Delighting your customers

by taking logistics
to the next level
Ingeborg Veelenturf
Regional Head of Logistics ASPAC
October 20, 2011

British American Tobacco at a glance

We are the worlds most
international tobacco group

200+ brands
Sold in 180+ markets
Global market share 13%
Market leader in 50+ countries
More than 60,000 employees
45 cigarette factories in 39
countries

2010 performance

Group cigarette volumes: 708 bn

Revenue: 14.8 bn
Profit after tax: 3.1 bn
Taxes generated for governments:
30,2 bn
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What this means for logistics in ASPAC

Selling 180bn sticks in ASPAC (27% global volume) in 27 markets
750 million consumers 12 mln Points of Purchase

MOVING stock in and out of > 300 WH in BAT

network

MOVING 25,000 TUEs for

packaging/Leaf/finished goods,
12,000 shipping orders and 30
shipping carriers

> 10,000,000 vehicle

movements
Production in 15 factories in 14 markets

85 3PL/Carrier
contracts with 70
suppliers
Many touch points, people,
cases, unit loads,
shipments, energy,.

Increasing challenges
Different supply chain networks:
End markets with and without factories

One to One model Many to Many model

Duty/tax regulations
Increasing complexities and supply lead times; more stringent
security & quality control
Region with high impact of Natural Disasters (flooding,
earthquakes)

Global Logistics Strategy

A sustainable fit for purpose integrated logistics network from
supplier to customer supporting growth and driving productivity
1.

By building an in-house specialist capability to support the route to consumer

strategy and optimising our end to end logistics network

2.

Further outsourcing of logistics activities where it adds value.

3.

World class execution through implementing Logistics Service Centres following

common processes, systems and standards.

Primary Supply Chain

Cost efficiency
Inbound
Freight

Leaf & Materials

Warehousing

Primary
Freight

Factory

Focus
/

Secondary Supply Chain

Value creation

Finished Goods National F/G Finished Goods End Market / State

Warehousing
Freight
Freight
F/G Warehousing

Distribution

What is a Logistics Service Centre ?

BAT Supply Chain Management
Leaf Operations

Supply Chain Service Centres

Factories

Buy

TM&D

Customers

Make

Design
Customer Supply Chain
Management
Plan

Sell/Service

Move

Single point of contact, co-ordinating multiple resources

to provide an integrated and optimised logistics service.
Continuous
Improvement

Network
Optimisation

Route
Optimisation

Supplier /
Factory

Customs

International
Transport

Port

Warehouse

Local
Transport

Procure 3PL
Services

On-Time In-Full Movements

Common processes, systems, standards

VIDEO 6

Logistics Service Centre Footprint

Why consolidate activities into Logistics Service Centres?

Natural teams focusing on Logistics management, improved service

Network coordination (Inbound / Outbound)

Increased scale, cover all materials (including raw materials)

How many Logistics Service Centres will we have?

1 international + 4 regional + c22 area / local

Driven by local business requirements and dynamics

ONE
International Logistics
Service Centre (ILSC)
(e.g. Innovations, Leaf)
in partnership with LLPs

FOUR
Regional Logistics
Service Centre (RLSC)
(e.g. marine / air)
in partnership with LLPs
TWENTY TWO
Area / Local Logistics
Service Centre (LSC)
(e.g. domestic road)
if appropriate in
partnership with LLPs

Logistics Management Framework

Strategy /
Standards

Logistics
Strategy

5% Spend
Most of the value

Network Business
Design Standards

In-House: INVEST

Network 3PL Supplier Continuous

Improvement
Optimisation Sourcing

Optimisation /
Management

Visibility /
Event
Management

Inventory
Management /
Replenishment

3PL Operational
Management
Transportation
Management

95%

Freight forwarding
-Marine
-Air
-Customs

Documentation
Management

Information
Management

Freight Audit &

Payment
Warehouse
Management

Transport Execution Value-Add services

-Dedicated
-Re-Packing
-Third Party
-Full load / Part load

Transport Order
Management

Controlled by BAT,
Where appropriate,
enabled by LLPs
COLLABORATION

Warehouse Operations
-Dedicated
-Shared User

Execution
OUTSOURCE
To 3PLs

Logistics Partners (both LLPs & 3PLs) are integral to our strategy
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How BAT is operating its international

movements AS IS
20 mn spend international freight increasing yearly
CARRIERS

Management
Planning

Execution

Booking
Instructions
Payments

Updates

Global Carrier
Tender / award

Invoicing

Todays challenges:
x Local for Local, no consistency in data and processes
x Documentation errors, reactive event management, OTIF issues
x No regional visibility on performance and costs

10

How we will operate TO BE

CARRIERS
Kuehne+Nagel LLS
Logistics Service Centre

Management

Planning

Execution

Booking Instructions

Carriers award

Documentation validation and

monitoring

Shipments traceability

BAT generates
sales /
shipment
orders

Carriers invoice audit and

Freight payment

Updates
Invoicing

Event management
Compliance
Performance management
Optimization

Future Deliverables:
Operational costs savings 8-15%
Documentation accuracy, improved OTIF, proactive event management
Full visibility on costs and performance

11

Practical case on above market support

Supporting Japan after March 11 Tsunami /Earthquake disaster

230 billion stick market; JTI 65%, PMI 25%, BAT 10%
Market leader JT unfortunately had to stop cigarette supply for 3-4 months due
to damages at domestic factories
PMI and BAT source 100% from outside Japan

12

The right governance on Logistics to meet

unpredictable increase in consumer demands

Majority sourced from US

Significance reliance on AIRFREIGHT was required [normal sea transit lead time is
5 weeks, fast consumption in the market, production capacity constraints]

Cross-functional collaboration to ensure service (Japan = highest service

requirement) whilst managing costs
Global Regional governance to support end market and supplier
Pipeline visibility & weekly control process and quick decision making
RJR - Japan Airfreight Costs / Mille

$10

By ensuring undisrupted supply, at certain point market share showed significant

increase
Market share

$8

$6

$4

Air Freight Costs per unit of measurement

$2

$0
Feb

Mar

April

May

June

July

August

September

Illustrative figures

13

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