Supply Chain Blog

FMCG Supply Chain - how green and environmentally friendly is yours?

Posted by Dave Jordan on Wed, Apr 25, 2012

I have always thought it a little strange. The “green “ movement is all about saving the Earth  yet the same colour is used for “green” house gases  (GHG) that are far from green and moving us towards unavoidable planetary oblivion, apparently. Now, there is huge debate about what contributes more to the ozone layer depletion; is it excessive human use of fossil fuels or is it primarily the fact that cows eat enormous quantities of grass leading to “cow house gas” emissions in rather large volumes?

However, that is not the point of this blog. I simply want to take a look at how many FMCG, Brewing and Pharmaceutical companies waste money which if they avoided would have a welcome knock-on effect of reducing their overall emission footprint.

Carbon footprint complex Netsize resized 600

  1. Why are office lights kept on all night? There is nobody in the office yet it is lit up like a Christmas tree with potentially hundreds of lights creating heat and gobbling up electricity for absolutely nil benefit. A simple timer system would secure a decent reduction in the fuel invoice. “But it is included in the rental cost” – it probably is and you are paying for this whether you like it or not. Perhaps this source of waste sounds insignificant when compared to a heavy duty factory but it all helps.
  2. Rain water harvesting really should be mandatory for factories. They usually have expansive roofs which are ideal for channeling and collecting water. Instead of using fresh water that has been chemically treated and pumped from miles away to flush toilets why not use “free” rain water. Ok, if you are located in Riyadh then the opportunity for rain collection is a rarity but if you are based in Manchester UK just think how much you can save and contribute to a cleaner environment.
  3. Solar water heating and electricity generation are becoming increasingly affordable and should be considered for any new factory project. Solar heating of water is probably more advanced yet panel costs are lowering each year. Yes there is an investment but if you are a major user of gas or electricity for water heating and you get a reasonable amount of sun (i.e. not Manchester) then a decent return on investment is achievable.
  4. Do you know how much your business is wasting in write offs and stock you do not need? If you don’t, you should. If we assume a moderately sized business of 500m Euro turnover then depending on the sector you could be running at a waste level of up to 8% of turnover, e.g. short shelf-life yoghurt etc. A detergents business will operate at considerably lower levels of waste but if we assume a modest 1% overall waste then that is 5m Euro down the drain. This is probably the worst kind of waste as you have paid for the product to be manufactured transported etc and then nobody buys it and you have to pay to have it destroyed.
  5. My bug bear is unnecessary packaging. Companies say they have reduced by x% and used more recycled materials but there is still a fair way to go. Innovation decisions need to be business wide and not just marketing wish lists. If you do not keep marketing in check they will add colours, layers, weight, thickness etc all to make their product better than competition. I admit that at the sharp end of the Route To Market shopper decisions can be swayed by packaging quality and appearance but still there is so much that is not required and goes directly into the waste bin (or hopefully the recycling system).

You will appreciate that items 1-5 are not exclusively about Supply Chain but that department inevitably receives the most focus. However, taking a look across the total business will expose numerous areas of waste and unnecessary material consumption.

While many may well blame the loss of the ozone layer on a their local herd of Black Angus cattle, companies can do so much more and it is not rocket science any more.

Tags: FMCG, Route to Market, Dave Jordan, Performance Improvement, Manufacturing Footprint, Supply Chain, S&OP, Low Carbon

FMCG Supply Chain: 5 Top Tips to ease the pain of a factory closure

Posted by Dave Jordan on Mon, Apr 23, 2012

Never easy. Never pleasant. Never going to happen? Never believe your factory is safe!

From a UK perspective if you had a job in a factory in the 1970’s you expected to have a job for life as long as you kept your nose clean and performed adequately. However, even in the time I have been breathing the number of factories in UK has plummeted and the economy is now largely one of service. All those manufacturing jobs have gone despite Trade Unions and mostly eastwards.

Initially, the opportunity of low cost manufacture in CEE persuaded producers to invest in green field facilities supported by EU grants and local tax benefits. Now most of CEE is in the EU the position is changing again as companies look at supply on a global basis and relocate even further to the east.

Nokia City Romania resized 600Take Nokia in Romania as an example. A new factory and local infrastructure was built just over 3 years ago and the local area relied on this investment for their collective livelihood. The location was known as Nokia City rather than the geographically correct Jucu yet it was not safe. There was somebody somewhere who could build mobile telephones better, faster and/or cheaper.

They may never admit this but companies know that Supply Chains in countries with weak trade union laws will be easier to close and downsize. Try closing a factory in France!

So, it happens and sometimes to the most highly performing manufcaturing operations when global economy shifts present opportunities elsewhere. When a factory gets a piece of irreversible bad news what can you do as an FMCG, Drinks or Pharma producer to exit with conscience and fingers in tact?

1. Request someone from head office to actually make the formal announcement in front of staff to be made redundant. This will take some of the heat away from local factory management -who may indeed also be losing their roles – to minimise the “them and us” situation.

2. The business case to close the factory must contain a healthy and realistic budget for staff out placement, relocation and re-training activities. If you do not budget for this in advance then exit will be difficult and the business proposal was flawed anyway!

3. Appoint someone to run the scheme to find jobs for your people. If you partner with 3rd party recruitment agencies ensure they are only rewarded on the number of people who find alternative employment or secure 3 interviews per person, for example.

4. Unless there has been some masterful and very, very quiet stock-build it is likely you will have to keep the factory operating and people motivated. Exit packages should be linked to loyalty AND continued performance. Those who stay until the bitter end should be adequately rewarded. It is no coincidence that closing factories tend to perform at a very high level until closure as human nature adopts a “we’ll show them what they are missing” mentality.

5. Treat everybody fairly and with respect. Do not allow any “special cases” to be agreed outside of communicated terms and conditions as this will anger others and lead to rapid loss of motivation. Make exit packages transparent in broad terms depending on work level and length of service and keep it simple. Try and maintain a “we are all in this together” attitude.

Many people who have been through factory closures often come out the other side with better opportunities and prospects. Don’t dwell on the bad news of the closure and do focus on preparing for the future.

How you manage people exits will have a bearing on corporate reputation. Don’t forget, you still have to sell your products to consumers who are now your ex employees so handle with care!

 

Image credit: HotCellularPhone.com

Tags: Brewing & Beverages, FMCG, Dave Jordan, Performance Improvement, Pharma, Manufacturing Footprint, Supply Chain, CEE

FMCG Logistics, Transport, Trucks and Yorkie Bars

Posted by Dave Jordan on Mon, Apr 16, 2012

I like trucking, I like trucking, I like trucking and I like to truck.” Those of you who have not been on the planet very long and people who like hedgehogs will not be familiar with this Not The 9 O’clock News ditty from the UK in 1979-82. The sketch showed macho truck drivers ploughing across the country flattening hedgehogs and munching on the obligatory chocolate Yorkie. (I was thinking how much smaller the Yorkie is now and when I checked it is indeed 15g and 2 chunks lighter than when I had my own teeth!)

Some of the trucks we see on the roads today are extremely high tech, modern and comfortable. They incorporate the latest motoring technology as well as a degree of driver cab  luxury of which 1970’s Yorkie Man could only dream. Tachographs have been around for ages but they are now largely superceded by satellite navigation that can track transport and shipments in real time ensuring drivers obey the rules of the road and avoid taking possibly amorous diversions they would rather keep quiet!

Load security and integrity can be monitored by a whole host of sensors keeping close watch on temperature, humidity, security seals and how often the doors have been opened and where and when. You also see some crazy looking trucks where the tops have been streamlined to cut down wind resistance and contributing to a green Supply Chain. Everything sounds hunky dory then as these modern juggernauts criss-cross the motorway network delivering chemicals, spares or finished goods for FMCG and other sectors. Well, if you look towards the east of Europe you will find that Yorkie Man and his crumbling kit are alive and well.

Trucking in CEE Netsize resized 600Yes, there are large fleets of top class modern equipment in CEE serving the internal country needs and of import and export to the EU. However, there remain a large number of smaller operators and owner-drivers who have not invested and upgraded to suit the needs of the modern transport trade. Again, there are some good examples but far too many are still using gas guzzling, fume spewing, unsafe vehicles that may be transporting your goods. Remember, when a truck delivers your product they form part of your face to the customer.

Too many vehicles – well, 1 is too many isn’t it? – are operating on less than perfect road infrastructures with bald tyres, broken lights, poor load security and on borrowed time. Couple these failings with indifferent driving skills and you have a recipe for a trucking disaster.

In particular, producer companies in those countries waiting to join the EU should take a look at how they move goods around and start thinking about forcing an upgrade before the Yorkie gets even smaller.

Tags: Logistics Service Provider, Dave Jordan, Humour, Pharma, Supply Chain, CEE, Logistics Management, Low Carbon

Who is the Weakest Link in your Supply Chain

Posted by Dave Jordan on Thu, Apr 12, 2012

Not since Margaret Thatcher has a woman been so feared. Steely cold eyes and a grin that makes the Mona Lisa look like she is having a good old guffaw. Jet black clothes contribute to her oozing superiority complex and an image of someone certainly not to be messed around. Is there anyone scarier on TV today then Anne Robinson? If you watch a non-UK version then apart from a few notable exceptions e.g. Ireland, Philippines, Japan and USA, the show is presented by a dark clad disciplinarian Robinson-clone backed up by a withering script.

Weakest link in your Supply ChainThe concept of systematically removing the weakest personnel link in an organisation would probably not work and would have all sorts of people racing off to the European Court of Human Rights. However, one former boss did have a similar policy of “interviewing” those considered to be holding up a project or process and not letting them leave the room until they stopped being the barrier. Inevitably, this meant someone else had been elevated to the role of “rate determining restrictor” and they were hauled in and the process continued. There is a limit to this approach as it is interpreted as buck passing and soon backside protection takes priority over the actual business issue and you go nowhere.

However, the approach could be used when considering where your weaknesses are in the Supply Chain. Any business process that relies heavily on a forecast, e.g. FMCG, Pharmaceutical is by definition imperfect and the challenge is to continually modify what you do in order to improve. Where might your “rate determining restrictor" occur? This could be a factory or a warehouse or a co-packer, IT, forecast accuracy or the entire S&OP process itself. When problems inevitably occur if you very publicly and without the threat of blame-storming get a team together to determine and agree what has to improve then you may well get a decent level of buy-in and therefore, a higher likelihood of success.

Inevitably, when you solve one problem you will come up against another but as long as the approach is collaborative and you avoid the “interviewing” technique of my former boss (you know who you are!) then progress will be made.

So instead of fixing the apparent culprit with a stare that would frighten a sleeping baby and announcing to the world “you are the weakest link, goodbye” try “we have the weakest link, good work”.

Anne Robinson is retiring from the show this year apparently and will be seeking a new position.  Think about it - Anne Robinson, your S&OP Process Manager.

Tags: Dave Jordan, Humour, Performance Improvement, Supply Chain, S&OP, Forecasting & Demand Planning

7 Top Tips to Successful Mergers & Acquisitions (M&A) Integration

Posted by Dave Jordan on Tue, Apr 10, 2012

The ink is dry on the deal, the celebratory corks have been popped and the lawyers have gone off to bank a small fortune. The projected negotiations to thrash out a deal to buy or merge with another FMCG or other sector company are finally over. Relief all around, smiley faces, back slapping; done and dusted! Although through-the-night negotiations on a diet of coffee and cigarettes are not easy, integrating the two or more entities will be substantially harder and a minefield.

M&AsConsiderable time, effort and cash are expended in calculating the business case of M&A activity before completion of the deal. Elaborately crafted press releases then tell the world about all the benefits the new relationship will deliver. However, very few people involved up to this stage in the process will actually be accountable for success or failure.

Whether your M&A is a local, regional, national or global event here are 7 top tips to getting as close to the glossy press release promises as possible.

  1. Team. Appoint a team to lead the change and ensure there is a Change Manager in the team with deep and recent experience in the field. The overall project must be led by someone of suitable seniority in order to make an easily accessible two-way bridge between junior and senior groups. Don’t select the team members from one entity only!
  2. Objectives. Make intentions clear and get buy-in from all parties and particularly the acquired team. If you genuinely make everyone feel part of the process you will have greater success in implementing difficult decisions later on and these will come!
  3. Assets. If offices and factories are involved and your intention is to centralise/harmonise you need to approach this delicately. The “bought company” will always assume their workplace is most at risk so all evaluations have to be transparent and honest and impartial 3rd party expert help is advised.
  4. Culture.  There will inevitably be differences in company culture but if both sides can accommodate modification towards a halfway-house then that can be a win-win. If one or other culture is forced on one group or another then you are likely to fail.
  5. Rumour Control. Have you ever heard a good news rumour about someone? Most rumours are negative or critical or someone or something and they will plague M&A integrations. If you get your communication policy in order and people feel free to raise concerns then damaging coffee machine gossip can be nipped in the bud.        
  6. Communicate, communicate, communicate, oh and communicate. M&A integration worries people and worried people are not as efficient and diligent as they should. Invest in a website and/or newsletter that very clearly keeps people informed on progress and next steps. Keep them fully involved with Q&A sessions and proactively sought feedback.
  7. Keep the business going! Sounds obvious but getting distracted by integration ups and downs can severely damage your business. You must keep close control on maintaining good business practice in all integrating businesses.

When you consider the amount of time and money that went into securing the M&A deal a generous budget for integration will payback extremely quickly. A degree of early planning and preparation on the actual integration will see you reach the press release objectives – if anyone ever checks!

Tags: Mergers & Acquisitions, Dave Jordan, CEE, Cost Reduction

FMCG Route To Market (RTM): Talking Heads Discussion – Part 2

Posted by Dave Jordan on Wed, Apr 04, 2012

Same small table, same two blokes, same close up camera shot.

In the last RTM talking Heads episode we ended with Jeff  hurriedly departing for the corner shop to see if the M&Ms Route To Market was intact or in trouble!

Mal: Why the long face?

Jeff: Mr Patel did not have any M&Ms. Not one packet. Not even a fun size packet.

Mal: Well, there you are then.

Jeff: I know, I’m here.

Mal: No, no, no what I mean is that you have just experienced the result of a failed Route To Market.

Jeff:  Have I? I just didn’t get my favourite sweets.

Mal: Exactly, you eat lots of M&Ms and when you went to get more the shop was out of stock. Mr Patel loses his profit and the producer loses his profit and they both have an unhappy customer, you!

Jeff: Well, I’m not that unhappy as I bought Smarties instead.

Mal: Even worse for the M&Ms producer, in that case.

Jeff: Is it, how’s that then?

Mal: You spent your hard earned cash on a competitor product and you might find you like Smarties and buy them again even if the M&M shelf is full next time you cross Mr Patel’s step.

Jeff: They are rather yummy, I have to say but I am an M&Ms man.

Mal: So the next time you pop to the shop and the M&Ms shelf is still empty will you buy something else?

Jeff: Yes, Smarties.

Mal:  I rest my case m’lud. Anyway, precisely why didn’t Mr Patel have any M&Ms?

Jeff: He said he ordered 4 boxes but only 3 arrived and he knew they wouldn’t last long enough.

Mal: And did he do anything about this?

Jeff: Of course he tried but he couldn’t get through to the Customer Service number. Too many buttons to press before a human answered and he had to hang up to serve someone in the shop.

Mal: Customer Service, pah!

Jeff: When he eventually got through he was told that the factory was concentrating on production for Easter and would not be able to re-supply immediately.

Mal: Well Easter has been around for a few years now so you would think they were prepared for this chocolate-fest by the 21st century!

Jeff: So, because of that he put an extra display box of Smarties on the shelf so it didn’t look empty.

Mal: A disaster for M&Ms! Lost profit all round, lost shelf space, lost sales and possibly a lost customer and consumer. You know what this means then Jeff? Do you realise what this means?

Jeff: No.

Mal: Perhaps “only Smarties have the answer.”

To be continued………

 

RTM Ebook

 

Tags: Brewing & Beverages, FMCG, Route to Market, Dave Jordan, Pharma, CEE, Distribution, RTM Assessment Tool