Streamlining Business Process with E-Commerce

1. Streamlining Business Process with E-Commerce Murray Webb, President, Lipton Monarch and Co-Chair EFR E-Commerce Committee Craig Simpson, V.P.Information Technology, SERCA Foodservice and Co-Chair EFR E-Commerce Committee Jim Greenwood, President, GFS Canada, Co-Chair EFR Steering Committee

2. Agenda • EFR E-Commerce Mandate • Lipton Monarch/SERCA Foodservice Pilot • Finlay Greenwood/Lynch Foods Pilot • The Road Forward • EFR E-Commerce Roadmap • ECCnet

3. EFR Electronic Commerce Committee • Created in 1997 to examine uses of electronic commerce in the foodservice supply chain. • Voluntary industry committee composed of manufacturers, distributors, and brokers. • Supported by industry associations. • ECCC, FCPMC, CCGD

4. Committee Mandate To integrate electronic commerce and any other viable methods of electronic communication into common business practices, from order to reconciliation.

5. Committee Objectives • To streamline existing supply chain business processes through enabling non-proprietary electronic commerce technologies, creating efficiencies and reducing costs.

6. Committee Progress to Date • 1998 • Foodservice EDI Survey • 1999 • Why EDI pamphlet • VICS 4010 • EFR EDI Implementation Guideline • Foodservice input into 832 development • 2000 • SERCA/Lipton Monarch Pilot • Lynch/Finlay Greenwood Pilot

7. 2000 Objectives • EFR EDI roadmap & timelines • Future technologies assessment • Industry support and use for ECCnet • Prologue migration to ECCnet

8. EFR EDI Pilots • Two EFR EDI Pilots launched in 1999 • Lipton Monarch/SERCA Foodservice pilot to implement 4 EDI Transactions in the Purchase Cycle. • Finlay Greenwood/Lynch Foods to implement EDI purchase orders and invoices.

9. Pilot Approach • The EFR pilot approach used was designed to determine potential savings that could be realized in a controlled environment.

10. Lipton Monarch/SERCA Foodservice Pilot The Purchase Cycle

11. Pilot Scope • To document and demonstrate the benefits of implementing a complete suite of EDI transactions within the purchase cycle. • EDI transactions used: • 832 Price Sales Catalogue • 850 Purchase Order • 855 Purchase Order Acknowledgement • 810 Invoice

12. Pre-Pilot Analysis

13. Key Driver - SERCA • For SERCA Foodservice the key driver for the pilot was the significant reduction or elimination of error rate and associated costs due to unsynchronized database information. • A pre-pilot activity analysis indicated debit/ credit memo ratio to invoices was over 40% • 15% =Pricing errors • 28% =Shorts, damages, etc

14. Key Driver - Lipton Monarch • For Lipton Monarch the key driver was the potential efficiencies and associated saving achievable through the automation of manual business processes enabled through the implementation of the 4 EDI transaction sets. • A pre-pilot full ABC study indicated potential savings in customer service, billing and account receivable and administration

15. Key Product Promotion Information into Item File Key Product Change Information into Item File Generate Payment Mail Cheque to Lipton Monarch Process Payments SERCA/Lipton Monarch Pre-pilot Process Key New Product Information into Item File Key New Product Information into Item File Fax Form to SERCA Fill in Product Listing Form Create P.O Fax P.O. to Lipton Monarch Key P.O. into Order Entry System Receive Invoice & match to P.O. Fax/Mail Invoice to SERCA Create Invoice Reconcile Difference Phone Call/Inquiry Manage Phone Call/Inquiry Create Debit/Credit Memo Fax Debit/Credit to Lipton Monarch Manage Deductions

16. SERCA/Lipton Monarch Pilot 832 Database Synchronization 850 Purchase Order 855 Purchase Order Ack. 810 Invoice

17. Data Synchronization • Product information and price is transferred using 832. • Lipton Monarch transmits item data to SERCA and then updates the data when changes are made. Benefits • Eliminates costly errors “downstream”. • Success on data alignment required to ensure other benefits. Changes Prices Item Maintenance

18. Purchase Order PO Acknowledgment Procurement • Purchase Order is transmitted to Lipton Monarch. • Acknowledgement and error corrections are transmitted to SERCA using the PO acknowledgement. • Benefits include: • Higher customer service levels, reduced time delays • Increased automation of procurement process • Elimination of manual key entry and associated errors.

19. Invoicing • Invoice is transmitted to SERCA • Matched to P.O. and payment generated • Completes the EDI document loop. • Time/data entry benefits. Invoice

20. Pilot Findings - Lipton Monarch • Implementation of 4 EDI transactions permitted automation of purchase cycle. • Efficiencies gained in 3 primary areas: • Customer Service • Billing and Accounts Receivable • General Administration • Savings = 34% of three primary areas outlined above • Savings determined by labour savings and reduction in consumption of resources.

21. Pilot Findings - Lipton Monarch • 34% savings were an accumulation of efficiencies in 5 functions in dealing with SERCA in the pilot: • 75% saving the order management process (850 & 832) • 20% saving in inquiry management (832) • 50% saving in billing and reconciliation (832, 855, 850) • 5% savings on collections and 15% savings in deduction management. • 5% savings in general administration

22. Pilot Findings - SERCA Foodservice • 832 provided foundational data accuracy for the entire process. Ensured correct: • U.P.C./SCC • Description • Price, allowances, etc. • Product sizing: dimensions, cube, weight, etc. • 850 automated purchase order process • 855 provided rapid order confirmation and notification of discrepancy from P.O. (substitution etc,).

23. Pilot Findings - SERCA Foodservice • Total debit/credit memo ratio to invoices was reduced from over 40% to 10% • Pricing errors reduced from 15% to 6.6%* • Debit/credit memos due to short shipment eliminated. • Ongoing audit in place to monitor results over time. • 6.6% error rate due to management error not data integrity.

24. Critical Mass • Full savings potential can only be realized when critical mass is achieved with trading partners

25. Key Lessons • Data synchronization provides the foundational data for the E-Commerce process. • Efficiencies are gained though error-free automation of business processes. • Critical mass vital to industry-wide efficiencies.

26. Finlay Greenwood/Lynch Foods Purchase Order/Invoices

27. Pilot Scope • To document and demonstrate the benefits of implementing EDI purchase orders and invoices. • A secondary objective was to demonstrate the speed with which an EDI program could be implemented. • EDI transaction used: • 850 Purchase Order • 810 Invoice

28. Purchase Order Invoice Procurement/Invoicing • Purchase order is generated and transmitted to Lynch Foods. • Invoice in generated and transmitted to Finlay Greenwood • Potential benefits include: • Increased automation of procurement and billing process • Elimination of manual key entry and associated errors

29. Key Pilot Learnings • Permitted automation of p.o. process for Finlay Greenwood and automation of invoicing process for Lynch foods. • Full benefits not realized due to lack of integration • Limited volume of transaction makes savings difficult to quantify. • Total Lynch EDI experience underscores need for: • One standard 1 version • One set of core data for entire industry • Data synchronization.

30. Moving Forward • Both Lynch and Finlay Greenwood support EDI and E-Commerce as correct path for foodservice. • GFS to implement extensive E-Commerce program. • Findlay Greenwood estimates that, by implementing the same 4 EDI transactions as Lipton Monarch and SERCA, could save $120,000 per year.

31. Savings Calculation • 20% of A/P and 12.5% of purchasing time currently spent resolving invoice discrepancies = $40,000 per annum. • Full EDI integration in A/P department = $ 80,000 per annum. • Total = $120,000 + additional efficiencies in item maintenance and purchasing from 832 and 850.

32. The Road Forward

33. EFR Roadmap • Currently under development by E-Commerce Committee. • Will include: • EDI implementation recommendations & timelines, incorporating pilot learnings. • Solutions providers directory and implementation options for small companies. • An assessment of future technologies (EDI over the Internet, XML, etc.)

34. Proprietary Systems • Single greatest threat to total supply chain efficiency. • Dramatic increase in availability of proprietary B to B E-commerce systems. • Seen as quick-fix solutions. • Potential to add significant cost to supply chain. • Alternatives?

35. What Is ECCnet A Service for Standardized, Synchronized Information Exchange ECCnet is a multi industryElectronic Catalogue,accessible via theInternet. It will ensure the integrity of data needed for electronic commerce transactions by providing a single, standardized record of product data, Trading Partner (location), and other information.

36. Product Listing & Pricing Information Marketing Information Nutritional ECCnet A Service for Standardized, Synchronized Information Exchange VICS “832” Data Synchronization Marketing Info Data Synchronization Prologue

37. ECCnet Product Listing & Pricing Information Marketing Information Nutritional Food ServiceECCnet Catalogue Scope WEB Suppliers Distributors Functionality Prologue

38. 1. Must do the 832 • 2. No savings without integration • 3. Critical mass