Supply Chain Blog

FMCG Cost Control: Boosting Brewing Bottom Lines

Posted by Dave Jordan on Tue, Sep 19, 2017

Picture the scene in many a brewing boardroom; a terse note has arrived from the suits at HQ telling the boss to urgently reduce costs as the year-end result is not going to look pretty. Why do all the board directors then look silently at their supply chain colleague? Of course, there are significant costs associated with a modern supply chain but you cannot make significant savings from that infrastructure overnight.  Supply chain budgets very rarely contain significant discretionary spend unlike the bank busting sums in the pockets of sales and marketing!

BREWING_COST_SAVINGS_BOTTOM_LINE_FMCG.jpgAs is usually the case, let us assume the SC team is constantly looking at ways to reduce cost in factories, logistics networks, 3PLPs, planning etc. What other costs could be challenged without causing discontinuity and unnecessary stress in the company?  The SC usually leads any cost efficiency projects which I think is fair enough as the discipline is most familiar with cost control and challenge.

Here are 5 areas I feel are always worthy of visiting when looking for "low-hanging fruit" bottom line benefits.   

  1. Old promotions, soon to expire stock, old artwork/label stock, slow movers. All companies (particularly FMCG) will have some or all of this and for various reasons - some good, some not so good. If you do not routinely address this you will be hit with an unexpected loss at year end or at the next stock count. Bring the list to the board meeting and hold accountable the actual people responsible for creating the stock in the first place. Sell it out and stop paying for storage too!
  2. Promotional activity. Is it all really necessary and does it actually pay back? Do you know how much of that original pristine packaging assembled in the factory is destroyed in the name of the latest promotional whim? Plastic film, outer cases and trays litter the floors of repacking operations everywhere. You have paid for that original packaging and now you are paying someone to destroy that and replace it with fresh material. Just think of all those Dollars/Euros that could be spent in a much more customer focussed way or simply saved? When you consider all the extra labour, logistics and packaging material just how much value is really generated for your business?

  3. How many SKUs do you need? Do you know how many your business has when you include all the promos and specials? Every single SKU costs money to source, transport, plan, store and deliver. Plus, the more you have the more likely you will generate the problem discussed in point 1 above. Analyse your current portfolio and see what is really driving value in your company. Conversely, see what is sucking value out of the business at the other end of the scale. Every extra low value SKU clogs up the wheels of your Sales & Operational Planning (S&OP) process.

  4. Telephones and internet. Always a difficult area as it can be perceived to be petty but it is usually an uncontrolled drain on cash. If you have provided staff with internet access on laptops or tablets or telephones you can be sure you are funding personal surfing time. Unless free telephone calls are part of the remuneration package why should the employee not pay for them? In my experience, significant cash can be saved through just a little prudence in this area. Do you leave your telephone network open at night with unlimited international dialling access? Also, the next time you see 2 people in the same office talking to each other on company mobile phones.......

  5. Discretionary spend. Don't make it discretionary! If budgets exist for team building and entertainment you can bet your life those funds will be used. Do you really need to "team build" every year? These occasions tend to be considered as a perk of the job and I am not convinced of their value when they happen so often. If team building sessions are to go then you should ensure this applies to all departments. Letting the marketing team building slip through will simply demotivate the rest of the company.

Achieving visible buy-in at the top table which is cascaded to teams will generate the best initiatives and ensure alignment. Paying consistent attention to these and other cost areas might save you from the ultimate saving of issuing redundancy notices including possibly, your own!

Image courtesy of Pixomar at freedigitalphotos.net

Tags: Brewing & Beverages, FMCG, Dave Jordan, Forecasting & Demand Planning, Cost Reduction

FMCG Turn-around Intensive Care Recovery KPIs

Posted by Dave Jordan on Wed, Sep 06, 2017

On a daily basis the amount of care we give to the human body is remarkably little. When you are feeling in good shape the best the body can hope for is a good wash, a brush of the teeth and a slap of moisturiser if you are a bit of a girly. What else? Haircut and manicure perhaps oh, and possibly a check that your weight has not dropped that desired 10% overnight.

Considering the complexity of the human body and how we cannot live without it we do not spend too much time analysing how it is performing. We probably spend more attention on our cars and IT gadgets. Why is my PC running so slow? The car is overheating, I must check this now. Such symptoms are immediately of prime importance and top of mind and must be addressed now!

This all changes when we are feeling unwell. Suddenly we are taking our temperature, blood pressure and pulse rate. Blood tests may be needed. You may be wired up to monitor to see how the heart or brain is functioning. The body is now getting the intensive care it needs in hospital. Recording and monitoring this raft of data is the route to a hopefully full and speedy recovery.

FMCG_RECOVERY_SUPPLY_CHAIN_KPIS.jpgIf your business is operating well and there is even some growth in these testing times then the usual keep fit-heart monitoring Balanced Scorecard KPIs are reported weekly or monthly. The focus is usually on getting your stuff to customers and onto shelves at the right time, in the correct quantity and at the lowest cost. Along with other company measures, e.g. finance, HR, SHEQA, the scorecard shows the health of the business.

When all is not going smoothly however, the Balanced Scorecard may need supplementing with other measures. In companies where sales are below expectations and cash flow has dried up you need intensive care focus in that area. This does not mean you stop generating the Balanced Scorecard as this will contain important financial and non-financial measures. Instead, you need to place the sensors in the critical locations.

What about when things are not going well? Measuring the usual set of KPIs is all very well but when you are in a mess you need some intensive care. For businesses struggling with tight cash flow here are top ten tips for some relatively simple Recovery KPIs:

  1. Sales-out Sales-in do not guarantee you a final cash sale to a consumer so focus on the final sales transaction.
  2. Discounts Control how much discounting is taking place by those generous sales people. Is it authorised in advance and at the correct level?
  3. Debtor Days This is money owed to you so negotiate favourable terms and constantly review. If 60 days has been in place for years then it is about time this was challenged so apply some pressure.
  4. Creditor Days You owe this money but if you upset suppliers they will stop supplying! Renegotiate where possible and do your best to pay on time as you never know when you really need a favour.
  5. Overdues Where money is due to you and has exceeded the agreed terms you need a persuader to get on top of late payers.
  6. Forecast Accuracy Do not look at every single SKU; apply segmentation principles. Determine which SKUs are important and make a healthy profit, focus here.
  7. Lost Sales Investigate every significant lost sale and systematically apply a 100-year fix so mistakes do not recur.
  8. Potential write off Monitor stock age internally and at distributors and avoid this criminal cash waste.
  9. RM/PM stock If you are overstocked you should not re-order and you might consider selling some items. Your stocks should be aligned with those important SKUs identified above.
  10. Finished Goods stock Again, ensure your key SKUs are always available in the required quantities. Promote any excess or slow-moving stocks to generate income and minimise potential write off.

In addition to the sensible tight control of discretionary spend this approach can stabilise your vital signs and guide you back to a healthy glow without the intensive glare of the suits from HQ.

Imag courtesy of moggara12 at freedigitalphotos.net 

 

Tags: FMCG, KPI, Supply Chain, Cost Reduction, Inventory Management & Stock Control, balanced scorecard, Recovery

Logistics Outsource Tendering in CEE - Top 7 Hazards

Posted by Dave Jordan on Wed, Nov 16, 2016

This process can be straight forward but a little extra care and knowledge will ensure you achieve the best warehousing and/or transport solution for your business.

Just a quick reality check, do you need to outsource? Before embarking on a complicated and potentially disruptive tender are you convinced your current in-house operation is unsuitable? Think long and hard about outsourcing or you could be trapped in a long-term relationship with someone who may not care about your business as much as you.

Assuming you have taken the correct decision let us look at 7 things that can go wrong.

1. Process Leadership If possible, appoint a leader from outside of the Supply Chain team, e.g. Finance. This will promote impartiality and in any case, many of the key debates will be in the Finance area. For complete impartiality, you might consider hiring an experienced Interim Manager or Consultant who has no long term interest. All contenders will be trying to pick up snippets of advantageous information and you must not compromise the tender process in any way.

2. Qualification. Get an idea for which companies are likely to be interested in and capable of being your 3PL partner. Do not be surprised if your list is relatively small but you should aim for 8-10 contenders in this first sweep. Contact these companies with a questionnaire asking them to outline their capabilities, pedigree and reputation in your geography and follow this up with a face to face meeting where you can get a better feel for competence and commitment.

3. Cost Comparison. Outsourcing is not always about cost reduction but the costs of the 3PL contenders will be a major element in the decision. Ensure you know your accurate current costs for the entire service you are expecting the 3PL to provide. You need transparency on your own cost structure to make a valid and meaningful comparison.

4. Time Expectations. Don't rush the process despite the pressure from above (or below) to make a change. You will be reliant on your 3PL to support your business so make sure a timetable is agreed with all stakeholders, including your own Supply Chain people. The tender process will not be a secret however hard you try and your people will be nervous. The changeover should fall in a slack period so avoid your seasonal peaks and major promotional periods.

5. People. If you are outsourcing your existing in-house Logistics function, then you are either going to make several staff redundant or you will be looking for the new 3PL to take those staff on board. Either way you must treat people in the best way possible or your service levels will suffer as you make this difficult change.

supply_chain_3pl_logistics_transport.jpgIf you are making staff redundant you must keep them fully informed at each critical step. Why not consider an escalating loyalty bonus linked to performance? If existing staff members are being offered the opportunity to join the new 3PL then it is your responsibility to ensure terms and conditions are fair. From experience in CEE it is wise to build a "parachute" agreement into the new contract ensuring existing terms and conditions are maintained for a period of say, 12-18 months.

 

6. Beware of well- meaning Distributor partners trying to step up to the mark as a 3PL and be similarly aware of any of the big names who are not present locally but "expect to be". This means they are unlikely to enter your market unless they get your business and you will not appreciate being their new guinea-pig!

7. Start-up Phase. Ensure your tendering process includes a clear understanding of what will happen as the business is transferred. How soon will KPI's be at the required level? Does the 3PL have the necessary staff with relevant skills, e.g. narrow aisle FLT drivers. Do they have extra FLT batteries than can be swapped to maintain the operation? Has the WMS been robustly tested? Do they have sufficient trucks and drivers?.........Even some of the big name 3PLs make mistakes at this crucial time.

Taking care of these 7 elements will help you move through the all-important implementation phase to a steady business state without surprises.

Some 3PLs tend to be very slick at securing new business but some of them are not very good at keeping it!

Want to know more about logistics in the CEE region?  Check out these posts too!

Logistics: Working With 3rd Party Logistics Providers in CEE 

Working With 3PLP's in CEE - When did you last see your stock count?

Top tips to improve your cycle counting & avoid suffering stock shock 

Image courtesy of Stuart Miles at freedigitalphotos.net

Tags: Customer service, Logistics Service Provider, Supply Chain, Cost Reduction, Transportation, 3PL

FMCG:Top 10 Smash Hits of Warehousing & Logistics

Posted by Dave Jordan on Wed, May 20, 2015

Hello pop pickers, here is this weeks’ top 10 smash hits in this important but often forgotten part of the FMCG Supply Chain.

FMCG_top_ten_warehousing_and_logisict_hitsAt number 10 is All Systems Go by Donna Summer – Do not cut costs on your Warehouse Management System (WMS) and avoid any untried local “specials”. Make sure all stakeholders are involved in the design specification at an early stage to avoid costly and “least worst” bolt-ons later.

Staying at number 9 is Prodigy with Out Of Space - Ensure your chosen Third Party Logistics Provider (3PLP) has sufficient space or can expand to meet your growth expectation. If your 3PLP offers you a site which is boxed in and cannot expand then walk away!

Old favourites Smokie with For A Few Dollars More lie 8th – avoid the temptation to accept the lowest 3PLP quote, however tempting. Cost is not everything and if you bite on the low quote you will probably pay for it in the long run. Evaluate 3PLP offers thoroughly including which staff they intend to deploy on your business. Also, is it really cheaper and more efficient to outsource your logistics capability?

Up And Away from the Banned of St Trinians pops up at number 7 this week – your fast moving, profit generating brands should be on the floor or lower racks to facilitate picking. Those slow moving or seasonal items (in that case why do you have ANY stock?) should be on the top row and up and out of the way.

Alliyah bringing us Age Ain’t Nothing But A Number stays at number 6 – your WMS must be capable of carrying out stock ageing analysis to prevent losses from expired products. If age analysis is not carried out you will lose sales when you realise your “stock” is not actually suitable for legal sale.

Holding steady at number 5 is Counting Every Minute from Sonia – if you want to avoid a severe financial shock at the end of the year then you must take responsibility for ensuring stock is accurately counted. In addition to statutory fiscal counting you should activate routine cycle counting to ensure your data retains accuracy. Secondly, if you see a stock mismatch early enough you may be able to rectify this before memories fade and time moves on.

Keep On Truckin’ by Eddie Kendricks sits at 4 this week – whether you chose electric powered narrow aisle or standard FLT’s do a simple check and ensure battery type are interchangeable across the fleet AND sufficient extra batteries are available to ensure 24/7 coverage. Surprisingly, idle FLT’s are a common sight when battery budgets have been cut. (They only seem to run out of power when it is busy. Right?)

Sittin’ On The Dock Of The Bay by Otis Redding begins the top 3 countdown – how many loading bays does your 3PLP have or propose for a new build? You have to get stock in at the same time as you move stock out. The almost inevitable month end bonus push from Sales will expose a simple lack of doors and bays.

Living In A Box by the delightfully titled Living in a Box is at number 2 – forgive my indulgence. I think this is a great Supply Chain themed song so it gets in!

It Takes Two Baby by ageing rockers Rod Stewart and Tina Turner leads the warehousing chart this week – do not assume your 3PLP knows enough about your business to leave him alone on a day to day basis. You need daily discussions to resolve operational issues plus monthly performance reviews at an appropriate senior level. Get yourself an office in the 3PLP premises and work hard at the relationship on a daily basis.

Enchange_improve_lsp

 

Images courtesy of Stuart Miles at FreeDigitalPhotos.net and Enchange Ltd.

 

Tags: FMCG, Logistics Service Provider, Dave Jordan, WMS, Cost Reduction, Logistics Management

Improve Supply Chain Performance via Total Productive Maintenance

Posted by Dave Jordan on Wed, Jun 25, 2014

When I first came across Total Productive Maintenance (TPM) I was sceptical of yet another ”blue sky” approach to pursuing manufacturing excellence. Surely, this would soon be replaced by the next set of buzz-word initials dreamed up by smart-suited consultants. But no; I saw the light and now I’m a believer (RIP Davy Jones) in this technique that originated in Japan.

If you have a factory that is running below par in terms of efficiency, output, reliability or cost etc then TPM could be the ideal tool to achieve a sustainable turnaround. Companies do not like under-performing factories and there is usually somewhere else they could make their products better, faster or cheaper. So, if your factory is under threat of closure you might consider following the TPM principles.

TPM is not rocket science but it requires just as much senior management buy-in and patience as an S&OP process demands. There are multiples levels of TPM success but even the basics will require a significant and sustainable change in behaviour. Kick off with the Kaizen 5S approach which is remarkably simple stuff.

Total Productive MaintenanceKaizen 5S is based on the translation of 5 Japanese words relating to systematic improvement and maintenance of a clean, efficient, well organised operation.

  1. Sort – Sort out what you really need – I mean really need! Throw out anything that has been hanging around for a few years “just in case”. Check out your spare parts store and see what items are held for equipment you no longer own!
  2. Straighten – Have you ever mislaid your car keys? This system creates a dedicated space for every tool or spare part located near to where it is needed.
  3. Scrub – Clean the machines and the production area thoroughly. Dust can affect quality, spills can be hazardous and well maintained equipment lasts longer.
  4. Standardise - If you use identical working practices for maintenance and cleaning your employees will become highly proficient. Standardisation provides you with a flexible workforce that can be deployed where needed and without a training period.
  5. Sustain – From the factory manager to the tea boy you must keep the faith and sustain every initiative. This is very difficult at first but you have to grit your teeth and keep going.

Of course, this is merely a snap-shot of what TPM entails but it shows the basic elements you need to start the journey. As mentioned, the first tentative steps can be painful but if you stay the course the benefits are immense in efficiency and employee satisfaction. The principles apply equally to logistic centres, offices; essentially everywhere people work.

Oh, but don’t try this at home or a divorce is highly probable, believe me!

Image credit: corbindavenport.blogspot.co.uk

Tags: FMCG, Dave Jordan, Performance Improvement, Manufacturing Footprint, Supply Chain, S&OP, Cost Reduction

FMCG SKU complexity: range extension by stealth!

Posted by Dave Jordan on Wed, Nov 13, 2013

What made me think of that? Do you remember that playground game called Statues? One person is the “museum” Curator and stands at the end of a field or yard. Everyone else stands an agreed distance away from the Curator.  The aim of the game is for a "Statue" to touch or tag the Curator.

The Curator turns away from the Statues and then they run and try to tag the Curator. However, whenever the Curator turns around, the Statues must freeze for as long as the Curator looks their way.  If a Statue is caught wobbling or moving, they are sent back to the starting line to begin again.

The same is happening in FMCG board rooms across the globe.

I am a frequent visitor to FMCG retails outlets for both business and the “pleasure” of seeing domestic senior management investing our money. When in different countries I always take a look at the local retailers to see what is different or innovative. One thing struck me on recent visits to three different countries. My word there are a lot of skus on the shelves, on racks, on gondolas, on the floor and even hanging from the ceiling. Do you really need all of them?

CEO’s speak about “necessary complexity” and “selective assortment” but as far as I can see skus are being added to portfolios willy-nilly, with major emphasis on the willy. Every time you add an sku you are incurring extra cost and less efficiency in the Supply Chain but these are rarely used as the basis for a new introduction. Do all your skus actually pay their own way or are they actually destroying value?

SKU complexity cost resized 600Analysis at a brand level is for sales and marketing to either brag or invent excuses about in-market performance. You really do need to ensure every single sku is adding something to the corporate pot over and above what it costs to have the sku on the portfolio. Once you have established the status quo you then need only to focus on those with turnover and profit/margin at the lower end of whatever scale you define.

When an sku is clearly not paying its way then notice should be served and if improvement is not forthcoming, delist. Get rid of the dead wood and spend scarce resources behind what is actually successful. I am not suggesting a ruthless sku rationalisation process in the style of King Henry VIII (strictly 1 in: 1 out) but a routine process with board level involvement will pay dividends.

Whatever process you put in place there are team members who simply worship skus. They like variants and different colours and numerous pack sizes and X number of facings like the competition, whether they make money or not. Oh, and don’t forget promotions and special editions as this is where the Statues mentioned earlier come in.

When the CEO is not looking, skus that were meant to be temporary or tactical become permanent skus. The CEO looks around and asks if sku numbers are under control and he gets nods from sales and marketing but turns away again before the Supply Chain and Finance guys can get a word in. As the Curator of your business you need to be firm but fair with what is on your portfolio. If some people don’t like that then perhaps divorce is the only answer – beheading is best avoided.

Why not check out the SKU Complexity e-book?

Image courtesy of Ambro at freedigitalphotos.net

Tags: FMCG, Dave Jordan, CEO, Supply Chain, Cost Reduction, Sales

FMCG Foods: Shocking Retailer & Producer Waste

Posted by Dave Jordan on Tue, Oct 29, 2013

That is an astonishing amount of food waste. Tesco in the UK has held its hands up and admitted it has generated 30,000 tonnes of food waste in the first 6 months of 2013. If that waste rate continues unabated it will reach an enormous 60.000 tonnes for the year. That is roughly the annual production volume of a decent sized food factory.

This refers only to Tesco so if you add in Asda, Morrisons, Sainsbury’s etc and the smaller retailers and assume a similar level of waste, the actual amount of goods produced but not consumed must be around 500,000 tonnes! Plus, that is just in the retailer’s possession, what about the food that ends up in millions of domestic rubbish bins?

If the same is true in other developed markets the figure wasted must be measured in millions of tonnes. Rightly, various organisations have spoken out about such excessive food waste when large parts of the global population struggle to feed themselves every day.

FMCG Tesco Waste resized 600Shocking figures indeed but think about what that means for the UK foods business as a whole. Based on my rough estimation this tells us that half a million tonnes of food were produced to a high quality standard for top-notch retailers and they and the producers received no income in return. Yes, some contracts may pass the financial burden onto producers but whatever way you look at it the waste pyramid expands significantly when you take into account all associated costs.

When all those fruit, vegetables, bakery goods and more start rotting in the ground or feeding livestock what else goes with it?

Someone was paid to source and order the raw materials and packaging.

A truck was loaded and brought the RM/PM to the factory.

The goods were unloaded and stored in a warehouse.

Production planning called-off the RM/PM.

Someone brought the materials to the production area.

Product was manufactured, packed and palletised.

Someone carried out relevant QA checks.

Finished goods were moved back in to another warehouse where they were stored before someone picked the pallet for despatch.

Once loaded on a truck the goods were delivered directly to a retailer or to a cross-docking platform.

Once at the supermarket the goods were unloaded into the back of store warehouse before finally reaching the shelf ready for sale.

All standard costs which will be included in COGS but they didn’t sell did they? So….

Someone had to empty the shelves and move the stock back into storage.

Someone had to pay for the storage and isolation of the stock.

Someone had to arrange destruction or donation or recycling.

A truck was loaded and took the goods to their final resting place.

As the quoted value of the wasted food is at the retailer level then it will include their lost margin but it does not show the full cost of failure to sell. Add in the disposal costs, promotional expenses, an untold volume of unaccounted telephone calls and endless paperwork/certification and the actual loss is probably even higher than these incredible published figures.

In an industry suffering from stalling economies these losses are not sustainable for bottom line and Corporate Social Responsibility (CSR) reasons. Sort it out!

Image courtesy of scottchan at freedigitalphotos.net

Tags: FMCG, Dave Jordan, Supply Chain, Forecasting & Demand Planning, Cost Reduction

FMCG/Pharma European Supply Chain Quality challenges

Posted by Dave Jordan on Thu, Sep 12, 2013

We took a weekend break in Prague recently. I have been there before but only saw the inside of a taxi, a hotel and a soap factory that also makes margarine so this was a real tourism opportunity with the family. These days I do actually relax on holiday but there are always opportunities to see Supply Chains in action.

I have never seen so many tourists, even in London and to cap it all it was Gay Pride weekend. At times we didn't know which way to turn.

Prague was forecast to be very hot and indeed it was so we were pleased our hotel choice had a swimming pool. Cannot wait! On arrival the check-in desk our thoughts of relaxing aching limbs in a cooling pool were shattered. A small digital sign (yes, very posh) on the desk told us the pool was not available as it was being sanitised. There must have been some virulent contamination as I found out the pool had been closed since mid July, i.e. 6 weeks previously.

This Customer Service failing inevitably put us on the front foot when evaluating everything else the hotel had promised to provide. If they knew the pool was unavailable the decent thing to do would be to tell people. Sure, some bookings may have been lost but at least you know what to expect on arrival. What next? “I am sorry sir but your bed has been taken away for repair so you will have to sleep on the floor.”

toast customer service efficiencyBreakfast the next day provided two further instances of customer service woe and neither required a rocket science degree to avoid.

Toast. Can you really get anything wrong with toast? You can at this hotel. Those tunnel toasters can really spoil your day if your carefully chosen bakery item is purloined by someone else while you were away pouring out your muesli.

Breakfast bread battles were not the cause of disappointment on this occasion, however. This toaster had a grill which rotated and took your bread between the glowing elements. The problem was you needed three passes to get even a tinge of a toasty look as the heat setting was on low and the speed was set at fast.

Being a bit of a practical type I reversed the settings to maximise the toasting opportunity in one pass. World War 3 nearly started in a Prague hotel breakfast room. Black-clad waiters appeared from every angle to give me stern looks and even sterner words I could not understand. Perhaps the Czech Republic had borrowed some of the UK’s ridiculous Health & Safety rules and touching the toaster could have put the entire city at risk?

I was completely lost for words when told that operating it this way uses up too much electricity and therefore money. My discussion on efficiency fell on deaf ears and they quickly reset the machine and bread continued to be “toasted” three or more times in front of a watching audience of hungry guests.

Could things really get worse? Oh yes!

Rice Krispies. What can go wrong with a bowl of this well known FMCG cereal? I filled my bowl with said cereal, added milk and sat to eat expecting to hear that famous snap, crackle and pop. Stale. They had the texture of cardboard and a similar taste too. They must have been around for weeks soaking up moisture and various odours from the environment. I took a waiter over to the large serving bowl of cereal and he was rightly horrified. Turning smartly he used the “out” door to enter the kitchen and quickly returned with a brand new unopened catering pack. With a Fawlty-esque flourish and smile of proud satisfaction he poured the new stock on top of the decaying stale stuff. Aaaaagh! Perhaps the police should be told about this cereal killer.

Customer service, operational efficiency and FIFO stock control all compromised and it was only day one!

Image courtesy of artimisphoto at freedigitalphotos.net

 

 

 

 

Tags: Customer service, Dave Jordan, Humour, Cost Reduction, Inventory Management & Stock Control

FMCG Customer Service & Complaints: Why do you plan for failure?

Posted by Dave Jordan on Wed, Aug 28, 2013

Do you remember those long running TV advertising campaigns for probably/possibly the best lager/beer in the world? The specific advert from the UK that sticks in my mind is the one where Mr. Middle Manager is leaving the office for the evening when he hears a telephone ringing.

Drinks FMCG Customer Service resized 600He is not sure which room it is coming from but then realises the source is an office marked as “Complaints Department” or something similar. Walking forward Mr. Middle Manager opens he door and enters an office that looks like it hasn’t been occupied for many years. (Anyway, how on earth did this available office space not get gobbled up in any number of corporate office relocations and redesigns?) On lifting up the telephone - yes a real old one with a curly cable - he discovers that the caller has the wrong number.

The subtle tongue in cheek message being that this particular brand of beer is so good and quality so consistently high that a “Complaints Department” is simply not relevant. If you think about it anyone with an unequivocally named Complaints Department probably expects to receive calls and letters from dissatisfied consumers and customers whether they are quality, service or performance based.

A clear double whammy! You pay people to who unfortunately make the mistakes and then pay another group to deal with the fall-out! I know life is not perfect nor are human beings or any process so the concept of the beer advert is an impossible to reach utopia. Similarly, you cannot keep everyone happy all of the time and some people and organisations believe complaining is a part of the producer-client game.

Nevertheless, recently I studied the regional Customer Service organisation of an FMCG blue-chip company. The brief was to ensure resources were aligned with the relative sizes and importance of the clients in the Key Accounts (KA) and Traditional Trade (TT) sectors. Changes to the split between KA and TT meant some people were twiddling their thumbs while others were clearly stressed.

While looking at possibilities it became clear that this company was spending more on complaints handling than on real Customer Service and cash collection. A whopping 38% more to be precise! A significant proportion of the non-sales force customer facing resources were employed to deal with problems. Talk about planning for failure!

Do you have a Complaints Department or perhaps it is hidden under the Customer Service umbrella? Take a look at how much you are spending in maintaining a team of people plus infrastructure to receive and deal with communications from unhappy callers and writers. Or let me present this another way, how much are you spending to correct the mistakes you are making at some stage of getting finished goods to consumers and customers?

Be careful or the next call to your office might be to discuss another role or even gardening leave!

Image courtesy of digitalart at freedigitalphotos.netfreedigitalphotos.net

Tags: Customer service, FMCG, Dave Jordan, CEO, Performance Improvement, Cost Reduction

FMCG Logistics: Are you optimising trucking weight & volume capacity?

Posted by Dave Jordan on Wed, Aug 21, 2013

I crossed a border in Eastern Europe recently and although the private and car traffic sailed through without delay there were a surprising number of trucks parked in a snake on the approach roads. Both countries are in the EU so I guess someone was carrying out a bit of thorough drugs or human trafficking checking or looking for some other equally vile trade.

I know this is not an unusual sight but something struck me as very unusual for transportation logistics in 2013. A majority of the waiting trucks had their curtains and/or doors opened probably awaiting the sniff test of a slobbering customs hound. What jumped out and hit me in the face making my jaw drop was that most of these 40 foot beasts were empty. Well, at least empty of any palletised or loose stowed goods depending on what the dog found under the boards!

I thought we had all been through the pain of back-hauling and similar opportunities to save money on fuel, assets and operational costs. Whether it was brewers bringing back empty bottles or FMCG producers shipping finished goods on trucks that had arrived with raw materials aboard or simply pallet poolers recovering their wooden stock, I thought the days of wasted trucking miles/kilometers were behind us. (I know this activity can never be a perfect fit as 100% back-hauling is just not going to happen due to the timing and geography of supply and demand fluctuations.)

transport pallets space utilisation resized 600To be fair, some of the trucks in the crossing queue were very well packed, e.g. bottles of fizzy drinks on the bottom with pallets of high volume/low weight snacks on top to maximise the available volume/weight capacity. Another was loaded with FMCG on the bottom and paper tissues above. Simple solutions to maximise available resources and certainly not rocket science. The last example was actually for goods from different producers so there is probably a proactive 4PLP involved who is financially motivated to squeeze every last penny of value out of any logistics expense.

You cannot mix just anything in loads of course. Tea is not going to taste very good after a few hours rocking about above perfume-rich detergent powder and you don’t want liquids above anything electrical but I think we could do a lot more to maximise transport resources. Some companies adopt a “not on your life” attitude at suggested capacity sharing but I think that shows a lack of innovation capability and desire.

On the subject of logistics optimisation and flexibility I stumbled across this excellent use of space and transport expenses. Click on this link and take a look at how soft drinks producers can help to distribute medicines in D&E regions. A simple solution to the distribution of medicines in very difficult environments where cost pressure usually means the people who need don’t get.

Image courtesy of renjith krishnan at freedigitalphotos.net

Tags: Brewing & Beverages, FMCG, Logistics Service Provider, Logistica Management, Dave Jordan, Cost Reduction, Logistics Management