VMI as technology to improve OSA

and to contribute growth

By Olga Khruscheva, SC Business Planning & Customer Integration Director,APICS CSCP

Content

Do you feel the difference?

How we do it…

What’s available to influence?

How it might look like?

OSA as a subject for consideration

What is available on shelf?

Consumer behavior if wanted product is not on shelf

36%Buys other brand

19%Buys in other

store

20%Buys another

flavor

17%Buys product

later

8%Doesn’t buy at

all

+ = Retailer sales loss

+ = Supplier sales loss

Danone Belgium OSA Results

Dairy FMCG DANONE Other

A BrandsPRIVATE

LABEL

Carrefour (Hyper) 93% 96,40% 90% 91%

LINEACOM

Colruyt (Hyper) 88% 90% 86% 89%No LINEACOM

Delhaize (Hyper) 94% 95,50% 91% 93%No LINEACOM

Are our products always available to our shoppers?

ManufacturerManufacturer RetailerRetailer

Why not apply VMI on Upstream part withsame benefits as upstream ?

FMCGPlant

FMCGPlant

WAREHOUSE OF SUPPLIERWAREHOUSE OF SUPPLIER

STORESTORE

Improvement on the traditional Preseller model

Order taking

Stock \ FIFO control

Price

Fridge \ POSM

Promo

Promo materials

Focus?

Sales Rep.(50 stores)

Sales Rep.(50 stores)

Focus

Stock takingShelf \ FIFO control

OSA, PPED

Merchandiser(1-3 stores)

Merchandiser(1-3 stores)

Focus

PriceFridge \ POSM

Promo Promo materials

4P

KA Executive(20 stores)

KA Executive(20 stores)

Focus

Stock controlOrder TakingAssortment

Promo managementOOS

VOLUME CONTROL

OSA, PPED

Order Creator(40 stores)

Order Creator(40 stores)

CONTROL AND FOLLOW UP

CONTROL AND FOLLOW UP

CONTROL AND FOLLOW UP

CONTROL AND FOLLOW UP

SALES SC

• Development, testing IT ordering tool• Creating Central ordering team • Creating Key Account executive team• Merchandizers team• Start stock counting• After 6 weeks of history – start ordering

Main changes in process

Billa is company for customers

One of the leaders in Europe Retail market, founder in 1924 and being

presented by 69 supermarkets and 3 hypermarkets in Russia since 2004 year.

Mission statement• It is all about our customers• Innovations and changes develop our business• Best partner for our suppliers

1. Stock & Sales integration

2. Sales Estimation based on Trends & Future Events (National/Regional)

3. Order Validation/Modification based on Store Specificities

Distribution Centre

Lineacom Principles

Basic Forecasting principles

Based on the cleaned sales history an estimation for the next sales period is made.This estimated sales is influenced by:

Basic Order principles

Basic Order principles

ForecastingAlgorithmes

• Base Forecast

Moving Average 4 or 8 weeks Flat

Moving Average 4 or 8 weeks Trend

• Promotional Uplift

Specific behaviour

Pre-Bon On Pack (Lower Safety Stock)

Bon On Packs (Uplift)

Post Bon Pack (Sell-Out)

• Innovations

Align product with Benchmark

Combine Benchmark with Real Sales

• Stops

Adapted Safety Stocks

Basic Order principles

245

-165

-480590

-225

-600725

400

Begi

n St

ock

P1

Del

iver

y P1

Sale

s Fo

reca

stP1

Shor

t She

lflife

Corr

ectio

n P1

Prop

osed

Del

iver

y P2

Sale

s Fo

reca

stP1

Shor

t She

lflife

Corr

ectio

n P2

End

Stck

P2

Short Shelflife Stock Correction

Sales Order = (Sales Forecast)*(Safety stock Policy) – (Begin Stock + Delivery P1 – Short Shelflife Correction)

Quantity of Products already in Store Stock where Shelflife is too

low to sell in Period

Basic Order principles

Safety Stock

• Defined by Product / Store Combination• Dynamic & Automatic based on Sales Forecast (% of

Period(s) to Cover)• Alignement with Business Strategy• Alignement with Customer Expectations

• FOCUS on Dairy, No High Performaning Tool available on market.

• IMMEDIATE & FULL listing of INNOVATIONS• TRUST in Quality by working with dedicated and

experienced PEOPLE • HIGHLY REACTIVE in a Fast Moving Environment

Why VMI by Danone?

Billa: something to compare

2. OSA in Billa stores with Central

OrderingOSA 93,0%

OOS 7,0%

1. OSA in Billa stores w/o Central

OrderingOSA 83,3%

OOS 16,7%

OSA83,3%

OSA93,0%

OOS16,7%

OOS7%

Billa: something to compare

Vertical Growth in Billa, 2009 vs 2010Vertical Growth in Billa, 2009 vs 2010

16,7%8,7%

No central ordering

No central ordering

Central orderingCentral

ordering

OSA is well contributed for growth

Thank you!Moscow, 2010