slide 1 © the delos partnership 2005 tesco supply & procurement thinking like tesco…
TRANSCRIPT
Slide 1 © The Delos Partnership 2005
Tesco Supply & Procurement Thinking like Tesco…
Slide 2 © The Delos Partnership 2005
Key People – Tesco Ireland Key People – Tesco Ireland
• Gordon Fryett – CEO
• Sandra Turner – Commercial Director • Paul Slevin – Head of Commercial
• Karl Pratt & Liam Forsyth – Senior Buying Managers
• Chris Burns – Buying Manager
• Tony Keohane – Property & Supply Chain Director
Slide 3 © The Delos Partnership 2005
Assumed Supply Priorities – Europe Assumed Supply Priorities – Europe
• Communicate the Tesco Vision & Strategies to the suppliers
• Assess the risk & supply potential from the local suppliers
• Benchmark local suppliers versus Tesco Strategic and UK Best in Class
• Put the best deals in place with local suppliers to underpin corporate supply and procurement goals
• Implement Supply Synergies & e Processes
Slide 4 © The Delos Partnership 2005
Tesco 2006 Tesco 2006
Likely Challenges & Goals
– Reduced Reduced Consumer Spending
– Cost Up (Energy, Logistics, Petrol)
– Aggressive Competitors - Price Cutting
– Higher Supplier Discounts
– Integrated Supply Processes
Slide 5 © The Delos Partnership 2005
Likely Tesco 2006 ApproachLikely Tesco 2006 Approach
Assumed Procurement Budget Focus• Purchasing Price Reduction• Cost Reduction (Overheads, Projects, Processes)• Cash Flow Generation • Capital Expenditure
How to deliver a £300m How to deliver a £300m Improvement Stretch Goal… Improvement Stretch Goal…
• Tough Supplier Negotiations • Verify / Reduce contract volumes• Improved Quality / Less Refunds• Reduced Tesco Inventory• Less Suppliers• Refuse all price increases• Special Deals/Rebates
Slide 6 © The Delos Partnership 2005
Likely Tesco 2006 ApproachLikely Tesco 2006 Approach
Why bigger Supply Discounts are justified?
– Tesco is the No 1 – More Differential is needed
– Bigger Rebates Year on Year are the retail norm
– We are growing and rebates help you grow with us
Slide 7 © The Delos Partnership 2005
How Tesco Europe might evaluate DairygoldHow Tesco Europe might evaluate Dairygold
#1 - Risk and Supply Value Potential
Slide 8 © The Delos Partnership 2005
Dairygold Risk Assessment Dairygold Risk Assessment
Scenario1. Product A2. Product B3. Service C 4. Service D5. Supplier E
Risk Map Key Severity
Major
Medium
Low
Minimal
Medium Priority
High Priority
Low Priority
Medium Priority
Minimal
Low Medium Major
Slide 9 © The Delos Partnership 2005
Dairygold is Tactical / LeverageDairygold is Tactical / Leverage
• The level of trust between Tesco and the Dairygold is low.
• Information sharing by both parties is limited.
• Tesco dictates pricing.
• There is no Strategic Partnering Programme and joint projects.
• Relationships are restricted and there is little Dairygold Supplier senior management engagement.
Slide 10 © The Delos Partnership 2005
Dairygold is Strategic/CriticalDairygold is Strategic/Critical
• The products / services that Dairygold supplies are Strategic Critical
• Dairygold openly demonstrates an international commitment to Tesco and proactively keeps us on the competitive edge.
• Strategies have been jointly shared & developed. Contact at all levels is excellent.
• Quality, HSE and Regulatory compliance are outstanding and have anticipated future needs.
• Detailed programmes are in place to manage risk, quality, cost and the supply chain.
• Processes have been fully optimised to ensure maximum product and service velocity and accuracy at the optimum cost.
Slide 11 © The Delos Partnership 2005
Workshop Workshop
Why would Tesco Europe/Ireland position Dairy Crest as a Strategic Supplier?
Slide 12 © The Delos Partnership 2005
Supplier Ranking & PerformanceSupplier Ranking & Performance• There are five levels of Supplier
• Performance is assessed against ten elements
• The level or ranking is based on the net total • value delivered by the supplier
• Suppliers might be eliminated at any level
BRONZEBRONZE(New)(New)
SILVER SILVER (Development)(Development)
SILVER GILTSILVER GILT(Approved)(Approved)
GOLDGOLD(Preferred)(Preferred)
PLATINUM PLATINUM (Strategic)(Strategic)
SUPPLIERELIMINATION
Slide 13 © The Delos Partnership 2005
Dairygold Performance Measures Dairygold Performance Measures
Performance Measurement Dairygold Assessment
1. Dairy Risk Management Risk Management Tool in place?
2. Dairygold RFTQ100%OTIF Is RFTQ in ppm & Quality Report in place?
3. Dairygold Net Price/Cost Competitiveness Are cost competitiveness & savings in place?
4. Dairygold Lead Time (Calendar days) Are lead times in place?
5. Dairygold Supply Chain Management Is VMI/ Sales Forecast in place?
6. Dairygold Supplier Schedule Achievement Is Schedule Achievement monitored?
7. Dairygold On Time New Products Are new products / innovation value recorded?.
8. Dairygold Strategic Alignment Is their evidence of Strategic Alignment?
9. Dairygold Education & Training Has Dairygold education been provided?
10. Dairygold Self Monitoring / Reporting Is Dairygold measuring / reporting performance?
Slide 14 © The Delos Partnership 2005
Dairygold Assessment FindingsDairygold Assessment Findings
0
1
2
3
4
5Risk Management
RFTQ100%OTIF
Price (Cost)
Lead Time
Supply Chain Management
Schedule Achievement
On Time New Products
Strategic Alignment
Education
Self Monitoring
Slide 15 © The Delos Partnership 2005
How we have prepared for Dairygold How we have prepared for Dairygold
• Planned the Tesco Purchasing Budget
• Looked at the Dairygold Spend History
• Assessed Dairygold past performance
• Met Dairygold competition to > leverage
• Researched the market
• Evaluated Supply / Demand
• Looked at Dairygold Financials
Slide 16 © The Delos Partnership 2005
How we will run the NegotiationsHow we will run the Negotiations
Slide 17 © The Delos Partnership 2005
What we will concedeWhat we will concede
• Very little
Slide 18 © The Delos Partnership 2005
What we will not concedeWhat we will not concede
Slide 19 © The Delos Partnership 2005
When we leave the 10Nov05 Meeting When we leave the 10Nov05 Meeting
• Dairygold