Best Practices in Supply Chain Management in the Retail Industry

Best Practices in Supply Chain
Management in the Retail Industry
Presented by
Dickson Yeo
Director (Supply Chain)
NTUC FairPrice, Singapore
20th August 2013
FairPrice - A Co-operative of NTUC
• FairPrice was established in 1973 as a cooperative with a social mission to
moderate the cost of living in Singapore
• Today FairPrice is a leading grocery retailer in Singapore with a retail
network of more than 270 outlets
16
6
95
134
22
FairPrice Retail Formats
FairPrice Central Distribution Centers
• First supermarket retailer in Singapore to have its own central warehousing
and distribution company
Joo Koon DC
Area: 300,000 sq. ft.
Product: Food, beverage
& dry merchandise
Daily throughput: 66,000
cartons
SKU: 9,000
Penjuru DC
Area: 200,000 sq. ft.
Product: Bulky items and
imports
Daily throughput: 15,000
cartons
SKU: 1,300
Fresh Food DC
Area: 180,000 sq. ft.
Product: Frozen, Dairy, Vegetable,
Fruits, Confect & Wine
Daily throughput: 44,000 cartons
SKU: 2,300
Overview of Fresh Food DC
Warehouse
Area (sq.ft.)
Temperature
Frozen Warehouse
16,000
- 20 Celsius
Dairy Warehouse
6,000
4 to 6 Celsius
Vegetable Warehouse
38,000
4 to 6 Celsius
Fruits Warehouse
25,000
4 to 6 Celsius
Confectionary & Wine Warehouse
29,000
18 Celsius
Ante Rooms
20,000
15 Celsius
Distribution without Centralization
 Transport route, order transmission, invoice payment, order receiving, order checking etc
 Some stores recorded up to 200 deliveries per day
Centralization
Central
Distribution
FFDC
 Only 15% of SKU coming directly from suppliers
Overview of FairPrice Supply Chain
Consolidated Ordering
1
2
Delivery
Suppliers
Centralized
Distribution
3
Invoice
Centralized
Purchasing
Electronic Document
1
4
5
Electronic Ordering
Delivery
Core Benefits of Centralization
• Improved service level
• Increased front-end SKU holding
• Supply chain cost reduction
Supermarkets
Supermarkets
Supermarkets
Improved Service Level
• High replenishment as frequent as 2 deliveries per day
• Inventory aggregation reduces out-of-stock, as some demands are not
positively correlated
• Lock in stock ownership to buffer against profiteering and market
manipulation
• Controlled stock allocation in face of sudden shortage for better stock
distribution
Increased Frond-end SKU Holding
• Better match of order volume with demand pattern
• Optimized space usage by imminently needed items only (average SOH
of 1.5 days at front-end supermarket)
• Front-ends focus on core competency of offering variance; back-end
manages the storage and picking
Supply Chain Cost Reduction
• Centralized purchasing lowers unit procurement cost
• Suppliers achieve savings via less delivery point and full-truck-load
delivery (warehousing cost is recovered from suppliers)
• Minimize receiving transaction and handling at supermarkets
• Ease of expansion for new store opening
• Centralization renders economy of scale thus enable automation
Material Handling System
Pick-to-Light Technology
• Paperless and hands-free picking
• No material handling equipment required
• Simple process and staff training
• High productivity (3.6 times faster)
PTL Panel
Material Handling System
Pallet-Live-Storage Module
• Continuous picking & replenishment
(independent processes)
• Multiple picking level
• 592 2-plt-deep pick points within 845m2
Material Handling System
Pick-to-Tote
• Ideal for slow or non-conveyable item

Small, fragile or odd packaging
• Piece picking

Better demand-supply match
Material Handling System
Carton-Live-Storage
•
SKU proliferation
•
Compact picking module

Minimize travel distance

High hit rate
(1,000 SKU for 62m aisle)
Material Handling System
Conveyor System
• Automation in goods
movement:
 Multi level goods
transportation leads to
space savings

Minimize material
handling equipment
thus less traffic
congestion

Connectivity
throughout the
distribution center
Material Handling System
Sortation System: Cross-Belt System
• FMCG of various sizes
with suppliers’ own
barcode
• Batch picking and flowthrough distribution
• Cartons are sorted
directly to its allocated
staging lanes
• Capacity: 7,200 carton
per hour
Benefits of DC Automation
Productivity & Capability Improvement
Daily
Throughput
Current
66,000
carton / day
90,000
Future
Projection carton / day
Without
MHS
With
MHS
%
Improvement
Throughput
/ hour
3,800
6,000
57.9 %
Headcount
187
176
6.1 %
Throughput
/ hour
4,500
8,000
77.8 %
Headcount
303
210
30.8 %

Tremendous improvement in productivity

Less reliance on manual labor

Improved accuracy and traceability
Importance of Processes
Inventory Management
• Visibility of stock-on-hand for HQ, distribution centers, supermarkets &
Online
• Inter-branch-transfer is possible
• System accuracy allows one stocktake exercise per year
Activity-Based-Costing
• Logistics charges to supermarket is directly proportional to activity
incurred
• Active adherence to on-time ordering and delivery
• Discourage non-essential delivery for non-critical item
• Urgent delivery is still available at extra cost
Healthcare Automation
Totebox Storage Solution
Vertical Storage Solution
* Courtesy of Swisslog
Pitfalls of DC Automation
Investment Cost
• ROI
 High capital investment
 Annual asset depreciation
 Nominal salvage value
 Maintenance cost
Business organic growth
More centralization
New formats & SKU
Throughput
volume
Returns on
Investment
Pitfalls of DC Automation
Business Model & Requirements:
 Push vs pull model
 Stock turn-over (ex: fashion vs grocery industry)
 Volume vs number of retail outlets (WalMart vs 7-11)
Logistics Operating Models
 Customer’s geographical dispersion (US versus Japan)
 Day / night / 24 hours delivery
 Cross dock & flow-through
 Lead time requirements
Pitfalls of DC Automation
Localization & adaptation of automation
 Local regulations
 Voice picking customization
Flexibility & adaptability
http://www.webresourcesdepot.com/free-vector-world-maps-collection/
Pitfalls of DC Automation
System Failure
• Build-in system redundancy
 Modular design
 Distributed risks
 Strengthening of single point of failure
• Contingency for minor failure
 Alternative order fulfillment processes
 Cross-train employee
• Contingency for major failure
 Partial/full operation diversion to alternative site
 Updates of critical items list
Success Factors for DC Automation
1)
Bold foresight and calculated initiative
•
•
•
•
2)
Automation project conceived in 2003
Operational in 2007
Utilized full facility capacity in 2015
Action before productivity/capacity crisis
Learn from the world’s best
•
•
3)
Many world-class distribution centers utilize ASRS and
automated picking modules
Suitable technology
Early employees’ involvement
•
•
4)
Feedback and participation from ground level
Employee acceptance towards automation
Invest in talents
•
Establish teams with multi-functional skills
Key Sharing
I.
Centralization concept rendered higher throughput volume, therefore
better business case for DC automation
II.
Automation leads to:
•
Improved productivity
•
Higher capacity
•
Overcome manpower crunch
•
Better service level
•
Cost savings to customer
III.
Do with care:
•
ROI calculation
•
System availability & redundancy
•
Suitable technology investment
•
Coordination with business partners
Thank You