Supply Chain Blog

FMCG Distribution: Route Planning & IKEA Shopping Chaos

Posted by Dave Jordan on Wed, Apr 29, 2015

Ok, I know I should not have gone there. It was Sunday and well before the live Premier League football on the TV. The weather was cold, the air was full of drizzle and as I turned off the overgrown roundabout the scale of my folly dawned; the IKEA car park was bursting at the seams. Every available legal and illegal space was taken.

There were families pouring out of cars and into the store and equal numbers trying to squash brown flat-packs of “destroy it yourself” furniture and fittings called Grunt, Splat and Twong into impossibly small cars. What do these people do about their Sunday outing passengers after they have loaded up? Do they give Granny and Granddad a few coins to take the bus home? There is no way you can fit all the passengers and the flat-pack must-haves back into some of these cars.  Maybe that is why they provide rope at the IKEA loading bay; it is actually to tie Granny and Granddad onto the roof of the car.

Oh well, I am committed so might as well join the hoards of people unable to control shopping trolleys, with absolutely no sense of direction and with varying levels of short-term memory loss. I hooked a yellow bag over my shoulder and I too became an IKEA shopper!

I know there is a science in store layout design whether it is a supermarket, a DIY store or an M&S type outlet. The store wants everyone to see everything they have available and they want it to be just at the right time when for example, the shopper has been subliminally convinced that the bright pink Plobo stool would look really nice in their kitchen.

FMCG RTM ROUTE PLANNING resized 600Oh, but the chaos this causes in an IKEA store. Being a Supply Chain chap I would make the whole store strictly one-way with nobody allowed to double back to soft furnishings or for a forgotten low energy light bulb. In fact, if I had my way I would make the floors with a defined downhill gradient and ensure trolley wheels were oiled hourly to help people on their way, through the broken furniture bargain section, past the cheap but strangely filling fast food and out into the car park. What about a small battery pack on each trolley which delivered a persuasive tingle of current if you tried to push the trolley against the traffic? Too extreme, possibly!

Think of all the wasted hours and wasted effort of moving all the way through the store then insisting on reversing the route and getting in the way of everybody else. Then it struck me. I realised where I had seen this before and why I perversely enjoyed dodging the trolleys in the IKEA shopping maze. This is what many FMCG companies suffer in their distribution route planning in Romania every single day. Wasted miles, wasted fuel, wasted time and in all that time there are customers not being served.

If your FMCG sales are struggling along and the stream of excuses for monthly gaps appears endless you might take a close look at how much time your sales people spend selling to and guiding distributors in the Traditional Trade If they have adopted the IKEA system then you may just have spotted a huge opportunity to improve your Route To Market performance.

Go and have a closer look. Get some IKEA rope, tie yourself to the roof a salesman’s car and see what some simple thought and routing logic can add to your bottom line.

Image courtesy of Stuart Miles at freedigitalphotos.net

Tags: FMCG, Route to Market, Supply Chain, Sales, Distribution, RTM Assessment Tool

FMCG's Working With 3PLP’s - Shrinking the "shrinkage" problem.

Posted by Dave Jordan on Wed, Apr 22, 2015

People over a certain age talk about times when they could leave their front doors open or when you found money on the pavement and took it to a police station. Long-gone days, sadly. Nowadays, if you leave your front door open all you belongings will be stolen plus your dog and the actual door itself. Once that loss has taken place it is nigh near impossible to recover the same.

Similarly, stock loss will be happening in your FMCG warehouse. Repeat; stock loses will be happening in your warehouse.......unless you are being proactively vigilant.

You are never going to stop packets of instant soup walking out of the gate in trouser pockets or drinks in lunchboxes or even the legendary string of frozen sausages hidden under a dapper French beret. Yes, 3PLP's need to be vigilant and carry out random checks on personnel (and their vehicles) as the bottom line is this is theft and it is costing you money and customers. However, your biggest losses may be leaving your 3PLP by the pallet not the pocket load.

The troika of Dispatcher, Truck Driver and Security Guard can cost your company huge sums of money.

Ok, so the loading document states 20 FMCG pallets, the driver signed for 20 pallets and the security man "counted" and signed the paper work for 22 pallets so what's the problem? The problem is the warehouse employee loaded 26 pallets, the driver rubs his hands and the security man looks forward to a brown envelope of notes at a later date.

Ensure your 3PLP hires a seasoned and professional security company to look after what could be several million Euros of stock. In-house security operations do not work as this makes the troika formation even easier. Even then the security personnel must be randomly rotated to avoid development of cosy cliques and familiarity. Be suspicious of security people who MUST work the night shift!

You would be amazed at how many major companies still allow high value stock to be shipped around without a robust truck seal protocol. Without a seal the truck becomes an immediate mobile supermarket for the driver.  Sometimes this will be opportunistic but on a majority of occasions theft is made to order and prearranged meetings take place for removal of your stock. If you do not believe me and you have stock losses then follow a few trucks and see where they go!

The 3PLP must apply a numbered seal to each and every truck and this must be done by a suitably senior and trusted security employee. If that seal is intact when the truck arrives at the destination then there is a fair chance the goods are there. However, beware of the delicately cut and carefully reconnected seal that is whipped off in a second at the delivery point.

FMCG Shrinkage 3PLP IKA Stock resized 600If you can persuade your customers to witness the seal breakage then you might stop endless the arguments about refunds and credit notes with your Key Accounts. Now, wouldn't that be nice I hear FMCG producers say!

You should not think the risk is all over when the goods are on the customer unloading dock. I have witnessed an instance when a full pallet of FMCG was relocated to an electrical room while the driver waited out of the way for paperwork processing.

Avoid the shock of huge claims for shortage, inevitable write off and tetchy IKA negotiations by treating your stock like cash because that is exactly what it is!

 

Image courtesy of jesadaphorn at freedigitalphotos.netfreedigitalphotos.net

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

FMCG Traditional Trade Distribution: A letter to the Drinks Agony Aunt

Posted by Dave Jordan on Wed, Apr 15, 2015

Dear Drinks Agony Aunt,

I have reached the end of my patience. I’m drinking too much coffee, too much beer, I smoke like a chimney, I’m not eating properly and I just cannot sleep. I have not managed to watch or play any of my favourite sports and now even my kids call me Uncle Dad as I spend hour after hour at work. At times, a short step off a tall bridge without a bungee cord does not seem such a bad idea. These drinks Distributors are killing me. Literally!

FMCG Drinks Distribution Agony resized 600The world’s greatest drinks salesman is glowing bright yellow in the sky. Consumers are literally gasping for drinks yet we cannot get our products onto shelves and into coolers. We have given the Distributors some very focused incentives and we are spending thousands on quirky TV adverts with that irritating guy with the funny hair. There is no doubt our brand awareness is right up at the top level yet we just don’t sell as much as we could and should!

When the weather is this hot, consumers want a drink when they are thirsty and not when Joe Egg the Distributor can be bothered to turn up in his smoke belching van to replenish stocks. If our product is not sitting invitingly in a cooler the thirsty masses simply take an alternative product. Consumption is immediate, I have lost a sale and this drives me madder than Brian Mad of Madcastle.

Please, please help me. Tell me what I should do before I lose even more of my hair.

Yours,

Frustrated of FMCG Drinks

......and the answer.  

Dear Frustrated of FMCG Drinks,

Thank you for your letter, which was a delight to read. Believe me; you are not alone in having such feelings and concerns. There is nothing worse than seeing the world’s greatest drinks salesman shining down and not being able to meet the demand of the thirsty masses. This frustration plus the lack of return on valuable investment can leave even the calmest of souls agitated and depressed. However, do not despair. As I said you are not alone and this is not the first time I have seen this problem. You need professional help to receive the Route To Market/Distribution therapy you need.

Firstly, you must overcome 2 important barriers. The first is that you cannot assume your existing Distribution network is entirely suitable for the job in hand. Secondly, you must look at yourself in the mirror and realise that you are not perfect either. If you can do these 2 things then help is at hand.

Using this simple checklist and guiding definitions you can take a critical look at how you manage your Distributors and how they manage your business on your behalf. Some of the questions are searching and may cause you some discomfort but this is necessary in order to accurately evaluate what is going well and what can be improved.

Do not keep this to yourself. The effective management and exploitation of a robust and proactive Distributor network is a team effort requiring buy-in from all Board colleagues and peers. Keeping this problem to yourself will only increase the caffeine/beer intake and accelerate the hair loss!

I will always be pleased to help you and look forward to your feedback on a very positive experience with the checklist. Cure the problem, do not treat the symptoms!

Yours in a soothing, calming tone,

The FMCG Drinks Agony Aunt

Image courtesy of Stuart Miles at freedigitalphotos.net

Tags: Brewing & Beverages, FMCG, Route to Market, Dave Jordan, Traditional Trade, Distribution, RTM Assessment Tool

FMCG Distributors: 7 Ways to avoid inventory overstocking

Posted by Dave Jordan on Wed, Apr 08, 2015

If you still rely on Traditional Trade (TT) distribution for a significant part of your business then read on! Over-stocking Distributors happens by stealth and the consequences creep up on you until suddenly and without warning you hit a brick wall and sales figures fall off a cliff.

FMCG Traditional Trade Inventory Stocks resized 600Avoiding this career-limiting disaster requires vigilance and discipline plus top-down leadership ideally through a harmonious Sales & Operational Planning (S&OP) process.

Month, quarter and year-end push. Run your business on one set of numbers agreed at Board level and ensure NOBODY (particularly Sales!) operates an alternative private agenda. If you follow a decent S&OP process such period end pushes can be avoided. Let's face it; period-end sales pushes place huge strain on everybody in the organisation yet only the Sales people receive a bonus for these efforts...........!

Failed launches. Get real with new launch innovation volume projections. Brand Managers will always, repeat always, overstate how successful their new brand/SKU is going to be. They do not want to appear unambitious, nor do they want to run out of stock but this is what happens when self-interest decisions are taken outside of a healthy S&OP process.

Old label/formulation stock. New launches should not a surprise and with decent planning you can avoid having old label/formulation stock in the Distributor warehouse. As soon as you start pumping in an SKU with a new label the Distributor will stop selling the old one. "Well that's his problem" - no it isn't as it blocks his warehouse, his cash flow and your customer service. If you plan your launch volume ramp-up well you can avoid this by simply running a sink-market region where all stocks of the old label SKU are sold out, possibly with a discount.

Old and expired promotions. If promotions have failed and do not move then take quick action and don’t let them sit gathering dust. Dismantle co-packs and put the valuable and original SKUs back into stock and/or re-label special offer packs.

Returns from customers. Producer sales forces struggle with this and particularly when it concerns Key Accounts. You need a cast iron agreement on responsibility AND authority for customer returns. If this is contractually agreed then fine, take the stock back and redirect it in your system. If there is no definite agreement then you leave the door open to individual sales people taking unilateral and comfortable decisions to accept returns to get clients off their back. Unexpected and unmanaged returns cause havoc in logistics, warehousing and in ERP's.

Producer forecasting errors. No forecast is ever 100% perfect and nor should it be, by definition. However, if you measure your forecast accuracy BY SKU and take actions to improve accuracy then this source of overstock can be significantly reduced. Ignore calls to measure accuracy by brand or by category as the data is useless to the people supplying the products.

Damaged and expired. This is really an accumulation of items 1-6. Damaged and expired products will be present in any business. To ensure they do not appear in the ERP as good stock available for sale it is important to write off and dispose of them as soon as possible.

In order to prevent re-occurrence there needs to be a change in company behaviour coupled with a living S&OP process led by the most senior person in the organisation.

            Want to know more about getting your inventory level right in FMCG?

Contact Dave with your questions!

Image courtesy of  Stuart Miles at freedigitalphotos.net


Tags: FMCG, Dave Jordan, CEO, Supply Chain, CEE, Traditional Trade, S&OP, Sales, Inventory Management & Stock Control

FMCG: The most perfect Supply Chain in the history of the universe?

Posted by Dave Jordan on Wed, Apr 01, 2015

I will not reveal the name of the organisation for obvious reasons but their Supply Chain is clearly 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.

 supply_chain_fmcg_humour

Source

Raw and packaging materials are bought at very competitive prices yet with equally favourable payment terms. Lead times are optimised, stock is on consignment and Service Level Agreements (SLA) are in place. Supplier collaboration is a key part of the business success.

Plan

Sales & Operational Planning (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 or category) 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 leading to month end chaos!

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, i.e. TPM.

Deliver

The relationship with the 3PLP is very close and proactive. Stocks at Distributors are maintained via a replenishment system. There is no overstocking, damage, shrinkage or write offs. A Route To Market (RTM) 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! What a Supply Chain?

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

Tags: FMCG, Dave Jordan, Humour, Supply Chain, S&OP