Supply Chain Blog

The Top 10 Smash Hits of FMCG Sales & Operational Planning

Posted by Dave Jordan on Tue, Sep 28, 2010

What a week it’s been. Plenty of S&OP tracks moving up the charts this week and some old favourites still hanging on – but only just.

Top 10 FMCG S&OP Hits

At number 10 it’s We Don’t Talk Anymore from Cliff Richard – A sign you need an S&OP process. When did you last talk to your Sales or Supply Chain colleague about how to improve sales? Do you spend more time fighting each other than fighting the competition?

Slowly sliding out of the charts is Road To Nowhere by Talking Heads - Working in silos with different targets gets you exactly here – nowhere!

At number 8 is Oasis with Definitely Maybe – This classically poor approach to data in the S&OP process is one to avoid. Make some decisions, get cross-functional buy-in and execute.

Always Look On The Bright Side Of Life by the Monty Python team sits at 7 – Starting S&OP means you are on the way to better days. Keep staff motivated through absolute clarity on reward and sharing of milestone successes. S&OP makes the company look good and not just individuals.

Don’t Give Up by Peter Gabriel is in position number 6 – There will inevitably be setbacks as your learn to work in an S&OP environment. Starting S&OP is a major step requiring resources from all functions. Giving up cannot be an option if you want to succeed.

At 5 is Bryan Ferry and Let’s Stick Together – A must-do for successful S&OP execution. Derive one set of numbers through close collaboration of all functions and you have a far greater chance of success.

The Beach Boys are at number 4 with Do it Again – The S&OP process cannot stop; your FMCG business is unlikely to take break so you must maintain discipline even over holidays and through peak seasons.

Reasons To Be Cheerful by Ian Dury and the Blockheads remains at number 3 - A cohesive and cross- functional S&OP leads to far greater productivity, happiness and job satisfaction at all levels.

Pushing hard to topple the number 1 is Can We Fix It from Bob the Builder – Inevitably the reality of market dynamics will not match your best laid plans. How you address these challenges through S&OP is what defines a top quality process in a top quality company.

And for the 10th week in a row at number 1 is still I’m A Believer  by The Monkees – The essentials mantra of the head of any business seeking to outperform competitors. If the company leader does not buy into S&OP then it will not work, fact!

That’s all from the FMCG S&OP top ten. Join me next time for another version of the Supply Chain chart toppers.

 

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Tags: Dave Jordan, Humour, S&OP, Forecasting & Demand Planning

Selling via FMCG/Drinks Distributors in CEE: That’s easy, isn’t it?

Posted by Dave Jordan on Mon, Sep 20, 2010
No.

If this was true there would be no space on the beach as it would be full of CEE Producer Sales Directors. Leave the Marketing guys to enjoy the beach.

Does your Distributor have a clear understanding of their potential universe? Small Distribution and Route To Market operations can fall into the trap of being content with a certain level of business with a consistent list of clients. This is very risky as competitors will eventually find a way into these clients leaving your Distributor with insufficient turnover to survive. However, defining the available universe is your responsibility and this can be achieved either internally or through an expert 3rd party agency. Once you know what the potential is, you and the Distributor have a valuable channel-wise database allowing you to deploy resources in the appropriate direction.

Some Distributor Sales Reps I have seen in CEE are "not fit for purpose". This is not being disrespectful to the people involved but it is often a reflection of how Distributors behave and how their people are rewarded. Perhaps the most common failing is in the area of training. Not everybody can sell; fact. You cannot take a person off the street, give them a box of business cards and set them up as a Sales Rep. Nor is it sufficient to send the new recruit out with an old hand for a few days. You need to ensure Distributors have a robust induction plan which includes professional sales training. This can be delivered internally but the important point is that it is delivered and it is repeated at agreed intervals.

Allowing an ill prepared Sales Rep to visit a client on your behalf is at best a waste of time and money. The Distributor Sales Reps are actually your face to the customer so you need to ensure they are skilled and able to do the job. They need a checklist of how to manage a sales call. A simple but clear sales call protocol will ensure your Distributor Sales Rep receives a good reception by the client and has a decent chance of closing a sale.

 Distributor sales representative - looking for customers

Image by HikingArtist.com published on Flickr 

One simple question to ask is the rate of Distributor Sales Rep turnover. A solid and reliable business would expect to see 8-12% staff turnover through natural wastage and external job opportunities. There are examples in CEE where this number is over 50%. Why? Well, let us first assume they are indeed trained for the task. How are they being rewarded and is this in line with your own reward to the Distributor? In these difficult times it is not unusual for Distributors to take your incentives and divert them away from the rewards offered to the field teams. It is your money so make you need to reassure yourself the funds are being allocated in the way you expect. Nobody is going to stay with a company if basic cash promises are broken as the market for good Sales Reps remains competitive in CEE.

To extend your education on your Distributors you must spend some time in the field with their own Sales Reps. Do not rely on what you are told by your own staff as their view is likely to be one of two extremes; "they are rubbish and that is why I do not make my numbers" or "they are wonderful but only because I am too"! Ensure your visits are unannounced to avoid the inevitable "stage managing" of what you see and do.

Get closer to your Distributors, avoid 100% delegation to your Sales Managers and you might just get sand between your toes occasionally.


Tags: Route to Market, Dave Jordan, CEE, Traditional Trade, Distribution, RTM Assessment Tool

Senior Management Commitment Works for Successful S&OP

Posted by Keith Marshall on Mon, Sep 20, 2010

Research and experience has shown that where companies view Sales & Operational Planning (S&OP) as a supply chain process and planning system it invariably fails to deliver the expected results and benefits. Conversely where S&OP is seen as the company planning system that all other company plans are subservient to it really does work and "does what it says on the tin" and delivers the benefits we always expected.

It is always stated in research papers, training and consultancy proposals that top management support is essential for successful S&OP. But we need to go further than that. The top management must really believe in S&OP and continually demonstrate their support by being totally involved throughout the process - not just for the first few months but continuously and were others may question the process the top management must be the champion and meet head on any issues that threaten the operation and validity of S&OP. Just lately I've heard the words "fanatical" and "obsessed" for managers describing their senior management's commitment to S&OP in companies where S&OP really works.

 

S&OP meeting

In the design of Senior Management KPIs S&OP performance should be a high rating objective not just to maintain the S&OP process but to further develop the accuracy and discipline of the process. These KPIs should then be cascaded through to each level of the organisation. The company strategy developed by senior management to meet the shareholders need must also reflect the paramount importance that the company pays to S&OP at the highest level.

Look at your MD's KPIs is S&OP there?
Look at your company's strategy statement - does it include reference to S&OP?

One area of danger to S&OP is the current trend of senior management career movement which seems now to be as little as 3 years in post especially with multi-national FMCGs. The good work of the previous senior management team cannot be left to the usual handover methods. S&OP should be part of a systematic and phased handover period between the incoming and outgoing managers. As well as the physical and process handover the belief and involvement must be through seamless continuity.

Senior management also have the responsibility to continually revitalise S&OP and update the way it works and the results it produces. This can be done by internal reviews, external benchmarking and use of consultants who have experience with many different companies across different industry sectors.

This is the second in a series of "Blogs" on the topic of S&OP by the author. Please feel free to comment and share experiences. Further "Blogs" will continue to provide more methods & approaches towards S&OP and explore what makes S&OP one of the most effective business processes.



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

Romania Route To Market (RTM) : Relationships Matter

Posted by Dave Jordan on Mon, Sep 20, 2010

There are many reasons why all sorts of relationships fail even after several years of partnership. Boredom, infidelity, money problems etc, etc but look at it a different way and consider what is it that makes relationships last and prosper?

 balancing distributor relationships

Photo by dalehugo published on Flickr  

Lasting relationships tend to be those where both parties know exactly what is expected of them, how they are monitored and the resulting reward and/or penalty. If you keep putting the dishes in the wrong cupboard and nobody tells you this is wrong then the bedroom is likely to be a frosty environment. However, if you are gently told where to put the crockery then a bedroom thaw is a possibility.

Producer - Distributor relationships in Route To Market (RTM) in Romania really do need hard work and constant attention. If the chosen Distributor is going to be responsible for getting your product in front of consumers then you must take time to find out who they are and what makes them tick. In even the most basic relationship you have to meet; at the right level and often. If the only Distributor contact with your company is at the level of the local sales rep then you are heading for trouble. Fix routine review meetings in the diary and ensure attendance at a suitably senior level and most importantly, make the discussions two-way and listen to each other! Distributors are actually closer to this business channel than you ever will be so take the time to use their knowledge for mutual benefit.

Right from the start, work with a Service Level Agreement (SLA) with your Distributor. This is not a one-way process or your SLA will simply appear to be a list of your demands. Work on it together and agree a document that defines the terms and conditions of your relationship. The SLA must contain measures of how your own operation will be assessed and measured. How much effort is wasted arguing with Distributors about what they should and should not have done while quietly ignoring internal failings?

Agree a set of relevant KPI's on which to measure the performance of both parties. If you do not measure performance in a clearly defined manner how can you possibly hope to evaluate and improve? Similarly, avoid irrelevant KPI's which inevitably take time and effort to calculate and lead to frustration. We have all suffered from repeated Head Office data requests which seem obscure and rarely generate any useful output. A concise set of KPI's will take all the pain out of reward and compensation debates and provide both parties with transparent and mutually agreed operational objectives.

Finally, share the successes and share the failures; this is part of a lasting relationship. Ensure a clearly communicated and shared approach to risk and reward and you have a head start in your Route To Market effort.

Tags: Route to Market, Dave Jordan, KPI, CEE, Distribution

Update your Supply Chain or risk ending up in Pennsylvania!

Posted by Dave Jordan on Mon, Sep 20, 2010

Before you ask, no there is nothing wrong with Pennsylvania. I found it to be a great place with the most helpful tourist office I have ever visited. Bear with me and I will get back to this later and also introduce Polly.

We have always done it this way” is one of the most frequent retorts when people are confronted with change. If you fail to keep up with change in any aspect of life you don’t even stand still any more, you go backwards! The same is certainly true in modern supply chains. Not too long ago many companies did not even have supply chains and muddled through with a variety of ill defined roles reporting into all sorts of unrelated functions.

Supply Chain DirectionThe rate of change necessary to keep your supply chain up to date is increasing. So, you implemented a new ERP in 2005? I would bet many companies are still working with the same structure, processes, KPI’s etc and this inevitably delivers inefficiency and waste. Staff may well be scared of change but which is worse; clear change for the better or mind-numbing frustration at work?

Supply chain leaders need to routinely stand back and take a fresh look at how they are operating in support of their business objectives.

  1. Are processes documented and in line with the ERP design AND business needs?
  2. Do your people have the skills and competencies to support the business? Do not expect them to tell you! (Who is in your supply chain team?)
  3. Is S&OP really working as it should or has the company slipped backwards to the multiple numbers game in target setting?
  4. Are you measuring the right KPI’s allowing for fair and accurate individual and departmental appraisal? Are they still relevant? Do you need to raise the bar a little?
  5. Does your 3PLP still provide the best service possible or have they also slipped back?
  6. Is your Route to Market network appropriate?

The full list is lengthy but you can be sure it encompasses all aspects of the supply chain. Failing to address the need for change is like watching a James Bond DVD on a black and white TV! You are not getting the full benefit of the resources available.

Aha! Polly. Polly guided us on our tour around USA recently and did remarkably well. We did get a little confused over miles and kilometers but all in all Polly provided great customer service. However, I was aiming for West Point when I saw the sign “Welcome to Pennsylvania”. I was not supposed to be in Pennsylvania and not least because the car hire company was not insured there. On challenging the car hire firm later it became clear that they had not updated the GPS software for a few years and Polly took us down a road that was not in her memory - “We have always done it this way”.

 

Image credit: svilen001

Tags: Logistics Service Provider, Dave Jordan, Humour, ERP/SAP, Traditional Trade, S&OP, Forecasting & Demand Planning

Manage Distributor/Route To Market (RTM) Networks:The Full Package!

Posted by Dave Jordan on Thu, Sep 09, 2010

 As the recession struggles on and governments continue to drip feed “corrections “ into national economies, e.g. VAT rises 19-24%, FMCG markets are spluttering. Discretionary spending is under tremendous pressure and items previously seen as simple necessities are becoming luxuries.

Shrinking FMCG Market resized 600

Take the humble beer, for example. The most popular way for workers to signal to end of the working shift in Western Europe and as you move eastwards beer begins to pop up considerably earlier in the day! Premium brands have certainly taken a knock but those at the lower end of the supping spectrum are also suffering.  See Beer Sales Droop. Eating out is in decline and this is contributing to a difficult period for brewers. I am not picking on beer; I just like drinking it!

Just think about your own product range and consider how many brands and/or sku’s are necessities. Yes, there are many items we must have to get through our daily lives but the amount of choice available at all price points means competition for the available cash is tough. The best financial brains tell us we will have such conditions for some time to come so what are you going to do about this?

One fact above debate is that when your product is not on the shelf you are going to miss out on precious pennies. Some big-name FMCG companies still underestimate the importance of Traditional Trade. Sure, the % of TT business may well be dropping but it still represents a huge market opportunity for a competitor to steal. (Surely one day the price of petrol and cat tax will also diminish the desire to make a weekly pilgrimage to out of town mega stores?).

Sort out your Route to Market Distributor network and do it now before it is too late. Here is some useful background to read. 

Finally, take a look at this free evaluation tool and see how your current network stacks up against these standards.

Free tool to get you started

Final, question; if you have challenges in your FMCG Distributor network why are you still reading this blog?

Oscar Supply Chain Blog

 

 

 

 

 

Image credit: HikingArtist.com

Tags: Route to Market, Dave Jordan, CEE, Traditional Trade, Distribution, RTM Assessment Tool

Romania Route To Market (RTM): Your Demand Or My Target?

Posted by Dave Jordan on Thu, Sep 09, 2010
"Yes, I know what you said you could sell but this is my target!" An all too familiar "demand discussion" between Producer Sales Rep and Distributor Manager. The Producer may operate a tight S&OP process but this commonly falls flat on its face with this type of interaction with Distributors.......that is, if they are involved at all!

If your Distributors account for say 30% of your FMCG business then they need to be an intimate part of demand creation and measurement or you are simply giving business away to competition. McDonalds make most of their sales inside the restaurant but do you think they pay less attention to the smaller Drive-In sales demand?

When size matters

 

 

 

 

  

 

 

 

However simple or complex your business you need a tool to capture market demand at Distributor level. (Let us assume the Producer has a suitable in-house S&OP to consolidate all demand signals into one number across all sectors!) The tool does not have to be sophisticated but it has to be agreed between the parties as the only reliable indicator of expected demand for the period. I am not suggesting that the Distributor presses a button, sends in his Demand Forecast and that is the end of debate. It should be the start of a two-way discussion based on shared data AND decision making to agree a deliverable sales plan leading to an internally deliverable supply plan.

Ensure Demand Forecasts are under-written by staff with direct trade interaction and experience and while no demand forecast is ever perfect you will not go far wrong. Consider how powerful it is to have a good Demand Forecast with the stamp of the Distributor AND the Producers Sales Rep. No double guessing, no hedging and no pointless debate after the month end. Sure, there will be differences to talk about but as market assumptions are agreed in together in advance then at least you have a basis for discussion about what went wrong and how to improve for next month.

As ever, monitoring is important as you cannot improve what you do not measure. The Distributor should be monitoring his demand forecast accuracy at SKU level. Ok, if you have a few thousand SKUs this might cause a drain on resources but you can monitor those key SKUs which drive the business. "If SKU X is out of stock we do not worry but if SKU Y is out of stock then it ripples all the way through my own business and into the Producer." The earlier a variation in demand signal (up or down) is transmitted to the producer, the better for all.

Lastly, the old chestnut of promotional activity. If you really are working in close collaboration with your Distributor then you will already be discussing the timing and effects of trade and consumer promotions. However, I consider this a rarity in Romania. Not only should this discussion include Distributor activity but be honest and brief them on parallel activity with Key Accounts and C&C etc. If the Distributor really is your partner then he needs to know what else if happening on his patch which is likely to impact his own and therefore your sales.

Move on from "you did not sell what you said you would" to "OUR Demand Forecast was good last month but let us see how we can make it even better". This simple mind shift can add to your bottom line without the need for investment.

 

Image credit: HikingArtist.com on Flickr  

Tags: SKU, Route to Market, Dave Jordan, CEE, Traditional Trade, S&OP, Forecasting & Demand Planning, Distribution

Fourth Party Logistics (4PLP); what this means for your Supply Chain

Posted by Dave Jordan on Tue, Sep 07, 2010

While third-party logistics outsourcing is accepted business practice (though not without risk), corporations are now looking to outsource to a single partner who will assess, design, build, run and measure integrated comprehensive supply chain solutions on their behalf. This evolution in supply chain outsourcing is Fourth-party Logistics or 4PL.

A 4PL provider is a supply chain integrator. The 4PL assembles and manages all resources, capabilities and technology of an organisation’s Supply Chain and its array of providers.

Fourth Party Logistics

An experienced and reliable 4PL provider will bring value and a reengineered approach to your organisation as it will manage the logistics process, regardless of what carriers, forwarders or warehouses are used. As the centralised contact with the client, 4PL has overall responsibility for logistics performance and the ability to impact the entire supply chain and not just single elements. Consider how many discrete discussions you need to have in your company to ensure your product gets into consumers hands!

Like Business Process Outsourcing, a 4PL solution aims to manage people, process and technology. Importantly, 4PL outsourcing must not be seen as a pure cost reduction issue and if it is considered as such then it is prone to failure. Adopting a 4PL approach brings a different perspective, knowledge, experience and technology to the existing in-house function. Successful 4PL partnerships will see both parties work side by side motivated by mutual success and reward.

Some of the 4PL benefits include: access to a broader base of potential suppliers; back-end system integration; increased market transparency for goods and services; standardisation and automation of order placement; reduced procurement costs and order cycle times. If your business and people are sufficiently mature you might also integrate the 4PL into the S&OP process. Think how powerful that could be!

Organisations are exploring this solution because it can improve their own bottom line through increased and sustainable business efficiency. A word of warning; do not go down this road unless your existing supply chain is already robust AND people are sufficiently experienced to cope with a very different way of doing business.

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describe the imageFMCG Producers!
Why not take a critical look at how you manage your Distributors and how they manage your business on your behalf! Learn more!

Tags: Logistics Service Provider, Dave Jordan, S&OP, Logistics Management

FMCG Inventory/Stock Levels can cause chaos in your company

Posted by Dave Jordan on Wed, Sep 01, 2010

If you seek to run a slick Supply Chain you should aim to have your key sku’s in one place where they are easy to find. These 3 insights into holding too much inventory are now in one place.

Do you agree? If I have overlooked something please do leave a comment.

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Free RTM assessment tool

Tags: Brewing & Beverages, FMCG, Dave Jordan, CEE, Inventory Management & Stock Control