Consumer Demand Driven Supply Chain
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- Lorraine Carr
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1 Consumer Demand Driven Supply Chain Analyst Field Trip Derrick Penick SVP Merchandising & Distribution Food Lion LLC Mark Doiron, EVP - Hannaford Portsmouth, NH December 3, Delhaize Group U.S. Supply Chain Growers Manufacturers Inbound Logistics Stores Store Replenishment & Delivery DG U.S. Distribution Centers 2
2 An Evolving Supply Chain Daily Delivery of Fresh Product Fresh Food Commissary Forward Deployment or Consolidation of Inventory Consumer Driven Forecasting Recognized for Local Sourcing Value Based Procurement Customized Market selection/ merchandising Healthy product choices in each category 3 Delhaize Group U.S. Master Vision Delhaize Group U.S. has an integrated consumer-driven Supply Chain where products and information flow through optimal channels in support of all Operating Company strategies to enhance value to our customers and shareholders. 4
3 Physical Our recent Optimization Study indicates that Distribution Centers are in the correct locations to support present and future growth 5 Creating Value Dynamic Supply Chain Common System Platforms Asset Utilization Shareholder Value - Lower Cost of Goods - Higher Earnings - Competitive Advantage - Enhanced Growth Capacity - Improved Cash Flow Great Customer Experiences - Product Quality - Corporate Responsibility - Right Product, Place, Price, Time 6
4 10 Year Net Benefit ( ) Total 10-Year Benefit $334M NPV Procurement $4M NPV (1%) Retail Inventory Management $91M NPV (27%) Improved Product Flow $132M NPV (40%) Inventory Reduction $107M NPV (32%) 7 Current Delhaize Group U.S. Physical Illustration: Suppliers ship directly to each Delhaize Group U.S. warehouse 8
5 Future Delhaize Group U.S. Physical Illustration: Suppliers ship to a central warehouse where goods are cross docked and re-distributed internally 9 Master Approach New Enterprise Channel Management Delhaize Group U.S. Services & Solutions Structure/ Capacity Supplier Collaboration Demand Planning Procurement/ Replenishment Inventory Planning Key Enablers - Establish Common Master Data Identity - Establish Common IT Supply Chain Systems - Establish Common Business Supply Chain Processes 10
6 11 Delhaize Group U.S. Supply Chain Future Delhaize Group U.S. Supply Chain Vision: - Delhaize Group U.S. has an integrated consumer driven Supply Chain where products and information flow through optimal channels in support of all Operating Company strategies to enhance value to our customers and shareholders. Initiatives that support Inventory Management: - Total inventory visibility and management - Common Supply Chain Systems (common data/information/tools) - Leverage Consumer Driven Forecasting Initiatives that support Channel Management: - Expanded use of cross docking and flow through - Forward deployment or consolidation of inventory - Fresh Food Commissary - Daily Delivery of Fresh Product - Total Logistics Management - Leveraging the passion and knowledge of our associates Delhaize Group IT Synergy Successes 12 Delhaize Group s IT community has achieved many synergy successes through collaborative approaches Examples of Synergy Successes - Established coordinated contract negotiation and aggregate volume discounts for select IT suppliers - Food Lion s break pack warehouse hosted by Hannaford Warehouse Systems - All Electronic Data Interchange (EDI) in the U.S. centralized at Food Lion - Adopted common process frameworks and development methodologies - IT Infrastructure Shared Service in Europe launched over 1 year ago - Implemented standard financial system in Europe - European IT has integrated and supports emerging markets - Shared master data management strategies (item, vendor, location, etc) ACIS, our average cost inventory system, and DSS, our inventory analytics system, have been deployed in Delhaize Belgium and all U.S. Operating Companies improving margin and inventory management
7 Delhaize Group CIO Governance Vision Delhaize IT leadership developed a model to describe the future state vision that will guide future operations 13 Exploring IT Convergence Delhaize Group partnered with an experienced external consulting firm to find a answers to our specific challenges Spring 2008: External Company Engaged - How do we gain the benefits of converged solutions and protect the unique needs of local operating companies as they serve local customers and communities? - How can we accelerate innovation in a shared services environment? Recommendation - Implement IT Shared Services and preserve local IT teams to develop and support unique solutions and support innovation 14
8 Delhaize Group IT Convergence After considering several alternatives, Delhaize Group has chosen to implement IT Shared Services for IT infrastructure, Regional & Global IT Solution Platforms Key Drivers - Support business strategy to leverage standardized systems and processes - Initial focus applications include U.S. Master and European Financials - Support growth and integrate acquisitions Key Benefits - Develop ability to implement and support standardized solution platforms - Leverage IT talent regardless of geographic location - Increase overall IT quality, predictability, and speed time to delivery 15 Summary and Next Steps 16 Building on its successes, Delhaize Group IT is positioning to support new business strategies, increase quality, and optimize cost Delhaize Group has leveraged a collaborative approach to leverage IT synergy opportunities While many successes have been achieved, structural changes are necessary to continue to gain significant efficiencies Delhaize Group is taking significant steps toward a future vision that incorporates local, regional, and global business needs Now Q Q Q Implementation Planning Change Management Interim financial structures Implement U.S. IT Infrastructure Shared Service Align European organization, adapt processes Refine Shared Service model & processes Implement long term financial model Implementation of the new governance structures, organizational changes, and more standardized IT processes will ensure Delhaize Group IT is well positioned for the future
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