Operational Plan Phase 1: Created By J . Engelbrecht Date: 12 August 2019

OPERATIONAL PLAN PHASE 1

CREATED BY J . ENGELBRECHT DATE: 12 AUGUST 2019

TABLE OF CONTENTS

PURPOSE OF THIS DOCUMENT

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INTRODUCTION TO NGMANYE

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OPERATIONAL SUMMARY

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BRIEF DESCRIPTION OF BUSINESS

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WAREHOUSE & EQUIPMENT

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PROCESS FLOWS

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EMPLOYEES

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COSTING MODEL & KEY METRICS

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MOTORBIKES

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RISK MANAGEMENT

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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 4

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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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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

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Driver*

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Sales Brand Ambassadors/ Sales reps

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Warehouse Manager / Forklift Driver Receiving

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Loading

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Office Debtors

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Creditors

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Accounts / HR

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Admin / Front Desk / Telesales

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Director

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Total Employees

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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 Write Off’s

Stock Order Write Vol & Off’s Freq

Order Vol & Freq

Profit Per Spaza

SKU contribution to overheads

Stock Turnover / On-hand

Profit Per to Avg Days Spaza sell stock

Stock holding SKU cost contribution to overheads

Stock Turnover Customer / Churn On-hand Rate

Avg Days to Backorders sell stock and filling time

Stock holding Customer Fill cost Rate

Customer Stock Churn Rate Accuracy

Customer Fill Rate

Stock Accuracy

Backorders and filling time

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9. MOTORBIKES Big box motorbike – See

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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 H

High – Risk that has the potential to greatly impact project cost, project schedule or performance

Low – Risk that has relatively little impact on cost, schedule or performance

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Impact

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

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

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Probability

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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