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Romania Srl

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Title: Romania Srl


1
Analysis Presentation Summary for Rand Sherif
Romania Srl
2
  • The goal of Project Together we win is to
    improve the way of doing business in Nestlé
    Romania with the following key objectives
  • Identify and analyse current Commercial Processes
    and recommend improvements
  • Analyse the current Distributor Management,
    identify the challenges and recommend solutions
    to improve coverage and necessary route to market
    by channel
  • Analyse Product Portfolio and identify potential
    needs to improve and adapt to the
    consumer/shopper and channel needs
  • Analyse Trade Terms and Conditions, establishing
    transparency about the customer and channel
    contribution and recommendation of a Commercial
    Policy adapted to the customers and channel needs
  • Review and optimise the Sales Area within Nestlé
    Romania, including reviewing the current way of
    doing business

3
Considering the tight timelines we did not cover
the following areas
  • Analysis of Foodservice
  • Analysis of Nestlé Purina Petcare (if not linked
    with route to market of Nestlé Romania)
  • Analysis of the activity of Medical Delegates

4
The tight timelines were only feasible because of
the excellent support from Interbrands and within
Nestlé. We would like to especially thank the
following people for their valuable support
Interbrands
  • Rand Sherif - General Manager of Interbrands
  • Anca Hîrtopeanu - Country Manager of Interbrands
  • Florentina Dobre - Budget and Reporting Manager
  • Mihaela Iancu - Budget Analyst
  • Gerald Gallagher - Logistic Manager
  • Andreea Calin
  • Dana Barbu
  • Ioana Pielescu

Nestlé Romania
  • Cristian Busu - National Sales Field Force
    Manager
  • Antonio Matei - Key Account Manager
  • Celina Mercone - Budget and Controlling Manager
  • Calin Cristescu - IT specialist
  • Stefan Alexandrescu
  • Alina Moldovan
  • Gabriela Benicky
  • Mariana Ardelean
  • Petre Manda
  • Cristina Besciu

5
We are now at the end of Phase 1 after the first
2 1/2 weeks of the project...
6
For the analysis phase we have allocated our
resources into 5 sub teams for the last 12 days
Sales Management
  • Analysis of the current Sales Force, including
    Field Sales and KA Management
  • Analysis of Sales Rep. territory management
  • Customer Management
  • Interactions and coordination between Sales and
    other departments
  • Roles and Responsibilities

Jérôme Puget Calin Pop Jacek Slota Jaroslav Kollar
7
The purpose of today is to share our findings
with you
Analysis Objective Build a fact-based picture
of the current situation. Understand the key
opportunities for improvement. Outcome Common
understanding on what we will focus on in the
next phase.
Is NOT yet to provide solutions to the problems
/ opportunities identified. Is NOT yet intended
to push decisions related to the Nestlé Romania
operation
It will often be the case that you or the
organisation already know about these findings -
Our aim is more to build credibility than to
reveal the unknown
8
We have used a variety of tools to enable a our
analysis...
People
Process
Information
9
  • which has been thorough and comprehensive

No. Completed
Source Project Together we win
10
Distributor Management
Romania Srl
11
Some key findings for the Distribution Management
Area
  • Inefficient DC set up
  • No essential KPIs in place like e.g. customer
    service, out of stock etc.
  • 100 of our sales go through Interbrands with a
    fix gross margin of 20 and no financial risks
    for IBR
  • Lack of clear distribution strategy and
    responsibilities / procedures
  • Branches are not analysed as independent
    distribution set ups
  • Insufficient coverage of impulse products,
    especially for foodstores and kiosks
  • No activity based cost allocation from
    Interbrands to Nestlé

Source Project Together we win interviews and
analysis
12
We are paying a flat 20 on our sales to our
national distributor, however we have not come
across any KPIs suggesting a break-up of the
commission by activity / expenses type
Source IBR PL for Nestle Division (Jan-Feb03
YTD)
13
Our first step was to analyse the coverage of the
Nestlé products
Gap Analysis Vs Nielsen Universe
Branch Profitability Analysis
DC Management
Branch logistics set-up operations
14
For our distribution drivers like Nescafé sticks,
Seasoning and Wafers, the food stores and kiosks
are very important for our coverage - based on AC
Nielsen data however, we are only directly
covering 51 of the overall Food General
stores.
Nestle coverage Vs ACN universe
69,505
COUNTRY
24,929
36 Nestle direct coverage Vs. ACN universe
17,220
VALAHIA
5,859
13,646
TRANSILVANIA
6,498
17,920
MOLDOVA
5,958
11,868
On Nestle and BAT estimation only 1,000 from
6,300 Petrol Stations can carry Food products
BUCURESTI
3,052
8,851
ACN
BANAT
3,562
CRISANA
NESTLE
0
20,000
40,000
60,000
80,000
Source ACN IBR
15
  • Across 2/3rd of Romania, less than 50 of the
    outlets are DIRECTLY covered by Nestle -
    especially low in the Eastern and South Eastern
    region with the highest population density

Nestle direct coverage Vs. AC Nielsen Universe
80-100
50-70
40-50
30-40
20-30
Source ACN IBR
16
Our second step was to analyse the branch
profitability
Gap Analysis Vs Nielsen Universe
Branch Profitability Analysis
DC Management
Branch logistics set-up operations
17
IBR provided us with Branch specific DIRECT costs
(without their Head Office and other indirect
expenses) to analyze infrastructure / break even.
  • IBR forwarded us information by Branch for the
    Jan-Sep02 period.
  • Analysis of this periods data reveals most IBR
    Branches did not reach the break-even as sales
    efficiency ratio was not achieved.
  • Manpower / Fleet accounted for nearly 80 of the
    total direct branch operating expenses.

Source IBR Branch info. for Jan-Sep02
18
Nearly 365 non-sales staff at IBR Branches in
2002 existed and were allocated to our PL for
the Mass and Petcare division without having a
clear understanding on how many were really
required to do the job.
  • Nestle operated through a dedicated set-up
    through 30 IBR Branches.

In Full Time Equivalents

Source IBR Branch info for Sep02 for Mass and
NPP
19
Payroll vans accounted for nearly 80 of the
Total Expenses.
Expenses as of Net Sales
Breakdown of Total Expenses
2
7
Jan-Sep02
0
1
12
2
0
2
47
5
0
8
29
0
5
10
1
Payroll
Travel
Vans
Dep. Assets
Logistics
Other Expenses
Prof. Exp.
Source IBR Branch info. for Jan-Sep02
20
Steps were initiated in July 2002 to improve the
profitability of IBR without specific emphasis on
either ...
  • The long term coverage perspective
  • Impact on Nestle distribution coverage and sales
    (coverage sank drastically after change)

SHARED coverage division formed to jointly
distribute products with PG, Gillette, Kotanyi,
Flit with a view to...
  • Improve profitability of the IBR Branches.
  • Primarily service the low end of the trade.

21
The set-up definitely improved profitability of
IBR but it hasnt brought us closer to achieving
the coverage objectives that will provide us an
edge in the market
Pre - July 02 NESTLE Division
30 IBR Branches
Mainly personnel costs / van expenses have
resulted in higher profitability.
28 IBR Branches
26 IBR Branches
SHARED Division
MASS Division
Shared along with other companies Smaller
retailers.
Nestle exclusive Bigger retailers including Key
Accounts
Source IBR Branch Head count info. for
Jan-Sep02/Jan-Feb03
22
  • Creation of the SHARED division has helped most
    branches reach the break-even (considering
    impact of DIRECT expenses only)
  • 4 Branches closed (Buzau, R. Valcea, Slobozia,
    Tulcea).

Jan-Feb 03 Break-even analysis across Branches
2790
3000
2411
2500
2000
1500
Avg. Sales/Month (Jan-Sep02)
1000
414
291
500
0
Sales
Gross
Margin
Net
Net Sales
Expenses
Total
Source IBR Branch PL Jan-Feb03
Net Margin Gross Sales X 20 - (Gross-Net) Sales
23
The third step was to analyse the current DC
approach
Gap Analysis Vs Nielsen Universe
Branch Profitability Analysis
DC Management
Branch logistics set-up operations
24
Route to market - the long and winding road
Bucharest
IBR DC
Welz
InterCompany
22,500 outlets
- gt 2000 pall spots
- 1850 pall spots
- 23 factories, in 13 countries
50 trucks /mth
26 branches
Timisoara
80 trucks /mth
- 5200 pall spots
Nestle ownership
IBR ownership
Source Supply Chain
25
IBR DC costs are high and not transparent as we
only receive a total amount without tracking the
DC costs separately
Based on OP 2003 volumes
IBR DC
TOTAL
eur/month
pall
eur/pal
Total IBR
STORAGE
12,500


37,731


Petfood
750


7.1
5,357


19,470


Nestlé
1,000


7.1
7,143


18,261


HANDLING
3,500


16,544


Petfood
1,255


1.3


1,646


7,876


Nestlé
1,414


1.3


1,854


8,668


TOTAL DC
16,000


54,274

  • IBR DC - relatively fixed costs, same
    infrastructure could cope with a higher volume
  • IBR DC cost - not tracked separately

Source Supply Chain and IBR
26
And finally we looked at the branch management
Gap Analysis Vs Nielsen Universe
Branch Profitability Analysis
DC Management
Branch logistics set-up operations
27
Branch Operations Supervisor, shared among
principals, is the key logistic person in a
branch...
  • Key responsibilities
  • supervise daily activities (warehouse, office)
  • reporting to IBR head office
  • control banking transactions
  • safety security
  • implement procedures coming from IBR head office
  • recruitment (warehouse staff), performance
    evaluation
  • main branch contact for Principals
  • maintenance, office administration

Limited decision making, mainly supervisory
administrative tasks
Source job description branch visits
28
No overall responsibility for branches management
Distributor Operations Team - interface between
Nestlé and IBR
Source job description branch visits
29
High number of skus, and warehouses layout
leads to relatively high space needs
Needs 1 avg. mth of sales, to cope with peaks,
except Buch and Timi (3 weeks)
Source IBR PL 2002 branch data
30
Some of the inefficiencies are generated by us
  • Almost 600,000 stickers to be put monthly
    (promotions not included), in order to comply
    with legal regulations, workload equivalent of 10
    full time employees
  • All skus stocked in all branches (), while on
    some (infant, imported confectionery) sales can
    be below 10 units/month!

() exception infant specialties, only in
branches with Pharma division
Source IBR
31
Lack of measurement and control at branch level
  • No customer service measurement (to start in
    April)
  • No tracking of missed orders, just a statistical
    calculation of out of stock
  • No performance measurement
  • FIFO not consistently applied
  • Branch performance depends on Branch Operations
    Supervisor capability rather than on system
    efficiency
  • Lack of consistent work processes and central
    coordination
  • Poor quality of co-packing activities
  • Limited training for Operations staff
  • Unclear cost allocation (ex. wrapping machines)

Source IBR, Field visits
32
Sales Force Analysis
Romania Srl
33
Key findings from Sales team
  • Territory Management is not adapted to customers
    type and potential
  • High amount of administration time for Sales
    Representatives
  • No consistent incentive scheme
  • Substantial overlap of customers between Shared
    and Mass division
  • No Nestlé orders for 1/3 of all customers visited
    by Shared division

Source Project Together we win interviews and
analysis
34
We conducted a Sales Force Activity Analysis
across our 3 Divisions
Sales Force Activity Analysis
Territory Management
35
Our study covered 1304 calls performed over 2
weeks
Sales Force Activity Analysis (SFAA) is a
systematic observation and analysis of the daily
activity of our sales people.
S C O P E OF THE STUDY
Divisions
17 Branches in 7 Regions
Sample Size
  • 63 observations - representing 31 of the total
    Field Sales Reps
  • 1304 outlets visited
  • Mass Division
  • Shared Division
  • Pharma Division

Brasov, Ploiesti, Pitesti, Alexandria, Slobozia,
Suceava, Targu Mures, Bacau, Constanta, Tg. Jiu,
Bucuresti, Iasi, Timisoara, Oradea, Craiova,
Cluj, Arad
Functions
  • 7 KAE
  • 23 Mass PSR
  • 4 Mass VSR
  • 24 Shared VSR
  • 5 Pharma VSR

36
The number of visits per day varied across the
types of Sales Reps
Number of Visits / Day
KAE
10
MPSR
26
MVSR
22
SVSR
22
PVSR
16
Source SFAA
37
Overall, 83 of the Sales Reps did not visit the
same amount of outlets as they planned at the
beginning of the day
In 75 of observation, at least 1 customer was
visited twice, to collect money
Measuring only successful calls, we do not have
a consistent tracking of this
of Reps who did not follow the of visits
planned for the day
67
KAE
82
MPSR
MVSR
67
92
SVSR
80
PVSR
0
20
40
60
80
100
38
The Hand Held Computer was used in 81 of the
calls
The hand Held computer is used only to take
orders, which explains the lower usage by KAE
100
91
90
89
90
84
81
81
80
A decision maker is met in 85 of the calls
80
73
73
70
60
50
37
40
30
24
22
21
19
19
20
10
0
KAE
MPSR
MVSR
SVSR
PVSR
Use customer file
Use a Hand Held Computer
Talk to decision maker
Source SFAA
39
Our 7 day credit policy generates a high
frequency of visits in all the types of outlets
and limits our potential coverage
6.2 on average
Every store is on the route plan each week
Days since last visit
Days since last visit
10
7.1
9.0
6.9
6.8
6.7
6.7
5.6
5.7
5.7
5.8
5.1
4.8
4.3
4.1
KAE
MPSR
MVSR
PVSR
SVSR
HM SM
Food Store
Mini-market
Wholesalers
CashCarry
Petrol Station
General Store
Subdistributors
Phamacy Hospitals
Kiosks Open Market
Source SFAA
40
From our snapshot, Sales Reps on average spend 5
hours in-store per day
Total Time Allocation
14
18
26
100
23
34
  • Breaks
  • 24 m

39
31
34
55
43
90
Private Travel 40 m
80
198
241
271
245
230
70
Working Travel 4h
60
126
127
129
138
50
Admin Time 2h14 m
141
40
30
Reps spend on average 41 of their time in store
371
304
In store Time 5h12 m
353
287
20
267
10
0
Source SFAA
KAE
MPSR
MVSR
PVSR
SVSR
41
Invoices Payment, briefings and truck loading
(for VSRs) are the main components of the
administrative time
of total Administrative time
Source SFAA
42
The MPSRs show the most balanced time allocation
between order taking and merchandising / display
activities
100
of Other Tasks
90
25
of Preparing delivery
delivering Total
80
of Checking stock storage /
2
Warehouse Total
70
Merchandising display activities 24
10
of Checking stock shelves
Total
60
6
of Managing shelf-displays
6
Total
50
9 on collecting money, although this activity is
in theory handled by delivery drivers
9
of Managing shelf-NON
displays Total
40
of Money collection Total
30
of Order taking Total
33
20
of Hard selling Total
10
8
0
Source SFAA
MPSR
43
SVSR spend more time on order taking money
collection than MVSR, at the expense of display
SVSR spend no time on products visibility
100
Handling orders for several principles
12
12
21
90
5
5
2
of Other Tasks
5
3
80
Stronger focus on money collection in the
Shared Division
3
1
6
of Managing shelf-NON
9
13
70
5
displays Total
3
6
of Managing shelf-displays
60
Total
12
of Checking stock storage /
24
50
19
Warehouse Total
of Checking stock shelves
24
Total
40
of Hard selling Total
30
of Money collection Total
40
20
40
of Order taking Total
29
10
of Preparing delivery
delivering Total
0
SVSR
PVSR
MVSR
Source SFAA
44
In 32 of their calls, SVSR spend 0 time on
Nestlé products
of calls with 0 time spent on ...
Even higher for PVSR
51
Better result for PG
44
38
32
SVSR
25
20
PVSR
0 Time Nestlé
0 Time PG
0 Time Gillette
Source SFAA
45
Time spent on Nestlé products by Shared Reps is
not proportional to our share of the fixed costs
Probably increased by the presence of a Nestlé
observer
Shared VSR dedicate an average of 5 minutes per
call to Nestlé
The time spent on Nestlé is proportionally higher
than our share of fixed costs (24.2)
4 min. for PVSR
Waiting Pleasantries
In pharma, we pay 30.4 of the fixed costs
Other
Kotany
Gillette
Nestlé
PG
Source SFAA / IBR data 2003
46
The Nestlé success rate of calls is low across
Mass and Shared division
Successful calls per principle
For Nestlé, success rate is 23 lower with SVSR
vs. MVSR or MPSR
SVSR 70 in total
SVSR 71.5 in total
70
63
63
56
56
53
48
Nestlé
PG
Gillette
27
MPSR
MVSR
SVSR
PVSR
Source SFAA
47
Shared VSRs sell on average 2.3 Nestlé SKUs per
call
Average Number of SKUs Sold Per Call
7.8
7
MVSR sell on average 2.8 more Nestlé SKUs than
SVSR per call...
6.5
6.4
but the same average of SKUs for PG
2.3
2
2
1
PVSR
MVSR
MPSR
SVSR
Nesté
PG
Gillette
Taking into account all visits, with or without
order
Source SFAA
48
Orders generated by Shared Sales reps include a
limited number of SKUs
  • The shared division SVSRs
  • have made their own ranking
  • In top 5 SKUs
  • 68 indicated bulk wafers
  • 11 indicated Nescafé Sachet

Although the outlets covered are able to hold a
wider portfolio for PG
26.3
Nestlé
PG
12.2
Gillette
11.3
10.4
10.1
Average Nestlé 9.3 SKUs
4.7
3.8
3.7
3.6
KAE
MPSR
MVSR
SVSR
PVSR
49
We have also analysed our territory management
approach
Sales Force Activity Analysis
Territory Management
50
Average turnover by salesman type is unbalanced
due to the customers size on their portfolio
Source IBR Database
51
We have a major coverage overlap between the Mass
and Shared divisions
The exact number is not yet available
30 of Mass customers universe 36 of Shared
customers universe
  • Approximately 3,000 customers () are visited by
    both Mass and Shared divisions
  • Pharma division is not overlapping with others
    due to their specialized customers

() In coming weeks, a database alignment will be
done, for automatisation purposes. Manual
analyses will be done in the meantime, at the
branch level.
Source IBR Database
52
VSRs PSRs have the same theoretical base for
territory coverage split visit frequency
  • Territory coverage takes into consideration
    driving time (all PSR, VSR have areas in and out
    of the cities)
  • Territory coverage is built on a weekly coverage
    base for VSRs PSRs, due to some constraints
  • commercial policy 7 day credit
  • low level of available cash/out of stocks
  • easy to measure/check
  • initiatives execution (i.e. new product launch,
    price increases)

Visit frequency is not linked to customer
potential and order frequency
Source Sales management
53
We have no formal tracking of the number of
actual visits made by our sales reps for VSR and
PSR
  • We only measure successful calls in our system
  • At branch level, ASS check which customers have
    been visited on a daily basis
  • If a customer does not order, we have no way to
    know if he has been visited or not, if he has no
    potential or a specific reason
  • We do not have a consistent use of the customers
    history

Source Sales management
54
Only 50 of the customers of Mass division were
invoiced in each of the 3 months of Q1
All are visited on weekly basis
Common customers represents 83 out of the total
turnover of Mass Division
  • 3000 customers were customers invoiced only
    once per Q1
  • 3000 customers were invoiced in 2 different
    months of Q1

Source IBR Database
55
In Shared division only 34 of the customers are
working on a monthly basis with us
Lowest level of stability in coverage is coming
from the smallest customers. Most constant ones
are B customers.
Common customers accounts for 66 of the sales
of the divisions Nestle turnover
Source IBR Database
56
Trade Investment
Romania Srl
57
Some key findings for the Trade Investment Area
  • Very strict and transparent commercial policy not
    adapted to channel needs
  • Shift from performance to non-performance caused
    by International Key Accounts
  • No activity based allocation of cost to serve
    (selling and distribution expenses)

Source Project Together we win interviews and
analysis
58
We did a comprehensive review of the drivers
behind current performance and transparency
across Cost to Serve
Groundwork
  • Establishment groundwork
  • Cost to Serve

Cost to Serve Analysis
  • General View of all channels

Commercial Policy Analysis
  • Nestlé and Competitors Commercial Policy Analysis
  • Bad goods / Delayed Payments

59
  • We are covering a significant part of the
    business split in the channels as below

GPS/CCS
Customers - CCS
1,1
Carrefour
The information for the CCS is collected from
direct and indirect sources (through IBR)
1,2
Mega
in of GPS
2,5
Billa
2,6
12 Customers
0,5
26 Customers
Hyper and Super
5 Customers
0,02
Food and G. Stores
0,5
18 Customers
Petrol Station
Indirect (IBR)
Nestlé
2.4
Kioks and OM
Selgros
14
CC
Metro
Wholesalers
0,1
RomGros
Subdistributors
2,3
4 Customers
Pharma
1
3 Customers
0.3
9 Customers
Source Market / Not included Pet Food,
FoodServices and others / Kiosks and Open Markets
included Retail Division - 2002
29
Sales Covered by CCS
60
  • The channels that we are covering are split as
    below...

2002 - in GPS
Source Market / Not included Pet Food and
FoodService/ Kiosks and Open Markets include
Retail Division - 2002
61
  • It is very hard to get the numbers because they
    come from different sources

The information of IBR is not activity based
costing but on reliable estimations and checked
by our project team that utilised some tools
like SFAA, Time allocation, Interviews ...
Nestlé
IBR
Customer
Consumer
Source Market
62
  • The CCS data was collected from 8 sources (not
    only Nestlé)

Source Analysis of Trade Investment Team
63
  • The TTS and Cost to Serve not goes only from IBR
    to the customer but also from Nestlé

6.7 not directly attributable
IBR (100 Sales)
Nestlé
5.2 TTS
20 Gross Margin of the Nestlé Sales
Customer
8.1 CTS
Nestlé X TTS
Nestlé X CTS
Source Interview/Finance/IBR/Trade Investment
Team Analysis/All Nestlé Business Included
64
  • Interviews and workshop were conducted to clarify
    TTS in the CCS

The workshop brings transparency, shifting some
figures from Performance to Non-Performance
Through the contract analysis and Workshop we
defined the Performance and Non-Performance
Source Workshop with National Sales Manager and
1 Key Account
65
Cost to serve was difficult to analyse as there
is no activity based costing in place
Groundwork
  • Establishment groundwork
  • Cost to Serve

Cost to Serve Analysis
  • General View of all channels

Commercial Policy Analysis
  • Nestlé and Competitors Commercial Policy Analysis
  • Bad goods / Delayed Payments

66
  • Distribution costs - Allocation the right cost
    per customer and channel is of paramount
    importance to get a clear cost transparency in
    all areas
  • Current situation
  • No Activity Based Costing in place
  • Action taken for Trade Investment
  • We assessed the distribution cost by customer
    through an excel database based on the
    information by IBR.
  • Impact on Trade Investment
  • Decisions should not be based on numbers below
    Net Contribution

Source Market
67
We (Nestlé and IBR) used some criterias to split
the Distribution Cost as drops and SFAA
We access the IBR PL and split the distribution
cost according to the some key parameters. Number
of drops and time spend in each channel.
Number of drops - We took the number of invoices
by customers by day and considered just it as one
drop when there were more than one invoice (to
eliminate the coffee-double invoicing
impact). Time Spend - We collected from time
spend by channel through the SFFA and applied it
to the Distribution Cost
Time spend with the customer/channel
Managing damage/good returns
Source Trade Investment Team/SFAA
68
  • Selling expenses - we tried to identify the real
    selling expenses by customer using a template we
    did for Nestlé Romania and the SFAA
  • Current situation - No Activity Based Costing
  • Action taken - Template for KAM Sales
    Administrative time allocation (69
    people)

- SFAA to measure the time the Field Sales Force
spend with the channels
  • Impact on IC3 - The selling expenses in the
    CCS are better allocated than before but
    still not 100 accurate!

Source Time Allocation/SFAA/Market
69
There is great variance in Cost to Serve between
the Channels
Groundwork
  • Establishment groundwork
  • Cost to Serve

Cost to Serve Analysis
  • General View of all channels

Commercial Policy Analysis
  • Nestlé and Competitors Commercial Policy Analysis
  • Bad goods / Delayed Payments

70
Based on IBR numbers we calculated the directly
attributable costs per channel
Total TTS CTS
Total Trade Spend IBR
Cost to Serve - IBR
Hyper and Supermaket
10
Cash and Carry
9
Wholesalers
9
Food and General Stores
20
Pharma
8
Subdistributors
13
Petrol Station
17
Kiosks/Shared (Nov-Feb)
16
Total
13
Source Market CCS 2002 and IBR numbers -
(Kiosks - Nov 2002 - Feb 2003)
71
The size and the payment has a strong impact in
the results
Total Trade Spend IBR
Cost to Serve - IBR
Billa
Mega Image
Carrefour
Gimrom
La Fourmi
Nic SM
Univers all
Artima
Interex
Intermacedoria
Trei G
Naturvita
Source Market CCS 2002 and IBR numbers
72
Due to the size RomGros has a bigger Cost to
Serve
Total Trade Spend IBR
Cost to Serve - IBR
Metro
RomGros
Selgros
Source Market CCS 2002 and IBR numbers
73
There were a big shift in the Cost to Service due
to the shift in to the Shared Division
of GPS
Nov-Feb
2002
Shared
Mass
GPS
100
100
Bad goods
0.02
0.06
Distribution costs
7.7
12.1
Selling Expenses
6.1
16.1
Source Customer contracts and CCS by Trade
Investment Team - 2002
74
We also analysed the commercial policy of our
major competitors
Groundwork
  • Establishment groundwork
  • Cost to Serve

Cost to Serve Analysis
  • General View of all channels

Commercial Policy Analysis
  • Nestlé and Competitors Commercial Policy Analysis
  • Bad goods / Delayed Payments

75
Some competitors have different behavior in the
Trade Terms area
  • Transparent Terms - Most of the suppliers do not
    show the trade terms on the invoice (Kraft,
    Unilever, Elite)
  • Cash Discount - is not uniform in the market
    (Elite - 2, Kraft - 1-2, European - 3, Amigo
    - 2)
  • Payment Terms - Some competitors have a better
    trade terms than we have (Elite - 7/14 days,
    Unilever - Up to 30 days for Key Accounts and 14
    days for the Wholesalers, Alka - 14/21 days...)

Source Trade Marketing Department Nestle Romania
76
Part of the analysis were also the delayed
payments and the bad goods
Groundwork
  • Establishment groundwork
  • Cost to Serve

Cost to Serve Analysis
  • General View of all channels

Commercial Policy Analysis
  • Nestlé and Competitors Commercial Policy Analysis
  • Bad goods / Delayed Payments

77
Creating transparency in the Bad Goods can bring
opportunities to deal with this important topic
  • There is no formal tracking of bad goods (we do
    not know how much we pay by channel/customer)
  • There is no clear rules in the Bad Good policy

The process finish with the Bad Goods being
given to the sales people!!
Source Finance and Supply Chain / IBR information
78
The main chunk of delayed payments in 2002 - lies
in Cash and Carry
Days over agreed time limit (due date)
Delay Payments from the customers to IBR
in '000 Euros
31
Hyper Super
75
Mini, Food GS
1,5
Petrol Station
11
Kiosks and Open Mktg
Subdistributor
15
Wholesaler
59
Cash Carry
74
Pharma
8
Average
IBR
- Delay form IBR to Nestlé - Money transit -
2 days
274.5
Source Finance/IBR system//Trade Investment
Team/(Include PetFood)/Interviews
79
The settlement discounts are transparent although
they hide the non-performance discount
  • Big customers understand and get the 4 discount
  • Immediate - 4 discount
  • 7 days - No discount

Romanian Inflation (2002) 18 Romanian Interest
(2002) 33 Nestlé Discount (0 days) 4
A change in the policy will impact the net
contribution of IBR
  • This policy was made in April 2000 when the
    interest was 50 and the inflation in 2000 was
    40.7

Source Finance, Customer contracts, interviews
80
Moving forward...
Romania Srl
81
We will be involving more members of staff in
Change Management Teams
  • Time commitment from team members
  • meetings twice per week for 2-3hours each
  • selected team member must attend - no substitutes
  • Team members should be open to change
  • Local team leaders take over as soon as possible
    with Project Together we win International
    members mentoring

82
In general CMTs will focus their work on three
things...
Tools
People
Processes
Detailing key templates, meetings to support the
processes ( structures)
Detailing processes, including determining who
does what, when
Detailing structures, skills, roles
responsibilities
The three areas overlap - change management teams
will look at 1, 2 or all 3
83
  • within our suggested 9 key areas of development
    in the recommendations phase

potential impact on IBR
Sales Roles Responsibilities
Sales Force Territory and Route to Market
Management
Branch Grading
Customer Management
Product Portfolio Optimisation
Commercial Policy and Trade Investment
Promotion Planning Evaluation
Business Planning
DC Efficiency
84
Overall timelines will include key involvement
steps and work that continues when the
internationals leave
Implementation
Change Management Teams
85
Thank you for your attention
Romania Srl
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