Chemical Supply Chain

Competitive Differentiation through Supply Chain Managementg

Klaus Venus, Head of Supply Chain ManagementM di E & I t ti lMondi Europe & International21st of April 2010

Agenda

Mondi Uncoated Fine Paper – Supply Network

2003 Supply Chain Analyse – Vision & Program

Key Initiatives implementedKey Initiatives implemented

Business Case – Service Improvements

Discussion

2009/06/17Wettbewerbsdifferenzierung über SCM Seite 1

Mondi Group

Key Figures Mondi Group

2009 2008

Mondi is an international paper andpackaging group and had revenues of EUR5.3 billion in 2009.

Revenue € 5,257M € 6,345M

Its key operations and interests are inwestern Europe, emerging Europe, Russiaand South Africa.

EBITDA1

EBITDA

€ 645M € 814M

and South Africa.

Mondi has production operations in around31 countries and about 31,000 employees.

EBITDA Return

Capital Employed

12.3%

€ 4,314M

12.8%

€ 4,367M

Mondi is a dual-listed company at theLondon Stock Exchange (LSE) andJohannesburg Stock Exchange (JSE).

ROCE2 7.6% 9.5%

Johannesburg Stock Exchange (JSE).

The corporate headquarters are located inJohannesburg.

Europe & International PresentationFebruary 23, 2010 Page 2

1 EBITDA is operating profit of subsidiaries and joint ventures before special items, depreciation and amortisation.2 Group ROCE is the underlying operating profit including share of associates’ net earnings divided by average trading capital employed (excluding capital employed on the major strategic expansion projects in Russia and Poland).

Business Structure Mondi Group

Europe & International (E&I) South Africa

Merebank

Richards BayInternational (E&I)

Forests

Corrugated Bags & SpecialitiesUncoated Fine Paper

Bag Converting

Kraft Paper

AylesfordAylesfordNewsprint Newsprint

ContainerboardUncoated Fine Paper

50%Corrugated Packaging

EuropapierEuropapier

Mondi Mondi ShandukaShandukaNewsprintNewsprint

Coatings

Consumer Flexibles

100%

50%


Mondi Packaging Mondi Packaging South AfricaSouth Africa

70%

Around 80 Production Sites in 30 countries

Uncoated Fine PaperUncoated fine paper millNewsprint mill

ContainerboardCorrugatedContainerboard

Recycled containerboard millVirgin containerboard mill

Corrugated PackagingCorrugated box plant

Bags & Specialities

Kraft paper mill

Bag converting plant

Kraft Paper

Bag Converting

Release liner plantExtrusion coating plant

S i lt l ti fil l t

Coatings

Consumer Flexibles


Specialty plastic films plantConverted flexible packaging plant

The Mondi Diamond

Sustainable DevelopmentOperational Excellence p● Health and safety● Protection of environment● Sustainable forestry● Social responsibility

● Continuous productivity increases● High OEE and machine efficiency● Waste reduction● Low working capital● Low overheads

People Development● Development and

Customer Focus● Flawless service

training of employees● Talent management● Leadership● Employer brand

● Delivery accuracy● Market and customer intelligence● CRM

Cutting Edge Products● Building brand awareness● Incremental product development● Highest quality and functionality


● Highest quality and functionality

Uncoated Fine Paper Products

Multifunctional Paper Colour Laser PaperColor Copy guarantees brilliant colour copies and perfect print results.

Color Copy is the number 1 colour

Our office paper meets all demands of modern office communication –whether for laser inkjet py

laser brand in Europe printing. whether for laser, inkjet or copy applications.

OffsetPre Print Offset Pre-Print

Our pre-print paper fits the needs of different printing technologies.

Our offset paper exhibits very good surface characteristics to ensure a perfect print result

Available in all standard formats.a perfect print result.

Available in folio & reels in a wide range of grammages.

December 1, 2009 PAGE 6Europe & International Presentation

Agenda





Discussion


What about is Supply Chain Management?

SupplierSupplierDelivery

ManagementOrder

ManagementConsumer

ManagementProduction & Warehouse Supplier

ManagementCatalogue

ManagementInventory

ManagementCustomerCustomer

M fl

SupplierSupplierManagementManagementManagement Management ManagementManagement ManagementCustomerCustomer

Money flowe.g. Customer payment, transaction accounting, supplier settlement

Information flowe.g.Customer forecast, delivery to address, product availability promise

Physical flowe.g. Manufacture, store, pick, pack, ship, deliver, return

The Dynamics of a Supply Chain si

ze

End User

Ord

er End User

Distrib torTrade Order

Production Order

DistributorOrder

time


Quelle: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998

Trends in Supply Chain Management

Supply Chain Management has evolved rapidly over recent years and Supply Chain Pioneers are starting to move towards a synchronised supply chain

AcrossAlliance Synchronised

hip With

Customers

AlliancePartners

y

elat

ions

h

Between

& Suppliers Step 3: Synchronisation of Process, Technology & Organisation with an Orchestrated Vision

cope

of R

e

Withi

BusinessFunctions Step 2: Collaborate with key

suppliers and customers

Sc WithinBusinessActivities

Optimised Integrated Collaborative Synchronised

Step 1: Integrate functions of the internal supply chain

Optimised Integrated Collaborative Synchronised

Nature of Relationship

Mondi Uncoated Fine Paper Supply Chain

ProductionSourcing DistributionFinishing

Formates

Wood Pulp Paper mill Reels

Finished Reels

Merchants, Distributors, Customers


Mondi UFP Supply Chain Organization

Supply Chain Management

Sales & O ti

Supply & DemandPl i Supply Chain Supply ChainOperations-

PlanningPlanning -Operative

Supply ChainManagement

Supply Chain Processes


2003 Supply Chain Analysis

OutputQuantitative & Qualitative

Interviewed key supply h i l t

Benchmark vs. NAG

006,007,00

Channel Strategy & Management(CS&M)

Quantitative & Qualitative AssessmentInterviews chain personnel to

understand current issues

0,001,002,003,004,005,00

Strategic Customer Managemen

Operations Planning, Execution C t lSupply Chain Configuration

Order Fulfillment Operations

Surveys

Supply Chain Value Assessment

Supply Chain Capability AssessmentCompany / Division: Current ClientSupply Chain Process: Strategic Customer ManagementSub-process: 1.0 Strategic Customer Service

The locations do not have a strategic perspective on customer service; customer service operations are informal with no clear supporting organizational structure,

Customer service focuses on the simple administration of accounts with emphasis on completing order transactions; service is largely reactive to service complaints or

Operating locations engage in standard maintenance of customer accounts and some tailoring of services to meet requirements; dedicated service resources are

Strategic account management principles are applied, such as tailoring service offerings based on profitability and criticality of customer segments; key

Criticality Score (0-9): 9.00 Highly Critical Practice EnabledPractice Score (0-9): 9.00 Pioneering

Non-existent / poor Common Practice Progressive Practice Pioneering Practice

Enable Practice

Print

Save

Developed and distributed supply chain & customer surveys to understand current performance and

Business Case &

Control

Supply Chain Planning

Supply Chain Configuration

Neusiedler AGBenchmark

Customer service operations are often relegated to secondary status at operating locations; no formal training or development processes are in place to support the service

Customer service processes / resources are viewed as a necessity but not part of core operations, and are often excluded from planning processes, budget development and

Customer service is viewed as a critical internal function and coordinates resolution on service issues; still seen as staff function and not given leadership role with

Customer service operations act as link in external collaborative supply chain for company; data on performance is gathered, used in customer financial analysis,

Non-existent / poor Common Practice Progressive Practice Pioneering Practice

Enable Practice current performance and identify gaps

D t Conducted to quantify as-Recommendations

• Implement Integrated Supply/Demand Planning Process & Asset Allocation

• Supply Chain Network Optimisation• VMI with Key Pulp & Packaging Suppliers • Roll-out VMI to Key Customers• Mill Direct

Main Initiatives Identified

Cumulated Net Supply Chain Benefits (€ ̀ 000)

43.456

62.991

30 000

40.000

50.000

60.000

70.000

Valu

e

Data Analysis

Conducted to quantify as-is performance and major gaps

• Eliminate Fill Orders with Negative Contribution• Reduce Production Cycle Times• Delivery Accuracy Improvement through better

Time Slot Management• Define & Implement Supply Chain Wide

• Rationalisation of Logistics Providers• Warehouse Structure Optmisation• Product Basket Optimisation• Pilot VMI with 1-2 Key Customers• Align Supply Chain Organisation• Shift smaller Customers to Merchants/OPEC• Implement ABC (Activity Based Costing) Tool to

Support Supply Chain Initiatives

2.0657.969

11.781

26.879

0

10.000

20.000

30.000

1 2 3 4 5 6

Year

V

Workshop

Conducted workshops to verify data analysis, discuss best practices and id tif i t


• Define & Implement Supply Chain Wide Performance Measures

• Improve Forecast Accruacyidentify improvement opportunities

Importance Factors for Customers

Source: EMGE-Survey 2008 – Mill importance factors


Supply Chain related factors

Mondi UFPSupply Chain Vision

• Supply Chain

Cost Effective

Flexible, Responsive

Demand Driven

High Performing

• Majority of orders • Accurate forecasts at • Integrated organization andperformance measures aligned to optimize Supply Chain performance

processed and dispatched within 48-72hours to support alternative sales channels2 3 regional warehouses

appropriate level used to minimize lead times and reduce inventory levelsForecasting process

supply/demand planning processused and supported with planning tools to provide optimum supplyperformance

• Detailed ABC (Activity Based Costing) toolimplemented and used

• 2-3 regional warehouses used across Europe to improve customer service levels while minimizing Finished Goods inventory

• Forecasting process supported throughdemand planning toolto improve accuracy and reduce manual

provide optimum supply plan to maximize profits

• Key suppliers integrated in planning process (e.g. VMI,

to support decision making processes about product and customer portfolio

• Effective postponement strategy enables short lead times and reduced stock levels, e.g. 100% mother reel strategy

effort• Collaborative

processes with key customers used (e.g. VMI)

collaborative planning)

mother reel strategy implemented

VMI) • Alternative sales

channels used

Supply Chain Strategy

Sheeting

Timber Pulp Mill Paper Mill Rewinding

Roll

Merchants/

Di t ib tFinishing Distributors/

Customers

PUSH PULL

ProductionSourcing DistributionFinishing

Low

Halbfertigfabrikat Fertigware


Low Uncertainty

High Uncertainty

Benchmarking 2003 – Gap Evaluation

KPIBest-in-Class

(multiple companies)

2003 Performance GAP

companies)1. Order Lead Time (days)

2. Availability/Order Success Rate (%)Rate (%)

3. Forecast Accuracy (%) (by SKU/Volume)

4. Production Schedule Adherence (%)

5. Inventory Finished Goods (days)

6. Semi-finished Goods in (days)

7. Order fulfill rate (delivery in full on time) (%)


Tactical vs. Strategic Approach

There is a growing gap in how companies think about their supply chains.

Strategic ApproachTactical Approach

• Supply Chain used to:– grow revenues– increase market share

• Supply Chain is a cost center

– create competitive advantage

• Target opportunities for new value added services

• Focus on operational cost control and reduction

added services

• Invest in VERY specific capabilities• Perceive operating efficiency as excellence -- “efficiency trap”

• Create a distinct business model

• Use new capabilities to change the customer relationship

• Lean to the point of starvationcustomer relationship

Supply Chain Management ....need to be considered across the full range of people,

processes and enabling systems

Comprehensive, Flexible,End-to-End approach

Cross Functional Teams withCl A t biliti

Strategy

People Clear Accountabilities

Common Processes

People

Process

Standardised Reports &Metrics Alignment of KPI’sMetrics & KPIs Metrics Alignment of KPI s

Integrated SystemsInformation & Systemsy

(Cohen, Roussel, 2004, p. 230) Strategic supply chain management: the five disciplines for top performers

Agenda





Discussion


The supply chain excellence program

To close the gap between our vision and the analysis a program was initiated consisting of 8 projects

Vendor M d

Network Di t ib ti

Supplier M dTransportationManaged

InventoryDistribution

StrategyManaged Inventory

Transportation Consolidation

Performance Organization

Production Cycle Time Reduction

SPEED -Integrated

Supply and D d

Product Basket

OptimizationReduction Demand Planning

Optimization

Paradigm shift from PUSH to PULL

Old WOld WayPush Principle – sell what you make!

Supply driven – production focus

Locally optimized machine efficiency

NEW Model Pull Principle – make what you sell!

Demand driven – customer focus

Group-wide optimized costsp p

Where and when to produce what for whom..… to achieve minimized costs AND increased customer service!

Russia AustriaAustriaIsraelSlovakiaSouth AfricaWarehouses

Allocation

Planning

Allocation

Forecasting

Service Level Agreements

Customer Y / Products

Customer Z / Products

Customer B / Products

Customer A / Products

Customer C / Products

Customer X / Products…

Forecasting & Planning- ProcessesDer Supply Chain steers and chairs the monthly meeting withSales, Marketing, Finance and all Production sites

Logistics & OrderprocessCheck System

ForecastSystem Forecast og st cs & O de p ocess

Forecast Consolidation

Develop final Master Plan and

release it for

Key in Customer demand

Control forecast and finalize

Consolidation release it for execution

Weekly forecast

Weekly forecast

Weekly forecast

Weekly forecast

Control forecast and finalize

Master Plan

Inventory

Supply & DemandPlanning

Block Scheduling

InventoryReplenishment


Performance Indicators

TransportSemi-

C t

Transport.Costs

Semi-finished

Inventory

Success of

FinishedGoods

Inventory

Costs

Success ofMondi

ProductionA

SalesForecastAccuracy

ProductionSchedulingAdherence

ShipmentAccuracy

Service

Constrained

DeliveryAccuracy

Accuracy

FinishingAccuracy

y

ConstrainedFill Rate

Un-constrained

Fill Rate

y

FinishingSchedulingAdherence

SuccessFactors

KPI’sAdherence

SC-Improvement process

Step I Scheduling Adherence Step II - Delivery Accuracy ex Mill

Fineplanning PM and FLSequencing

Paper availabilityMaterial availabilityStabile aggregates

Frozen periode Capacity planning

Mill Supply Chain Processes:

I t A hImprovement Approach

Finishing cycle timesSafety stock g yPM cycle timesPot closure times

Safety stockDispo stockReplenishment cycles

Step III – Reduce Cycle TimesStep IV – Reduce Inventories


Collaboration across Business PartnersDeeper collaborative partnerships in order to compete at the supply chain level

2 L i ti2 L i ti1. Supplier

Collaboration1. Supplier

Collaboration 2. Logistics Collaboration2. Logistics

Collaboration

ProductS li MaterialR M t i l

StoresProduct

Manufacturers

Retail Distribution

Suppliers Inbound OutboundMaterial Converters

Raw MaterialsSupply

Consumers

Di t

3. Customer Collaboration3. Customer Collaboration

3pl Transport Services

Links with other B2B exchanges, e.g.:

3PL Transport Services

Direct ExchangesTransport

Exchanges

5. Industry 5. Industry

4. Exchange

Collaboration

4. Exchange

Collaboration

g g• Transport exchanges


yStandardisation

Leverage

yStandardisation

Leverage

Key to implementing an effective VMI.. ….solution is to create a win-win relationship where both the customer and Mondi benefits.

Incr. revenue (quantity)Incr. revenue (price)Improved customer service

ILLUSTRATIVE

stom

er

Reducedinventory

Reduced working capital Net Benefit

Customer WIN

Cu

AdminReduced process costs

Overall Net Benefit

VMITransportationReduced internal

transportation

-WIN

Mon

di Improved customer serviceNet Benefit

Mondi

ProductionI d d ti l i

Increased revenue (quantity)

M

AdminAutomated order management

ProductionImproved production planningImplementationReduced

inventory Replenishment planning effortVMI implementation costsReduced working capital

B fit C tTransportation

AdminAdmin Increased transportation effort

Benefits Costs

VMI – Example out of our Web-based tool

Positive downwards trends trend

Agenda





Discussion


Project Structure

Q1 - Q4 S

2003 (Level 1) 2004 (Level 2)

Q3 - Q4 Q1 Q2 Q3

2005 (Level 3)

Q1 - Q4

2006 (Level 4)

Q4

Roll out VMI to Key Customers

and Pilot / Implement with Key Suppliers

Pilot VMI with Key Customers (Design &

Build)

SelectIssuStrategic

VMI 1

Transportation

SUPP

Q1

�

�Select

Providers and Implement

Issue

RFP

Strategic Sourcing Approach

Implement Supply Chain Distribution Network Strategy Delayed due to later start

Develop Supply Chain Network Distribution

Strategy

Rationalize external

warehouseI h

Network Dist. Strategy

2Transportation Consolidation

2

LY

C

�

�

Product basket

optimization

s Improve change over

times and processes

Reduce production cycle times Detailed cost analysi

Production Cycle Time Optimization

Complexity Management

3

4

CHAI

�

Complexity Management �

Implementation of real time costing for product basket to optimize contr. changed into sales strategy

Implement Balanced Scorecard & Align SC Organization

Detail SC Scorecard

optimization s

Performance

Management

6

N

LE�

�

Demand & Supply Chain Process & Planning Tool Implementation*Solution Selection

Planning Process Design

Align SC OrganizationScorecard

Program

Integrated Demand & Supply

Organization6

7

EADE

�

Ongoing Resource Planning & Program ManagementProgramSet-up

gManagement R

Assumptions: No further mill integrations requiring IP resources

Development of selected Indicators

Delivery Accuracy InventoryInventorydays Mondi / CEPIInventorydays Mondi / CEPI

25

30

35CEPI Mondi UFP

0

5

10

15

20

3 5 7 9 3 5 7 9 3 5 7 9 3 5 7 9 3 5 7 9

Leadtimes Cost Improvements 2003-2008

2004

0120

040 3

2004

05

2004

0720

0409

2004

1120

0501

2005

0 3

2005

0520

0507

2005

0920

0511

2006

01

2006

0 320

0605

2006

0720

0609

2006

11

2007

0120

070 3

2007

0520

0707

2007

09

2007

1120

0801

2008

0 320

0805

2008

07

2008

0920

0811

Total Improvements SC-Program 2003-2008

48.568

40000

50000

60000

O

4.616

12.943

18.526

28.768

10000

20000

30000

TS E

UR

O


84801 2 3 4 5 6

Years

Supply Chain Management Awards

Mondi’s remarkable value creationMondi s remarkable value creationOn October 28th, 2008 Mondi Uncoated Fine Paper was awarded in London with the esteemed European Supply Chain Excellence Award which is organised by Supply Chain Standard in partnershipAward, which is organised by Supply Chain Standard in partnership with PRTM Management Consultants, for the best end-to-end Supply Chain industrial sector solution. In September 2008 Mondi had also been distinguished with theIn September 2008 Mondi had also been distinguished with the Supply Chain Management Award for the best value chain 2008 from PRTM in cooperation with LOGISTIK HEUTE and the Supply Management Institute (SMI) of the European Business School in


g ( ) pWiesbaden.

The best Supply Chain companies are getting better

Lead of Best-in-Class Companies

getting better…

35

Lead of Best in Class Companies over Average Performing Companies

25

3025+ 25+

30+

15

2020+

Performance Advantage for E h A (%)

5

10

Each Area (%)

0

5

Supply Chain Cost*

Inventory Levels

Fulfillment Cycle Time

Fill Rates

Source: PRTM/AMR Supply Chain Reference* Based on the difference in supply chain cost as a % of revenue … while the rest are falling farther behind.

Agenda





Discussion


Discussion

Competitive differentiation through...

Supply Chain Management

[email protected]


Our Website: www.mondigroup.com


FORWARD - LOOKING STATEMENTS

It should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations of market growth and developments; expectations of growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, “may” or similar expressions, are forward-looking statements. Since these statements are based on current knowledge plans estimates and projections they involve risks and uncertainties which may cause actual results to materially differ fromSince these statements are based on current knowledge, plans, estimates and projections, they involve risks and uncertainties which may cause actual results to materially differ from those expressed in such forward-looking statements. Various factors could cause actual future results, performance or events to differ materially from those described in these statements. Such factors include in particular but without any limitation: (1) operating factors such as continued success of manufacturing activities and the achievement of efficiencies therein, continued success of product development plans and targets, changes in the degree of protection created by Group’s patents and other intellectual property rights, the availability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for the Group’s products and raw materials and the pricing pressures thereto, financial condition of the customers, suppliers and the competitors of the Group, potential introduction of competing products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group’s principal geographical markets or fluctuations of exchange rates and interest ratesfluctuations of exchange rates and interest rates.

Mondi does not

a) assume any warranty or liability as to accuracy or completeness of the information provided hereinb) undertake to review or confirm analysts’ expectations or estimates or to update any forward-looking statements to reflect events that occur or circumstances that arise after the date of making any forward-looking statements.


Education

Chemical Supply Chain