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OPERATIONAL PLAN

PHASE 1

CREATED BY J . ENGELBRECHT
DATE: 12 AUGUST 2019
TABLE OF CONTENTS

PURPOSE OF THIS DOCUMENT 3

INTRODUCTION TO NGMANYE 4

OPERATIONAL SUMMARY 5

BRIEF DESCRIPTION OF BUSINESS 6

WAREHOUSE & EQUIPMENT 6

PROCESS FLOWS 8

EMPLOYEES 10

COSTING MODEL & KEY METRICS 11

MOTORBIKES 11

RISK MANAGEMENT 11

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1. PURPOSE OF THE DOCUMENT

The objective of the operational plan is primarily to form part of the basis of
an important investment decision and in order to serve this objective, the
document covers aspects of the start-up, business operation, processes and
management. (Purchasing, Warehousing, Sales, Finance and Stakeholder
Engagement)

The purpose of this document is to facilitate further discussion with potential


investors by providing them with a clear understanding of the business. Best
practices observed by our team, including trial and error through
experience, is the guiding source regarding various aspects of the business
set-up and it’s successful management while achieving significant scale.

2. INTRODUCTION TO NGMNAYE

The informal economy has attracted the attention of some of the biggest
businesses in the country. The major banks, telecoms and numerous tech
start-ups are highly innovative in offering newly created financial and digital
services and solutions to this “hidden” part of the economy. The informal
sector accounts for an estimated 18% of GDP or 29% of people under the
age of 15, and unfortunately comprises the poorest, most disadvantaged
segment among the population. The economic and moral opportunities are
clear.

Our dynamic team have been working on building out an FMCG logistics
distribution solution optimised for informal markets, blending digital needs
of multinational brands to the analogue nature of the township economy,
creating the right platform to supply the informal sector with recommended
retail pricing while building their brands.

We now have what we think is an attractive real-time analytical feedback


loop that can facilitate highly accurate targeted distribution, advertising, and
a reduction in our working capital cycle. We feel we are able to close the gap
in the asymmetry of information much faster than other retail data
providers, whose analysis is often outdated by the time it is procured by
mid-value chain market participants.

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Our inclusive model centres around buy-in from each local community in
which we operate, transferring skills, creating jobs and uplifting the youth.
Township businesses benefit from increased ordering efficiency, lower
pricing, dedicated brand relationship managers, and alignment of incentives
through transfer of ownership and participation in our economics. One of the
outcomes of this integration is a reduction in per unit distribution costs
which we feel will be very difficult to compete with.

3. OPERATIONAL SUMMARY

Ngmanye (Pty) Ltd is proposed to be located south of Soweto to distribute


Fast Moving Consumer Goods (FMCG) to the Local market. This business can
also be undertaken in all small 2nd tier towns, in addition to suburban towns
of large cities.

This proposed distribution agency will distribute a basket of goods to


informal market traders. The assumed sales and distribution force has the
capacity to distribute around 145 tons of product weekly and initially they
will be utilizing 30 – 35% of proposed capacity.

Given the cost assumptions IRR and payback are 40 % and 3.5 years
respectively. The most critical considerations or factors for success of the
project are

 Product and Brands to be distributed


 Management of stock and route logistics
 Trade recoveries such as debtors and creditor payments and rebates

4. BRIEF DESCRIPTION OF BUSINESS

Product: It has been structured that for the proposed distribution business,
the company would act as connector for Multinationals to the informal
market. The business would distribute a basket of roughly 40 SKU’s through
hybrid platform, featuring legacy and digital components simultaneously.

Location: The Distribution Centre can be set-up in or nearby any major


informal settlement. This business can also be done in all small second tier
towns in addition to suburban towns of large cities.

Target Market: GPD estimates on the size of the informal sector vary
between R80b– R120b. The sector is made up a diverse mix of micro

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enterprises. The majority of these micro enterprises are Spaza Shops,
followed by taverns / shibeens, hair salons and restaurants/ food stalls. A
vast majority of these micro business owners do the purchasing of goods
and supplies themselves through wholesaler channels, meaning extra costs
for transporting stock and closing the shop or paying runners expensive fees
to do the buying on their behalf. There are an estimated 120 000 spaza
shops, 50 000 tabletop traders and 30 000 taverns in the informal markets.

Employment Generation: Phase 1 proposed project will provide direct


employment to 16 people at the distribution centre alone, a further 20
drivers and 12 brand ambassadors will form part of the community
employment though working with our stakeholders in the taxi and social
networks in the township.

5. WAREHOUSE & EQUIPMENT

Suggested Areas: Devland, Aeroton, Eldorado Park, West Rand Mega Park,
Protea Glen Industrial Park, Stormill, Rand Leases Property Type:
Warehouse. Size: 1200sqm

Property Features Bays: >2 Loading Bay / >1 Receiving Bay

Racking: Back to back long span shelving on ground level for picking with
pallet racking 3 levels high on top. Total pallet bays per block is 24.

Areas required: Staging, Picking, Packing and demarcated areas for


damaged/ soiled / problem stock.

Office, kitchen, staff room, storeroom

Layout Example

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Racking, Shelving Examples:

5.1. EQUIPMENT WAREHOUSE

Packing tables, packing crates, forklift, pallet jack, warehouse ladder

5.2. EQUIPMENT OFFICE

Standard desks and computers for admin staff

5.3. WMS, TMS , ACCOUNTING, ROCKSOFT & OTHER SYSTEMS

Accounting systems will be added first. Omni software has all three modules
that can be added in quick succession without system downtime. Rocksoft is
a sales management tool that also does route planning for brand
ambassadors sales calls and captures orders on the app which is then sent
to the sales department to import.

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6. PROCESS FLOWS

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b f

l g
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k i
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k e

6.1. Receiving Delivery of Stock GRN –


h
Goods Received Note is signed by the receiving bay. The receiving bay
books the stock into the inventory system. The signed note is sent to
creditors clerk who checks the note against the Order invoice.

The GRN is booked in as a receipt against the invoice and loaded for
payment on the next billing cycle (30 days from statement). Short delivered
items are automatically placed on back order by supplier. Prior to stock
being stored, it is checked for the expiry date and stored accordingly. Short
Dated stock will be sent back for a credit

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6.2. Stock
 Stock stored on FIFO basis, First in First Out. Model stock refers to
the stock model. D)
 The stock model will differ throughout the year and account for things
like seasonality of certain products.
 Stock to be stored palletized descending to lower level where bulk is
broken into boxes for picking
 Daily, weekly, monthly, quarterly stock reports

6.3. Sales orders


 Generated by sales reps in the field, visiting spazas. Tele-sales also
assist the sales team by calling for orders at selected clients.
 Whatsapp platform and online ordering are also available, not initially,
but over time the platforms will be extended and marketed to the
spaza owner.
 Sales orders generate a picking slip and a packing slip, and 2 invoices
and a delivery note. The picking slip is sent to the picking department,
the packing slip is sent to the packing department. 1 invoice is sent to
dispatch, and 1 invoice is sent to the debtors clerk.
 Picking slips are collated and sent in a batch order to the warehouse
floor where the stock is batch picked off the shelves and taken to a
packing area.
 Packing Slips break down the batch order into individual orders and
allows various stock items to be packed together to form the sales
order.

7.4 Delivery & Dispatch Commented [JE|R1]:

 Picking slips are collated and sent in a batch order to the warehouse
floor where the stock is batch picked off the shelves and taken to a
packing area.
 Packing Slips break down the batch order into individual orders and
allows various stock items to be packed together to form the sales
order.

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7. EMPLOYEES

7.1. # Employees Required

Distribution – * Not employed by Ngmanye

Manager 1

Driver* 20

Sales

Brand Ambassadors/ Sales reps 10

Warehouse

Manager / Forklift Driver 1

Receiving 2

Loading 4

Office

Debtors 1

Creditors 1

Accounts / HR 1

Admin / Front Desk / Telesales 2

Director 3

Total Employees 16

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8. COSTING MODEL [A ] KEY METRICS [B]

Leading & Lagging indicators are used as terms to indicate if what is being
measured is leading an action or following an action.

Costing Model The Participation Model calculates each product / sku’s


participation in the overheads and running costs. See Product Costing
05.2016 for references on the costing model. The basic principal behind
the participation model ( lagging indicator) is to have a rearward view of
profitability of each item sold and transported in the operation. This shows
on a very detailed level how product contribute to profit and participate in
overhead costs.

Key Metrics

As detailed above some key metrics for Ngmanye to measure performance


are:

Profit Per SKU Profit Per SKU Stock Turnover


Spaza contribution to / On-hand
overheads

Profit Per SKU


Stock Write Profit Per to
Avg Days Stock holding Stock Turnover
Customer
Off’s Spaza
sell stock SKU
cost / Churn
On-hand
Rate
contribution to
overheads

Stock
Order Write
Vol & Avg Days to
Backorders Stock holding
Customer Fill Customer
Stock
Off’s
Freq sell stock
and filling cost
Rate Churn Rate
Accuracy
time

Order Vol & Customer Fill Stock


Freq Backorders Rate Accuracy
and filling
time

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9. MOTORBIKES

Big box motorbike – See

10. RISK MANAGEMENT PLAN

The management team working with the stakeholders in the will ensure that
risks are actively identified, analyzed, and managed throughout the life of
the project. Risks will be identified as early as possible in the project so as
to minimize their impact. The steps for accomplishing this are outlined in
the following sections

Risk Identification

Risk identification will involve the project team, appropriate stakeholders,


and will include an evaluation of environmental factors, organizational
culture and the project management plan including the project scope.
Careful attention will be given to the project deliverables, assumptions,
constraints, WBS, cost/effort estimates, resource plan, and other key project
documents.

Risk Analysis

All risks identified will be assessed to identify the range of possible project
outcomes. Qualification will be used to determine which risks are the top
risks to pursue and respond to and which risks can be ignored.

Qualitative Risk Analysis

The probability and impact of occurrence for each identified risk will be
assessed by the project manager, with input from the project team using
the following approach:

Probability

 High – Greater than <70%> probability of occurrence


 Medium – Between <30%> and <70%> probability of occurrence
 Low – Below <30%> probability of occurrence

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Impact

High – Risk that has the potential to greatly H


impact project cost, project schedule or
performance
M
Medium – Risk that has the potential to slightly
impact project cost, project schedule or
L

Impact
performance

Low – Risk that has relatively little impact on cost, L M H


schedule or performance

Probability
Risks that fall within the RED and YELLOW zones
will have risk response planning which may i

Include both a risk mitigation and a risk contingency plan.

Quantitative Risk Analysis

Analysis of risk events that have been prioritized using the qualitative risk
analysis process and their affect on project activities will be estimated, a
numerical rating applied to each risk based on this analysis, and then
documented in this section of the risk management plan.

Risk Response Planning

Each major risk (those falling in the Red & Yellow zones) will be assigned to
a project team member for monitoring purposes to ensure that the risk will
not “fall through the cracks”.

For each major risk, one of the following approaches will be selected to
address it:

 Avoid – eliminate the threat by eliminating the cause


 Mitigate – Identify ways to reduce the probability or the impact of the
risk
 Accept – Nothing will be done
 Transfer – Make another party responsible for the risk (buy insurance,
outsourcing, etc.)

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For each risk that will be mitigated, the project team will identify ways to
prevent the risk from occurring or reduce its impact or probability of
occurring. This may include prototyping, adding tasks to the project
schedule, adding resources, etc.

For each major risk that is to be mitigated or that is accepted, a course of


action will be outlined for the event that the risk does materialize in order to
minimize its impact.

Risk Monitoring, Controlling, And Reporting

The level of risk on a project will be tracked, monitored and reported


throughout the project lifecycle.

A “Top 10 Risk List” will be maintained by the project team and will be
reported as a component of the project status reporting process for this
project.

All project change requests will be analyzed for their possible impact to the
project risks.

Management will be notified of important changes to risk status as a


component to the Executive Project Status Report.

Tools And Practices

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