Palestra AMCHAM “Ciclo de Eficiência na Cadeia Logística” Marcelo Frias, Avon Latam Logistics Director October, 01st 2014.
About Avon • For more than 125 years, Avon Representatives have brought beauty into the lives of women • Avon, the company for women, is a leading global beauty company, with $10 billion in annual revenue • More than 6 million active independent Avon Sales Representatives • Products are available in over 100 countries • Color cosmetics, Skincare, Fragrance, and Fashion and Home products The "three pillars" of Avon's corporate mission and the focus of the company's corporate responsibility efforts and achievements:
Social Reponsability
Operation Network LATAM Mexico Site Celaya
Source Points
Site
NOLA - Mexico
Guatemala D.Republic Nicaragua* Honduras* Panamá* El Salvador*
Guatemala Site Vezla Site Guatire Colombia Site Medellin
SMG – Argentina
Chile Uruguay
Brazil Site Interlagos
Paraguay
Peru Site
CPE - Colombia
Ecuador Peru
Chile Site Argentina Site Moreno
MANUFACTURING
Venezuela
Stand alone
Brazil
Stand Alone
*Supplied by Guatemala
Main Logistics Indicators 2014 YTD+Profit Plan More than 26.000 shipments
Over 1000 lanes 19%
3200 FEUs 4%
100.000 Ton of volume
18%
Spend of $110M 59% More than $420M of product cost Over 30 Customs Units
How Avon Logistics can support strategic procurement, reduce in transit inventory?
How can we have minimal/economic stocks in inventory building?
Incoterm Review Project - EXW to FOB Main Expected Benefits
Main Objective: Complexity Reduction Responsability Seller Buyer
Seller
FOB
Carrier
Border
Port
Ship
Port
Named Place Buyer
Logistics Complexity
+
Compliance/Customs Risk
++
Cargo Handling Risk
+
Cargo Delivery Date
+
Strong Improvement
++
Moderate Improvement
+
Flexibility on shipment
=
Responsibility
++
No Change
=
Air Freight
=
-
Lead Time
+
Moderate Decrease
Inventory in Transit
+
Strong Decrease
--
ďƒź FOB INCOTERM allows Avon taking the full responsibility over risk and cost implied by EXW term;
Inventory Management
+
Partial Nationalization/Call Off
=
ďƒź Share with supplier the portion of responsibility over which he can have better control: the local operations at origin;
Cash flow
+
EXW
(Ex Works) FOB
(Free On Board)
ASIA Consolidation Project – Overview
Operational Scenario – Previous to project • • • • •
25 % of volume imported by LATAM; 2600 processes/year; High LCL shipments volume (70%); 21 ports at origin x 7 destinations = 147 Lanes; Pick up coordination at 115 supplier’s sites.
Identified Opportunity: Development of a 3PL (supplier) at China to coordinate consolidation; process and orders managements to LATAM (7 markets).
Delivered Results: • • • •
Logistics complexity reduction: 3PL order management; Major control and processes standardization; Logistics Costs reduction through consolidation, containers; optimization, processes flow mapping and adequacy; Reduction of CO2 emission.
8
ASIA Consolidation Project – Results
Previous Current
Operational Simplification: • • •
# of origin ports from 21 to 5 ports; Pick up at supplier’s sites elimination; # of lanes to be negotiated on BID from 147 to 35.
Savings / Benefits: • • • • •
$600K– Savings Container Occupation (avg): 15% higher vs. PY; Cargo availabity improvement throught higher logistics efficiency; Control and visibility improvement; Data accuracy.
9
International Multimodal Implementation (Air, Ocean, Truck) • Allow companies to manage their supply chains more cost-effectively and quickly • Alternative to conventional sailings and flight schedules • Flexibility and more frequency to attend LATAM schedule • Timely and economical option to keep transport on track • Create direct transits under a single rate, which can translate into a cost savings compared to Air Freight • Multimodal could potentially decrease Lead Time from 40 to 50 percent, compared to Ocean Freight
Total Logistics LT: 10-15 days
Total Logistics LT: 30-35 days
Total Logistics LT: 60-65 days
AIR
Intl Multimodal
OCEAN
BR Consolidation to SMG Project – Overview Brazilian Suppliers attending ARG market
Scenario Previus to Project xxxx yyyy
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21 suppliers locatted at São Paulo area; High complexity to pick up coordination; No consolidation utilized, High LTL volume; Customs process at URUGUAIANA border; higher LTime and risk.
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Identified Opportunity:
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A 3PL development to coordinate consolidation from BR to ARG Lanes and International Freight.
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Delivered Results:
Substantial reduction on OTR freight spend; Operational complexity reduction; FTL Vehicle occupation Optimization; Export Clearance process at “Customs warehouse – MIC/DTA” reducing Customs LTime and risk.
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Savings :
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The radius of the circles is approximately 60km.
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385 Ops.
650.996 KG
3.331 M3
U$S 534.561 11
Incoterm Review – Supplier 1 Pilot DAT Bonded (Bra and Arg volume) Financial and Operational Analysis That was analysed different scenarios as: EXW to FOB and EXW to DAT(Bonded) # Items
Scenario
Volume Units (SKUs)
Current Spend USD (EXW)
Main Benefits
Description
12
EXW to DAT(Bonded)
61.952.575
9.182.484
(2,8MM)/ 1,5 Days
Inventory reduction
11
EXW to FOB
20.091.281
4.670.044
2 days
Operational Ltime Reduction
Operational Benefits
Final Recomendation: To convert high unit movers (12 items) to DAT/Bonded Warehouse model, driven by benefits previously detailed; low unit movers (11 items) to FOB incoterm, driven by operational lead time reduction.
Logistics Complexity Compliance/Customs Risk Cargo Handling Risk Cargo Delivery Date Flexibility on shipment Responsibility Air Freight Lead Time Inventory in Transit Inventory Management Cargo Disposal Partial Nationalization/Call Off Cash flow
FOB + ++ + + = ++ = + + + + = +
CFR + ++ ---= + -++ = =
BONDED + ++ -++ -+ ++ ++ ++ + ++ ++ ++
Strong Improvement
++
Moderate Improvement
+
No Change
=
Moderate Decrease
-
Strong Decrease
--
US RI logistics network review - Overview Suppliers Location
Scenario Previous to Project +500 RI vendors via two Brokers (US companies); +700 Skus 20% of total mark up cost is related to US domestic freight: Inland from vendor locations to the consolidation Hub in MIAMI;
Currently LATAM utilizes mainly AF to move cargo for destination countries, due to small volumes and planning strategy 80% of shipments to LATAM destinations are < 200Kgs with no consolidation opportunity
Identified Opportunity:
Low Volume Medium white High volume
Review Logistics Network utilizing the best geography to support US domestic consolidation; Consolidate cargo in the north east USA. JFK/EWR or PHL This initiative will be completely aligned with Regional Sourcing strategy: “Broker Nationalization Strategy project” already initiated FREIGHT and MARK UP cost reduction will be achieved
Quality Assurance for key suppliers
Quality Assurance for Imported Items (China origin) • SGS is responsible for the technical evaluation at origin China to guarantee that our Fashion&Home products are in accordance with Avon’s requirements, before shipping to LATAM countries. Local Sourcing
Purchase
Supplier Contact
Coordination
Send Report Send STD Send Report
TS / Sourcing Inform to:
•Shipping Autorization – Supplier / Logistics •Request new operation •Reject
Local Local
SGS Local and Origin teams coordinate the inspection.
Inspection