Supply Chain Blog

Top tips to improve 3PLP cycle counting & avoid suffering stock shock

Posted by Dave Jordan on Mon, May 31, 2010

Stock counting is such a pain that it is lucky you are only required to count your stock once per annum under most jurisdictions. If you really think it is "lucky" then you are fooling yourself. Count your stock once per year and you are asking for a huge and unexpected hole in the stock level and value. In most cases it really is "your stock" so you need to ensure you play a full part in the 3PLP process of keeping your stock under control.

Stock countingAn annual stock counting policy leaves your stock integrity open to prolonged genuine errors and more deliberate stock adjustments. This is not all about stock loss; it is more about stock accuracy. If your system indicates a stock of 100 pieces and a client orders 100 pieces but it is not there then that is a lost sale and an unhappy customer. Potentially you have also lost the value of the actual stock (plus VAT in most countries), a real triple whammy!

You need to be counting something on a daily basis if sku numbers are high, e.g. FMCG. The discipline of caring and counting for stock is not something that can be switched on and off. The 3PLP must display rigorous care and attention on a daily basis; night and day; rain, hail or shine and yes, even while the World Cup is on!

Do not be afraid of cycle counting. Initially it may sound daunting and laborious but in the long run it will help the 3PLP to keep your stock level and accuracy under tighter control than is possible via a sole annual count. The system requires counting of different sku's, or brands or aisles or columns repeatedly over a period of time. The 3PLP must ensure the fastest moving and highest value sku's appear more frequently in the count. Do not waste time counting very slow moving stock as few transactions will gave taken place since the last count.

The 3PLP must be organised to do this professionally or it will do more harm than good. Count the stock on a rolling daily basis four times a year and you will have a reasonably accurate stock record prior to the legally required count. Inevitably errors will still occur but by cyclic stock counting you can check back to the last count and you will have a far better chance of finding the error over a much lower number of transactions.

Stock counting teams must be 100% honest and reliable. For cycle counting they can be made of one 3PLP employee and or more Producer employees. The Producer employees do not have to have Logistics or Warehouse experience and some of the best stock counters are unsurprisingly in Finance roles.

For the annual stock count you need to apply more rigour. To ensure impartiality the teams must be made up of at least three parties; a Warehouse Operator, a Producer Logistics representative plus a Financial colleague who has the overall authority and responsibility for booking the derived data. (To engage in a little team development you can even task your Marketing and HR colleagues to join in!)

Avoid stock-shock by getting on your bike and insisting yourStock accuracy trough  improved cycle counting 3PLP follows cycle counting.



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Tags: Logistics Service Provider, Dave Jordan, CEE, Traditional Trade, Inventory Management & Stock Control

Working With 3PLP’s in CEE - When did you last see your stock count?

Posted by Dave Jordan on Tue, May 18, 2010
People over a certain age talk about times when they could leave their front doors open or when people found money and took it to a police station. Long-gone days, sadly. Nowadays, if you leave your front door open all you belongings will be stolen plus your dog and the actual door itself. Stock losses will be happening in your warehouse. Repeat; stock loses will be happening in your warehouse.......!

You are never going to stop packets of instant soup walking out of the gate in trouser pockets or drinks in lunchboxes or even the legendary string of sausages hidden under a dapper French beret. Yes, PLP's need to be vigilant and carry out random checks on personnel (and their vehicles) as the bottom line is this is theft and it is costing you money. However, your biggest losses may be leaving your 3PLP by the pallet load.

The troika of Dispatcher, Truck Driver and Security Guard can cost your company huge sums of money.

Ok, so the loading document states 25 FMCG pallets, the driver signed for 25 pallets and the security man "counted" and signed the paper work for 25 pallets so what's the problem? The problem is the warehouse employee loaded 26 pallets, the driver looks forward to his own mobile supermarket and the security man looks forward to a brown envelope of notes at a later date.

Ensure your 3PLP hires a seasoned and professional security company to look after what could be several million Euros of stock. In-house security operations do not work as this makes the troika formation even easier.

Stock counting

Even then the security personnel must be randomly rotated to avoid development of cosy cliques and familiarity. Be suspicious of security people who MUST work the night shift!

You would be amazed at how many major companies still allow high value stock to be shipped around without a robust truck seal protocol. Without a seal the tuck becomes an immediate mobile supermarket for the driver.  Sometimes this will be opportunistic but on a majority of occasions theft is made to order and prearranged meetings take place for removal of your stock. If you do not believe me and you have stock losses then follow a few trucks and see!

The 3PLP must apply a numbered seal to each and every truck and this must be done by a suitably senior and trusted security employee. If that seal is intact when the truck arrives at the destination then there is a fair chance the goods are there. However, beware of the delicately cut and carefully reconnected seal that is whipped off in a second at the delivery point. If you can persuade your customers to witness the seal breakage then you might stop endless the arguments about refunds and credit notes with your Key Accounts. Now, wouldn't that be nice I hear FMCG producers in CEE say!

Next time I will let you know about the role of cycle counting to avoid huge and un-budgeted stock loss values at year end.


Tags: Logistics Service Provider, Dave Jordan, CEE, Logistics Management, Inventory Management & Stock Control

10 Tips for improving performance through closer Logistics Service Provider relationships

Posted by Christian Cusworth on Thu, May 13, 2010

An open and transparent engagement with your LSP can deliver tangible business benefits in addition to a less stressed working environment; consider some of the following pointers in your relationships with LSPs.

 

  1. Information sharing: Be willing to invest in systems integration and visibility, be open and willing to share information.
  2. Partnership approach: Adopt the Logistics Service Provider as a business partner (not just another supplier) and ensure that he has a participative role in the S&OP process.
  3. Dot over burden the LSP: Avoid excessive KPIs and monitoring. Review key areas regularly, but give the Logistics manager time and space to manage his operations.
  4. Place an implant: (ouch!) Often a full time employee placed in the LSP can assist greatly in addressing day to day delivery issues and smoothing relations.
  5. Establish a feedback loop to S&OP: Often the LSP is the first to hear important customer and competitor information including in relation to performance and sales.
  6. Jointly assess market trends: An expansion upon point 5 that covers Logistics market trends and ensures an optimum route to market solution.
  7. Share the upsides (and the down sides): Reward successful performance and importantly the correct behaviour from your partners. If your key target is price or customer service, ensure that the LSP agreement is aligned.
  8. Say NO to everyone (sometimes!): This goes for all parties. If something is really impossible be prepared to say no, and likewise accept no as an answer. Don't be afraid to tell the customer no either. A strong relationship will develop through mutual trust in each others expertise. Better the occasional no then the frustration of ongoing broken promises.
  9. Stay flexible: Be prepared to update and improve working practices as you go, this provides the platform to deliver Logistics solutions that meet the ever changing needs of the business.
  10. Smile regularly. Don't forget there is more to life than huts, trucks and boxes.

LSP  performance improvement
 
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Tags: Logistics Service Provider, S&OP, Logistics Management

Forecasting – The Great Unknown?

Posted by Keith Marshall on Mon, May 10, 2010
The sales forecast is the main driver of the S&OP process. This is the critical input to the process and the successes of all subsequent planning actions are dependent on the accuracy of the forecast.

Working as a supply chain consultant for Enchange primarily in FMCG and Pharmaceutical companies, S&OP is probably the major area of project work. In these companies forecasting varies from a "good guess" to the use of the most sophisticated IT tools using mathematically designed algorithms and it has to be said that the accuracy gained from forecasting methods from both ends leaves much to be desired. So why can't we forecast accurately?

accurate sales forecasting

One favourite excuse is that the low level of maturity in the market provides a level of instability that does not allow the supplier to be able to forecast to a level of accuracy required. If customers don't know what they are going to sell in the month how can we be expected to forecast accurately? Other excuses stem from the dichotomy between supply chain "push" and "pull".
We were involved recently with a maker of specialist bathroom fittings that has a captive market and sells all it can make and therefore says why I should bother to forecast!

A pharmaceutical company that has an "ABC" product classification has stopped forecasting for all "A" products and used a replenishment method of managing factory finished goods inventory against set levels indicated by Green, Amber & Red values. When stocks of a product fall from the Green level to the Amber level a production order is raised and before falling into the Red level the order is being produced. However, for most companies we have to forecast and must forecast accurately to provide expected levels of customer service and manageable supply chain costs.

So how do we do this and provide an accurate input to our S&OP process? Well here goes - firstly we need to agree not to forecast all products - it's just not worth it so let's stick to the 20% of products that provide the 80% of our business (turnover & profit). Secondly let's consider all the internal and external inputs we can to the forecasting process. A recent brainstorming session with a client identified a possible 20 inputs which was up from the previous 8 inputs. For all inputs we need to verify the accuracy of information and the reliability of the person or organisation providing them. Thirdly not all inputs have the same importance we need to weight the inputs as to their significance to the volumes being forecasted. We now have a recipe to make the forecast and what we need to do now is to throw all the ingredients in to the pot (database) and see what comes out. If you get "gobbledegook" you will need to check the accuracy of your inputs and weighting. A good rule of thumb is to look at the "this month last year volumes" and the sales trends this year compared with last year.
Is forecasting a science or an art? Well it's a bit of both with what I think is a higher weighting towards science. What level of forecasting accuracy is achievable for my company? Well it's the value that provides the optimum levels of customer service you require at the supply chain costs you can manage.

Learn more about S&OP


Tags: FMCG, S&OP, Forecasting & Demand Planning, Keith Marshall

Logistics: Working With 3rd Party Logistics Providers (3PLPs) in CEE

Posted by Dave Jordan on Wed, May 05, 2010

If you have outsourced your logistics operation to a 3rd party logistics provider (3PLP) in CEE and you have any of the following problems:

  •  Unexplained stock losses  
  •  Poor communication
  •  Delivery delays
  •  Inefficiency
  •  Cost increases
  •  Picking errors
  •  Complaints
  •  Unsafe practices
  •  Poor customer service...
 

 

 

 

 

 

 

 

THEN IT IS PROBABLY YOUR FAULT! YES, REALLY YOUR OWN FAULT!

"Hold on" I hear Producer Supply Chain and Logistic Directors shout, "surely it is the other way around?"

The vast majority of 3PLPs are wholly unprepared for what they are tasked to do. During a tender process you are not going to hear the 3PLP admit to any short-comings or potential problems. They want your business and will do almost anything to get it. Their approach is very short term and focused only on securing the contract and not on how they are actually going to execute the day to day operational requirements.

Producers make assumptions that big-name 3PLP candidates know how to be a reliable partner. Of course they understand the KPI's and the cost targets in the tender but few know how they are going to achieve these standards until it is too late. By the time the Producer realises what a mess their logistics is in they are between the devil and the deep blue sea. Do they change providers and suffer the enormous business discontinuity or do they stumble on accepting the poor service on offer? Most soldier on slowly but surely destroying customer relationships and profits.

3rd Party Logistics Service ProvidersSo what do you do to avoid this scenario? You need a Project Manager leading your team and this must be someone steeped in warehousing and logistics knowledge. Such a role is not a place for a fresh-faced but promising junior manager; that's not fair. Nor is it a role for anyone expected to hold a line job at the same time; that doesn't work. Consider hiring an expert logistician to fill this vital role.

Do not assume the 3PLP will have the required skills and experience in place. These people are running the sharp end of your business so also make it your business to know the key people involved. Check and reassure yourself on the profiles and career records of your key partners or you will find the 3PLP is staffed with "bright young things" and even worse, family members!

Plan the transition well in advance and resist the temptation to over promise on deadlines. Position the change in an off season or one with traditionally slow sales to take some pressure off your own and the 3PLP teams. The change will not be perfect so prepare your customers and offer them the chance to temporarily raise stock levels. You could offer the extra stock on extended terms or even consignment to keep the customer sweet.

Lastly, ensure your own internal team and peers are aligned behind the objectives, plans and timelines. Sales and Marketing colleagues will rarely pass up the chance to have a bitch about supply so involve them in the decision making process about risks and contingency. You will be getting enough grief from your 3PLP and will not need unnecessary internal strife and politics.


Tags: Logistics Service Provider, Dave Jordan, KPI, CEE, Logistics Management

A solid internal S&OP process and still we failed to deliver!

Posted by Christian Cusworth on Tue, May 04, 2010
We often hear FMCG businesses complain about being let down by their Logistics providers. "They couldn't deliver "Not enough space in the warehouse" "Trucks in the wrong location", "Resource constraints" etc.

The standard response is to despatch the Supply Chain Director with a set of KPIs, service level agreements and a cricket bat (typically the bigger the manufacturer the bigger the bat), to "remind" the Logistics provider of his "commitments".

Logistics providerApologies accepted and penalties charged, "How can we make this work" bellows the manufacturer "Well there is one thing" the supplier responds timidly. "Information", "just a little information". The response that the Logistics provider would like to give may be similar to this: You change the sales plan daily and we only find out when orders are receipted, promotional quantities and skus change by the hour, 20% of orders are for delisted skus, new products arrive at the warehouse and we don't know what they are, order volumes change during picking, and by the way we have an aisle full of obsolete stock awaiting a "decision" from you for over 6 months.

After further thought and valuing his contract with the manufacturer, our Logistics manager restrains himself and offers the following: I understand that you review the Sales Plans & Marketing activity in your S&OP process.  If we where to be involved in this process I could better plan my resources and activities to deliver what you need. I could attend part of the S&OP meeting, understand the plan and advise of any constraints. We could look at mid/longer term plans, thus giving us the time to develop further capacity, increase headcount or trim back, whatever is required. In addition you may share promotional strategy, NPI information and price change data for example.

Logistics providers are not deliberately rubbish. They may not be house trained but must be integrated at a basic level within the S&OP process.

FMCG manufacturers depend on Logistics providers to serve customers, without them they fail. Sharing information with them is as important as communicating internally. The forum for this communication is S&OP.

 

Learn about S&OP

Tags: FMCG, Logistics Service Provider, S&OP, Logistics Management