Fresh Connection Decision for Round 4

[Agung Darmawan]

Dear all,

Regarding our positive results, for the next round, there will be a little change for some roles.

Purchasing : You guys did a great job. If it is possible, for the next round we still need more reliability. And efficiency of the contract index is also important. Dank jullie wel.

Operation : You guys also did a great job. For next round, I think we need more outbound warehouse, because on the last round, the usage is more than 90%, and for this round I will increase the production a bit more to fulfill the service level. And please keep the operational cost low. Merci beaucoup.

Sales : Penalty is not fit to represent the sales performance. as long as, we can earn more revenue then we don't have any problem with penalty (as long as still less than 100k). For next round, I'm quite confident that we can reach the current service level. you can increase the service level and shelf life for Dominick become 93% and 72% to increase our revenue. Other options are also considerable to be changed to make the contract index more efficient. Terima kasih banyak.

I believe we will make a better performance this round. Let's pray. :P

[ferryap...@gmail.com]

Thanks Agung, we'll do it.

Ferry

-- BlackBerry® from Mobistar ---

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From: Agung Darmawan <agu...@gmail.com>

Sender: belatvin...@googlegroups.com

Date: Wed, 17 Apr 2013 15:58:35 +0200

To: <belatvin...@googlegroups.com>

Subject: Fresh Connection Decision for Round 4

[Agung Darmawan]

Kindly reminder..

[Agung Darmawan]

Dear my lovely friends,

Based on my research and experiment, for round 4, we can not stick on the low cost strategy.

Because of the CO2 thing, we need to change our strategy to be more responsive.

Especially for the Purchasing and Sales, which will get big influence from this CO2 regulation.

While for Purchasing, you need to consider about the distance of the supplier. So, we have problem with orange,which is from Miami. Yes, I know that's cheap. But the CO2 is also very big. I consider to choose the one from Spain with certification (Arancia d'Espana) with set : payment in 4 weeks, trade unit in Tank, reliability 97%, delivery window in 1 week and High quality. It will give us a big contract index (1.06). And we also will make lost with the termination.

But in the other side, we can decrease the CO2 up to 1 million kg, which will give big impact to the sales. Because the lower CO2 we promise, the higher profit we earn.

The good impact will also affect the operation and supply chain. Because the distance of the supplier is less, the lead time also less. The less lead time affects the stock we have to prepare, the less lead time means the less stock. And we all know that less stock is the goal we need to reach (because it affects directly to ROI), beside the stock itself has also influence with CO2 (the higher stock, the higher CO2 produced).

Please consider this. And make the decision as soon as possible. Thank you for your attention.

Kind regards,

Agung Darmawan

[Annelies Wouters]

Dear Agung,

 

Patricia already analysed some things. I am going to analyse further now and I will enter our decisions.

 

Annelies

2013/4/20 Agung Darmawan <agu...@gmail.com>

[Anete Freimane]

Agung,

I noticed that you have decreased the production lot size, which is ok. the impact will be that there will be more changovers and cleaning - but we will take action to decrease the impact of this.

but also for the consideration - it increases the amount of energy and water we use.

[Annelies Wouters]

Dear Agung and Brecht,

 

I just finished my analyses from the Purchase viewpoint.

Please find in attachment

1) an analysis of the previous rounds,

2) an overview of calculations from the Purchase Department with suggestions from Patricia and me, as well some questions from our side.

 

Regarding your suggestion to increase the reliability of some suppliers: for Purchasing, it would be interesting which minimum % of reliability you prefer. So far, we strive for a minimum % of 90%. We did some suggestions, could you please inform us if the suggested reliability for some components should be higher?

 

Another practical question: is there a need to lower the actual delivery window for some components?

 

About your suggestion to change from supplier for Oranges: I notice that the supplier Medina from Morocco is cheaper than the supplier Arancia from Sevilla. I suppose there won't be important differences in the CO2 emission between these 2 suppliers.

To avoid termination costs, I wonder it would be an option to keep the current supplier Miami Oranges and to choose Medina as dual source? For Purchasing it is not clear how a difference between both suppliers will be done in practice in the game The Fresh Connection. Can a difference be made at the level of ordering the components?

What do you prefer?

a) to terminate the contract with the current supplier Miami Oranges and to contract for example Medina.

b) to keep the current contract with Miami Oranges and to contract Medina as dual source.

 

I will be available until tomorrow 10h45 AM to input-change data in the system.7

 

Could you please inform me and Patricia about your feedback?

 

Many thanks in advance,

 

Kind regards,

 

Annelies

 

2013/4/20 Anete Freimane <anete.f...@gmail.com>

[Agung Darmawan]

Dear Anete,

Yes. As I have told you on Thursday, I have increased the production interval for 2 products, which have bad service level (only about 88%). Because we need them become about 93% to fulfill our sales. Based on working hours, the increment is only about 2 hours, I don't think that will affect the production cost significantly, we just need a lil bit more outbound warehouse (approximately 1000).

Dear Annelies,

I think we just need to increase the reliability or maybe increase the quality only for mango. Because both of reliability and quality will affect the component availability and rejection. I don't have any problem with other components.

And for the orange, I underestimated the CO2 thing before. But when I logged in to the Sales role (under the permission of Ferry) to investigate, we need also to promise the CO2 footprint to all customer, which has quite big impact to the contract index. The defaults of CO2 is 0.80, but based on our result last round, that is 0.89 (F&D), 0.85 (LM), 1.1 (D). With increment on production, I believe we will increase the production of CO2. If we promise too high CO2, our revenue will be so much decreased.

I would like to know, how much we need to pay to terminate a contract. I tried to find it, but I don't find it (my bad). I can not calculate exactly, how significant is the impact to the CO2, if we change to a "closer" supplier. But I believe, by changing it to the Spanish supplier, the CO2 will be decreased. Why not the Morrocan? Because of the distance, and you will need both boat and road, which the difference will be not reasonable. Beside, the free capacity is lower (affect to the reliability).

Well, other impact is with the stock, as I said. the lead time to Miami is 30 days. And I need to set more safety stock for it. Stock is one of the variable as the denominator for ROI. So, less stock, higher ROI. Beside more stock will increase the handling cost and also the CO2 production.

I don't want to push my argument. I don't insist for it. If the termination cost is too big, I will consider to use dual supplier instead. Thank you.

Kind regards,

Agung

[Annelies Wouters]

Dear Agung,

 

Thank you very much for your feedback.

 

I think the termination costs are in general not known. I also tried to find them, but without any result...

I'll consider your feedback regarding the suppliers for Oranges and think about it. I suggest to do a proposal by tomorrow in the morning.

 

Annelies

2013/4/20 Agung Darmawan <agu...@gmail.com>

Dear Anete,

[Agung Darmawan]

Dear Annelies,

For mango, I think increasing quality will be more significant to reduce the rejection and increase availability.

Please make decision before 8.45 about the supplier. Because I have to inform Ferry also for the sales decision. Thank you. 

[Agung Darmawan]

Dear Annelies,

I just found the formulation for the CO2. I did mistake. So, we don't have to change the supplier of orange. This is so bad, we will have big lost of revenue.

The calculation for purchasing CO2 : Demand per week x 26 x emission per pieces x emission index. so it is 33,948 x 26 x 2 kg x 97% = 1.712 millions.

If we change the supplier, the impact only affect the distribution which is very small. I do apologise.

[Agung Darmawan]

Dear Annelies,

Using iPET is also considerable.

[Annelies Wouters]

Dear Agung,

 

I entered the data in the program.

In my opinion it is not opportune to change suppliers or to contract dual sources (also not from a viewpoint of CO2 emission).

I have find the following about terminating contracts: "During any round you can amend your decisions as many times as you like. In general there are no consequences attached to doing so. However, there are two exceptions to this - cancelling existing contracts and purchasing information. Cancelling a contract CANNOT be undone, nor can the associated costs coming the remaining contract duration and the contract value (the purchasing value at the supplier)."

 

Kind regards,

 

Annelies

[Ferry Akbar Pasaribu]

Guys,

I think I support Annelies, to have two suppliers will increase CO2 even higher. Is it true that we could not change the existing contract? Please let us know guys, we need to move.

Thanks.

<Oranges.docx><Purchase - suppliers_VP_Round 4.xlsx>

[Agung Darmawan]

Dear Annelies,

Yes, you're right.

[Ferry Akbar Pasaribu]

So, how's the decision Agung?

[Agung Darmawan]

Dear Ferry,

Because we can not do anything to reduce the CO2 emission significantly. The only thing we can do is just increase the sales. It means offer more service level to balance the CO2 and also the contract index.

I am still calculating. I think I need to log in as Sales again to investigate. May I?

[Ferry Akbar Pasaribu]

I don't mind, but when I saw the carbon print level with all the buyers, they are all below 1. Please just make sure that the production and purchasing are not too high which would in turn could increase further the carbon print. My suggestion, please finish the calculation first Agung. But if you want to have a look again to Sales, I give you my consent. Please let us know about your investigation then.

Thanks a lot.

Ferry

[Agung Darmawan]

Dear Ferry,

As I said before, we need to increase the sales significantly. There will be a lot of changes in sales role due to the CO2 emission regulation. I will list the changes below :

Dominick :

Service level 94%, Shelf life 74%, order time 20pm, trade unit pallet layer, payment 5 weeks, Carbon 0.97.

Land Market :

Service level 92.5%, Promotion pressure Middle, payment 5 weeks, Carbon 0.83.

Food and Grossery : 

Service level 94.5%, Shelf life 75.5%, payment 5 weeks, Carbon 0.85.

I believe, the sales will be increased significantly. I already set the production and stock to fulfill these decisions. I expect there will be penalties, but I hope our revenue will cover it. Thank you.

[ferryap...@gmail.com]

Ok, I'll adjust the sales based on your suggestion.

Thanks.

Ferry

-- BlackBerry® from Mobistar ---

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From: Agung Darmawan <agu...@gmail.com>

Date: Sun, 21 Apr 2013 08:21:57 +0200

To: Ferry Akbar Pasaribu<ferryap...@gmail.com>

Cc: Annelies Wouters<annelies...@gmail.com>; Anete Freimane<anete.f...@gmail.com>; <belatvin...@googlegroups.com>

Subject: Re: Fresh Connection Decision for Round 4

[Agung Darmawan]

Dear All,

I will wait your all fix decision until 9am. Thank you.

[Annelies Wouters]

Dear all,

 

I looked again to the data of purchasing, especially for Mango.

I still made a little changes:

 

Supplier Mango: Dalima: Rejection % in round 3 was high: > 4%. Attempt to lower this by choosing high quality in this round 4.
free capacity = 4% + delivery reliability lower than agreed + rejection % of 4,4% => increase negotiated reliability from 95% to 96%. Payment term of 6 weeks instead of 7 weeks to keep in average the same contract index as yesterday.

 

=> This means, I just changed the negotiated reliability from 95% to 96% and the payment term from 7 to 6 weeks.

 

The rationale of this is: if changing the quality from middle to high doesn't decrease significantly the rejection %, and taken into account the reliability is in general lower than agreed, then there is a possibility that the final absolute reliability will fall below 90% which would be too low.

 

Annelies

 

PS I am not able anymore to make changes before 12AM, so if you still prefer changes, I give permission.

2013/4/21 Agung Darmawan <agu...@gmail.com>

[Anete Freimane]

Hello All,

The results are available from the 4th round. Thanks a lot to all! Better luck next round! We still have to see where exactly we shall improve from the next round.

I have one comment from my side - could we get a bit more organised to avoid last minute changes and last minute decisions? We have to always keep in mind that decisions made by one department, have an impact on the others. Which means that 1) all have to be aware what has been decided 2) ze need time to analyse the impact and maybe change something for the other department.

Operations are actually dependent on the decisions made by supply chain.  The lot sizes and safety stock defined by SC has a direct link to the warehouse space. We based our decisions based on the Supply Chain numbers that were online Sunday night. I just noticed that the decisions made for the round 4 are different which unfortunately has had an impact on the usage of outbound warehouse.

[Anete Freimane]

I meant, Saturday night

[Annelies Wouters]

Dear all,

 

Please find in attachment the analysis after round 4.

For the last round 5, which will be closed on next Saturday 27 April (instead of Sunday!) I believe Purchasing need the input of especially Supply Chain regarding Stock Management.

 

Regarding the choice of suppliers: I suggest to keep our current suppliers and to focus on the reliability to negotiate.

 

In addition to the previous rounds, we can negotiate to implement 1) a supplier development program and 2) a VMI.

I suggest to implement a supplier development program (10.000€) for these suppliers with a high purchase cost and a reliability in practice less than agreed.

 

Regarding the VMI, Purchasing needs to help of the team about the preference to implement these program yes or no and for which suppliers. If there is a preference to implement for some suppliers, than an idea about the upper and lower limits would be helpful to calculate the impact on the contract indexes.

 

Thanks in advance,

 

Kind regards,

 

Annelies

 

 

 

2013/4/21 Anete Freimane <anete.f...@gmail.com>