Supply Chain Blog

FMCG 4th Quarter Sales Challenges - some things never change!

Posted by Dave Jordan on Tue, Oct 14, 2014

I am not going to pretend I wrote this blog once again but when I came to sit down and look at the last quarter of the year I could not really see any difference from last year. The same challenges are clearly there and what is astonishing is that the same companies as last year are still making short term and expensive efforts to “make the numbers”. What folly; instead of pouring cash in to a black hole without return why not divert some of this hard earned cash to sort out the underlying problems? When the economy does recover those companies that had the vision to be critical of how they do business will be the winners. All the others will simply be loading the trade….again and again.

Ok, the third quarter is behind us and results will be available soon. In any event you will have a good feeling for how things have gone in Q3 and what is still needed in Q4 to reach the numbers you committed to over 12 months ago. "Committed" may well be the wrong word as you were probably forced to accept figures you knew would be difficult if not impossible to achieve. However, for the greater corporate good you took it on the chin and said “yes, we will do it”.

Exactly how are you going to achieve those seemingly distant numbers? The corporate world is indeed still firmly in recession but so are consumers. The two groups are not disconnected; consumers are having a very tough time considering the increasingly clueless government austerity measures that continue to drip out around the globe. Consumers simply do not have the money to prop up your annual plan and what money they do have is likely to be rationed to be sure of a reasonably happy Christmas. Remember, consumers owe you nothing!

One thing you will be doing whether you like it or not is to fall into the trap of month-end loading. Let us consider this scenario which is far from uncommon even in “blue-chip” FMCG companies. October sales are poor for the first 2 weeks and then the word is given to “push” stocks into the trade. Discounts are given, favours called in and hey presto, the required target is achieved and you think you are back on track.

FMCG Month End LoadingYou have pushed so much promoted stock into the trade that distributors are short of cash and Key Accounts platforms are overstocked. Consumers do not drink more beer or wash their hair or eat more snacks because you sold at a discount. They have taken advantage of your offers and have filled their own domestic warehouses ready for Christmas and possibly beyond.

November. This time sales are poor into the third week and the rallying call to push does not seem to be working. Support budgets are raided again and yet more stock is pushed into places where it has no demand. Despite this, the motivation of achieving targets and securing a bonus ensure that the right number is flashed to HQ at the end of the month.

Ok, just December to get through……even if it is really only a 16/17 day month for selling. You are so close that a few more discounts and the promotion of high value skus means you end the year on target. It’s a champagne moment, get the cigars out!!!!

Think about what you have just done for the sake of kudos and bonus. You have turned the operation of the company upside down, contravened numerous policies, abused S&OP (if you use it) and unfairly stretched your staff

If you are brutally honest you will know you have sold January’s demand over the last quarter the year. You will not get away with that for long as it will come back to bite you eventually!

Tagss: FMCG, Dave Jordan, CEO, Performance Improvement, S&OP, Forecasting & Demand Planning, Sales, Distribution