Allen Hoover, Medifast PRIVATE LABEL MANUFACTURING

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INTRODUCTION / OBJECTIVES

7 #NAVUGFocus YOUR PRESENTER Allen Hoover Material Control Manager, Medifast

8 #NAVUGFocus Private Label / Co-Manufacturing - Overview Private Label / Co-Manufacturing - Overview SESSION OBJECTIVES Component Inventory Component Inventory BOM Structure – Process Flow BOM Structure – Process Flow Posting Consumption / Output - Inventory Posting Consumption / Output - Inventory Questions / Experiences Questions / Experiences What we do and why – Inventory movement What we do and why – Inventory movement

9 #NAVUGFocus What is Private Label / Co-Manufacturing? QUESTION? What does it mean to you and your organization? What is a Virtual Warehouse? Why use a Virtual Warehouse? How do I create a PO for this?

WHAT IS PRIVATE LABEL / CO- MANUFACTURING?

11 #NAVUGFocus HOW DO WE GET THERE?

12 #NAVUGFocus WHAT DO WE DO?

13 #NAVUGFocus PROCESS MAP – EASY TO UNDERSTAND!

14 #NAVUGFocus WAIT! KEEP CALM!

15 #NAVUGFocus External step in your manufacturing process PRIVATE LABEL - QUICK AND SIMPLE RAWSHIPFINISH Internal manufacturing for another company Supply 3 rd party with materials for processing

16 #NAVUGFocus PRIVATE LABEL / CO-MANUFACTURING Pick / Pack Transfer Milkshakes R-US Semi-Finished Goods – Powder mix Medifast Raw Materials

17 #NAVUGFocus WHAT DOES THIS LOOK? Milkshake Tolling Fee Powder Blend Packaging Work center Routing Chocolate Milkshake Cocoa powder Chocolate powder Chocolate Flavor Sugar / Salt Fructose Salt Water / milk Whey Powder Milk Powder

18 #NAVUGFocus HOW DO WE BUILD THIS IN NAV?

19 #NAVUGFocus PROCESS FLOW – COMPONENT INVENTORY PO – Tolling Fee (component of Fin Good)( receipt based on final yield ) PO – Packaging PO – 3 rd Party Supplied Items (water, raws ect) Receipt – Virtual Warehouse Physical & Virtual Inventory at Co-Man

20 #NAVUGFocus MILKSHAKE BOM – FINISHED GOOD Milkshake Tolling Fee Powder Blend Packaging Work center Routing

21 #NAVUGFocus MILKSHAKE ORDER – TOLLING PO

22 #NAVUGFocus PRODUCTION ORDER – FIN GOOD Quantity – Order quantity on PO Department Code - COMAN Location Code – CNP (Virtual Location)

23 #NAVUGFocus COMPONENT DEMAND Fin Goods RP – Creates demand for components We can create a Production Order for Powder now Notice – Packaging is increased by 5%

24 #NAVUGFocus PACKAGING ORDER – PO FOR BOTTLES MOQ of 65,000 shipped directly from vendor to Milkshakes R-Us

25 #NAVUGFocus POWDER BLEND - BOM Cocoa powder Chocolate powder Chocolate Flavor Sugar / Salt Fructose Salt Water / milk Whey Powder Milk Powder

26 #NAVUGFocus PRODUCTION ORDER – POWDER BLEND Quantity – Powder Demand Department Code - COMAN Location Code – CNP (Virtual Location)

27 #NAVUGFocus RAW MATERIAL DEMAND We can now see demand on the Shortage Report for all components to produce our Chocolate Milkshake.

28 #NAVUGFocus WE NEED MATERIAL. WHAT NEXT?

29 #NAVUGFocus PROCESS FLOW – RAW INVENTORY Demand from Powder Blend Production Order shortage list Physical activities / NAV transactions Co-Man

30 #NAVUGFocus PRIVATE LABEL / CO-MANUFACTURING Pick / Pack Transfer Milkshakes R-US Semi-Finished Goods – Powder mix Powder Plant Raw Materials

31 #NAVUGFocus PRODUCTION – MILKSHAKES R-US Milkshakes R-Us do what they do best and blend mix and make all of those yummy milkshakes. Milkshakes R-Us will provide final yield before Consumption and Output is posted in NAV.

32 #NAVUGFocus HOUSTON…WE HAVE MILKSHAKES Now what?

33 #NAVUGFocus CONSUMPTION – FINISHED Populate the consumption journal Remember our Quantity was based on our initial order of 50,000 milkshakes Milkshakes R-Us had a final yield of 45,000 milkshakes They will invoice for 45,000 milkshakes (PO Receipt to reflect 45,000ea Tolling item) Request inventory of remaining packaging components or packaging used (there will be some scrape/loss Milkshakes R-Us reported a packaging usage of 56,126 bottles

34 #NAVUGFocus CONSUMPTION – FINISHED Q1. Why post actual consumption for the Tolling fee? Q2. Why didn’t I change the Chocolate Milkshake Blend Quantity? A1. Remember that the tolling fee is the charge invoiced by Milkshakes R-Us to produce our product. If we are invoiced for 45,000 and we receive 45,000 then we only want to consume 45,000. A2. The Milkshake blend was used completely. All 27,972.5lbs went through the packaging lines and was either packaged or wasted.

35 #NAVUGFocus OUTPUT – FINISHED MILKSHAKES Again we want to post Output for the final quantity produced – 45,000

36 #NAVUGFocus WE HAVE INVENTORY NOW WHAT?

37 #NAVUGFocus TRANSFER / SHIPPING Milkshakes R-US Powder Plant Move inventory back to your warehouse / distribution with a Transfer Order

38 #NAVUGFocus LETS COMPLICATE IT! This shows a very simplified version of what we actually did for our product. After it was packaged in blank bottles we had it shipped to another company for customized wrapping.

39 #NAVUGFocus KITTING OR PRODUCTION ORDERS? Raw Materials Tolling Fee (process charge) Packaging Component

40 #NAVUGFocus BOM JOURNAL – CONSUMPTION & OUTPUT Populate the BOM Journal – Apply lot numbers to RAWs as needed Getting inventory to the Virtual Warehouse is the same as when processing with Production orders.

41 #NAVUGFocus QUESTIONS?

42 #NAVUGFocus Contact information Allen Hoover, Medifast – THANK YOU

43 #NAVUGFocus  Download the session slides from the NAVUG Focus community at navugfocus.com under the Events tab.  Complete your Session Survey at  Enjoy the Conference! FINAL REMINDERS