THE FRESH

CONNECTION
BUSINESS GAME TEAM 2

ANA CORREA
CLAUDIA GOMEZ
K A M I L A H U R KO V A
M E R V E N U R TA Ş
TOMMI VEROMAA

THE FRESH CONNECTION | TEAM 2 1

EXECUTIVE SUMMARY
WHAT DID WE ACHIEVE:
✓ The company obtained profit in each period, growing uninterruptedly in the first 4 rounds and with
a slight decrease in the last 2 rounds.
✓ Since round 1, ROI has always been positive.
WHAT WAS THE GENERAL STRATEGY :
✓ Make decisions integrating all departments, evaluating the possible positive or negative effects on
them in order to minimize costs and maximize the benefit to the company.
✓ Evaluate the decisions made in each period, provide feedback and take corrective actions to make
better use of company resources.
PROBLEMS ENCOUNTERED:
✓ Difficulties in predicting how some decisions will impact the performance of the company.
(The simulator restrained some functionalities at the first stages of the game)
✓ Align strategic decisions of departments in a common goal

THE FRESH CONNECTION | TEAM 2 2

CONTENTS
TEAM & RESPONSIBILITIES
◦ SALES
◦ OPERATIONS
◦ SUPPLY CHAIN
◦ PURCHASING

FINANCIAL RESULTS & CONCLUSIONS

THE FRESH CONNECTION | TEAM 2 3

TEAM & RESPONSIBILITIES

SUPPLY
SALES OPERATIONS PURCHASING
CHAIN

ROI %

Cube utilization % Components % Rejection Components %

Service level %
Prod.Plan Adherence % Stock Components Raw Material Costs %
Obsoletes %
Unused capacity % Stock Products Delivery Reliability
Gross Margin
Nr. of shifts Suppliers
Responsibilities: Responsibilities:
Responsibilities: Coordinate different Responsibilities:
Sell all produced goods
Optimize and control departments, inventory Purchasing components,
with highest possible
production and control and production negotiating with suppliers
price
warehouses

THE FRESH CONNECTION | TEAM 2 4

 SALES – GROSS MARGIN
I. STRATEGY II. RESULTS
✓ Increase gross margin as much as possible 27303
prioritizing biggest customers
✓ Try not to lose gross margin on smaller customers 22486
significantly
✓ Introduce promotional pressure for customers
during later rounds
III. ANALYSIS 14510
✓ Gross began to grow on F&C and Dominick’s during 11610
round 3 when customer order priorization was
implemented
✓ Further increases in later rounds with promotional
pressure
✓ Overall increase in gross for F&C and Dominick’s
was attained without losing gross margin on Land
Market
✓ F&C gross increased by almost 5 000 and
Dominick’s by 3000 during 6 periods

THE FRESH CONNECTION | TEAM 2 5

 SALES – NEGOTIATIONS
I. STRATEGY II. RESULTS
✓ Align capacity of SC and Operations to match
negotiated service and shelf life levels
✓ Take advantage of one customer with full product
range to decrease potential obsoletes
✓ Trade unit: Pallets for all and VMI for F&C and
Dominick’s to reduce outbound stress
✓ Customer priorities: 1. F&C, 2. Dominick’s, 3. LM
III. ANALYSIS
✓ Obsoletes were solved with having LM with shelf
life of 62-65%
✓ Negotiated service level % was calculated and
estimated based on improvements in SC and
Operations
✓ Decision-making in Sales was first based on
improvements made in SC and Operations, further
the decisions in SC and Operations were changed
based on Sales.

THE FRESH CONNECTION | TEAM 2 6

 OPERATIONS - WAREHOUSES
I. STRATEGY II. RESULTS
✓ Optimise pallet allocations (to avoid overflow and
120%
outsourcing / too large unsued capacity) 108%
1400
99% 100%
✓ Allocate adequate number of shifts 98%
94% 96% 97%
100%
✓ Reduce variability in processes and smooth raw 1200
101% 101%

Warehouse Capacity
95% 97%
materials income and finished goods storage (align

Cube Utilisation
1000 79% 80%
85%
with Supply Chain and Purchasing) 71%
✓ Be ready to handle all demand (align with Sales) 800
60%
1050 1000
1500 975
600 1200 950 930

920
40%
900 900 900 900 900 900
III. ANALYSIS 400

✓ Round 4 was the most successful 20%

200
✓ Starting in Round 5, the demand overpassed the
warehouses‘ capacities and it was not adjusted 0 0%
correctly Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6
✓ Outsourcing of warehouses would lead to Inbound Capacity Outbound Capacity
significantly higher costs Inbound Cube Utilisation Outbound Cube Utilisation

THE FRESH CONNECTION | TEAM 2 7

 OPERATIONS - PRODUCTION
I. STRATEGY
´ II. RESULTS
✓ Allocate adequate number of shifts
✓ Select wisely new investments to smooth 100.0%
production and increase ROI (mixing and botteling) 94% 92% 93% 94%
90.0% 89%
✓ Minimize production costs, unused capacity, 87%
changeover and breakdown times 80.0% 79%
78% 81%
73% 73% 73%
✓ Maximize production plan adherence 70.0%
✓ Align with all other functions to be ready to satisfy 60.0% 58%
all demand at lowest cost 50.0% 53%

40.0%
III. ANALYSIS 39%
✓ In Round 5, the bottling line was changed and 30.0%
25%
shifts increased too much  this mistake was 20.0%
corrected in round 6 10.0% 10% 11% 10%
✓ New investment lead to higher production costs 5% 6%
0.0%
and consequently lower ROI (lack of alignment
Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6
with other functions)  on longterm, the company
would improve its business results (lower variability in
production, less rejection component rate, less breakdown, Production Plan Adherence Runtime Unused Capacity
low unused capcity, high runtime %, etc.)

THE FRESH CONNECTION | TEAM 2 8

 SUPPLY CHAIN - COMPONENTS
I. STRATEGY II. RESULTS
✓ Guarantee availability of components to meet
demand (depending on supplier reliability, lot sizes
ANALYSIS PER COMPONENTS
and safety stock ) 50 Low availability of Vitamin 102.0%
✓ Keep cost of stock at min level (in accordance with 45
C – High stock PET and
Pack 1
operations decisions) – Pet and Pack 1L (1-2 99.8% 99.9% 99.8% 100.0%
40 99.6%
rounds) 35 98.8% 98.9%
✓ Adequate lot sizes depending on the stock cost and Increased Stock 98.0%
30 Adjust Pack 1 – per Week PET –
transport costs given by procurement Reduction of lot sizes increase demand
25 96.0%
III. ANALYSIS 20
94.0%
✓ It was possible to guarantee availability over 99% 15
but in some cases compromising average stock – 10
92.0%
which increased the cost 5
✓ Increasing supplier reliability in some products 0 90.0%
(vitamin C) was key to have a better stock control Round 1 Round 2 Round 3 Round 4 Round 5 Round 6
✓ Round 3 and 4 best results obtained Mango Orange Pack 1 liter
✓ Round 6 problem lack alignment with other
PET Vitamin C Stock Availability %
departments

THE FRESH CONNECTION | TEAM 2 9

 SUPPLY CHAIN – FINISHED GOODS
I. STRATEGY II. RESULTS
✓ Lower average stock weeks of demand and %
obsolete products without compromising service
level - in accordance with contract index per 10 120.00%
customer 9 98%
97% 95% 96% 96% 97% 100.00%
✓ Adjust production interval to decrease overall cost

Stock (weeks of demand)

8
94%
and increase utilization rate (7 day) 7 94% 87% 92% 93% 89%
80.00%
✓ Frozen period allows to keep flexibility to react to 6 5.64 5.24 5.50 5.56 5.67 5.32
demand changes 5 60.00%
4
III. ANALYSIS 3 40.00%
✓ Achieved to keep obsoletes between (0%-1%) –
2 20% 20.00%
Round 6 increase -> due to plan adherence bottling
1
line involving PET related products and production 0% 0% 1% 1% 3%
0 0.00%
interval
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6
(Increasing production due to increase in demand)
✓ Round 2 and Round 6 lowest prod plan adherence Stock per week Average % Obsoletes
– higher production interval increase average stock Average % Service Level Average % Product Plan Adherance

THE FRESH CONNECTION | TEAM 2 10

 PURCHASING –Component Focus
I. STRATEGY II. RESULTS
✓ Ensure high delivery reliability and low rejection Pack 1 Liter
100.00% 1.025
rates, for the best price.
✓ Make sure lead times & trade units and expected 90.00%
1.02
amounts are planned and aligned with operations. 80.00%

70.00% 1.015

60.00%
1.01
50.00%
1.005
40.00%
III. ANALYSIS 30.00% 1
✓ Round 4: Supplier is changed 20.00%
✓ Round 5: Supplier Development Plan is introduced 0.995
10.00% 3.50% 3.60%
3.40% 3.20%
Lower rejection rate is obtained 2.40% 2.30%
0.00% 0.99
Other benefits of the SDP may be observed in
1 2 3 4 5 6
further rounds
Delivery reliability (%) Rejection(%) Contract Index

THE FRESH CONNECTION | TEAM 2 11

PURCHASING – Component Focus
PET Orange
100.00% 1.04 100.00% 1.01
90.00% 1.03 90.00%
1.008
80.00% 1.02 80.00%
70.00% 1.01 70.00% 1.006
60.00% 1 60.00% 1.004
50.00% 0.99 50.00%
40.00% 0.98 40.00% 1.002
30.00% 0.97 30.00% 1
20.00% 0.96 20.00%
5.60% 5.70% 0.998
10.00% 3.10% 3.30% 2.10% 2.00% 0.95 10.00% 1.00% 1.00% 0.90% 0.90% 0.80% 0.70%
0.00% 0.94 0.00% 0.996
1 2 3 4 5 6 1 2 3 4 5 6

Delivery reliability (%) Rejection(%) Contract Index Delivery reliability (%) Rejection(%) Contract Index

✓ Round 2: Trade unit is changed ✓ Round 2: Trade unit is changed

✓ Round 3: Supplier is changed ✓ Round 4: Higher delivery reliability rate is negotiated.
✓ Round 5: Supplier is changed & Bottling Line is changed with a
more tolerant one.

THE FRESH CONNECTION | TEAM 2 12

PURCHASING – Component Focus

✓ Round 2: Higher delivery reliability rate is negotiated. ✓ Round 3: Supplier is changed & Higher deliveriy reliability
rate is negotiated.

THE FRESH CONNECTION | TEAM 2 13

 PURCHASING – Raw Material Costs (%)
I. STRATEGY II. RESULTS
✓ Raw material cost (%) (purchase costs as a Purchase Costs (%) - Purchase Value
percentage of total revenue) is one of the crucial 1,100,000 40.00
37.48
KPI’s of the company
✓ It is calculated taking into consideration the bonus 1,000,000
34.14
35.00
32.47 32.14
& penalties 30.96
31.70
✓ Strategy: Lower Values 900,000 30.00

800,000 25.00
1,014,346
III. ANALYSIS 700,000 20.00
857,446 861,096
✓ Decreasing Trend during the first 5 rounds 828,373 839,319 840,809

✓ High obsolete products in round 6 Causes 600,000 15.00

unnecessary purchases
✓ Unmatched Service Level Agreements in round 6 500,000 10.00
Causes high penalties 1 2 3 4 5 6
✓ Best performance: Round 4 & 5 Purchase Value Purchase Costs (%)

THE FRESH CONNECTION | TEAM 2 14

FINACIAL RESULTS & CONCLUSIONS
I. RESULTS II. CONCLUSIONS
FINANCE ✓ The average of goods sold in the 6 rounds was $ 2.66 million. The periods
with the highest sales were rounds 1, 5 and 6.
✓ The cost of goods sold drastically influenced the gross margin, the average of
this in the 6 rounds was $ 1.37 million. It can be seen that the periods with
the highest cost of goods sold were 1 and 5.
✓ The ROI went from negative in the first period to positive in the second,
having the best percentages in periods 3 and 4 and lower results in periods 5
and 6 caused by lack of alignment on following factors:
ROI EVOLUTION • Change of filling line
• Increased demand
• Decreased production interval
• Not sufficiently increased warehouse capacity
Not allocating the capacity correctly lead to
• High obsoletes % and penalty costs
• High cube utilisation % in warehouses
• Low production plan adherence
✓ The weighted average was 4%

THE FRESH CONNECTION | TEAM 2 15

BACK UP:
Decisions per each round

THE FRESH CONNECTION | TEAM 2 16

 SALES - Decisions
ROUND 1
✓ Understand how the game works
✓ Use real life experience in decisions
✓ Find correlations between other
departments when making decisions
ROUND 4
✓ Obsoletes still at 0,2% -> Increase shelf
life more
✓ Calculate service level and shelf life based
on changes made in SC and Operations
ROUND 2
✓ Get rid of high % of obsoletes by
drastically decreasing shelf life and
introducing FIFS shortage rule
✓ Calculate service level based on changes
made in SC and Operations
ROUND 5
✓ Install VMI for 1 customer
✓ Trade unit to Pallet for all customers
✓ Communicate promotional pressure and
implemented changes VMI to SC and
Operations
THE FRESH CONNECTION | TEAM 2
ROUND 3
✓ Calculate service level and shelf life based
on changes made in SC and Operations
✓ Obsoletes value at 0,2%
✓ Set goal to increase obsoletes to 1-2% in
order to find how much « air » is in
between actual capacity and negotiated
ROUND 6
✓ Calculate service level to align with
achieved service levels from round 5
✓ VMI for 2 customers
✓ Communicate promotional pressure and
implemented VMI to SC and Operations
17
OPERATIONS - Decisions
Period 1 Period 2 Period 3 Period 4 Period 5 Period 6
Decision Period 0
30.03.17 06.04.17 20.04.17 20.04.17 27.04.17 27.04.17
Pallets location 900 920 900

Inbound Shifts 5 3 2 3
(Raw materials) IntakeTime days N/A 5 6
Inspection N/A No Pets,Pack 1 liter Pets, Plastics
Mixing Mixer Type Fruit Mix MQ
Shifts 2 3 2 3 2
Projects - SMED - -
Preventive
N/A A little A lot
Maintenance
Bottling
Solve
Breakdown N/A Yes No
Training
Bottling Line Swiss Fill 2 Multi Flex 1
Outbound Pallets location 1500 1200 1050 950 930 975 1000
(finished
goods) Shifts 4 3 4

THE FRESH CONNECTION | TEAM 2 18

 SUPPLY CHAIN - Decisions
ROUND 1
✓ Safety Stock: increased Vitamin C, decrease safety
for all finish products (depending on the shelf life)
✓ Lot Size: decreased for PET and Pack 1
✓ Production Interval: Increased production interval of
Freassie Orange/c-Power 1 liter, Fressie Orange PET,
Fressie Orange/C- power PET
✓ Frozen Period: 3
ROUND 2
✓ Safety Stock: reduced Pack 1L and brought back
Vitamin C , unified to 2 SS of finished goods
✓ Lot Size: Decreased Pack 1 liter, orange, mango and
Vitamin C
✓ Production Interval: unified to 8
✓ Frozen Period: 3
ROUND 3
✓ Safety Stock: increased Vitamin C, Fressie Orange/C-
power
✓ Lot Size: decrease Vitamin C
✓ Production Interval: Changed back to 7 Fressie
Orange 1 liter, Fressie Orange/c-Power 1 liter, Fressie
Orange/Mango PET, Fressie Orange/C - power PET
✓ Frozen Period: 4

ROUND 4 ROUND 5 ROUND 6

✓ Safety Stock: lower vitamin C ✓ Safety Stock: Fressie Orange 1 liter, Fressie Orange
✓ Lot Size: no changes /C-Power
✓ Production Interval: no changes ✓ Lot Size: Reduced for orange and mango
✓ Frozen Period: 3 ✓ Production Interval: unified to 7
✓ Frozen Period: 3
✓ Safety Stock: decreased orange, mango, vitamin c
✓ Lot Size: no changes
✓ Production Interval: no changes
✓ Frozen Period: 3

THE FRESH CONNECTION | TEAM 2 19

 PURCHASING – Detailed Information
Contract Index - Purchase Value Graph
Obsolete Products (%) -Average
0.210
24.00%
0.180
0.183
0.150 20.00% 20.00%

0.120
16.00%
0.090
0.064
12.00%
0.060 0.035

0.030
0.004 0.004 8.00%
0 0.000
0.000
0.000 -0.002 0.007 4.00% 2.52%
-0.030 -0.013 1.23%
-0.024 0.95%
0.23% 0.22%
-0.060 0.00%
1 2 3 4 5 6 1 2 3 4 5 6
Purchase Value (%D) Contract Indexes (%D)

✓ Percentage Change Graph ✓ Obsolete Products

THE FRESH CONNECTION | TEAM 2 20