Supply Chain Blog

Doing business in Africa - 11 signs that your S&OP needs improvement

Posted by Michael Thompson on Fri, Oct 29, 2010

“We’ve been doing S&OP in our African Operating Companies for 5 or 6 years .... & it’s still not working properly....”

This was one of several discussions we have had with clients over the last couple of weeks and something of a recurring theme.

Although many of the countries in Africa present unique challenges, the principles of S&OP are the same as anywhere else.

A good place to start is looking at organisation capability and the outcomes that S&OP should deliver.

So here are 10 (plus 1) questions to consider:

  1. Customer service. Are your customers enjoying consistent & excellent service levels?
  2. Planning Processes.  Do your supply chain planning processes deliver optimum levels of service & cost?
  3. Inventory.  Do you have full visibility of stock & are inventory levels at or below best practice industry standards?
  4. Logistics & Route to Market.  Is your distributive supply chain a source of competitive advantage?
  5. Measures & Performance.  Do your KPIs quickly identify performance opportunities & guide corrective intervention?
  6. Decision Making.  Is decision making proactive & at the correct level in the organisation?
  7. Competency.  Are your people fully able to manage the demands of your supply chain?
  8. Data.  Do you operate your supply chain with one set of numbers?
  9. Systems.  Are your IT systems fully optimised to support your supply chain?
  10. Cost.  Are your total supply chain costs at or below best practice industry standards?

And in a world with limited resources:

 11. Low Carbon.  Does your supply chain have the lowest   possible carbon impact?

    If you have answered “yes” to all of the above, you have fully functional S&OP process that supports an optimised supply chain.

    If you have answered “no”, there will be clues to begin the process of improvement.

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    Tags: Michael Thompson, S&OP, Forecasting & Demand Planning, Doing Business in Africa

    Do Spreadsheets Undermine Your ERP in FMCG/Brewing/Pharma?

    Posted by Dave Jordan on Mon, Oct 25, 2010

    Despite what you might wish to believe the answer is probably, yes. You have invested heavily in brand spanking new ERP software and similarly heavily in some smart, young consultancy people to run the implementation. You will have spent some timing debating and making these choices as the change to an all encompassing and integrated ERP is a huge step and at the same time a huge risk for your FMCG/Pharma company.

    Suddenly the flexibility to back-date or correct entries is lost or at least there is a rigid and auditable procedure to follow in order to make any adjustments. Sudden uplifts in Sales cannot be slipped in unnoticed and neither can the supply shortages or Marketing tardiness with promotional activity. Everything you do in a good ERP is recorded and can be seen.

    ERP System ImplementationIf your ERP really is the only software being used to run your business then a hearty well done to you. However, in a surprisingly large majority of FMCG companies the all important role of change management has not received the required seniority or focus.  Staff who have been using spreadsheets for maybe 10 years cannot and will not stop using them just because they have been trained in a new ERP.  Spreadsheets are like a cuddly teddy at bedtime; they are familiar, comforting, not demanding and always there!

    An element of your decision to implement a new ERP was probably a supplier guarantee that people productivity and data accuracy would be improved through use of the integrated IT. In reality you will find staff operating a covert shadow ERP on the same old spreadsheets. Detailed planning, sales and allocation decisions are being made on a spreadsheet and then manually inserted into the ERP. Commonly, decisions are taken in isolation of S&OP and lack the consistency that ERP master data brings plus the all important history development for the business baseline.

    Staff efficiency and data accuracy have certainly not improved; they have worsened. The tedious “cut and paste” of data into the ERP is time consuming and fraught with error. Post ERP implementation is always a rough time for FMCG/Pharma businesses  as they get to grips with new IT but is it any wonder some stay in a continual state of intensive care?

    If you pay sufficient attention to change management you can lessen the impact. If staff cannot see the medium terms benefits outweighing the short term inconvenience then they will operate the shadow ERP.  The change manager has to clearly show what the ERP brings to people first and subsequently the company – not the other ware around.

    Of course, one solution might be to deactivate the spread sheet program on the network until ERP discipline is second nature? Now, who is brave enough to do that?

     

    Image credit: HikingArtist

    Tags: FMCG, Dave Jordan, Pharma, ERP/SAP, Integrated Business Planning

    The Challenges of FMCG Supply Chain & Route to Market in West Africa

    Posted by Michael Thompson on Thu, Oct 21, 2010

    I have been thinking about Africa this year & its particular needs regarding supply chain.  We have been working there since 1993 & it came back into consciousness during the World Cup.

    Many African countries are growing rapidly.  However, I have been hearing a lot of stories about significant constraints to growth, many of which are related to poor supply chain processes & practices.

    With this in mind we decided to visit West Africa & talk to someWest Africa FMCG Supply Chain and Route to Market leaders in the FMCG sector.  The focus of our visit was “current issues that are impacting supply chain performance in Fast Moving Consumer Goods (FMCG)”.  We spoke to a number of leading FMCG organisations and 3rd Party Logistics Providers.  What we found confirmed some of our suspicions.

    1. Distributor Performance.  Poor performance of Distributors and Transporters is causing low levels of customer service and excessive Route to Market costs.   Although there are factors that Producers cannot influence, notably poor infrastructure, there are many ways in which Distribution and Transportation standards can be significantly improved.
    2. Improving Distributor Performance.  All companies we met were looking at improving distribution and transportation through improving current processes and systems.  However, only one company was looking to do something completely different and tear up what was happening now and provide a completely new way of doing things.
    3. Logistics & 3PLs.  Some companies operated with owned warehouses, distribution centres and trucks and were not sure whether this was the best option.  Some were actively considering using 3PL partners.  However, they were unsure of the timing and were worried about the professionalism and capacity of potential 3PL partners, and the risk of a possible drop in customer service standards.
    4. Growth & Supply Chain Limitations.  All companies stated that they were experiencing market growth of between 8 - 14% but this did not translate into a corresponding level of increased profits due in part to excessive supply chain costs. For all companies a key issue was to review all areas of the supply chain for ways to improve productivity, customer service and reduce supply chain operational costs and capital invested in the supply chain. One common issue was the large amounts of finished goods held by the manufacturer compared with the relatively low levels of finished goods stocks held by the Distributor.
    5. S&OP.  All companies were operating S&OP at some level but reported not to the levels of discipline and standards required to utilise the process as the company´s one operational planning process utilising ‘one set of numbers’. There was a common need to re-launch S&OP in a new ‘Lite’ format that can be more aligned to the working culture of the region providing:
      • Improved use of IT and more standard reports available from ERP
      • Reduced and more focussed S&OP meetings
      • More discussion and focus on exceptions rather than regular issues
      • Improved accuracy of demand planning
      • Integrating Distributors within the S&OP process
    6. Planning.  Poor forecasting and demand planning is causing production planning issues by continuously changing production plans on a weekly and sometimes daily basis. Production Planning tools were generally felt to be inadequate and either not available within the ERP system or used stand-alone spreadsheets and manual workaround solutions

    Although we have based these observations on a relatively small sample of visits, we would like to hear what other companies in the region are also experiencing. 

    Oscar Supply Chain Blog

    Tags: FMCG, Route to Market, Michael Thompson, S&OP, Forecasting & Demand Planning, Logistics Management, Distribution, Doing Business in Africa

    Where Have All The Pallets Gone? FMCG/Pharma Warehousing Capacity

    Posted by Dave Jordan on Wed, Oct 20, 2010

    If you suffer from agoraphobia you should avoid visiting FMCG/ Pharmaceutical warehouses in CEE. Pre the banking and financial melt-down you would struggle to find any available space and certainly not in significant workable quantities. Not too long ago Logistics Directors across the region were searching around for space and even re-commissioning ageing facilities previously thought unusable.

    Warehouse Romania Small resized 600In tight financial times you think about what you are buying personally for yourself and the home. Sensibly you destock a little on those items not deemed essentials and those items seen as luxuries are purchased less regularly or not at all. When governments increase VAT by 5% points and restrict public sector salaries there is inevitably a lot less hard cash in the market place and this has directly affected FMCG and Pharma industries.

    Warehouses previously bulging at the seams are now desperate for business to cover costs. A majority of facilities were financed in the boom years with ROI calculated on continued growth progression. That growth level is gone and gone for a long time to come. With the limited or even negative growth we see, it is difficult to see how warehousing can be profitable in the medium term. Sure, some savvy 3PLP’s will have inserted volume limit clauses but this effect is not a long term fix. Your income is restricted to the penalty fee and you miss out on any manipulation or value-added income.

    “Every cloud has a silver lining” – the empty space presents an opportunity to FMCG and Pharmaceutical producers now! If you are nearing the end of a contract or suffering high rates on a fixed volume deal then you might consider looking at alternatives. There is no harm in checking out the market rates on offer to put pressure on your existing provider, is there?

    The big players in warehousing will survive the crisis but a number of local players also invested heavily on the growth gamble. Will they survive or will they become opportunity targets for circling private equity in the same way CEE FMCG/Pharma producer companies have?

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    Image credit: stock.xchange

    Tags: FMCG, Pharma, CEE, Logistics Management

    FMCG/Pharma Mergers & Acquisitions and Supply Chains

    Posted by Dave Jordan on Tue, Oct 19, 2010
    As we slowly (but surely?) emerge out of recession you can expect the number of M&A deals to rise. Many companies have tightened their belts and tried to ride out the economic storm but many have already gone to the wall and even more will follow. The recession is hitting local companies particularly badly in Romania where several big local players have declared insolvency.

    If the Private equity people have their wallets open then they may benefit from some rich pickings.

    While some M&A deals seem like they are made in heaven others are a disaster waiting to happen and often it is because the people signing the deal have not paid sufficient attention to the integration of potentially very different supply chains. Post merger supply chain integrationFailure to do this can turn successful companies into a chaos from which it is difficult to self-extricate. You cannot operate 2 discrete Supply Chains for long after a merger; you should plan Supply Chain integration even before the ink dries.

    Unless you are overflowing with surplus resources do yourself a favour and get somebody else to plan and execute the integration. Your existing people will still be doing their day jobs (and worrying about job security!) and will not have time to step back, look at the big picture and move the right levers at the right time.

    A few key focus areas:

    IT - is each entity running SAP or another common system? Evaluate both, chose the optimum system and migrate to it. You can spend hours arguing about which system to migrate to so providing they are top class IT solutions simply evaluate both, choose one quickly and move on.

    S&OP - In some cases it can be advantageous for neither of the merger parties to operate a robust S&OP. Implementing such a process jointly can provide a huge step forward in the integration process and staff camaraderie. If S&OP is already active there is no harm in taking the best elements from both and moulding a freshly agreed process with widespread buy-in.

    Warehousing & Logistics - Do not try and integrate these ahead of the IT and S&OP changes. There is no harm in allowing warehouses to operate in parallel for some time. Once you have your business processes stabilised you can move ahead to integration, simplification and cost saving here.

    Distribution/RTM - many different Route To Market models exist and careful planning is needed when changing any aspect of customer/consumer interaction. Do you service Key Accounts direct? Do you need all those Distributors? A merger is an ideal opportunity to thoroughly evaluate the newly combined Distributor cadre. Some will obviously be better than others but you need a scientific and unemotional tool to assess this critical function.

    Learning to live with a new partner is never going to be easy but you can minimise the stress by taking steps to integrate Supply Chains in a timely fashion.

     Post-merger Supply Chain  Integration


    Tags: FMCG, Route to Market, Mergers & Acquisitions, Dave Jordan, Pharma, Private Equity, ERP/SAP, S&OP, Logistics Management, Distribution

    New Opportunities in Route to Market (RTM): Manufacturers in Nigeria

    Posted by Keith Marshall on Tue, Oct 19, 2010

    Route to Market (RTM) is a term used for a series of innovative approaches to a manufacturers supply chain that encompasses all processes and activities dealing with Finished Goods (FG) .  Traditionally these processes have been identified as Secondary Supply Chain, Distribution and Trade Marketing among others and when you consider that when companies were managing this key part of their supply chain found that 30-40% of labour costs and numbers were attributable to this area of operations.

    In the 90’s the view that “all non core activities were not the main business of the manufacturer and “we do not have the skills” led to manufacturers appointing Distributors as third party providers to take over this crucial part of their business.   In most countries with mature markets manufacturers have developed successful partnerships with their Distributors and would see this major change in business practice has led to competitive advantage resulting in improved customer service, reduced costs, increased sales and market share.  However in less mature markets the same positive results have not been so easily found due to poor standards of Distribution Partners and the general lack of infrastructure of these countries.

    Nigeria route to market At about 150 Million people Nigeria is the most populated and due to its oil revenues potentially richest country in Africa with one in six Africans a Nigerian and over half of West Africans a Nigerian.  Nigeria has the largest consumer goods market in Africa and in Lagos one of the largest cities in Africa with plans to be the “Singapore” of Africa.

    Clearly there is a massive market and opportunities for profits and growth for manufacturers in Nigeria in the present and future.  However success does not come easy in Nigeria as operating conditions are equal to some of the most difficult in the world.  Companies face an extremely daunting task trying to implement modern supply chain solutions and achieve customer service targets in a market with a low maturity level and a crumbling infrastructure that is going to take billions of Naira to improve.  Route to Market (RTM) manages the critical supply chain processes from the Factory Finished Goods to the Customer and develops a case for the selection, development and retention of local Distributors who act as partners to the Manufacturer in delivering a cost effective and customer centred RTM customer service solution.

    Successful RTM customer service solutions begin with the careful selection of Distributor Partners where new selection criteria and assessment models are delivering a high level of Distributor recruitment and retention.  Integrating Distributor partners into the business are seen as a critical part of RTM and the Distributor’s development and continuous performance improvement.  IT is a key area of integration and the use of the rapidly expanding mobile phone network to enable real time sales and inventory information is making massive improvements in customer service and savings in inventory in trade and reducing stock shortages.  Integrating Distributors input to the S&OP process is improving demand planning trough to finial production planning bringing high levels of savings.

    Distributor Partnership models are many and varied but all have the key objectives of making the Distributor feel a real part of the business and raising the standards of professionalism and business performance.  Funding models designed in association with banks to assist local Distributor development of warehousing, vehicles and IT is an ongoing support service that is placing Distributors on a sounder footing and enabling longer term planning and relationships to be developed to the benefit of Manufacturer and Distributor.

    The blogger is a senior consultant with Enchange specialising in workable supply chain solutions for African companies.

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    Oscar Supply Chain Blog

     

     

     

     

     

    Photocredit: zouzouwizman

    Tags: Route to Market, Distribution, Doing Business in Africa, Keith Marshall

    The Top 10 Smash Hits of FMCG Route to Market Distribution (RTM)

    Posted by Dave Jordan on Thu, Oct 07, 2010

    This weeks’ top 10 looks at FMCG Route To Market Distribution - how do you get your product onto shelves? 

    Straight in at number 10 is Queen with One Vision – Work with Distributors that have a clearly defined strategy in place. If they know what they are aiming at and have made the effort to define this they are likely to be more able to support your objectives. RTM Top 10 Hit resized 600

    At number 9 this week is Two Hearts from Phil Collins – You need to establish a relationship with your Distributor. If you have both organisations “believing in just one mind” your interaction will be smoother and a firm basis for success.

    Depeche Mode and I Just Can’t Get Enough” stay at number 8 – There is nothing worse than having orders you cannot fulfill due to being out of stock. Spend some quality time with the Distributor to understand the actual baseline market demand without promotions and new launches etc.

    An old favourite at number 7 is Adam and the Ants with Stand and Deliver – Perhaps not considered the most important aspect of Distributor performance. However, if you do not know where your stock is or how to get it to shops cost effectively then this will hinder your ambitions.

    On a similar theme Space Oddity by David Bowie sits at number 6 – You may be surprised at the low quality of some of your Distributor storage facilities. Foods and drinks need to be stored in clean and tidy conditions and possibly temperature controlled. If not food and drink then your stock may be of high unit value and so theft is what you need to avoid.

    At 5 is Status Quo with Whatever You Want – Do you know how your Distributor representative takes orders on your behalf?  You should try being a fly on the wall one day and see for yourself. You may not be too happy with what you see!

    Sitting at number 4 this week is the Peter Pan of Pop Cliff Richard with Move It - Once you have secured an order you need to be sure this is processed in a timely fashion. You should check how long an order takes to be processed and acted upon.

    Another old favourite secures number 3 this week and it’s Abba with Money, Money, Money – Your Distributors need cash flow plus a modest profit to survive or it is not worth them being in business. Take care when setting your trading terms or you could cause problems which can lead to financial collapse.

    Near the top at number 2 is The Jags from the ‘70’s with (I’ve Got Your Number) Written On The Back Of My Hand – Hard to believe but some FMCG Distributors still take hand written orders on any available piece of paper. If you want to ensure accurate order capture and prompt processing then you need to invest in some sort of data collection IT. This does not have to be directly on line but of course, that would be even better.

    Finally, at the top is Reward by Teardrop Explodes – The Distributor is not a charity and needs a reasonable return on his investment. Review your support spend and ask if it is really fair and motivational. Similarly, take time to ensure the Distributor is treating his staff in exactly the same way as they are actually a key part of your route onto the shelf.

    To see how you can rise up the Distributor performance chart visit RTM Distribution and see how you stack up.

    Oscar Supply Chain Blog

    Tags: FMCG, Route to Market, Dave Jordan, Humour, Traditional Trade, Distribution