P&G China and Metro C&C Supply Chain performance improvement project (by ECR Asia Pacific)

1. P&G-Metro SC Performance
Improvement Project
Member of METRO Group

2. 1
METRO in China
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3. 2
The Cash Carry business concept
for professional customers groups
HORECA
TRADER
HORECA TRADER CBU
CBU
e.g.
e.g.
e.g. - Small Retailers
- Administrations
- Hotels - Generalists
/Institutions
- Restaurants - Specialists
- Industry
Drug Stores
- Caterer - Service companies
Petrol Station Shops
- Cafes/bars - Freelancer
Kiosks
- Special food - Authorities
sales formats
The service level of logistic relating to CFR, OOS, etc. are critical in
CC, because the professional shoppers are doing business with CC.

4. 3
Current SC Network
SC Network (DFNF) Y2007
• Metro Procurement Logistics (PAXD) network
built up with 3 cross docking centers in Shanghai,
Guangzhou, and Beijing, generating 8.1% indirect
flow share in Dec 2007.
• PG have Regional Distribute Centers in
Shanghai (East), Guangzhou (South), Beijing
(North), Tianjin (North), Chengdu (Center West)
to cover Metro orders.

5. 4
PG-Metro SC Performance Improvement Project
--Objective
Overall improved supplier performance and more
(Metro and Supplier ‘win-win’)

6. 5
PG-Metro SC Performance Improvement Project
-- Deliverables
Decreased
Late Delivery
Increased Customer
Fill Rate Satisfaction
PG SC
Performance
Improvement
Increased Improved
Sales GP Goods availability

7. 6
PG-Metro SC Performance Improvement Project
Background
• Metro and PG supply chain jointly agreed that Fill Rate is a priority
KPI opportunity in China given Metro’s rapid growth in the market.
• Before the project kick off(Jan07-Jun07), Metro Fill Rate has been
60.3% nationally, that means about 40% of Metro order can not be
supported by PG, without having an aligned root cause.

8. 7
PG-MetroSupply Chain Supplier Scorecard
METRO SC Performance Improvement Project
Project Proposal – General Working Process
Principle: MCC Buyer integrates SC Supplier Score Card in normal operational business process, monitors
improves it together with PG. Tracking Sheet is submitted to Metro SCM for monitoring.
Contact
PROCESS
KPI / Scorecard KPI Follow-up
KPI /
Distribution to
with PG, * Implement KPI
Scorecard need discuss reasons,
Buyer / PG and penalty Developm
Creation Impro- define action
Analysis process ent
vement plan, targets.
Monthly Monthly Monthly Monthly Monthly
WHEN
Alignment
Metro SCM Metro SCM Buyer PG Buyer PG Buyer
WHO
Involve Buyer Involve SCM if Involve SCM if
Involve
PG needed needed
SCM

9. 8
PG-Metro SC Performance Improvement Project
-- Tools- KPIs/ Scorecard Definition
KPIs Formula Remark
KPI measures the share of articles
delivered correctly concerning quantities.
Fill Rate % (Ord Qty - Short Qty) / Ord Qty
Only short deliveries have a negative
influence (no over deliveries).
KPI measures the share of articles
Lead-time Reliability
Late Delivered Qty / Total Delivered Qty delivered late in the concerning period. Too
(Late) %
early deliveries are not considered.
KPI measures the average lead time
Avg. Lead-time Goods Receiving Date - Order Generating Date
between order and delivery.
KPI answers the question, which timeframe
Stock Coverage Avg. Daily Stock Qty / Avg. Daily Sales Qty
(days) is covered with the actual stock.

10. 9
PG-Metro SC Performance Improvement Project
-- Concept and Example
Scoring Concept
For the time being the focus of the scoring is on order related KPIs only (Fill Rate, LTR - Too Late Deliveries, Order To Delivery
Lead-time)
KPIs Weight Limits Scoring Formula
Full Score No Points
Fill Rate (in % ) 50 100 60 (value - 0.6) *2.5 *weight
LTR-Too Late Deliveries (in %) 30 0 40 (0.4- value)*2.5*weight
Order To Delivery LT (in days) 20 1 6 ((weight/6)*(1/value)*6
* Value of the KPI
Example of Scoring sample report
KPIs KPI Value Scoring Score
Fill Rate (in % ) 84.7% (84.7%-60%)*2.5*50 30.9
LTR-Too Late Deliveries (in %) 19.7% (40%-19.7%)*2.5*30 15.2
Order To Delivery LT (in days) 3.0 (20/6)*(1/3)*6 6.7
Total Score 52.8

11. 10
PG-Metro SC Performance Improvement Project
Execution
• Dedicate one PG Logistics Manager to work with Metro SCM and
HQ Buyer/Store Operation to jointly gain a deep understanding of store
operation processes.
• Developed a set of Hypotheses on the key factors and root causes
leading to low FR in each bucket and developed a set of solutions to
address the root causes.
• The 4 stores (ZB, SZ, TJ, GZ) were selected for the pilot based on
the relatively low level of promotion pack Fill Rate, then deploy
nationally.

12. 11
PG-Metro SC Performance Improvement Project
Pilot Stores
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Jan07 Feb 07 Mar07 Apr07 May07 Jun07 ZB is in Shanghai
ZB CS TJ GZ
• The chart above shows Metro FR data for the 4 pilot stores during
Jan-Jun07, the average FR is only 60%, TJ store even have 27% FR
before.

13. 12
PG-Metro SC Performance Improvement Project
Root Cause
• During the pilot project period (Jul07), service defects in the 4 stores significantly
declined from 22.35% to 6.3% on “Promotion pack over allotment order”. Highlight
has been the “CS store”, which could be reduced to 0 defect rate on “over allotment
order”.
• Meanwhile, during the pilot period, for open allocation day order, we
established a tracking to every store order, no store over inventory amount
when placing order, which greatly meet our target.

14. 13
PG-Metro SC Performance Improvement Project
Results
50
45
40
35
30
25
20
15
10
5
0
All All Jul GZ GZ Jul CS CS Jul ZB ZB Jul TJ TJ Jul
(Jan- (Jan- (Jan- (Jan- (Jan-
Jun) Jun) Jun) Jun) Jun)
Over allotment during allocation period Open allotment day
• During the pilot project period (Jul07), service defects in the 4 stores significantly
declined from 22.35% to 6.3% on “Promotion pack over allotment order”. Highlight
has been the “CS store”, which could be reduced to 0 defect rate on “over allotment
order”.
• Meanwhile, during the pilot period, for open allocation day order, we
established a tracking to every store order, no store over inventory amount
when placing order, which greatly meet our target.

15. 14
FR Improvement Project Phase I Review
-- Fill rate improvement CY2007
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FR improved from previous 60%(Jan-Jul 07 average) vs current 76%(Aug07-Feb08
average), 16% improvement already.
Promotion pack unfilled rate decrease 50% after process implement.
In Feb08, we got historical high FR data as 82%.
FR project was successfully put in Global MM and PG joint 2007 annual report
as the first China supply chain golden case.

16. 15
Contact Details
Metro:
Mr. Denny Yang – Head of SCM
yibing.yang@metro.com.cn
Ms. Jin Lan – Metro China Buyer
Lan.jin@metro.com.cn
Mr. Xu Bin –Flow and Demand Manager of SCM
bin.xu@metro.com.cn
Ms. Nellie Wu – SCM Assistant
huifang.wu@metro.com.cn
PG:
Ms. Terry Tang – Metro Team CBD AD
Tang.te@pg.com
Ms. Kim Kehoe – PG Customer Logistic AD
Kehoe.ks@pg.com
Ms. Grace Li – Metro Team logistic manager
li.gr@pg.com
Mr. Philip Cai – Metro Team Category Management Account Executive
cai.qi@pg.com

17. 16
Backup

18. 17
back
Supplier KPI / Scorecard
Supplier Order quantity GR quantity Over Short
ABC delivery delivery
Art. 1 100 120 20 0
Art. 2 110 80 0 30
Art. 3 100 0 0 100
Sum 310 200 20 130
Fill Rate shortfall% = (Ord Qty - Short Qty) / Ord Qty (over delivery excluded)
Fill Rate shortfall% : (310-130)/310 = 58.1%
Supplier Order Planned GR-Date GR- GR (excluding Late
ABC Qty Delivery Date quantity over delivered Delivered
Qty) Qty
Art. 1 100 15.07.05 15.07.05 120 100 0
Art. 2 100 15.07.05 14.07.05 100 100 0
Art. 6 100 21.07.05 22.07.05 40 40 40
Sum 240 40
Leadtime Reliability Late% = Late Delivered Qty / Total Delivered Qty (over delivery excluded)
Leadtime Reliability Late% : 40/240 = 16.7%

19. 18
back
Supplier KPI / Scorecard
Supplier Order Sending Goods Lead
ABC Date receiving Date Time
Order line 1 01.03.2006 05.03.2006 4 days
Order line 2 08.03.2006 15.03.2006 7 days
Order line 3 21.03.2006 27.03.2006 6 days
Lead-time = Goods Receiving Date - Order Generating
Average Lead Time in Days = (4+7+6)/3 = 5.6
Supplier Avg. Stock in Avg. Sales in
ABC MU MU
Art. 1 50 2
Art. 2 50 3
Art. 3 100 5
Stock coverage = Avg. Stock in MU / Avg.
Stock coverage = 200/10 = 20 days