Supply Chain Blog

Balanced Scorecard & Intensive Care Recovery KPIs

Posted by Dave Jordan on Thu, Feb 28, 2013

On a daily basis the amount of care we give to the human body is remarkably little. When you are feeling good the best the body can hope for is a good wash, a brush of the teeth and a slap of moisturiser if you are a bit of a girly. What else? Haircut and manicure perhaps oh, and possibly a check on your weight.

Considering the complexity of the human body and how we cannot live without it we do not spend too much time analysing how it is performing. We probably spend more attention on our cars or IT gadgets. “Why is my PC running so slow? The car is overheating, I must check this quickly.” Such symptoms are immediately of prime importance and top of mind.

This all changes when we are unwell. Suddenly we are taking our temperature, blood pressure and pulse rate. Blood tests may be needed. You may be wired up to monitor to see how the heart or brain is functioning. Now the body is getting the intensive care it needs. Recording and monitoring the raft of data is the route to a hopefully full and speedy recovery.

Balanced ScorecardIf your FMCG/Brewing/Pharma business is operating well and there is even some growth then the usual “heart monitoring” Balanced Scorecard KPIs are reported weekly or monthly. The focus is usually on getting your “stuff” onto the shelf at the right time, in the correct quantity at the lowest cost. Along with other company measures the scorecard shows the health of the business.

When all is not going smoothly however, the Balanced Scorecard may need supplementing with other measures. In companies where sales are below expectations and cash flow has dried up you need intensive care focus in that area. This does not mean you stop generating the Balanced Scorecard as this will contain important financial and non-financial measures. Instead, you need to place the sensors in the critical locations.

For businesses struggling with cash flow here are some relatively simple Recovery KPIs you might consider.

  1. Sales-out – Sales-in do not guarantee you a final sale to a consumer so focus on the final sales transaction.
  2. Discounts – Control how much discounting is taking place. Is it authorised and at the correct level?
  3. Debtor Days – This is money owed to you so negotiate favourable terms and constantly review. If 60 days has been in place for years then it is about time this was challenged.
  4. Creditor Days – You owe this money but if you upset suppliers they will stop supplying! Renegotiate where possible and do your best to pay on time.
  5. Overdues –  Where money is due to you and has exceeded the agreed terms you need a “persuader” to get on top of late payers.
  6. Forecast Accuracy – Do not look at every single sku. Determine which skus are actually important and make a healthy profit and focus on them.
  7. Lost Sales – Investigate every significant lost sale and systematically apply a “100 year fix” so mistakes do not recur.
  8. Potential write off – Monitor stock age internally and at distributors and avoid this criminal cash drain.
  9. RM/PM stock – If you are overstocked you should not re-order and you might consider selling some items. Your stocks should be aligned with those important skus identified above.
  10. Finished Goods stock - Again, ensure your key skus are always available in the required quantities. Promote any excess stocks to collect income and minimise potential write off.

In addition to the sensible tight control of discretionary spend this approach can stabilise your vital signs and guide you back to health.

Tags: Brewing & Beverages, FMCG, Dave Jordan, Performance Improvement, Pharma, KPI

FMCG dummy QA recalls are not for dummies:Supply Chain Challenges

Posted by Dave Jordan on Mon, Feb 25, 2013

The recent high profile cases of horsemeat DNA appearing in products marked as beef and other meats have generated a fair amount of humour but they also place great strain on FMCG Supply Chains. Thousands of Supply Chain professionals around the globe spend their waking hours trying to get their stuff/skus/merchandise in front of customers and consumers at the right place, price and as fast as possible.

Numerous companies have invested heavily in Supply Chain improvements including S&OP and Route To Market, e.g. Unilever and you can see the effect of these and other initiatives on their share price. Unilever is now very slick at getting the right products where they are needed, when they are needed.  However, what is unfortunately just as important is how they can reverse that slick chain to recover product stocks in a recall situation.

FMCG Dummy RecallHave you ever tried pushing tooth paste back in to a tube?  Or forcing shaving foam back in to an aerosol can or an egg back in to a chicken? Ok let’s not go there but you get the idea. Once you have moved something downwards along a complicated and narrowing process or extended chain it is not easy to reverse the same. With people and process optimising a one-way street executing a potentially damaging recall is often given less attention that it deserves.

In developed markets where there is a high proportion of traditional trade a product recall is difficult enough but the number of storage points is usually limited. Producers and customers operating to a low stock holding policy will be applying reasonable FIFO/FEFO and IT systems in both parties will be accurately recording stock codes and locations. Tracing your product in an International Key Account (IKA) environment is tough but do-able.

Compare that relatively transparent situation with the fragmented Traditional Trade (TT) Route To Market (RTM) distribution commonly found in Developing & Emerging (D&E) markets. You should have batch code visibility to your in-house distribution centre or 3PLP – well, frankly if you don’t you might consider a career change.  However, you might not have visibility when stock leaves the 3PLP and heads for a myriad of TT operations. Or rather, you think you have code destination visibility but the integrity of this now relies on your distributor partners.

Some partners will be professional and maintain the recording of batch code destination. Others will simply not be equipped for this and others will be operating in basic conditions where FIFO/FEFO is not a priority or a possibility. In the event of a corporate recall this is no defence in the eyes of authorities, the public or the blood-thirsty popular press. Solutions do not have to be IT based in an expensive WMS system but a simple Excel approach or even pen and paper – remember that? – would be an improvement on admitting a lack of knowledge about where your potentially dangerous products have been sent.

Five key points to note on recalls:

  1. Ensure you have an agreed product recall procedure signed off by the operational Board.
  2. Review this procedure on a regular basis to ensure it is still relevant to your current business model. No use having the instructions to Draughts if you are now playing Chess.
  3. In the event of a recall the process should be led by a previously defined competent person who knows exactly what do to at the drop of a hat. Do not wait for the disaster to happen to find someone who can do this job.
  4. Make dummy recall incidents an important part of your business and see that they take place on a regular basis in all channels. Do not settle for a dummy recall stopping at the 3PLP warehouse. Document and time dummy recalls to monitor and subsequently improve your performance.
  5. Lastly, in the event of a real and urgent recall you need to get over the fact that it has happened. Surely, someone in the business needs to be understanding why the fault occurred in order to implement a 100-year fix but the senior team needs to focus on getting the recall executed in the most efficient way to protect both the public and your own brand and corporate image.

If you can get full scale dummy recalls into your company DNA you will be ready for the challenge that will arrive sooner or later.

Image courtesy of Imagerymajestic FreeDigitalPhotos.net

 

Tags: Route to Market, Dave Jordan, CEO, Performance Improvement, Supply Chain, Inventory Management & Stock Control

FMCG S&OP Leadership: has it gone to the dogs?

Posted by Dave Jordan on Thu, Feb 21, 2013

If you live in or have visited Bucharest you may well have seen one or two stray dogs hanging around the city. Well, ok more than one or two but numbers have certainly decreased over the last couple of years. A proposal was made in 2010 to organise a proactive cull of stray dogs but a certain Brigitte Bardot was outraged and the plans went on the back-burner.

Where have all the dogs gone now? Some will have met their canine maker either naturally or under the encouragement of a Dacia Duster front wheel. One unnamed FMCG giant actually rounded up the dogs inhabiting their factory site, enticed them into a truck and shipped them off to Oradea - ‘tis true I tell you!  However, I believe most of them have relocated or have been relocated to where I live.

Role of Business Leader in S&OPYes, it’s Pipera. The land of traffic congestion, too many schools and dodgy politicians. There have always been a few dogs affiliated to various building sites around here but there are now a serious number of packs. The pack closest has amassed 20 drooling inbreds – no not British politicians – making a walk for our pet dog rather hazardous. Mr. Patch is half Jack Russell, half Mr. Bean and always up for a fight but I’m not.

The daily walk requires quite an armoury to avoid my legs becoming dog food, i.e. small baseball bat, high frequency noise maker, stones plus my revolving toy cap gun which seems most effective of all. The packs’ tactic is to hide away around a corner and when we appear they go completely crazy and start looking at each other until their commander, an aging Rottweiler gives some unseen signal and they charge.

With OAP Rottie at the front they present a frightening prospect for anyone not armed with my personal arsenal deterrent. A few bangs and flashes of the toy gun sees most yelp away and a quick blast on the high frequency scarer persuades the rest to retreat and re-group out of range. The same drama takes place as we return home and with the same result.

Yesterday, fully armed with weapons and dog I turned the corner expecting the outraged growling cacophony prior to the boss giving the signal to engage the enemy. Nothing! Not a word and not a movement as the dog pack simply sat and watched us walk on. Was it an ambush? Had they split into two groups to apply a pincer movement? This was all very strange and we carefully walked on sure in the knowledge that they must give chase.

Then it hit me. The Rottie was not there; AWOL. There was nobody there to bark the orders and activate an offensive movement. No dog to show the way forward. The rest of the pack simply did not know what to do or did not have the courage to make a move. They lay half asleep on the floor completely uninterested.

And that is why many S&OP implementations fail.

Image courtesy of Vlado / FreeDigitalPhotos.net

Tags: FMCG, Dave Jordan, CEO, Performance Improvement, Supply Chain, S&OP

FMCG "Horse" Meat Producers: Quality Control or Quality Assurance?

Posted by Dave Jordan on Mon, Feb 18, 2013

“After eating what he thought was a beef burger at a Shergar King outlet my friend was taken to a private hospital where he is now in a stable condition. While he has recovered well he has been saddled with an expensive invoice for medical services. After overcoming this financial hurdle he has the bit between his teeth in taking legal action. Somebody is for the high jump for all this horsing around.”

Possibly the best beef-horse pun was the doctored box apparently containing “Spaghetti Bologneighs”.

Anyway, joking aside this is a very serious issue. Experts tell us it is not a health issue but clearly something has gone awry in the extended Supply Chain. There is nothing wrong with eating horse meat it is just that some countries like UK do not eat anything that could be described as a pet.

You see a few pet sheep now and again but rarely do even the animal loving British consider cows as pets. Cows were never any good at chasing sticks anyway. Don’t expect to see Goldfish Fingers, Mice Pudding or Hamster Thermidor on Jamie Oliver’s show just yet.

FMCG Beef Meat QA QCIn the olden days – whenever they were – a statistical quantity of inbound raw materials were analysed to ensure they conformed to the specification and were suitable for use in production. Any defects were re-sampled and continued failure usually saw them shipped off back to the supplier or for supplier funded destruction. Procurement colleagues would of course try and get manufacturing to take the material anyway as they had negotiated a discount. That really irritated me when I was running factories as it is foolish to ever take the pressure off suppliers in terms of quality.

QC then progressed to Quality Assurance or QA. Supplier facilities and service were certified over a lengthy monitoring period to ensure inbound materials were meeting required standards. Finished goods were then statistically analysed to ensure the final make up of the product was accurate and suitable for sale. Most of this QA was positive analysis, i.e. checking for what is meant to be present rather than what is not.

Some products do require “negative reassurance” that a material is absent, e.g. alcohol level in non- alcoholic beer or caffeine in caffeine-free drinks but obviously testing for Mr. Ed in beef burgers is not common. I know very little about burger quality checks but I guess after asseessing, weight, size, colour, consistency, fat/water content and protein/meat content you know about your burger, or do you?

Once your testing regime is established, well-known and consistent you leave yourself open to unscrupulous practice. If suppliers know what you do not test for then some may tailor their raw material quality – downwards of course - so you do not notice any difference in your testing regime. Perhaps in the horse/beef case a bit of extra or periodical ad hoc QC would have highlighted the contamination sooner.

If a supplier has not suffered a consignment rejection for some time you might consider looking for what should not be there rather than what is there. Don’t be blinkered on quality.

Image courtesy of Suat Eman FreeDigitalPhotos.net

Tags: SKU, FMCG, Dave Jordan, Humour, Performance Improvement, Supply Chain, Inventory Management & Stock Control

FMCG Drinks & ugly vegetables Quality Assurance (QA) opportunities

Posted by Dave Jordan on Thu, Feb 14, 2013

I note that the faceless suits in Brussels relaxed the laws on misshapen fruit and vegetables in 2009. The soaking the UK has received last “summer” has now seen supermarket chains further relax their standards on how fresh produce should appear.

I don’t know about you but if I see a potato that looks like a Tellytubby or a carrot that looks like a pair of knobbly legs with a fake tan or an onion that looks like a light bulb I buy them straight away; no hesitation. My favourite “ugly food” purchase was a spud that looked like Tony Blair. How I enjoyed making mashed potatoes that day.

Obviously, if your potato is as misshapen as in the BBC link above then there is going to be excessive waste involved and this is far from cost effective. However, the vast majority of “ugly” produce is perfectly fit for cooking and eating and surely having a culinary guffaw at the same time is healthy.

In these difficultQuality Ugly Vegetables economic times are we being too rigorous on FMCG/Drinks product quality? Ok, I accept you cannot take any risks with pharma or perishable food quality or the source of "beef" but in these difficult economic times are companies being unnecessarily rigorous, particularly with packaging defects? There is no debate necessary concerning usage instructions or safety advice but small blemishes would not be noticed by a majority of loyal consumers.

I can hear the QA purists stamping their feet and making comments like "over my dead body". They will argue that brand image is paramount and any defects must be wholly funded by the supplier itself. Gaining a refund on any particular faulty batch is not really relevant as the supplier will recover the cost from you one way or another. What is worse? Having a product on the shelf with a minor defect or no product on the shelf at all?

What about the contents of the packaging, is there any leeway there? Drinks manufacturers cannot possibly QA each unit of sale and in fact wine producers assume a reject rate of 8% due to ‘corking’ – prior to plastic corks and screw caps of course. Yes, I questioned that defect rate too but it is correct so your celebration case of 12 bottles has an even chance of one with a foul, musty taste.

I just wonder how much money is being unnecessarily wasted at a time when nobody – private or corporate – can afford to lose a penny. No doubt at quarter and year-ends travel restrictions and the freezing of discretionary spend budgets will be rolled out as producers try to meet the numbers they “agreed”.

The hot and possibly ugly potato is that they may be missing easier opportunities to achieve the targets.


Image credit: Freakingnews.com

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

Top Secret: Special Agent Assignment: Spamfall and S&OP

Posted by Dave Jordan on Mon, Feb 11, 2013

Secret Agent Jon D Beams glided through the polished corridors of HQ. Reaching his destination door he knocked and entered at the same time and introduced himself as Beams, Jon D Beams. The swooning Miss Cashnickel smiled a Colgate smile and without delay gestured Jon to enter the boss’s office. Jon knew the boss very well, so well in fact that he shortened her name to Em much to Emma's annoyance. (I wrote this before I saw the film, honest!)

After some general chit-chat and the inevitable comment on the weathe, Jon was given his assignment. The enemy this time was an exceptionally daring and flamboyant group known as S.P.A.M (Sales People & Marketing). Often lying low for prolonged periods S.P.A.M. would surface and cause disruption to corporate business plans. They had to be stopped and Jon D Beams was the best choice to get S.P.A.M. into line.S&OP Agent

Beams next stop was to collect his new briefcase packed with gadgets. After spending some time understanding how the new equipment worked he thanked Mr. Kew and set out on his mission. There was no time to lose before S.P.A.M unleashed untold chaos on the monthly results. Beams hopped into his indestructible sports car and sped away.

Meanwhile in S.P.A.M. headquarters the time was 16.00 hours and the lunch break was drawing to a close. Over many years the S.P.A.M. team had maintained strict secrecy on their plans and intentions to ensure maximum surprise and disruption. Beams had to find a way to infiltrate the organisation to make changes and his deadline was the end of the month when the untold chaos of trade loading would occur.

The following day Beams had to go undercover. In order to blend in with S.P.A.M. he bought a cheap suit and a tie from the charity shop and removed his watch. Taking care not to arrive early Beams slipped into S.P.A.M. HQ a few minutes before 10.30 to ensure he was there at the start of the working day. The suit worked a treat and he was not challenged as he joined the queue for coffee and do-nuts. While the S.P.A.M employees debated the origins of the hole in the doughnut, Beams quietly slipped away.

Beams found a door labelled “Top Secret” and walked inside the brightly lit room. Hidden amongst the table top basketball nets and wacky weasel balls on a large glass table was a file marked “Monthly Plan”. Flipping open the file with a pen Beams immediately realised his worst fears; Em was right. S.P.A.M was operating to two sets of numbers. One set they released to the business as the corporate plan and the other set was what they actually expected to achieve and variations were significant.

Severe discontinuity was imminent and decisive action was required. Using a digital camera built into his tongue Beams collected the evidence and then left his decisive mark. Quickly copying the joined up writing Beams made both set of numbers exactly the same and replaced the file on the glass top. Carefully replacing a part-used lollipop on the file so nobody would suspect anything had been moved he made a swift exit.

By-passing the end of assignment tryst with a beautiful girl, Beams hurried to inform Em that there was now only one plan for the business and S.P.A.M. had finally been foiled. They now worked towards only one set of numbers across the business. No more unexplained month end loading. No more bonus chasing and a far healthier outlook for the business by adopting the principles of Sales & Operartions Planning (S&OP). Customer Service quickly improved to boost the bottom line.

Cue familiar staccato music and the silhouette image of a sharp suited Jon D Beams turning to shoot his gun.

Image credit: graphicshunt.com

Tags: Dave Jordan, Humour, S&OP, Forecasting & Demand Planning, Sales

“Lean” FMCG/Drinks factory operations mean excess manpower

Posted by Dave Jordan on Mon, Feb 04, 2013

Back in the days when the only reality TV was live sport, a tablet got rid of your headache and a mobile was a normal phone with a longer cable, I used to run a large FMCG factory. Long before TPM was implemented the factory cost base was huge and unsustainable. There were people everywhere and everyone seemed to have their own assistant or “mate” to do any tasks that were difficult or labour intensive.

The factory did not really need conveyors on the filing lines as the high operator numbers could pass the filled bottles or stamped tablets to one another towards the packing station. Even the packing stations were only semi-automatic and required a human helper. There were so many operators that 50% of them could have all gone to the toilet at the same time – space permitting – and production efficiency and output would not even blink.

In D&E countries the labour cost is usually so low that capital proposals for automation investment don’t really get too far. People can do the jobs far cheaper although excess manual handling can lead to unacceptable quality variation.

Production SupplyChainAfter some time listening to the raft of reasons why staff numbers could not possibly be reduced I started to observe a little more closely and at unexpected times of the day. I noted that most production lines were actually running reasonably well with little or “no touch” from humans. Line operators were slouched against walls or leaning on machinery and that is when I realised that this type of “lean manufacturing” was not helping and had to stop. The only place where more people were being paid to do nothing was in the EU parliament.

With a liberal helping of Non Violent Direct Action (NVDA) aided by non-unionised labour:

  1. Slowly but surely remove people from overstaffed operations. If after making a reduction you are not sure if more can be removed, remove 1 more and see what happens….. and repeat.
  2. Residual staff will now have to actually work. Ease the pain by sharing some of the saved salaries across the new team in return for KPI efficiency improvements.
  3. Train the staff in multi-disciplinary skills to facilitate seamless sickness and leave substitution as well as job rotation.
  4. Avoid having a separate maintenance or repair department. The people who run a machine need to be the ones to fix any problem right now, immediately and not at the whim of another group.
  5. Get people motivated to implement one of the continuous improvement programmes, e.g. TPM, 6-Sigma. High profile leadership is required for success.

This is just for starters. Once you get some momentum and operator involvement in decision making you will start to see significant cost, efficiency and reliability benefits and no leaning!

 

Tags: Brewing & Beverages, FMCG, Dave Jordan, Performance Improvement, Manufacturing Footprint, Supply Chain, Cost Reduction