caling The Benefits of Upstream Integration estlé and the Global Upstream Supply Initiative GUSI)

Scaling The Benefits of Upstream Integration

Nestlé and the Global Upstream Supply Initiative (GUSI)

Tony Fitzhugh

Nestlé Zone Europe eSupply Chain Coordinator Strasbourg , EUROLOG 2006, June 21 2006

Today’s Objectives

To raise awareness of the GUSI initiative and to stimulate interest across peer manufacturers & suppliers

To demonstrate how Nestlé is working “today“ with suppliers & other manufacturers to develop and

implement upstream collaboration programs based on scaleable industry standard solutions

To help you identify what the next steps could be for your company

Agenda

Overview Nestlé SA

Upstream Integration – What Is It? Global Upstream Supply Initiative Nestlé Experience – Crown

Implementing & Roll Out Q & A

Nestlé SA

Nestlé with headquarters in Vevey,

Switzerland was founded in 1866 by Henri Nestlé and is today the world's biggest food and beverage company.

Sales at the end of 2005 were CHF 91 bn, with a net profit of CHF 8 bn.

We employ around 250,000 people and have factories or operations in almost every country in the world.

Nestlé Brands

Nescafé, Taster’s Choice, Ricoré, Ricoffy, Nespresso, Bonka, Zoégas, Nestea, Nesquik, Nescau, Milo, Carnation, Libby’s, Caro, Nestomalt,

Nestlé Pure Life, Nestlé Aquarel, Perrier,Vittel, Contrex, S.Pellegrino, Acqua Panna,Levissima, Arrowhead

Chef, Davigel, Minor’s

Stouffer’s, Lean Cuisine, Hot Pockets, Buitoni, Maggi

Purina, Friskies, Fancy Feast, Alpo, Gourmet, Mon Petit, Felix, Dog Chow, Cat Chow, Pro Plan, Purina ONE

Nestlé, Antica Gelateria del Corso, Dreyer's/Edy's, Drumstick/Extrême,

Maxibon/Tandem, Mövenpick Nestlé, Sveltesse, La Laitière, La Lechera, Ski, Yoco, Svelty, Molico, LC1, Chiquitin

Nestlé, Nan, Lactogen, Beba, Nestogen, Cerelac, Neslac, Nestum, Guigoz, Good Start

Nestlé, Crunch, Cailler, Galak/Milkybar, Kit Kat, Polo, Smarties, Butterfinger, Aero,

Shredded Wheat, Cheerios, Nesquik,Fitnesse,Fibre 1, Cookie Crisp

What is Upstream Integration?

It is about optimising the supply chain processes between manufacturers and suppliers by

automating the mechanisms for sharing information

This will provide increased responsiveness to manufacturing requirements and hence better

Manufacturers Retailers Consumers

End-to-End Supply Chain Model

Supply Planning Procurement Manufacturing Distribution Sales & Marketing Suppliers Upstream Integration

Focus: manufacturing and replenishment plans

Consumer unit

Focus: consumer demand

Raw materials and packaging

Retailers Consumers Manufacturers

Expected Benefits

– Optimized inventory levels

– Better supplier service levels

– Lower integration costs

– Optimized processes Upstream Integration S upplie rs

Consumers Retailers Manufacturers

Expected Benefits

– Optimized inventory levels

– Better supplier service levels

– Lower integration costs

– Optimized processes

– Increased retailer responsiveness

– Maximised production capacity

– Optimized inventory levels

– Reduced obsolescence – Optimized processes Manufacturers S upplie rs

Expected Benefits

– Increased customer responsiveness

– Maximised production capacity

– Optimised inventory levels

– Reduced obsolescence

– Optimised processes

– Better visibility

– Optimised inventory levels

– Better supplier service level

– Lower integration costs

– Optimised processes

– Increased on-shelf availability

– Reduced time to market

Manufacturers Retailers Consumers

Supply Planning Procurement Manufacturing Distribution Sales & Marketing Suppliers Upstream Integration Manufacturers S upplie rs Retailers

Global Upstream Supply Initiative

(GUSI)

Suppliers and Manufacturers working together to: Develop an industry integration solution

(Upstream Integration Model) based on: – common processes

– common messages

Build momentum and usage

The GUSI group started informally in January 2003 and was integrated into GCI in November

Upstream Supply Chain

The Scaling Barrier

Time Business Benefits Current company specific programs S C A L E B A R R I E R Complexity

Lack of common approaches Low return on

investment

No sharing of experience High IT/IS Costs

No upstream industry standards

Global Benefits across the industry Create Sc ale Based on Standard s

Upstream Integration Model (UIM)

Standardises the data interchanges between

manufacturers and material suppliers for use in electronic communications.

Covers the following business areas: Procurement

Material forecasting

Inventory Management

Despatch, Receipt and Consumption of materials Financial Settlement.

Within an overall (manual) Integration Agreement between the manufacturer and the supplier.

Upstream Integration Model (UIM)

The UIM is a modular solution which covers the „Plan to cash“ process for the 2 most used order scenarios:

Supplier Managed Inventory (SMI)

Upstream Integration Model

Integration Agreement

Building Blocks Manufacturer Process Supplier Process Data Alignment Purchasing Conditions Demand & Supply Signals Dispatch, Receipt & Consumption Financial Settlement

Agree on business rules

Maintain Master Data

Agree Purchasing Conditions

Report Inventory

Gather material requirements

Integrate information Await shipment Receipt of goods Check goods Consume goods Invoice receipt Create Self billing invoice

Invoice confirmation Create Remittance Advice

Initiate Payment

Integration Agreement

Item Master Data

Purchase Conditions

Inventory

(instead of Inv. and R. Forecast)

Purchase Order Confirmation Delivery Plan Purchase Order Net requirements Consumption Forecast Replenishment Forecast Dispatch Notification

Physical shipment of goods

Receipt Notification Consumption Report

Invoice

Invoice confirmation Self billing invoice

Remittance Notification

Physical Payment

Agree on business rules

Maintain Master Data

Agree Purchasing Conditions

Report Inventory

Plan production & supply

Confirm delivery

Pick & Pack goods Shipment

Goods Receipt Notification Consumption Notification Create invoice Invoice receipt Invoice confirmation Payment Notification Payment receipt

Upstream Integration Model (UIM)

More information on UIM available on the UIM report published on the GCI website http://www.gci-net.org

The "Upstream Integration Model"

Version 2

A foundation for global upstream supply chain improvements

Integration in Practice:

The Nestlé Experience

Nestlé GLOBE

The GLOBE Program was established in 2000 in order to unlock Nestlé's potential by:

Leveraging our size as a strength in a rapidly changing environment

Uniting and aligning us on the inside to be globally competitive on the outside

Enabling Nestlé to manage complexity with operational efficiency

The GLOBE Template is a fully configured,

documented and tested solution composed of Best Practice Business Process and custom developments ready to be used in the Nestlé Markets.

eNestlé Strategy

To support the B2B vision, Nestlé will proactively

build its relationships with eMarkets focused on B2B Collaboration to accelerate and drive industry

value chain integration and standardization...

(source, eBusiness Strategy Blueprint -Executive Summary)

Upstream Supply Chain Roll Out

Supplier SupplierSupplier Supplier

Supplier

Supplier

30 sites

26 sites 10 Countries

Over 25,000 deliveries per year

?

Our Integration History

2001 Crown & Nestle Purina Pet Care (NPPE) begin integration project 2004 GLOBE implemented in NPPE, eSC solution adopted into GLOBE template

2002 First messages live covering forecast, purchase order and dispatch advice (pre GLOBE)

2003 Receipt advice and invoice messages implemented (pre GLOBE)

2005 Migration to GUSI standard messaging begins

2006 Q2 GUSI messages live

Nestlé CROWN Project Scope

Nestlé & CROWN Project Objectives

Key processes review / simplification / harmonisation

Message availability

Automation of message exchange and integration in to ERP systems

Key Processes Review

Review lead times and stock management policy Re-define goods receipt process

Integrate use of scanned

data of physical flow…. _{flows of}

information distribution harmonise exchange of information bottlenecks & stock policies Supply Securisation product range planning & mix of goods capacity planning simplification supply chain discussions planning

Integration Scope

Nestlé

Supplier CROWN Retailer

Physical flow

barcoded data capture

Information flow N e s t l é C R O W N acknowledgement dispatch note forecasts / orders invoicing / payment

Current Status/Achievements

Foundations of upstream integration between Nestlé Purina and CROWN have been

established

Benefits identified though project still in the process of being rolled out

Full benefits to be achieved during roll out across Europe

Conclusions

The project between Nestlé and CROWN has proved the opportunities for upstream

integration

To scale the benefits across trading partners an industry integration solution should be agreed between companies

The Leveraging and

Implementing GUSI/UIM

Number of global companies actively implementing GUSI

Unilever, SmurfitKappa, P&G, Nestlé, Crown

Europe, IFF, Novozymes, National Starch, Quest, Loders Croklaan, Symrise, Givaudan, Firmenich, etc

Approx. 150+ couplings covering approx. 20 countries world-wide planned for 2006 so far

up from 6 pilots last year

Major service providers also actively involved CPGMarket, Elemica, etc

Implementing GUSI/UIM

Implementing GUSI/UIM is not the sole preserve of large companies!

Can equally be applied to small organisations - benefits are greater/costs are reduced!

Use of well-accepted process and messaging standards will benefit every company (small or large)

GUSI/UIM - The Next Steps

Based on learnings/success of UIM v2.2, new workstreams are being created:

transport & warehousing contract manufacturing portal standardisation

e-billing (e-invoicing & e-selfbilling) Output will form UIM v3.0

NB: these are parallel workstreams! Companies

should not wait for these to finish before implementing UIM v2.2 - do it now! (UIM v3.0 will be

GUSI Summary

Business models defined

Standard messages available Implementation Guide published Companies actively implementing

The GUSI Opportunity

Scaling usage across our partners

Share experience

Scaling with more trading partners

– lower costs and ease of adoption

Next Steps

The next meeting of the GCI Global Upstream Supply Initiative (GUSI) Team will take place

On: 27 June, 2006 Location: Paris

Please contact Ruediger Hagedorn, GCI

([email protected]), if you are interested in joining the meeting!

Thank You