Chemical Supply Chain

Competitive Differentiation through Supply Chain
Management
g
Klaus Venus, Head of Supply Chain Management
Mondi E
M di Europe & International
I t ti l
21st of April 2010

Agenda

Mondi Uncoated Fine Paper – Supply Network

2003 Supply Chain Analyse – Vision & Program

Key Initiatives implemented

Business Case – Service Improvements

Discussion

Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 1

Mondi Group
Key Figures Mondi Group

Mondi is an international paper and
packaging group and had revenues of EUR
2009 2008 5.3 billion in 2009.

Its key operations and interests are in
western Europe, emerging Europe, Russia
Revenue € 5,257M € 6,345M
and South Africa.

EBITDA1 € 645M € 814M Mondi has production operations in around
31 countries and about 31,000 employees.
EBITDA
12.3% 12.8%
Return
Mondi is a dual-listed company at the
Capital London Stock Exchange (LSE) and
€ 4,314M € 4,367M
Employed Johannesburg Stock Exchange (JSE).
ROCE2 7.6% 9.5%
The corporate headquarters are located in
Johannesburg.

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).

February 23, 2010 Europe & International Presentation
Page 2

Business Structure Mondi Group

Merebank

Europe & Richards Bay
South Africa
International (E&I)
Forests

Uncoated Fine Paper Corrugated Bags & Specialities

Uncoated Fine Paper Containerboard Kraft Paper

Corrugated Packaging Bag Converting 50%
Aylesford
Newsprint

Coatings 100% Europapier

Mondi Shanduka
50%
Consumer Flexibles Newsprint

70% Mondi Packaging
South Africa

Page 3

Around 80 Production Sites in 30 countries

Uncoated Fine Paper
Uncoated fine paper mill
Newsprint mill

Corrugated
Containerboard
Recycled containerboard mill
Virgin containerboard mill
Corrugated Packaging
Corrugated box plant

Bags & Specialities
Kraft Paper
Kraft paper mill
Bag Converting
Bag converting plant
Coatings
Release liner plant
Extrusion coating plant
Consumer Flexibles
Specialty plastic fil
S i lt l ti films plant
l t
Converted flexible
packaging plant


The Mondi Diamond

Operational Excellence Sustainable Development
p
● Continuous productivity increases ● Health and safety
● High OEE and machine efficiency ● Protection of environment
● Waste reduction ● Sustainable forestry
● Low working capital ● Social responsibility
● Low overheads

Customer Focus People Development
● Flawless service ● Development and
● Delivery accuracy training of employees
● Market and customer intelligence ● Talent management
● CRM ● Leadership
● Employer brand
Cutting Edge Products
● Building brand awareness
● Incremental product development
● Highest quality and functionality

Page 5

Uncoated Fine Paper Products

Multifunctional Paper Colour Laser Paper
Our office paper meets Color Copy guarantees brilliant colour
all demands of modern copies and perfect print results.
office communication –
Color Copy is the number 1 colour
py
whether for laser, inkjet
laser
laser brand in Europe printing.
or copy applications.

Pre-Print
Pre Print Offset
Our pre-print paper fits the needs of Our offset paper exhibits very good
different printing technologies. surface characteristics to ensure
a perfect print result.
result
Available in all standard formats.
Available in folio & reels in
a wide range of grammages.

December 1, 2009 Europe & International Presentation
PAGE 6

Agenda





Discussion


What about is Supply Chain Management?

Production &
Consumer Catalogue Order Inventory Delivery Supplier
Customer Warehouse Supplier
Management Management Management Management Management Management
Management

Money flow
M fl
e.g. Customer payment, transaction accounting, supplier settlement

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

Physical flow
e.g. Manufacture, store, pick, pack, ship, deliver, return

The Dynamics of a Supply Chain
Order size

End User

Trade Order
Distributor
Distrib tor
Order

Production Order

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

Across
Alliance Synchronised
y
Partners

With
hip

Customers
elationsh

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

Business
Functions Step 2: Collaborate with key
suppliers and customers

Within
Withi
Sc

Step 1: Integrate functions of
Business
the internal supply
Activities chain

Optimised Integrated Collaborative Synchronised

Nature of Relationship

Mondi Uncoated Fine Paper Supply Chain

Sourcing Production Finishing Distribution

Formates

Wood Pulp Paper mill Reels
Merchants,
Distributors,
Finished Reels Customers


Mondi UFP Supply Chain Organization

Supply Chain
Management

Sales & Supply & Demand
Supply Chain Supply Chain
Operations-
O ti Planning -
Pl i
Management Processes
Planning Operative


2003 Supply Chain Analysis

Output
Interviewed key supply
chain personnel t
h i l to Quantitative & Qualitative
Interviews Assessment
understand current Benchmark vs. NAG

issues Channel Strategy & Management
(CS&M)
7,00
6,00
5,00
00

Developed and distributed
Save
Supply Chain Value Assessment
Print
4,00
Supply Chain Capability Assessment Order Fulfillment Operations Strategic Customer Managemen
Company / Division: Current Client 3,00
Supply Chain Process: Strategic Customer Management

supply chain & customer
Sub-process: 1.0 Strategic Customer Service 2,00
Enable Practice
1,00
The locations do not have a Customer service focuses on the Operating locations engage in Strategic account management
strategic perspective on customer
service; customer service
simple administration of accounts
with emphasis on completing order
standard maintenance of customer
accounts and some tailoring of
principles are applied, such as
tailoring service offerings based on 0,00

Surveys surveys to understand
operations are informal with no clear transactions; service is largely services to meet requirements; profitability and criticality of
supporting organizational structure, reactive to service complaints or dedicated service resources are customer segments; key

Non-existent / poor Common Practice Progressive Practice Pioneering Practice

current performance and
Criticality Score (0-9): 9.00 Highly Critical Practice Enabled
Practice Score (0-9): 9.00 Pioneering Operations Planning, Execution
Supply Chain Configuration
Enable Practice Control
C t l
Customer service operations are Customer service processes / Customer service is viewed as a Customer service operations act as

identify gaps
often relegated to secondary status resources are viewed as a necessity critical internal function and link in external collaborative supply
at operating locations; no formal but not part of core operations, and coordinates resolution on service chain for company; data on
training or development processes are often excluded from planning issues; still seen as staff function performance is gathered, used in
are in place to support the service processes, budget development and and not given leadership role with customer financial analysis,

Non-existent / poor Common Practice Progressive Practice Pioneering Practice
Neusiedler AG
Supply Chain Planning Benchmark

Conducted to quantify as- Business Case &
Data
D t Recommendations
is performance and major
Analysis gaps Cumulated Net Supply Chain Benefits (€ `000)
Main Initiatives Identified
• Implement Integrated Supply/Demand Planning
70.000 Process & Asset Allocation
60.000
62.991 • Supply Chain Network Optimisation
• VMI with Key Pulp & Packaging Suppliers
50.000
• Roll-out VMI to Key Customers
40.000
43.456
• Mill Direct

Value
V
30.000
30 000
26.879 • Rationalisation of Logistics Providers
20.000
• Warehouse Structure Optmisation
• Product Basket Optimisation

Conducted workshops to
10.000 11.781
7.969

0
2.065 • Pilot VMI with 1-2 Key Customers
1 2 3 4 5 6 • Align Supply Chain Organisation
Year • Shift smaller Customers to Merchants/OPEC

verify data analysis,
• Implement ABC (Activity Based Costing) Tool to
Support Supply Chain Initiatives

Workshop discuss best practices and
• Eliminate Fill Orders with Negative Contribution
• Reduce Production Cycle Times
• Delivery Accuracy Improvement through better
Time Slot Management

identify i
id tif improvement t
• Define & Implement Supply Chain Wide
Performance Measures
• Improve Forecast Accruacy

opportunities

Importance Factors for Customers

Source: EMGE-Survey 2008 – Mill importance factors

Supply Chain related factors

Mondi UFP
Supply Chain Vision

Demand High Flexible, Cost
Driven Performing Responsive Effective

• Accurate forecasts at • Supply Chain • Majority of orders • Integrated
appropriate level used organization and processed and supply/demand
to minimize lead times performance dispatched within 48-72 planning process
and reduce inventory measures aligned to hours to support used and supported
levels optimize Supply Chain alternative sales channels with planning tools to
• Forecasting process performance • 2 3 regional warehouses provide optimum supply
2-3
supported through • Detailed ABC used across Europe to plan to maximize profits
demand planning tool (Activity Based improve customer service • Key suppliers
to improve accuracy Costing) tool levels while minimizing integrated in planning
and reduce manual implemented and used Finished Goods inventory process (e.g. VMI,
effort to support decision • Effective postponement collaborative planning)
• Collaborative making processes strategy enables short
processes with key about product and lead times and reduced
customers used (e.g. customer portfolio stock levels, e.g. 100%
VMI) mother reel strategy
• Alternative sales implemented
channels used

Supply Chain Strategy

Sheeting

Timber Pulp Mill Paper Mill Rewinding
Merchants
/
Roll
Distributor
Di t ib t
Finishing
s/
PUSH PULL Customer
s

Halbfertigfabrikat Fertigware

Sourcing Production Finishing Distribution

Low High Uncertainty
Uncertainty

Benchmarking 2003 – Gap Evaluation

Best-in-Class
2003
KPI (multiple GAP
Performance
companies)
1. Order Lead Time (days)

2. Availability/Order Success
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.

Tactical Approach Strategic Approach

• Supply Chain is a cost center • Supply Chain used to:
– grow revenues
– increase market share
• Focus on operational cost – create competitive advantage
control and reduction
• Target opportunities for new value
added services
• Perceive operating efficiency as • Invest in VERY specific capabilities
excellence -- “efficiency trap”
• Create a distinct business model

• Lean to the point of starvation • Use new capabilities to change the
customer relationship

Supply Chain Management
....need to be considered across the full range of people,
processes and enabling systems

Comprehensive, Flexible,
Strategy End-to-End approach

Cross Functional Teams with
People
Clear A
Cl Accountabilities
t biliti

Process Common Processes

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

Information & Systems
y Integrated Systems

(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 Network Supplier
Transportation
Managed
M d Distribution
Di t ib ti Managed
M d
Consolidation
Inventory Strategy Inventory

SPEED -
Production Product Integrated
Performance
Cycle Time Basket Supply and
Organization
Reduction Optimization Demand
D d
Planning

Paradigm shift from PUSH to PULL

Push Principle – sell what you make! Old Way
W
Supply driven – production focus
Locally optimized machine efficiency

NEW Model Pull Principle – make what you
sell!
Demand driven – customer focus
Group-wide optimized costs
p p

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

Warehouses South Africa Russia Slovakia Israel Austria Austria

Allocation

Planning

Forecasting
Customer A Customer B Customer C Customer X Customer Y / Customer Z /
…
/ Products / Products / Products / Products Products Products

Service Level Agreements

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

System Check System
Forecast
Forecast
Logistics & O de p ocess
og st cs Orderprocess
Key in Customer
demand

Develop final
Control forecast
and finalize
Forecast Master Plan and
Consolidation release it for
Control forecast
execution
and finalize

Weekly Weekly Weekly Weekly
forecast forecast forecast forecast

Supply & Demand
Master Plan
Planning

Inventory
Replenishment

Block Scheduling


Performance Indicators

Semi- Transport.
Transport
finished Costs
Inventory

Costs
C t

Finished
Goods
Inventory
Success of
Sales Mondi
Forecast Production
Accuracy Shipment Scheduling
Accuracy
y Production Adherence
Accuracy
A

Service Delivery
Accuracy Finishing
Accuracyy
Success Constrained
Factors Fill Rate
Un-
Finishing
constrained
Scheduling
KPI’s Fill Rate
Adherence

SC-Improvement process

Step I Scheduling Adherence Step II - Delivery Accuracy ex Mill

Fineplanning PM and Paper availability
FL Material availability
Sequencing Stabile aggregates
Frozen periode Capacity planning

Mill Supply Chain
Processes:
I tA h
Improvement Approach

Safety stock Finishing cycle times
g y
Dispo stock PM cycle times
Replenishment cycles Pot closure times

Step IV – Reduce Inventories Step III – Reduce Cycle Times

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

1. Supplier
Collaboration
2. L i ti
2 Logistics
Collaboration

Stores
Suppliers
S li Raw M t i l
R Materials Material Product Retail
Converters Inbound Manufactur Outbound
Supply Distribution
ers
Consumers

3PL Direct
Di t
Transport
3pl Transport
Transport Exchanges
Exchanges
Services
Services
3. Customer
Collaboration
Links with other B2B exchanges, e.g.:
g g
• Transport exchanges
4.
Exchange
Collaboration
5. Industry
y
Standardisation
Leverage


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

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

Reduced working Reduced
capital Net Benefit
inventory Customer WIN
Overall -
Reduced internal Transportation Net Benefit WIN
transportation
Admin VMI
Reduced process costs
Increased Net Benefit
Improved customer service revenue
Mondi

Mondi
(quantity)
Production
M

Improved production planning
I d d ti l i
Reduced working capital Reduced Implementation VMI implementation costs
inventory Admin
Admin Replenishment planning effort
Automated order management Admin Transportation Increased transportation effort
Benefits
B fit Costs
C t

VMI – Example out of our Web-based tool

Positive
downward
s trend

Agenda





Discussion


Project Structure
2003 (Level 1) 2004 (Level 2) 2005 (Level 3) 2006 (Level 4)

Q3 - Q4 Q1 - Q4 Q1 - Q4 Q1 Q2 Q3 Q4
S
Pilot VMI with Key
Roll out VMI to Key U
Customers
VMI 1 Customers (Design &
Build)
and Pilot / Implement with P
Key Suppliers
Strategic Issu Select
P
Transportation
Consolidation 2 Sourcing e Providers and L
Approach RFP Implement

Network Dist. Rationalize Develop Supply Chain Implement Supply Chain
Y
Strategy 2 external Network Distribution Distribution Network Strategy Delayed due to later
warehouse Strategy start
Reduce
s Improve change
I h C
Production Cycle 3 over
Time Optimization
production
cycle times
times and H
processes
Detaile
Product
A
Complexity d cost Complexity Management
Management
4 analysi
basket
optimization
I
s
N
Implementation of real time costing for product basket to optimize contr.
changed into sales strategy

Detail SC Implement Balanced Scorecard &
L
Performance
6 Scorecard Align SC Organization E
Organization
Integrated
Planning
Solution
A
Process Demand & Supply Chain Process & Planning Tool Implementation*
Demand & Supply 7 Design
Selection D
Program
g E
Program
Management
Set-up
Ongoing Resource Planning & Program Management R
Assumptions: No further mill integrations requiring IP resources

Development of selected Indicators

Delivery Accuracy Inventory
Inventorydays Mondi / CEPI

CEPI Mondi UFP
35

30

25

20

15

10

5

0

200401
200403
3
200405
5
200407
7
200409
9
200411
200501
200503
3
200505
5
200507
7
200509
9
200511
200601
200603
3
200605
5
200607
7
200609
9
200611
200701
200703
3
200705
5
200707
7
200709
9
200711
200801
200803
3
200805
5
200807
7
200809
9
200811
Leadtimes Cost Improvements 2003-2008
Total Improvements SC-Program 2003-2008

60000

50000
48.568

40000

TS EURO
O
30000
28.768

20000
18.526

12.943
10000

4.616

848
0
1 2 3 4 5 6
Years


Supply Chain Management Awards

Mondi s
Mondi’s remarkable value creation
On October 28th, 2008 Mondi Uncoated Fine Paper was awarded
in London with the esteemed European Supply Chain Excellence
Award,
Award 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 the
Supply Chain Management Award for the best value chain 2008 from
PRTM in cooperation with LOGISTIK HEUTE and the Supply
Management Institute (
g (SMI) of the European Business School in
) p
Wiesbaden.


The best Supply Chain companies are
getting better…
better

Lead of Best in Class Companies
Best-in-Class
over Average Performing Companies

35
30+
30
25+ 25+
25

20+
20
Performance
Advantage for
15
Each Area (%)
E hA

10

5

0
Supply Chain Inventory Fulfillment Fill Rates
Cost* Levels Cycle Time
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

klaus.venus@mondigroup.com


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 from
knowledge, plans, projections,
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 rates
rates.

Mondi does not

a) assume any warranty or liability as to accuracy or completeness of the information provided herein
b) 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.


Chemical Supply Chain

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