Supply Chain Blog

FMCG Customer Service & Complaints: Why do you plan for failure?

Posted by Dave Jordan on Wed, Aug 28, 2013

Do you remember those long running TV advertising campaigns for probably/possibly the best lager/beer in the world? The specific advert from the UK that sticks in my mind is the one where Mr. Middle Manager is leaving the office for the evening when he hears a telephone ringing.

Drinks FMCG Customer Service resized 600He is not sure which room it is coming from but then realises the source is an office marked as “Complaints Department” or something similar. Walking forward Mr. Middle Manager opens he door and enters an office that looks like it hasn’t been occupied for many years. (Anyway, how on earth did this available office space not get gobbled up in any number of corporate office relocations and redesigns?) On lifting up the telephone - yes a real old one with a curly cable - he discovers that the caller has the wrong number.

The subtle tongue in cheek message being that this particular brand of beer is so good and quality so consistently high that a “Complaints Department” is simply not relevant. If you think about it anyone with an unequivocally named Complaints Department probably expects to receive calls and letters from dissatisfied consumers and customers whether they are quality, service or performance based.

A clear double whammy! You pay people to who unfortunately make the mistakes and then pay another group to deal with the fall-out! I know life is not perfect nor are human beings or any process so the concept of the beer advert is an impossible to reach utopia. Similarly, you cannot keep everyone happy all of the time and some people and organisations believe complaining is a part of the producer-client game.

Nevertheless, recently I studied the regional Customer Service organisation of an FMCG blue-chip company. The brief was to ensure resources were aligned with the relative sizes and importance of the clients in the Key Accounts (KA) and Traditional Trade (TT) sectors. Changes to the split between KA and TT meant some people were twiddling their thumbs while others were clearly stressed.

While looking at possibilities it became clear that this company was spending more on complaints handling than on real Customer Service and cash collection. A whopping 38% more to be precise! A significant proportion of the non-sales force customer facing resources were employed to deal with problems. Talk about planning for failure!

Do you have a Complaints Department or perhaps it is hidden under the Customer Service umbrella? Take a look at how much you are spending in maintaining a team of people plus infrastructure to receive and deal with communications from unhappy callers and writers. Or let me present this another way, how much are you spending to correct the mistakes you are making at some stage of getting finished goods to consumers and customers?

Be careful or the next call to your office might be to discuss another role or even gardening leave!

Image courtesy of digitalart at freedigitalphotos.netfreedigitalphotos.net

Tags: Customer service, FMCG, Dave Jordan, CEO, Performance Improvement, Cost Reduction

FMCG Logistics: Are you optimising trucking weight & volume capacity?

Posted by Dave Jordan on Wed, Aug 21, 2013

I crossed a border in Eastern Europe recently and although the private and car traffic sailed through without delay there were a surprising number of trucks parked in a snake on the approach roads. Both countries are in the EU so I guess someone was carrying out a bit of thorough drugs or human trafficking checking or looking for some other equally vile trade.

I know this is not an unusual sight but something struck me as very unusual for transportation logistics in 2013. A majority of the waiting trucks had their curtains and/or doors opened probably awaiting the sniff test of a slobbering customs hound. What jumped out and hit me in the face making my jaw drop was that most of these 40 foot beasts were empty. Well, at least empty of any palletised or loose stowed goods depending on what the dog found under the boards!

I thought we had all been through the pain of back-hauling and similar opportunities to save money on fuel, assets and operational costs. Whether it was brewers bringing back empty bottles or FMCG producers shipping finished goods on trucks that had arrived with raw materials aboard or simply pallet poolers recovering their wooden stock, I thought the days of wasted trucking miles/kilometers were behind us. (I know this activity can never be a perfect fit as 100% back-hauling is just not going to happen due to the timing and geography of supply and demand fluctuations.)

transport pallets space utilisation resized 600To be fair, some of the trucks in the crossing queue were very well packed, e.g. bottles of fizzy drinks on the bottom with pallets of high volume/low weight snacks on top to maximise the available volume/weight capacity. Another was loaded with FMCG on the bottom and paper tissues above. Simple solutions to maximise available resources and certainly not rocket science. The last example was actually for goods from different producers so there is probably a proactive 4PLP involved who is financially motivated to squeeze every last penny of value out of any logistics expense.

You cannot mix just anything in loads of course. Tea is not going to taste very good after a few hours rocking about above perfume-rich detergent powder and you don’t want liquids above anything electrical but I think we could do a lot more to maximise transport resources. Some companies adopt a “not on your life” attitude at suggested capacity sharing but I think that shows a lack of innovation capability and desire.

On the subject of logistics optimisation and flexibility I stumbled across this excellent use of space and transport expenses. Click on this link and take a look at how soft drinks producers can help to distribute medicines in D&E regions. A simple solution to the distribution of medicines in very difficult environments where cost pressure usually means the people who need don’t get.

Image courtesy of renjith krishnan at freedigitalphotos.net

Tags: Brewing & Beverages, FMCG, Logistics Service Provider, Logistica Management, Dave Jordan, Cost Reduction, Logistics Management

FMCG Mergers & Acquisitions (M&A):Why acquired brands fail to deliver

Posted by Dave Jordan on Wed, Aug 14, 2013

Let me get straight to the point on this one. Why do so many FMCG mergers or acquisitions frequently result in the apparent death-knell of once proud and promising brands? I am not going to name any names but if you think about it there have been some real clangers dropped by some of the blue-chip FMCG giants.

Purchased companies or individual brands are usually reasonably successful in order to attract new owners. Yes, sometimes companies will divest weaker brands or brands no longer core to their portfolios but you will struggle to sell a clearly decaying brand name. A real hospital pass if ever there was a branded one.

I am studying such a case in Europe at the moment where the FMCG brand acquisition is about 12 months old so plenty of time for smooth integration or so you would think. Marketing activity has not changed and I am also assured above and below the line advertising spend has been maintained at pre-acquisition levels. That in itself is unusual as sellers usually spend big to make a brand more attractive at sale time.

So why does an apparently attractive acquisition fail so quickly? Nothing at all to do with marketing or finance but everything to do with the extended Supply Chain. Just to be clear here I do not consider the Supply Chain to end at the distributor’s warehouse in Traditional Trade markets you commonly find in CEE, Africa and the Middle East. You need Supply Chain skills to get products on to shop shelves and then keep them replenished. With due respect to salesman and women, they are trained to sell.

Supply chain rtm m&a resized 600The newly acquired brand that was purchased with buoyant sales and a high profile has been dragged down to the level of the existing brands by inadequate Supply Chain and Route To Market (RTM) operations. Frankly, it did not stand a chance and it is no wonder the company wanted to buy a top selling brand when their own were performing so badly. However, the reasons for failure were all in-house as the once top selling brand plunged to the depths.

There was no formal Supply Chain department with planning, logistics and customer service roles scattered around in Finance and Sales departments. There was no focus and no single person to co-ordinate and run a functioning Supply Chain. Forecasting accuracy; what’s that? Stock cover; no idea. S&OP; forget it Customer service; no!

Couple that level of disorganisation with a bonus-centric, forecast averse sales force trying to run the distribution chain through to the TT shop shelf and it is no wonder all the presentation arrows were red and pointing south.

When considering an acquisition to bolster sales and profit make sure your existing skus are not already blighted by lack of care an attention to your Supply Chain and RTM.

Image courtesy of renjith krishnan at freedigitalphotos.net

Tags: FMCG, Route to Market, Mergers & Acquisitions, Dave Jordan, CEO, Traditional Trade, Forecasting & Demand Planning, Distribution

FMCG KPI/Balanced Scorecard or Monthly Data Dumping?

Posted by Dave Jordan on Wed, Aug 07, 2013

Last week was spent enjoying the weather in UK as I moved the heiress into her third new student house in 3 years.  This time the house has 9 – yes nine – residents which must make it a no go area for anyone above the age of 25 unless wearing protective clothing and packing a can of MACE. Carrying boxes down from an attic room via narrow and winding staircase was quite a work-out but my notorious glass back survived intact although the box of books came close.

Job done I made my way back to base with another couple of KLM flights but this time without a Jobsworth amongst the crew. The weather in UK was on the warm side on departure so I decided on a minimalist approach to clothing to ease my way through the various security screenings. Shorts, t-shirt, socks and trainers enabled me to glide through the checks without being patted, prodded or made to make a second pass through the metal detector.

Data rain FMCG CEO resized 600The end of the world was in progress on arrival back in Bucharest. Heavy dark and angry clouds were dispensing rain by the bucket load and it was relentless. Coat; what coat? The rain quickly soaked what clothes I had on and whatever I did made absolutely no difference. In effect my fellow passengers and I were taking a prolonged but warm shower.

Futile attempts at shelter included the held-aloft flat newspaper and the rather dangerous shopping bag with eye holes over the head. Even the all in one little black bin bag number was ineffective in diverting any of the torrential downpour. This was a storm without escape where complete saturation was guaranteed and inevitable. Saturate! Saturate! Saturate, as the Daleks might say. Everything I tried to improve my situation failed miserably.

I felt rather like an FMCG CEO. Bombarded with data that people believe he/she needs to see in order to run the business. Completely overwhelmed by meaningless numbers and perceived trends. In reality most of that data is aimed at passing the buck to other departments for failure or lack of success. Sadly, the motivation for receiving data from any area of business is to ensure backside protection for the post-mortem that takes place long after the month or quarter or whatever period has closed.

Even if you do not run a swish ERP you need to be able to address in-market issues while you still have a chance of making a difference. However, to do that you need to receive information which quickly converts to relevant knowledge and then facilitates actions. To actually see the reality of market performance you don’t need meaningless masses of numbers, you need actionable facts.

If you don’t have a KPI or Balanced Scorecard then sort one out quickly. If you already monitor performance in this way then take a long hard look at what is actually being reported; is it for the benefit of the reporting colleague/department or for the benefit of the entire company?

Continuing to respond to out of date data will see your business performance stay under the weather.

Image courtesy of Vichaya Kiatying-Angsulee at freedigitalphotos.net

 

Tags: FMCG, Dave Jordan, CEO, Performance Improvement, KPI, Supply Chain

Month end sales peaking is alive and well in FMCG/Pharma-land.

Posted by Dave Jordan on Thu, Aug 01, 2013

Imagine Manchester United needed to score 5 goals in the last match of the season to win the English Premier League yet they do not start attacking with any intent until the 80th minute. Or the England cricket team needing to take 6 wickets to win a Test Match but bowl underarm until the last over.

What about the building contractor who wins a lucrative 2 year contract but starts work only 2 months before completion date? How about leaving your Christmas shopping until 24th December or doing no revision until a week before your final exams? Oh, hold on, the last two are real life!

I am amazed at how few CEO’s appear not to see routine month end peaking and the problems this causes in their companies. “Problems” is actually an understatement as what is actually happening is:

  1. Lost sales/profit/cash
  2. Unhappy customers and staff
  3. Ongoing disruption to company processes.

A medium sized FMCG multi-national recently engaged me “to sort out those people in Supply Chain, especially in Planning”. Allegedly, they were the culprits for continual lost sales and poor customer service going back as far as the CEO could remember. Needless to say although the SC was not perfect the cause of the CEO’s wrath resided elsewhere.

A reasonable demand forecasting tool was in place within S&OP and all S&OP meetings were happening as per plan. This only served to further irritate the CEO as S&OP was in place after several months of learning curve pain. What was going wrong here? This was:

A typical 4 week month had the following sales pattern:

Week 1 - 5% of monthly forecast

Week 2 – 15%

Week 3 – 20%

Week 4 – 60% with 30% in the final 3 days!!!

Yes, unsustainable!

You might as well giNegative auction forecast accuracy resized 600ve all your sales staff the first 2 weeks off on leave as they are not actually doing too much. Orders are low so logistical movements are few and well within capacity so the Supply Chain would appear far from stretched.

However, forecasted inbound skus continue to arrive and as outbound shipments are low the pressure on space in warehousing slowly but surely builds. By the time the sales alarm clock sounds in week 4 your warehouse is likely to be tasked to hold 60% of current month stock plus a very high proportion of the following month stock, certainly greater than 60%, plus a few weeks of safety stock.

 What does month-end peaking cause?

  1. Warehouse capacity is exceeded and costly back-up storage has to be used. This increases picking and dispatch lead times.
  2. Warehouses become very congested making picking and put-away sub-optimal. Fast moving skus can no longer find homes on lower racks making high truck access necessary. You simply physically struggle to access stock even with the best WMS in the world.
  3. Ability to move stock for promotional assembly and return is hampered.
  4. Transport become scarce as demand exceeds contracted capacity and spot transport prices diminish profit.
  5. Bonus-centric sales people desperately try to reach the numbers and sell whatever is readily available to meet their targets even if not in the forecast.
  6. In turn, the current month forecast is shot and stock identified for the following month is no longer available.
  7. Last but not least, safety and security are compromised.

Oh, we must not forget lost sales, unhappy customers and demotivated staff who suffer this grief on a monthly basis. They must look forward to quarter and year ends with glee, not!

The culprit is not in SC in this case. The sales halo needs to be taken down and placed in a drawer until they get their collective act together. Nobody expects a 25/25/25/25% routine in the month but asking the team to deliver 60% of forecasted monthly results in only a few days is at least madness and probably incompetence on behalf of the CEO.

Yes, I know all the defending arguments about client cash flow and the desire to operate on low retailer stocks but facing the issue head on will pay immediate dividends.

Image courtesy of David Castillo Dominici at freedigitalphotos.net.

 

Tags: FMCG, Route to Market, Dave Jordan, CEO, Performance Improvement, Forecasting & Demand Planning, Sales