Supply Chain Blog

Why you need to study your Manufacturing Factory Footprint

Posted by Dave Jordan on Wed, Jun 29, 2011

The sharp, customer end of the extended supply chain continues to receive attention as companies implement and hone S&OP and RTM-style programmes. The multiple drivers include cost of course, but also customer service and a desire not to be out of stock particularly in critical seasonal peak periods. If your “sharp end” is looking OK at the moment you might take a look at the other end of the chain.

Not so long ago companies like Unilever and P&G focussed their attention (perhaps too much?) on getting optimum performance out of their manufacturing facilities. Initiatives such as the Japanese based TPM squeezed out every last grain of efficiency at lower and lower operating costs. Indeed, some factories reached stunning levels of operational reliability, flexibility and cost. Great news!

Manufacturing Footprint RedesignUnfortunately, business like life does not stand still and taking the time to study your factory footprint regularly will pay dividends. The footprint that was so slick and fitting 5 years ago may now be hindering your business. In fact, who needs to wait 5 years when you consider the increasing pace of change in the world?

Amongst a whole host of factors to consider:

  1. Did you buy another company with its own manufacturing network?

  2. Did you sell off a significant part of your business?

  3. Did any trade barriers go up or disappear, e.g. CEE countries accession to EU?

  4. Has a previously low cost base suffered inflation or the damage of a highly volatile currency?

  5. Is the workforce sufficiently skilled and do local colleges still support the conveyor belt of technical talent?

  6. Has your portfolio or technology base changed resulting in over capacity and idle assets?

  7. Does your footprint include a location affected by rising public unrest and government instability?

  8. Are new territories offering start-up tax breaks or attracting structural funds?

  9. Have improved logistics capabilities made inter- and intra- regional transfers attractive?

  10. Can competent 3rd parties do the job better than in-house facilities?

If you have not studied your factory footprint lately you might consider this now as the global economy wakes up to a hopefully brighter future. Forget S&OP and RTM etc for now; if your factory footprint is flawed or outdated you will lose sales and miss out on growth opportunities, fact!

Don’t kick yourself in the footprint!


Tags: Customer service, Route to Market, Dave Jordan, Performance Improvement, Manufacturing Footprint, Inventory Management & Stock Control

Inventory/Spare Parts Management in FMCG, Brewing, Pharma Factories

Posted by Dave Jordan on Sun, Jun 19, 2011

Well, I find it strange anyway. Some very large companies spend countless hours and cash in finding and securing a third party logistic provider (3PLP) to take great care of their finished goods assets. The performance of the chosen 3PLP is then measured and monitored very closely using a suite of KPIs, eg damages and losses are recorded and usually debited to the 3PLP under the contract terms.

A 3PLP is charged with “storing stuff” as safely and cost effectively as possible and providing easy picking for dispatch. I wonder why some blue chip companies fail to adopt similar warehousing and logistics principles in the operation of in-house engineering stores? Depending on the industry the value of the components can be several millions of Euros. If you do not pay attention to this area then the same things happen as they do in finished goods warehouses, including:

Shrinkage or more accurately, theft! Your spare parts stores will be helping to repair private cars, replenish home tool-boxes and raise personal funds through the sale of stolen goods. This might seem harsh but I have seen it first-hand and continue to in large organisations.

Bottling line resized 600Important parts are not in the right place. If you do not have clearly labelled storage bins you can stop production lines very quickly losing valuable operating time. At the end of the day an idle line can probably lead to more lost sales than a badly picked finished goods pallet.

Spare parts not replenished. If stock control is not rigorous then you will go out of stock on important items just when you need them. Sod’s Law dictates that they will also be the parts with lengthy lead times.

A few simple principles from big scale warehousing will help:

  1. Operate some sort of stock management system. This can be done on Excel with some discipline but specifically designed software packages are available. You need to know where each spare part is located just like in a finished goods warehouse.
  2. Carry out cycle and annual stock counting. Keep a close eye on your high value and production-critical items by counting them on a rotating basis. Do not wait for a year-end count to reveal a hole in your stock value.
  3. Carry out an ageing analysis. Many large stores are full of spares for machines that were last running when “shep was a pup”. They are of no use to you yet they sit on shelf and on your books as working capital. Any materials with specific shelf lives also need regular checking to ensure you are not holding something which is at best useless or at worst dangerous!
  4. Secondary store for critical items. Items of high value or those which will stop production can be held in a “store within a store”, e.g. a wire cage with 2 locks. Access to these items requires a more senior employee to be present at issuance, e.g. maintenance manager.
  5. Operate some relevant KPIs. These do not have to be wide ranging or difficult to calculate, e.g. ageing, stock rotation, shrinkage etc. An important KPI can be the value of your spares as a % of the operation asset value. Do you know yours?
  6. Order and stock only what you need. Avoid the temptation to buy in bulk as the price is keener. If you are able to calculate a forecast plus some safety stock then you can minimise your inventory and your working capital. Also, ensure that spares purchasing and receipt are spilt responsibilities or you may find you are buying items you do not actually use in the factory..………
  7. Restrict access to the spare parts stores. If you allow anyone to wander in and remove items then your stock control will be out of control, no doubt. If you require access to spares on a 24 hour basis then ensure the facility is staffed appropriately at all times. Leaving the stores unmanned and the door open should be a disciplinary offence.

When looking at factory operating efficiency people will often focus only on the production line and RM/PM supply. Take a look at how you manage spare parts and you may be able to influence your level of efficiency from an unexpected source.

 

Image credit: Hi.WTC

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

Reasons for establishing S&OP in Mobile Telecoms

Posted by Michael Thompson on Fri, Jun 17, 2011

I have two recent stories to tell.

Story 1

Recently I was chatting to a Senior Executive in a mobile telecommunications company. We first met about a decade ago when he was the Supply Chain Director for an FMCG multinational in Kenya.

S&OP in Mobile TelecomThe conversation was comparing his former life in FMCG to his current life in a mobile telecoms company. I should mention that the FMCG company was a mature business and the mobile telecoms company is a relatively new and growing business.

To paraphrase, it could be summed up in one of his expressions "The energy is great. But I could do without the chaos."

This compares to the relatively stable and predictable working life he remembered from his previous FMCG position.

I should also mention that one of the reasons for this ‘stability’ was that Enchange had implemented S&OP in the FMCG company – that is how we first met.

We reminisced.

“Do you remember when things were also chaotic before? And do you remember how we sorted it  out?”

I continued “Have you ever thought of implementing S&OP in your mobile telecoms company?”

“S&OP in mobile telecoms?  Does it work?”

Story 2

I have just returned from DRC (Democratic Republic of Congo) and met up with a former client manager - she now works for Enchange as a consultant.

In her previous position she was an operational manager and worked on an S&OP project that Enchange implemented in the company. It was a mobile telecoms business.

I asked her if the project had delivered the results that were expected and the extent to which the change had been sustained.

Her reply was revealing.

“Everybody was sceptical at the time the project was implemented. However it ended up transforming (her word, not mine) the way the business was run.”

I asked her to explain. The key difference was that consensus and order had over time replaced bitter argument and chaos.  However, the energy of a new and growing business remained.

“We got the best of both worlds”.

And the moral is?

I mentioned this story to the Senior Telecoms Executive.

Having not even considered S&OP, we are now actively discussing how S&OP could work in his new company – a mobile telecoms business.

More later.

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

How good is your Route To Market (RTM) distribution? Take this test!

Posted by Dave Jordan on Wed, Jun 15, 2011

Whether your business is summer seasonal, e.g. beer, ice cream or you enjoy a relatively flat demand profile one of your key challenges will be to reach your Traditional Trade (TT) consumers. Where TT remains sizable and therefore important, your full year performance can hinge on how you manage your distribution network in peak periods.

The excitement and allure of the expanding International Key Account (IKA) retailers seems to divert attention away from this important channel. Producer influence in IKA is relatively limited yet the potential power over TT distribution is often ignored. You can spend endless resources pushing something into a retailer who begrudgingly accepts (or rejects) yet you can achieve growth and profit from a TT network you can drive in a way that suits you. No listing fees, no complicated platforms, lower discounts; what’s not to like?

Take this simple test from the perspective of a Sales or Commercial Director and get a snapshot of how healthily your TT distribution network is at present.

  Yes No Don't know
  1. You have a distribution strategy to which distributors contribute? 
  2. You know your key distributors; visit them and trust them?
  3. Do you have joint demand and promotional planning?
  4. Is distributor stock level under control and do you see the data?
  5. Is your stock stored in a suitable warehouse which is safe and secure?
  6. Is route planning a joint decision and are white spaces targeted?
  7. Does the distributor have an order taking protocol linked with inventory?
  8. Do you hold joint business review meetings at a senior level?
  9. Do you share real time data with each other via relevant IT?
  10. Does the distributor measure KPIs and reward staff appropriately?
     

 

If you answered “yes” to all 10 questions, then very well done! However, the likelihood is that there is a sprinkling of straight “no” and “don’t know” answers. If you fall into this category then you are staring at an opportunity wholly within your direct control.

If you need a more detailed assessment guide then you can download this RTM tool to further expose the pot of gold you are potentially missing. RTM assessments are inexpensive when you consider the speed and size of the pay-back in top and bottom line improvement.

 

RTM Distribution Improvement E-book

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

S&OP Compliance – 3 Steps to Success

Posted by Michael Thompson on Mon, Jun 13, 2011

I have had several further discussions with our Supply Chain Executive from a recent blog on the subject of supply chain and S&OP compliance and its relationship to supply chain assessment.

Let me reiterate the key issue. 

Many organisations undertake a periodic supply chain assessment or review.  Generally this is a ‘deep dive’ assessment of the supply chain – a health check or audit, so to speak.

S&OP ComplianceS&OP compliance is different.  This is a regular (usually monthly) compliance check. It 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.

So to address the question posed in the last blog:  Can our Senior Supply Chain Executive translate his supply chain assessment into a simple monthly compliance checklist?

The answer was – sort of. So we had a further series of discussions to help guide the process.

In summary, a strategic view needs to be taken with regard to the current status of the supply chain (Where are we now?), future supply chain strategic intent and goals (Where do we want to get to?) and the steps and measure to achieve our supply chain goals (How do we get there?).

So to put our discussion of supply chain assessment and compliance into this ‘strategic context’, I offer the following 3 steps to success:

 1. Current Supply Chain Status – measure

  • Measure current status of the ‘internal’ supply chain & ideally external relationships with supply chain partners (e.g. suppliers & distributors).
  • The current status can be expressed as Supply Chain Maturity.

2. Strategic Intent, Goals & Plans – decide what you are trying to achieve.

  • Decide overall strategic intent (e.g. improve service levels to >98%; reduce inventory to upper quartile of industry best practice, achieve overall supply chain maturity of >3.0; etc). Remember cost / benefit of high levels of supply chain maturity.
  • Establish internal supply chain goals & external goals with supply chain partners.
  • Develop Road Map & Plan to realise above.

3. Compliance – develop & deploy a model

  • Translate strategic intent and goals into monthly (or weekly) activities on a process basis. The activities will be closely aligned to the assessment criteria used in determining supply chain status in 1) above.
  • Establish compliance methodology and tools to support the required activities.
  • The Enchange toolset measures compliance to predefined standards. As a simple monthly self-assessment check, it also quickly identifies specific & targeted areas for performance improvement

Having had this discussion, we attempted to put the theory into practice. 

More in the next blog on S&OP and supply chain compliance.

Comments always welcomed please.

S&OP Compliance

 

Read other posts regarding Compliance HERE.

 


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

Practical Guide to SKU Complexity Reduction in the Premier League

Posted by Dave Jordan on Mon, Jun 13, 2011

Previously I have looked at sku complexity in FMCG, Brewing and Pharmaceutical businesses and how it can affect customer service and profitability. This simple chart shows how you should be reviewing your sku portfolio to ensure your resources are placed behind winners. A regular clean out will pay dividends in the long run so have the debate but make some binding decisions.

SKU Complexity

Now that the FA Premier League season is over for another year I thought how managers such as Sir Alex Ferguson and Kenny Dalglish could use a similar tool. After all, players are simply skus and weekly the manager shuffles his pack trying to get the best result. With football players the cost of an “sku” is known so you can make an even more accurate assessment of your return on investment (ROI). In daily business you either need a very detailed and fluid ABC costing activity or you make an estimate of the cost of having an sku on the range.

This is how I think an end of season sku complexity chart would look like for the teams finishing in the top 6 this year. I stress this is my personal view and I have no axe to grind with any team or any player. To put this into perspective, my team is Tranmere Rovers from the depths of the English league system!

SKU Complexity 3 resized 600

Picking out a few examples starting with Torres. On the "strength" of his goals return since being acquired for 50million GBP then arguably he should be in the red box as he is not generating any ROI. Yes, you need to give skus time to settle but his purchase price to have on the playing list plus his weekly expense would not be tolerated in business. He has to improve quickly next season.

Few would argue with the choice of Wayne Rooney for the top box. Rooney has scored some wonderful goals this season and not least the overhead kick against Man City. There have been a few hair-raising moments for Rooney this season but there is no doubt he helped Man U take many scalps both in England and in European competition.

Joe Cole is firmly in the red box. Ok, he did not cost anything to buy but he does have heavy weekly maintenance costs. I think Dalglish will dispose of the Cole brand and actually make a handsome profit on the deal.

In the top left box there is a mixture of players who simply do not appear regularly but when they do they do actually perform well. Berbatov was top scorer last year but does not play in all the big games.  Shay Given is a top keeper who wants to play in the Premier League but is blocked from doing so by Joe Hart. These skus could be distracting other players in the team and blocking the way for fresh skus. These are all big names who receive (not earn) vast amounts of cash but they might be undermining the rest of the range, i.e. you could be spending this money elsewhere.

Those players and skus that deliver value for invested capital are the ones that prolong their stays at the top teams. However, sooner or later every single player will outlive his usefulness, move on and be replaced by something new and more successful

Tags: SKU, Brewing & Beverages, FMCG, Dave Jordan, Humour, Pharma, Inventory Management & Stock Control

FMCG, Brewing, Pharma Champions League Supply Chains

Posted by Dave Jordan on Tue, Jun 07, 2011

Barcelona won the Champions League finally quite easily and to actually hear Sir Alex say something like “they gave us a good hiding” was refreshing. Messi was far from untidy and several Barcelona players looked head and shoulders above their Manchester United counterparts. They simply had better individuals and a better team. Of course, having the most expensive individuals does not always guarantee the best team – case in point, Manchester City.

So which team reflects your Supply Chain?

UEFA CL Trophy Small resized 600Is it Manchester United? A very strong team and some very good players but critically, less than Barcelona. On Saturday they seemed sadly lacking in the plan area. As in any business there comes a time to rotate and replace some staff to refresh the team and team approach. They have had splendid careers but it is now time for Scholes and Giggs to hand in their jerseys. The Man U deliver skills are at least equal to Barcelona’s but planning and logistics were woeful.

Is it Arsenal? Another season without a trophy, though. Wenger tries to gradually develop a very young team and has made few changes to his department in recent years. While this team is developing others are getting ahead and being successful. If you stand still in Supply Chain or football someone will take advantage and overtake you. Also, you have to be honest with yourself by measuring KPI’s and holding your hands up when you make a mistake. Wenger sometime fails to see the most obvious fouls by his players but sees everything inflicted in the opposite direction.

Is it Manchester City? Man C will play in the Champions League next year for the first time. Seemingly unlimited wealth has forced together a group of disparate people. In fact, I struggle to name one player who “came through the ranks” and is actually from Manchester. If they can develop some kind of cohesive team spirit that rises above the money-funded egotism then they could be successful. They need a degree of managerial stability (i.e. unlike Chelsea), however. The head of “Supply Chain” in all teams so far has been allowed time to build, make mistakes and then improve again. How long will Mancini get?

Or is it Accrington Stanley? "Who are they? Exactly!"

In Supply Chain terms Barcelona has certainly excelled in beating competition, enjoying excellent customer service and financial return on investment.

 

 

Image credit: thetotalfootballer.com

Tags: Customer service, Dave Jordan, Humour, KPI, Forecasting & Demand Planning, Logistics Management