Supply Chain Blog

FMCG 3PLP Outsource Tendering in CEE - Top 7 Hazards

Posted by Dave Jordan on Wed, Nov 26, 2014

This process can be straight forward but a little extra care and knowledge will ensure you achieve the best solution for your business.

FMCG 3PLP HAZARDS OUTSOURCE resized 600Just a quick reality check, do you really need to outsource? Before embarking on a complicated tender are you really convinced your current in-house operation is unsuitable? Think long and hard about outsourcing or you could be trapped in a long term relationship with someone who may not care about your business as much as you do. Assuming you have taken the correct decision let us take a look at 7 things that can go wrong.

Qualification. Get an idea for which companies are likely to be interested in and capable of being your 3PLP. Do not be surprised if your list is relatively small but you should aim for 8-10 contenders in this first sweep. Contact these companies with a questionnaire asking them to outline their capabilities, pedigree and reputation and follow this up with a face to face meeting where you can get a better feel for competence and commitment.

Cost Comparison. Outsourcing is not always about cost reduction but the costs of the 3PLP contenders will be a major element in the decision. Ensure you know your current costs for the entire service you are expecting the 3PLP to provide. You need transparency on your own cost structure in order to make a valid and meaningful comparison.

Process Leadership If possible, appoint a leader from outside of the Supply Chain team, e.g. Finance. This will promote impartiality and in any case many of the key debates will be in the Finance area. For complete impartiality you might consider hiring an Interim Manager or Consultant who is rewarded on the tender process efficiency and has no longer term interest. All contenders will be trying to pick up snippets of advantageous information and you must not compromise the tender process in any way.

Time Expectations. Don't rush the process despite the pressure from above (or below) to make a change. You will be reliant on your 3PLP to support your business so make sure a timetable is agreed with all stakeholders, including your own Supply Chain people. The tender process will not be a secret however hard you try and your people will be nervous. Any changeover time should fall in a slack period so avoid your seasonal peaks and major promotional periods.

People. If you are outsourcing your existing in-house Logistics function then you are either going to make a number of staff redundant or you will be looking for the new 3PLP to take those staff on board. Either way you must treat people in the best way possible or your service levels will suffer as you make this difficult change.

If you are making existing staff redundant you must keep them fully informed at each critical step. Why not consider an escalating loyalty bonus linked to performance? If existing staff members are being offered the opportunity to join the new 3PLP then it is your responsibility to ensure terms and conditions are fair. From experience in CEE it is wise to build a "parachute" agreement into the new contract ensuring existing terms and conditions are maintained for a period of say, 12-18 months.

Beware of Distributor partners trying to step up to the mark as a 3PLP and be similarly aware of any of the big names who are not present locally but "expect to be". This means they are unlikely to enter your market unless they get your business and you might not appreciate being their new guinea-pig!

Start-up Phase. Ensure your tendering process includes a clear understanding of what will happen as the business is transferred. How soon will KPI's be at the required level? Does the 3PLP have the necessary staff with relevant skills, eg narrow aisle FLT drivers. Has the WMS been robustly tested.........Even some of the big name 3PLPs make mistakes at this crucial time.

FMCG 3PLP OUTSOURCIING HAZARDS resized 600Taking care of these 7 elements will help you move through the all-important implementation phase to a relatively steady business state without surprises.

3PLPs tend to be very slick at securing new business but some of them are not very good at keeping it!

Want to know more about logistics in the CEE region?  Check out these posts as well!

 

 

Logistics: Working With 3rd Party Logistics Providers in CEE 

Working With 3PLP's in CEE - When did you last see your stock count?

Top tips to improve your cycle counting & avoid suffering stock shock 

Image 1 courtesy of photostock at freedigitalphotos.net

Image 2 courtesy of Ambro at free digitalphotos.net


Tags: FMCG, Logistics Service Provider, Logistica Management, Dave Jordan, Supply Chain, CEE, Logistics Management, Outsourcing

FMCG Christmas Promotional Activity Planning - 7 Top Tips

Posted by Dave Jordan on Wed, Nov 19, 2014

Did you know that the Christmas season originally ran from December 25th to January 6th which was in turn popularly known as the 12 Days of Christmas?

Christmas is becoming like old age; it slowly creeps up on you without you really noticing. I can remember eagerly looking out for the first sparkling tree to appear in a window in our road and that was usually around the 11th of December. Yes, what about that? Well into December before even a hint of tinsel and good old Bernard Matthews urging us to try his “bootiful” turkey.

FMCG S&OP Promo Activity Planning resized 600How early can you start to see festive fare in FMCG supermarkets and shopping centres? Certainly here in Romania that jolly friendly man carrying gifts has popped up in mall windows in October. I was not really looking out for seasonal items so perhaps the displays were set up as early as September. Yes, it is just a commercial event now and far removed from celebration of a carpenter’s family failing to make a hotel booking in time.

This year has brought something I have not seen before. Festive non-dairy food has been promoted in the shops for a few weeks now and slowly sales are rising as people stock up for the holidays and beyond. But, have we finally reached the height of stupidity? Christmas food products are available that are marked with best before dates well before the big day!

Which genius thought that one up? I know, “best before” does not mean the products are not fit to eat but you would at least expect them to be top quality as Noddy Holder begins to scream out Merry Christmas Everybody yet again. You will not find many retailers willing to display “expired” stock.

What a time to place unnecessary stress on the Supply Chain? The company is already pushing to end the year on a high and suddenly an important part of your operation is dealing with returns.

How did that get past the S&OP process? I can only assume that a robust sales and marketing activity plan was absent. The peak sales period for festive foods is in the last 2weeks so why would you risk having your heavily promoted item off the shelves when the TV ad is jingle-jangling away?

Let us look at a few pointers to a good activity plan:

  1. Insist on having a plan however painful it seems and however much sales and marketing gripe. This is for their benefit after all.

  2. While maintaining necessary confidentiality, publish the plan widely so that all departments know what is expected.

  3. The plan should have a 24 month horizon. You can start off with a shorter time period but you need to build up your activity planning skills quickly.

  4. The plan must roll on and on, on a monthly basis. For example, you do not wake up in January with the previous year closed and think “what promos should I do now”?

  5. Review the plan in the S&OP process. The plan should be challenged and adjusted as required in order to balance supply and demand and enable financial planning.

  6. Allow flexibility where possible and where there is a high probability of success. Your business will always need tactical promotions to counter competitive activity or tap unexpected opportunities. The key is to provide what is possible without disrupting work in progress activity.

  7. Evaluate the success (or failure) of each promotion or activity in order to learn lessons for future campaigns.

No, not rocket science but it can help to avoid the lunacy of taking back and destroying “expired” products and taking the excess cost hit just at the wrong time of the financial year.

Image courtesy of keerati at freedigitalphotos.net

Tags: FMCG, Dave Jordan, CEO, Performance Improvement, Supply Chain, S&OP, Forecasting & Demand Planning, Sales

FMCG Supply Chain Consultants – Gok, Martha and Jamie...........

Posted by Dave Jordan on Wed, Nov 12, 2014

My aging Toyota Land Cruiser is about to clock up an impressive 300,000km on roads that are of variable and low quality. Luckily, the car is built like a tank and comes with bull bars on the front or what I like to call a “Dacia Catcher”. (Dacia as in Thatcher not Dacia as in Facia; will Captain Slow of Top Gear ever learn?)

Toyota fmcg supply chain consultants resized 600Now is the time I have to get the car ready for the bi-annual roadworthiness inspection and this year I thought I would change the servicing garage. The one that caught my eye was called “Superstar Motor Services”. Ok, may be a bit of a cheesy name but they guarantee a quality job on the engine, bodywork and interior. A superstar product obviously carries a price premium but I thought I would give it a go.

I arrived at the very plush service centre, booked the car in and was then introduced to the servicing team. Nice touch! However, I admit I was taken aback to see the team consisted of Gok Wan, Martha Stewart and Jamie Oliver. Not the sort of people I was expecting to see in a car workshop but fair enough, let us see what they can do.

Gok quickly got to work in his pink overalls by changing the brake shoes for a more modern Italian design and followed this by fitting a matching engine drive belt. Bringing style to the old Toyota Gok finished off by polishing and aligning all the buttons on the dashboard. Simply gorgeous!

Next to swing in to action was Martha who was about to give the interior a professional make-over. The carpet was replaced and the old rubber mats removed to be replaced with colour coordinated fabric matting. The rear view mirror? So year 2000! A new crystal encrusted dual focus mirror was installed to contrast with the new jet black seat covers. With a swish of chiffon, Martha was gone.

Along came Essex boy Jamie with spanner in hand. In no time at all Jamie had replaced the sieves in the fuel, oil and air systems. The radiator grill was cleaned up and ready for use and the engine was topped up with a drizzle of extra virgin motor oil. Jamie’s final flourish was a sprinkling of new nuts for the wheel hubs. Job’s a good ‘un.

As with all superstar operations you have to pay for the service before you receive anything back so I flashed the plastic and went to collect my car. My trusty Toyota would be like new and the engine would purr or it should for that price! I turned the key ....and the car would not start. Not a sound. Not even a click of an electric relay. The Toyota was an ex-car that had ceased to be. Never to be the same again.

So the lesson Mr/Mrs FMCG CEO is when you have a challenge in the Supply Chain you need to work with someone who has actually done the job in question. Hiring superstar consultants with expensive suits may be the easier corporate decision but being armed with a first class degree is nothing compared to long term, hands-on practical experience.

If you get this wrong you invariably exceed the budgets and get locked into a downward spiral of failed objectives.

Image courtesy of teerapun at freedigtalphotos.net

Tags: FMCG, Dave Jordan, CEO, Humour, Performance Improvement, Supply Chain, Forecasting & Demand Planning

Opening a new FMCG/Pharma warehouse? Top Ten Tips to success

Posted by Dave Jordan on Wed, Nov 05, 2014

I suppose it’s inevitable with age. Everything starts to fall apart eventually and it is amazing how it creeps up on you. You remember giggling silently when someone of a certain age walked in to a room and could not remember why or what they are supposed to be doing. I do this and like millions of others I have to return from whence I came to try and remember why I purposely strode into another room.

Packing for business travel used to be automatic and everything that was required was found and packed without resorting to lists. Recently I have found myself in Africa without toothbrush and paste but that was soon remedied via a hotel vending machine. I was not so lucky on arriving in Cyprus to find I did not have any undies. You try finding them in a budget hotel vending machine!

Now let us look at warehousing. A project to design, build and open a new warehouse is usually large and complicated but at least it is an indication something is going well in the business. Assuming the facility is built on time and to specification and all legal matters are in hand, here are some important aspects you need to remember in order to bring the warehouse on stream smoothly.

Project Network

A suitably qualified and experienced person should be leading the project and one of the key tasks is to maintain a very detailed network.  The network should be widely available and routinely updated to ensure potential issues are flagged up in real time. You do not need expensive software to do this but you do need rigorous project management discipline.

Job Descriptions

Every role should have a job description including the oft forgotten pallet repairer. Unless you are about to run an innovative warehouse you will have no trouble finding good job description templates on the internet. Once adjusted to suit your particular circumstance you need to ensure suitable role segregation has been defined.

Recruitment

Do not wait until the last minute to recruit staff. Get them in as early as you can so you are able to see how they operate against job descriptions and them working in teams. Companies frequently leave this too late thus placing training and commissioning in jeopardy. If you are transferring staff from an existing warehouse to a new facility you must ensure a controlled transition. An army of people turning up for work on a Monday morning in a new warehouse will not work.

FMCG_New_Warehouse_top_tipsTraining

Untrained people are dangerous and particularly in a warehouse situation if you are using narrow aisle high reach FLT’s. All employees require formal and documented training in their particular area before they are set loose in the warehouse. Do not skimp on training for specialist roles, e.g. for high reach truck training you need certified training by the supplier directly.

 

Dry Commissioning

Before you open for business you need to systematically test all your equipment to verify that it operates to desired specifications. You do not need a warehouse full of goods to do this and you should use this exercise to iron out any glitches.

Wet Commissioning

Now you do the same but under realistic conditions moving finished goods. Generate some test inbound receipts and customer orders. Go through the motions of the actual operation without running the risk of disappointing customers or injuring employees. Attempt to operate at high capacity so your process is well tested.

Ramp-Up Planning

However well you have prepared it is highly unlikely you will be at 100% logistical efficiency immediately. Set targets which see acceptable efficiency achieved within a reasonable time frame and display the plan widely so everyone is singing from the same hymn sheet.

IT & Comms

Do the telephones work? Is the IT network in place and accessible? Do the hand-held scanners communicate correctly and from all areas of the warehouse? Has the ERP been tested and tested and tested again?

Stock Count

A key part of the preparation phase is the receipt of stocks as if these are not counted and booked accurately you will soon be in trouble. Mass stock movements present opportunities for “shrinkage” and make no mistake somewhere along the line someone will be looking to exploit this discontinuity.

Communicate

Suppliers and customers need to know what you are doing and not least as the start up may pose them problems. With the ramp-up plan in mind you should make sure your suppliers and customers know what to expect and when you are capable of meeting their usual demands. They may not have much sympathy for you but being forewarned often helps to ease relationships into the new ways of working.

You will not get everything right and something always crops up to derail even the most well prepared, planned and activated project.

What will you forget? When I look at all the warehouse start-ups I have seen there is one item which is frequently missed. Remember to buy sufficient batteries to keep your FLT’s operating 24/7!

Image courtesy of lamnee at freedigitalphotos.net

 

Tags: FMCG, Logistics Service Provider, Logistica Management, Dave Jordan, Pharma, Supply Chain, Inventory Management & Stock Control