Supply Chain Blog

FMCG Manufacturing, Sourcing and the Ukraine-Russia Unrest

Posted by Dave Jordan on Wed, Sep 24, 2014

The unrest – what a terrible BBC understatement that is – in Ukraine does not look to be going away in the near future and will possibly be hanging over us for considerably longer. The “unrest” is not localised and it obviously involves many other countries and regional bodies with political, economic and territorial interest in the area. One recent escalation has been to ban the sale of EU goods inside Russia which is rather a throw-back to Cold War days when the same rule applied to iconic western branded goods like Coke and Wrangler jeans.

In Cold War times big brand name FMCG consumption behind the iron curtain was probably driven by the efficiency of the black market and wider Russia was probably just a tempting white spot on the corporate globe. Now it is a different matter as Russia is a little bit more important, if you allow me to adopt some BBC understating diction. As part of the BRIC countries Russia is important in driving the growth aspirations of many of the world’s largest FMCG companies. Or it was.......

Most of the large companies have developed pan-European sourcing strategies and gone are the days when each individual region or even country had its own small “local for local” factory operations. This means that tea maybe sourced from Russia for EU countries but olives are imported from EU into Russia, for example. Companies with a local for local approach in Russia will be largely immune to the EU ban whereas others may actually have exports to Russia as a critical part of their businesses.

What can companies do about this? Well, legally and above board, not a lot. There is always someone willing and able to get passed all manner of regulations and restrictions but usually not in significant volumes and certainly not at the same overall cost of supply. Organisations with local manufacturing operations may well keep the Russian market supplied without hindrance and with little impact on cost and efficiency.

Mfmcg factories russia ukraine resized 600eanwhile, those big names relying on exports into Russia from EU may be far less comfortable as they may be saddled with higher costs as production reduces and fixed costs have to be reallocated across residual volumes. In turn this makes factory gate prices higher for existing EU MSO buying offices if sourcing units do indeed pass on the full hit and wood-panelled HQ does not put its hand in its pocket. Turnover of the Russian MSO is also hit as it cannot get hold of products to sell.

“Really not very good at all” says the man from Aunty Beeb in a clipped English accent brimming over with deep concern and gravitas.

As the region is so important to FMCG growth is it just remotely possible that Russia will come out of this conflict with a far larger local manufacturing footprint and a huge amount of western investment?  Indeed, that may sound ridiculous now but will this turmoil force or persuade more companies to be present on the ground and behind the invisible curtain?

Image courtesy of exdos4 at freedigitalphotos.netfreedigitalphotos.net

Tags: FMCG, Dave Jordan, Manufacturing Footprint, Supply Chain, Sales

FMCG Humour: Supply Chain Communication Clarity

Posted by Dave Jordan on Wed, Sep 17, 2014

The United States of America, the US of A, Uncle Sam and the land of the three. No, not a typo but three visits to USA by yours truly, that is.  Two for business and one for pleasure but you cannot visit there without having fun even if it is after a bit of a boring day discussing the details of how to make better soap.

While I have many great memories from the trips there is something humorous that always stands out from each visit. During the first visit to San Francisco for an externally run training course I was told that my English was quite good. The second visit was to Chicago and here after a food fight in a restaurant I was brought a plate of frogs’ legs to make me feel at home.......

humpur_FMCG_SUPPLY_CHAIN_LANGUAGEThe most recent expedition was to West Point near New York City. Not even Jack Bauer could get me to reveal the reason why I was there. Strictly classified. Anyway, in every restaurant or bar bathroom was a sign stating boldly “Staff must was hands”. Well, I waited and waited but nobody came so eventually I washed them myself.

I recently blogged about the lack of clarity in general business language and here I take another look at how a few extended supply chain phrases and terms might have alternative meanings.

Sales are buoyant

The entire sales team is on a team building exercise on a boat

Volumes have softened

The freezer control on the ice cream warehouse has broken down

Service improvement

There is a new speaker system in the church

Operational efficiency

Hospital surgeons are working very well

Forecast accuracy

The weather guy got it right for once

Month-end peaking

Ordering a Chinese roast crispy duck soon after collecting salary

Stock control

A cheap remote for the TV

Capital investments

Buying a house in London or Paris or Rome

Quality control

Expensive remote for the TV

Sales remain buoyant

They are still messing around on that boat

Stock availability

Lots of gravy left over after the roast beef

Bill of materials

A guy called William from the RM/PM warehouse

Lost sales

Inevitable; we have called out the coast guard

Promotional planning

A rarely used HR tool

Transport provider

A taxi

Balanced scorecard

Golf - 74 shots on the front nine & eactly the same on the back nine

Factory gate prices rise

Now it costs more to put a barrier at the front of the factory

Pallet configuration

How an artist arranges paint

Shrink-wrap

A psychiatrist singing an Eminem song

Stock take

Your FMCG warehouse has just been robbed

Pallet utilisation

How much of the pallet is covered with paint

Cross-docking

How the boat captain feels as he finally brings the sales team back

While these are English, English-centric I am sure many exist in other languages. Why not share your alternative supply chain meanings below?

Click here for more supply chain lexicographic guffawing.

Image courtesy of Stuart Miles freedigitalphotos.net

Tags: FMCG, Dave Jordan, Humour, KPI, Supply Chain, Sales, Inventory Management & Stock Control

FMCG Supply Chain Communication, Gobbledygook & BS Bingo

Posted by Dave Jordan on Wed, Sep 10, 2014

I recall laughing out loud when I was first exposed to FMCG BS Bingo – I leave you to work out what BS stands for. This game was designed for boring business meetings where people would pepper their comments and views with the latest buzz-phrases, e.g. blue sky thinking, unencumbered by the facts, bang for your buck and my personal non-favourite, touch base. When each buzz word was heard you crossed it off your list and when all the words had been used you were able to claim bingo or a full house of buzz.

Why do we seem to see more and more gobbledygook and unnecessary words and phrases in business? Why is simple English so rare and apparently inappropriate? Take a look at this business results announcement where I have deliberately disguised this culprit but it is based on an announcement from a household name.

“Closure of the second semester highlighted significant buoyancy in top and bottom line progress despite non-forecasted environmental resistance. Developing & emerging countries have experienced a further slow-down in momentum largely due to the latent threats of conflict and disease. This slumber has been exacerbated by the failure of developed markets to provide an expected modicum of growth.

"Nevertheless, we continue to stride ahead of our markets vectored by ground-breaking innovations in premium categories. Long term market sustainability investments have taken our top brands into the “sleeping giant” BRIC territories and other potential profit rich, atlas white spaces.

"Our newly focussed portfolio was modified through growth-themed acquisitions and overdue disposal of laggardly businesses. Costs remain under pressure but saving plans are primed to reach fruition in the next period being achieved primarily through a rationalisation of homosapien resources.

"The outlook remains challenging but we are confident of delivering impressive growth while enhancing core operating margin deliverance and a muscular cash flow.”

Supply Chain Communication Humour resized 600Such statements are then usually followed by an announcement of availability in Braille, large print and hard of hearing versions. What about being available in plain English? Ok, there is some poetic licence in that announcement but I am sure you get my point; when you need to say something why not say it simply, clearly and with a minimum of verbage? In that case maybe people will understand what you are actually stating or asking instead of trying to guess between the lies – no, not a typo.

I remember a training video from years ago where a Dutch guy talked about having “real” conversations with people. At the time I did not really get the point but I fully bought in when I was working in a factory in Jeddah. Direct, unambiguous conversations may be going against the British grain but they ultimately lead to a much higher level of achievement and success for both parties.

So, walk the talk, toe the line, get your thinking cap on and reach for the sky!

Image courtesy of pakorn at freedigitalphotos.net freedigitalphotos.net

 

Tags: FMCG, Dave Jordan, Humour, Supply Chain

FMCG Supply Chain Insights - In trust we trust!

Posted by Stefan Cucu on Fri, Sep 05, 2014

No, I’m not suggesting we should start printing Supply Chain bank notes but if these were ever introduced, they would certainly need to contain the phrase above. Or just imagine introducing a new KPI: the trust level inside your Supply Chain, a (key) common indicator for all players: departments, suppliers and clients. This would not be so new: the stock markets are using it as we speak.

Seriously, some years ago, I was asked to define the most predominant feeling when working in Supply Chain. This happened during a training session in Leadership. Initially, I did not understand what they wanted from me and in addition, the question came from a former SAS trainer, with iron muscles and a metallic look. He told incredible stories and recommended us to sleep no more than 4 hours per day. ..... I was confused about this questions coming from Mr. Terminator.

After that incident, I kept searching for an answer for many years. Feelings? When you deal with numbers all day long? Yes, perhaps I should cry, particularly when the expenses are way above budget?  Anyway, it so happened that the answer should be given by a waiter.

If you are familiar with the city of Hamburg, you may have had the chance to eat at Friesenkeller, a local restaurant near Alster. Nothing sophisticated (at the time), just good food and good service.

I was a young Supply Chain Manager celebrating together with his team and the German suppliers of raw materials. What were we celebrating? A Service Level Agreement (SLA), finally signed after two years of struggle: articles, paragraphs, wrapped up in a document which weighed about two kilos and was most likely impossible to be read by any normal human being.

Supply_Chain_SLA_supplier_qualityCheering, smiling, laughing. We had finally done it! I had a plate of shrimps. Exceptionally cooked, with olive oil, rosemary and a vague scent of garlic... “You have some excellent shrimps in Germany. I guess you must have an SLA with your shrimp supplier”, I said jokingly. Everybody at the table enjoyed my joke, but not the waiter, who after placing the fork at the correct distance from the plate, said “I don’t know, sir, but I’ll ask”. The German colleagues tried to explain to the waiter what was an SLA.  Nevertheless, we did not expect the waiter to take the matter seriously.

But in the end, after we had finished the delicious meal, the waiter came with a most elaborate answer: “Our shrimps are not German, sir. They are French because our supplier is French. We did not change the supplier in the last 40 years because of the exceptional quality and freshness but we don`t have a SLA, we just trust them.”

Wow! Here is my answer: trust, we need trust in Supply Chain.  We speak about Supply Chain transparency, but you feel trust when you have it. All the magnificent apps you use to interface the ERP`s, capable to generate reports that others apps will read, all these are generating trust.

Yes, indeed, trust is expensive: 40 years of shrimp trade or lots of money in IT systems, SLAs, etc…

I know, you will say trust is needed in any job, and this is true, but in Supply Chain it is certainly a must-have.

Perhaps you should introduce this inside your Supply Chain: a new KPI - level of trust...  Just think about it.

Image courtesy of tor00722 at freedigitalphotos.net

Tags: Customer service, FMCG, Humour, Stefan Cucu, Supply Chain