Supply Chain Blog

2 issues to address before you can optimise inventory.

Posted by Michael Thompson on Wed, Nov 25, 2015

Inventory_optimisation_issues_fmcg.jpgIn my last post I dealt with the long-standing issue of inventory optimisation and some of the reasons that many organisations are still struggling with it. If it was just left to a technical challenge, optimising an organisation’s inventory, whilst never straight forward, would at least be doable to an extent.  However, we are dealing with people in organisations; often many people and each person has an opinion, an ego and a career to protect and progress. In working on supply chains for well over 20 years, I have found that many of these people issues can get in the way of sorting things out and this includes with respect to inventory optimisation. So here is my recipe for the two that must be addressed before any organisation can optimise its inventory. 

  • Cut out the blame.  Nothing quite lends itself to blaming others than the causes or perceived causes of poor inventory management - too much, too little (stock outs), never the right amount to satisfy anyone. Whether it is supply chain management ("if only we had a decent sales forecast"), sales management ("why can't the planners give us enough stock?"), purchasing management ("we should order more or we will be blamed again when the stock runs out") …. and so forth.  A decent Sales & Operational Planning (S&OP) process can cut through a lot of the blame culture but sometimes this is only a start. Something else is needed.
  • Stick to the facts.  I have found that the single most effective way to cut out blame is to stick to the facts. At its most basic every supply chain management team (or S&OP Team) needs a decent set of supply chain KPIs or metrics. These can change an emotional exchange (at a pre-S&OP meeting for example) into an objective decision making process.

Sometimes, however, we need something more. If it was just down to a decent S&OP process supported by KPIs, inventory optimisation would be much easier than it is in practice. This something else, I have found, can be a deeper and more thorough analysis, sometimes referred to as supply chain analytics.  I will deal with this in my next blog with a real example. In the meantime, please do share your organisation’s inventory story.

Image courtesy of Ambro at FreeDigitalPhotos.net

Tags: Michael Thompson, Inventory Management & Stock Control, Supply Chain Analytics, Integrated Business Planning

3 reasons why multinationals are still struggling with inventory

Posted by Michael Thompson on Wed, Nov 18, 2015
Last week I had another chat with a client about inventory.The essence of the client's problem was - "Why can't we get our stock right?  We either have too much …. or run out … and we have just spent a fortune on a new IT system …."

Sound familiar? I have had variations of the same discussion dozens of time and it boils down to this for most manufacturing-based organisations:

  • Inventory_stocklevel_supply_chain_question.jpgDo they know the ideal level of inventory that will deliver their target service levels?
  • Do they know what needs to be changed to achieve these targets?
  • Do they really understand what is actually happening with their supply chain? 
If they are honest, often the answer to at least one of these is "no". In the last 10 years or so, despite investments in sophisticated systems, there are still huge opportunities to improve supply chain performance, particularly for large global supply chains. Why is this? I believe that there are three reasons:  
  1. Poor Diagnosis.  In efforts, often motivated by internal politics and attempts to apportion blame, there is an incorrect diagnosis of poor performance.  Root cause is not always if ever addressed.  For example, the forecast is often blamed - “if only we had a decent forecast …”. In reality the issue often lies within the supply chain processes, incorrect supply chain policy, the set-up of the IT systems or how the tools are being used.
  2. Complexity.  Managing supply chain complexity, especially for multinational organisations, is a real challenge.  Many operate in 100’s of markets around the world, have a factory footprint of dozens of factories, 100’s of warehouses and serve 100’s or 1000’s of direct customers.  To protect themselves, supply chain managers in these businesses are buffering supply chains with inventory and lead-times.
  3. Complex IT Projects.  Often large IT projects (e.g. SAP/APO upgrades) automate traditional ways of working.  This can result in little improvement or sometimes things are made worse with increased noise and nervousness in the planning processes.

So what is the solution? I believe that before a ‘technical solution’ can be found (and there is always a technical solution), certain internal issues need to be addressed. I will deal with these in my next blog. 

In the meantime, please do share your organisation’s inventory story.

Image courtesy of niamwhan at FreeDigitalPhotos.net

 

 

Tags: Michael Thompson, Inventory Management & Stock Control, Supply Chain Analytics, Integrated Business Planning

FMCG Foods: Hugh F-W and UK Retailer & Producer Waste

Posted by Dave Jordan on Wed, Nov 04, 2015

Good to see chefy type and anagramists dream Hugh Fearnley-Whittingstall speaking out about the continuing food waste in UK. After the faceless, expenses-hungry suits in Brussels relaxed the laws some years ago retailers have been allowed to vary their acceptance standards for misshapen fruit and vegetables. This has resulted in horrific food waste as shown by the non-pretty parsnip mountain in Hugh’s link above.

I don’t know about you but if I see a potato that looks like a Telly Tubby or a carrot that looks like a pair of knobbly legs with a fake tan or an onion that looks like a light bulb I buy them straight away; no hesitation. My favourite “ugly food” purchase was a spud (aka potato) that looked like Tony Blair. You could tell by the eyes he was lying, again. How I enjoyed making mashed potatoes that day.

Obviously, if your potato or carrot is so misshapen that there is going to be excessive waste involved in peeling the thing then this is far from cost effective. However, the vast majority of misshapen or “ugly” produce is perfectly fit for cooking and eating and surely having a culinary guffaw at the same time is healthy. Cosmetically defect but nutritionally perfect.

In these difficult economic times are we being too rigorous on FMCG/Drinks product quality? Ok, I accept you cannot take any risks with pharma or perishable food quality but in these difficult economic times are companies being unnecessarily rigorous, particularly with packaging defects? There is no debate necessary concerning usage instructions or safety advice but small blemishes would not be noticed by the vast majority of loyal consumers.

I can hear the QA purists angrily stamping their feet and making comments like "over my dead body". They will argue that brand image is paramount and any packaging defects must be wholly funded by the suppling company. Gaining a refund on any particular faulty batch of packaging materials is not really relevant as the supplier will recover the cost from you one way or another. What is worse? Having a product on the shelf with a minor, insignificant defect or no product on the shelf at all?

What about the contents of the packaging; is there any leeway there? Drinks manufacturers cannot possibly QA each unit of sale and in fact wine producers assume a reject rate of 8% due to ‘corking’ – prior to the introduction of plastic corks and screw caps of course. Yes, I questioned that defect rate too but it is correct so your seasonal celebration case of 12 southern hemisphere bottles has an even chance of one with a foul, musty taste.

I just wonder how much money is being unnecessarily wasted at a time when nobody – private or corporate – can afford to lose a penny. No doubt at quarter and year-ends travel restrictions and the freezing of discretionary spend budgets will be rolled again out as FMCG producers try to meet the numbers they “agreed”.

The hot and possibly ugly potato is that they may be missing easier opportunities to achieve their tough targets.

Image courtesy of feelart at freedigitalphotos.net

Tags: Brewing & Beverages, FMCG, Dave Jordan, Humour, Performance Improvement