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Optimizing the Value of Fully Integrated DSD

Presented to

Trading Partner Alliance Supply Chain Conference

by

GMA DSD Committee

February 1, 2011

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Thank You

The GMA DSD committee expresses their appreciation to the retailers who made this project possible:

• Cub Foods

• Hannaford Brothers

• Kroger

• Safeway, Inc.

• SaveMart

• Wegmans

• Winn Dixie

Optimizing the Value of Integrated DSD

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DSD Committee Mission

Focus on emerging opportunities todrive growth, profitability and

productivity for CPG companies and their customers through the use of the

DSD distribution system.

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Study Background

2005 ‐ “Unleash the Power of DSD” conducted by Willard Bishop Consulting, LTD

2007 – A comprehensive guide to retail Out‐of‐Stock Reduction in the Fast Moving Consumer Goods Industry conducted byUniversity of Colorado and IE Business School Madrid, Spain

2008 ‐ Powering the Growth through Direct Store Delivery conducted by AMR Research and Clarkson Consulting


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Objective

The objective of this study is to identify how retailers and suppliers can collaborate to optimize Fully Integrated DSD to increase sales and improve the shopping experience by:

• Benchmarking:

• Adoption of proven operating practices

• In‐stock levels on the shelf

• Underfacings that can reduce in‐stock

• Documenting in‐store merchandising and operating experiences


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TodayGoalTo help you get full value from this important new research

Agenda• Introduction

• Overview of the study• Approach• Results

• Discussion• Panel• Audience

• Opportunities


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Study Sponsors

6. Kraft North America

7. Pepperidge Farm, Inc.

8. PepsiCo, Inc.

9. Schwan’s Consumer Brands NA

10. Snyder’s–Lance, Inc.

1. Bimbo Bakeries

2. The Coca Cola Company

3. Dreyer’s Grand Ice Cream

4. Flower Foods Inc.

5. Kellogg Company


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By

Jim Hertel, Managing Partner

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What We Hope You Take Away from the Study

• A lot of progress has been made

• Results come at a good time

• There is significant upside business potential

• The key to increase sales and profits is through even greater collaboration


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Evolution of the Study

• Initial Vision – To establish the relationship between proven practices and shelf conditions. On the way we realized:

• Shelf conditions are dynamic

• Impact of individual practices cannot be isolated

• Final Vision – To identify opportunities to increase in‐stock levels by providing information to answer:

• How do I compare?

• How do we improve?


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Overview of the Study

Study Findings

• Overall

• Company Specific

Executive Interviews• Identified Opportunities• Benchmark adoption of

practices• 7 Retailers• 10 Interviews

Manufacturers Sales Representatives Survey(boots on the ground)• In‐store experience• Tactical feedback

• Total 128 Interviews• 12 to 26 responses

per retailer

Shelf Analysis• In‐stock levels• Facing Compliance

• 6 categories• 28 stores


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ShelfSnap Analysis


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ShelfSnap Analysis

Collect

• Plan‐o‐grams

• Reference data

ShelfSnapTM Output

• In‐stock levels

• Facing Compliance

Capture Shelf Conditions

• Timing

• Digital Photos


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Walk Through the Findings

Orientation to the ReportTwo types of information

• Overall results• Your company results

• Highlighted by arrows

• Interpretation in the grey areas

Each participant report is customized


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Finding 1: Challenges in managing plan‐o‐grams are an important reason why shelf conditions don’t always deliver the optimum shopping experience

Keys questions for successfully managing plan‐o‐grams

1. Who has the custody of the plan‐o‐grams?

2. Is there an easy way to connect the specific plan‐o‐gram to the individual stores?

3. Are store specific plan‐o‐grams up‐to‐date and do they reflect the store size, layout and fixturing?

4. Are there instances where only some products in the category areplan‐o‐gramed or where entire categories have no plan‐o‐gram?

5. Are authorized plan‐o‐grams implemented without modification?


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Finding 2: The in‐stock level for DSD categories averaged 98.2% compared with 94% from more than 100 ShelfSnapTM studies in warehouse and DSD categories.

In‐Stock Levels for Participating Chains(In‐Stock as a Percent of Items on the Shelf)


A B C D E F G Average

98.8% 98.8% 98.78% 97.5% 98.32% 98.16% 98.1% 98.2%

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Opportunities to Increase in-stock levels:• Increasing collaboration with DSD suppliers on shelf allocation and back stock

• Sharing more sales information and merchandising plans

• Scheduling regular meetings to make plan‐o‐gram adjustments

• Establishing agreement for “off hour” restocking of DSD products from backroom


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Finding 3:The incidents of “under facings,” in this study average 13.1%, which is significantly lower than the 30.0% found in other ShelfSnapTM studies.

Incidence of Under Facings for Participating Chains

(Percent of Authorized SKU’s on the Shelf)

11.2%13.7%

11.3% 10.5% 11.8%14.0%

18.4%

13.1%

0.0%

5.0%

10.0%

15.0%

20.0%

A B C D E F GAve

rage


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Opportunities to minimize underfacings:• Using syndicated data and POS information to assign facings for both branded and private label products.

• Determining the necessary “days of supply” to establish shelf holding power for fast moving items.

• Establishing a process that combines supplier input with retailer expertise in developing plan‐o‐grams.

• Scheduling regular updates to realign facings to sales as necessary.


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Finding 4: There are significant differences in retailer adoption of DSD practices which creates potential for improving performance.


86%

28% 14%

14%

100%

56%

14%

86%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Special Hours for Large, Complex Deliveries

Priority Check-in for NEX,DEX, or ASN Suppliers

More Than one Receiver During Peak Times

Allow 2 or More Suppliersto Stage Product for Check In

Full Partial Limited/None

Receiving Scheduling Practices(Percent of Participating Chains)

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How You Compare


Overall

Results

Your

Results

Consistent access and up ‐to‐date lists 41%

Limited access and up ‐to‐date lists 32%

Consistent access and not always up ‐to‐date lists 10%

No access 17%

Responses: 128

Access to Authorized Item Lists

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How You Compare

Overall

Results

Your

Results

Consistently 23%

Sometimes 27%

Never 50%

Responses: 128

Retailer Sharing of POS Data


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How You Compare

OverallResults

YourResults

Waiting on Receiving 43%

Finding/Organizing Promotional Inventories 24%

Handling Returns 4%

Resolving Changes in Shelf Sets 7%

Communicating/Building Relationships With Store Personnel

20%

Reconcile Invoices 3%

Responses: 128

Activities that Take the Most Time Away from Working the Shelf


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Thanks For ListeningThanks For Listening…… Questions?Questions?

www.gmaonline.orgOptimizing the Value of Integrated DSD

Opportunity To Further Leverage DSDOpportunity To Further Leverage DSD

Ability To Drive A Strong InAbility To Drive A Strong In‐‐Stock PositionStock Position. This Is A Top Priority At Retail And Was The Most Frequently Mentioned Contribution. DSD Labor And Delivery Frequency Are Seen As Integral To It.

Capability To Effectively Serve Local ConditionsCapability To Effectively Serve Local Conditions. Retailers Are Moving Beyond Clusters To Tailor Merchandising To Local Needs With The Ultimate Goal Of Store‐Specific Plans. DSD Is Seen As A Way To Execute Against This Goal.

Range Of Product To Support Varying Assortment RequirementsRange Of Product To Support Varying Assortment Requirements. DSD Provides Retailers With The Ability To Offer The Products Needed To Serve Local Preferences And To Quickly Respond To Seasonal Changes In Demand.

Execution To Maintain Shelf ConditionsExecution To Maintain Shelf Conditions. DSD’s Strong Execution At The Shelf Is Important In Maintaining Shelf Conditions. DSD Also Speeds New Products To The Shelf, Which Is Essential To “Maintaining The Reputation For Being Ahead Of The Marketplace.”


Areas Of Joint OpportunityAreas Of Joint Opportunity

Increasing Communications & Collaboration At Store LevelIncreasing Communications & Collaboration At Store Level

“We Want Our Stores Engaged In Presale Planning And Encourage These Conversations.” Source: Retail Merchandising Executive

While There Was Consistent Emphasis On The Need To Understand And Apply Best Practices At Store Level, A Number Of Retailers Also See Value In Collaborating To Achieve Greater Coordination Of Store‐Level Activities.


Improving Shelf ConditionsImproving Shelf Conditions

“We Are Focusing On Upgrading Shelf Conditions And Need To Make Sure It Happens In DSD As Well As The Rest Of The Store.”

Source: Senior V.P. Of Operations

The Primary Goal Of Improving Shelf Conditions Is To Reduce Out‐Of‐Stocks. One Way To Do This Is To Align Merchandising Support With The Sales Of Fast Moving Products. Most Retailers Also Want To Be Sure That Category Plans Are Implemented All The Way To The Shelf And That New Items Are “Cut In” As Soon As Possible. Further, There Is An Opportunity To Work Together To Better Execute Store‐By‐Store Assortments.




Optimizing Backroom InventoryOptimizing Backroom Inventory

One Key To Improving Shelf Conditions Involves Ensuring That There Is Adequate Backroom Inventory For The Store’s Fast Moving Products And That The Back‐stock Of Slower Moving Products Is Held To A Minimum, Since Pockets Of Excess Inventory Can Reduce LaborProductivity And Increase Shrink.



Increasing Alignment Of Activities At RetailIncreasing Alignment Of Activities At Retail

“We Want To Continuously Improve Our Labor Productivity.”Source: Senior Operations Executive

A Common Theme Among Retailers Is That There Is Opportunity To Increase Alignment With Their DSD Suppliers.


We Would Like To Recognize & We Would Like To Recognize & Thank Our Study PartnersThank Our Study Partners

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