Supply Chain Blog

3 Steps to Address Q4 FMCG, Drinks Supply Chain Challenges

Posted by Dave Jordan on Mon, Sep 26, 2011

How on earth did it get around to the end of September so quickly? One minute I was sniffling at our daughter’s school leaving speech and the next I see Christmas goods in shops. Who is in the mood to buy Christmas goods in September? Who plans for Christmas sales in September – that’s another S&OP story!

The global economy remains poorly. We are seeing successive green shoots of recovery trampled back down by repeated bad news from countries and companies. The feared double-dip recession is back in the headlines and no, a double-dip recession is nothing to do with a shortage of taramasalata and tzatziki in Greece. With countries failing it is no surprise FMCG companies are feeling the pinch particularly when they operate in the area of discretionary purchases. I am aware of local operating companies that have lost significant turnover over the last couple of years and by significant I mean 20-30%. When viewed within the agglomerated global numbers such failings are often hidden but they are there and could be depressingly negative for some time.

What next? Well, I would bet most global HQ are pushing their local operating companies to “make the numbers” while offering little direct assistance. This happened in 2009 and again in 2010 and no doubt the same call to action will be made in various board rooms around this time of year. This is folly! When consumer discretionary spend is restricted you cannot hope to keep filling up their baskets and pantries with stocks of discounted goods. Eventually your turnover will collapse and how you react will dictate how long it remains in the doldrums.

Those same suits from HQ will hold you responsible for touring the business around despite the same suits issuing orders to do something illogical to “make the numbers”.

A few initiatives which will help you get under control and prepared for future challenges:Supply Chain Review

  1. Maintain rigour on S&OP. Stock pushing “orders from above” are inevitably going to change the way you plan deployment of resources. This will be disruptive but if S&OP is functioning well you can mitigate the discontinuity and at least record the newly made assumptions and make senior management aware of the implications.
  2. Clean out your stocks. You will have tired all sorts of activities and promotions to make a sale. Some will work while some will not. There may be a once off hit on profit but you can pump up your top line by pushing out this stock through discounting while also reducing the associated logistics costs for holding the same.
  3. Realign your horizon and structure. Fire fighting and number chasing forces entire organisations into ridiculously short term horizon management. Using S&OP as the “glue” that holds everything together you can once again look to the business medium term and make tough decisions based on realistic if albeit unimpressive, forecast data. If you are constantly worrying about tomorrow then 6 months hence will be a disaster.

If you have the time for a port and cigar moment you might reflect on what might have been when your business set out on 2011.

 

RTM Improvement

Tagss: FMCG, Dave Jordan, S&OP, Forecasting & Demand Planning, Inventory Management & Stock Control