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TOCICO International Conference - PROGRAM

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July 16-19, 2017
Melia Hotel in Berlin, Germany.


Miguel Abuhab, Founder and Chairman NeoGrid
 
 

 What to change? 

 

The Decisive Competitive Advantage for a CPG - Consumer Packaged Goods company is to increase product turnover in retail chains.

The VMI offer, or Automatic Replenishment, is a solution for a small number of retailers. On the other hand, retailers have a small number of suppliers that can deliver VMI or automatic replenishment. Out-of-stock levels in retail are high, and consequently there is loss of sales for manufacturing companies. ERPs set shipment priorities by internal criteria, or by observing Local Optimum conditions, but do not consider risks related to loss of sales.

 

What to change to? 

 

To ensure that there is no out-of-stock at the point of sale, manufacturers must prioritize order delivery taking into account the risk of product shortage at the store. Based on this information, the manufacturer can better plan its delivery in order to increase the turnover of its products and, at the same time, the retailer can increase availability on the shelf, reducing for both parties, losses caused by product shortages.

 

How to cause the change? 

 

 It is necessary to adjust shipment prioritization for order items using the Throughput Value Day (TVD) indicator, which means the risk value of sales loss, whose calculation is made considering gains and the number of days for product shortage risk, and is included in the manufacturing ERP. To maintain a single priority criterion, retail networks are integrated into a single cloud system that allows the standard calculation of the TVD indicator, updating daily the priorities in the ERPs of the manufacturing companies. This is a new dimension for the supply chain where all retail networks are integrated to manufacturing companies.

 

 Lessons learned?  Include successes, challenges, and obstacles and how they were overcome. 

 

Product shortage represents a direct loss of sales for both the retailer and the manufacturer. Only in December 2016, in Brazil, the amount lost by out-of-stock in supermarket retailers was over R$ 900 million. In this scenario, the challenge of reducing losses can be solved with shipping priority using TVD.

 

However, difficulty of implementation can be an obstacle, taking into account the practice adopted by manufacturers and the market’s maturity level.

 

When the former governor of the state of Santa Catarina at Brazil, Mr. Luiz Henrique da Silveira, started his first mandate in 2003, he asked for Mr. Abuhab’s help on how to improve the state’s tax management system in order to enhance the tax collection efficiency.

As he stood before the problem, his mind was immediately driven by two important beliefs in science: First that “all complex systems are governed by inherent simplicity” and also that "all conflicts with systems can be resolved...if we can find the erroneous assumption(s)”.

Weeks later, Mr. Abuhab returned to the governor with his first draft for how to improve the tax management system by just breaking the limiting assumption that was blocking the viable vision. Miguel has shown that by changing the current perspective to a holistic one, they could not only improve the tax system, but completely change it for a brand new reality, where the taxes fees could be reduced while the government would be able to leverage its tax income. At this point both Miguel and the governor realized they were standing before a solution for the country instead of something local.

At this moment, backed by powerful assumptions, and a handful of injections, this plan was analyzed by the Secretary of the Treasury of Brazil, Mr. Joaquim Levy, among other key stakeholders within the government. Later on, Mr Joaquim Levy became World Bank Director`s and invited Mr Abuhab to make a presentation to the International Monetary Fund (IMF) –in Washington on Sept 2016.

On February this year Mr. Abuhab’ s plan was introduced by the Deputy Mr. Luiz Carlos Hauly, as a proposal for the new Tax System in Brazil. The Congress will vote on the proposal this year to be effective on 2018.

It’s not about finding a better way to raise the tax incomes. It’s a plan to boost the economy, benefiting both citizens and government in a true win-win relationship.