South African Wine Supply Chain Project

Transcription

1 3rd International Workshop on Food Supply Chain Making Food Supply Chains Efficient, Responsive and Sustainable South African Wine Supply Chain Project Joubert van Eeden 1, Esbeth van Dyk 2, Johan Louw 1 Corneli Jooste 1, Tielman Roos 1, Johan Smit 1 1 Stellenbosch University / 2 CSIR November 2014 Department of Industrial Engineering Faculty of Engineering

2 Agenda Introduction and Background Project participants SCC Project Implementation Process Where to from here? Preliminary performance measurement frameworks 2

3 Agenda Introduction and Background Project participants SCC Project Implementation Process Where to from here? Preliminary performance measurement frameworks 3

4 Copyright Stellenbosch Source: WOSA University

5 Brief history of SA wine industry In 19th century the British occupation of the Cape and their war with France created a market for SA wines. Vines & wine production increased dramatically 1861 trade treaty between Britain & France SA wine exports collapsed. Overproduction, prices dropped 1918 KWV was formed to alleviate situation by controlling sales and removing surplus from market encouraged overproduction and discouraged quality Approx 1950 KWV withdrew from buying grapes, so farmers needed access to cellars cooperative cellars formed, farmers paid from pool 1997 SA wine industry deregulated fragmentation

6 Types of wine cellars Producer cellars: Cooperative cellars work on a communal basis, processing grapes of their farmer members into wine. All the grapes are pooled, so farmers with poor quality grapes benefit most. (50 coop cellars press about 80% of SA total harvest). Corporate cellars a coop cellar that has become a company and may thus make a profit Estates a small farm with own cellar where all the wine must come from the farm; not allowed to buy in grapes or wine Private cellars allowed to buy in (all) grapes

7 Quick stats on SA wine industry (2013) 296 million vines on hectares 1.49 million tons of grapes crushed million litres wine, brandy & juice produce million litres wine (38% red, 62% white) million litres wine exported (compared to 21 million litres in 1992) 9th largest producer & 9th largest exporter (2013) Some 3323 producers and 564 cellars (>300 built in last decade) Contributed R26.2 bn or 10% to SA GDP (2008) Some people employed (2013)

8 Packaged & bulk natural wine export destinations Country Volume (M Litres) % Cumulative % United Kingdom % 21% Germany % 39% Russia 37 7% 47% France % 53% Sweden 33 6% 59% USA % 65% Canada 22 4% 70% The Netherlands 22 4% 74% Denmark 20 4% 78% Italy 15 3% 80% Total (top Source: 10) SAWIS % Grand Total %

9 Worldwide production and export 2013 Country Area under vines - bearing (Wine and table grapes) Wine production (liters) Hectares % of total world surface area Rank Wine Production % of total world production Rank Spain France Italy China USA Argentina Chile Sources: OIV Statistics 2004 & Global Wine Statistical Compendium Australia South Africa

10 Project Overview South African Wine Industry Increased exports since deregulation Numerous strategies and distribution channels Improve performance of the supply chain through the development of a performance measurement framework Follow a SCOR approach as a point of departure 3 year project ( ) 10

11 Project Overview Steering committee VinPro, Winetech, SAWIS, SU, CSIR Guide process & track progress Initial industry segmentation Bulk / Packaged Local / Export Organise wine cellar participation Project aims Gather information from interviews, focus groups, visits to wine cellars, surveys and experimental studies Compile a literature study on a variety of benchmarking methods Develop a performance measurement framework and benchmarks for each identified segment 11

12 Agenda Introduction and Background Project participants SCC Project Implementation Process Where to from here? Preliminary performance measurement frameworks 12

13 Project Team Mr Joubert van Eeden (SU, Industrial Engineering) Project Leader Prof Johan Louw (SU, Logistics Management) Mr Konrad von Leipzig (SU, Industrial Engineering) Dr Esbeth van Dyk (CSIR) Ulrike Kussing (PWC Advisory) Students: 5 x Final year students in Industrial Engineering (workstream 1) 6 x B Com Honours students in Logistics Management (workstream 1) 3 x Masters students in Industrial Engineering (workstream 2) Supporting stakeholders: Winetech (Approved project) Vinpro PWC (Insights Survey 2010, 2012, 2013, 2014) 13

14 Work stream 1 Supply Chain Analysis Method: Analysis of the supply chains of 16 wine cellars. Use method as proposed by the Supply Chain Council. Analysis of the AS IS, performance measurement, Business process analysis and proposal of opportunities for improvement. Resources: Five 4th year Industrial Engineering, six Logistics Management Honours students Part of their research projects. (Supported by study leaders)

15 Work stream 1 Supply Chain Analysis Duration : April to October Outputs: 16 Case studies: one per cellar for cellars own benefit. High level summary information about the opportunities and lessons learned will be reported to the wine industry organisations, and wine interest groups.

16 Work stream 2 Supply Chain Measurement Framework Method: Focus on the priority segments identified at workshop Packaged export / Bulk export / Packaged local / Bulk local Formulating the measurement framework for each of the chosen wine industry segments. Process attempt to: Identify metrics that indicate success in the wine industry segment, Measure a larger population of wine cellars in that segment, and Provide feedback on opportunities to the industry about large scale and/or individual changes possible by the industry or individual cellars.

17 Measurements - Reliability x y z 80% 90% 99% 90 th percentile = 97% 50 th percentile = 90% 70 th percentile = 94% 17

18 Measurements - Reliability x x y z z 18

19 Measurements - Reliability x y z 84% 92% 99% 90 th percentile = 97.5% 50 th percentile = 92% 70 th percentile = 95% 19

20 Measurements - Reliability x y z 20

21 Work stream 2 Supply Chain Measurement Framework Resources: Three Masters students in Industrial Engineering (2014) Each focussing on one of the priority segments of the SA wine industry. Study leaders are part of the project team

22 Work stream 2 Supply Chain Measurement Framework Duration: April 2014 to August 2015 (interim milestones to coincide with the project objectives) Outputs: Three masters theses. Supply chain measurement frameworks for three priority segments of the SA wine industry (or some for alternative focusses). Articles in academic journals and wine industry publications. Conference presentations. Feedback to industry organisations and individual cellars that contributed measurement values to the project team.

23 Liters in sample [Millions] % of industry Current industry partners producer wine cellars committed to process Participants represent the industry well % 32.6% 19.9% Million Liters % of Industry 13.4% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% % 0.0 Bulk Local Bulk Export Packaged Local Packaged Export 0.0% 23

24 Agenda Introduction and Background Project participants Project Implementation Process Where to from here? Preliminary performance measurement frameworks 24

25 The SCOR model an industry open standard SCOR is a supply chain process reference model containing over 200 process elements, 550 metrics, and 500 best practices including risk and environmental management Organized around the five primary management processes of Plan, Source, Make, Deliver and Return Plan Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source Return Return Return Return Return Return Return Return Suppliers Supplier Supplier Your Company Customer Customer s Customer Internal or External Internal or External 25

26 7 Steps of a Benchmarking Program 1. Supply Chain Definition 2. Supply Chain Prioritization 3. Supply Chain Strategy 4. Selecting Metrics 5. Sourcing Data 6. Creating a Balanced SCORcard 7. Performing Benchmark 27

27 Supply Chain Definition: The Matrix We now place the customer list as column headings repeating until finished And then the products list as row headings repeating until finished For each product that flows to a customer, we put an X in the cell Retailers Group 1 On premise Group 2 Bottler Packaged wine Bulk wine Product 1 Product 2 Product 3 Product 4 Customer A Customer Restaurant B Customer Restaurant Walmart Tesco C Customer D chain A chain B X X X X X X 28

28 Four Supply Chains identified Through a process of definition and prioritisation the following supply chains were selected Local Export Bulk wine Bulk - Local Bulk - Export Packaged wine Packaged - Local Packaged - Export 29

29 Preliminary performance measurement framework Packaged Local Supply chain prioritisation 70% Local distribution per channel 60% 50% 40% 30% Distribution by value 20% 10% 0% Retailers On-Trade Other Source: Marketline

30 Preliminary performance measurement frameworks: Packaged Export (measure up to importer) Supply chain prioritisation Country Average yearly growth UK -3.49% Sweden -2.64% Netherlands -2.88% Germany 3.72% China 37.84% Nigeria 20.60% 31

31 Preliminary performance measurement frameworks: Bulk Export (measure up to bottler) Supply chain prioritisation Prioritisation is according to volume exported 37.34% of the total wine produced in South Africa is exported in bulk format 120,000,000 Bulk export L i t r e s ( l ) 100,000,000 80,000,000 60,000,000 40,000,000 20,000, Years UNITED KINGDOM RUSSIA CANADA EUROPE (GERMANY & FRANCE) 32

32 Supply Chain Strategy Identify priority attributes of supply-chains A supply chain strategy is defined by selecting: 1 Superior attribute (90 % percentile) 2 Advantage attributes (70% percentile) 2 Parity attributes (50% percentile) Attributes Reliability On time? Complete? Undamaged? Responsiveness From Customer Request to final acceptance? Agility How long to scale up? How expensive to scale down? Cost Cost of Processes? Cost of Goods Sold? Assets Cash to cash cycle time? Inventory days of supply? 33

33 Supply Chain Strategy in 5 Minutes Build Strategy Model Lifecycle Likely Priority Buy Make ETO MTO MTS Start Middle Commodity EOL 1. Assets 2. Cost 1. Reliability 2. Response 1. Assets 2. Reliability 1. Flexibility 2. Response 1. Cost 2. Reliability 1. Cost 2. Assets 1. Assets 2. Cost 34

34 Supply chain Strategy of Participating Cellars Bulk local Bulk export Packaged local Packaged export SCC Performance Attributes S* A** S* A** S* A** S* A** Reliability Responsiveness Agility Cost Assets Number of wine cellars focusing on the specific segment

35 Internal Customer Selecting Metrics First round of metrics Attribute Metric Unit Reliability Perfect Order Fulfillment % Responsiveness Order Fulfillment Cycle Time Days Agility Upside Supply Chain Flexibility Days Per bottle (packaged) or Storage Cost Cost per litre (bulk) Transportation Cost % of Revenue Assets Inventory Days of Supply Days 36

36 Agenda Introduction and Background Project participants SCC Project Implementation Process Where to from here? Preliminary performance measurement frameworks 37

37 Where to from here? Up to Sep 2015 Finalise supply chain segmentation Dec 2014 Finalise supply chain metrics Mar 2015 Perform measurement round 2 Apr 2015 Analyse Adjustments Perform measurement 3 Jul 2015 Analyse Publication 2015 and 2016 Implement in SA industry Facilitate change where improvements are required International comparisons 38

38 Collaboration opportunities 1. Measure for supply chains from your country to similar markets 2. Perform comparative measures from customers perspective Responsiveness and Reliability To Northern hemisphere markets From Southern hemisphere countries I.e. SA vs Chili vs Argentina vs Australia 39