Supply Chain Blog

FMCG RTM: Evaluate your distributor network in peak season

Posted by Dave Jordan on Thu, Jun 27, 2013

When you are absorbed in a competitive fast moving consumer goods business there is never a good time to take holidays. Those long awaited training courses always appear on the agenda at a critical launch period or at a difficult month or quarter end. And of course, do not forget the all-time favourite when a party of senior suits from head office makes a very short notice visit to your organization to see how they can help!

People must think that senior suits cannot smell fresh paint, spot newly polished floors or new carpets or that the factory workers all seem to be in the same new uniform and even that the bloke with the long hair in planning has put it in a pony tail. There is nothing wrong with everyone having a wash and brush up as you want to appear in a go0d light but blatantly obvious cosmetics don’t actually impress anyone.

FMCG shop shelves RTM resized 600In fact, the visiting VIP is likely to want to see how your business operates under normal operating conditions rather than under false pretences. What is the point of preparing a set-piece presentation or display that potentially glosses over the real issues? Perhaps the senior suits should communicate in advance that they do not want to hear good news but where there are real issues and challenges or the business. They could then earn their mega-bucks salaries by adding real value to struggling operations, particularly in D&E markets.

The same principle applies to FMCG producers who use a network of distributors within the Traditional Trade channel. Often they have inherited distributors from local companies that have been purchased and shoe-horned into the existing producer network.  While all sectors have peak and trough periods, e.g. drinks, ice cream in summer, household cleaners in spring and chocolate at Easter, there never appears to be a good time when producers can take a critical look at how they are getting their products in front of consumers.

If it is not Christmas, Easter, summer, month end or year end then it is holidays of key people and probably more senior suit visits. While there really is no convenient time to assess your RTM deployment it is a necessary evil but one that will lead to improved top and bottom lines. Instead of looking for a slack period why not evaluate the efficiency of your RTM network of distributors in peak season?

You would not take your car to the workshop, tell them you think there is a problem with the engine but decline their request to start the motor to carry out diagnostic checks. Would you go to a dentist with painful toothache and then sit there tight lipped while the white coated devil tries to find out the problem?

If you evaluate your RTM in a peak season then you will see where the real pressure points and challenges exist. If your beer RTM does not work very well on a cold Saturday in November how can you expect it to cope with the guzzling, frothy demand that July to August brings – UK excluded, of course?

The cost of an assessment of the RTN network with improvement plans delivered for each distributor could be recovered in weeks, not years. Interested? Click here.

Image courtesy of Ambro at freedigitalphotos.net

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

FMCG Demand Planning Quality and Wimbledon Tennis

Posted by Dave Jordan on Tue, Jun 25, 2013

That time of year is upon us once again. This 2 week period usually guarantees rain in UK when the only relief could be an impossibly wrinkle-free and young-looking Cliff Richard leading the communal singing during the delays. “Oohs” and “aahs” and “I say’s” will reverberate around the famous courts and atop Henman Hilll or is it Murray Mount now? Was it ever Taylor Tor, Lloyd Lump or even Perry Peak?

Yes, the Wimbledon tennis tournament takes place in SW19. Will Andy Murray go one step further and win the championship? Will any of the British ladies get past the dressing room door? Will there be enough balls? Yes, balls. Wimbledon is a huge planning and logistics exercise which largely goes unnoticed – like Supply Chains all over the globe; nobody knows they are there until something does not go precisely to plan.

Can you imagine the umpire calling for new balls please, yet finding there are none available or not at the right storage temperature? How would McEnroe react to that at his peak of petulance? How do you forecast how many balls you need – around 52,000 apparently? Someone must and they are probably licenced to over-estimate to ensure no unhappy umps and palyers. (Good to see the used balls are recycled as nests for brown mice, honest.)

Pimms is usually associated with hot summery days so I always find it incongruous that this drink and strawberries are must-haves for 2 weeks in July in UK. More than 80,000 pints (   litres) of Pimms and 17,000 bottles of champagne are quaffed by people who are apparently trying to watch tennis.  If you look closely during the long rallies you will notice that the watching heads move from side to side with a 2 second delay as they belatedly react to being woken by the smash of ball on racquet.

My word, if demand forecasts were incorrect or logistics not seamless you could easily cause a riot in Womble-land. Spectators might even have to eat normal food and drink and that just would not do, would it? Pimms, champagne and strawberry producers do not get a second chance at satisfying this huge and unusual demand so these 2 weeks are extremely important to them. Ok, Wimbledon may not make or break annual performance but it can certainly put a very hefty dent in the final numbers.

FMCG S&OP RTM  Tennis resized 600As far as I am aware none of these Wimbledon staples have suffered significant stock-outs so these FMCG producers appear to have placed the right resources and processes (S&OP?) behind making this event a complete success. While there may not be a flagship, high consumption event associated with beer and other FMCG drinks why do they seem unable to ensure stock availability as close to 100% as possible in peak periods?

Is it lack of attention to S&OP or an imperfect Route To Market (RTM) deployment or is it a fact that demand cannot be accurately forecast? I don’t believe that drinks forecasting cannot be significantly improved through taking an outside view of demand planning within S&OP and the RTM network quality. Most CEO's know their RTM is just not working but seem unable or unwilling to raise their game.

So many Producers suffer peak period stock-outs that the most common exchange at appraisal time might be “new balls please”!

Image courtesy of Tina Phillips at freedigitalphotos.net


Tags: Brewing & Beverages, FMCG, Route to Market, Dave Jordan, S&OP, Forecasting & Demand Planning, RTM Assessment Tool

FMCG Beer Brewers, here comes the sun. Is your RTM ready?

Posted by Dave Jordan on Thu, Jun 20, 2013

 

The sun is out and the sky is blue so what drink waits for you? Beer producers rely on the sun to drive sales and produce a distinct pull along the supply chain but how many will win the market place battle? Certainly, if they are not ready for the worlds greatest drinks salesman then they are in for a flat summer.

A short Beatles song modified to suit the beer business should have you singing along but will you actually take action and get your creaking RTM sorted?  Click to find out how and do it now!

Here comes the sun (doo doo doo doo)
Finally the sun, and I pray
You sell right

Beer maker, do your sales still feel like its winter?
Beer maker, you need to change and that is clear
Here comes the sun
Finally the sun, and I pray
You sell right


Beer maker, you have many stock out failures
Beer maker, your RTM is very poor, I fear

Here comes the sun
Finally the sun, and I pray
You sell right

beer_rtm_summer sunSun, sun, sup, beer flows
Sun, sun, sup, beer flows
Su
n, sun, sup, beer flows
Sun, sun, sup, beer flows
Sun, sun, sup, beer flows

 

 

Beer maker, take a good look at your network
Beer maker, you know its not been done for years                    
Here comes the sun
Finally the sun, and I pray
You sell right

Here comes the sun
Finally the sun, and I pray

You sell right
You sell right

Check out the original Beatles song.

Image courtesy of Danilo Rizzuti at freedigitalphotos.net

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

Formula 1 Supply Chain: S&OP Team working

Posted by Dave Jordan on Tue, Jun 18, 2013

I used to be a big fan of Formula 1. Sunday afternoons in rainy UK in front of BBC2 watching either the Grand Prix or the 40 overs a side John Player League cricket – weather permitting, bliss. Jasper Carrott once expressed surprise at how anyone could be interested in watching blurred adverts flash past at 200+mph but I was enthralled by the noise, speed, competition and yes, I admit, the crashes.

Murray Walker was the star commentator and has not been bettered since in my view. Murray was forever putting the mockers on drivers by saying  how well a certain driver was racing only to see their car break down or crash out of the race almost immediately after. Murray’s famous catchphrase was “...Unless I'm very much mistaken..." which was inevitably followed by "...And I am very much mistaken...".

Racing Car_F1_S&OP_Pit stopMy interest ended abruptly in 1994 when Michael Cheatmacher deliberately crashed into championship leadership rival Damon Hill’s car to knock him out of the Australian Grand Prix. Mr. Cheatmacher therefore won the championship with Hill in second place and unable to claim any points. Never to be forgiven.

There must be one enormous logistics organisation behind each and every F1 team. Just think about the amount of stuff that has to be dismantled and transported to a location on a different continent before being re-assembled and ready for racing. You really don’t want to tell Lewis Hamilton that he cannot race this weekend as you left the tyres in Japan or tell Fernando Alonso that his favourite steering wheel didn’t arrive. Not that Alonso could look more miserable anyway.

Amongst this huge Supply Chain effort there are many smaller chains working in parallel and in sequence. For me the most impressive piece of Supply Chain team working is the pit-stop. The current record for four tyre changes, refueling and a complimentary spray of screen insect remover is a staggering 2.31 seconds set by the team supporting Jensen Button in Germany in 2012. For someone who needs about 30 minutes to change a wheel that is a ridiculous speed.

They key is that everyone knows their job and what is expected of them. Each player knows how their actions impact on others in the pit-stop process and they are primed and ready to act when it is their turn to perform. You so not see mechanics looking around for the compressed air wheel nut remover or the fuel man putting the wrong type of fuel in the tank or the windscreen man asking Vettel to wait a moment while he gets a clean cloth. Of course, not all teams can manage 2.31 seconds but anything below 10 seconds is impressive.

That pit-stop is a mini S&OP process. Preparation beforehand is to minute detail and each team member comes to the “meeting” armed with exactly what is required to make the interaction a success. This is a “one shot deal” which directly impacts on race/business success. If any one team member fails to do their job then 2.31 seconds can soon turn in to 20 seconds and millions of Euros in grand prix money/turnover can be lost.

Have you checked out how smoothly your current S&OP process is driven? You will find some F1 S&OP tips here……….. unless I am very much mistaken.

Image courtesy of Jon Whiles at freedigitalphotos.net

Tags: Dave Jordan, CEO, Performance Improvement, S&OP, Forecasting & Demand Planning

FMCG CEO appears on Supply Chain Mastermind

Posted by Dave Jordan on Thu, Jun 13, 2013

Cue the famously ominous theme music, "Approaching Menace" by the British composer Neil Richardson. A hushed, shadowy, darkened studio. Contestant number one leaves his competitors in the dark and walks in a moving beam of light to the famous black leather chair. One harsh spotlight focussed on the face of a nervous FMCG CEO.

CEO_Supply Chain _QuizMagnus: Please state your name, occupation and specialist subject.

CEO:  Arnold Businessman, FMCG Company CEO and my specialist subject is the extended Supply Chain.

Magnus:  You have 2 minutes starting from now.

Magnus: What is the prime Supply Chain business planning tool in your company?

CEO: The expensive ERP IT package.

Magnus: No, it is Excel spreadsheets.

Magnus: How many SKU’s does your business have?

CEO:  157

Magnus: No, 454 including promotions.

Magnus: Is your forecast accuracy based on volume, value, brand or sku?

CEO: Volume.

Magnus: Correct answer but actually wrong in practice.

Magnus: When monthly sales figures are poor, does the sales team takes responsibility?

CEO: Pass.

Magnus: Yes, pass the buck. I will accept your answer.

Magnus: Do multiple warehouse storage locations affect overall inventory levels?

CEO: No.

Magnus: Incorrect, they do and upwards.

Magnus: Who has overall responsibility for S&OP process quality?

CEO: It is a Supply Chain problem.

Magnus: No, you do.

Magnus:  What is your Customer Service Level?

CEO: 98%.

Magnus: Correct, but….

Magnus: Is this figure based on orders or stock availability?

CEO: Pure orders.

Magnus: Incorrect, orders are manipulated to sell what is available.

Magnus: Which team is responsible for On Shelf Availability?

CEO: Sales

Magnus: Incorrect, the S&OP team.

Magnus: Will you still have a BEEP BEEP BEEP BEEP – I’ve started so I’ll finish - job at the end of this show?

CEO: Yes.

Magnus: Pass.

Magnus: At the end of that round Mr. Businessman you have scored 3 correct results and I had 1 pass. Thank you.

Polite applause as the CEO heads back to his seat with head bowed and rightly so. His big chance of Supply Chain TV fame blown apart in the space of 2 awkward minutes.

Arnold can try again next year but in the meantime for the sake of the company and his career he should get far closer to the Supply Chain related realities within his FMCG Company.

Cue Approaching Menace once more……...

Image courtesy of artur84 at freedigitalphotos.net

 

Tags: FMCG, Dave Jordan, CEO, ERP/SAP, Supply Chain, S&OP

FMCG, Pharma & Beatles? Spreadsheets damage more than your ERP

Posted by Dave Jordan on Tue, Jun 11, 2013

Some time ago I wrote about the way spreadsheets were undermining expensively assembled ERP’s in FMCG, Brewing and Pharmaceutical companies. They still are, by the way.

Recently, a paper on Public Debt and Austerity published by 2 eminent Harvard Professors was found to contain errors in the Excel coding. Several significant countries were excluded from the data analysis and therefore the conclusions could not be accurate.

The glitch was spotted by a student who like everyone else, believed he and not they must be wrong. If you can make mistakes at this level then think what may be happening in your planning office. A decimal point in the wrong place or a misplaced cell could lead to market place challenges in stock availability or indeed, excess.Beatles_ERP_Spreadsheets

The bug in that Public Debt spreadsheet leads me to the Beatles – what a segue! Here is what they might have written about spreadsheets and ERPs.

Yesterday, an IT man took my Excel away
Now I have to plan a different way

How I wish it was yesterday

Certainly, I’m not as comfortable as I used to be
There's a new ERP in front of me.
How yesterday came shockingly

Why Excel had to go I don't know, IT wouldn’t say
Did I plan something wrong? How I long for the Excel way.

Yesterday, spreadsheet planning was the only way
Now I need to learn a different way
I need to believe in the ERP

Why Excel had to go I don't know, IT wouldn’t say
Did I plan something wrong? How I long for the Excel way.

Yesterday, poor planning was the only way
Error riddled spreadsheets everyday
Now I don’t believe in yesterday
Mm mm mm mm mm mm mm

You can catch up with the classic Beatles track by clicking here.

If you do not run an ERP that relegates spreadsheets to useful supporting tools then you are risking poor planning in your business.  If you are running an ERP you might check exactly where the data comes from and where the critical calculations are really made.

Image courtesy of artur84 at freedigitalphotos.net

Tags: Dave Jordan, CEO, Pharma, ERP/SAP, Supply Chain, Forecasting & Demand Planning

Sales & Operational Planning (S&OP) CEO Question Time.

Posted by Dave Jordan on Thu, Jun 06, 2013

I met the CEO of an FMCG drinks company at a recent charity event and with both being fans of the foaming ale we settled on a post main course discussion of all things beer. At this event I was not wearing my Enchange hat so the conversation was very open and informative in a way that formal, office based meetings seldom allow.

We talked about readiness for the upcoming annual appearance of the World’s Greatest Drinks Salesman. Obviously, I was not in UK as they have already enjoyed their summer day this year. All was good apparently and they were anticipating a good season supported by several new variants and an aggressive marketing campaign.

Dancing CEO Beer questions resized 600In fact, said Mr. CEO slowly topping up on his own product, “if we can get beyond 80% Customer Service level we could be in for a great year”. The background music stopped playing. Drinks were suspended in long streams from the necks of bottles above thirsty glasses. People around the room were in a state of frozen animation with faces fixed in laugher and limbs in mid stride or dance. A silence enveloped the room as a cloud of mist was silently sucked under my table.

Immediately, sensing the urgency I reached under the table to find the blue coloured, round cardboard box tied with ribbon. I pulled on the ribbon and reached inside the box for the contents. As I put my Enchange hat on everything in the room immediately returned to normal. Drinks flowed and splashed into glasses, laughing continued and the dancing-dads resumed their jerky exhibitionism.

I repeated what I had just heard in case it was the beer talking/listening but no, their Customer Service Level across the hot seasonal peak was a relatively paltry 80%. What is more, I knew that this level was significantly lower than competitors in the same markets.

Next step was to start throwing in a few searching questions that would tease out the reality in this business:

1. Is forecast accuracy measured? Is the measurement "honest" and allows you to monitor  improvement?

2. Does your Supply Review use a clearly agreed plan of expected sales?

3. Is there a single set of financial numbers used by all functions?

4. Do you lead an S&OP meeting each month which covers an adequate planning horizon?

5. Are all orders are given a clear promise date at order capture and service levels given the highest priority?

6. Is there a process to provide visibility for key items covering an adequate planning horizon while maintaining materials at an optimum level? 

7. Is there a series of formal meetings in place to support S&OP?

8. Are you seen to be actively leading S&OP across the business?

9. Do you have suitable IT tools, systems and KPI performance measures to support S&OP?

10. Do you believe S&OP works for you?

Mr. CEO was popping out so many “no’s to these questions he sounded like he was being mercilessly tickled by Ken Dodd’s tickling stick.

As the coffee and cigars arrived I decided to literally bite a biscuit and then told him he was running an immature S&OP rather than a having a fluid process that should be running the business. Do nothing and 80% Customer Service will be all you deserve and can expect. No cigar moment for this CEO,yet……..

Image courtesy of photostock at freedigitalphotos.net

Tags: Dave Jordan, CEO, Supply Chain, S&OP, Forecasting & Demand Planning

Making a bid for improved FMCG Forecast Accuracy Levels

Posted by Dave Jordan on Tue, Jun 04, 2013

When a company asks me to take a look at their S&OP process yet boasts a Forecast Accuracy (FA) of 98%, alarm bells are immediately sound. If you are at a genuine level of 98% then of course there is a little more incremental improvement possible but it indicates your S&OP process is in very good health. Or does it?

After posing a few questions to junior staff I discovered that the company was in fact cheating itself. The 98% FA boast was based on volume alone. Oh dear, the sales team were patting themselves on the back when in fact accuracy was far from the case. They simply did not understand the chaos multi-sku volume FA measurements cause within the company.

Ok, so the revised level was 75%. Not the worst figure I have ever seen but at least it presented a clear opportunity for improvement in market performance. The newly generated data was flashed onto the screen and just as debate kicked off I noticed that the FA values were in a column headed by brand names. Oh dear, forecast accuracy by brand may well be a decent measure for sales and marketing category management evaluation but it does not lend itself to top class Customer Service achievement.

So the number reduced again to just below 50%. However, by this time the junior members could smell blood and went in for the kill. The latest figure quoted did not include imported products. You can get away with this approach if you have very few and relatively unimportant imported materials but not when the ratio is 75/25. I wonder what the logic was for the decision to omit imports.

Quiet descended around the room as the newly calculated number popped up as 28%, a far cry from the initial boast in the high nineties. At least we now knew the baseline for potential top and bottom line improvement. Like a classic Christmas pantomime, “oh no we don’t” came out of a few mouths who I guess had known these defects all along but were persuaded or out-graded not to reveal the ugly truth. “Shouldn’t we be including promotions in the calculation?”

Again, if you carry out little or no promotional activity then fair enough leave these out of the calculation if you wish, but when you are in a D&E market and promotions form a high proportion of sales you need to include them.

S&OP Planning Forecast AccuracyLike a negative live auction the number dropped out of the 90’s, passed the 70’s, quickly entered danger territory below 50% before almost settling in the 20’s before finally hitting near rock bottom at 16% FA. Sold! Or not sold, to be more accurate. The finally accurate and very low FA bluntly indicated that a huge opportunity existed to sell more products.

Yes, they had an S&OP process but in name only as they failed to measure FA accurately and continually underperformed. When measurement of a key performance indicator is flawed there is no way you can achieve your objectives as the target is moving and you are blindfolded.

With this calculation now fixed I will see how they get on but one thing is certain, they can only get better!

Image courtesy of Keerati at freedigitalphotos.net

 

Tags: FMCG, Dave Jordan, Performance Improvement, S&OP, Forecasting & Demand Planning