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
AGENDA... • BASIC CONCEPT OF SUPPLY CHAIN • CREATING SHARED VALUE – Sustainable Competitive advantage
? Preface • What is the hidden lever that can impact the total business performance of any company? What do the best performing companies like Toyota, Wal-Mart, 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)
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 • following four process cycles – • Customer order cycle • Replenishment cycle • Manufacturing cycle • Procurement cycle Customer 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 superiorto competition in terms of: • On-shelf Availability • Freshness, Quality, Packaging • Value for money Consumer mindset
Process integration • Process efficiency & effectiveness COMPETITIVE ADVANTAGE… • Superior on-shelf availability and quality • End-to-end optimization of costs • Superior responsiveness to market dynamics RELIABILITY COST SPEED But How..?
LOOK AT THE DEFINITION…. Supply Chain is an integrated chain of business processes, which drives the business towards meeting consumers’ demand efficiently & effectively.
THE SUPPLY CHAIN CONCEPT IS VERY SIMPLE... ... but hard to implementin practice
Process integration • Process efficiency & effectiveness FROM ‘FARM TO FORK’ – a lot of stages in Supply Chain... Each stage is critical to have ultimate ‘End to End’…
SUPPLY CHAIN HAS TWO BASIC ELEMENTS… • Information • Products & Materials Supply Chain cannot function properly without any one of them. ‘FUND’ - another element which is required everywhere
THE CLASSICAL FLOW MODEL :Physical Supply and Demand Information Flows Too many interfaces ENSURING SUPPLY XYZ Company Sales &Marketing(SupplyPart) Consumer Distributor/ Operator Demand & Supply Planning Purchasing Suppliers Demand Information Flow Customer Service & Distribution Manufacturing Flow of Products and Materials
SUPPLY CHAIN STARTS AND ENDS AT CONSUMERS… Sources of Supply Supplier Sales & Marketing Distributor /Operators Shoppers/ Manufacturing EFFECTIVE SUPPLY CHAIN PROCESS DRIVES THE WHOLE BUSINESS EFFICIENTLY…. Demand & Supply Planning Procurement Consumers Customer Service & Distribution USUALLY PART OF SUPPLY CHAIN
INTEGRETED SUPPLY CHAIN REQUIRES END-TO- END ALIGNMENT FLOW OF PRODUCTS & INFORMATION…. Engine Upstream Downstream Demand Planning Purchasing Suppliers &ServiceProviders Manufacturing Order Management& Physical Logistics Trade Customers, Distributors & Operators Shoppers & Consumers Consumer & Customer Insight Factory toCustomer DomesticFactory PhysicalRetailStores MasterWholesaler RegionalDC CentralDC Wholesaler Innovation & Renovation Inter-Market Supply AffiliatedFactory RegionalDC RetailerWarehouse Supply Planning Direct to Store Direct to Consumer Co-Packers 17
SUPPLY CHAIN PROCESS IS GOVERNED BY…. THE 4SUPPLY CHAIN MANAGEMENT PRINCIPLES… 1 Optimise simultaneously : Costs, Service/Freshness, Agility Multi-Functional Supply Chain Processes Continuous Improvement Driven by Key Performance Indicators (KPI) Involve all 4 Management and Systems Levels (Strategic, Tactical, Transactional and Physical) 2 3 4 18
AGENDA... • BASIC CONCEPT OF SUPPLY CHAIN • CREATING SHARED VALUE – Sustainable Competitive advantage
CREATING SHARED VALUE (CSV)… For a company to besuccessful over time and create value for shareholders, it must alsocreate value for the society…
CSV ENCOMPASSES SUSTAINABILITY AND COMPLIANCE… Creating Shared Valueis a business strategy, where: (a) shareholders interest and society’s interest strongly intersect and (b) value creation can be optimized for both Sustainability Development which meets the needs of the present without compromising the ability of future generations to meet their own needs Compliance With all applicable laws and internal regulations
WE CAN WORK IN DIFFERFENT AREAS… For Example: Leading the thinking NUTRITION TRAINING RURAL DEVELOPMENT Leading by doing WATER Leading the dialogue
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.
SUSTAINABLE COMPETITIVE ADVANTAGE: …working with farmers / suppliers… PARTNERING: • To buildCapacity, Skilldevelopement , Knowledge sharing and Technologytransfer • To ensure ‘Consistent Quality’ of supply • To establishsupply links with ‘Fair Price’ strategy to ensure ‘Value addition’ and ‘Agility’ Creating Shared Value:Optimized value creation
HUGE OPPORTUNITIES & POTENTIALS IN BANGLADESH…. FY‘10 GDP USD 99.8 Billion CONSISTENT GDP GROWTH 4.6% Agriculture 21% Industry 29% Services 50% 6.3% 5.9%
e.g. Nestlé Environmental sustainability: 2011 highlights WE NEED TO DEVELOP RESPONSIVENESS… • 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.
QUALITY ASSURANCE FOR FOOD INDUSTRIES REQUIRES FOLLOWING TESTS… • 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 • Physical test • Chemical test • Microbiological test • Vitamin test • Mineral test • Allergen test
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 • 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
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
LIVE EXAMPLE – Creating Opportunities through Partnering… How Private sector and NGO can work together… Private sector NGO Proshikha - Supply Honey Nestlé - Requires Honey and
Proshikha - Honey Supply How PROSHIKHA is partnering with Farmers to collect Honey and Process Honey… • 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
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
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.
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
Proshikha - Honey Supply APIARY IN MUSTARD FIELD… • .
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
THEREFORE, CREATING SHARED VALUE – a Sustainable Competitive Advantage in Supply Chain… From ‘Farm to Fork’
AGRIBUSINESS SUPPLY CHAIN – Creating Opportunities through Partnering… THANK YOU International Supply Chain Education Alliance