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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 International Supply Chain Education Alliance 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