Lean Fulfillment Streams: Responsive Supply Chain Solutions to Optimize Order Fulfillment at the Lowest Total Costs

What is Lean? How Genysis Brand Solutions has applied lean principles. What these capabilities mean for our Clients.

What is Lean? Taiichi OhnoShigeo Shingo

Musings from a Lean Thinker

Lean vs Mass Thinking Lean Order FulfillmentMass Order Fulfillment Build to orderMake & sell Economies of speedEconomies of scale EffectiveEfficient Pull (from customer)Push (to customer) Small & frequent ordersLarge & infrequent Quick changeoverChangeover unimportant Production cellsFunctional silos Right-sized machinesBig, fast machines Fast to respondSlow to change AdaptiveRidged, inflexible

Primary Objectives Improve Product Availability (right products, right place, when needed) Reduce Total Cost of Fulfillment

Pop Quiz Which waste is the most egregious? Toyota’s 7 Wastes Motion Overproduction TransportationOverprocessing Defects Inventory Waiting

Overproduction Answer

The Problem with Overproduction No Cash New Product Introduction? Where is My Stuff! Insurance Wrong Location Cost of Capitol Scrap Obsolescence Shrinkage Transactions

Inventory & WIP Crowds the Voice of the Customer Why? I need 300 units of A and 100 units of B! A B C Genysis ?

Because People & Equipment are Busy Working on the Wrong Things I need 300 units of A and 100 units of B! A B C Genysis

1 Min.2 Min.3 Min. Good Flow - A Poor Flow - B AB C 1 Min. 10 Min. 22 Min. STOP! Error at Step A ABC Catch at Step C STOP! The Method we Choose Makes a Difference

Large & infrequent orders vs small & frequent orders

Lean has Enabled New Capabilities for Genysis Brand Solutions

2014 Key Objectives Best-in-class quality Industry-best lead times (PO to Delivery) 123 Mission Statement: Deliver best in class nutritional brand solutions in days, not weeks Fastest product launches

How to Achieve Short Fulfillment Lead Times? 1 Re-Organize By Value Stream 2 Decouple Procurement & Production 3 4 Week Lead Time (PO to Delivery – Pull System) 4 Increase Fulfillment System Velocity (Reduce Working Capitol) Small & Frequent Orders vs. Large & Infrequent Orders

Flour is More Valuable Than Cake – Taiichi Ohno

Case Studies Since August 2014, delivered 1.7 million bottles 100% on time in less than 3 weeks Shipped 46,185 units 100% on time with an average lead time 3.98 Weeks Launched 214,000 units 100% on time with an average lead time of 6.4 weeks

What These Capabilities Mean for Our Clients

Why Brands Care As the client, why do you care about reduced lead times and how does this model translate? 100% on-time, in-spec delivery Reduced finished good inventory Reduced GOGS EXPIRED Reduced risk of obsolescence Order flexibilityShorter lead-times 50% reduction

Product Fulfillment Partnering o Supply agreement o Stocking agreement o Standard lead times are 8 weeks o Sub 8 week lead times may require stocking agreements o Genysis Fast Track delivers in industry leading sub-4 weeks o Performed by Supply Chain Analysts o Determines threats to ship dates o Develops detailed action plan

Genysis Fast Track Program Our Fast Track program has been engineered to meet our client’s most important needs AFTER Genysis Fast Track: Sub 4 Weeks PO Placement ProductionReady to Ship BEFORE Genysis Fast Track: 8-10 Weeks 5-7 Weeks2-4 Weeks Stocking Program PO Placement Ready to Ship 2-4 Weeks Procurement Period (Removes procurement Period) 8-10 Weeks 2-4 Weeks Production

Genysis Fast Track ROI As the client, why do you care about reduced lead times? How does this program translate into a real benefits? COST% OF ADOH Cost of capital (as % of capital ADOH per annum)5% Warehouse costs3% Inventory damages3% Insurance on inventory4% Inventory obsolescence (write offs)4% Inventory shrinkage3% TOTAL CARRYING COSTS22%

Genysis Fast Track ROI Reducing inventory directly affects the total cost of fulfillment 1 FG Unit = $10 Average Inventory Units = 50,000 Average Inventory Carrying Cost = 20% o Consumption = 4,000 units per week o Ave. 8 week lead time = 32,000 Units on hand o 4 week buffer stock = 16,000 units on hand Carrying Cost: $500,000 X.20 = $100,000 EXAMPLE

Doors Open to Clients We want our clients to always have the insight they need into our production facility. We therefore invite clients in for audits and send out internal audit summaries