Supply Chain Blog

Quarter 4 Opportunities for FMCG, Brewing and Pharma Companies

Posted by Dave Jordan on Thu, Sep 27, 2012

Hold on a minute, how did we get to this time in the year? I know time appears to hasten as you grow older but this year has flown by. One minute we were eagerly awaiting the Olympics and now we heading directly into a northern hemisphere winter and towards Christmas.

Reaching sales traget in Q4Those FMCG/Brewing/Pharma companies with financial years closing in December will be presented with the stark reality that there are just a few weeks to get your numbers in line before HQ invites you to a “career discussion” in January.  Act now to ensure you don’t get a one-way ticket as a present this season.

This time of the year is also around the time many companies put their following year Annual Plans in place. Monstrous data collection spread-sheets will be dropping into inboxes across the globe all seeking improved performance. The recession is still with us but HQ wants top and bottom line improvement – so unfair!

What surprises me though is that many executives will be putting a plan together for growth and probably lower cost while at the same time turning sales and logistic somersaults to reach current year targets. Promotions and bulk-buy special offers will push stock into the trade but be honest; when everyone is doing the same you know a proportion will remain unsold. The numbers you have so carefully crafted for an impressive Q1 will be impossible to achieve.

Of course, yours may be one of those businesses where you are looking to slow sales down as the numbers are already in the bag or soon will be. If you are in that fortunate position then you can still prepare now for a bumper new year. Relaxing your company and particularly the Supply Chain too much will cause a loss of momentum and sharpness. Once you have achieved success and see your competitors drowning you really want to aim a hose at their throats rather than let them get a sniff of recovery.

Whether you are struggling to make the numbers or cruising along now is the time to put plans and budgets in place to ensure your new year resolutions come to fruition.

 

Image credit: HikingArtist

 

Tags: Christmas, Dave Jordan, Performance Improvement, S&OP, Forecasting & Demand Planning, Sales, Distribution

FMCG Regional & Global Manufacturing; Is the factory tide turning?

Posted by Dave Jordan on Thu, Sep 20, 2012

This post on migration and return of retailers to the high street had me thinking about a similar effect in manufacturing.  No, I don’t mean FMCG companies are now placing factories in towns and villages next to post offices and fast “food” outlets. The days when industrial units were located in residential areas are rightly long gone in most countries.

Once upon a time, most countries – particularly in Europe - covered by multi-national FMCG giants would have their own dedicated factory to make detergent, margarine, soap, shampoo and soup for the local market. Service and cost was very much local-for-local and very rarely did stock cross borders except for a few export markets. Local-for-local product innovations also meant that the same brand would have a different formula in different markets.

Regional Manufacturing SmallEventually, the FMCG giants realised the potential for consolidating manufacturing facilities in much larger purpose built facilities strategically located in places served by good infrastructure. For example, producing all your soap in a small number of factories inevitably saves cost through capital efficiency and consolidated buying. Yes, you may pay more to get the product to the final destination and that may indeed extend lead times but overall the decisions to close smaller factories were financially sound.

Many of these large strategic manufacturing units also house integrated 3rd party packaging production operations. This factory in a factory approach allows key packaging items to be readily available and easily interchangeable with lower cost and very short lead times. The FMCG giants also win by renting their own space to the 3rd party producers for packaging production.

How far can this go? Can we expect to see more factories the size of a large town making product for the whole continent or even the globe? Are regional/global factory locations sustainable or will we see some degree of reversal?

Through the use of Swiss/Singapore based legal entities many of the large FMCG players are already taking tax advantage of “owning” manufacturing facilities and stocks. Precise factory locations within trade agreements are becoming irrelevant and manufacturers are keen to take advantage of subsidies and grants offered by growth opportunities.

Watch this space!

Tags: FMCG, Dave Jordan, Manufacturing Footprint, Supply Chain, Cost Reduction

Return of FMCG international key account retailers to the high street

Posted by Dave Jordan on Mon, Sep 17, 2012

Not that long ago most of our shopping was done at smart rows of local shops. Every community had a row of mainly family owned shops where you bought everything from Persil soap powder - yes the real soap version – to baked beans to nuts and bolts. The row would include a chemist, a hardware store, a newsagents, a grocer, an off-licence for beer and wine and if you were lucky, a baker and a chippy.

High Street Return of IKA retailersConsumer and community life revolved around these outlets which mostly opened late and closed early and shut completely for a lunch break. Finding one of these shops open on a Sunday was a rarity. Then International Key Accounts (IKA) like Tesco came to the fore and small outlets were opened in what were previously the grocers or some other shop which had closed through retirement of the owners. They brought a fresh outlook to local shopping and while they maintained a relatively small floor size they were clearly different.

You could buy many more things in one single location and you were actually allowed to touch and study the products you wanted without them being handed to you by an Open All Hours Arkwright figure in a brown overall. However, this was the beginning of the end for local grocers and green grocers as the large IKA retailers gradually gained better prices and service from manufacturers making profit generation difficult for the independent retailers. Slowly but surely the retail giants soaked up all the local business paving the way for empty shops and the birth of the video rental businesses and endless fast “food” outlets.

Then they upped and left.

Out of town super and mega stores were created allowing you to buy virtually anything in one concrete jungle only accessible if you owned a car. Public transport was available but if you wanted to buy more than a few bits and pieces you needed four wheels. If you forgot something vital then off you went out in the fuel guzzling car back to concrete-ville. Now, if the corner shops were still in place you would not need such logistics.

Then the IKA returned.

Now with new sexy names like - express, - mini, - local, - market, the large IKA players are back on this high street in stores only slightly larger than Arkwright’s. IKA stores are in petrol stations, attached to post offices, in airports and almost everywhere where there is a healthy foot fall of consumers.  Quite a sensible decision if you ask me but how much investment has been wasted in realising that placing retail outlets in the communities where people live is a good idea?

Is that the end of the cycle or can we expect a repeat migration out of the high street?

 

Image credit: ThisisKent.co.uk

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

FMCG/Fuel Forecast Accuracy: Forget Flying Fears

Posted by Dave Jordan on Wed, Sep 12, 2012

Sales Forecast AccuracyI have just arrived back from a great holiday full of sun, sand, sea and sacks of candy-floss which inevitably inspired me to write.

I was already in my late twenties when I first flew primarily due to an irrational fear of flying. As a conscious effort to overcome this I took a new job requiring “significant overseas travel” and soon found myself on a plane to Kuala Lumpur. Hundreds of flights later I find the experience boring rather than something to worry about. After all when you are at 30,000 feet, and there is absolutely nothing you can do to keep the plane airborne so why not simply accept the salty nibbles, the plastic bottle of wine and relax.

Severe turbulence is of course unpleasant and to be avoided but the only 2 occasions I have been seriously concerned occurred while initially on the ground. Flying out of Jeddah on a crowded flight the last person to board slipped as he placed a bag in the overhead locker. Various belongings dropped to the floor including a cardboard strip of 10 craft knives! For months my eye sight was badly affected by having one eye continually on the passenger and the other on the overhead locker until we reached Cairo.

The second incident happened at the start of the recent trip after the captain said we were ready to go. As wedid  start to slowly move a tanker truck raced to the side of the plane and seeing the aircraft move away the driver stood up, waved his hands madly and seemed to be saying “I haven’t refuelled you yet”.

I can only assume the fuel logistics man was at fault as we landed safely several hours later without a hint of engine coughing or swerving to get the last reserves of fuel from the wing extremes. If our plane was not short of fuel then I do wonder which one was!

In FMCG terms it is all about having enough product in stock in warehouses and a reserve just in case. If you have too little you will lose sales/crash and if you have too much you will waste money on unnecessary storage, potential write-off and destruction. Getting your sales forecast accuracy up to a high level will allow the remainder of the business to supply what is required to the right customer at the right time, cost and quality.

Any tools you use e.g. ERP, APO etc will not do this for you. Yes, they will facilitate decision making but the basic input data has to come from the sales force and often this is poor quality or non-existent. Successful companies include those having a sales force that understands the value of the rest of the business, the challenges they face and the importance of forecast accuracy. Companies with a dismissive sales approach to forecast accuracy will always struggle even if they have the best IT in the world.

Taking all constraints and eventualities into account, in flying terms it is good to know that sales people generally do not forecast the fuel of commercial airplanes.

Tags: FMCG, Logistica Management, Dave Jordan, Performance Improvement, Forecasting & Demand Planning, Logistics Management, Sales, Inventory Management & Stock Control