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Business Point B&W - 53201

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on 19 April 2016

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Transcript of Business Point B&W - 53201

Separate elements
Purpose
Process
Payoff
IMPLEMENT
UNDERSTAND
What is the Agenda
Check if everything is clear
Tell it loud
Order
Policy
Minimum
Let's start this

journey
How we are going to do this?
Step by Step
Background Information
MOP Policy – Ground Rules
Governance and Controls
Process Overview - Examples
EBS Technical Solution
BI Reporting
MOP Implementation Approach
YOU
feel comfortable with what we do
Order
Policy
Minimum
Order
Policy
Minimum
Order
Policy
Minimum
Order
Policy
Minimum
Order
Policy
Minimum
Order
Policy
Minimum
Background Information
Problem Statement
- Minimum Order Policy either not or inconsistently applied towards our customers
- Minimum Order Policy has non harmonized rules per Division and/or across Markets / Countries
- Minimum Order Policy does not drive customer order behavior effectively


Consequences
- Gross Margins are negatively impacted due to proportionally higher Transportation and Warehousing (T&W) costs in relation to Average Order Value and/or Weight
- Low Average Drop Size - high delivery frequency with low volume
- Increased complexity and administration costs

Objective
- Change customer order behavior by implementing effective Minimum Order Policy across Institutional, Healthcare and Textile Care, in 15+ countries
- Documented Minimum Order Policy (Value / Weight)
- Sustainable E2E Governance with clear roles and responsibilities
- Reporting Systems to enable ongoing monitoring / track effectiveness

Timeline
Effective as of 1st June 2016

Benefits
2016 Fiscal Year OI Impact:
Institutional: $300K | Textile Care: $150K | Healthcare: $400K

What we want to achieve?

- The new policy is designed to align our approach, help customers better manage their order patterns and enable improved performance and optimization of our supply chain logistics

- Strengthening our policy will enable us to continue delivering prompt and efficient customer service by limiting small order management

- Fewer orders also means less packaging, paper and carbon dioxide from delivery trucks released into the environment
Lower T&W Cost

Fee Collection

-
Different
MOP Policy standards and exceptions
- Country MOP Policy
for all Divisions
-
Single
MOP Policy per Division per Country
(more than 100 variants in Europe)
-
No
automated MOP reporting available
-
No
control mechanism available
- Fragmented governance in each
country / division
-
Fragmented
and complex MOP -
Limits and Charges
per country and division in EBS
- 13 different pricing conditions
- 60 different local MOP Customer Attributes
-
Common
MOP Policy exceptions
- For customer accounts and single orders
- Standard MOP Policy
per Division
for
15+ countries
-
Monthly
reporting – MOP at invoice level
-
Leading and Lagging
control mechanisms in place
-
Robust
governance for all divisions and countries
-
Harmonized
EBS Solution in place easy to maintain
- 2 pricing conditions for 15+ countries
- 3 standard MOP Customer Attributes per Division

TODAY
TOMORROW
MOP Ground Rules
Only
ONE
MOP Charge per Customer / Hierarchy can be applied

Customers serviced by Divisions which are not in scope of MOP Policy remain unchanged – current conditions stay as there are (for example customers who belong to F&B or FRS Division)

Direct Customers
For standard customers – serviced by one Division – MOP Charge comes from this Division
For exceptional cases – X-Divisional customers – it needs to be agreed between divisions which divisional MOP to be applied

Indirect Customers

by default get Standard Charge based on Sales Skill / Customer Lead Division information

For new customers MOP is to be applied by selection of relevant MOP Customer Category via CDM RQF Customer Creation/Change Form:
-
Standard
– MOP charge applied as per divisional standard model
-
Exemption
– no MOP charge applicable
-
Deviating
– MOP charge other than Standard applied

2 Sold-To / Ship-To partners attached to one Hierarchy
must
have the same MOP Charge as this Hierarchy

2 Ship-To partners attached to Sold-To
must
have the same MOP Charge as this Sold-To

Governance and Controls
European
Division General Manager
owns and defines Standard MOP Limit and Charges

Provided Standard MOP Limits and Charges are to be reviewed by European Division Management and Supply Chain / Logistics and adjusted (if required) on
annual basis
(by December 20th)

MOP Policy Compliance is ensured

retrospectively
based on enhanced BI Reporting (including Credit Memos with reason code: Minimum Order Policy)

Divisional Controllers
own MOP Policy Compliance metrics

Standard
MOP
does not require
any approval to be obtained

Approver Levels:

Customer/Hierarchy Related Exceptions
– MOP Attributes other than Standard –
Regional Sales Manager
- obtained once customer / hierarchy is being created or changed by requestor
- executed by application of Customer Attribute other than Standard

Order Related Exceptions
– particular Order Charge to be dismissed –
Country Sales Manager
- obtained by Customer Service rep. upon request or customer claim
- executed by application of ZMOP (manual condition) which overwrites MOP charge
- relevant Business Cases for Orders to be exempted without approval:
- Multiple orders for one Business Partner combined into one shipment
- Back Orders
- Mistake on Ecolab side

Current
SOX report
to control manual conditions (including ZMOP) on daily basis in each country remains unchanged

Process Overview
-
Standard
– MOP charge applied as per divisional standard model
-
Exemption
– no MOP charge applicable
-
Deviating
– MOP charge other than Standard applied

Institutional
Healthcare
Textile Care
Food & Beverage
Kay Chemical
Food Retail Service
Pest Elimination
WPS
Energy


Pre-filled but can be adjusted if X-divisional account is being created
Divisions (Sales Support) to make sure that approval from
Regional Sales Manager
is obtained prior to Customer change/creation
No gate keeper concept
for CMD RQF Form submission - requests are not validated by Shared Service Master Data Genpact

Current procedure remains unchanged – only requests received from
pre-approved requestors
to be processed by Shared Service Pricing Team in Krakow

No Approval required
for pre-approved business cases to avoid negative impact on Lead Time
- Multiple orders for one Business Partner combined into one shipment
- Back Orders
- Mistake on Ecolab side

Customer Service to make sure that approval from
Country Sales Manager
is obtained prior to application of ZMOP Manual Condition

Current SOx
report to control manual conditions (including ZMOP) on daily basis in each country remains unchanged

EBS Technical Solution
Pricing Condition:
ZMOX (Value)
Key Combination:
EBS Sales Org./Distr. Chl./Customer Hierarchy
Pricing Table:
Order Value < 1000 Euro = MOP Charge of 75 Euro

Example
Pricing Conditions:
ZMOX (Value) and ZMOY (Weight)
Key Combination:
EBS Sales Org./Distr. Chl./Attribute 6
Pricing Tables:
ZMOX - Value
Order Value < 200 Euro = MOP Charge of 50 Euro
Order Value < 400 Euro = MOP Charge of 30 Euro
ZMOY - Weight
Order Weight < 75 Kg = MOP Charge of 50 Euro
Order Weight < 150 Kg = MOP Charge of 30 Euro


Example
Pricing Condition:
ZMO1 - Existing Condition
Key Combination:
EBS Sales Org./Distr. Chl./Customer Hierarchy
Pricing Table:
Order Value < 500 Euro = MOP Charge of 50 Euro

Example
Pricing Condition:
ZMO1 - Existing Condition
Key Combination:
EBS Sales Org./Distr. Chl./Customer
Pricing Table:
Order Value < 250 Euro = MOP Charge of 20 Euro

New Pricing Conditions
ZMOX (Value)
and
ZMOY (Weight)
have the same logic as existing most commonly used MOP Pricing Conditions in Europe – ZMO1 (Value) and ZMO2 (Weight)

MOP Order Charge is calculated as per following logic:
- Sales Document Type (Order Type) = ZSOR (EBS Sales Order)
- Shipping Condition ≠ Z3 (Customer Self Pick Up)
- First Order-flag is NOT set
- Item Category ≠ item listed below:

Exception:
ZMOY (Weight)
have the same logic as existing most commonly used MOP Pricing Conditions in Europe (Weight)
To be excluded:
Items Categories:
- EBS Sales Item Free
- EBS Drop Ship Free
for Material Types:
- ZPAR
- ZEQP
BI Reporting
1.
ZMOP manual adjustment overwrites conditions applied on customer level – no charge at invoice level
2.
No ZMOP manual adjustment – more favorable setup for customer applied at invoice – charge = 20
3.
Value based charge only – no adjustment – charge = 50
4.
No MOP condition applied for customer – no adjustment – no charge at invoice level

MOP Policy KPIs

Average Order Value
Average Order Size
Average Cost per Order
MOP Fee Collected
New Line in BI Management Reporting showing total amount of collected MOP Surcharge as per logic:
Total of MOP Surcharge Invoiced – Total Amount of Credit Memo Items with reason Code: MOP

Order
Policy
Minimum
MOP Policy Implementation Approach
MOP Data Migration of Existing Customers
Purpose
Enable New MOP Policy for all EBS countries and Divisions is scope
Respect current MOP conditions for customer and hierarchies who belong to Divisions which are out of scope




Consequences
All existing MOP Pricing Conditions need to be validated in following areas:
- Customer / Hierarchy Ownership (which MOP should customer / hierarchy get)
- New MOP Attribute: Standard / Exemption / Deviation
Objective
- Ensure full Transparency and Quality of data migrated
- Give Opportunity to Sales Management to validate existing conditions and provide relevant if required
- Enable appropriate internal and external communication
- Avoid customers claims caused by communication gaps and misunderstanding of New MOP Policy

Rules
Validation to be performed in all EBS Countries in Europe by end of Q2 2016
All Active Hierarchies + Major Direct Customers (Direct Sales allocated for last 12 months) need to be validated
Divisional General Manager approves All local conditions provided before MOP data migration

INFORMATION PROVIDED
- Customer Master Data
- Current MOP Attribute
- Direct and Indirect Sales allocation
- X-Divisional Accounts
- Proposed Customer / Hierarchy Ownership
INPUT REQUIRED
- Customer / Hierarchy Owner for X-Divisional Accounts
- All MOP Non-Standard Accounts for Divisions in Scope
- Deviating Conditions for Accounts with Attribute “Deviation”
X-Divisional Accounts

Rules for single customer allocation:
1. Customers with 1 PoU assigned only – MOP charge follows the Sales Skill
2. Customers with more than one PoU – amount of sales compared by Profit Center on customer level to determine where significant majority (at least 70%) is allocated
3. For outstanding Customers - Customer Lead Division used as indicator

Rules for hierarchy allocation:
1. Sales allocated to 1 Division only – this Division owns Hierarchy
2. Sales allocated to more than 1 Division – amount of sales compared by Profit Center on hierarchy level to determine where significant majority (at least 70%) is allocated
3. If there is no Division which has at least 70% of turnover – Hierarchy Lead Division used as indicator

MOP Validation Scope
To be skipped:
- Inactive accounts
- No PoU of Division in Scope
- No Sales allocated
- No Direct Sales allocated
What can't be skipped:
- Hierarchies with Sales allocated

Full Scope:
All Active Customers and Hierarchies
Full transcript