Creating Value in Your Supply Chain My Approach Today Very brief - - PowerPoint PPT Presentation

Creating Value in Your Supply Chain

My Approach Today

• Very brief background on Sun-Rype
• Evaluating your Supply Chain
• Assessing functional areas
• Change
• Q&A

Sun-Rype has Deep Roots & Strong Branches

Who we are

• Regional co-op in 1946.

From the lush Apple growing region known as the Okanagan valley

• Privately held company
• wned by the Jim Pattison
• Group. North American

company with production facilities in Kelowna, BC Washington State

1 1 Who we are

What we’re proud of

• #1 Juice brand in Western

Canada with a 26 share

• #2 Fruit processor in

western North America

• World class

manufacturing facilities with rigorous attention to Safety and quality detail

2 2 What we’re proud of

Where we’re heading

• Building a brand that

resonates with Consumers

• Closely matching

consumer trends with an extensive innovation pipeline

3 3 Where we’re heading

“What if” ……..

Total Annual Costs = $100 MM

Low 1% $1MM

Medium 2.5% $2.5MM

High 5% $5 MM

Very High 7.5% $7.5 MM

Nirvana 10% $10 MM

Is More Possible?

Evaluating Your Supply Chain

Defining Your Supply Chain

• Assessing your Supply Chain should start with an end to end view
• f performance over time.
• Challenge is many company’s do not organize against this

principle.

• Solution is to engage senior management to support the

assessment.

Establish the Right Project Team

• The right team is critical

to effectively completing assessments.

• In addition to the

functional subject matter experts, consider including:

– Finance – HR – IT – External support where necessary

Establish Your Scope and Objectives at the Beginning

Agree on Your Guiding Principles

Assessing Functional Areas

Benchmarking KPI’s

Purchasing

• Assess performance over

time versus one year.

• Key metrics to review:

– Purchase prices (transportation costs in /

• ut)

– Inbound shipment accuracy / on-time performance – Quality metrics – Inventory levels – Innovation – Negotiation performance

Manufacturing

• Schedule attainment / on-

time performance

• Manufacturing efficiency
• Quality ‘First Pass’
• Cost / unit
• Waste / yields

Inventory Planning

• Weeks of supply
• Inventory Turns
• Obsolescence
• Inventory aging write-offs
• Forecast accuracy

Logistics

• Cost per cwt / unit / ton /

kg

• On-time delivery

performance

• Damages
• Returns
• Integrated inbound /
• utbound cost

performance

• Customer fines / fees

Customer Supply Chain

• Case Fill Rates

– Ensure your service metrics align with how your customers measure your performance – Where possible, obtain direct feedback on your performance from your Customers – Assess how well your Customers are getting your goods to market

• On-time delivery

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“PPM” – All components of the program must be implemented to deliver cost reductions.

Metrics / Scorecard Process Standardization Planning/ Project Management Zero Based Budgeting “ZBB”

Leading Practices Leadership / Change Management Innovation

ZBB – The Traditional View

“A method of budgeting in which all expenditures must be justified each new period, as opposed to only explaining the amounts requested in excess of the previous period’s funding…funding would have a base at zero. A department would have to show why its funding efficiently helps the

• rganization toward its goals.”

(Investopedia.com)

ZBB – A Different Approach

While continuing to build budgets from ‘zero’ each year, this expanded methodology to manage, control, and reduce costs based on the creation of shared responsibilities with well-defined owners and deep understanding

• f expenses key drivers (cost and

consumption).

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ZBB – A Different Way of Looking at Costs

Packages Travel People Maint. Services TOTAL

Accountability

Entities Facility 1 Facility 2 Facility 3 Facility 4 Total

Implementation of Best Practices

Facility 5 Facility 6

Changes to Roles – Key to Define Roles and Responsibilities

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• Responsible for setting policies
• n spending within a defined

package

• Establishes cost targets,

leveraging key benchmarks

• Monitor performance against

targets

• Spread best practices
• Senior leaders in the business

(e.g. Corporate Vice President)

Entity Owners

• Responsible for building

activity based budgets as per the spending policies

• Runs the business to deliver

against budget expectations

• Implementing best practices
• Typically the owner of the
• peration (e.g. Facility

Director, Plant Manager)

Package Owners

Benchmarking: Creating comparisons based on

activity drivers versus total dollars

• Comparison of ‘like’ sites using activity

metrics to benchmark costs.

• Focus on facts that drive costs
• Objective is to identify best practices for

application across the business.

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Spending Policies: Direction to the business on

how money will be spent in the business

Example from a large distribution company Fuel a) Policies

• Fuel purchases must be made through the approval supplier (Shell).
• In the event the approved supplier does not appropriately service a particular

geography, national procurement must be consulted to negotiate contracts with alternate suppliers. Approvals for exceptions will be made by the Package Owner

• All drivers must complete mandatory training for cost effective fuel

consumptions.

b) Budget Guidelines:

• All tractors will have speeds governed to a maximum of 100 km/hr
• Cost challenge for sites that have actual km/l lower than the total fleet

(based on prior year) average = 20% improvement. Cost challenge for sites that have actual km / L better than the national fleet average = 10% improvement.

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Spending Policies: Direction to the business on

how money will be spent in the business

Example from a large manufacturing company: Buildings and Facilities Maintenance Materials a) Policies

• All spare parts and maintenance purchasing must have the direct involvement of

an approved buyer.

• All entities (Canada/USA) must first look to source spare parts through National

Supplier Agreements.

b) Budget Guidelines:

• Reduction have been applied to plants with above average $/sqft. Cost challenge

for the upcoming budget year = 20% reduction. Facilities with less than the average cost / sq = 5% reduction.

• Enter maintenance budget in the proper cost center newly created in the drop-

down list on the template.

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What do we do with all this data?

Time to Implement Complexity

Less than $50K $50K - $250K $50K - $250K

Establish an Implementation Plan

• Once the plan has been finalized, establish senior

level ownership

• Set clear targets and implementation timing
• Ensure there is a follow-up plan
• Celebrate successes

Some Thoughts on Change

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Technology

• Commodity markets highly

volatile.

• Strategic Partnerships
• Rapidly Changing
• Real Time Information
• Drive towards total supply

chain visibility

Shareholders Consumers

• Increased profitability

expectations

• Quarterly focus with long term,

sustainable growth expectations.

• Value/Quality Expectations
• Convenience and Variety
• Healthy Products

Competitors Customers

• Want your customers!
• Industry Consolidation
• Focused and Agile
• Aggressive & Good
• Increasing service expectations
• New Retail Formats
• Consolidation

The Rules of the Game have Changed!

Demands A Performance Breakthrough

Suppliers Environmental

• Social responsibility
• Emerging expectations
• Changing technology

People

• Expectations for growth and

development

• Criticality of top talent

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My Change Management Epiphany

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1 Mile 2 Miles

• Senior level support imperative
• Install the process into your culture
• Invest in the right level of technology
• Disciplined commitment to follow the process
• Recognize the importance of training (for senior

leaders as well)

• Recognize performance ……. And non performance.

Change Management: Success is not a ‘Slam Dunk’

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1057 806 739 586 644 713 628 840 200 400 600 800 1000 1200 1400 1600 1800 Year 1 Year 2 Year 3 Year 4

Fixed Costs

• Mktg. & Sales

1.701 1.519 1.367 1.426

Before we finish …….

Let’s go Beyond Nirvana!

Perseverance

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"Press on: nothing in the world can take the place of

• perseverance. Talent will not;

nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent."

wsarafinchan@sunrype.com (250) 469-4582