Introduction - Weeblydimitarpopov.weebly.com/uploads/5/3/6/6/5366082/gaea_products.pdf ·...
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Transcript of Introduction - Weeblydimitarpopov.weebly.com/uploads/5/3/6/6/5366082/gaea_products.pdf ·...
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Agenda
Introduction
South America– Analysis
– Recommendation
– Implications
CPFR– Benefits
– Implementation
– Analysis
– Implications
Conclusion
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Current Environment
Time
South America
Transportation inefficiencies from Manufacturing Plant to DCs
30% of COGS
$ 77 Million
South America: Sales and Profit
Sales Profits Costs
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Current Environment
Walmart
Our largest customer has asked us to implement CPFR
30% of Revenue
$ 1.6 Billion
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Recommendation
South America
– Shift to ocean shipping eliminating the current high cost of air transportation
CPFR
– Gradually implement CPFR into Gaea’s global supply chain
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
South America
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
SWOT Analysis
STRENGTHS- Strong Brand Equity- Operating at a Profit
WEAKNESSES- Inefficient and Costly Transportation
OPPORTUNITIES- Growing Industry- Many available transportation choices
THREATS- New entrants- Economic/Political Instability
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Current Map
Argentina – Chile
– AIR
Chile – Peru
– Truck
Air transportation is becoming less reliable and freight rates are increasing
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Assumptions: TLC
TOTAL LOGISTICS
COST
ORDERING COST
HOLDING COST
PIPELINE COST
FREIGHT COST
= + + +
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Assumptions: Lead Time
Speed of Transportation (Low – High)
High Value
Low Value
TransportationCost
InventoryCost
Average COGS = $3
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Recommendation
Eliminate the expensive (but fast) air transportation
Cost = $203 per box
LT = 1 day
Shift to ocean shipping , a low cost (but slow) alternative
Cost = $3 per box
LT = 6 days
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Cost Implications
TOTAL LOGISTICS
COST
ORDERING COST
HOLDING COST
PIPELINE COST
FREIGHT COST
= + + +
99
%
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Financial Implications
Previous transportation cost from Manufacturing Plant to DCs = $1.37 Million
New transportation cost = $20,000
Cost Savings = $1.37 Million
Change of 99%
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Other Potential Solutions
Ship with Truck
– Argentina to Chile = $101; LT = 4 days
Ship from San Diego to Lima
– Operational Constraints
Ship from Asia
– More expensive + Longer LT
Relocate DCs
– Customer Data Unavailable
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
CPFR
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Benefits
Demand
– Improved Relationship
– Sales Growth
– Category Management
Supply
– Reduction of Inventory
– Improved ROI
– Customer Satisfaction
DEMAND SUPPLY
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Benefits
Retailer Benefits Typical Improvement
Better Store Shelf Stock Rates 2% to 8%
Lower Inventory Levels 10% to 40%
Higher Sales 5% to 20%
Lower Logistics Costs 3% to 4%
Manufacturer Benefits Typical Improvement
Lower Inventory Levels 10% to 40%
Faster Replenishment Cycles 12% to 30%
Higher Sales 2% to 10%
Better Customer Service 5% to 10%
*Source: AMR Research (2001)
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Internal Collaboration
External Collaboration without Internal Collaboration => Overpromising
Internal Collaboration without External Collaboration => Lost Opportunities
Internal and External Collaboration => Achieve Optimal CPFR Benefits
YEAR 1
Implement Internal CollaborationPartner with a consultancy (Gartner) Redesign internal company communications platform
Average cost = $500,000
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Implementation
PreparationCompany
AssessmentJoin VICSEstablish CPFR
Strategy
Gaea –Walmart Team
Collaboration Agreements
Develop Expectations
Evaluation Metrics
Train employees
Begin PilotPromotion
PlansForecasts
Review Evaluation Metrics
Assessment of Collaboration Results
Q1 Q2 Q3 Q4
YEAR 2
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Final Result
DemandPlanning
Make to Demand
Transportation Planning
Assess Demand
POS Replenish
Report Results
CPFR
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
SWOT Analysis
STRENGTHS- Wal-Mart CPFR experience- VICS support/guide- Systematical 4 region implementation
-Smooth cultural transition- Improved business knowledge- CRM with Wal-Mart enhanced
-Chain effect to customers
WEAKNESSES- Long time to fully implement- Cost implications
OPPORTUNITIES- Reduce implementation time- Innovate employees culture- Gaining market knowledge- Capital free-up = investments opportunity
THREATS- Lost market share from last implemented CPFR regions - Culture/leadership resistance to change- Lack of trust between companies
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Financial Implications
Costs: Total = $2 Million– Internal data integration:
• $200,000 - $500,000 software licensing• $50,000 - $100,000 for annual maintenance
– External data integration:• $500,000 annual budget for new team • Collaboration Software (EDI)- Average $500,000
Revenues:– 2% = $5.6 Billion– 5% = $5.8 Billion– 10% = $6.1 Billion
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Summary
South America
– Our recommendation will result in annual transportation savings of approximately $1.35 Million
CPFR
– Internal and External Collaboration will allow for optimal CPFR benefits
– Implementation complete within 2 years
– Expected Sales growth of $5.6 Billion
I n t r o d u c t i o n | S o u t h A m e r i c a | C P F R | C o n c l u s i o n
Questions?
