Supply Chain Blog

FMCG: Driving success through Integrated Business Planning (IBP)

Posted by Dave Jordan on Wed, Sep 30, 2015

The sun is shining high in the sky and you are driving your Volkswagen Golf Cabriolet 2.0 TDi with the top down on a six lane highway. There is a long drive ahead for you and your three friends but with this car on this road things should turn out fine. The only emissions you are bothered about are coming from the quadrophonic surround-sound speaker system.You can see far ahead down the highway into the distance in the direction of your objective. You can see all the potential hazards in good time from your comfortable leather bucket seat. Traffic is starting to build up but you are ready and move down the gears gently before the road clears and you equally gently depress the accelerator and resume cruising. You can see a bumpy stretch of road ahead and position the car so the hazard disappears directly between the front wheels of the VW causing nil discomfort for those on board.You can see the policemen ahead with a radar gun and you diligently slow down and adopt a speed 1 click below the limit. You even give the officer a jaunty wave and onwards you drive. Ahead is a hazard caused by a broken down lorry so without any desperate braking you indicate early and move into the next lane to pass the vehicle that is not going anywhere soon.Your passengers are relaxed, comfortable and enjoying the ride. You are approaching your destination and looking forward to successful evening at the beach.That is how your FMCG S&OP or Integrated Business Planning (IBP) process should look. Planning and executing your actions in good time and well into the future. Perhaps this is how your process works?The same VW, same driver and passengers, sun, road and the same destination objective. Instead of relaxing back into the leather you are gripping the steering wheel like it was about to fall off. You are leaning forward in the seat looking at the road directly in front of the bonnet/hood (delete as geographically appropriate). Every single stone or bump or holes felt by the passengers as you try to avoid driving over hazards that present themselves at the very last second before they slip under the tyres.

Seeing everything so late you are lurching the car one way and then the other making the passengers uncomfortable and probably a little concerned. Clearly, you are not incontrol of the vehical or your destiny. Looking just over the bonnet at the road surface you also miss the broken down truck in the near distance and smash into the rear at speed. You and your company are having a terrible journey and you do not achieve your objective. You missed the radar gun earlier and now have a hefty fine and penalty points on your licence.Following a rigorous IBP process allows you to plan your innovation, promotional and routine and tactical sales activities in good time ensuring everyone is on board and knows what they have to do well in advance.

If you recognise your company in the chaotic driving example then you have quite an opportunity!Image courtesy of Bill Longshore at freedigitalphotos.net

Tags: FMCG, CEO, S&OP, Sales, Integrated Business Planning

FMCG: S&OP morphing into Integrated Business Planning (IBP)?

Posted by Dave Jordan on Wed, Sep 23, 2015

I speak to many FMCG companies who tell me they do not need Sales & Operational Planning in their businesses. As a formal process they may not be operating to S&OP norms but if they are getting their products onto shelves then some form of S&OP must be in place. This may not be optimum or efficient but at the end of the day their products are in front of consumers and ready for purchase or not, depending on how successfully your sales and marketing colleagues have stimulated the market.

This leads me to a frequent problem with S&OP – the name, not the process. Reluctantly sales people do get involved in S&OP process but in my experience they have rarely bought into the idea 100%. Nevertheless, they are there at the meetings and they are sharing data and information etc.

To everyone else in a company the “operational” term usually applies solely to those continually moaning Supply Chain types and sometimes in Finance. Colleagues in all other functions including marketing frequently do not see themselves as part of this process yet it is the lack of rigour and discipline in these sales supporting roles that undermines business performance.

This is why I increasingly prefer the term Integrated Business Planning (IBP) as it covers the whole company plus there is no “and” in the process name. The latter point may seem trivial but S and OP triggers a “them and us” mentality whereas there is no debate about the IBP process. We are in this together (not in the current UK government way) including HR who play the important role of providing the right people and the right training opportunities in order to support the overall business objectives.

The use of IBP does not change the objectives of the process significantly but perhaps the benefits are more clearly defined:

IBP helps to transform planning from a boring must-have into a decisive and continually improving competitive advantage by fostering one integrated planning platform across sales, marketing, supply chain and finance and yes, even HR:

  • A clear and unambiguous understanding of business performance drivers.

  • A dynamic understanding of the financial impact and interdependencies of different planning scenarios.

  • Optimisation and balance of the monthly business plan with longer term strategic planning and identification an allocation of skilled resources.

  • Balancing planning for profitability or volume or growth as per the business need.

  • Unambiguous quantification of financial risk and opportunity of planning scenarios.

  • Continually increasing business flexibility and surety of success.

  • One company working as one team.

Of all these desirable benefits the last is the one you really need to pursue. If you get this working within the framework of an IBP you will be hard to stop in the FMCG marketplace.

Image courtesy of Sheelamohan at freedigitalphotos.net

 

Tags: FMCG, S&OP, Forecasting & Demand Planning, Sales, Integrated Business Planning

FMCG: What does S&OP bring to the party? Sales success of course!

Posted by Dave Jordan on Thu, Sep 17, 2015

During my recent travels I met with two Sales (or Business Development Directors if you’re posh) from well known FMCG companies to discuss an assessment review of their Route To Market (RTM) networks. Surprisingly, neither was interested and gave a remarkably aligned reason for the rejection. “All this does is raise Sales In and we know how to do that already”. Oh dear!

No, Nein, La, Nu, He, Nem, Không có!!! Whatever language you choose to use, this understanding of an RTM assessment review is flawed. There is no doubt Sales Directors across the globe know how to increase Sales In and frankly it is not that hard is it? You can use promotions, discounts, extended credit, BOGOF, sale or return etc, etc. Unless you are regularly working on a knife edge with out of stocks (OOS) at the Distributor, pushing Sales In does not guarantee one single extra sale, not one single piece.

Without a focus on Sales Out any stock pushed into an RTM network is likely just to sit in Distributor warehouses as there is no obvious consumer pull or demand. The Distributor is sitting on plenty of valuable stock but without a pull from the trade all this extra pushed stock is wasted. One of the key drivers for a push strategy is the alignment of Sales In targets with Sales Team bonus payments. Once the stock has moved out of Producer hands it is considered a “sale” and this is simply not true in the cold light of day. Nothing is actually sold until a consumer has handed over their hard earned cash at the till.

FMCG_RTM_SALES_UPLIFTThe beauty of an RTM Assessment is that it addresses how to achieve a Sales Out uplift and every assessment with which I have been involved has achieved such an uplift! If you get close to your Distributors and develop a lasting relationship you will be able to get more out of the market – even in this recession which seems endless.

Partnership – treat Distributors as equals as they are an integral part of your Traditional Trade business whether you like it or not. Hold regular meetings at the right levels and ensure the discussion is a real two-way process.

Planning & Logistics – do not assume Distributors know how to aggregate demand by SKU to form a demand forecast. If their forecast is more accurate then this gently ripples right back to you own factory and procurement activities.

Sales/Order Management – provide training to ensure your face to the customer is professional and competent. Ensure orders are captured promptly AND that stock is available to promise.

Finance & Back Office – is the Distributor financially sound and capital efficient? Do they recruit and retain the right calibre of people and are they rewarded fairly and sensibly?

This is just a snapshot of a what a comprehensive RTM assessment review delivers and more can be found here.

If you are struggling to make your 2015 numbers you might find that Q1 2016 presents an extremely difficult start to the year. A thorough review of your RTM Distribution network could be just what you need to make up ground in the following months.

A real uplift in FMCG sales is there for the taking!

Image courtesy of samuiblue at freedigitalphotos.net

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

FMCG Supply Chain & the Rugby World Cup

Posted by Dave Jordan on Wed, Sep 09, 2015

The Rugby World Cup is upon us once more and this time it is in the northern hemisphere and in UK. Therefore rain can be expected throughout the tournament.

Rugby is a strange sport in some ways. The forwards are the incredibly big blokes (yes, and girls too now) who seldom score and the backs are the more nimble bodied (but still relatively large) who carry out most of the scoring. In a majority of sports you score goals or points but in rugby you get rewarded for a “try” and a “conversion “which sounds a bit wishy-washy and indecisive if you are not a follower of the game. Do supporters shout “try” when one is scored? Not sure but I doubt they shout “conversion” even after disposing of a few pints.

You also have to pass the ball backwards in order to make progress and move forwards so that presents a challenge in rugby supply chain terms. In supply chains you are generally pushing (yes, in good times it is a pull) everything forward towards the consumer shelf, continually honing your route to market (RTM). Anything coming in the reverse direction is usually poorly planned, unwanted, expired or damaged goods and that easily sticks a spanner in an otherwise slick supply chain.

FMCG_SUPPLY_CHAIN_RUGBY_TEAMThe rugby ball is not round; nowhere near a perfect sphere (but it s a spheroid) and when kicked it reminds me of an FMCG sales forecast – no, please stay with me. Have you ever seen a rugby ball bounce after being kicked forward and into the sky? If the ball is not caught cleanly the shape means it could actually bounce in any direction at any speed and change both at any time without any warning, i.e. impossible to predict. Sounds familiar?

You could also imagine the scrum being the supply chain team grunting and groaning and expending mammoth sweat and effort to prevent the competition from getting to the target, i.e. the ball. You then watch as the backs (a.k.a. FMCG salesmen) stride on and take all the credit and kudos for the entre process! Sounds familiar again? In rugby it is not quite like that as team spirit is very real and paramount but in FMCG life that is far too often the reality. In rugby your department or position does not matter and the whole team is focused on scoring points or tries and conversions.

The winners of the 2015 World Cup will probably be New Zealand but there is just a small chance, a very teeny-weeny chance that England could win. Such a result would mean the English rugby supply chain was slick and fast with customer service approaching 100%

I have not yet found a way to use cricket to illustrate supply chain excellence but I will keep thinking.

Image courtesy of Digitalart at freedigitalphotos.net

Tags: Customer service, FMCG, Supply Chain, Sales

FMCG Route to Market – the Warehouse to Customer journey

Posted by Dave Jordan on Wed, Sep 02, 2015

Your Supply Chain has been revised, optimised, transformed or even blue sky’d – yes, honestly have been present when this was used but managed to stifle a guffaw into a cup of hot chocolate. What a smooth running well oiled machine it has become. Processes and procedures have achieved ISO standards in all areas and KPIs shine like a halo above the Supply Chain Directors swelling head.

You source competitively and you have a robust Supplier Certification process in place. Raw and packaging materials arrive on time in full and the supplier relationships are good.

Manufacturing operates like a Rolls Royce with the full raft of certification and manufacturing excellence credits. You really are producing tomorrow demand today.

Sales & Operational Planning (S&OP) is alive and kicking and has the full buy-in of all functions, even sales and marketing. The top team has a monthly love-in with the Board S&OP meeting.

A proactive 3PLP partner is in place and operates your logistics to best in class cost and standards. Stock shrinkage is minimal and even fuel and tyre consumption are routinely monitored to keen costs keen and service on track.

Your Route To market (RTM) distribution partner operates at a Customer Service Level higher than the completion with universe coverage approaching 100%. This RTM news sounds too good to be true and certainly if you are not careful it can suddenly go really bad. No, I mean really, really bad with all sorts of body parts going over each other. Let me tell you a short factual tale......

FMCG_RTM_TT_SALES_SUPPLY_CHAINThis week I joined an FMCG sales agent on his daily journey to deliver temperature controlled products to traditional trade customers. I did not know what to expect as Cecil (not his real name) chugged away from the chill of the warehouse and towards the steaming metropolis. While many tasks were completed well the overall experience was a disappointment. Here’s why.

1.The chiller unit was not working correctly so product integrity was immediately at risk

2.The van air conditioner was not working so quickly both Cecil and I looked like we had run a marathon.

3.Orders were picked in the rear of the van while the door was open for several minutes and no air curtains were present. (Picking on the move, beat that Amazon.)

4.There was space to pick in the van as space was only 20% utilised.

5.Cecil made “on the hoof” decisions on the route plan as we repeatedly passed the same landmarks including a bus stop packed with female students.....

6.The van remained unlocked while Cecil was inside the outlets making the deliveries and collecting cash.

OK, this was one spot check in a full year of RTM deployment but I am sure a majority of these observations will be present in other areas and with other sales agents. This is the sharp end where sales are made and cash collected so however impressive you Supply Chain may be it is imperative that FMCG producers regularly experience the final face to face customer experience. Far too many sales managers are sat in offices appearing to work hard while actually following the cricket/rugby/football on the internet*.

* Delete as appropriate for you.

Image courtesy of palZiyawit at freedigitalphotos.net

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