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 1 2 3 1 2 3 What we’re proud of Where we’re heading Who we are What we’re proud of Where we’re heading Who we are Regional co-op in 1946. #1 Juice brand in Western Building a brand that From the lush Apple Canada with a 26 share resonates with Consumers growing region known as #2 Fruit processor in Closely matching the Okanagan valley western North America consumer trends with an Privately held company extensive innovation World class owned by the Jim Pattison pipeline manufacturing facilities Group . North American with rigorous attention to company with production Safety and quality detail facilities in Kelowna, BC Washington State
“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 of 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 Manufacturing • Assess performance over • Schedule attainment / on- time versus one year. time performance • Key metrics to review: • Manufacturing efficiency – Purchase prices • Quality ‘First Pass’ (transportation costs in / • Cost / unit out) • Waste / yields – Inbound shipment accuracy / on-time performance – Quality metrics – Inventory levels – Innovation – Negotiation performance
Inventory Planning Logistics • Weeks of supply • Cost per cwt / unit / ton / kg • Inventory Turns • On-time delivery • Obsolescence performance • Inventory aging write-offs • Damages • Forecast accuracy • Returns • Integrated inbound / outbound 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
“PPM” – All components of the program must be implemented to deliver cost reductions. Leadership Leading / Change Planning/ Practices Management Project Management Zero Based Budgeting “ZBB” Process Metrics / Standardization Scorecard Innovation 19
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 organization 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 of expenses key drivers (cost and consumption).
ZBB – A Different Way of Looking at Costs Facility 1 Facility 4 Facility 6 Facility 2 Facility 3 Facility 5 Entities Total Packages Travel Implementation of Best Practices People Maint . Services TOTAL Accountability 22
Changes to Roles – Key to Define Roles and Responsibilities Package Owners Entity Owners • • Responsible for setting policies Responsible for building on spending within a defined activity based budgets as per package the spending policies • • Establishes cost targets, Runs the business to deliver leveraging key benchmarks against budget expectations • • Monitor performance against Implementing best practices targets • Typically the owner of the • Spread best practices operation (e.g. Facility Director, Plant Manager) • Senior leaders in the business (e.g. Corporate Vice President) 23
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? Less than $50K $50K - $250K Complexity $50K - $250K Time to Implement
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
The Rules of the Game have Changed! Customers Environmental Consumers • Increasing service expectations • Social responsibility • Value/Quality Expectations • New Retail Formats • Emerging expectations • Convenience and Variety • Consolidation • Changing technology • Healthy Products Shareholders Competitors Demands A Performance • Increased profitability • Want your customers! expectations • Industry Consolidation Breakthrough • Quarterly focus with long term, • Focused and Agile sustainable growth expectations. • Aggressive & Good Suppliers People Technology • Commodity markets highly • Expectations for growth and • Rapidly Changing volatile. development • Real Time Information • Strategic Partnerships • Criticality of top talent • Drive towards total supply chain visibility 35
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My Change Management Epiphany 1 Mile 2 Miles 38
Change Management: Success is not a ‘Slam Dunk’ • 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. 39
Before we finish ……. Let’s go Beyond Nirvana! 1.701 1800 1.519 1600 1.426 1.367 1400 644 1200 713 628 840 1000 800 600 1057 400 806 739 586 200 0 Year 1 Year 2 Year 3 Year 4 Fixed Costs Mktg. & Sales 40
Perseverance "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." 41
wsarafinchan@sunrype.com (250) 469-4582
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