• Author / Uploaded
• Neill Braybrooke

Citation preview

THE FRESH CONNECTION BUSINESS GAME

TEAM 2

ANA CORREA CLAUDIA GOMEZ

K A M I L A H U R KO V A M E R V E N U R TA Ş TOMMI VEROMAA

THE FRESH CONNECTION | TEAM 2

1

EXECUTIVE SUMMARY WHAT DID WE ACHIEVE: ✓ The company obtained profit in each period, growing uninterruptedly in the first 4 rounds and with a slight decrease in the last 2 rounds. ✓ Since round 1, ROI has always been positive.

WHAT WAS THE GENERAL STRATEGY : ✓ Make decisions integrating all departments, evaluating the possible positive or negative effects on them in order to minimize costs and maximize the benefit to the company. ✓ Evaluate the decisions made in each period, provide feedback and take corrective actions to make better use of company resources. PROBLEMS ENCOUNTERED: ✓ Difficulties in predicting how some decisions will impact the performance of the company. (The simulator restrained some functionalities at the first stages of the game)

✓ Align strategic decisions of departments in a common goal THE FRESH CONNECTION | TEAM 2

2

CONTENTS TEAM & RESPONSIBILITIES ◦ SALES ◦ OPERATIONS

◦ SUPPLY CHAIN ◦ PURCHASING

FINANCIAL RESULTS & CONCLUSIONS

THE FRESH CONNECTION | TEAM 2

3

TEAM & RESPONSIBILITIES SALES

SUPPLY CHAIN

OPERATIONS

PURCHASING

ROI % Service level % Obsoletes % Gross Margin Responsibilities: Sell all produced goods with highest possible price

Cube utilization % Prod.Plan Adherence % Unused capacity % Nr. of shifts Responsibilities: Optimize and control production and warehouses

Components % Stock Components Stock Products

Responsibilities: Coordinate different departments, inventory control and production

THE FRESH CONNECTION | TEAM 2

Rejection Components % Raw Material Costs % Delivery Reliability Suppliers Responsibilities: Purchasing components, negotiating with suppliers

4

SALES – GROSS MARGIN I. STRATEGY

II. RESULTS

✓ Increase gross margin as much as possible prioritizing biggest customers ✓ Try not to lose gross margin on smaller customers significantly ✓ Introduce promotional pressure for customers during later rounds

27303 22486

III. ANALYSIS

✓ Gross began to grow on F&C and Dominick’s during round 3 when customer order priorization was implemented ✓ Further increases in later rounds with promotional pressure ✓ Overall increase in gross for F&C and Dominick’s was attained without losing gross margin on Land Market ✓ F&C gross increased by almost 5 000 and Dominick’s by 3000 during 6 periods

14510 11610

THE FRESH CONNECTION | TEAM 2

5

SALES – NEGOTIATIONS I. STRATEGY

II. RESULTS

✓ Align capacity of SC and Operations to match negotiated service and shelf life levels ✓ Take advantage of one customer with full product range to decrease potential obsoletes ✓ Trade unit: Pallets for all and VMI for F&C and Dominick’s to reduce outbound stress ✓ Customer priorities: 1. F&C, 2. Dominick’s, 3. LM

III. ANALYSIS ✓ Obsoletes were solved with having LM with shelf life of 62-65% ✓ Negotiated service level % was calculated and estimated based on improvements in SC and Operations ✓ Decision-making in Sales was first based on improvements made in SC and Operations, further the decisions in SC and Operations were changed based on Sales. THE FRESH CONNECTION | TEAM 2

6

OPERATIONS - WAREHOUSES

III. ANALYSIS ✓ Round 4 was the most successful ✓ Starting in Round 5, the demand overpassed the warehouses‘ capacities and it was not adjusted correctly ✓ Outsourcing of warehouses would lead to significantly higher costs

1400

108% 99%

98%

1200 1000

79% 71%

94%

96% 95%

97% 97%

100%

100% 101%

101%

80%

85%

800 600 400

1500 900

1050 950

1200 900

920

900

120%

930 900

1000

975 900

900

60% 40%

Cube Utilisation

✓ Optimise pallet allocations (to avoid overflow and outsourcing / too large unsued capacity) ✓ Allocate adequate number of shifts ✓ Reduce variability in processes and smooth raw materials income and finished goods storage (align with Supply Chain and Purchasing) ✓ Be ready to handle all demand (align with Sales)

II. RESULTS

Warehouse Capacity

I. STRATEGY

20%

200 0

0% Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Inbound Capacity

Outbound Capacity

Inbound Cube Utilisation

Outbound Cube Utilisation

THE FRESH CONNECTION | TEAM 2

7

OPERATIONS - PRODUCTION I. STRATEGY ´

✓ Allocate adequate number of shifts ✓ Select wisely new investments to smooth production and increase ROI (mixing and botteling) ✓ Minimize production costs, unused capacity, changeover and breakdown times ✓ Maximize production plan adherence ✓ Align with all other functions to be ready to satisfy all demand at lowest cost

III. ANALYSIS

✓ In Round 5, the bottling line was changed and shifts increased too much  this mistake was corrected in round 6 ✓ New investment lead to higher production costs and consequently lower ROI (lack of alignment with other functions)  on longterm, the company would improve its business results (lower variability in production, less rejection component rate, less breakdown, low unused capcity, high runtime %, etc.)

II. RESULTS 100.0% 94%

90.0% 80.0%

87% 79% 78%

73%

70.0%

60.0%

92%

93%

73%

73%

58%

94%

50.0%

53%

40.0%

39%

30.0%

25%

20.0% 10.0% 0.0%

89% 81%

6%

5% Round 0

Round 1

Round 2

Production Plan Adherence

THE FRESH CONNECTION | TEAM 2

10%

11%

Round 3

Round 4

Runtime

10% Round 5

Round 6

Unused Capacity

8

SUPPLY CHAIN - COMPONENTS I. STRATEGY ✓ Guarantee availability of components to meet demand (depending on supplier reliability, lot sizes and safety stock ) ✓ Keep cost of stock at min level (in accordance with operations decisions) – Pet and Pack 1L (1-2 rounds) ✓ Adequate lot sizes depending on the stock cost and transport costs given by procurement

III. ANALYSIS ✓ It was possible to guarantee availability over 99% but in some cases compromising average stock – which increased the cost ✓ Increasing supplier reliability in some products (vitamin C) was key to have a better stock control ✓ Round 3 and 4 best results obtained ✓ Round 6 problem lack alignment with other departments

II. RESULTS ANALYSIS PER COMPONENTS 50 45

40 35

102.0%

Low availability of Vitamin C – High stock PET and Pack 1

98.8%

98.9%

30

99.8%

99.6%

99.8%

100.0% 98.0%

Increased Stock per Week PET – increase demand

Adjust Pack 1 – Reduction of lot sizes

25

99.9%

96.0%

20 94.0%

15 10

92.0%

5 0

90.0%

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Mango

Orange

Pack 1 liter

PET

Vitamin C

Stock Availability %

THE FRESH CONNECTION | TEAM 2

9

SUPPLY CHAIN – FINISHED GOODS ✓ Lower average stock weeks of demand and % obsolete products without compromising service level - in accordance with contract index per customer ✓ Adjust production interval to decrease overall cost and increase utilization rate (7 day) ✓ Frozen period allows to keep flexibility to react to demand changes

III. ANALYSIS

✓ Achieved to keep obsoletes between (0%-1%) – Round 6 increase -> due to plan adherence bottling line involving PET related products and production interval (Increasing production due to increase in demand) ✓ Round 2 and Round 6 lowest prod plan adherence – higher production interval increase average stock

II. RESULTS

Stock (weeks of demand)

I. STRATEGY

10 9 8 7 6 5 4 3 2 1 0

120.00% 97%

95%

96%

96%

94%

87%

92% 5.50

93%

5.64

5.24

5.56

98% 94% 5.67

97% 89% 5.32

100.00% 80.00% 60.00% 40.00%

20%

20.00% 0%

Round 1

Round 2

0% Round 3

1%

1%

3%

Round 4

Round 5

Round 6

0.00%

Stock per week

Average % Obsoletes

Average % Service Level

Average % Product Plan Adherance

THE FRESH CONNECTION | TEAM 2

10

PURCHASING –Component Focus I. STRATEGY ✓ Ensure high delivery reliability and low rejection rates, for the best price. ✓ Make sure lead times & trade units and expected amounts are planned and aligned with operations.

II. RESULTS Pack 1 Liter 100.00%

1.025

90.00% 1.02 80.00% 1.015

70.00% 60.00%

1.01

50.00% 1.005

40.00%

III. ANALYSIS ✓ Round 4: Supplier is changed ✓ Round 5: Supplier Development Plan is introduced Lower rejection rate is obtained Other benefits of the SDP may be observed in further rounds

30.00%

1

20.00% 0.995 10.00%

3.40%

3.50%

3.60%

3.20%

2.40%

2.30%

1

2

3

4

5

6

0.00%

0.99

Delivery reliability (%)

THE FRESH CONNECTION | TEAM 2

Rejection(%)

Contract Index

11

PURCHASING – Component Focus PET 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

5.60% 1

5.70% 2

Delivery reliability (%)

3.10% 3

Orange

3.30% 4 Rejection(%)

2.10% 5

2.00%

1.04 1.03 1.02 1.01 1 0.99 0.98 0.97 0.96 0.95 0.94

100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

6

1.008 1.006 1.004

1.002 1 1.00%

1.00%

0.90%

0.90%

0.80%

0.70%

0.998 0.996

1

Contract Index

✓ Round 2: Trade unit is changed ✓ Round 3: Supplier is changed ✓ Round 5: Supplier is changed & Bottling Line is changed with a more tolerant one.

1.01

2

Delivery reliability (%)

3

4 Rejection(%)

5

6 Contract Index

✓ Round 2: Trade unit is changed ✓ Round 4: Higher delivery reliability rate is negotiated.

THE FRESH CONNECTION | TEAM 2

12

PURCHASING – Component Focus

✓ Round 2: Higher delivery reliability rate is negotiated.

✓ Round 3: Supplier is changed & Higher deliveriy reliability rate is negotiated.

THE FRESH CONNECTION | TEAM 2

13

PURCHASING – Raw Material Costs (%) I. STRATEGY ✓ Raw material cost (%) (purchase costs as a percentage of total revenue) is one of the crucial KPI’s of the company ✓ It is calculated taking into consideration the bonus & penalties ✓ Strategy: Lower Values

III. ANALYSIS ✓ Decreasing Trend during the first 5 rounds ✓ High obsolete products in round 6 Causes unnecessary purchases ✓ Unmatched Service Level Agreements in round 6 Causes high penalties ✓ Best performance: Round 4 & 5

II. RESULTS Purchase Costs (%) - Purchase Value 1,100,000

40.00

37.48 34.14

1,000,000

32.47

35.00

32.14

30.96

31.70

900,000

30.00

800,000

25.00 1,014,346

700,000

857,446

828,373

839,319

840,809

861,096

600,000

20.00

15.00

500,000

10.00 1

2

3 Purchase Value

THE FRESH CONNECTION | TEAM 2

4

5

6

Purchase Costs (%)

14

FINACIAL RESULTS & CONCLUSIONS I. RESULTS

FINANCE

II. CONCLUSIONS ✓ The average of goods sold in the 6 rounds was $ 2.66 million. The periods with the highest sales were rounds 1, 5 and 6.

✓ The cost of goods sold drastically influenced the gross margin, the average of this in the 6 rounds was $ 1.37 million. It can be seen that the periods with the highest cost of goods sold were 1 and 5.

ROI EVOLUTION

✓ The ROI went from negative in the first period to positive in the second, having the best percentages in periods 3 and 4 and lower results in periods 5 and 6 caused by lack of alignment on following factors: • Change of filling line • Increased demand • Decreased production interval • Not sufficiently increased warehouse capacity Not allocating the capacity correctly lead to • High obsoletes % and penalty costs • High cube utilisation % in warehouses • Low production plan adherence ✓ The weighted average was 4%

THE FRESH CONNECTION | TEAM 2

15

BACK UP: Decisions per each round

THE FRESH CONNECTION | TEAM 2

16

SALES - Decisions ROUND 1 ✓ Understand how the game works ✓ Use real life experience in decisions ✓ Find correlations between other departments when making decisions

ROUND 2 ✓ Get rid of high % of obsoletes by drastically decreasing shelf life and introducing FIFS shortage rule ✓ Calculate service level based on changes made in SC and Operations

ROUND 3 ✓ Calculate service level and shelf life based on changes made in SC and Operations ✓ Obsoletes value at 0,2% ✓ Set goal to increase obsoletes to 1-2% in order to find how much « air » is in between actual capacity and negotiated

ROUND 4 ✓ Obsoletes still at 0,2% -> Increase shelf life more ✓ Calculate service level and shelf life based on changes made in SC and Operations

ROUND 5 ✓ Install VMI for 1 customer ✓ Trade unit to Pallet for all customers ✓ Communicate promotional pressure and implemented changes VMI to SC and Operations

ROUND 6 ✓ Calculate service level to align with achieved service levels from round 5 ✓ VMI for 2 customers ✓ Communicate promotional pressure and implemented VMI to SC and Operations

THE FRESH CONNECTION | TEAM 2

17

OPERATIONS - Decisions Decision Pallets location Shifts Inbound (Raw materials) IntakeTime days

Bottling

900

920

5

3

Period 3 20.04.17

Period 4 20.04.17

Period 5 27.04.17

Period 6 27.04.17

900

N/A

No

Mixer Type

2

3

5

6 Pets,Pack 1 liter

Pets, Plastics

Fruit Mix MQ

Shifts

2

Projects

-

3

2 SMED

3

2

-

-

Preventive Maintenance

N/A

A little

A lot

Solve Breakdown Training

N/A

Yes

No

Bottling Line Outbound (finished goods)

Period 2 06.04.17

N/A

Inspection

Mixing

Period 1 30.03.17

Period 0

Pallets location Shifts

Swiss Fill 2 1500

1200

1050

4

Multi Flex 1 950

930 3

THE FRESH CONNECTION | TEAM 2

975

1000 4

18

SUPPLY CHAIN - Decisions ROUND 1

ROUND 2

ROUND 3

✓

✓

✓

✓ ✓ ✓

Safety Stock: increased Vitamin C, decrease safety for all finish products (depending on the shelf life) Lot Size: decreased for PET and Pack 1 Production Interval: Increased production interval of Freassie Orange/c-Power 1 liter, Fressie Orange PET, Fressie Orange/C- power PET Frozen Period: 3

✓ ✓ ✓

Safety Stock: reduced Pack 1L and brought back Vitamin C , unified to 2 SS of finished goods Lot Size: Decreased Pack 1 liter, orange, mango and Vitamin C Production Interval: unified to 8 Frozen Period: 3

✓ ✓ ✓

Safety Stock: increased Vitamin C, Fressie Orange/Cpower Lot Size: decrease Vitamin C Production Interval: Changed back to 7 Fressie Orange 1 liter, Fressie Orange/c-Power 1 liter, Fressie Orange/Mango PET, Fressie Orange/C - power PET Frozen Period: 4

ROUND 4

ROUND 5

ROUND 6

✓ ✓ ✓ ✓

✓

✓ ✓ ✓ ✓

Safety Stock: lower vitamin C Lot Size: no changes Production Interval: no changes Frozen Period: 3

✓ ✓ ✓

Safety Stock: Fressie Orange 1 liter, Fressie Orange /C-Power Lot Size: Reduced for orange and mango Production Interval: unified to 7 Frozen Period: 3

THE FRESH CONNECTION | TEAM 2

Safety Stock: decreased orange, mango, vitamin c Lot Size: no changes Production Interval: no changes Frozen Period: 3

19

PURCHASING – Detailed Information Contract Index - Purchase Value Graph

Obsolete Products (%) -Average

0.210

24.00%

0.180 0.183 0.150 0.120

20.00%

20.00% 16.00%

0.090

0.064

0.060

12.00%

0.035

0.030 0

0.004

0.004

0.000

8.00%

0.000 -0.030

0.000

-0.002 -0.024

-0.013

-0.060 1

2

3

Purchase Value (%D)

4

5

2.52%

4.00%

0.007

6

0.23%

0.22%

2

3

1.23%

0.95%

4

5

0.00% 1

6

Contract Indexes (%D)

✓ Percentage Change Graph

✓ Obsolete Products

THE FRESH CONNECTION | TEAM 2

20