Supply Chain Blog

FMCG Retailing/Supply Chains: corner shops to out of town superstores

Posted by Dave Jordan on Wed, Sep 25, 2013

A couple of weeks ago senior management and I had to stay up late to collect the heiress and a very brave boyfriend from the airport around midnight. Unfortunately the low cost airline they were using did not live up to its speedy name and the flight was delayed by 2.5 hours. We were committed at that stage so no point in sleeping, what should we do?  We went shopping of course!

Now, 24/7 shopping is not new but it was not so long ago that the FMCG outlet network operated in a very different way, in the UK at least. Before the boom in out of town shopping centres the vast majority of FMCG products were sold in the local high street and mostly by independent traders. I can only recall Tesco, the Co-Op and perhaps Spar as having anything like a national network. Yes, I realiSe I am showing my age here.

These shops had rigorously defined opening hours which were usually 09.00 until 12.30 when they would close for lunch and then re-open at 14.00 until the shutters were back on again at 17.00. Where I lived in a quaint village called Birkenhead they did not open at all on Wednesday afternoons and many did not open on Sunday either.

Some archaic laws did not help as you had the crazy situation where you could buy a girly magazine on a Sunday but not a Bible! (Coincidentally, when In Vienna 2 years ago I found out it was illegal to sell paper products there on Sunday.) If you needed something and the shops were shut then you really had no option but to wait until they re-opened the following day as long as it wasn’t a Sunday!

FMCG Retailers Supply Chains resized 600Supply chains or what passed for supply chains at that time were relatively simple with shopkeepers usually restocking from a cash & carry like Makro/Metro.

Spring forward a generation and you can just about buy anything you like at any time of the day and on any day of the week. I am not sure how many people do shop at 3am but it must be profitable as so many FMCG retailers keep their doors open permanently. With shelf off-take spread over 24 hours in any one day retailers need to have slick chains in place to move goods from their central warehouses right up to the shelf. FMCG Producers who deliver direct to stores or to retailer platforms need to be time flexible to meet the variable consumer demand.

Shops are open constantly and demand is usually greater at weekends so why do so many supply chains close down at 5pm on a Thursday or Friday, depending on where you live? While everyone needs a break isn’t there a competitive edge to be had from offering supply chain support at least every day of the week if not 24 hours a day?

Image courtesy of digitalart at freedigitalphotos.net


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

FMCG/Pharma: The slow death of an S&OP process

Posted by Dave Jordan on Tue, Sep 17, 2013

One of the commonest responses I receive when discussing Sales & Operational Planning (S&OP) with prospective clients having growth problems is “….but we have S&OP in place so we do not need any assistance”. “Ok, then why do you have negative growth, out of stocks and excess working capital?” is my retort.

One sS&OP POOR PERFORMANCE FMCG resized 600uch FMCG company invited me to take a look at their S&OP structure and process just to get rid of me. What an eye opener!To be fair the S&OP structure was ok but digging deeper provided some insights to the problems this company was experiencing.

Marketing (R&D, Innovation)

 

A 1 month marketing planning horizon made it impossible for the supply side of the company to do even a half decent job of planning the right stocks to be available. On two occasions in the past year this company has spent 6 figure sums on adverting campaigns BEFORE stock was actually available for sale. I get teaser campaigns but this was ridiculous.

 

Since the establishment of S&OP the leadership seniority of this important meeting had gradually eroded so that the freshest marketing trainee was now running the monthly meeting. No experience or knowledge of the business and hardly able to influence other departments.

Demand Planning

Carried out by a Supply Chain guy as the people who create the demand, i.e. Sales had lost interest and ceased making any inputs. Inevitably, forecast accuracy was consistently low.

Procurement Planning

With the variable and low forecast accuracy the procurement planning was simply a best guess and guesses are usually wrong.

Financial Planning

A classic top-down insistence that the target number must be the budget and the target number must be achieved. No room or desire for debate or scenario evaluation to close gaps.

KPIs and Data

Data was being collected and published but the KPIs selected were all about backside protection and blamestorming. What is the point of recording the number of skus where the sales forecast was below 75% when it has not been at that level for many a moon?

Pre-SOP, SOP Meetings

No agendas, no minutes plus variable and mostly junior attendees ensured that S&OP was not being managed as the key sales business process. To cap it all S&OP had been removed as a standing item on the main Board agenda meaning no senior control or care whatsoever.

Over a period of about 3 years a once slick S&OP had deteriorated gradually with process performance falling to below the actual starting standard. What was left of S&OP had become a Supply Chain process and that can never work.

S&OP. If you’ve got it flaunt it but if you haven’t or it is ineffective, be honest with yourself and do something about it. Above all else, persevere with the process change and reap the benefits!

Image courtesy of Vichaya Kiatying-Angsulee at freedigitalphotos.net

Tags: FMCG, Dave Jordan, CEO, Pharma, S&OP, Forecasting & Demand Planning

FMCG/Pharma European Supply Chain Quality challenges

Posted by Dave Jordan on Thu, Sep 12, 2013

We took a weekend break in Prague recently. I have been there before but only saw the inside of a taxi, a hotel and a soap factory that also makes margarine so this was a real tourism opportunity with the family. These days I do actually relax on holiday but there are always opportunities to see Supply Chains in action.

I have never seen so many tourists, even in London and to cap it all it was Gay Pride weekend. At times we didn't know which way to turn.

Prague was forecast to be very hot and indeed it was so we were pleased our hotel choice had a swimming pool. Cannot wait! On arrival the check-in desk our thoughts of relaxing aching limbs in a cooling pool were shattered. A small digital sign (yes, very posh) on the desk told us the pool was not available as it was being sanitised. There must have been some virulent contamination as I found out the pool had been closed since mid July, i.e. 6 weeks previously.

This Customer Service failing inevitably put us on the front foot when evaluating everything else the hotel had promised to provide. If they knew the pool was unavailable the decent thing to do would be to tell people. Sure, some bookings may have been lost but at least you know what to expect on arrival. What next? “I am sorry sir but your bed has been taken away for repair so you will have to sleep on the floor.”

toast customer service efficiencyBreakfast the next day provided two further instances of customer service woe and neither required a rocket science degree to avoid.

Toast. Can you really get anything wrong with toast? You can at this hotel. Those tunnel toasters can really spoil your day if your carefully chosen bakery item is purloined by someone else while you were away pouring out your muesli.

Breakfast bread battles were not the cause of disappointment on this occasion, however. This toaster had a grill which rotated and took your bread between the glowing elements. The problem was you needed three passes to get even a tinge of a toasty look as the heat setting was on low and the speed was set at fast.

Being a bit of a practical type I reversed the settings to maximise the toasting opportunity in one pass. World War 3 nearly started in a Prague hotel breakfast room. Black-clad waiters appeared from every angle to give me stern looks and even sterner words I could not understand. Perhaps the Czech Republic had borrowed some of the UK’s ridiculous Health & Safety rules and touching the toaster could have put the entire city at risk?

I was completely lost for words when told that operating it this way uses up too much electricity and therefore money. My discussion on efficiency fell on deaf ears and they quickly reset the machine and bread continued to be “toasted” three or more times in front of a watching audience of hungry guests.

Could things really get worse? Oh yes!

Rice Krispies. What can go wrong with a bowl of this well known FMCG cereal? I filled my bowl with said cereal, added milk and sat to eat expecting to hear that famous snap, crackle and pop. Stale. They had the texture of cardboard and a similar taste too. They must have been around for weeks soaking up moisture and various odours from the environment. I took a waiter over to the large serving bowl of cereal and he was rightly horrified. Turning smartly he used the “out” door to enter the kitchen and quickly returned with a brand new unopened catering pack. With a Fawlty-esque flourish and smile of proud satisfaction he poured the new stock on top of the decaying stale stuff. Aaaaagh! Perhaps the police should be told about this cereal killer.

Customer service, operational efficiency and FIFO stock control all compromised and it was only day one!

Image courtesy of artimisphoto at freedigitalphotos.net

 

 

 

 

Tags: Customer service, Dave Jordan, Humour, Cost Reduction, Inventory Management & Stock Control

FMCG/Pharma Supply Chain: Much more than source, plan, make & deliver

Posted by Dave Jordan on Tue, Sep 10, 2013

What supply chains are meant to do has been very well documented but source, plan, make deliver disciplines are the core activities. Add in a potential warehousing and logistics role and if the company is forward thinking, a customer logistics role then you have just about covered the entire extended chain.

supply chain roles responsibilties resized 600That is enough to try and manage for any sizeable business, in my humble opinion. Add in the usual mix of forecast variability, hap-hazard NPD/product change management, complex supply network planning and supply chain people tend to earn their pay packets.

Look closer though and you will see a raft of other important roles allocated to the supply chain. Does someone think supply chain teams have bags of free time to sit idly through 4 hour agency lunch breaks or appear at endless press conferences and product launches like certain colleagues?

Here I take a look Just a small sample of what I have seen labelled as a supply chain responsibility over the years. Of course, some are indeed border-line and debatable but everything has to be managed by somebody, somewhere.

Safety, Health & Environment (SHE)

Yes, SHE usually ends up in supply chain. When you are responsible for large numbers of people in manufacturing units this is sensible as most of the SHE impact arises where people work in processing environments. However, when the unit is an office of a Marketing & Sales Operation (MSO) the responsibility could sit elsewhere.

Quality Assurance (QA)

Ditto in that QA usually ends up in supply chain and while it is probably the best place sometimes there are challenges of role segregation when QA staff freeze or block stock which has been made available to promise by planners.

Security

Security related to warehousing and stocks is in scope but why would it be down to a supply chain employee to manage security in an MSO office?

Car Fleet

Ok, cars have wheels and like heavy goods transport they need monitoring for maintenance, fuel consumption and distance travelled. I think this is one of those that should be in an HR function as the majority of cars may be a part of employee remuneration packages. (Aside; have a look at how many miles or km your cars are travelling as many will be being used as taxis out of working hours!)

Catering

Now we are getting extreme as feeding masses of people is not something at which I have become skilled. I guess the principle of catering is to buy ingredients, construct menus, cook food and then serve – source, plan, make and deliver!

Office Management

Another role from left field. Surely somebody in HR or a shared services function can do a better job of this role.

Tendering

This one is where on balance the supply chain has the skills required to find, assess, test and select in terms of 3PLP tendering or in terms of buying negotiations. I have seen some really appalling tendering processes take place outside of supply chains and once I did help run a tender for the provision of Medical Services.

All in all, the supply chain scope can be a lot wider than people think and I don’t expect that to change very quickly. Have you got any other more extreme examples?

 Image courtesy of renjith krishnan at freedigitalphotos.net

 

 

Tags: FMCG, Dave Jordan, Supply Chain, Forecasting & Demand Planning, Logistics Management, Inventory Management & Stock Control

FMCG/Pharma RTM: CEO's don’t hide! Face the reality of inefficiencies

Posted by Dave Jordan on Wed, Sep 04, 2013

The CEO/GM/”head honcho” or whatever “big boss” is to the local company plans a visit to your territory. These events are usually planned well in advance to get fixed in the diaries of the senior people and if such a visit is a rarity you must ensure it is a resounding success. You may not get the opportunity of a face to face with the key decision maker and of course, someone who can draw a line under your FMCG/Pharma career with the stroke of a red pen.

You put a team in charge of preparations which inevitably takes people away from their routine work and the derived tasks are given priority importance. You want to make the best effort so you put your best people behind this which further detracts from day to day selling or manufacturing.

CEO route planning RTM resized 600If the visit involves inspection of a manufacturing facility then the fresh paint will have been ordered and production lines programmed to be idle for a period of advance cleaning and cosmetic beautification. Is this really what senior bods in FMCG/Pharma want or deserve? We’ve all done it, but why? Why not show them the warts and all reality of how you are struggling to cope under lack of investment, training or category focus? Continually pulling the wool over their eyes will get you precisely nowhere!

This leads me to a true story about a visit to a major FMCG company in CEE by the European “head honcho”. The focus was on the Route To Market (RTM) performance of the business in the light of dwindling sales despite some high profile brand acquisitions. A comprehensive route plan was thrashed out that covered Traditional Trade (TT) and Key Accounts (KA) Customers.

Clients were briefed to ensure they were all on-board for this key set-piece visit and swarms of plain clothes merchandisers were allocated to keep shelves stocked and tidy at all times before disappearing into the consumer crowd without being spotted. Military precision was applied in terms of timings and which clients would be introduced to the big boss and exactly which stores would be visited and when.

On the morning of the visit the big boss was given a briefing on the day ahead, the shop visit programme along with the visit objectives of the local business. Suits had been dusted down, hair washed and the fast food wrappers removed from the Sales pool car. This was going to be a good day.

Cue pantomime response of “oh no it’s not”. Taking a seat in the car the big boss insisted that none of the previously identified outlets were to be visited and that no mobile phones were to be used for the duration of the field visit. If the local company wanted top management to understand the difficulties faced in this D&E market and take action then they must show the warts and all reality.

Huge discomfort for the Sales team for the rest of the day as they witnessed out of stocks, poor merchandising and competitor use of POS assets amongst many other RTM failings.

If you do not tell the doctor your symptoms how can you expect correct diagnosis and resolution of your problem?

Image courtesy of Stuart Miles at freedigitalphotos.net

 

 

 

 

 

 

 

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