© DKSH

Concorde Hotel Shah Alam, Kuala Lumpur, Malaysia, 8 October 2013

New-Generation Suppl y Chains: Engine for Growth

Reinv enting partnership with warehouse team members

For GS1 M alaysia Supply Chain & Logistics Summit

By L ee Choon Kein , General Manag er

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• Executive summary : DKSH Malaysia

• Labour challenges faced by distribution centres (DC)

• How do we meet the challenges?

• Case study: increasing DC produc tivity by i mplementing KPI incenti ves

• Smart partnershi p

• Q&A

Agenda

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• Helping companies to grow their busi ness

in new and existi ng mar kets

• Provi ding busi ness partners with the

knowledge, advice, rel ationships, and on-

the-ground logistics to reach their

indivi dual growth goals

• Expanding their access to knowl edge, their

sourcing base, revenue opportunities, and

ultimatel y, their mar ket shares

• This is what we define as Market

Expansion Ser vices

We serve more than 13,000 customers in Malaysia, ensuring that our clients’ products are visib le on the shelves at al l times

We help companies enter new markets and expand in existing markets…

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…with a comprehensive portfolio of services

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A long history of entrepreneurship and bridging cultures

Ov er 100 years history in Malaysia

• DKSH has been conduc ting business in

Malaysi a 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

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DKSH Holdings (Malaysia) Berhad

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Our industry expertiseFour highly specialized Business Units

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Capillary distribution network to…

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Marketing and Distribution Serv ices – selected suppliers

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• 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

Distribution facilities

Through our state-of-the-art infrastructure, we professionally store, transport

and distribute products to the market place

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• Executi ve summar y : DKSH Malaysia

• Labour challenges faced by distribution centres (DC)

• How do we meet the challenges?

• Case study: increasing DC produc tivity by i mplementing KPI incenti ves

• Smart partnershi p

• Q&A

Agenda

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The challenges

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• Executi ve summar y : DKSH Malaysia

• Labour challenges faced by distribution centres (DC)

• How do we meet the challenges?

• Case study: increasing DC produc tivity by i mplementing KPI incenti ves

• Smart partnershi p

• Q&A

Agenda

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How do we meet the challenges?

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• Sort/Sisih/常組織常組織常組織常組織 – sort through an

area removing unnecessar y items

• Set in order/Susun/常整頓常整頓常整頓常整頓 – arrange

necessary items for easy and efficient

access

• Shine/Sapu/常清潔常清潔常清潔常清潔 – clean

ever ything

• Standardize/Seragam/常規範常規範常規範常規範 –

create guidelines for keeping area organized, clean & visual

management

• Sustain/Sentiasa/常自律常自律常自律常自律 –

educating, communicating &

maintaining the s tandar ds

• Safet y/Selamat/常安全常安全常安全常安全 – ensur e safe

wor king condition to prevent accident

• Securit y/Sekuriti/常保衛常保衛常保衛常保衛 – ensure

tight control on security measure

7S concept (七常法七常法七常法七常法 ) in the warehouse

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7S audit

7s audit team p erforming warehouse audit

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Our corporate values describe and articulate the unique culture of D KSH. As such, they

provide us guidance to set priorities in our dail y wor k life and shape our behavior.

DKSH corporate values

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Staff performance of all levels are appraised based on DKSH C orporate Values

Cultivate DKSH corporate values

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SCM cost sav ings performance v s. target

Continuous work improvement

2013 proj ect completion summar y (accumulativ e)

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Pick face & space utilization improvement

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• Executi ve summar y : DKSH Malaysia

• Labour challenges faced by distribution centres (DC)

• How do we meet the challenges?

• Case stud y: increasing DC productivity b y implementing KPI in centives

• Smart partnershi p

• Q&A

Agenda

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Increasing team members productivity by implementing KPI Incentive at consumer goods distribution center in Klang, Selangor

Total Area of Distribution

Center

131,000 sqm

Total Storage Area 55,000 sqm

Ambient Storage Capacity 49,638 pallets

Air-conditioned Storage

Capacity

4,678 pallets

Office & S taff Facilities 2,220 sqm

Docks 88 units

High Level Storage 7 levels for pallets

(10.2 meters to top beam)

Standard Pallets 1.2m x 1.0m

Emergency Power Supply Rated for continuous with on site fuel

reserved

Fire Protection System Localized hose reel & hydrant

Full roof & in rack sprinkler system

Our distribution center in Klang, Selangor

Address: Lot 10394, 10451,

10452 Jalan Sungai Jati, 41200 Klang

Operated

since:

1998

Ownership: Rental/Leased

Distribution CenterKey facts

CGL, Klang

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Project Background

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 secti on personnel in the form of monetar y rewards.

Scope:

− The pr ogram will be i ntroduced to the pickers as pilot r un (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.

KPI incentiv e to boost productivity

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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 mus t be NO MHE accident and housekeeping must be of reasonabl e 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 ti mes 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 productivit yof 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.

Qualifying criteria

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Selection of target measurement

What is the correct measurement for Pickers achievement?

1. Pick R ate: Number of carton picked per wor ked hour

2. Pick R ate: Number of line picked per wor ked hour

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 c tn / hr

Eg.3 100 1 1 1 line/ hrEg.4 50 1 1 1 line / hr

Pick rate by line is selec ted based on the assumpti on of picki ng time is 70-30 between

traveling and picking, and most of our picki ngs are loose.

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Cost saving analysis

Productivity Details as at June 2012 Benchmark

Total Picker 117

Total line picked/month 289894

Pick Rate (line picked / picker worked hour) 11

Incentive Scheme Details Workhour Comparison Cost Saving

Improved Pick Rate Target Tier

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

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Pick rate after KPI incentiv e roll out in July 2012

Av erage pick rate

88%

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Cost saving analysis - actual

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Source: CGL Pickers Productiv ity report

Pickers headcount Jun ‘12 to Jul ‘13

No of pickers

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Medical leaves taken Jan ‘12 to YTD Aug ‘13

Before Incentive After Incentive

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• Executi ve summar y : DKSH Malaysia

• Labour challenges faced by distribution centres (DC)

• How do we meet the challenges?

• Case study: increasing DC produc tivity by i mplementing KPI incenti ves

• Smart partnership

• Q&A

Agenda

© DKSHPage 33

Extrinsic and intrinsic motivation

Committed

A sense of BelongingSelf Discipline

High Job Satisfacti on

Inner Self Needs Fulfilled

Physiological Needs Ar e

Not Fulfilled

Trouble !

Well Rewarded

Deficiency Needs Fulfilled

Obliged

Feel Li ke Taken For Granted

Low Initiati ves

Low Intrinsic Moti vation High Low Intrinsic Moti vation High

Lo

w

Ext

rinsic

Moti

vatio

n

H

igh

Lo

w

Ext

rinsic

Moti

vatio

n

H

igh

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Extrinsic, intrinsic motivation & productiv ity

High Motivati on &High Producti vity

Low Moti vation butHigh Producti vity

Low Moti vation &

Low Producti vity

High Motivati on but Low Producti vity

Low Pr oduc tivity HighLow Pr oduc tivity High

Lo

w

Intr

insic

& E

xtr

insic

Moti

vatio

n

Hig

h

Lo

w

Intr

insic

& E

xtr

insic

Moti

vatio

n

Hig

h

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Smart partnership

Smart Partnersh ip Index

=

Productivity Index

X 100% Values Index

(Staff Extrinsic & Intrinsic Motivation)

Produc tivity Index =Total Produc tivity

Management Target of Producti vity

Values Index=

Staff Values Index (Questionnaire Survey)

(Intrinsic + Extrinsic) Management Target of Staff Values Index

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Smart partnership

Objective of Smart Partnership •Strive to achieve a Smart Partnershi p index of 100%.

Smart Partnersh ip Below 100%•Indicate that produc tivity is not on bar with s taf f moti vation ( extrinsic and intrinsic).

•Need to identify reasons of l ow producti vity.

•Impl ement improvement projects.

Smart Partnersh ip Above 100%•May be good for company in short term but not sustainable in l ong ter m.

•Staff could feel demoti vated and producti vity would plummet.

•To maintain or i mprove producti vity further, s taf f extrinsic and intrinsic motivation must not be neglected.

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Smart partnership surv ey done in June 2012 (before implementing KPI incentive)

Extr insic M oti vati on1 (Very Bad)

(Sangat Ter uk)2 (Bad )(Ter uk)

3 (Average)(Sederh ana)

4 (Good)(Baik)

5 (Very Good)(Sangat Baik)

Tota l Sample Average Score

1What do t hink of y our pay as c ompa red t o the mark et?

(Pendap at an da te ntan g gaji a nda sek aran g be rban ding p asara n?)11 9 33 23 8 84 3.10

2Is your wo rk com mens urate to yo ur work ?

(Adakah gaji and a setim pal de ngan k erja anda )4 16 35 23 7 85 3.15

3How is the b onus p aid to y ou?

(Bagaima na bo nus dib ayar k epad a an da?)43 11 20 1 5 80 1.93

4

Is ther e any inc entive / rewa rd fo r go od pe rfor mance ?

(Adakah t erda pat a pa- apa ins entif/g anjara n unt uk pr estasi ke rja yan g

baik?)

15 26 18 10 6 75 2.55

5

Overall, a re yo u hap py with yo ur inco me?

(Secara k eselur uhan, adak ah an da b erpu as hati deng an p enda patan

anda? )

5 14 33 16 9 77 3.13

1 3.85

Intr insi c M otiva tio n1 (Very Bad)

(Sangat Ter uk)

2 (Bad )

(Ter uk)

3 (Average)

(Sederh ana)

4 (Good)

(Baik)

5 (Very Good)

(Sangat Baik)Tota l Sample Average Score

1Do you fe el goo d ab out yo ur job ?

(Adakah anda beras a ser onok deng an pek erjaa n and a)1 1 29 30 19 80 3.81

2 Are you h appy with the wo rk you do?

(Adakah anda gembi ra d enga n kerja y ang anda buat ?)1 31 28 18 78 3.79

3Are you le arning some thing useful in y our wo rk?

(Adakah anda mem pelajari s esuatu yang ber guna dari ke rja a nda? )2 1 20 34 21 78 3.91

4Do you fe el app reciate d of y our wo rk do ne?

(Adakah anda rasa dihar gai atas kerja y ang a nda buat? )9 7 26 26 12 80 3.31

5Overall, h ow is your job satisf action?

(Secara k eselur uhan, bag aimanak ah ke puasa n beke rja a nda? )3 35 30 11 79 3.58

1 8.41

Total Value Index 32.26

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Smart partnership score before implementing KPI incentiv e

BeforeJune 2012

AfterFeb 2013

Productivity Index =Total Productivity 11

0.611-

Management target of productivity 18 21

(Intrinsic+Extrinsic) =

Staff Questionnaire Survey 32.260.849

-

Values index Management Target of values index 38 42

Smart Partnership Index

=Productivity Index X

100%

0.61172% -

(Intrinsic + Extrinsic) Values Index 0.849

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Smart partnership surv ey done in Feb 2013 (after implementing KPI incentive)

Extr insic M oti vati on1 (Very Bad)

(Sangat Ter uk)

2 (Bad )

(Ter uk)

3 (Average)

(Sederh ana)

4 (Good)

(Baik)

5 (Very Good)

(Sangat Baik)Tota l Sample Average Score

1What do t hink of y our pay as c ompa red t o the mark et?

(Pendap at an da te ntan g gaji a nda sek aran g be rban ding p asara n?)1 12 29 21 17 80 3.51

2Is your wo rk com mens urate to yo ur work ?

(Adakah gaji and a setim pal de ngan k erja anda )2 2 26 44 6 80 3.63

3How is the b onus p aid to y ou?

(Bagaima na bo nus dib ayar k epad a an da?)18 4 21 29 8 80 3.06

4

Is ther e any inc entive / rewa rd fo r go od pe rfor mance ?

(Adakah t erda pat a pa- apa ins entif/g anjara n unt uk pr estasi ke rja yan g

baik?)

4 1 16 46 13 80 3.79

5Overall, a re yo u hap py with yo ur inco me?(Secara k eselur uhan, adak ah an da b erpu as hati deng an pe ndap atan

yang b aik?)

8 8 16 36 12 80 3.45

1 7.44

Intr insi c M otiva tion1 (Very Bad)

(Sangat Ter uk)

2 (Bad )

(Ter uk)

3 (Average)

(Sederh ana)

4 (Good)

(Baik)

5 (Very Good)

(Sangat Baik)Tota l Sample Average Score

1Do you fe el goo d ab out yo ur job ?

(Adakah anda beras a ser onok deng an pek erjaa n and a)15 34 31 80 4.20

2Are you h appy with the wo rk you do?

(Adakah anda gembi ra d enga n kerja y ang anda buat ?)9 43 28 80 4.24

3Are you le arning some thing useful in y our wo rk?

(Adakah anda mem pelajari s esuatu yang ber guna dari ke rja a nda? )17 43 20 80 4.04

4Do you fe el app reciate d of y our wo rk do ne?

(Adakah anda rasa dihar gai atas kerja y ang a nda buat? )5 27 28 20 80 3.79

5Overall, h ow is your job satisf action?

(Secara k eselur uhan, bag aimanak ah ke puasa n beke rja a nda? )4 14 37 25 80 4.04

2 0.30

Total Value Index 37.74

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Smart partnership score before & after implementing KPI incentiv e

Before

June 2012

After

Feb 2013

Productivity Index =Total Productivity 11

0.61118.13

0.863Management target of productivity 18 21

(Intrinsic+Extrinsic) =

Staff Questionnaire Survey 32.260.849

37.740.899

Values index Management Target of value index 38 42

Smart Partnership Index

=Productivity Index

X 100%0.611

72%0.863

96%(Intrinsic + Extrinsic) Values Index 0.849 0.899

© DKSH

Thank you for your attention

DKSH Malaysia Sdn BhdLot 10394, 10451, 10452, Jalan Sungai Jati,

41200 Klang, Selangor Daru l Ehsan, MalaysiaPhone +60 3 5520 8800 Fax +60 3 5520 8810www.dksh.com

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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 inaccuraci es, 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 infor mati on on this presentation without notice

• The layout, graphics and other contents in this pr esentati on are pr otec ted by copyright law

and should not be repr oduced or used without DKSH’s written permission