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AGRIBUSINESS SUPPLY CHAIN – Creating Opportunities
through Partnering…
CREATING
SHARED VALUE
- Sustainable Competitive
Advantage in Supply Chain
Naquib Khan and Ejazur Rahman
18-19 June 2012
International Supply Chain Education Alliance
AGENDA...
• BASIC CONCEPT OF SUPPLY CHAIN
• CREATING SHARED VALUE –
Sustainable Competitive advantage
International Supply Chain Education Alliance
Preface
?
• What is the hidden lever that can impact the total
business performance of any company? What do
the best performing companies like Toyota, WalMart, McDonald’s and Dell know that the rest of
the business world hasn’t yet realized fully?
• The answer may surprise many of us here:
“Supply Chain Management”.
International Supply Chain Education Alliance
What is Supply Chain Management
Supply Chain Management includes planning and
management of all stages that are involved directly or
indirectly in fulfilling customer request. Importantly, it
also includes coordination and collaboration with
channel partners, which can be suppliers,
intermediaries, third-party service providers, and
customers. In essence, supply chain management
integrates supply and demand management within
and across companies.
(Source: http://cscmp.org/aboutcscmp/definitions.asp)
International Supply Chain Education Alliance
What is a Supply Chain
International Supply Chain Education Alliance
The Objective of a Supply Chain
• The objective of every Supply Chain is to maximize
the overall value generated
• Value : The difference between what the final
product is worth to the customer and the costs the
supply chain incurs in filling the customer’s request.
• Value is strongly correlated with supply chain
profitability (also known as supply chain surplus)
International Supply Chain Education Alliance
Cycle View of Supply Chain Process
•The processes in a supply chain are divided into a series of
cycles, each performed at the interface between two
successive stages of a supply chain.
• Supply Chain processes can be broken down into the
Customer
following four process cycles –
•Customer order cycle
•Replenishment cycle
•Manufacturing cycle
•Procurement cycle
Customer Order Cycle
Retailer
Replenishment Cycle
Distributor
Manufacturing Cycle
Manufacturer
Procurement Cycle
Supplier
International Supply Chain Education Alliance
WILL THEY PREFER AND PICK-UP YOUR PRODUCTS
EVERY TIME…..?
Yes, if you are superior
to competition in terms of:



On-shelf Availability
Freshness, Quality,
Packaging
Value for money
Consumer mindset
International Supply Chain Education Alliance
COMPETITIVE ADVANTAGE…
1. Superior on-shelf availability and quality
RELIABILITY
2. End-to-end optimization of costs
COST
3. Superior responsiveness to market dynamics
SPEED
But How..?
• Process integration
• Process efficiency & effectiveness
International Supply Chain Education Alliance
LOOK AT THE DEFINITION….
Supply Chain is an integrated chain
of business processes, which drives the
business towards meeting consumers’
demand efficiently & effectively.
International Supply Chain Education Alliance
THE SUPPLY CHAIN CONCEPT IS VERY SIMPLE...
... but hard to
implement
in practice
International Supply Chain Education Alliance
FROM ‘FARM TO FORK’ – a lot of stages in Supply Chain...
Each stage is critical to have ultimate ‘End to End’…
• Process integration
• Process efficiency & effectiveness
International Supply Chain Education Alliance
FOUNDATION OF SUPPLY CHAIN….
International Supply Chain Education Alliance
SUPPLY CHAIN HAS TWO BASIC ELEMENTS…
1. Information
2. Products & Materials
Supply Chain cannot function properly
without any one of them.
‘FUND’ - another element which is required everywhere
International Supply Chain Education Alliance
THE CLASSICAL FLOW MODEL :
Physical Supply and Demand Information Flows
Too many interfaces
ENSURING SUPPLY
XYZ Company
Suppliers
Purchasing
Demand &
Supply
Planning
Sales &
Marketing
(Supply
Part)
Distributor/
Operator
Demand Information Flow
Flow of Products and Materials
Manufacturing
International Supply Chain Education Alliance
Customer
Service &
Distribution
Consumer
EFFECTIVE SUPPLY CHAIN PROCESS DRIVES THE WHOLE
BUSINESS EFFICIENTLY….
SUPPLY CHAIN STARTS AND ENDS AT CONSUMERS…
Sources of
Supply
Supplier
Procurement
Demand &
Supply
Planning
Manufacturing
Sales &
Marketing
Distributor
/Operators
Shoppers/
Consumers
Customer
Service &
Distribution
USUALLY PART OF SUPPLY CHAIN
International Supply Chain Education Alliance
INTEGRETED SUPPLY CHAIN REQUIRES END-TO- END
ALIGNMENT FLOW OF PRODUCTS & INFORMATION….
Engine
Consumer
&
Customer
Insight
Demand
Planning
Upstream
Purchasi
ng
Supplier
s &
Service
Provider
s
Downstream
Manufacturing
Factory to
Customer
Domestic
Factory
Order
Management
& Physical
Logistics
Regional
DC
Trade Customers,
Distributors &
Operators
Master
Wholesaler
Central
DC
Wholesaler
Innovation
&
Renovation
Affiliated
Factory
Inter-Market
Supply
Regional
DC
Retailer
Warehouse
Direct to Store
Supply
Planning
Co-Packers
Direct to Consumer
17
International Supply Chain Education Alliance
Physical
Retail
Stores
Shopper
s &
Consume
rs
SUPPLY CHAIN PROCESS IS GOVERNED BY….
THE
1
4 SUPPLY CHAIN MANAGEMENT PRINCIPLES…
Optimise simultaneously : Costs,
Service/Freshness, Agility
2
Multi-Functional Supply Chain Processes
3
Continuous Improvement Driven by Key
Performance Indicators (KPI)
4
Involve all 4 Management and Systems
Levels (Strategic, Tactical, Transactional and
Physical)
International Supply Chain Education Alliance
18
?
AGENDA...
• BASIC CONCEPT OF SUPPLY CHAIN
• CREATING SHARED VALUE –
Sustainable Competitive advantage
International Supply Chain Education Alliance
CREATING SHARED VALUE (CSV)…
For a company to be successful over time and create value for
shareholders, it must also create value for the society…
International Supply Chain Education Alliance
CSV ENCOMPASSES SUSTAINABILITY AND COMPLIANCE…
Creating Shared Value
is a business strategy,
where: (a) shareholders
interest and society’s
interest strongly intersect
and (b) value creation can
be optimized for both
Compliance
With all applicable
laws and internal
regulations
International Supply Chain Education Alliance
Sustainability
Development which meets
the needs of the present
without compromising the
ability of future generations
to meet their own needs
WE CAN WORK IN DIFFERFENT AREAS…
For Example:
Leading the
thinking
NUTRITION
TRAINING
RURAL
DEVELOPMENT
Leading
by doing
WATER
Leading the
dialogue
International Supply Chain Education Alliance
SUSTAINABILITY-3R: Reduce, Reuse and Recycle…
• Engage with farmers to promote, support and invest in good water
management practices.
• Also engage in water preservation activities with local stakeholders,
and share best practice for sustainable water use.
International Supply Chain Education Alliance
SUSTAINABLE COMPETITIVE ADVANTAGE:
…working with farmers / suppliers…
PARTNERING:
• To build Capacity, Skill
developement , Knowledge
sharing and Technology
transfer
• To ensure ‘Consistent
Quality’ of supply
• To establish supply links
with ‘Fair Price’ strategy to
ensure ‘Value addition’ and
‘Agility’
Creating Shared Value: Optimized value creation
International Supply Chain Education Alliance
HUGE OPPORTUNITIES & POTENTIALS IN BANGLADESH….
FY‘10 GDP USD 99.8
Billion
CONSISTENT GDP GROWTH
7.0%
6.5%
6.0%
5.0%
5.2%
6.2%
5.7%
5.4%
6.0%
4.6%
4.4%
4.0%
Agriculture
21%
3.0%
2.0%
1.0%
0.0%
1991-95 1996-00 2001-05
FY 07
GDP growth rate
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FY 08
FY 09
FY 10p
Services
50%
6.3%
Industry
29%
5.9%
WE NEED TO DEVELOP RESPONSIVENESS…
e.g. Nestlé Environmental sustainability: 2011 highlights
•
•
•
•
•
Greenhouse gas (GHG) emissions reduced by 17% since 2001.
Water withdrawals reduced by 58% per tonne of product since 2001.
Energy consumption reduced by 42% per tonne of product since 2001.
Renewable energy consumption is 12% of total energy consumption.
Water discharges reduced by 64% per tonne of product since 2001.
International Supply Chain Education Alliance
QUALITY ASSURANCE FOR FOOD INDUSTRIES REQUIRES
FOLLOWING TESTS…
•
•
•
•
•
•
Physical test
Chemical test
Microbiological test
Vitamin test
Mineral test
Allergen test
International Supply Chain Education Alliance
•
•
•
•
•
•
•
•
•
•
•
•
Heavy Metal, Contaminants
Microbiological
Melamine test
Vitamin, Mineral test
Authenticity test
Radiation test
Pesticide, Antibiotics
GMO, Micotoxin
Patulin, Dioxin & PCBs
Fatty acid Profile
MCPD
Boron, Tin , Antimony
FOOD SAFETY MANAGEMENT SYSTEMS MUST BE IN PLACE….
8 Mandatory Elements :
•
•
•
•
•
•
•
•
Good Manufacturing Practice (GMP)
HACCP
Pathogen Monitoring of Production
Environment
Quality Monitoring Scheme (QMS),
covering CCPs, OPRPs and all other
monitoring activities related to FPL
Instrument Calibration, for all
instruments used for monitoring
CCPs, OPRPs.
Release System
Traceability, Lot Identification,
Coding
Recall and Crisis Management
International Supply Chain Education Alliance
Additional requirements:
•
Management Commitment to Food
Safety
•
Regulatory Compliance Including
labeling information to
customer/consumer
•
FSSC/ ISO 22000 & PAS 220
Compliance
QUALITY ASSURANCE AT DIFFERENT STAGES IN FOOD
INDUSTRIES……
Raw Materials:
– Vendor approval procedure  stringent procedures to be in
place
– Natural Resources in Raw Materials :
• Sourcing raw materials from selected suppliers, to be collected
from secured firm
• Working with Farmers / suppliers
• Higher monitoring on deliveries
- Pesticide Residues & HM
• ~ 200 type of Pesticides & 9 HMs are screened.
- Antibiotics & Micotoxins
• ~ 50 type of Antibiotics & Micotoxins are screened
International Supply Chain Education Alliance
QA IN FOOD INDUSTRIES: Continuous monitoring is vital…
Monitoring:
– Sampling plans ensure commitment to
declaration. e.g. one NIDO fortified packs has
~ 30 nutrients in declaration, we ensure to meet
them consistently.
– Chemical contaminants are also monitored.
e.g for a Infant Cereal variant ~ 21 contaminants
are tested
International Supply Chain Education Alliance
LIVE EXAMPLE – Creating Opportunities through Partnering…
How Private sector and NGO can work together…
Private sector
Nestlé
- Requires Honey
International Supply Chain Education Alliance
NGO
and
Proshikha
- Supply Honey
How PROSHIKHA is partnering with Farmers
to collect Honey and Process Honey…
Proshikha
- Honey Supply
Start up:
– Proshika Management agreed on our requirements
and Gap assessment done for the whole honey prod.
chain
– Made development plan from cultivation of land till
delivery of honey to Nestlé Factory
International Supply Chain Education Alliance
Proshikha
- Honey Supply
Farmers Development:
Cultivators and agriculture officers of the area were
gathered and gave way forward regarding:
 Use of fertilizer on the basis of soil analysis

Limit pesticide usage on their crops (visited by bees)

Scientific proof of increase crops production due to cross
pollination by honey bees
International Supply Chain Education Alliance
Proshikha
- Honey Supply
Merits of Bee keeping for the farmers:

Crop and Fruit production will be
increased.

Healthy and quality seed
production.

Increased oil production from the
oil seeds.
Substantial income by way of
honey production in addition to
crop production.

International Supply Chain Education Alliance
Proshikha
- Honey Supply
Bee Keeper were trained on:
 Herbal Bee population treatment instead of antibiotic

Hygienic Bee colony maintenance during off season

Honey extraction technique to get maximum output without
affecting the Bee colony

Hygienic preservation of honey till delivery to Proshika
International Supply Chain Education Alliance
APIARY IN MUSTARD FIELD…
• .
International Supply Chain Education Alliance
Proshikha
- Honey Supply
Proshikha
- Honey Supply
Development of Proshika:
 Proper storage of Raw honey

Change of processing technique to increase shelf life and
ensure better quality & food safety

Improve overall environment of the manufacturing facility

Analysis facility and monitoring of honey at different stages
International Supply Chain Education Alliance
THEREFORE, CREATING SHARED VALUE – a Sustainable
Competitive Advantage in Supply Chain…
From ‘Farm to Fork’
International Supply Chain Education Alliance
AGRIBUSINESS SUPPLY CHAIN – Creating Opportunities
through Partnering…
THANK
YOU
International Supply Chain Education Alliance