- Sustainable Competitive Advantage in Supply Chain

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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
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AGENDA...

• BASIC CONCEPT OF SUPPLY CHAIN

• CREATING SHARED VALUE Sustainable Competitive
  advantage

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?
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, McDonalds and Dell know that the rest
  of the business world hasnt yet realized fully?
• The answer may surprise many of us here Supply
  Chain Management.

International Supply Chain Education Alliance
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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)
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What is a Supply Chain
International Supply Chain Education Alliance
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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 customers
  request.
• Value is strongly correlated with supply chain
  profitability (also known as supply chain
  surplus)

International Supply Chain Education Alliance
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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

International Supply Chain Education Alliance
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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
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COMPETITIVE ADVANTAGE

1. Superior on-shelf availability and quality
2. End-to-end optimization of costs
3. Superior responsiveness to market dynamics

RELIABILITY
COST
SPEED
But How..?
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LOOK AT THE DEFINITION.
Supply Chain is an integrated chain of business
processes, which drives the business towards
meeting consumers demand efficiently
effectively.
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THE SUPPLY CHAIN CONCEPT IS VERY SIMPLE...
... but hard to implementin practice
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FROM FARM TO FORK a lot of stages in Supply
Chain...
Each stage is critical to have ultimate End to
End
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FOUNDATION OF SUPPLY CHAIN.
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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
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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
Manufacturing
Customer Service Distribution
Flow of Products and Materials
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EFFECTIVE SUPPLY CHAIN PROCESS DRIVES THE WHOLE
BUSINESS EFFICIENTLY.
Demand Supply Planning
Procurement
Consumers
Customer Service Distribution
USUALLY PART OF SUPPLY CHAIN
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INTEGRETED SUPPLY CHAIN REQUIRES END-TO- END
ALIGNMENT FLOW OF PRODUCTS INFORMATION.
Engine
Upstream
Downstream
Demand Planning
Purchasing Suppliers ServiceProviders
Manufacturing
Shoppers Consumers
Trade Customers, Distributors Operators
Order Management Physical Logistics
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
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SUPPLY CHAIN PROCESS IS GOVERNED BY.
THE 4 SUPPLY CHAIN MANAGEMENT PRINCIPLES
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• 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
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AGENDA...

• BASIC CONCEPT OF SUPPLY CHAIN

• CREATING SHARED VALUE Sustainable Competitive
  advantage

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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
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CSV ENCOMPASSES SUSTAINABILITY AND COMPLIANCE
Creating Shared Value is a business strategy,
where (a) shareholders interest and societys
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
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WE CAN WORK IN DIFFERFENT AREAS
For Example
Leading the thinking
NUTRITION TRAINING
RURAL DEVELOPMENT
Leading by doing
WATER
Leading the dialogue
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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.

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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
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HUGE OPPORTUNITIES POTENTIALS IN BANGLADESH.
FY10 GDP USD 99.8 Billion
CONSISTENT GDP GROWTH
4.6
Agriculture 21
Industry 29
Services 50
6.3
5.9
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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.

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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

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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

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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

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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

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LIVE EXAMPLE Creating Opportunities through
Partnering
How Private sector and NGO can work together
Private sector
NGO
Proshikha - Supply Honey
Nestlé - Requires Honey
and
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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

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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

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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.

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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

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APIARY IN MUSTARD FIELD
Proshikha - Honey Supply

• .

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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

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THEREFORE, CREATING SHARED VALUE a Sustainable
Competitive Advantage in Supply Chain
From Farm to Fork
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AGRIBUSINESS SUPPLY CHAIN Creating
Opportunities through Partnering
THANK YOU
International Supply Chain Education Alliance