Wimm-Bill-Dann Georgia

Supply Chain Management

Prepared by: Giorgi Gvimradze Kakha Bekauri Khatia Svanadze Keti Mgebrishvili Lika Chichinadze

Table of Contents
Company Overview ...................................................................................................................................... 1 Wimm-Bill-Dann Russia............................................................................................................................. 2 Wimm-Bill-Dann Georgia .......................................................................................................................... 3 Organizational Structure .............................................................................................................................. 4 Product Portfolio ............................................................................................................................... 5 Competitors .................................................................................................................................................. 6 Financial Information ................................................................................................................................... 6 Future Developments................................................................................................................................... 6 Logistics Organizational Structure ............................................................................................................... 6 Warehouse ............................................................................................................................................... 6 Transportation .......................................................................................................................................... 6 Sales and Operations Plan ........................................................................................................................... 6 Manufacturing .............................................................................................................................................. 6 Quality Management ................................................................................................................................... 6 Suppliers ....................................................................................................................................................... 6 Inventory Management ............................................................................................................................... 6 Packaging ...................................................................................................................................................... 6 Distribution ................................................................................................................................................... 6 IT Systems .................................................................................................................................................... 6 Problems ....................................................................................................................................................... 6 Recommendations ....................................................................................................................................... 6

Company Overview
Wimm-Bill-Dann Russia
Founded in 1992 Wimm-Bill-Dann is the largest producer in dairy products and one of the leader childrens food in Russia. WBD has more than 35 production facilities in Russia, Ukraine and Central Asia. The Company distribution network covers 100% of the Russian territory and also includes the CIS. Wimm-Bill-Dann serves needs of 280 million customers. More than 18,000 people work at WBDs production facilities and trading affiliates. The Company operates into three segments: dairy, beverages and baby food. Wimm-Bill-Dann Russia is market leader in soft beverage industry.

Wimm-Bill-Dann Georgia WBD purchased Georgian Foods and restored the old brand Soplis Nobati in September 2009. Initial Investement was $15 million. Nowadays Wimm-Bill-Dann helds 23% of market share and is the third of largest producers of dairy products in Georgia. The Georgian Foods plant is Wimm-Bill-Dann's first production facility in the Caucasus region. In addition to serving local demand in Georgia, the factory also supplies nearby markets in Armenia and Azerbaijan. Wimm bill Dann Georgia employees 160 people. The plant is located in Fonichala, Tbilisi and is spread on 2100 square meter territory. The company uses automated manufacturing systems and all the processes from processing of raw materials to packaging are arranged automatically.

Main Directions
Wimm-Bill-Dann processes are divided into four major categories: Procurement Manufacturing Sales Distribution

Procurement deals with purchasing ingredients and packaging materials. Local market can not satisfy the whole demand of milk producers and WBD supplies materials from Ukraine and Russia. Besides, part of the production is imported as finished good and procurement department supports import related activities.

Manufacturing involves processing of raw materials by adding fat and granulated sugar. Milk is classified into cream and skim-milk and additional ingredients are mixed to get the desired product. Wimm-Bill-Dann is equipped with automated manufacturing system which gives the company opportunity of effectively and rapidly implementing production process. Sales department defines the demand on milk and dairy goods, establishes production selling plans and gives order to manufacturing department. Distribution department chooses direct or indirect distribution channels, deals with distributors and provides the scheme that is cost efficient and based on time delivery.

Organizational Structure
The head of Wimm-Bill-Dann Georgia is General Director that subordinates manufacturing, sales, logistics and finance managers. Each of the departments includes different directions and sub-departments. Marketing and Quality management are separated units and are responsible to general director of the company. To get detailed information about organizational structure, please see Appendix 1.

Product Portfolio
Product Portfolio of Wimm-Bill-Dann can be classified into 3 major categories: Traditional Milk Products (TMP) includes sterilized milk and traditional sour-milk products such as kefir, cottage cheese, soft cottage cheese and sour cream. Yougurt-Desert Group (YDG) consolidates yogurt, soft cottage cheese, glazed cheese, Domik v Derevne, Chudo, Vesely Molochnik. Soft Beverage- includes natural juices. J7 is imported from Russia. Traditional Milk Products are produced in Wimm-Bill-Dann Georgia, but Yougurt-Dessert-Group and soft beverage products are imported from Russia and Ukraine as finished goods. Imported and local manufacturing distribute 50/50% share of companys sales. The Wimm-Bill-Dann Georgias major direction is traditional milk manufacturing that holds 70% of the whole production. The rest 30% possess to yogurt dessert group. Please See Appendix 2. 4

Competitors
Sante GMT Produts, Eco Food and Wimm-Bill-Dann are 3 major players in the Georgian milk and dairy production market. Sante GMT Products is the oldest in Georgia. It is represented since 1998 year. Company is market leader and holds 42% of market share. Sante offers high variety of products to the customers that differentiate it from others. The company has highly developed distribution channel and covers the whole Georgia. In an effort to further improve the quality and safety of its products Sante GMT has pioneered introduction of international standards (HACCP - Hazard Analysis of Critical Control Points and ISO 9001) in dairy industry and production of juices in Georgia. Eco Food is the second major player in the market. The company was founded in 2004 and for today possesses 30% of market share. Eco Food is associated with high quality production. Like Sante Eco Food also provides high variety of products and has developed distribution channels. Wimm-Bill-Dann holds the third place in the market. Company is represented with 23% of market share. Wimm-Bill-Dann has high quality production that is its major competitive weapon. But the company has low variety of product assortment and enters only in part of Georgian regions. Other 5% of market share hold small manufacturers of milk products, such are Qobuleturi, Fermeri and etc. Please see Appendix 3.

Financial Information
In 2009 and 2010 years company did not generate profit and showed loss in financial statements. These 2 years were start up for the company and cost related with new plant caused the negative results. It was foreseen in business plan of the company at the early beginning. In 2011 Wimm-Bill-Danns sales projection is 2 million lari per month.

Future Developments
Wimm-Bill-Dann Georgia plans to be the market leader in 2012. The company is going to increase market share with high quality production. Besides, it plans providing new variety of products to the customers. Wimm-Bill-Dann has recently lounched new product named Margo. Margo is cheaper and is intended for low income segment. This new brand involves matsoni and kefiri production. In fall 2011 the company is going to get ISO and HACCP certificate. This will help to increase the confidence level and strengthen the image of the company.

Logistics Organizational Structure

Logistics Manager is head of logistic department. 6 units are responsible to logistics manager: Import transportation, Auto Park, Processing, Procurement, Planning and Warehousing. Each of these units serves to implement major logistical functions in the company. One of the major functions of logistic is managing inventory levels in organization. Manager of planning unit is responsible for controlling the inventory levels. He decides when to place order and defines the lot size. Procurement unit is responsible for managing procurement functions. Two procurement processes took place in Wimm-Bill-Dann: purchasing from local suppliers and import materials from foreign countries. Import transportation has separate manager, who decides on choosing transportation mode, determining the cost related to transportation and the time of performance cycle. Warehousing is another function of logistics. Manager of this unit deals with processes related to handling and storing materials and order pick up. Distribution is also one of the major functions of logistics. This unit develops distribution channels and manages relationship with contract based distributors in regions. Order processing is occurring via portable terminals. Distributors and pre-sellers send signals via the terminals. Logistics department is responsible for processing the orders and preparing inventory for the next day outbound. See detailed structure in Appendix 4.
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Warehouse
The company has own warehouse facility, which is located near the manufacturing plant and holds 1200 square meters. Warehouse is divided into several rooms. Temperature is different in each room for storing various types of products. Sorting process is an important function of warehousing. All the production is sorted and located according to appropriate temperature and conditions. Warehouse staff manages the production disposal process. There is special space for out-of-date returned inventory and after several days perished production is disposed in a special space separated by Tbilisi City Hall. Warehouse is equipped with modernized security system, which defends the company from pilfering and thieving. Warehouse is permanently controlled with specially fixed web-cameras and employees are examined after the working process every day, before leaving the building. Wimm-Bill-Dann possesses big territory that gives the company possibility of warehouse expansion in the future, in case of increased production process.

Transportation
Wimm-Bill-Dann uses truck as transportation mode. The company possesses 21 vehicles for local distribution of production. Cargo revenue of Wimm-Bill-Dann is 12 trucks per month, capacity of 20 tons each.

Sales and Operating Plan

Wimm-Bill-Dann establishes sales plan several times in a year. Major plan is one year sales plan, made for budgeting in July. The company reviews sales quarterly and makes changes in sales plan. Besides, weekly sales plan is an important document for manufacturing process. Operations plan of the company is in accordance with sales plan. Procurement planning takes place after reviewing sales plan and defining the required level of inventory. Sales plan is not stable and it changes monthly based on actual sales of previous period. Operations planning take these changes into consideration. As we mentioned the major source for manufacturing is weekly sales plan that is established according to sales of previous week. The company has policy to connect with pre-sellers and
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find out their opinions while defining the next week sales. Besides, other religious or economic factors are foreseen.

Manufacturing
Company uses Make to Plan (MTP) strategy and arranges manufacturing process according to sales. Volume capacity of the plant is 80 tons per day. The company has flexible plant and can easily produce different types of products in a short period of time. The major constraint of manufacturing process is that dairy and milk products are easily perishable and company cant produce high volume of production. Thats why Wimm-Bill-Dann doesnt achieve economy of scale. Wimm-Bill-Dann arranges manufacturing process effectively in order to minimize lead times. Efficiently use of capacity is another task of manufacturing. Four major stages take place in milk production process: receiving milk from local suppliers, processing the milk, fermentation and manufacturing of cottage cheese. Each of these stages has different capacities. Please see table in Appendix 5.

Quality Management
Quality is the major competitive advantage of Wimm-Bill-Dann. Thats why quality control takes an important place. Wimm-Bill-Dann has dependent quality control unit that doesnt subordinates to other departments and is responsible to general director of the company. Quality audit happens on each level of production. When supplying the milk from local producers quality is controlled at the receiver unit, after this the fitness of the production is examined in the factory laboratory.

Suppliers
Wimm-Bill-Dann Georgia has 2 main local suppliers from Ninotsminda and Tsalka. Company receives natural milk from local farmers.

International suppliers of the company are Ukraine and Russia. Wimm-Bill-Dann supplies most of the ingredients from them, besides package materials entirely supplied from Ukraine. Yougurt Dessert Group products also are get from headquarter and Ukraine plant. Dependence level is varied with local and foreign suppliers. Local market is unstable as natural milk is seasonal product and local farmers cant sell it for whole year. But reliability of foreign suppliers is high and Wimm-Bill-Dann receives materials and production permanently for them.

Inventory Management
Wimm-Bill-Dann owns inventory management system that controls inventory levels in the company permanently. Reorder point is defined like most Georgian companies. The company uses perpetual inventory management system. On weekly base logistic manager receives information about sales, compares with manufactured production and defines what will be average demand on Wimm-Bill-Danns products for the next week period. After this determines required components for manufacturing process and makes order to Ukraine suppliers. Preparing order needs approximately 5 days and 8 days are necessary for transportation. So the whole performance cycle lasts for 13 days. Natural milk from local suppliers is received into 2 days after placing order. The company orders small sizes as milk and dairy production is specific field and is constrained with short life cycle. Wimm-Bill-Dann keeps low level of safety stock and prefers working according to out-of-stock strategy. The reason of minimal safety stock is high cost, related with disposal of out-of-date products. In a whole the company has poor inventory management, because of having little historical data on sales and past experience.

Packaging
Wimm-Bill-Dann uses modern style packaging materials for its products, that are imported from Ukraine like raw materials and Yogurt Desert Group products. Materials delivery time is 30 days.

Distribution

IT Systems
Wimm-Bill-Dann uses 1C system. The company uses 2 modules of 1C: distribution and warehouse management. Implementation problem occurred at the very beginning stage. Tasks were not clearly defined and the platform was not suited to the company requirements. Thats why Wimm-Bill-Dann doesnt effectively use IT system even today. The major benefit of 1C is that it gives the company possibility of having visible supply chain and having continuous information about inventory levels.

Problems
1. Wimm-Bill-Danns major problem is dealing with inventory levels and controlling stock in warehouse. Problem related with inventory management is caused by the fact that the company is new in the market and has no historical data. 2. 1C was not correctly implemented at the beginning and the company has problems with effectively use of this program. 3. Dependence on single transportation mode-trucks. 4. Not integrated operations and sales plan. 5. Lack of control of regional distribution. 6. Confidence in population that products are done based on natural ingredients is another problem of the company. 7. Part of the Georgian customers have negative attitude toward Wimm-Bill-Dann because of Russian origin. 8. The company has poor control of debtor liabilities that is also very important problem. Difficulties related with collecting account receivables obstacles cash generation process in Wimm-Bill-Dann.

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Recommendations
1. Rail mode development will be a new challenge for Wimm-Bill-Dann. Magistral is near the company plant and it will be good idea to build rail channel from central magistral to the company. This will give opportunity to reduce transport related costs. Develop own distribution channel in regions after company generates income. This will help to increase sales volume and assist Wimm-Bill-Danns strategy to be market leader in near future. Create integrated sales and operating committee. Members of the committee will be general director and managers of sales, manufacturing, logistics, finance and departments. They will jointly discuss all the issues related with feasible sales and make the consistent production plan. Reuse of out of dated products will be profitable for the company. Wimm-Bill-Dann can sell this type of production to bakeries and to local farmers for feeding animals. Developing the new direction and producing baby food products is another challenge for the company. Wimm-Bill-Dann Russia successfully produces baby food and has huge experience in this field. So sharing the experience of headquarter will be good for Georgian plant too.

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