The Fresh

Connection
Egge Haak
The Challenge

• The Fresh Connection

• is a producer of fruit juices
• In NW Europe
• suffering severe losses in the last year
• because of poor performance

• A new management team has been appointed

• The assignment is to make the company profitable
again
• By making strategic and tactical choices

3
The Value Chain

VP Supply Chain

Components Finished product

Supply Production Distribution

VP Purchasing VP Operations VP Sales

4
Assortment

• Two packaging types

– 1L carton
– 0.3L PET bottle

• Three flavors
– Orange
– Orange C-Power
– Orange/Mango

• Shelf life of finished products is 20 weeks

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Shelf life

Shelf life agreement= 75% Internal shelflife

Shelf life is 20 weeks

• If the shelf life agreement is 75%, the internal shelf life

becomes 25%
• In other words, if the customer is promised a remainder of
shelf life of 15 weeks at the moment of delivery, inventory
of finished products may not rise higher than 5 weeks
• Finished products are NOT distributed to a customer if the
shelf life agreement is violated

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Market

• Three customers

– Retailer Food & Groceries

• 500 stores
• Supply chain leader

– Retailer Land market

• 300 stores
• Discounter

– Chain of gas stations Dominick’s

• 50 stores
• Only PET bottles
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Contract index

Price setting

• You cannot negotiate directly on sales/purchasing prices

• Negotiate on supply chain performance (SLA’s)
• This leads to a ‘contract index’
• Contract index determines the sales/purchasing price

• Example (sales)
Promise Contract index Basic price Sales price
Much 1.1 1.50 1.65
Little 0.9 1.50 1.35

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Performance evaluation

Costs
Operational costs
Improvement projects

highest
ROI

Revenue Investments
Price: Working capital
Customer satisfaction Equipment
Volume: Buildings
Portfolio

9
 Quick
Tour

testgig3 10
The Challenge –
The Start

• Make this company profitable again

• You have one round (half a year) to prove you
can do this job

• How?
• We make pairs of two people
• Each pair has one vote
• Hand out ABCD forms
• Majority rules

• All roles are played in a very limited format

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Where do we start?

A. Purchasing
B. Operations
C. Sales
D. Supply chain management

Results
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Purchasing - PET

A. Current supplier, no change

B. Current supplier, high quality
C. More reliable supplier, high quality and FTL
D. Nearby top supplier, high quality and FTL
Trio (current) Trio (high quality) Plantin Philyp Jones

Leadtime in days 10 10 15 5

Service level % 94% 94% 96% 98%

Certified No No Yes Yes

Price (contract index) 0.9620 0.9660 0.9860 1.022

Component price 0.0289 0.0290 0.0296 0.0307

Price (relative) 100 100.4 102.5 106.2

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Purchasing – vitamin C

A. Single source with current supplier (Seitan Vitamins)

B. Dual source with All Vitamins
C. Dual Source with Yoboma
D. Dual source with SYI

Seitan All Vitamins Yoboma SYI

Vitamins
Location China France India Amsterdam
Leadtime in days 60 20 40 4
Certification no yes yes no
Delivery reliability 90% 96% 95% 98%
Price (contract index) 0,966 1,038 1,006 1,058

Price (relative) 100 107,5 104,1 109,5

Supplier management costs €10k a year Back to roles

Operations –
Inbound Warehouse

A. Warehouse size 750 pallet locations

B. Warehouse size 1,000 pallet locations
C. Warehouse size 1,250 pallet locations
D. Warehouse size 1,500 pallet locations

• Inhouse: 200 per location per year

• Overflow: 3 per location per day

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Operations –
Bottling

A. Increase speed
B. Go to three shifts
C. Introduce SMED
D. Introduce preventive maintenance

• Increase speed, costs: 15 K, 10% more speed

• Extra shift, costs: 200 K annually
• SMED, costs: 10 K, 30% less changeover time
• Prev maintenance, takes 3 hours/week, 50% less
downtime
Back to roles
16
Sales – Shelf life

A. Shelf life for all customers to 70%

B. Shelf life for all customers to 75%
C. Shelf life for all customers to 80%
D. Shelf life for all customers to 85%

• Every 5% increase gives 75 K extra revenue

• Every 5% increase means 1 week less time internally

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Sales – Service level

A. Service level for all customers to 90%

(- 545k)
B. Service level for all customers to 92.5%
(- 119k)
C. Service level for all customers to 95%
(actual promise)
D. Service level for all customers to 97.5%
(+ 68k)
Back to roles
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SCM – Frozen period

A. Frozen period to 4 weeks

B. Frozen period to 3 weeks
C. Frozen period to 2 weeks
D. Frozen period to 1 week

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SCM –
Production frequency

A. All products every day

B. All products every two days
C. All products every week
D. All products every two weeks

Back to roles
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Results

Predictable financial results are important.

What do you expect for the next half year?

A. Increase of the ROI

B. Decrease of the ROI

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 How to
improve?
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Learning by experience
The Fresh Connection

A cross functional
learning experience
Around managing the
supply chain
To create a lasting
learning effect
And building strong
To create alignment by tapping into the full learning &
development potential of your people:
teams

• Class room learning

Bridging the gap from
• Learning from colleagues strategy to execution
• Learning by doing
Creating alignment

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… as catalyst for the magic learning cycle …

A cross functional
Experience learning experience
Micro worlds
Around managing the
supply chain
To create a lasting
Apply Magic Reflect
learning effect
Circle
And building strong
teams
Bridging the gap from
Conceptualise
strategy to execution
Creating alignment

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 Egge Haak
+31-653662562
e.haak@involvation.nl

Prinsenlaan 3
3732 GN DE BILT
THE NETHERLANDS
+31 (0)30 - 2217766
www.involvation.com