Posted by Dave Jordan on Thu, May 17, 2012
Last week we watched a show featuring an Elvis Presley impersonator/tribute artist. We saw the usual early Elvis leather jacket look followed by the gaudy Las Vegas fancy dress outfit. Vocally, he was a very good match to recordings but not sure how close he was to the real Elvis performing live as he had already “returned to sender” before I left school.
We had all the usual lip curling, posturing and hip thrusting but I could see my wife getting embarrassed so I stopped and sat down. However, the physical similarities of this Elvis were less than impressive and if this guy was similar in appearance then my next job will obviously be as Meryl Streeps’ body double. His set did not last long either so all in all Elvis was a bit of a let down for non-hard core fans.
Nevertheless, he did strike a chord when “love me tender, love me true” curled out of his mouth and I realised there a number of companies that do not. Only last week I heard about a major multi-national company with a German HQ who decided not to operate a logistics tender in CEE and simply rolled over the contract with the existing provider…..for the 4th time.
There is absolutely nothing wrong with long tern relationships and you certainly need time for both parties to get aligned with each other in expectations and service levels. A short 2-year contract with a new provider is insufficient and a 5 year commitment with performance based opt out clauses is fairer.
Even if the company in question was perfectly happy with service levels and cost isn’t there a case for taking a look at the market and seeing how you may be able to become even better? How many companies are actually genuinely delighted with their logistics services? Of course changing your 3PLP or 4PLP does cause discontinuity in the business and there is never a good time to make such changes.
So much has changed in supply chain and specifically logistics capabilities that you may be missing out on cutting edge technology and skills that are actually causing your business to lose ground versus competition. The problem is that without competitive tendering in a suitable time-frame you will find yourself locked in to a certain way of working that is difficult for senior management to break.
I do not think it is a coincidence that the company in question is struggling in the market and is clearly operating way behind peers in logistics efficiency.
So have a think about your tendering policy. That comfortable relationship you have with your 3PLP may really turn out to be a devil in disguise.
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Posted by Dave Jordan on Tue, May 15, 2012
Summer has come early at least here in Romania and this will be good news for all the beer, water and soft drinks producers. Nothing raises sales like a scorching yellow disc in a clear blue sky.
One of the classic summer tracks is Here Comes Summer by a variety of artists depending on your age. When you hear this song it is a sure sign summer is approaching and if you want to sell your drinks you had better be ready!
With reference to the original piece by Jerry Keller.
Here comes summer
The sun is out, oh happy days
Here comes summer
The peak for drinks is on the way
If we’re winning
Our sales will rise right away
Will the sun shine bright on our happy summer sales?
Here comes summer (here comes summer)
Almost June, the sun is bright
Here comes summer (here comes summer)
The drinks market will be tight
It's the toughest (here comes summer)
So little time to get it right
Will the sun shine bright on our happy summer sales?
Distribution’s not so bad but it could be better
They need close attention to make it to the top
Assess your route to market and do it soon
If we miss, our drinks sales will surely drop
Here comes summer (here comes summer)
Don’t let your competitor sales outshine
Here comes summer (here comes summer)
Whether it’s beer, soda or wine
Make it the greatest (here comes summer)
Drinks season of all time
Will the sun shine bright on our happy summer sales?
Image credit: raichinger
Posted by Dave Jordan on Fri, May 11, 2012
I don’t know why I looked this up now but I did. Do you remember the Icelandic volcano that erupted in 2010 and caused so much havoc to supply chains in and around Europe? Most people do as they were affected in some way either in professional or personal life. Outside of Iceland, I expect few people had heard of the location and even fewer could pronounce it – Eyjafjallajökull – well worth 406 points in Scrabble.
Do you know how much ash and other debris was propelled skywards from the Eyjafjallajökull volcano in the first 3 days? The best estimate indicates a mammoth 140 million cubic metres (180,000,000 cu yards) which erupted at a rate of 75 tonnes per second – thanks Wiki. Think about it for a second or two. That is enormous. Try and picture about 100 pallets of washing powder being propelled into the air every single second for some considerable time and staying airborne!
If matter cannot be created or destroyed, what replaced this? Is Iceland actually sitting on a structure that looks like a giant Malteser which may give way at any time? I think we should be told. Mastermind’s Magnus Magnusson would have told us.
And now to my supply chain related volcano comparison. On a much less destructive level the month, quarter, year-end sales push in FMCG, Pharma and Brewing places unwanted stock in the market which disrupts supply chains and can severely destabilise companies. When so much unwanted stock explodes into the market place – usually the last few days of the month - this causes a number of related problems and not least forecast accuracy collapse:
- The Producer may believe the demand signal is healthy and gears up for replenishment stock which locks up resources, cash and physical space.
- Distributor/Key Accounts cash flow and warehouses are blocked as nobody actually wants the product that is available.
- Supply of product consumers actually want is delayed as Producers make the wrong stuff.
- Stock will expire and you will suffer write offs.
- Sales people get their bonuses despite causing internal chaos……..
Like my Icelandic Malteser proposition, at the period end you have thrown so much unwanted stuff into the market that nobody needs or wants and it hangs around for ages. What is left behind is uncertainty and certainly not very pleasant.
You can only get away with a “head in sand” push strategy for so long until your business is paralysed and badly damaged and this can take years from which to recover. Next time you are asked to approve a last minute loading don’t say “pass” say “no”.
Posted by Dave Jordan on Wed, May 09, 2012
The English dictionary lists the definition of complexity as “the state or quality of being intricate or complicated: an issue of great complexity”.
Wikipedia defines complexity in great detail and starts with “In general usage, complexity tends to be used to characterize something with many parts in intricate arrangement”.
Sales and Marketing people define SKU complexity as ‘those items vitally important to the future of the company, the country and possibly the global economy”.
Supply Chain people define SKU complexity as “what Sales and Marketing insist on to make our lives difficult.”
Based on our work with many blue-chip companies we have produced an E-book which may help you understand and manage SKU complexity in your FMCG, Brewing or Pharmaceutical Supply Chains.
Posted by Dave Jordan on Tue, May 08, 2012
Inevitable, I guess. Large parts of the UK have implemented a hose pipe ban due to lack of water in reservoirs. Almost from the minute the ban was activated the rain has not stopped and now many places are under water with houses and businesses flooded. Apparently, the ground is now too hard for the rain to soak in and the run-off is “going to the wrong places”. Sounds rather like the wrong kind of snow and leaves on the track that brought British Rail to a halt a couple of years ago.
Here where I scribe in Romania we have seen temperatures above 30 degrees at the end of April which is about 10 degrees higher than last year. Are we due for a scorching summer in CEE this year? If so, will the beer producers be on top of their game to quench the thirst of the parched population? Well, I have no doubt beer will be produced in vast foaming quantities but will the associated Route To Market (RTM) be ready to maintain supply to multiple points of sale?
International Key Accounts (IKA) will probably have their act together to ensure they are well stocked should the hot weather hang around for a few weeks. Interaction with IKA can be easier than with distributors particularly if you are sending break-bulk to IKA logistics platforms. If Distributors are proactively managed as real partners in business development then you can be successful.
However, despite the distributor channel remaining sizeable, producers often fail to grasp the full opportunity their wide and deep coverage can provide. For large parts of Eastern Europe they provide significant sales outside the big cities and this rural reach should be valued as this population will not reduce that quickly particularly while the recession has its teeth firmly clenched on economies.
Before the season kicks in and the “best beer salesman in the world” is a daily feature in the sky you will benefit from taking a close look at how you interact with distributors and what you expect them to achieve. Treat them as idiots and you will get the associated response. Treat them as partners and an integral part of your business and you can jointly reap the benefits by keeping shelves and coolers well stocked.
Beer boys tell me that brand loyalty is more important but I don’t buy that and here is why. Imagine the sun is beating down, the hose pipe-ban continues, the ground is brown, dusty and dry and you have invited your mates around to watch the European Championship football. Your favourite beer is not available in sufficient quantities at the shop so what do you do?
A. Wait until your favourite brand is delivered.
B. Don’t buy any beer and treat the boys to a nice cup of tea.
C. Buy another brand and get it back home to the ‘fridge at top speed.
A no-brainer!
Posted by Dave Jordan on Fri, May 04, 2012
Laurel and Hardy, Morecambe and Wise, Abbott and Costello, Little and Large, Cameron and Clegg. These are examples of double acts where one party plays the straight/stooge and apparently serious man while the other plays the fool/jester. I admit I am not too sure who is who in the last example.
Having suffered 2 weeks of UK television recently it was difficult not to see the latest popular double act of Ant and Dec popping up at frequent intervals. My jury is out on these two as they appear to be part of a TV talent vacuum presided over by a man who looks like a dark-haired Max Headroom – youngsters, Google it. I always thought Simon Cowell was that nice bloke who rescues badgers from drains in Surrey!
Anyway, the point is that these performers work through the contrast in styles and the way each party plays off the other to score points and generate laughs. For some reason the first name in the act title is usually the funny or less serious partner who generates the gags and generally puts down the straight man partner. This notation is also consistent with Sales & Operational Planning with Operational Planning being the collective remainder of your FMCG, Brewing or Pharma business.
Why do so few Sales people – senior and junior – get S&OP? In fact do any Sales people really get S&OP and recognise the process as one for common good in a company? If only there was a way of replacing sales bonuses with cross-discipline bonuses. While the straight man of the team endeavors to supply on time in full against the forecast the joker waits until the last few days of the month to sell anything including his granny to make the required number and secure a bonus. And thus, the cycle repeats again, and again, and again.
If you pump too much unwanted stock into the market sooner or later you will need to destock your distributors and/or International Key Accounts (IKA). Distributors have always been ripe for a bit of extra loading here and there to manipulate the sales figures but don’t fool yourself this does not happen with IKA. It does and with the modern power of IKA accounts you might find yourself with a very unwelcome stock return and a difficult to refuse request for compensation.
Frequently, when things go wrong in the market place the Sales people will chirp up with something like “that’s another nice mess you’ve gotten me into” as a prelude to their Teflon blame-storming.
S&OP requires a team effort to succeed as a process which will lead to better performance in the market place. No planning or forecasting process is ever perfect but a little more diligence and team playing from the funny man would bring immediate and lasting results.
Posted by Dave Jordan on Tue, May 01, 2012
Ok, I know I should not have gone there. It was a Sunday and well before the live football on the TV. The weather was cold and the air was full of drizzle and as I turned off the roundabout the scale of the folly dawned on me; the IKEA car park was bursting at the seams.
There were families pouring out of cars and equal numbers trying to squash brown flat-packs of “destroy it yourself” furniture and fittings called Grunt and Splat and Twong into impossibly small cars. What do these people do when they have loaded up? Do they give Granny and Grandad a few coins to take the bus home? There is no way you can fit all the people and the flat-pack must-haves back into some of these cars. Maybe that is why they provide rope at the IKEA loading bay; it is to tie Granny and Grandad onto the roof of the car.
Oh well, here now so might as well join the hoards of people unable to control shopping trolleys, with absolutely no sense of direction and with varying levels of short-term memory deficiency. I hooked a yellow bag over my shoulder and I too became an IKEA shopper!
I know there is a science in store layout design whether it is a supermarket or a DIY store or an M&S type outlet. The store wants everyone to see everything they have available and they want it to be just at the right time when for example, the shopper has been sub-luminally convinced that the bright pink Plobo stool would look really nice in the kitchen.
Oh, but the chaos this causes in an IKEA store. Being a Supply Chain chap I would make the whole store strictly one-way with nobody allowed to double back to soft furnishings or for a forgotten low energy light bulb. In fact, if I had my way I would make the floors with a defined downhill gradient and ensure trolley wheels were oiled hourly to help people on their way, through the broken furniture bargain section, past the cheap fast food and out into the car park. What about a small battery pack on each trolley which delivered a persuasive tingle if you tried to push the trolley against the traffic? Too extreme, possibly!
Think of all the wasted hours and wasted effort of moving all the way through the store then insisting on reversing the route and getting in the way of everybody else. Then it struck me. I realised where I had seen this before and why I perversely enjoyed dodging the trolleys in the IKEA maze. This is what many FMCG, Brewing and Pharmaceutical companies suffer in their distribution route planning every single day. Wasted miles, wasted time and in all that time there are customers not being serviced.
If your sales are struggling along and the stream of excuses for monthly gaps appears endless you might take a close look at how much time your sales people spend selling to and guiding distributors. If they have adopted the IKEA system then you have just spotted a huge opportunity to improve your Route To Market performance.
Go and have a closer look. Get some IKEA rope, tie yourself to the roof a salesman’s car and see where some simple thought and logic can add to your bottom line.
Image credit: A littleSprite
Posted by Dave Jordan on Wed, Apr 25, 2012
I have always thought it a little strange. The “green “ movement is all about saving the Earth yet the same colour is used for “green” house gases (GHG) that are far from green and moving us towards unavoidable planetary oblivion, apparently. Now, there is huge debate about what contributes more to the ozone layer depletion; is it excessive human use of fossil fuels or is it primarily the fact that cows eat enormous quantities of grass leading to “cow house gas” emissions in rather large volumes?
However, that is not the point of this blog. I simply want to take a look at how many FMCG, Brewing and Pharmaceutical companies waste money which if they avoided would have a welcome knock-on effect of reducing their overall emission footprint.
- Why are office lights kept on all night? There is nobody in the office yet it is lit up like a Christmas tree with potentially hundreds of lights creating heat and gobbling up electricity for absolutely nil benefit. A simple timer system would secure a decent reduction in the fuel invoice. “But it is included in the rental cost” – it probably is and you are paying for this whether you like it or not. Perhaps this source of waste sounds insignificant when compared to a heavy duty factory but it all helps.
- Rain water harvesting really should be mandatory for factories. They usually have expansive roofs which are ideal for channeling and collecting water. Instead of using fresh water that has been chemically treated and pumped from miles away to flush toilets why not use “free” rain water. Ok, if you are located in Riyadh then the opportunity for rain collection is a rarity but if you are based in Manchester UK just think how much you can save and contribute to a cleaner environment.
- Solar water heating and electricity generation are becoming increasingly affordable and should be considered for any new factory project. Solar heating of water is probably more advanced yet panel costs are lowering each year. Yes there is an investment but if you are a major user of gas or electricity for water heating and you get a reasonable amount of sun (i.e. not Manchester) then a decent return on investment is achievable.
- Do you know how much your business is wasting in write offs and stock you do not need? If you don’t, you should. If we assume a moderately sized business of 500m Euro turnover then depending on the sector you could be running at a waste level of up to 8% of turnover, e.g. short shelf-life yoghurt etc. A detergents business will operate at considerably lower levels of waste but if we assume a modest 1% overall waste then that is 5m Euro down the drain. This is probably the worst kind of waste as you have paid for the product to be manufactured transported etc and then nobody buys it and you have to pay to have it destroyed.
- My bug bear is unnecessary packaging. Companies say they have reduced by x% and used more recycled materials but there is still a fair way to go. Innovation decisions need to be business wide and not just marketing wish lists. If you do not keep marketing in check they will add colours, layers, weight, thickness etc all to make their product better than competition. I admit that at the sharp end of the Route To Market shopper decisions can be swayed by packaging quality and appearance but still there is so much that is not required and goes directly into the waste bin (or hopefully the recycling system).
You will appreciate that items 1-5 are not exclusively about Supply Chain but that department inevitably receives the most focus. However, taking a look across the total business will expose numerous areas of waste and unnecessary material consumption.
While many may well blame the loss of the ozone layer on a their local herd of Black Angus cattle, companies can do so much more and it is not rocket science any more.
Posted by Dave Jordan on Mon, Apr 23, 2012
Never easy. Never pleasant. Never going to happen? Never believe your factory is safe!
From a UK perspective if you had a job in a factory in the 1970’s you expected to have a job for life as long as you kept your nose clean and performed adequately. However, even in the time I have been breathing the number of factories in UK has plummeted and the economy is now largely one of service. All those manufacturing jobs have gone despite Trade Unions and mostly eastwards.
Initially, the opportunity of low cost manufacture in CEE persuaded producers to invest in green field facilities supported by EU grants and local tax benefits. Now most of CEE is in the EU the position is changing again as companies look at supply on a global basis and relocate even further to the east.
Take Nokia in Romania as an example. A new factory and local infrastructure was built just over 3 years ago and the local area relied on this investment for their collective livelihood. The location was known as Nokia City rather than the geographically correct Jucu yet it was not safe. There was somebody somewhere who could build mobile telephones better, faster and/or cheaper.
They may never admit this but companies know that factories in countries with weak trade union laws will be easier to close and downsize. Try closing a factory in France!
So, it happens and sometimes to the most highly performing operations when global economy shifts present opportunities elsewhere. When a factory gets a piece of irreversible bad news what can you do as a producer to exit with conscience and fingers in tact?
1. Request someone from head office to actually make the formal announcement in front of staff to be made redundant. This will take some of the heat away from local factory management -who may indeed also be losing their roles – to minimise the “them and us” situation.
2. The business case to close the factory must contain a healthy and realistic budget for staff out placement, relocation and re-training activities. If you do not budget for this in advance then exit will be difficult and the business proposal was flawed anyway!
3. Appoint someone to run the scheme to find jobs for your people. If you partner with 3rd party recruitment agencies ensure they are only rewarded on the number of people who find alternative employment or secure 3 interviews per person, for example.
4. Unless there has been some masterful and very, very quiet stock-build it is likely you will have to keep the factory operating and people motivated. Exit packages should be linked to loyalty AND continued performance. Those who stay until the bitter end should be adequately rewarded. It is no coincidence that closing factories tend to perform at a very high level until closure as human nature adopts a “we’ll show them what they are missing” mentality.
5. Treat everybody fairly and with respect. Do not allow any “special cases” to be agreed outside of communicated terms and conditions as this will anger others and lead to rapid loss of motivation. Make exit packages transparent in broad terms depending on work level and length of service and keep it simple. Try and maintain a “we are all in this together” attitude.
Many people who have been through factory closures often come out the other side with better opportunities and prospects. Don’t dwell on the bad news of the closure and do focus on preparing for the future.
How you manage people exits will have a bearing on corporate reputation. Don’t forget, you still have to sell your products to consumers who are now your ex employees so handle with care!
Image credit: HotCellularPhone.com
Posted by Dave Jordan on Mon, Apr 16, 2012
“I like trucking, I like trucking, I like trucking and I like to truck.” Those of you who have not been on the planet very long and people who like hedgehogs will not be familiar with this Not The 9 O’clock News ditty from the UK in 1979-82. The sketch showed macho truck drivers ploughing across the country flattening hedgehogs and munching on the obligatory chocolate Yorkie. (I was thinking how much smaller the Yorkie is now and when I checked it is indeed 15g and 2 chunks lighter than when I had my own teeth!)
Some of the trucks we see on the roads today are extremely high tech, modern and comfortable. They incorporate the latest motoring technology as well as a degree of driver cab luxury of which 1970’s Yorkie Man could only dream. Tachographs have been around for ages but they are now largely superceded by satellite navigation that can track transport and shipments in real time ensuring drivers obey the rules of the road and avoid taking possibly amorous diversions they would rather keep quiet!
Load security and integrity can be monitored by a whole host of sensors keeping close watch on temperature, humidity, security seals and how often the doors have been opened and where and when. You also see some crazy looking trucks where the tops have been streamlined to cut down wind resistance and contributing to a green Supply Chain. Everything sounds hunky dory then as these modern juggernauts criss-cross the motorway network delivering chemicals, spares or finished goods for FMCG and other sectors. Well, if you look towards the east of Europe you will find that Yorkie Man and his crumbling kit are alive and well.
Yes, there are large fleets of top class modern equipment in CEE serving the internal country needs and of import and export to the EU. However, there remain a large number of smaller operators and owner-drivers who have not invested and upgraded to suit the needs of the modern transport trade. Again, there are some good examples but far too many are still using gas guzzling, fume spewing, unsafe vehicles that may be transporting your goods. Remember, when a truck delivers your product they form part of your face to the customer.
Too many vehicles – well, 1 is too many isn’t it? – are operating on less than perfect road infrastructures with bald tyres, broken lights, poor load security and on borrowed time. Couple these failings with indifferent driving skills and you have a recipe for a trucking disaster.
In particular, producer companies in those countries waiting to join the EU should take a look at how they move goods around and start thinking about forcing an upgrade before the Yorkie gets even smaller.