Supply Chain Blog

How would your FMCG or Pharma Supply Chain cope in a crisis?

Posted by Dave Jordan on Thu, Mar 24, 2011

We have seen some terrible natural disasters recently. The large earthquakes in New Zealand and Japan have ruined lives and caused unbelievable devastation. When you add in the political unrest in several countries and the recent UN mandate on Libya you can only wonder what else is to come. Of course, the immediate priority is saving lives but eventually rebuilding takes place and some sort of life resumes albeit of varying quality and probably with a very short term view of the future.

Crisis in Business Small resized 600Crises do not have to be on your doorstep or even very large but they can affect your supply chain in many ways, e.g.

  1. Raw materials are suddenly not available.
  2. Key people may be off line for some time.
  3. Transport may be diverted to humanitarian efforts.
  4. Your product or service may not be a priority or a necessity.
  5. Product for export may be taking up warehouse space for longer than anticipated.

Your crisis does not have to be a natural disaster. How would these incidents affect your business?

  1. Your supplying factory has a fire.
  2. Your 3PLP goes bankrupt – not uncommon!
  3. Your ERP is attacked by a virus and suffers meltdown.
  4. Your email client fails to function - imagine that chaos, can you live without email?
  5. The mobile phone networks crashes – at least travelling on public transport would be quieter.

Unless you live in a known hot-spot for natural disasters you really cannot predict what crisis will rear up and slap you in the face. How will you react? How will your business be affected? How can you prepare? Taking the above examples in isolation:

  1. If you rely on a single source factory then you are in trouble and should have a 3rd party production back-up plan in place. Few companies operate country dedicated factories these days so taking supply from the in-house factory network would be a solution. However, you still have to have the contingency in place.
  2. You may be lucky enough to get another 3PLP to take over the running in the existing location but which one? If you own the lease to buildings then this should be possible and there would be no shortage of willing partners. If the 3PLP owns the lease on building then you are at the mercy of the bankruptcy process which may demand the sale of all assets to settle debt.
  3. Well, you may find that your team is already operating a spreadsheet system under the radar! Your IT licence should include some sort of fall-back facility but it would be best to check. Larger companies will be backing up data regularly in a remote location so disruption can be minimised
  4. Again, the same applies on e mail with regard to data back-ups. With so many web-based email clients available you should not be offline for too long. However, you still need a reasonably recent address database or the start up will be very slow and painful.
  5. If your mobile telephone network crashes then you can always swap to another. Not a problem for a small number of users but it is a calamity if your organisation is contracted to company x AND the handsets are network-locked. Shock, horror; you may have to use that dusty old landline set. (Why do people use mobile phones to call colleagues in the same office on their mobile phone anyway? This really does happen.)

Should all five of the above occur in parallel then there are probably more important things to think about. A degree of preparation in anticipating what could go wrong and what to do about it could give your company an edge when it matters most. Crisis management needs to be in place BEFORE a crisis!

Tags: FMCG, Logistics Service Provider, Dave Jordan, Pharma, Logistics Management

Retailer Logistic Platforms: A Help or Hindrance?

Posted by Dave Jordan on Fri, Mar 18, 2011

For years producers have sent their products to individual retails stores and endured the seemingly endless waits for an unloading slot plus the inevitable claim “for missing goods”. Why do International Key Account (IKA) retailers have so much power to frankly mess around with very often very experienced and professional producer logistics? Slick supply chains frequently grind to a halt once the retailer back of store unloading bay is reached. Unloading delays and stock loss simply postpones the arrival of producer goods on the shelf.  

This probably does not bother the retailer too much as shoppers may well decide to buy another product which has managed to make it to the shelf.  For the brand owner of the products sitting in the rain it is never- to-be-recovered lost sales.

Retailer logistic PlatformsSo, after years of criticising producer supply chains as inefficient and weak, retailers are increasingly building logistical platforms to service their own store networks. Producers are now being asked to send goods to a central platform where goods from multiple suppliers are consolidated before shipment to individual stores. Sounds sensible; instead of 20-30 trucks arriving at the retail outlet you get a smaller number of in-house or 3PLP trucks loaded with consolidated goods for each store.

These “platform” trucks take priority over those clinging onto direct delivery and sweep past the queues and up to the unloading bay. Use of platforms involves some sharing of cost to serve benefits and this usually involves considerable negotiation to ensure both side perceive a win-win. However, is it really a worthwhile win for anyone?

Producers?

  1. Simplicity. Well it would be if producers could send bulk pallets to the platform for subsequent picking per store. Instead, they usually still have to pick to order at their own warehouses before dispatch to the platform.
  2. Cost. There will be some cash saved by not delivering to a country-wide store network but that is likely to be eaten away by the adjusted credit terms demanded for the pleasure of using the platform.
  3. Reliability. There is a belief that retailer platforms will ensure goods are replenished on the shelf faster and more often. You are still dealing with the archaic store unloading bay organisation in addition to the involvement of an extra party at the platform. Why should this be any better than the previous direct delivery operation?

Retailers?

  1. Simplicity. Well, yes if you consider they only have to deal with a few trucks per day.
  2. Cost. If they have had a good negotiator they have probably gained more than they have lost in the deal.
  3. Reliability. No, I do not think so. An extra step has been added to the supply chain which really does not add any value and is simply another logistical hurdle to overcome. Success really depends on how well the platform is operated by in-house or 3PLP management.

In summary, the retailers probably see and obtain a benefit from use of a platform. For producers cajoled into sending picked pallets to sub-optimal logistics platforms; I just cannot see it…..yet!

Working with 3PLs in CEE

Tags: Route to Market, Logistics Service Provider, Dave Jordan, CEE, Logistics Management, Distribution

Supply chain services; Big Firm vs Small Niche experts?

Posted by Michael Thompson on Mon, Mar 14, 2011

In the 1970s when organisations bought PCs it used to be said that "you never got fired for buying IBM".

Selecting supply chaon consultancyI wonder if the same attitude to risk is still true in 2011 when organisations buy supply chain consultancy services?

Here are two recent examples of projects for which Enchange has bid:

A multinational pharmaceutical client wanted to improve its demand planning and S&OP processes.  It was a competitive bid between Enchange and one of the ‘Big Consultancy Firms’.  Enchange was chosen because we were able to demonstrate a successful track record on similar projects and we were “far better value for money”.

Another multinational company wanted to implement a new regional supply chain organisation.  Enchange were invited to bid with two other ‘Big Consultancy Firms’, one of whom won the bid.  We were told that the decision was based upon a degree of “comfort” that the winning firm was able to offer, despite the fact that Enchange had the technical competency and were more competitively priced.  Unofficially the winning bid was perceived as being a “lower risk option”.

Of course we are very pleased to have been chosen to work on the first project.  However, we are convinced that in the second example the higher risk option has been chosen by the client.

Talking to fellow supply chain consultancy professionals, the view is that it can be difficult for smaller specialist firms to compete with the “Big Names”. 

Furthermore, there is a common consent with fellow professionals that far from being a low risk option, hiring one of the ‘Big Names’ can add considerably to project risk, especially if the firm beings to dominate the client project.

So in answer to my own question? 

Yes.  Decisions on hiring supply chain (or other consultancy services) is still part driven by a perception of relatively low risk in hiring a ‘Big Name’.

This is a theme that I will return to in the coming weeks. 

In the meantime, I welcome any comments.

 

Image credit: HikingArtist.com

Tags: Interim Management, CEO, Performance Improvement, Michael Thompson

10 Reasons Why NOT to Evaluate your FMCG/Pharma Route To Market

Posted by Dave Jordan on Fri, Mar 11, 2011

RTM Distributor Assessment Tool The reasons and benefits for carrying out a professional review of your Distribution network are well documented. Most of the senior people I meet understand the value of such a programme but there is a sizeable minority holding opposing views.  Here, I take a brief look at the top 10 reasons why senior people in FMCG/Pharma industries are reluctant to activate an evaluation programme. 

In no particular order:

  1. Cost. Of course there is a cost to any professional evaluation but the Return On Investment (ROI) is rapid and high. If you are not enjoying your sales figures in this recession then drawing up a healthy business case ROI would be a no-brainer.
  2. Too busy. You are probably too busy spending unnecessary management time on your existing and potentially inefficient network.  Most businesses have peak and trough periods so plan well in advance and the disruption is nil!
  3. Competitors not doing it. Isn’t that the best reason to do it then? You would be surprised how many blue-chip companies have quietly carried out an RTM review and are now enjoying the benefits.
  4. Traditional Trade (TT) not important. Possibly. If you only operate in the premium sector then you are likely to be focused on International Key Accounts (IKA). A majority of companies will have significant reliance on TT but sometimes they do not give it the attention it deserves. You can get growth from TT!
  5. Would help competitors. Again possibly, but you can gain the first mover advantage and strengthen relationships with Distributors when they see the results for themselves. You may well find that competitors become less important to your key Distributors.
  6. Don’t need it. Very little in this world is perfect so why should your network be any different? If you are using multiple Distributors then it is highly unlikely they are all operating to the same high level.
  7. Done it before. Good, well done but if it is now a few years ago you would benefit from looking once more. Post recession will see those companies with leaner and meaner Distributor networks taking advantage of growing economies.
  8. Distributors cannot improve. Cannot or will not? There is a difference being unable and unwilling to do something. If you have partners who perform badly and will not buy-in to an assessment programme then you really do have to consider if they are right for you.
  9. Will upset my sales people. Good! We often find two extremes of behaviour in Distributor-Producer relationships. Some Producer teams are frightened to upset Distributors as at the end of the day they rely on them for their bonuses. At the other end of the scale we have Producers sales people who mistreat and bully Distributors. In either case this is not a recipe for success and a “shake up” could well be what your business needs.
  10. Will take time to see benefits. Not correct. In our experience a thorough evaluation and development of an action plan will provide immediate uplifts in sales and improvement in bottom line profit.

    I rest my case.

    If you are using Distributors to serve Traditional Trade you should read this E-Book if you want to increase profits! This really does work.

    Tags: FMCG, Route to Market, Dave Jordan, Pharma, Distribution, RTM Assessment Tool

    Supply Chain Blog Enchange Oscars - and the Winner is...

    Posted by Michael Thompson on Tue, Mar 08, 2011

    Lest we were caught up in the furore of the Hollywood version, it is now time to announce the winners of the inaugural Enchange Supply Chain Blog Oscars.

    Without further ado:

    1. Best Route to Market Blog – goes to Evaluate your FMCG Route to Market Distributor Network
    2. Best Sales & Operational Planning Blog – goes to Top 6 Critical Success Factors of S&OP in Africa
    3. Best Supply Chain in Africa Blog – goes to The Challenges of FMCG Supply Chain & Route to Market in West Africa
    4. Best Supply Chain in Central & Eastern Europe Blog – goes to 7 Ways to avoid overstocking FMCG distributors in CEE
    5. Light Entertainment Category – goes to The Top 10 Smash Hits of FMCG Route to Market Distribution
    6. Best Adaptation of a Supply Chain Theme – goes to Santa & Opening Presents - Why S&OP is Invaluable at Christmas

    And finally:

    Supply Chain Blog of the Year is Top Ten FMCG Supply Chain New Year Resolutions for 2011

    Thank you to all our readers who have voted.  Enchange has made a donation of GBP 1 pound to our supported charities in Kenya & Romania.

    supply chain blog oscar 2011

    Tags: FMCG, Route to Market, Humour, Michael Thompson, CEE, S&OP, Doing Business in Africa

    Essential Elements of FMCG/Pharma Route To Market (RTM) Success

    Posted by Dave Jordan on Mon, Mar 07, 2011

    Sales Rep Small resized 600With Traditional Trade enjoying something of a revival due to the extended recession some savvy companies are sorting out their RTM distribution networks. This will provide an immediate advantage over competitors and once the recession cloud blows over they will be better prepared to maximise sales in the TT and Internal Key Account (IKA) channels.

    It really is not rocket science and here is an initial selection of essential elements of a prosperous RTM network.

    Relationship. Both parties have to work hard at the relationship. You cannot switch it on and off; it is a full time job.

    Objectives. Share your objectives with your partners to ensure alignment all the way to the shopping basket. If they are “ploughing the same field” you have a good chance in the market.

    Understanding. Believe it or not but good Distributors are likely to have a better understanding of TT than your own teams. Get them involved in the decision making process and use their knowledge to your advantage.

    Training. This is not always high on the list of important actions but it should. If you want your Distributor representatives to be your extended sales team you must provide training in sales skills. Importantly, this must be topped frequently and up as new recruits arrive.

    Experience. Few are brave enough to enter a territory with a Distributor who is also a fresh face on the market. You might take a look around and see who is already established and may or may not have a complimentary product range.

    Trust. If you do not really trust your Distributor partner then do you really think the relationship will work? If you are always suspicious of them they will never perform as you desire.

    Order management. Spend some time on seeing first- hand how your Distributor sales people manage order capture and processing. This is the key moment a client decides where to place their orders so it deserves attention.

    Meetings. Do not be a stranger to your Distributor partners. Routine meetings at operational and senior level should be in the diary. Resist the temptation to send a delegate as this sends a clear message of unimportance to the Distributor. Be there!

    Access to funds. Does the Distributor have access to funds or banking facilities that allow for a reasonable level of working capital to support your business? Do your payment terms allow him to keep afloat?

    Reward. Agree sensible and realistic financial rewards and fully budget for the expense. You need to ensure the Distributor is equally fair in the allocation and payment of bonuses to his own staff.

    KPIs. If you do not measure then you cannot hope to improve. Agree a short list of highly relevant KPIs and monitor frequently with a simple “traffic light” colour coding.

    Evaluation. If you carry out a professional evaluation of your network you will see the strengths and weaknesses but above all else you will see the opportunity.

    The results? How do you know if your efforts were successful? These top 10 indications of success will help you.

    If you are using Distributors to serve Traditional Trade you should read this E-Book if you want to increase profits! This really does work.

    RTM Distributor Assessment Tool

    Tags: FMCG, Route to Market, Dave Jordan, Pharma, Distribution, RTM Assessment Tool

    FMCG Complexity: Factory Efficiency versus Operating Company Cost

    Posted by Dave Jordan on Thu, Mar 03, 2011

    Initiatives such as 6-Sigma and TPM have helped producers towards optimised output from their manufacturing networks. Line changeovers are carried out with Grand Prix slickness. Packaging components have been harmonised and rationalised. Output reliability and product quality have never been better. But how much of that output actually ends up in retailer warehouses in exactly the same condition?

    Potentially, very little! The product leaving the factory is frequently changed in some way before a consumer picks it off the shelf. The power of retailers means one will want a 6-pack while others opt for 4-packs. Promotional assembly requires the pristine external packaging to be removed (and discarded?) while skus are bundled together or stickered with “special price” labels. All of this requires time and considerable cost. So where should the complexity sit; factory or in the local operating company warehouse?

    FMCG producers in particular have slowly but surely reduced the number of under utilised factories in order to make assets sweat in large, regional facilities. Adding a discrete language label for a low volume product destined for a small developing market would upset the KPI chart so it does not happen, perhaps rightly. However this then puts the burden of market development on fledging operating companies. If the product is made by a 3rd party then perhaps this is the correct approach but usually the factory and operating company are part of the same multi-national. Yes, the two entities may well have separate legal and tax set-ups but at the end of the day all the profit (or loss) goes into one pot.

    sku complexity reductionBlue-chip companies and their shareholders increasingly rely on developing and emerging (D&E) markets for growth as mature markets struggle along with low single digit or negative growth. The common rejection of a request for product X for small country Y is that the volume is not high enough to warrant a dedicated sku or even a place on the back label language cluster. If you place the re-pack/co-pack financial and slow-to-react burden on their shoulders then the likelihood is that their volumes will always be small as they fail to gain manufacturing efficiency benefits.

    I do not suggest for example that companies should produce a special pack for a place such as the Isle of Man but there is the dilemma. Do you back slick factories and let the operating companies deal with complexity or vice versa?

    Tags: SKU, FMCG, Dave Jordan, Performance Improvement, Manufacturing Footprint