Sustainable Transport & DistributionPavel Isaev

Supply Chain Director Danone RussiaMoscow – 03/06/2010

Era of Retail Expansion

High costs due to parallel operated line hauls Less flexibility in departure schedules Complex supply chain processes occupy management capacity on both sides (Manufacturer and Retailer)

ChallengesRetailer DC

Warehouse of Supplier

Production PlantManufacturer

Production PlantManufacturer

Retail Outlet

Retail Outlet

Retail Outlet

Retail Outlet

Inefficient Supply Chain

Existing Network CoverageExisting Network Coverage20 DCs and 8 cross docks in 26 cities

500 Trucks delivering over 30,000 destinations (1,5 times a week on average)

Current annual volumes handled : more than 350,000 tons

80% of the Russian population and 85% of the buying power is delivered within 24 / 48 hours

Network coverage reflects the population spread in Russia

Service frequency ranges from daily in major cities to once a week in furthest locations

Designed to meet manufacturers and retailers’ needs

Danone Pan-Russia Chilled Network

TOTAL COST TO SERVE MODEL TOTAL COST TO SERVE MODEL

INBOUND

PRIMARYDISTRIBUTION

SECONDARYDISTRIBUTION

POS

Factory expedition

Primary warehousing

Freight to secondary & Cross-dock

Freight to distributors

Freight to platforms

Distributors

POS

Customer platforms

POS

Vanselling

Preselling)

Internal freight outInternal freight out import

Factory export Factory 1 Factory 2

DnK

A solution for the food and beverage chilled sector with multiple delivery points in Russia

Project Idea

Network

Volumes

Temperature range : 2oC to 6oC

Pan-Russia Chilled Network

Goods delivered through the network includeGoods delivered through the network includeDairy products

Milk, traditional and modern dairy, butter, cheese, etc..

Semi-cooked or ready meals and saucesPacked processed meatChilled and temperature sensitive beverages

Combined delivery with goods are accepted forCombined delivery with goods are accepted for POS materials to the same delivery point (marketing leaflets and

publicity)Non-contaminating dry foodstuff tolerating the temperature range

Specialized in temperature controlled goods delivery

Advantages at a glance

The DnK optimized network

Main DnK warehouse

Production PlantManufacturer

Production PlantManufacturer

Retail Outlet

Retail Outlet

Retail Outlet

Retail Outlet

DnK Regional warehouse

Warehouse of Supplier

– On time delivery via optimized DC locations– Cost reduction through shared facilities and trucks– Improved delivery time reliability and flexibility in departure schedule (no minimum

quantity)

Around 5,000 delivery points in Moscow

3,500 delivery points in St Petersburg

600 points of delivery in Yaroslav (500 000 people)

From Retail Chains and Hypermarkets

To traditional stores

DnK currently visits over than 30,000 delivery points

Network Coverage

Dnk solutionOperational perspective

After salesAfter salesDocuments returned after delivery in

1 week time for 80% of destinations

2 weeks for far destinations (20%)

Delivery notes scanned within 24 hours after deliveryOrders tracing and visibility on web portal with delivery status

Returns managementReturns managementProposed solutions

Delivery to the same or to another delivery pointDestructionReturn to customer’s DC

WarehousingWarehousingStorage and picking solution close to the consolidation centers

Dnk solutionTariffs

Tariffs can be based on weight or on number Tariffs can be based on weight or on number of palletsof palletsSmallest quantity invoiced : 10 kg1 pallet is considered from 200 kg, but the invoice can

be based upon weight only, if requested

Weekly invoice

One single contract for all RussiaOne single contract for all RussiaCentral invoicing

Central claims management

Central customer service

DnK tariffs

Large potential of products to achieve critical mass Large potential of products to achieve critical mass

Broad geographical coverageBroad geographical coverage

High frequency of shipmentsHigh frequency of shipments

Variety of destinations – from Hypermarkets to small storesVariety of destinations – from Hypermarkets to small stores

Flexible distributionFlexible distribution

Cost efficient solutionCost efficient solution

Quality, efficiency & reliability as major network characteristicsQuality, efficiency & reliability as major network characteristics

Safety and security Safety and security

Full traceability and visibility of the flows through IT systemFull traceability and visibility of the flows through IT system

DnK - Unique distribution offer on the market

Thank you!Thank you!

Any Questions?Any Questions?

BACK UPBACK UP

Main warehouse

St-PetersburgSt-Petersburg

Moscow NorthMoscow North

Moscow Moscow SouthSouth

TchekhovTchekhov

Rybinsk (XD)Rybinsk (XD)

KostromaKostroma (XD)(XD)

YaroslavlYaroslavl

Nijni-Nijni-NovgorodNovgorod

VoronezhVoronezh

KalugaKaluga

RostovRostov

KrasnodarKrasnodar

Novorossiysk Novorossiysk (XD)(XD)

VolgogradVolgograd

Saratov (XD)Saratov (XD)

Samara (XD)Samara (XD)

TogliattiTogliatti

KazanKazan

UfaUfa

MagnitogorskMagnitogorsk ((XDXD))

Orenburg Orenburg ((XDXD))

EkaterinburgEkaterinburg

Chelyabinsk Chelyabinsk (XD)(XD)

PermPerm

TyumenTyumen

OmskOmsk

NovosibirskNovosibirsk

KrasnoyarskKrasnoyarsk

7

5 6

3

2.5

2

1.5

1.5

1.3

1

1

1

1

1.2

2.3

2

4

Regional warehouses Cross docking

DnK Chilled Network: lead times of delivery (days)

2.3

3

4

41.4

1.4

2.7

Other towns covered

1.6

LT details

p. 16

Main warehouse

St-PetersburgSt-Petersburg

Moscow NorthMoscow North

Moscow Moscow SouthSouth

TchekhovTchekhov

Rybinsk (XD)Rybinsk (XD)

KostromaKostroma (XD)(XD)

YaroslavlYaroslavl

Nijni-Nijni-NovgorodNovgorod

VoronezhVoronezh

KalugaKaluga

RostovRostov

KrasnodarKrasnodar

Novorossiysk Novorossiysk (XD)(XD)

VolgogradVolgograd

Saratov (XD)Saratov (XD)

Samara (XD)Samara (XD)

TogliattiTogliatti

KazanKazan

UfaUfa

MagnitogorskMagnitogorsk ((XDXD))

Orenburg Orenburg ((XDXD))

EkaterinburgEkaterinburg

Chelyabinsk Chelyabinsk (XD)(XD)

PermPerm

TyumenTyumen

OmskOmsk

NovosibirskNovosibirsk

KrasnoyarskKrasnoyarsk

5

5 8

27

6

16

20

11

9

1

11

13

8

54

13

6

7

Regional warehouses Cross docking

DnK Chilled Network: nb of connections per week

3

3

6

61

1

1

20