Supply Chain Blog

FMCG Boardroom Blame Tennis: What really causes lost/missed sales?

Posted by Dave Jordan on Tue, Apr 29, 2014
I witnessed an intense match of blame tennis recently in the board room of a popular FMCG multinational. The intensity and aggression on display presented a mental image of a tennis match with John McEnroe, Ilie Nastase, Goran Ivanisevic and Marat Safin all on court at the same time with each competing against three opponents in multiple, parallel games. Can you imagine the debris from all those broken racquets and chairs? There would certainly be a multi-lingual blueness in abundance along with some badly damaged balls.

FMCG_Sales_BoardThe CEO blamed the Sales Director for not meeting the targets so the sales guy sent a blame diverting back-hand into the ribs of the Supply Chain Director who then immediately returned with a solid smash only for the sales guy to produce an unexpected lack of credit drop shot that completely caught out the Finance Director. What a waste of senior level time and energy and frankly, shame on the CEO for starting the interchange as he/she should have been better informed. What is more, the S&OP process is obviously not very healthy.

As ever, the reasons for not meeting sales targets are numerous and seldom are such failures attributable to one individual department or team. Through the S&OP process people need to be brave and very open about why errors occur and they will certainly occur as nobody and certainly no S&OP process is perfect.

Work together to identify the real causes of lost, missed or reversed sales. Do not rely on hearsay or history as you cannot cure what you cannot clearly see. Agree a policy that identifies the exact source for all lost sales or returns from clients and then you can drill down and apply 100 year fixes. Note that the aim is not to be able to allocate blame!

Sales generated lost sales/returns/reversals

  • Expired in Key Accounts
  • Expired in Traditional Trade
  • Valid order rejected on receipt at client
  • Damaged at client
  • Overstock at client – stock pushed at month end and not actually required
  • Stock returned by client prior to a relaunch or promotion, i.e. prefers the new packaging
  • Post relaunch returns
  • Failed promotion returns
  • Slow moving stock returned by client, i.e. sales not going as well as expected

SC generated lost sales/returns/reversals

  • Wrong shipments, e.g. client or store
  • Shipment rejected due to missed delivery time slot
  • Damaged on receipt
  • Picking errors, missing goods
  • Picking errors, expired/close to expire goods
  • Documentation errors
  • Old product supplied after relaunch

Shared lost sales/returns/reversals

Duplicate orders received and/or recorded in the ERP.

These are the items that should be under your own control and if you can control them you should be able to engineer improvements. You cannot do much about lost sales due to unexpected but compelling competitor activity, a sudden economy bubble-burst or a natural disaster so focus on what you can influence.

Get John, Ilie, Goran and Marat off each other’s back and get them to direct their shots at the opposition for a change.

Image courtesy of imagerymajestic at freedigitalphotos.net

 

 

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

FMCG/Pharmacuticals: Macbeth Supply Chain S&OP Soliloquy

Posted by Dave Jordan on Wed, Apr 23, 2014

As we celebrate St George's Day and the birthday of William Shakespeare (also the date he died!) what would the great bard think about S&OP in FMCG and Pharmaceuticals?

Is this a plan which I see before me, S&OP ala Shakespeare
The numbers are as we planned? Come, let me see.
They are not, I see two numbers, still.
Art thou not following S&OP, incredible!
Your “gut feeling” could be right? or is this but
A plan of the sales mind, a false creation,
Proceeding from the bonus-obsessed brain?
I see this yet, inform others
As this which you cannot ignore.
Thou shall assure me S&OP gets going;
And the S&OP instrument I want used!
Mine eyes see the foolish lack o' consensus,
Or else worthless at best; I see this ill,
And on thy supply plan remove doubts of “could”,
Which was not so before. There's no such thing:
It is the demand plan which conforms
Thus to mine eyes. I must see minutes recorded
Pre S&OP must go ahead, and ERP is in use.
The gaps could be deep; discussion eliminates
Take extra offerings, and work even harder,
Align by this meeting, calm the sales wolf.
More minutes you attach, thus with stealthy pace
With colleagues at your sides, a single plan design
Move on to the Board. Ensure a firm-set plan,
Fear not our quips, the way we talk, no fear.
Some small adjustments we may talk about.
And take the present plan and deploy as,
This now suits the Board. S&OP is done, and leads
Towards defeat of those where S&OP lives not.

The original William Shakespeare work.

Is this a dagger which I see before me,
The handle toward my hand? Come, let me clutch thee.
I have thee not, and yet I see thee still.
Art thou not, fatal vision, sensible
To feeling as to sight? or art thou but
A dagger of the mind, a false creation,
Proceeding from the heat-oppressed brain?
I see thee yet, in form as palpable
As this which now I draw.
Thou marshall'st me the way that I was going;
And such an instrument I was to use.
Mine eyes are made the fools o' the other senses,
Or else worth all the rest; I see thee still,
And on thy blade and dudgeon gouts of blood,
Which was not so before. There's no such thing:
It is the bloody business which informs
Thus to mine eyes. Now o'er the one halfworld
Nature seems dead, and wicked dreams abuse
The curtain'd sleep; witchcraft celebrates
Pale Hecate's offerings, and wither'd murder,
Alarum'd by his sentinel, the wolf,
Whose howl's his watch, thus with his stealthy pace.
With Tarquin's ravishing strides, towards his design
Moves like a ghost. Thou sure and firm-set earth,
Hear not my steps, which way they walk, for fear
Thy very stones prate of my whereabout,
And take the present horror from the time,
Which now suits with it. Whiles I threat, he lives:
Words to the heat of deeds too cold breath gives

 

Learn more about S&OP

Tags: Dave Jordan, Humour, ERP/SAP, Supply Chain, S&OP, Forecasting & Demand Planning, Sales

FMCG, Pharmaceuticals S&OP: Team work is critical for success

Posted by Dave Jordan on Wed, Apr 16, 2014

“What do you call a smiling, friendly and courteous person at a sales conference?” The caterer.

“How do you save a drowning supply chain guy?”  Take your foot off his head.

“What is black and brown and looks really good on a sales guy?” A Rottweiler.

“What do you call a bus full of supply chain guys at the bottom of the ocean?” A good start.

 “How do you get a sales guy out of a tree?” Cut the rope.

A man walked into a bar with a snarling alligator. “Do you serve supply chain people in here” the man asked.

“Certainly do.” replied the barman.

“Perfect!” the man said, “I’ll have a beer and I’ll take a demand planner for my alligator?”

“A salesman and your mother-in-law are trapped in a burning building. You only save time to save one of them. Do you a, have lunch or b, go and watch a movie?

“Sales people think forecasting is about going fishing with three colleagues.” (That one might need a bit of thought.)

No, this was not Les Dawson in dead-pan full flow in a dimly lit, smoky northern England working men’s club just before he threw in a dubious segue to his stock-in-trade mother in law jokes. This was the beginning of an FMCG pre-S&OP meeting! Yes, the meeting where rigorous debate was expected between colleagues in different functions in preparation and eventual agreement and commitment to a plan for the following period.

Pre-S&OP; the final meeting in a monthly cycle before the balanced supply and demand plan is proposed and commended to the senior team. The meeting where sales, marketing, finance, purchasing, supply chain and other functions do their best to agree a plan that is achievable in terms of volume and value, within supporting budgets and in line with senior team expectations.

FMCG, Pharma, S&OP teamworkingNow, I like a good old guffaw and I think I give as much as I get but this type of banter is going a little too far. However, I am not suggesting meetings should take place with stiff British style upper lip and devoid of humour. Some of the most productive meetings in which I have been involved included a degree of humour which generally relaxed attendees and ensured everyone felt comfortable enough to make a considered contribution. A little bit of fun goes a long way to gelling teams, removing inhibitions and building trust but…..

Under the circumstances described at the beginning of this blog there is about 2/5 of 3/5ths chance of anything like a cohesive and reliable plan emerging from the tennis-like squabble. If your S&OP is suffering a similar fate then do something about it now as it will not get better of its own accord.  Of course, if one of the senior team joins the meeting as an observer all will be sweetness and light but you will be able to tell by the quality, reliability and credibility of your S&OP output if real and open team working is alive and kicking in the business.

Did you hear the one about the marketing guy………….?

Image courtesy of Stuart Miles at freedigitalphotos.net

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

Integrated Supply Chain Planning – 1 Reason Why It Is Difficult

Posted by Michael Thompson on Mon, Apr 14, 2014
In my previous two blogs on the subject, I outlined how producers (manufacturers) can achieve very significant improvements in the financial performance of their supply chains by a process of integration between the primary and secondary supply chains (Integrated Supply Chain Planning – The Number 1 Opportunity). I then described how to achieve focus when considering global supply chain integration programmes of this type by looking at different market profiles (Integrated Supply Chain Planning – 4 Opportunities and 2 Quick Wins).

This raises the following question.  If the opportunities exist (they do), and they are so significant (they are), and the process of achieving the success is well established (it is), why have more companies not simply gone ahead and implemented these changes?

The short answer is that some companies have. However, many haven’t.

There are several explanations but actually only one real reason.

To integrate the primary and secondary supply chains almost always involves the co-operation of two company departments – supply chain for primary and commercial (sales / trade marketing) for secondary.

Let’s look at the proposition from the point of view of the Supply Chain Department.  The key benefits relate to lower inventory and that’s a good thing for a Head of Supply Chain.  Integration benefits are long term and make for a more effective and responsive supply chain.

Now let’s consider Sales.  They will get fewer stock outs (higher sales - that’s good), more effective trade marketing (good again) and better deployment of product launches (also good of course).  So what’s not to like?
win_win_situation
The problem is this – the lower inventory applauded by Supply Chain, is also a one-off reduction in sales, very much loathed by Sales.  It is only a short term one-off hit to sales.  However, that matters.  If, for example, stock is reduced by 2 weeks, that is nearly a 4% reduction in annual sales.  Such a reduction is simply not palatable for most Sales Directors or CEO’s.  
So we have the competing interests of the Supply Chain and Sales Departments, long term vs short term considerations.  Moreover, for multinationals we also have the competing interests of each market (and Country Manager generally bonused on sales and profit), regional and global Heads of Supply Chain (whose bonuses will include working capital tied up in inventory), regional and global Heads of Sales (only the top line matters for them), regional Heads responsible for regional bottom lines and so forth.

To achieve integration of the primary and secondary supply chains on a global basis, just about all of the above stakeholders (and more) will have to agree.  And the only person who holds sway over everyone is often the global CEO.

So it may come down to this.  If you want to integrate your business with that of your distributor in, for example, Nigeria, you may need the approval of the Group CEO.  And that is the number 1 reason why it is difficult.   
However, for those who think about the long term and are prepared to grasp this particular nettle, the rewards are plentiful indeed.

 

Image courtesy of www.freedigitalphotos.net

Tags: FMCG, Route to Market, Pharma, Michael Thompson, Supply Chain, Sales, Distribution, Inventory Management & Stock Control, Integrated Business Planning

Integrated Supply Chain Planning – 4 Opportunities and 2 Quick Wins

Posted by Michael Thompson on Wed, Apr 09, 2014
In my previous blog on the subject (Integrated Supply Chain Planning – The Number 1 Opportunity), I outlined how producers (manufacturers) can achieve very significant improvements in the financial performance of their supply chains by a process of integration between the primary and secondary supply chains.
 
The key is data exchange between the producer and their key distributors.
 
Given that global multinationals operate in a large number of markets and generally with a large number of distributors, the question of how to achieve focus becomes very important when considering global supply chain integration programmes of this type.

The opportunities from such integration are dependent on the particular characteristics of each market.  These depend on the following:

  1. Direct vs indirect distribution
  2. Proportion of sales via Key Accounts vs Traditional Trade
  3. Distributors characteristics in each market – their number, degree of exclusivity and competency, for example.
 
Now let’s look at different market profiles.  The integration opportunities can be summarised as follows:

Integration opportunities for different market profiles      
We can see from the above that there are four integration opportunities of which two are quick wins:

  1. Where a market is serviced via direct distribution (i.e. the producer undertakes its own distribution), the long term solution is to establish internal direct data interfaces with key warehouses.
  2. Where Key Accounts predominate (e.g. hypermarket chains in Western Europe), the long term solution is to establish direct EDI interfaces with Key Account customers.
  3. With markets where there is an exclusive distributor there is scope for Quick Wins.  This can be achieved by establishing a stock replenishment process at key distributor stock locations and ensuring that distributor stock data forms a key input to the sales forecasting process of the producer.  The data exchange to enable this process could if needed be manual in the first instance (for the most important “Category A SKUs” for example). In the longer term EDI interfaces can be established.
  4. In markets where there is no exclusive distributor, Quick Wins are still possible provided there is a relatively small number of significant distributor stock locations – i.e. where there is a small number of key distributors.  Integration can be achieved via a similar process to that above in No 3.

For producers, analysing their markets in this fashion will identify where opportunities exist including for Quick Wins.

I would be interested to hear of readers experiences with this type of supply chain integration … as it is often not as easy as it seems …
… but not for the reasons you may think.

I will explore this in my next blog. 

Image courtesy of Enchange Ltd

Tags: FMCG, Route to Market, Performance Improvement, Pharma, Michael Thompson, Supply Chain, Distribution, Integrated Business Planning

Integrated Supply Chain Planning – The Number 1 Opportunity

Posted by Michael Thompson on Mon, Apr 07, 2014

Enchange has been working with many FMCG and Pharmaceuticals multinationals for years on projects to improve their primary supply chains.  
We have also been working with many of the same companies on Route to Market (RTM) projects.

For the sake of clarity, by “primary supply chain” we mean all processes (e.g. planning, sourcing, manufacturing, etc.) up to the point that finished goods are in the producers’ warehouse before the stock is sold to customers.  By “route to market”, we mean the processes by which finished goods leave the warehouse and arrive on retailers’ shelves, often via third party distributors.  Some people also refer to the latter as the secondary supply chain.

One particular client is involved in a number of global projects updating its primary supply chain including implementation of a new SAP and APO platform.

A few months ago we set ourselves a challenge at Enchange.  How, we wondered, could this client achieve a step change improvement in financial performance?  Bear in mind that they were already involved in a very large global project to do just this.

So we held a workshop.  Our conclusion?  There remained a significant gap in their supply chain improvement plans.  It was integration of the primary and secondary supply chains.  Once stock was sold to their customers, there was limited interest as far as the producer supply chain was concerned.

fmcg supply chain planningAnd therein lay the gap.  Or rather the opportunity.  If customer (e.g. distributor) data was formally integrated into the primary supply chain processes, there will be significant benefit for our client (the producer) and their distributors.
 
The key to this is data.

If there was greater and more reliable visibility of trade stock, the producer will be able to reduce its own finished goods stock.  Sales and stock data can be exchanged with the producer by EDI interfacing with distributor systems or by use of ‘virtual links’ where key data is presented by the distributor and extracted into the producer’s systems.  With this data a VMI type of relationship can be established whereby the producer replenishes distributor stock, rather than waiting for an order from the distributor.

The benefits for the producer will be finished goods inventory reductions and a reduction in month-end sales peaking.  Direct bottom line increases will also be possible following reductions in distributor discounts, the next time that contracts are negotiated.  Additionally improved trade stock visibility will drive improved product launch and trade marketing effectiveness including with promotions.

For the distributors there will also be benefits.  Stock can be also reduced and this will free up valuable cash and space.

So we presented these findings to our client.  The response was very positive.

The next question that was asked.  How can we focus our efforts with this approach?  I will deal with this in my next blog.

 

Image courtesy of Enchange Ltd.

 

Tags: FMCG, Route to Market, Pharma, Michael Thompson, Supply Chain, Forecasting & Demand Planning, Inventory Management & Stock Control, Integrated Business Planning

Is this the most perfect FMCG or Pharma or Drinks Supply Chain ever?

Posted by Dave Jordan on Tue, Apr 01, 2014

I will not reveal the name of the organisation for obvious reasons but their Supply Chain is one very impressive, slick machine. Across the Source, Plan, Make and Deliver Supply Chain disciplines we can see excellence and leading edge systems and performance.

April Small resized 600

Source

Raw and packaging materials are bought at very competitive prices yet with equally favourable payment terms. Lead times are optimised and stock is on consignment. Supplier collaboration is a key part of the business.

Plan

S&OP is alive and kicking and visibly led from the top table. Demand and supply is finely balanced and forecast accuracy at sku (not brand) level is a minimum of 95%. Every aspect of planning is done in the ERP without a spreadsheet in sight. Stock levels are set using rolling 2-year historical data along with the weekly updated activity plans from Sales & Marketing colleagues. No month-end Sales target push!

Make

Output reliability is close to 100%. Manufacturing costs are the lowest amongst the peer group of similar companies. Production line efficiency is well above the manufacturer name-plate specification. There is zero waste and rework and this new factory follows the principles of the Japanese Institute of Plant Maintenance.

Deliver

The relationship with the 3PLP is very close and proactive. Stocks at Distributors are maintained via a replenishment system. There is no overstocking or write offs. A Route To Market assessment has been carried out and all distributors are proactive partners. Customer service levels are over 99% for all customers.

Overall Supply Chain efficiency is monitored through a short list of highly relevant and stretching KPI targets. The Supply Chain team is highly motivated and valued by colleagues. Who wouldn’t like to work in this company? What an organisation!

...but remember Always Place Revealing Information Last – Find Our Other Laughs

Tags: Customer service, Brewing & Beverages, Route to Market, Dave Jordan, Humour, KPI, S&OP, Logistics Management, Inventory Management & Stock Control