entif/g anjara n unt uk pr estasi ke rja yan g baik?) Overall, a re yo u hap py with yo ur inco me? 5 (Secara k eseluruhan, adak ah anda berpuas hati dengan pendapatan anda? ) 11 9 33 23 8 84 3.10 4 16 35 23 7 85 3.15 43 11 20 1 5 80 1.93 15 26 18 10 6 75 2.55 5 14 33 16 9 77 3.13 1 2 3 4 5 What do think of y our pay as c ompared to the mark et? (Pendap at an da te ntan g gaji a nda sek aran g be rban ding p asara n?) Is your work commens urate to your work? (Adakah gaji anda setimpal dengan k erja anda ) How is the b onus p aid to y ou? (Bagaimana bonus dibayar k epada anda?) Is there any inc entive / reward for good performance? (Adakah t erda pat a pa- apa ins entif/g anjara n unt uk pr estasi ke rja yan g baik?) Overall, a re yo u hap py with yo ur inco me? (Secara k eseluruhan, adak ah anda berpuas hati dengan pendapatan yang b aik?) 1 12 29 21 17 80 3.51 2 2 26 44 6 80 3.63 18 4 21 29 8 80 3.06 4 1 16 46 13 80 3.79 8 8 16 36 12 80 3.45 1 3.85 1 7.44 Intrinsi c M otiva tio n 1 (Very Bad) (Sangat Teruk) 2 (Bad ) (Ter uk) 3 (Average) (Sederh ana) 4 (Go od) (Baik) 5 (Very Go od) Tota l Sample Average Score (Sangat Baik) Intrinsi c M otiva tio n 1 (Very Bad) (Sangat Teruk) 2 (Bad ) (Ter uk) 3 (Averag e) (Sederh ana) 4 (Go od) (Baik) 5 (Very Go od) Tota l Sample Average Score (Sangat Baik) Do you fe el goo d ab out yo ur job? 1 (Adakah anda beras a seronok dengan pek erjaan anda) Are you happy with the work you do? 2 (Adakah anda gembi ra dengan kerja y ang anda buat?) 1 1 29 30 19 80 3.81 1 31 28 18 78 3.79 Do you fe el goo d ab out yo ur job? 1 (Adakah anda beras a seronok dengan pek erjaan anda) Are you happy with the work you do? 2 (Adakah anda gembi ra dengan kerja yang anda buat?) 15 34 31 80 4.20 9 43 28 80 4.24 3 Are you learning something useful in y our work? (Adakah anda mempelajari s esuatu yang berguna dari kerja anda? ) 2 1 20 34 21 78 3.91 3 Are you learning something useful in your work? (Adakah anda mempelajari sesuatu yang berguna dari kerja anda? ) 17 43 20 80 4.04 Do you fe el app reciate d of y our wo rk do ne? 4 (Adakah anda rasa dihargai atas kerja yang anda buat? ) 9 7 26 26 12 80 3.31 Do you fe el app reciate d of y our wo rk do ne? 4 (Adakah anda rasa dihargai atas kerja y ang anda buat? ) 5 27 28 20 80 3.79 Overall, how is your job satisfaction? 5 (Secara k eseluruhan, bagaimanak ah kepuasan bekerja anda? ) 3 35 30 11 79 3.58 5 Overall, how is your job satisfaction? (Secara k eseluruhan, bagaimanak ah kepuasan bekerja anda? ) 4 14 37 25 80 4.04 1 8.41 2 0.30 Total Value Index 32.26 Total Value Index 37.74 Page 37 Page 39 Smart partnership score before implementing KPI incentive Smart partnership score before & after implementing KPI incentive Before June 2012 After Feb 2013 Before June 2012 After Feb 2013 Productivity Index Total Productivity 11-0.611 Management target of productivity 18 21 Total Productivity 11 18.13 Productivity Index 0.611 0.863 Management target of productivity 18 21 (Intrinsic+Extrinsic) Staff Questionnaire Survey 32.26-0.849 Values index Management Target of values index 38 42 (Intrinsic+Extrinsic) Staff Questionnaire Survey 32.26 37.74 0.849 0.899 Values index Management Target of value index 38 42 Smart Partnership Index Productivity Index X 0.611 (Intrinsic + Extrinsic) Values Index 100% 0.849 72% - Smart Partnership Index Productivity Index X 100% 0.611 72% 0.863 96% (Intrinsic + Extrinsic) Values Index 0.849 0.899 Page 38 Page 40
Thank you for your attention DKSH Malaysia Sdn Bhd Lot 10394, 10451, 10452, Jalan Sungai Jati, 41200 Klang, Selangor Darul Ehsan, Malaysia Phone +60 3 5520 8800 Fax +60 3 5520 8810 www.dksh.com Disclaimer Due care has been used i n preparation of this presentation and DKSH makes ever y effort to pr ovide accurate and up-to-date information. Nevertheless, this presentation may be subject to technical inaccuracies, information that is not up-to-date or typographical errors DKSH does not assume liability for rel evance, accuracy and completeness of the information provi ded. DKSH reser ves the right to change, suppl ement, or delete some or all of the information on this presentation without notice The layout, graphics and other contents in this pr esentati on are pr otected by copyright law and should not be reproduced or used without DKSH s written permission Page 42