ECR Europe Supply Side Topics ECR Europe Executive Board meeting on 12 November 2004

ECR Europe started off with Supply Side Topics in 1995 Supply side offered the most obvious opportunity for efficiency and savings

Up to now we have run 12 supply side projects

Summary of supply side topics –Efficient Replenishment & Electronic Data Interchange ( ) –Efficient Unit Loads ( ) –Efficient Replenishment with third party service providers ( ) –Transport Optimisation (1999 – 2000) –Integrated Suppliers – ECR upstream ( ) –Unit Loads Identification & Tracking (1999 – 2000) –Reusable Transport Items (2000 & 2003) –Collaborative Planning, Forecasting & Replenishment (2001 – 2002) –Consumer Direct Logistics (2001 – 2002) –Shrinkage (1999 – ongoing) –Optimal Shelf Availability (2003 – 2004) –Traceability (2003)

‘History’ of supply side topics 1995 – 1996: Efficient Replenishment & Electronic Data Interchange  models for replenishment (e.g. cross- docking, vendor managed inventory, etc.),  necessary EAN communication standards

‘History’ of supply side topics 1996 – 1997: Efficient Unit Loads  dimensions and handling procedures for pallets, crates, cases

‘History’ of supply side topics 1998 – 1999: Efficient Replenishment phase II  involvement of third party service providers in replenishment process  consolidation of shipments/backhauling

‘History’ of supply side topics 1999 – 2000: Transport Optimisation  best practices for optimal use of transport capacity Pallet height Multi-modal transport Vehicle technology Efficient network design Shipment consolidation / backhauling

‘History’ of supply side topics 1999 – 2000: Integrated Suppliers (‘ECR upstream’)  extending ECR collaboration upstream to packaging, ingredients & raw material providers

‘History’ of supply side topics 1999 – 2000: Unit Loads Identification & Tracking  best practices for identification & tracking of pallets & cases based on EAN standards

‘History’ of supply side topics 2001 & 2003: Reusable Transport Items  reusable pallet & crate dimensions (further development of former efficient unit loads recommendations)  handling mechanisms / organisation  communication

‘History’ of supply side topics : CPFR (collaborative planning, forecasting & replenishment)  Simplified version of the VICS model  European case studies & insights

‘History’ of supply side topics : Consumer Direct Logistics (on-line shopping)  Impact of consumer direct operations on logistics  guidance on best logistics approaches to consumer direct

‘History’ of supply side topics : Optimal Shelf Availability  roadmap to better shelf availability  harmonised measurement approach  now in implementation stage

‘History’ of supply side topics : Traceability  best practice guide on how to comply with EU regulation 178/2000 (implementation as of 1 Jan 2005), based on EAN standards

‘History’ of supply side topics ongoing: Shrinkage – reducing stock loss in the supply chain  roadmap on collaborative approach to shrinkage  studies on various aspects of shrinkage  implementation support

What now? A lot of work has been done… …but are our recommendations actually being implemented?

Global ECR Scorecard results ( ) Overall Supply Strategy & Capabilities ECR strategy Average ScoreStatus of activities Strategic direction 2.5 Roll-out of projects with trading partners to improve supply chain capabilities and reduce cost using actual demand signals. People & organisation 2.6 Total Supply Chain teams assume responsibility for total logistics system. Building direct links with counter-part teams in key trading partners. Information management 2.3 Most supply chain data is communicated manually between trading partners. Some point of sale transaction data is communicated electronically with key trading partners. 0 = nothing planned; 1 = plans agreed; 2 = pilots; 3 = implementation started; 4 = fully implemented

Supply Management, Supply Strategy & Capabilities ( ) Strategic Direction 67 scorecards, average=2.5

Supply Management, Supply Strategy & Capabilities ( ) People & Organisation 67 Scorecards, average=2.6

Supply Management, Supply Strategy & Capabilities ( ) Information Management 67 scorecards, average=2.3

Global ECR Scorecard results ( ) Details on supply side concepts ECR strategy Average ScoreStatus of activities Transport Optimisation 2.9 Roll-out started: transport capacity utilisation is part of total supply chain costs; supply chains critically monitored for balance of costs and networks changed accordingly Product Flow Techniques (Efficient Replenishment) 2.5 Between pilot and roll-out phase; implications of different techniques understood; monitoring of results by ABC; Integrated Suppliers 2.3 VMI pilots with some upstream suppliers underway Shrinkage 2.3 Isolated, but detailed, programmes on 'hot' products are implemented, based upon information and data gathered. Programmes are reviewed and areas for internal collaborative working are identified. Efficient Unit Loads 2.2 Pilots with some trading partners underway to harmonise tertiary & secondary items Collaborative Planning, Forecasting & Replenishment (CPFR) 1.9 Plans are combined to form a jointly agreed single plan. Occasional joint review of the plan takes place. Raw data is exchanged between trading partners and is actively incorporated in forecasts. Processes exist to convert sales forecasts into order forecasts. Accuracy of forecasts is measured. Optimal Shelf Availability 1.6 Plans to measure and set targets. Mostly irregular manual collection of on-shelf availability data, plus ad hoc reviews.

Product Flow Techniques - Efficient Replenishment ( ) 44 scorecards, average=2.5

Transport Optimisation ( ) 63 scorecards, average=2.9

Efficient Unit Loads ( ) 65 scorecards, average=2.2

Integrated Suppliers (ECR upstream) ( ) 26 scorecards, average=2.3

Reliable Stock Loss Management (Shrinkage) ( ) 50 Scorecards, average=2.3

On-Shelf Availability Management ( ) 51 scorecards, average=1.6

Supply side implementation Average Scorecard results between 1.6 and 2.9 Pilot stage Implementation started

New supply side topics In June, the national ECRs, together with the Advisory Group, generated a list of 8 broad supply side areas for potential action by ECR Europe: –Impact of new technologies on supply side practices –Waste Management –Visibility and control of product movement –Reaching out to other supply chain partners –Cross border supply chains –Efficient Pallet Management –Factory Gate Pricing –Quality management in supply chain management –Effect of standards on supply chain management

New supply side topics In July, the supply side break-out session of the ECR Board recommended to focus on the following: –Impact of new technologies on supply side practices –Waste Management –Reaching out to other supply chain partners –Visibility and control of product movement –Cross border supply chains –Efficient Pallet Management –Factory Gate Pricing –Quality management in supply chain management –Effect of standards on supply chain management –+ new: Re-mapping of the supply chain

Supply Chain Re-mapping Proposal at July Board meeting –Update 1995/96 supply chain mapping carried out under Efficient Replenishment & EDI project –Include new developments Conclusion by September Advisory Group –Supply chain transformation due to new technologies is handled under EPC business case of GCI  ECR Europe should examine the transformational scenarios identified by this study and their impact on ECR best practices

Waste Management Proposal at July Board meeting –Impact of European waste regulations on supply chain operations –Mapping of requirements for companies and best practice guidance Conclusion by September Advisory Group –Already well covered by existing European and national organisations –Waste management implementation is a local affair  No need for an ECR Europe project

Cross-border supply chain optimisation Proposal at July Board meeting –Impact of EU enlargement on distribution, warehousing, supply chain configurations Conclusion by September Advisory Group –This addresses genuine logistics & distribution issues –EU expansion very topical  Worthwhile to have a group look at this in greater depth

Overall outcome –Emphasis needs to be on learning and implementation of ECR supply side best practices –Analysis of impact of RFID/EPC on supply chain practices –Potential project on cross-border supply chains

For Board discussion –Do you agree with the analysis above? Proposal for next steps: –Set up supply side working group to prepare work programme –Find Board ‘champions’ to co-chair this group