Chemical Supply Chain

© TMK_Logichem 2010 1

Achieving Supply Chain Excellence

in the

Fast Moving Consumer Goods Industry

Thomas Müller-Kirschbaum

Düsseldorf, April 21, 2010


Agenda

Company

Business Sector & Supply Chain

Cheaper, Faster, Smarter: The Challenges

Responses

Key Take Aways

1

2

3

4

5


Three Areas of Competence134 Years of Brand Success

Quality with Brands & Technologies

Laundry &Home Care

AdhesiveTechnologies

Cosmetics/ Toiletries


Henkel Brands Performance around the Clock


Agenda

Company



Responses

Key Take Aways

1

2

3

4

5


Laundry & Home CareProduct Portfolio

• Heavy-duty detergents

• Fabric softeners

• Laundry care products

• Dishwashing products

• All-purpose cleaners

• Scouring agents

• Floor and carpet care products

• Bath and WCcleaners

• Glass cleaners

• Kitchen cleaners

• Specialty cleaning products

• Air fresheners

• Insecticides for household use


2009 Sales by business sector

Sales: 13,573 million euros

Corporate210 (2%)

Adhesive Technologies6,224 (46 %)

Cosmetics/Toiletries3,010 (22 %)

Laundry & Home Care4,129 (30 %)

in million euro


2009 EBIT by business sector

Adhesive Technologies506 (36 %)

Cosmetics/Toiletries387 (27 %)

Laundry & Home Care530 (37 %)

in million euros

1) Adjusted for one-time charges/gains and restructuring charges

Adjusted1) operating profit (EBIT): 1,364 million euros

Excluding Corporate


Supply Chain Design – Basis for SuccessKey Dimensions

One Global SC Organization with

• End-to-End Process Responsibility

(from the customer to the customer) and

• Full Vertical Integration

(Global – Regional – Local Level).


Supplier Production AC / Warehouse

Market /Customer

Purchase to pay Order to cash

Demand / Order

Order Plan OrderPlan Demand

Source

Source

Make DeliverMake Deliver

Info

rma

tio

n f

low

Ma

teri

al

flo

wSupply Chain – End-to-End ProcessExtended View of the Value Chain


Supply Chain – Key Elements Planning/Procurement, Production, Distribution

Planning& Procurement

Production Distribution

Moving 15,000 SKU

Plants

>40<30

Distribution Center

>150<120

10,000 Drop points

Single Suppliers

>2,900<1,400

past (2005)future (2012)


Supply Chain Strategy PillarsFramework for Long-Term Action

Optimize total performance(Cost, Inventories, Service)

Design & implement an extended and

adaptive supply chain

Build on smart technologies,

processes and systems

Design & implement theright organizational setup

• Mass products vs. specialties:

decentralized vs. centralized production

• Fully exploit make-or-buy potential

• Integrated technology sites

• Interconnectivity Processes & Systems

• Smart complexity management

• Integration of customers & suppliers

• Process simplification

• Integrated supply-chain planning

• Permanent benchmarking

• End-to-end responsibility

• Talent management

• Clear governance


Agenda

Company



Responses

Key Take Aways

1

2

3

4

5


Assessment of FMCG Environment 2010+No Revolution, but Evolution happens

• Demand variability increases

• Complexity increase and drives late stage differentiation as well as adaptive supply chain designs

• Retailer power expected to rise; „smartest players in the value chain“

• Raw material prices continue to be volatile as resources remainscarce; importance of risk management along value chain increases

• Distribution cost increases stronger than processing cost

• Sustainability emerges a new competitive parameter

• Challenge of private label product offerings remains and grows

+ Supply chain capabilities become a strategic success factor

+ Human capital in supply chain is a current & future bottleneck


The Future: Balance of Power movesRetailers invest to become the “smartest“ Players

A consultants view on the industry:Maturity of overall supply chain knowledge in FMCG

Uninformed

Going to School

Educated

Expert

Most informedSupply Chain

Participant

Suppliers

Manufacturers

Retailers

1980's Current 2012+

Source: AT Kearney (2008)


Flexibility

Reliability

Speed

Cost & Capital Efficiency

Sustainability

Volatility in upstream / downstream markets

Consumer individualization / diversity

Changing customer specific supply chains

Perfect Order as KPI, OTIF is hygene factor

Full process transparency

Fast changing consumer & customer patterns

Customization of product offerings

Speed of innovation processes

Scarce resources / Energy conservation

Urbanization / Demographical concentration

Customer & supplier integration (e.g. VMI)

Volatility in downstream demand

1

2

3

4

5Su

pp

lyC

hain

Perf

orm

an

ce

Key Factors Supply Chain PerformanceChallenges 2010+ can be clearly identified


Agenda

Company



Responses

Key Take Aways

1

2

3

4

5


Overview

Integrated Supply Chain Organization

Strategic Network Design

Horizontal & Vertical Cooperation

End-to-End Supply Chain Planning

Smart Complexity Management

Sustainability Matters

KPIs

People make the Difference !

A

B

C

D

E

F

G

H


Global Global SC Operations

Production Steering

Industrial Engineering

SHEQ

Planning & Logistics

Process Technology

Head of Local SC

Planning LogisticsHead of Plant(s)

Production/

Engineering

Industrial

EngineeringSHEQ

Planning

/Logistics

Local

Head ofRegional SC

Regional

Production Steering /Engineering

Industrial Engineering

SHEQPlanning & Logistics / Contract Manufacturing

Head ofGlobal SC

Integrated Supply Chain OrganizationExample Laundry & Home Care

A


Strategic Network Design Example European Network Re-Design

• Population density drives

set-up

• Optimum distribution

distance to be respected

• Country borders do not

matter

• Minimum number of storage

stages for responsiveness

and sustainable efficiency

Own factories (2010)

�Produce & deliver close to customers & consumers

Population Density

Factory closed/sold (2005-2010)

B


Strategic Network Design Example Warehouse Concept Eastern Europe

Achievements since 2006

• Avoidance of 200,000

transportation km /

70,000 liters diesel /

185,500 kg CO2 per year

• Double-digit reduction of logistics

costs

• Other positive impacts on service

levels, inventories and

responsiveness increasing quality

of our service to customers

Central Warehouse ViennaReduction of 3 warehouses

x xVienna

�Significant reduction of kilometers & CO2 emissions

x

Warehouses

Production Facilities

B


Horizontal & Vertical CooperationExample HeCoRe

Joint deliveriesJoint warehouses

Savigny ~ 50% deliveries

St Quentin ~ 50% deliveries

MainPrinciples

Implemented

• Carrefour : 23 warehouses (full perimeter deployed)

• Auchan : 2 warehouses

• Galec : 2 warehouses (joint deliveries with Reckitt)

• Match : 2 warehouses

Benefits

�� Stock level

�� Service

level

• Increase of delivery frequency

• Improve service level

• Reduce transport costsWin-win-situation

C


Allocation

To Plants

DistributionCenterDemand

DistributionCenter

Forecast

Sales

Forecast

End-to-End Supply Chain PlanningExample Improvement Potential DPQ / SFA

12

3

4

Production

Planning

5

Confirmation

to DistributionCenters

6

DC Replenish-

mentPlanning

7

ExpectedSales

CustomerOrders

D


End-to-End Supply Chain PlanningExample Clear Rules exploit Potential of Tools

Monday Tuesday Wednesday Thursday Friday

CopackingPlanning

Stock Trans-fer Planning

Alert Mgmt

Distribution Center Replenishment

Production Planning

Contract Manufact Planning

Direct demands

Dependend demands

RemainingStock alerts

Directdemands

DC Forecastsand

Stock Alerts

D

Sales Forecast

Sales Orders


Smart Complexity ManagementExample Late Customization of Liquids

going X-Box

Past

Now

Produkttanks A

FillingMixer

tank fortype

tank fortype

Filling

ContiPost-addition

XBoX

Mixer

Post-Addition of perfume, color, actives, salts, citric acid

● 1-Step process● Batch production● Slow process● More cleaning &

waste water

● 2-Step process● Continuous production● Fast change-over● Less cleaning &

waste water

Result: -70% in base formulas

First pilot 2004

E


SustainabilityLeading Position in External Recognition

WWW.ETHISPHERE.COM

ETHICALWORLD‘S MOST

COMPANIES20

09

Germany’s most

sustainable brand

Henkel

WalMart

Sustainability Award

Member 2007/08

Member 2008/09

Member 2009/10

F


Sustainability MattersCorporate CSR/Sustainability Targets for 2012

further reductionin

energyconsumption*

further reductionin

water consumption*

further reduction in

waste generated*

further reduction in

occupationalaccidents

Long-term target:Zero occupational

accidents.

–– 15 %15 % –– 10 %10 % –– 10 %10 % –– 20 %20 %

* Targets per metric ton of output. Base year: 2007

F


Focus on Entire Value Chain

Rawmaterials

Washingmachine

production

Packagingand

transportRetail

Rawmaterials

Detergentproduction

Packagingand

transportRetail

Waste & recycling

Consumers

Contribution to carbon footprint in %:

Raw materials Production, packaging, transport, retail,

recycling

Consumer usephase

~ 70%~ 70%~ 10%~ 10%~ 20%~ 20%


Performance based on Sustainability:

Leading through Focus on Total Value Chain and

Consumer Information

�Henkel products stand for innovative sustainable consumption

Raw Materials Production Packaging Transpor-tation

Purchasing ProductUsage

Disposal Total

Average scenario

30°C

60°C

1000

800

600

400

200

0


How to Improve

Sustainable Consumption & Production

Less Energy Consumption

Global Carbon Cycle

Biodegradability

1

2

3

Biodiversity4


SCI ~E • BIO • DIV

GWP

E: Efficiency in relative units of detergency

BIO: Biodegradability in total oxygen consumption

DIV: Biodiversity contribution in comparison to existing solutions

GWP: Global Warming Potential in g CO2 equivalent

Sustainable Consumption Index (SCI)


Changesplanned

2005-2010

Changesrealized

2005-2008

KPI – Supply Chain KPI MasterWhat you measure is what you get!

• Integrated set of KPI linked to business strategy

• Basis for continuous improvement

• Bottom-up reconciliation and benchmarking

Total Supply Chain Costs (% of sales without materials) -150bp -220bp

Quality-in-the-box (%) +30% +30%

Incident Rate (accidents per 1 mill. working hours) -38% -48%

Service Level (%) +1.7% +1.5%

# SKUs -13% -20%

Inventories (% of sales) -6% -16%

Transport & Whse. Cost (EUR/ton) -2% -2%

Processing Cost (EUR/ton) (powder/liquid) -3% -10%

Headcount Productivity (tons per headcount and year) +19% +51%

G


People make the Difference!Example for Developping & Retaining HR

�� Right organization template & governance

�� Less, but higher qualified resources

Succession Planning Levels 1 – 3

Talent Development Programme

Supply Chain Academy

Initiatives @ Supply Chain Henkel

H

1

2

3


Agenda

Company



Responses

Key Take Aways

1

2

3

4

5


Key Take Aways

• FMCG environment changes expected to

happen in an evolutionary way (basedon last 2-3 years experiences)

• Flexibility, Speed, Reliability and Efficiency are „Classic Challenges“joined by Sustainability being a competitive factor

• Strategic responses focus on structuraland process improvements as well as

clear metrics along the integrated supplychain process

• Technology is a must, People will be the

„true“ differentiator in Retail-FMCG

Supply Chains of the Future

Awarded by:

• Supply Chain Management Institute, European Business School

• PRTM Management Consultants

• Trade Magazine, Logistik Heute

Supply Chain Management Award

Chemical Supply Chain

Education

supply chain excellence

supply chain design

business sectorsales

business sectoradjusted1

value chain purchase

challenges4 responses5

allpurpose cleaners

delivermakedeliversource