SOLAR: OPRET POLITIKKER FOR IND- OG UDFASNING

ABC BREAKFAST CLUB

AFHOLDT D. 09. NOVEMBER 2010KUNDECASE: SOLAR

PÅ DENNE ABC BREAKFAST CLUB INVITEREDE VI:

ESBEN JANSEN, CORPORATE SUPPLY CHAIN COORDINATOR

FRA

Her er deres præsentation

Mvh ABC Softwork

ABC Breakfast Club- Indkøbsoptimering

Solar stock policy

2008-05-13

Solar A/S- Company presentation

Solar in short 2009

Solar is one of Northern Europe’s leading technical wholesalers

Listed on NASDAQ OMX Copenhagen

EUR € 1,431m m revenue - 3,175 people

7 countries - 12 central warehouses - 156 Drive-Ins

Electrical, heating, plumbing and ventilation components and solutions

Solar Danmark A/SHeadquarters located in Vejen. One central warehouse.Three regions and twelve drive-ins.CED Søren Larsen.

Solar Deutschland GmbHHeadquarters located in Neumünster.One central warehouse.Six regions and twenty drive-ins. CED Jens Andersen.

P/F Solar FøroyarOne warehouse and one sales office located in Thorshavn. Manager Finn Jørgensen.

Solar Nederland BVHeadquarters located in AlkmaarThree central warehouses.Six regions and nineteen drive-ins.CED Frans Soulier.

Solar Norge ASHeadquarters located in Gardermoen.One central warehouse.Three regions and twenty-five drive-ins.CED Jan Willy Fjellvær.

Solar Polska Sp. z o.o.Headquarters located in Lodz.One central warehouse.Five regions and seventeen drive-ins.CED Dariusz Targosz.

Solar Sverige ABHeadquarters located in Gothenburg.Three central warehouses.Four regions and fourty-five drive-ins. CED Kjell Svensson.

Solar in 7 European countries

Aurora in 4 European countries

Aurora Group Danmark A/S,Denmark

Aurora Group Norge AS, Norway

Aurora Group Sverige AB, Sweden

Aurora Group Finland Oy, Finland

Headquarters located in Ballerup, Denmark. One central warehouse.Four national companies.CED Pauli Joensen.

Solar's 2009 revenue in € million

Aurora50.5

The Faroes3.9

Germany147.4

Poland22.5

Norway210.4

Finland15.4

The Netherlands371.1

Denmark355.7

Sweden262.2

Refreshed group strategy 2010-2015“#1 in Technical Wholesale”

• The group strategy is designed to ensure a significantly increased performance and a continued development of Solar’s position as the number 1 technical wholesaler within electrical, heating, plumbing and ventilation material.

Electrical - HVAC&R - Plumbing - Renewable Energy

Solar’s business areas are within:

LightingInstallation Cables IndustryMarine & Offshore

Heating, Water & SanitationVentilationSecurityCommunication

Renewable energy

Solar delivers products and solutions to customers within:

Residential and

CommercialBuildings

Industry Marineand

Offshore

Utility and

Infrastructure

Public Sector

Central warehouses and distribution

• Central warehouses are placed in each country.

• Late order cut-off on e-orders.

• Orders are executed the same day.

• Flexible distribution setup.

• Extensive quality control.

Solar head office

Solar Drive-In

Solar central warehouse

Key figures 2009

Employees: 801

Drive-Ins: 12

Turnover: € 355.7m

Central warehouses: 1

Owned by Solar since: 1919

Solar Denmark

2008-05-13

Solar A/S- Indkøbsoptimering via Stock Policy

Headlines within stock policy

• Roles / Responsibility / Communication

• Classification

• KPI’s

• WD / Stock exceeding

• Drive In stock

• Return policies

• Purchasing guidelines

Stock policy

Roles and responsibilities (Headlines)

Scope :

• Definition of communication between Purchasing Department, Market Department and Sales Department.

• Definition of responsibility split.

• Definition of roles.

Product :

• The Purchase Department is always responsible for the Service Degree

• Supply Chain owns the logistical part of the contract whereas Market Department owns the commercial part.

• Supply Chain and Market Department have a joint responsibility to look at the purchase from a total cost

focus perspective

Responsibility

Process :

• The Purchase Department will always take the lead to avoid threatening write down, stock exceeding, 0-sales.

• Purchase has the responsible role of optimizing the inventory but the market department / Product Management is a very important stakeholder, who has an important role in making sure that the stock can be optimized.

Roles and responsibilities (Headlines)

The following must be in place before purchase will take the new article in for replenishment:• A written return agreement must be made with the supplier to make sure that articles can be returned – e.g.

if sales do not reach expected levels or an article does not sell at all.

• Monthly sales forecast figures for the first 6 month must be available. The numbers must have been registered and documented by the market and sales departments.

• The article must be correctly created in our ERP system with all necessary data according to Master Data Management code of practice.

An article must prove that it has a “life” before the purchase department will take over the responsibility. The definition of an article “life” is when there is:

• Equal to or more then 8 picks in the last 9 month

• Sales figures in 3 month or more of the last 9 month

• A “storage date” that is created within the last 9 month

New articles :

Roles and responsibilities (Headlines)

• When articles no longer meet the requirements of “life”, then the purchaser must act and have a dialogue with the market and/or sales department to establish actions for the article.

Phasing out articles with a previous life:

In addition, the following guidelines apply:

• If there have been 0 sales over the last 6 months, then the purchase department can remove the article from stock.

• “Campaign” or “seasonal” articles without sales for 12 months will be discontinued.

• “Customer specials” without sales for 12 months must be invoiced for the articles or the customer must pay a fee matching write down for keeping the articles in stock.

Articles that meet the below criteria are defined as not having “life”:• Less than 8 picks over the last 9 months

• Sales figures in less than 3 of the last 9 months

• A “storage date” older than 9 months

• Articles marked as “campaign”, “seasonal” or “customer specials” are not governed by the above mentioned rules

Communication (Headlines)

Communication :

Vendor Inventory owner- Supply Chain

Product owner - Market

Market responsible- Sales

• Replenishment• Service degree

outbound• PLC• Phase out• Remove from

Inventory• Backorder

• First purchase• Replace of existing

product• Product information

(Data, purchase history)• Validation• Phase out• New product• Forecast• Campaign• Season times + Items

• Marketing• Forecast

• Phase out• Backorder• Replace of existing

product• New product

Information / Recommendation / Meeting

Communication model

The model indicates the communication flow needed to ensure an optimized inventory

Communication (Phase Inn)

Supply Chain / Market meeting per month / 14 day / week

SSAService degree outboundBackordersPhase outStock exceedingNew articles

PLCScrap / WD / 0 – SalesForecastCampaignsProjectsYellow to green

Action list with responsible person and deadline

” Early warning meetings”

Meeting structure between Supply Chain and Market

• Meetings must be held to fit the need based on local market conditions.

• Meetings should as a minimum be conducted at least once per month.

0

200

400

600

800

1000

1200

1400

1600

1 2 3 4 5 6 7 8 9

Month

# o

f ar

ticl

es /

Val

ue

NOT OK

OK

Example

Roles and responsibilities (Headlines)

It is important to state that the purchase department must not argue why an

article should be discontinued, but that product management is responsible for

determining why an article should be kept in stock even though the article does

not have "life".

Product management is responsible for determining which articles must be

carried in stock, and the purchase department is responsible for maintaining a

healthy and optimised stock.

Classification

High Frequency Low Frequency

Hig

h C

os

t va

lue

Low

Cost

Valu

e

BC

AA

CC

BB

CB

AB AC

BA

CA

Double ABC classification

The double ABC code is calculated on a monthly basis, using 3 months' ongoing data – this means that there will always be one new month's data together with two known months' data.

Classification per business area (HWS, ventilation, electrical products)

When moving into a new business area, classification should be kept separate for that area until turnover to some extent equals the existing business area.

Month 1 Month 2 Month 3 Month 4 Month 5

Product Life Cycle

Time

Sales

Stock building

Stock exceeding

Back order

Balance

PLC

CC

BB

BB

CCWrite Down

AA

AA

Focus

Product Life Cycle awareness

• If an article changes colour within the ABC classes – pay attention.

High Frequency Low Frequency

Hig

h C

os

t va

lue

Low

Cost

Valu

e

BC

AA

CC

BB

CB

AB AC

BA

CA

KPI’s

1. Service degree KPI

High Frequency Low Frequency

Hig

h C

os t

valu

eLo

w C

ost

Valu

e

88%

99%

88%

97%

97%

97% 88%

99%

99%

• Service degree must always be 97% on average.

• The service degree must be 99% of all AA articles and should also be 99% on BA and CA articles.

2. Stock turnover KPI

High Frequency Low Frequency

Hig

h C

os t

valu

eLo

w C

ost

Valu

e5

18

3

8

4

9 6

14

6

• Stock turnover must be ≥ 10 times on average before 2012• Stock turnover must be ≥ 12 times on average before 2015

Drive In Stock

• As a general rule, all articles in the drive-ins must be defined as “Green” articles at the CW. All articles in drive-in stocks are controlled by the purchase department. Automatic replenishment must apply based on automatic re-order points. A fixed assortment must be accepted.

• The local Product Management will define the assortment.

• The central purchase department are responsible for the purchase (replenishment) to all Drive in’s

• KPIs for drive-ins must be the same as for the overall stock.

Return Policy

Returns from Drive - In

• Supply chain owns the Drive - In stocks

• The purchase Department can recall articles that are not selling or is stock exceeding (Not for articles in a fixed assortment like Solar Plus etc).

• The purchase department owns the parameters for Drive - In replenishment.

Returns to suppliers

• A written return agreement must be made with the supplier to make sure that new articles can be returned.

• Purchase for projects or campaigns must have a return agreement on a possible remaining level that exceeds normal sales according to article classification and rules under section of KPIs.

General return rules

• Articles that are not green at the central warehouse cannot be returned to a central warehouse or Drive - In – this goes for both customer and Drive - In returns. Individual exceptions may be made if special terms have been agreed with a customer.

Purchasing

Guidelines for the maximum quantity to have in stock to keep up with the KPI’s on stock turnover.

High Frequency Low Frequency

Hig

h C

os t

valu

eLow

Cost

Valu

e

10 weeks sales

3 weeks sales

17 weeks sales

7 weeks sales

13 weeks sales

6 weeks sales

8 weeks sales

4 weeks sales

8 weeks sales

Purchase change of mindset

• Focus on doing purchase based on the right mindset• Not buying more lines, but buying more focused• Understanding the importance of having the right focus

MRP calculation per double ABC class

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