ECR AP Award Integration of Logistics Distribution Drives Supply Chain Optimization by Metro, PG,...

Copyright © 2009 METRO Cash & Carry China Member of METRO Group

Integration of Logistics Distribution Drives Supply Chain Optimization -- Collaboration among producer, retailer, and 3PL to drive change in FMCG & retail industry

METRO, P&G, Unilever, Vinda, UPM, Supor, and Sinotrans Logistics

Shanghai, China August, 2011

Member of METRO Cash & Carry China Page 2 2

Food Retail Self-service Wholesale

Nonfood

Specialty

Department

Stores

Buying (MGBI) Logistics (MGL)

Advertising (MGA)

Real Estate (MAM)

IT (MGI)

METRO GROUP

2,200+ outlets in 33 countries

Over 280,000 employees

2011 sales 67 billion Euros

METRO Cash & Carry

700+ stores in 30 countries

Over 120,000 employees

2011 sales 31 billion Euros

METRO Cash & Carry - A Core Brand of METRO Group

Company Introduction

Member of METRO Cash & Carry China Page 3

Strong Foothold across China

METRO Cash & Carry China

Market Entry: 1995

54 stores in 39 cities across

China with 3 investment focus:

Bohai Bay, Yangtze River Delta,

Pearl River Delta

8,500+ employees

3 million professional customers

2011 sales 1.5 billion Euros

Shanghai (HQ)


Member of METRO Cash & Carry China Page 4

Focus on Professional Customers

Hotels

Restaurants

Caterers

Cafes & pubs

Lorem ipsum Dolor sit Lorem ipsum Dolor sit Lorem ipsum Dolor sit HoReCa Trade SCO

Small retailers

Kiosks

Petrol stations

Street markets

Social services

Companies

Offices


Member of METRO Cash & Carry China Page 5 Page 5

Tailor-made to the specific needs of our professional customer

Each brand provides complete solutions as basis for successful business

Own Brands: Focus on Top 6 Brands


Member of METRO Group METRO Cash & Carry China

Innovative Ideas

Page 6

1. With its newly established distribution network, retailer integrates producers’ existing

distribution (cover all METRO stores and over 1000 producers/suppliers integrated)

1. Logistics distribution integration drives overall supply chain optimization (started from

logistics distribution integration, whole OTC process covered)

2. Collaboration among producer, retailer, and 3PL to drive change in FMCG industry


Content

Case Background:

Logistics Distribution Integration Needed for Supply Chain Excellence

Logistics Distribution Integration:

Driving Supply Chain Optimization of METRO, P&G, Unilever, Vinda, UPM, Supor, and

Sinotrans Logistics

Further Implementation Plan: Becoming an Engine of Supply Chain Excellence in the

Industry

Page 7

Member of METRO Group METRO Cash & Carry China Page 8

In China, most big producers already have their distribution network, while recently many retail giants have started to build up their own distribution network.

Any chance to integrate the distribution networks and build up the supply chain excellence for both parties?

Case Background


Challenge: Can big producers’ existing distribution be integrated into retailer’s distribution network?

Producer/Supplier Retailer/

Wholesaler

Retailer/ Wholesaler

Producer/Supplier Distribution System

Distributor Distributor

Logistics System

Producer/Supplier Retailer/

Wholesaler

Retailer/ Wholesaler

Producer/Supplier Distribution System

Distributor Distributor

Logistics System

Integrated Distribution

System


Opportunity: Logistics Distribution Integration Enable Supply Chain Excellence

Improved and well-controlled logistics service:

punctuality, traceability, reliability

Leaned supply chain & better chance for profitability for both parties: no need for distributor

Enhanced quality and quantity control

Simplified and efficient ordering, order processing,

invoicing, payment & administration

Overall enhanced cost effectiveness for both sides

Efficient goods receiving at DC & store

Shelf Ready Package Backhaul sharing & pallet

delivery

RFID and EDI Master Data and GDSN


Content

Case Background:




Sinotrans Logistics


Industry

Page 11


P&G is a Company of Brands P&G Growth Strategy

Touching and improving more consumers’ lives in

more parts of the world more completely


Case I: P&G and METRO - Operation Model Change:

Page 13

METRO Store

METRO Store

METRO Store

P&G DC

P&G DC

P&G DC

P&G Plant

P&G Plant

METRO Store

METRO Store

METRO Store

P&G DC

P&G DC

P&G DC

P&G Plant

P&G Plant

METRO DC


Achievements

• P&G and METRO: Increase of on-time delivery (+3.1%), decreased quantities of order (-70.9%) and invoice (-94.2%)

•P&G and METRO: Better chance and flexibility (e.g. to consolidate goods via multiple DCs) to serve business of urgent orders, promotion, peak season and etc.

Case I: P&G and METRO - Performance Improvement

• P&G and METRO: Enable further supply chain optimization (e.g. palletized delivery, selective check, speed-up store goods

receiving and etc.)

• P&G: Simplified and efficient OTC processing (order, invoice and payment, -19% workload) and days (-1day)

• P&G: Shorter stock days even with P&G supply term change (-2days)

• METRO: Order scale increase helps to gain more discount from P&G (+15.4%)

0 200 400 600 800 1000 1200 1400

after

before

Invoice Consolidation 发票整合 Order Consolidation 订单整合

number of invoice decreased 94.16%

number of order decreased 70.90%


Excellent Collaboration in Supply Chain Management between P&G and METRO China

• Set-up quarterly supply chain top2top meeting and identify improvement opportunity & plan

• Jointly won ECR (Efficient Consumer Response) China Golden Award by order fulfillment improvement project

• Started distribution integration in Eastern China and 40% of METRO volume covered

• Jointly won ECR China Platinum Award again by logistics integration project

• Built up EDI link at order level and strongly support the business development and supply chain performance improvement

• Jointly won ECR China Platinum Award jointly by integrated information flow project

• Extend distribution integration cross the country

• Extend EDI link at dispatch and receive advice levels

• Fully implement automatic GDSN

• Introduce palletized distribution

2013-2015

• Optimization of logistics distribution, e.g. rolling out palletized distribution, shelf unloading, GR optimization, backhaul sharing, etc.

• Innovation for overall Supply chain performance improvement, e.g. optimized order proposal, shelf-ready-package, joint planning and forecasting, etc.

• Target: leader in excellent supply chain collaboration in FMCG & retail industry

2009 2010 2011 2012

Major Supply Chain KPI Status (2009 - May, 2012)


in China (refer to as “UL” below)

Page 16

• In 1923, Lever Brother established its soap business in Shanghai

• In 1986, Unilever restructured itself in China

• Now, China has become one of Unilever’s strategic focus in developing and emerging market

- Over 5,000 local employees

- Provide more than 20,000 job opportunities

- Largest production base in Group

- A global research centre

- A global purchase centre

We now have


Supply Chain and Sustainability

Page 17

environmental impact

business growth

Collaboration is key

It is to double the size of Unilever while at

the same time reducing our environmental

impact


Unilever Distributor

Case II: Unilever and METRO - Operation Model Change:

Page 18

Unilever Plant cold-chain

METRO DC cold-chain

METRO Store (in some regions)


Unilever DC cold-chain

Unilever DC cold-chain



Unilever DC ambient

METRO DC ambient

Unilever DC ambient

Unilever Plant ambient

Unilever Plant ambient

Unilever Plant cold-chain


Achievement

• Unilever & METRO: For all sales lines (including

Ice-cream, Food Retail, HPC and Food Solutions)

on-time delivery increases 2.5% and order

fulfillment increases 2.4%

• Unilever & METRO: Quantities of order and

invoice decrease 74.9% and 94.3% individually

• Unilever & METRO: Better logistics support on business increase, especially during promotion and peak season (e.g. CNY)

period

• Unilever & METRO: Explored opportunity of supply chain optimization from both sides (e.g. backhaul transport, inventory

planning, on-shelf availability improvement, pallet delivery and etc.)

• Unilever: Shorter stock days approximately 3 days

• Unilever: Simplified and efficient OTC processing (order, invoice and payment, -15% workload) and days (-3days)

Case II: Unilever and METRO - Performance Improvement

0 500 1000 1500 2000 2500 3000

after

before

Invoice Consolidation 发票整合 Order Consolidation 订单整合

number of invoice decreased 94.26%

number of order decreased 74.97%


Case III: Vinda and METRO - Operation Model Change:

Page 20

Vinda Plant METRO DC METRO Store

(in tier 1-2 cities)

METRO Store (in tier 3 cities)

Vinda DC

Vinda Plant METRO Store

(in tier 1-2 cities))

METRO Store (in tier 3 cities)

Vinda DC

Vinda Distributor

Vinda Branch


Case III: Vinda and METRO - Performance Improvement

Page 21

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

非准时到货率 Late Delivery 订单满足率 Fill Rate

before after

Achievement

• Vinda & METRO: Consolidated delivery helps logistics distribution cost decrease (-38.3%)

• Vinda & METRO: Good progress of on-time delivery (+5.6%) and fill rate (+5.5%)

• Vinda & METRO: Big improvement on stock control and urgent order fulfillment for bundle pack products from both

wholesaler and producer sides

• Vinda : Good practice on OTC process consolidation. Nowadays, standardized OTC process and related KPI system becomes one

of the benchmarks for Vinda’s other sales channels.


UPM Plant METRO DC METRO Store

(in some regions)

METRO Store (in Eastern China)

UPM Plant METRO Store (in some regions)

METRO Store (in Eastern China)

UPM DC

Case IV: UPM and METRO - Operation Model Change:


50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


Case IV: UPM and METRO - Performance Improvement

Page 23

before after

Achievement

• UPM & METRO: Consolidated delivery helps logistics distribution cost decrease (-24.0%)

• UPM & METRO: Significant improvement of on-time delivery (+22.6%)

• UPM & METRO: Recognized operation on full-way pallet delivery from plant to stores

• UPM & METRO: Better opportunity to maintain store stocks and balance cost & customer service

• UPM：Decreased administration cost via optimized OTC process

• UPM：Sale growth with better distribution coverage


Supor Plant

Supor Distributor

Supor Branch

Case V: Supor and METRO - Operation Model Change:



METRO Store (in Wuhan)

Supor Plant



METRO Store (in Wuhan)

METRO DC


50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


before after

Page 25

Case V: Supor and METRO - Performance Improvement

Achievement

• Supor & METRO: Consolidated delivery helps logistics distribution cost decrease (-11.3%)

• Supor & METRO: Trackable step of on-time delivery (+7.7%) and fill rate (+8.4%)

• Supor & METRO: Stable order size and more optimized order frequency

• Supor & METRO: Better business supports during peak season and promotion

• Supor: Remarkable total sales channel cost decrease compared with direct trade and distributor

• Supor: sales expansion resulted from efficient distribution network


0%

200%

400%

600%

800%

1000%

Jan

/07

May

/07

Sep

/07

Jan

/08

May

/08

Sep

/08

Jan

/09

May

/09

Sep

/09

Jan

/10

May

/10

Sep

/10

Jan

/11

May

/11

Page 26

•With the operation of METRO’s integrated

distribution network, Sinotrans Logistics entered

into Retail/FMCG contract logistics market in 2007

and developed its business approximately 8 times

during last 4 years

•Today, with the efferent operation and excellent

customer service, Sinotrans Logistics becomes one

of the leading contract logistics service providers in

China and serves many top 500 and well-known

domestic FMCG companies, including Wrigley,

Kimberly-Clark, Kraft & Cadbury, AB Food &

Beverages, LEE KUM KEE, UNI-PRESIDENT, Auchan,

Carrefour and etc.

Case VI: Sinotrans Logistics and METRO - 3PL: growing-up together with retailer’s distribution network


0%

100%

200%

300%

400%

500%

600%

700%

2007 2008 2009 2010 May, 2011

Integrated Distribution via METRO Logistics System

Number of Suppliers

Metro Integrated Distribution Share

Number of Suppliers

Page 27

METRO’s Practice in Integrating Distribution Logistics with Suppliers

• Since 2004, METRO China started to build-up its

national logistics distribution network for both

ambient and perishable products

• More than 1000 medium & small suppliers

integrated into METRO’s logistics distribution

networks

• The integrated logistics distribution have

significantly contributed to METRO’s business

and expansion by

Standardized and excellent service

Cost effectiveness

Continuously increased volume

• Relying on METRO’s integrated logistics

distribution, many medium and small suppliers

have their businesses successfully growing and

expanding cross the country


Content

Case Background:




Sinotrans Logistics


Industry

Page 28


Together with other retailers and producers, we’re driving change to build up supply chain excellence in FMCG & retail industry!

Page 29


Collaboration Creates Excellent Supply Chain!

© Copyright

This concept is intended only for the purpose of presentation and is the intellectual property of METRO Cash & Carry >Please insert your country. Passing on to third parties as well as the use and exploitation of the presentation either in whole or in part is expressly forbidden. METRO Cash & Carry China

METRO Jinjiang Cash & Carry Co., Ltd.

Procter & Gamble (China) Ltd.

Unilever China

Vinda Trade Co., Ltd.

UPM-Kymmene (Changshu) Paper Industry Co., Ltd.

Wuhan Supor Cooker Co., Ltd.

Sinotrans Logistics Development Co., Ltd.

Contact： Denny Yang

Head of Supply Chain Management & Logistics

METRO Jinjiang Cash & Carry Co., Ltd.

1425 Zhenbei Road, Shanghai 200333, China

Tel: +86 021 2207 8542

Email: [email protected]

mailto:[email protected]

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