The Fresh Connection Game

The Fresh Connection Game Presentation, Rounds 1-6
Spring Semester 2017, RTU / Riga

1. THE FRESH
CONNECTION
BUSINESS GAME
ANA CORREA
CLAUDIA GOMEZ
KAMILAHURKOVA
MERVE NUR TAŞ
TOMMIVEROMAA
THE FRESH CONNECTION | TEAM 2 1
TEAM 2

2. EXECUTIVE SUMMARY
WHAT DID WE ACHIEVE:
✓Thecompanyobtainedprofitineachperiod,growinguninterruptedlyinthefirst4roundsandwith
aslightdecreaseinthelast2rounds.
✓Sinceround1,ROIhasalwaysbeenpositive.
WHAT WAS THE GENERAL STRATEGY :
✓Makedecisionsintegratingalldepartments,evaluatingthepossiblepositiveornegativeeffectson
theminordertominimizecostsandmaximizethebenefittothecompany.
✓Evaluatethedecisionsmadeineachperiod,providefeedbackandtakecorrectiveactionstomake
betteruseofcompanyresources.
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

3. CONTENTS
TEAM & RESPONSIBILITIES
◦SALES
◦OPERATIONS
◦SUPPLY CHAIN
◦PURCHASING
FINANCIAL RESULTS & CONCLUSIONS
THE FRESH CONNECTION | TEAM 2 3

4. Cube utilization %
Prod.Plan Adherence %
Unused capacity %
Nr. of shifts
Responsibilities:
Optimize and control
production and
warehouses
Components%
Stock Components
Stock Products
Responsibilities:
Coordinatedifferent
departments, inventory
control and production
Rejection Components %
Raw Material Costs %
Delivery Reliability
Suppliers
Responsibilities:
Purchasing components,
negotiating with suppliers
Service level%
Obsoletes%
Gross Margin
Responsibilities:
Sellall producedgoods
withhighestpossible
price
TEAM & RESPONSIBILITIES
THE FRESH CONNECTION | TEAM 2 4
R O I %
PURCHASING
SUPPLY
CHAIN
OPERATIONSSALES

5. SALES –GROSS MARGIN
THE FRESH CONNECTION | TEAM 2 5
✓Increase gross margin as much as possible
prioritizing biggest customers
✓Try not to lose grossmarginon smallercustomers
significantly
✓Introducepromotionalpressure for customers
duringlaterrounds
I. STRATEGY II. RESULTS
✓Gross beganto growon F&C and Dominick’sduring
round 3 whencustomerorderpriorizationwas
implemented
✓Furtherincreasesin laterrounds withpromotional
pressure
✓Overallincreasein grossfor F&C and Dominick’s
wasattainedwithoutlosinggrossmarginon Land
Market
✓F&C grossincreasedby almost5000 and
Dominick’sby 3000 during6 periods
III. ANALYSIS
11610
14510
22486
27303

6. SALES –NEGOTIATIONS
THE FRESH CONNECTION | TEAM 2 6
✓Aligncapacityof SC and Operations to match
negotiatedservice and shelf life levels
✓Take advantage ofonecustomerwithfull product
range to decreasepotentialobsoletes
✓Trade unit: Palletsfor all and VMI for F&C and
Dominick’sto reduceoutboundstress
✓Customer priorities: 1. F&C, 2. Dominick’s, 3. LM
I. STRATEGY
✓Obsoletes weresolved 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 inSC and Operations were changed
based on Sales.
III. ANALYSIS
II. RESULTS

7. 900 900 920 900 900 900 900
1500
1200
1050
950 930
975
1000
98% 99%
94%
96% 97%
100%
108%
71%
79%
85%
95%
97%
101% 101%
0%
20%
40%
60%
80%
100%
120%
0
200
400
600
800
1000
1200
1400
Round 0Round 1Round 2Round 3Round 4Round 5Round 6
Cube Utilisation
Warehouse Capacity
Inbound Capacity Outbound Capacity
Inbound Cube UtilisationOutbound Cube Utilisation
OPERATIONS-WAREHOUSES
THE FRESH CONNECTION | TEAM 2 7
✓Optimise pallet allocations (to avoid overflow and
outsourcing / too large unsued capacity)
✓Allocate adequate number of shifts
✓Reduce variability in processes and smooth raw
materials income and finished goods storage (align
with Supply Chain and Purchasing)
✓Be ready to handle all demand (align with Sales)
I. STRATEGY II. RESULTS
✓Round 4 was the most successful
✓Starting in Round 5, the demand overpassed the
warehouses‘ capacities and it was not adjusted
correctly
✓Outsourcing of warehouses would lead to
significantly higher costs
III. ANALYSIS

8. 79%
94%
87%
92% 93%
94%
89%
78%
58%
73% 73% 73%
53%
81%
5%
25%
6%
10% 11%
39%
10%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Round 0Round 1Round 2Round 3Round 4Round 5Round 6
Production Plan Adherence Runtime Unused Capacity
OPERATIONS-PRODUCTION
THE FRESH CONNECTION | TEAM 2 8
´
✓Allocate adequate number of shifts
✓Select wisely new investments to smooth
production and increase ROI (mixing and botteling)
✓Minimize production costs, unused capacity,
changeover and breakdown times
✓Maximize production plan adherence
✓Align with all other functions to be ready to satisfy
all demand at lowest cost
I. STRATEGY II. RESULTS
✓In Round 5, the bottling line was changed and
shifts increased too much this mistake was
corrected in round 6
✓New investment lead to higher production costs
and consequently lower ROI (lack of alignment
with other functions)on longterm, the company
would improve its business results (lower variability in
production, less rejection component rate, less breakdown,
low unused capcity, high runtime %, etc.)
III. ANALYSIS

9. 98.8% 98.9%
99.6%
99.8% 99.9% 99.8%
90.0%
92.0%
94.0%
96.0%
98.0%
100.0%
102.0%
0
5
10
15
20
25
30
35
40
45
50
Round 1Round 2Round 3Round 4Round 5Round 6
ANALYSIS PER COMPONENTS
Mango Orange Pack 1 liter
PET Vitamin C Stock Availability %
SUPPLY CHAIN -COMPONENTS
THE FRESH CONNECTION | TEAM 2 9
✓Guarantee availability of components to meet
demand (depending on supplier reliability, lot sizes
and safety stock )
✓Keep cost of stockatmin level (in accordance with
operations decisions) –Pet and Pack 1L (1-2
rounds)
✓Adequate lot sizes depending on the stockcost and
transport costs given by procurement
I. STRATEGY II. RESULTS
✓It was possible to guarantee availability over 99%
but in some cases compromising average stock –
which increased the cost
✓Increasing supplier reliability in some products
(vitamin C) was key to have a better stock control
✓Round 3 and 4 best results obtained
✓Round 6 problem lack alignment with other
departments
III. ANALYSIS
Low availability of Vitamin
C –High stock PET and
Pack 1
Adjust Pack 1 –
Reduction of lot sizes
Increased Stock
per Week PET –
increase demand

10. SUPPLY CHAIN –FINISHED GOODS
THE FRESH CONNECTION | TEAM 2 10
✓Lower average stock weeks of demand and %
obsolete products without compromising service
level -in accordance with contract index per
customer
✓Adjustproductioninterval to decrease overall cost
and increaseutilization rate (7 day)
✓Frozen period allowsto keep flexibility to react to
demand changes
I. STRATEGY II. RESULTS
✓Achieved to keep obsoletes between (0%-1%) –
Round 6 increase -> due to plan adherence bottling
line involving PET related products and production
interval
(Increasing production due to increase in demand)
✓Round 2 and Round 6 lowest prod plan adherence
–higher production interval increase average stock
III. ANALYSIS
5.64 5.24 5.50 5.56 5.67 5.32
20%
0% 0% 1% 1% 3%
97%
95% 96%
96%
98%
97%
94% 87% 92% 93%
94%
89%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
0
1
2
3
4
5
6
7
8
9
10
Round 1Round 2Round 3Round 4Round 5Round 6
Stock (
weeks
of
demand
)
Stock per week Average % Obsoletes
Average % Service Level Average % Product Plan Adherance

11. PURCHASING–Component Focus
THE FRESH CONNECTION | TEAM 2 11
✓Ensure high delivery reliability and low rejection
rates, for the best price.
✓Make sure lead times & trade units and expected
amounts are planned and aligned with operations.
I. STRATEGY II. RESULTS
✓Round 4: Supplier is changed
✓Round 5: Supplier Development Plan is introduced
Lower rejection rate is obtained
Other benefits of the SDP may be observed in
further rounds
III. ANALYSIS
3.40% 3.50% 3.60% 3.20% 2.40% 2.30%
0.99
0.995
1
1.005
1.01
1.015
1.02
1.025
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
1 2 3 4 5 6
Pack 1 Liter
Delivery reliability (%)Rejection(%) Contract Index

12. PURCHASING–Component Focus
THE FRESH CONNECTION | TEAM 2 12
✓Round 2: Trade unit is changed
✓Round 3: Supplier is changed
✓Round 5: Supplier is changed & Bottling Line is changed with a
more tolerant one.
✓Round 2: Trade unit is changed
✓Round 4: Higher delivery reliability rate is negotiated.
5.60% 5.70%
3.10% 3.30% 2.10% 2.00%
0.94
0.95
0.96
0.97
0.98
0.99
1
1.01
1.02
1.03
1.04
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
1 2 3 4 5 6
PET
Delivery reliability (%)Rejection(%) Contract Index
1.00% 1.00% 0.90% 0.90% 0.80% 0.70%
0.996
0.998
1
1.002
1.004
1.006
1.008
1.01
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
1 2 3 4 5 6
Orange
Delivery reliability (%)Rejection(%) Contract Index

13. PURCHASING –Component Focus
THE FRESH CONNECTION | TEAM 2 13
✓Round 2: Higher delivery reliability rate is negotiated.✓Round 3: Supplier is changed & Higher deliveriy reliability
rate is negotiated.

14. PURCHASING–Raw Material Costs(%)
THE FRESH CONNECTION | TEAM 2 14
✓Raw material cost (%) (purchase costs as a
percentage of total revenue) is one of the crucial
KPI’s of the company
✓It is calculated taking into considerationthe bonus
& penalties
✓Strategy: Lower Values
I. STRATEGY II. RESULTS
✓Decreasing Trend during the first 5 rounds
✓High obsolete products in round 6 Causes
unnecessary purchases
✓Unmatched Service Level Agreements in round 6
Causes high penalties
✓Best performance: Round 4 & 5
III. ANALYSIS
1,014,346
857,446
828,373 839,319 840,809
861,096
37.48
34.14
32.47
32.14
30.96
31.70
10.00
15.00
20.00
25.00
30.00
35.00
40.00
1 2 3 4 5 6
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
Purchase Costs (%) -Purchase Value
Purchase Value Purchase Costs (%)

15. FINACIAL RESULTS & CONCLUSIONS
THE FRESH CONNECTION | TEAM 2 15
✓Theaverageofgoodssoldinthe6roundswas$2.66million.Theperiods
withthehighestsaleswererounds1,5and6.
✓Thecostofgoodssolddrasticallyinfluencedthegrossmargin,theaverageof
thisinthe6roundswas$1.37million.Itcanbeseenthattheperiodswith
thehighestcostofgoodssoldwere1and5.
✓TheROIwentfromnegativeinthefirstperiodtopositiveinthesecond,
havingthebestpercentagesinperiods3and4andlowerresultsinperiods5
and6causedbylackofalignmentonfollowingfactors:
•Change of filling line
•Increased demand
•Decreased production interval
•Not sufficiently increased warehouse capacity
Notallocatingthecapacitycorrectlyleadto
•Highobsoletes%andpenaltycosts
•Highcubeutilisation%inwarehouses
•Lowproductionplanadherence
✓Theweightedaveragewas4%
I. RESULTS
FINANCE
ROI EVOLUTION
II. CONCLUSIONS

16. BACK UP:
Decisions per each round
THE FRESH CONNECTION | TEAM 2 16

17. SALES -Decisions
THE FRESH CONNECTION | TEAM 2 17
ROUND 1
✓Understandhow the gameworks
✓Use real life experiencein decisions
✓Findcorrelationsbetweenother
departments whenmakingdecisions
ROUND 2
✓Getridof high % of obsoletesby
drasticallydecreasingshelf life and
introducingFIFS shortagerule
✓Calculateservice levelbasedon changes
made in SC and Operations
ROUND 3
✓Calculateservice leveland shelf life based
on changes made in SC and Operations
✓Obsoletesvalue at 0,2%
✓Set goal to increaseobsoletesto 1-2% in
orderto findhow much«air» isin
betweenactualcapacityand negotiated
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 5
✓Install VMI for 1 customer
✓Trade unit to Pallet for all customers
✓Communicate promotional pressure and
implemented changes VMI to SC and
Operations
ROUND 6
✓Calculateservice levelto alignwith
achievedservice levelsfromround 5
✓VMI for 2 customers
✓Communicatepromotionalpressure and
implementedVMI to SC and Operations

18. OPERATIONS -Decisions
THE FRESH CONNECTION | TEAM 2 18
Decision Period 0
Period 1
30.03.17
Period 2
06.04.17
Period 3
20.04.17
Period 4
20.04.17
Period 5
27.04.17
Period 6
27.04.17
Inbound
(Raw materials)
Pallets location 900 920 900
Shifts 5 3 2 3
IntakeTimedays N/A 5 6
Inspection N/A No Pets,Pack 1 liter Pets, Plastics
Mixing Mixer Type Fruit MixMQ
Bottling
Shifts 2 3 2 3 2
Projects - SMED - -
Preventive
Maintenance
N/A A little A lot
Solve
Breakdown
Training
N/A Yes No
Bottling Line Swiss Fill2 MultiFlex 1
Outbound
(finished
goods)
Pallets location 1500 1200 1050 950 930 975 1000
Shifts 4 3 4

19. SUPPLY CHAIN -Decisions
THE FRESH CONNECTION | TEAM 2 19
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
✓Safety Stock: lower vitamin C
✓Lot Size: no changes
✓Production Interval:no changes
✓Frozen Period: 3
ROUND 5
✓Safety Stock: Fressie Orange 1 liter, Fressie Orange
/C-Power
✓Lot Size: Reduced for orange and mango
✓Production Interval: unified to 7
✓Frozen Period: 3
ROUND 6
✓Safety Stock: decreased orange, mango, vitamin c
✓Lot Size: no changes
✓Production Interval: no changes
✓Frozen Period: 3

20. PURCHASING –DetailedInformation
THE FRESH CONNECTION | TEAM 2 20
0.000
-0.024
-0.002
-0.013
0.035
0.183
0
0.004
0.064
0.004
0.007
0.000
-0.060
-0.030
0.000
0.030
0.060
0.090
0.120
0.150
0.180
0.210
1 2 3 4 5 6
Contract Index -Purchase Value Graph
Purchase Value (%D) Contract Indexes (%D)
20.00%
0.23% 0.22%
1.23% 0.95%
2.52%
0.00%
4.00%
8.00%
12.00%
16.00%
20.00%
24.00%
1 2 3 4 5 6
Obsolete Products (%) -Average
✓Percentage Change Graph ✓ObsoleteProducts