04_2012_workshop_JTupper_IGD by ECR Baltic

James Tupper, ECR Learning & Change Manager, IGD

13.30 – 14:55 Secondary Hall, ECR Baltic Forum (Vilnius), 8th November 2012

Who is attending the workshop? Trading Partners Retailer

Wholesaler

Distributor

Manufacturer

Supplier e.g. Pack

Brand / Marketing Category / Buying Colleagues

Supply Chain Production Customer Service Corp Responsibility

ÂŠ IGD 2012

How to Improve Performance Together? As a result of this workshop – which builds upon the earlier presentation – you will : • Gauge the extent to which preventing material waste from occurring in the first place should be more firmly on your agenda • Use the evidence provided to engage colleagues and trade partners to improve end-to-end waste performance • Identify actions to truly engage others, embed waste elimination disciplines into day-to-day operations and sustain low waste • Adapt the methods proven elsewhere and apply them in the Baltic States

13.30 – 14:55 Secondary Hall, ECR Baltic Forum (Vilnius), 8th November 2012

Agenda • Preventing it together rather than just managing it ourselves – Internal – amongst colleagues – External – with trading partners

• Types of Supply Chain Waste and their root causes • How to – see what material is wasted, where and when – identifying how and why wastage is occurring – generate ideas and design trials to test impacts

• Redistribution

Agenda • Preventing it together rather than just managing it ourselves – Internal – amongst colleagues – External – with trading partners

• Redistribution

Connecting the UK Business

UK Business Units UK Factories UK Supply Chain Head Office Financial Tracking Portfolio Management Corporate Reporting

 Great individual initiatives  We can achieve more!

Connecting the UK Business

UK Business Units UK Factories UK Supply Chain Head Office Financial Tracking Portfolio Management Corporate Reporting

 Deploying “5 to drive”  Consolidated approach

Changes to the Waste Structure Supply Chain Marketing

Finance

Operations

Sales

ÂŠ IGD 2012

Changes to the Waste Structure Senior Management

Operations

Lifecycle Team

Sales & Marketing

Finance

ÂŠ IGD 2012

Waste Governance Objective: Effectively manage business operations to prevent the generation of product and packaging waste in the supply chain • • • • •

Inputs Outputs from previous review Latest KPI performance Activity status External updates (legislative, environmental, supply chain) Key topics for this review

Attendees Management Team sponsor Chair Waste /Sustainability Manager Lead Finance Functional Waste representatives

Purpose/agenda 1.Performance review KPI performance Key changes Gaps v’s target – action planning 2.Waste Prevention Activities Latest status New activities for agreement Review of implemented activities 3.Risks & Opportunities Any escalation points? 4.Decisions, actions & outputs Timing Once per business cycle

• • • • •

Outputs KPI scorecard v’s targets Agreed action plan to drive improvement Opportunities/issues/risks to be investigated Issues/outputs/decisions made Escalation points to management forums

KPI‘s Total waste generated v’s target (total, by product group, by supply chain) Waste generated / tonne sold v’s target (total, by product group, by supply chain) © IGD 2012

Need to work cross functionally Function

Major Influences Include

Supply Chain

Forecasting of and responsiveness to demand Management of product flow and stock life

Category, Brand and Marketing

Range, product and packaging decisions

Operations

Monitoring and communication of material efficiency Processes improvement

Commercial

Prioritisation of improvement opportunities Tracking of waste performance across products and trade partners

Sustainability

Help others to align decisions based on factual wastage data alongside sales, customer satisfaction and cost information

ÂŠ IGD 2012

Agenda • Preventing it together rather than just managing it ourselves – Internal – amongst colleagues – External – with trading partners

• Redistribution

Preventing waste with trading partners

• To help trading partners, the group launched a free Collaborative Waste Prevention toolkit: • Assist in launching successful collaborative initiatives

• Providing clear principles • Giving structure through step-by-step process to deliver greatest benefits

Working together to root out supply chain waste

ÂŠ IGD 2012

Agenda • Preventing it together rather than just managing it ourselves – Internal – amongst colleagues – External – with trading partners

• Redistribution

A few examples

ÂŠ IGD 2012

Measurement

Machine/Equipment Refrigeration equipment

Availability Targets Forecasting error

Quality control Promotions

Methods

Different goals

Handling

Supply chain design

Inventory management

Training

Transport

Production efficiencies

Information sharing

Customer preferences

Storage

Shelf-life

People

Lead times

Weather

Seasonality Forecasting Major events Planning

Environment

Packaging

Food & Packaging Waste

Freshness Source

Materials ÂŠ IGD 2012

Food Supply Chain Waste Root Causes 1. Food and Packaging waste is created between suppliers and retailers

Root Cause Analysis – Food Waste

130. Waste may not be managed systematically across the supply chain

2. Products exceeding their shelf life will be wasted

132. Waste is not measured consistently

46. Product rejected by mainstream retailers can sometimes be wasted (e.g. own brand)

90. Product recalls create waste

110. Packaging waste arises along the chain 120. Product gets damaged or spoilt along the supply chain

45. Short shelf-life products have been increasing

33. Product stock can often exceed demand

100. Responsibility for managing waste is not clear in many organisations

41. Fresh products tend to have short shelf-lives

21. Forecast are often inaccurate

32. Retailers and manufactures don’t have confidence on each others’ data

47. Own brand products cannot be sold to alternative customers

70. Products with shorter shelf-life left can remain unsold

20. Over-ordering and overproduction can take place

42. People are increasingly demanding fresh food without preservatives

44. Mainstream retailers demand the majority of the shelf shelflife (60-75%)

50. Availability takes priority over waste

71. Consumers want product to be as fresh as possible

35. Retailers enforce penalties for not delivering OTIF 72. Stock rotation practices are not always followed

31. Sharing of demand information between retailers and suppliers can be limited

23. Demand for certain products has high variability

301. Price sensitive information cannot be shared

302. Some organisations are not always open to sharing information

3. Products with poor appearance often remain unsold - wasted

61. Failure of refrigeration equipment (retail display, transport and warehousing) can spoil product

121. Customers expect consistency in product appearance

82. A higher proportion of the shelf-life is used in the supply chain

60. Poor retailer chilled displays can affect appearance and reduce shelf-life

26. Weather fluctuations create variability of demand for many products

30. A structured approach to running promotions is not always followed

112. Intermediate packaging can create waste

111. Changes in pricing and labelling can cause packaging waste at the producer

62. Product can be damaged from chilling

80. Imported products tend to have longer lead times 63. Poor practices in cold chain management can affect the product

15. Packaging is not always designed to minimize waste

83. People are demanding more products out of season 15. Stacking and shelving procedures are not always followed

25. Promotions create uncertainty in demand for promoted product and for other products (cannibalisation)

27. Seasonality and cyclicality can create unstable in demand

13. Packaging is sometimes fragile

12. Product is not always handled appropriately

81. Out of season products have to be imported

36. Forecast and orders can be inflated for various reasons (e.g. meet financial targets, make shelves look full)

91. Failures in Quality management and Health & Safety will cause product recalls

122. Retailers will reject products with sub-standard appearance

300. Handling discounts are offered to increase efficiency

37. Forecasting practices in the industry are variable

73. Performance indicators focus on cost, efficiency and availability

16. Temporally labour is often not sufficiently trained

Version 5.0 10/07/09 Prepared by C. Mena

Defra report: Evidence on the role of supplier – retailer trading relations and practice in waste generation in the food chain

Best Practice Sub-Group Survey Q1

Best Practice Sub-Group Survey Q2

Best Practice Sub-Group Survey Q3

Identifying instances of outof-stocks & diagnosing root causes

Yes

Is the product on shelf? Yes

Yes

Do systems say there should be stock in-store?

Yes

Is there a Shelf Edge Label?

Is the product ranged?

No Root Cause 1: De-listed by store staff

Yes

Is there stock at back of store?

No Ask Store Staff for reasons for shortage

Yes

Is stock fit for sale?

Root Cause 2: Replenishment discipline

Root Cause 3: In-store damages or out-of-date stock

No Root Cause 4: Phantom stock

Root Cause 5: Spike in demand

Source: ECR UK Availability Survey, Convenience with Root Cause Analysis, 2006

Root Cause 6: Error in order placement

Root Cause 7: Delivery issues (misspicks, transit damages)

Root Cause 8: Unable to discuss with staff in-store

ÂŠ IGD 2012

Agenda • Preventing it together rather than just managing it ourselves – Internal – amongst colleagues – External – with trading partners

• Redistribution

Waste Performance Improvement SET UP

MEASURE & UNDERSTAND

REDESIGN & PILOT

ROLL OUT & SUSTAIN

• See what material is wasted, where and when • See how and why material waste is occurring • Generate ideas / solutions to prevent waste occurring in the first or redistribute it via alternative markets © IGD 2012

Waste Performance Improvement

See what is wasted, where and when • Retailer-supplier team focus on one of their product families where the opportunity to prevent supply chain waste is likely to be most substantial • Select product family by sharing and combining top level aggregate data about the absolute and percentage values and volumes of material waste between factory in-gate and till • Material waste can arise at many stages of the supply chain; from goods-in, through processing, packing, storage, picking, dispatch, transport, to shelf replenishment and shopping • This material waste can take the form of raw material processing loses, clean down waste, and contaminated, damaged, obsolete or expired stocks of product and packaging materials, work-in-progress and finished goods © IGD 2012

See what is wasted, where and when • Interrogate SKU / location / time specific data on ERP or similar systems to identify instances of material waste • Waste type and reason codes are often entered into these systems to explain waste when a manual adjustment is made – Warehouse codes may include: “promotion”, “minimum order quantity”, “sales below forecast”, “season exit stock” or “damaged”

• Bring together granular data about the absolute and percentage values and volumes of material waste • Use the ECR Collaborative Waste Prevention Toolkit and Waste Matrix Wastage Matrix by Product Area

Time Period of Measure (Daily, Week ly, Periodically)

Wastage Matrix for (Product Area )

Value

Product Area Example A Example B Example C Product Area 4 Product Area 5 Product Area 6 Product Area 7 Product Area 8 Product Area 9 Product Area 10 Totals

Wastage Matrix by Location

Sell Value (£)

Damages

Out of Date

£425,000 £82,000 £225,000

£390 £125 £1,110

£1,220 £2,225 £1,375

£732,000

£1,625

£4,820

Volume

Wastage % to £ Sales 0.38 % 2.87 % 1.10 % #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.88 %

Wastage % to Total £ Sales 0.22 % 0.32 % 0.34 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %

Sell Volume

Damages

Out of Date

3,602 9,111 45,000

3 14 222

10 247 275

57,713

239

533

Example A Example B Example C Location 4 Location 5 Location 6 Location 7 Location 8 Location 9 Location 10 Totals

Value

Wastage % to Sales (vol) 0.38 % 2.87 % 1.10 % #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 1.34 %

Wastage % to Total Sales (vol) 0.02 % 0.45 % 0.86 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %

Time Period of Measure (Daily, Week ly, Preiodically)

SKU Example A Example B Example C Product 4 Product 5 Product 6 Product 7 Product 8 Product 9 Product 10 Totals

Sell Value (£)

Damages

Out of Date

Wastage % to £ Sales

£100,000 £50,000 £120,000

£32 £1 £2,400

£287 £4,754 £850

£270,000

£2,433

£5,891

Sell Value (£)

Damages

Out of Date

Wastage % to £ Sales

£2,000,000 £1,700,000 £1,650,000 £1,625,000 £1,850,000 £1,690,000 £1,575,000 £1,595,000 £1,705,000 £1,750,000 £1,825,000 £1,900,000 £20,865,000

£100 £80 £75 £70 £85 £80 £65 £65 £80 £85 £85 £95 £965

£30,000 £16,150 £15,675 £15,450 £17,575 £16,055 £14,965 £15,150 £16,200 £16,625 £17,340 £28,500 £219,685

1.51 % 0.95 % 0.95 % 0.96 % 0.95 % 0.95 % 0.95 % 0.95 % 0.95 % 0.95 % 0.95 % 1.51 % 1.06 %

0.32 % 9.51 % 2.71 % #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 3.08 %

Wastage % to Total £ Sales 0.12 % 1.76 % 1.20 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %

Volume Wastage % to Sales (vol)

Sell Volume

Damages

Out of Date

8,333 12,500 6,667

3 0 133

24 1,189 47

27,500

136

1,260

Sell Volume

Damages

Out of Date

Wastage % to Sales (vol)

166,667 141,667 137,500 135,417 154,167 140,833 131,250 132,917 142,083 145,833 152,083 158,333 1,738,750

8 7 6 6 7 7 5 5 7 7 7 8 80

2,500 1,346 1,306 1,288 1,465 1,338 1,247 1,263 1,350 1,385 1,445 2,375 18,307

1.51 % 0.95 % 0.95 % 0.96 % 0.95 % 0.95 % 0.95 % 0.95 % 0.95 % 0.95 % 0.95 % 1.51 % 1.06 %

0.32 % 9.51 % 2.71 % #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 5.08 %

Wastage % to Total Sales (vol) 0.10 % 4.32 % 0.66 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %

Wastage Matrix by Time Period

Value Location

Time Period of Measure (Daily, Week ly, Periodically)

Sell Value (£)

Damages

Out of Date

£500,000 £750,000 £1,000,000

£850 £525 £650

£1,250 £1,700 £1,450

£2,250,000

£2,025

£4,400

Volume Wastage % to £ Sales 0.42 % 0.30 % 0.21 % #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.29 %

Wastage % to Total £ Sales 0.09 % 0.10 % 0.09 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %

Sell Volume

Damages

Out of Date

41,667 62,500 83,333

71 44 54

104 142 121

187,500

169

367

Value Wastage % Wastage % to Total to Sales (vol) Sales (vol) 0.42 % 0.09 % 0.30 % 0.10 % 0.21 % 0.09 % #DIV/0! 0.00 % #DIV/0! 0.00 % #DIV/0! 0.00 % #DIV/0! 0.00 % #DIV/0! 0.00 % #DIV/0! 0.00 % #DIV/0! 0.00 % 0.29 %

Time Period Week/Period 1 Week/Period 2 Week/Period 3 Week/Period 4 Week/Period 5 Week/Period 6 Week/Period 7 Week/Period 8 Week/Period 9 Week/Period 10 Week/Period 11 Week/Period 12 Totals

Volume Wastage % to Total £ Sales 0.14 % 0.08 % 0.08 % 0.07 % 0.08 % 0.08 % 0.07 % 0.07 % 0.08 % 0.08 % 0.08 % 0.14 %

Wastage % to Total Sales (vol) 0.14 % 0.08 % 0.08 % 0.07 % 0.08 % 0.08 % 0.07 % 0.07 % 0.08 % 0.08 % 0.08 % 0.14 %

See what is wasted, where and when • Bring together and analyse system data to identify – hot products – which – hot spots – or locations along the chain – where – hot times – of day, days of the week, periods in the promotion cycle, seasons – when

• the numbers of instances or the absolute or percentage volumes of different types of waste are or seem extreme, peculiar or inexplicable • This office based system data analysis is an essential precursor to further investigations which it will shape • Go through all the data together, face-to-face © IGD 2012

Waste Performance Improvement

See how and why waste is occurring • The system data analysis sheds some light on top level types of and reasons for material waste • Before effective solutions can be generated the mechanics and root causes of the material waste need to be identified • The how and why cannot be detected from the system • They can be too easily assumed; the temptation to make assumptions, jump to conclusions and invest in changes that don’t prevent material waste has to be guarded against • Your retailer-supplier team need to go to the hot spots at the key times, investigate the products and use investigative techniques such as the “5 Whys” to learn from those involved

See how and why waste is occurring • Identify the root causes and build a Loss Tree

• Process mapping to depict who does what when can help reveal root causes in, for example, the breakdowns or delays in the handoffs of information between functions deep in head office miles away from the resulting material waste © IGD 2012

See how and why waste is occurring • The retailer and supplier team need to work together all the way from till to factory in-gate and through their respective head offices taking different roles depending whose territory they are on – When visiting, team members should concentrate on asking all their questions and making all their requests to help build understanding – When hosting, team members should concentrate on facilitating access to front line staff who can answer questions and to responding to other requests as possible

• The learning is maximised when all this can be undertaken by a cross-functional trading partner team • Sometimes the true significance of something seen at one point is only recognised by somebody who works somewhere else along the supply chain © IGD 2012

See how and why waste is occurring • Such “supply chain walks” should be arranged very carefully to maximise access and learning • It is often tempting for a site host to dress things up in preparation for a visiting delegation without realising that this defeats the purpose of the visit • Previously agreed working principles such as those in the ECR Collaborative Waste Prevention Toolkit help build the trust and openness required for maximum effectiveness • Alongside its competition compliance policy IGD has a new statement of the conduct expected of participants when working on supply side projects (see www.igd.com/policies) • This is to provide maximum clarity about what can and cannot be done with trading partners on projects such as material waste prevention projects © IGD 2012

Improve on what is going on, not what you think is going on

ÂŠ IGD 2012

Waste Performance Improvement

Generate solutions to prevent or redistribute • A potentially very wide range of waste prevention opportunities will arise, some with no (or low) cost • Evidence may have emerged that justifies further consideration of opportunities such as: – Joined-up management of promotions planning, implementation and review – Order process improvement – Secondary packaging design improvement – Warehouse picker responsibility alignment and education – Tertiary packaging load stabilisation – Avoidance of co-packing – Line by line performance analysis and range adjustment

Opportunity assessment

ÂŠ IGD 2012

Agenda • Preventing it together rather than just managing it ourselves – Internal – amongst colleagues – External – with trading partners

• Redistribution