Supply Chain Blog

Sales & Operational Planning (S&OP) in FMCG, Brewing, Pharma

Posted by Dave Jordan on Tue, May 31, 2011

Did anyone hear the loud clanging noise on Tuesday around 14.30? The sound was similar to a very large church bell being struck by a huge iron bar and that bar was in the hands of Arnold Schwarzenegger. Arnie was also in a very bad mood! The noise bounced around and around the room hardly losing any intensity. That resonating “boing” was followed by a much less impressive although definite clunk as my jaw dropped.

S&OP MeetingHaving spent a week walking through a certain company S&OP process I rolled up at the CEO’s office to provide a tactical heads-up before presenting our findings to the wider management team. If you get the CEO on board with any criticisms or challenges you are about to expose, the closure meeting runs a little easier. We discussed what I had observed which was typical for most companies who think they run a robust S&OP, e.g.

  1. Working with more than 1 set of agreed numbers.
  2. Lack of KPIs focussed on improving service, e.g. forecast accuracy by sku.
  3. Patchy meeting attendance.
  4. “It’s a Supply Chain problem.”
  5. Blame–storming.

I could go on and on, unfortunately. The basic elements of an S&OP process were present but there was a lack of cohesion in the process and buy-in from key people. Essentially, everybody was going through the motions, ticking the right boxes but not improving. This company even had an internal corporate audit on S&OP and came out with flying colours. How? Well, it is a bit like when a big global boss visits an FMCG or Pharmaceutical operating company head office - you can always smell fresh paint!

So, back to my meeting with the CEO of the FMCG company in question. There was plenty of nodding and frankly not too much surprise and certainly no push back or denial. Then the bombshell came, “It is a complicated process so I leave all that S&OP stuff to a bright young thing in Supply Chain".

Slowly and calmly Arnie stood, took off his jacket and picked up his iron bar. After a brief flex of his considerable muscles he stood back from the church bell………

 

Image Credit: HikinArtist.com

Tags: FMCG, Dave Jordan, Pharma, KPI, S&OP, Forecasting & Demand Planning

Concise Role Definitions in FMCG, Brewing, Pharma Supply Chains

Posted by Dave Jordan on Thu, May 26, 2011

Relaxing businessman Supply Chain resized 600The average job description will run to a few pages of A4. Even after you have read your own it may not be completely clear what you should be doing. Here I have tried to encapsulate a selection of supply chain roles and processes in just a few words using only the available initials.

Supply Chain

Some utterly professional people leading you can help achieve incredible numbers.

Warehouse

When a rack empties hurriedly often uplifting service excellence.

Planning

Predicting local and national needs in new goods.

Logistics

Loading our goods in stylish time improves customer service.

Source

Seeking opportunities usually reduces cost exposure.

Manufacture

Making amounts not usually forecast accurately- complexity takes up resource estimates.

Forecast

Find one reliable, easily collated and stable trend.

Deliver

Daily enterprise leaving items via every route.

Customer Service

Can uniquely see the objectives - meaning efficient response! Seeking extra revenue vested in customer experience.

Enchange – well I had to throw this one in!

Executing new challenges has advanced numerous global entities.

You catch up with other light-hearted posts here. Take some time out of the daily hassle and stress and relax a little.

Tags: Customer service, Dave Jordan, Humour, Supply Chain

Reducing Cost in FMCG, Brewing, Pharma Businesses

Posted by Dave Jordan on Mon, May 23, 2011

Picture the scene in many a boardroom; a note has come from HQ telling the boss to reduce costs as globally the annual set of results is not going to look pretty. Why do all the board directors then look at their Supply Chain colleague? Of course there are significant costs associated with a modern Supply Chain but you cannot make significant savings from that infrastructure overnight.  Supply Chain budgets very rarely contain any discretionary spend unlike the bank busting sums in the pockets of Sales and Marketing!

Cost reduction resized 600As is usually the case, let us assume the SC team is constantly looking at ways to reduce costs in factories, logistics networks, 3PLP, planning etc. What other costs could be challenged without causing discontinuity in the company?  The SC usually leads any cost efficiency projects which I think is fair enough as the discipline is familiar with cost control and challenge.

Here are 5 areas I feel are always worthy of visiting when looking for “low-hanging cost fruit”.   

  1. Old promotions, soon to expire stock, old label stock, slow movers. All companies (particularly FMCG) will have some or all of this and for various reasons. If you do not routinely address this you will be hit with an unexpected loss at year end or the nest stock count. Bring the list to the board meeting and hold the correct people accountable for creating the stock in the first place. Sell it and stop paying for storage too!
  2. Promotional activity. Is it all really necessary and does it actually payback? Do you know how much of that pristine packaging assembled in the factory is destroyed in the name of the latest promotional whim? Plastic film, out cases and trays litter the floors of repacking operations everywhere. You have paid for that original packaging and now you are paying someone to destroy it and fresh packaging. Just think of all those Dollars/Euros that could be spent in a much more customer focussed way or simply saved? When you take into account all the extra labour and packaging just how much value is really generated for your business?
  3. How many skus do you need? Do you know how many your business has when you include all the promos and specials? Every single sku costs money to source, transport and store. Plus, the more you have the more likely you will generate the problem discussed in point 1 above. Analyse your current portfolio and see what is really driving value in your company. Conversely, see what is sucking value out of the business. Every extra low value sku clogs up the wheels of your Sales & Operational Planning (S&OP) process.
  4. Telephones and internet. Always a difficult area as it can be perceived to be petty but it is usually an uncontrolled drain on cash. If you have provided staff with internet access on laptops or Blackberrys you can be sure you are funding personal surfing time. Unless free telephone calls are part of the remuneration package why should the employee not pay for them? In my experience significant cash can be saved through just a little prudence in this area. Do you leave your telephone network open at night with unlimited international dialing access? Also, the next time you see 2 people in the same office talking to each other on company mobile phones…….
  5. Discretionary spend. Don’t make it discretionary! If budgets exist for team building and entertainment you can bet your life those funds will be used up. Do you really need to “team build” every year? These occasions tend to be considered as a perk of the job and I am not convinced of their value when they happen so often. If team building sessions are to go then you should ensure this applies to all departments. Letting the marketing “team building” slip through will simply demotivate the rest of the company.

Achieving visible buy-in at the top table which is cascaded to teams will generate the best initiatives. Paying consistent attention to these and other cost areas might save you from the ultimate saving of issuing redundancy notices, possibly your own!

Tags: SKU, Dave Jordan, S&OP, Cost Reduction, Inventory Management & Stock Control

Supply Chain and S&OP Compliance & Assessment

Posted by Michael Thompson on Wed, May 18, 2011

My earlier blogs about supply chain and S&OP compliance have prompted a number of further discussions.

I love being compliant resized 600One particular issue that has emerged is an area of potential confusion. It came to light during a recent discussion with a Supply Chain Executive of an FMCG multinational. 

SCE (Supply Chain Executive) - You have mentioned the need to produce a checklist based upon an operating model. Indeed this was noted as “Step 2” in one of your blogs.  We tried this and it looked very similar to the list that we previously used to assess our supply chain.

Mike  Good. It is supposed to. However, there is a significant difference between a ‘deep dive’ assessment of the supply chain and a regular operational compliance check.

SCE  Please explain.

Mike  A supply chain assessment is a periodic event that assesses the status of the supply chain and can, for example, measure supply chain maturity.  It is akin to an audit and typically takes between one and three weeks for a operating company, depending on the level of detail. 

A monthly compliance check is a simple and quick method of assessing the extent to which there is compliance against, for example, a set of supply chain process standards that have been developed and deployed.

SCE  I can understand that.  But you said that the two are similar. 

Mike  Yes. The two are similar in so much that they should be closely aligned. Ideally the compliance checklist should be fully supportive of the supply chain assessment originally used, assuming that you wish to measure compliance based upon the original assessment (audit).  The difference is that the compliance check is a simplified and more ‘user friendly’ version.

SCE  So at one level they could be almost identical?

Mike  Yes. For example, you may wish to use the same key activities (e.g. demand planning) and the same checklist criteria within each key activity but please remember that the compliance checklist must be simple.

SCE  How can I make the monthly checklist simple if the original assessment was far more complicated?

Mike Try this test.  For each item on the checklist, make sure that it can be answered with a “yes” or “no” response.

SCE  Sounds straight forward.  Let me try.

Mike  It is not too difficult but does need to be carefully thought through.

SCE  Leave it with me ....

S&OP Compliance

 

Read other posts regarding Complience HERE.

 

Image credit: zazzle.co.uk

Tags: FMCG, Michael Thompson, S&OP, Forecasting & Demand Planning, Compliance

FMCG, Pharma, Brewing Co-packing and Re-Packing Management

Posted by Dave Jordan on Tue, May 17, 2011
Whether you call it co-packing or re-packing this involves the further manipulation of a finished and complete sku. Look around the shelves and the evidence of extra expense and work is displayed by special stickers, multi-packs and banded promotions amongst many others. The impact on your Supply Chain is potentially huge.

Wincanton_Copacking_SmallI will park the question of the value (or waste) of these activities for another day but where is the best place to carry out such operations? When you consider that some blue-chip FMCG producers co-pack/re-pack a majority of the volume coming out of their factory gates you realise this is not a small issue. How many products carry the original barcode into consumer’s houses? Not many!

At the producing factory?From an operating company (OPCO) perspective this provides the least complexity downstream in the chain. For factories seeking higher and higher efficiency and asset utilisation this can be nightmare of cost and complexity. Even if the factory is part of the same company many will refuse to entertain “abnormal” requests from sister operating companies.

If an sku requires a label that can be applied online without affecting speed then you might be ok. However, anything like banding together 2 different sku’s is unlikely to get a positive response. In any event, the 2 promotion-bound skus may be produced in different factories, countries and even continents.

At the OPCO warehouse? The stock is certainly closer to the final market destination so this makes sense but there are drawbacks to what providers call “added value services”. Seldom is a third party logistics provider (3PLP) set up to operate what is essentially a mini factory. If promotional volumes are low then you can deal with them on an ad hoc basis but where levels are higher you need a factory mentality and facilities and this is not common in 3PLPs.

Stock control is vital and a good quality WMS with added value functionality is a must. Knowing what product is where requires meticulous attention to master data detail. What goes into a re-packing location will come out with a completely different bar code – chaos prevails otherwise.

You are essentially locked into your 3PLP and he may well take advantage of that when it comes to pricing the work.

Get this wrong and you will suffer unexpected and rising costs, stock “shrinkage” and the resultant drop in Customer Service Level.

At a specialist 3rd party? They do exist and if they are set up well and sensibly staffed this can work. You can expect a professional service and a well managed operation. Quality and flexibility will be higher and costs can be keen as the assets are not dedicated to a single company. Such a 3rd party is likely to have a wider portfolio of promotional options available and will invest in plant against a sound business case.

Of course, the downsides frighten potential clients away. You have the added cost and hassle of moving stock in and out of your logistical 3PLP and the associated longer lead times.

At the point of purchase (POP)? No, not as crazy as this might sound. If you can manage to get the same unadulterated sku from the factory gate to the shelf then you are very lucky and secondly, you probably operate a slick chain.

Obviously, you will not be able to carry out the full menu of promotion assembly and display but this route does provide a tactical advantage that can catch competitors napping. An unannounced special price sticker or “buy 1 get 1 free” (BOGOF) promotion can pay dividends. You need the cooperation of the retailer but when there is mutual benefit, why not?

A blend of all 4 sounds like quite a unique opportunity.

CTA 3PLs in CEE 0.03 Small resized 600

Image credit: Wincanton

Tags: Logistics Service Provider, Dave Jordan, Manufacturing Footprint, Logistics Management

An FMCG Success Story; Focus on Customers and See the Benefits

Posted by Dave Jordan on Mon, May 09, 2011

Once upon a time there was an FMCG company that I will refer to as “Foresight”. “Foresight” had spent many years and many dollars creating an acknowledged slick inbound Supply Chain.

  • Top class global buying
  • Flexible factory network
  • State of the art ERP
  • Rigorous S&OP

Slick inbound Supply ChainWith all those important boxes ticked they must be successful...but they were not; not even close. In their peer group they were not number 1, top and bottom line growth was getting harder and harder. Throw in an untimely recession and the consumption of their product range plummeted – double digit style. A big FMCG business and quite a few personal reputations were not looking pretty.

The problem was a surprising lack of focus on the customer end of the Supply Chain. Both International Key Accounts(IKA) and the Traditional Trade (TT) were being poorly serviced.

A lot of hard work upstream was being wasted through inefficiency and actually, ignorance. The situation had existed for a number of years but as the same malaise was common in the industry nobody could see the benefit or indeed the need for “getting ones act together”. “Last amongst equals” was hardly a motivating and compelling business proposition for an international big name.

Seeking external expert assistance “Foresight” started out on an adventure that would change the way they approached business at the customer end of the chain.

Customer Service.   This was something “Foresight” thought it was already good at providing but critical aspects were lacking:

  1. Customer Service responsibilities were fragmented and lacked clear and unambiguous leadership.
  2. “Customer Service personnel” had received no training in the subject - nobody really wanted to take responsibility.
  3. “Customer Service” was actually limited to invoice issuance. Proactive interaction with customers and problem solution were not in job descriptions.

    This hardly projected an image of a caring “Foresight” and this was a huge risk considering the increasing power of the retailers…. 

    Route To Market (RTM). “This is under control for TT and it seems to work”, however RTM was in the Sales black box and that box needed opening and shaking upside down vigorously!

    1. The Distributor RTM network had been in place for several years and was decaying. “Foresight” salesman interaction with Distributors was far from a win-win relationship.
    2. Several Distributors were simply incapable and/or ill equipped to represent such a major company. Some actually did not wish to be involved.
    3. “Foresight” did not know who they could rely on in their network or how large and obvious opportunities could be targeted.

    Bonus linked sell-in was the focus and the remaining steps to the consumer were ignored at “Foresight” level and left in the hands of some indifferent distributors.

    The cures were not simple or quick but they were effective and the payback was fast and sustained.

    Customer Service Centre“Foresight” now operates a centralised Customer Service department looking after customer needs in a standardised and caring manner. Phone calls are answered by someone who wants to help and the customer is not passed from pillar to post trying to find someone interested in their problem. Retailers now see CS staff face to face as they proactively take steps to understand the needs of both sides of the partnership. The Retailer office was once “sales only” and off bounds to other departments but not now and the benefit is clear and significant.

    In RTM, “Foresight” carried out a comprehensive assessment of their distributor network making evaluations of all aspects of each distributor’s organisation. The strengths and weaknesses of each partner are now known and understood. “Foresight” now knows where there is receiver capacity to take more responsibility and a leading role in market deployment. Similarly, they also know to tread carefully with a number of distributors who are struggling financially or simply not equipped to meet expectations. “Foresight” efforts are now focused on those areas providing maximum opportunity and reward. The “one size fits all” approach has gone and distributors are managed as important partners.

    In combination these changes have transformed the business and success has been quick to materialise.  “Foresight” enjoys a leading position in its sector while competitors scrap around trying to find growth that is there but they cannot reach.

    For “Foresight” at least, they really are able to live happily ever after!

    Tags: Customer service, Brewing & Beverages, FMCG, Route to Market, Dave Jordan, Performance Improvement, Distribution

    FMCG Beverages and the World’s Greatest Drinks Salesman!

    Posted by Dave Jordan on Fri, May 06, 2011

    As the snow ploughs, sledges and gloves are packed away for another year in the northern hemisphere we enter a key period in the FMCG industry.  Beverage consumers are about to get thirsty or at least large numbers of drinks companies hope this is the case.

    FMCG sale resized 600With a typical summer season there is only a limited amount of throat thirst to quench so who will win? The sun does not work to a timetable and can appear at any time so you need to be ready, flexible, well stocked, primed to act and serve. Of course, the world’s greatest drinks salesman can also disappear behind an unexpected cloud and leave you and/or the distributor with a bit of an excess stock problem

    The problems you face include not having your product available when the thirsty masses invade the watering holes. When someone with a red face and a red chest (except where his string style T-shirt was) steps off the beach and pops in for a drink and your product is not available he is unlikely to say “Oh, what a shame. Never mind I’ll wait until my drinky choice arrives” as he stumbles off back to the sun lounger. Red Man simply opens another cooler and takes a competitor and pours it down his throat. Sale well and truly lost forever and ever!

    What must be really galling is that Red Man was probably enticed into the outlet by your bold and bright advertising livery above the door. A double waste!

    The above example clearly relates to beer, soft drinks/colas and water but the principle applies equally to wine and spirits. No product on the shelf; no sale. Product offered on the restaurant wine/drinks list but not available; no sale and mutual loss of credibility and trust. Perhaps not Red Man this time, but a more discerning and probably premium segment consumer is disappointed.

    If the majority of your business relies on Traditional Trade (TT) sales serviced by distributors then now would be a good time to review your Route To Market. Failure to do so might see Red Man and Discerning Consumer drinking anyone’s liquid but yours.

     

    RTM Assessment Tool

    Tags: Brewing & Beverages, FMCG, Route to Market, Dave Jordan, Traditional Trade, Sales, Distribution

    Supply chain and S&OP Compliance – 5 Steps to Making it Happen

    Posted by Michael Thompson on Tue, May 03, 2011

    I have had several discussions in response to my last blog on the subject of supply chain and S&OP compliance.

    A common theme was the practicalities of measuring compliance.  So here are 5 steps to make it happen.

    1. Supply Chain & S&OP Operating Model. Start with the blueprint or template of how the supply chain should operate.  This is often a process map at several levels of detail, sometimes to procedural level.
    2. Checklist.  Use the operating model to define a checklist of activities that should be undertaken on a regular basis; monthly is usually sufficient.  Subdivide the list into key activities – e.g. Demand Review, Supply Review, Financial Evaluation, Consensus, Demand Execution, Supply Execution.  Clearly define for each activity what constitutes compliance. 
    3. Process Owners.  Assign a process owner to each key activity.  These people nearly always pick themselves as depicted by their operational roles.  Their roles should now include formal responsibility for reporting compliance each month. 
    4. Measuring Compliance.  A reporting mechanism is now needed.  We have found that some type of tool is the best way of capturing compliance data and information.  The tool should be accessible by process owners of course and be visible to the operational management team and team of senior executives.  Tools can be spreadsheet based (this is often a good place to start), web based or utilise social networking tools.  The key issue is to make the tool easy to use and accessible.  We would also advise that the tools focus not only on compliance as such but also on improvement.  As such it is a good idea to include a section in the tool related to a short narrative on status and future improvement actions.  Brief and train users in the use of the tool and, critically, on why it is being deployed.  If possible aim for a ‘sell approach’ but a ‘hard sell’ – this is a critical part of company operations.
    5. Keep it Simple.  People do not like what they perceive as extra work.  People also do not like filling out forms, even if they are within well designed tools.  Whatever type of tool or reporting mechanism you choose, test it and time how long it takes to complete.  If it is longer than 10 minutes (maximum 15 minutes), it is too complicated.

    Supply chain and S&OP Compliance

    You are now ready to go.

    Our experience is that if you stick to these 5 steps, you will have a practical approach to ensuring the extent to which your supply chain and S&OP operating model has been successfully deployed.

    If you would like more help with checking supply chain and S&OP compliance, please do contact us – we have done this successfully many, many times before.

    S&OP Compliance

     

    Read other posts regarding Compliance HERE.

     


    Tags: FMCG, Michael Thompson, S&OP, Forecasting & Demand Planning, Compliance