Supply Chain Blog

Global FMCG Supply Chain Transformed by Analytics

Posted by Dave Jordan on Wed, Apr 05, 2017

The Challenge

A leading global FMCG company undertook an aggressive supply chain improvement programme across 150 markets. The objective was 100% alignment of worldwide operational activities with company strategy and objectives. Not an insignificant task! 

The Problem

The organisation routinely calculated and published multiple KPIs and targets, but a lack of data integrity, accessibility and insightful reporting limited supply chain progress. Data was ‘scattered’ across multiple sources including enterprise ERP, market ERP, multiple factory systems and MI systems. No shortage of data but a severe dearth of insight and information.

In several markets, the organisation was suffering from volatile and highly variable short-term supply chain plans and an excess of finished goods inventory, despite a stable and predictable consumption. The ways of working within the supply chain and the interactions externally were traditional, with operating practices and decision making analysis unchanged for far too many years.

The Solution

Engagement with key stakeholders across the business established the corporate need and critical success factors for the analysis. A Toolset & suite of SKU-level Dashboards was developed, focussing on demand, planning, materials, production & execution. Company data was extracted into the toolset to provide information leading to appropriate actions. New monthly reporting and analysis revealed significant inventory reduction opportunities and importantly, operational management had the confidence to drive the required changes with a far greater understanding of potential outcomes.

sc_transformation_supplyvue_updated.pngThe Winning Tool

SupplyVue is a revolutionary supply chain analytics solution.

  • SupplyVue uses existing data to analyse and diagnose problems and successes in the supply chain.
  • SupplyVue provides a suite of tools and dashboards to model different inventory, financial and service level scenarios.
  • SupplyVue provides the visibility, data, information and business case to drive changes in the supply chain while fully understanding potential trade-offs.
  • SupplyVue enables provides visibility across the end-to-end supply chain to deliver better service to internal and external stakeholders.

The Result

Hard work, patience and trust in the analytics tool provided:

  • Improved forecasting accuracy.
  • Senior management tools to set informed policy.
  • For the first time, planners had powerful and relevant tools to perform root cause analysis of supply chain issues.

The big one? The company achieved an inventory reduction of 40% (yes, forty) in 12 markets amounting to US$ 200 million. Not too shabby eh?

Plus, something that is difficult to measure. SupplyVue raised the morale of supply chain staff who were now able to offer intelligent and assured solutions rather than shoulder shrugs and excuses.

The Future

Would you like to read more about analytics?

Supply Chain Analytics

SupplyVue

The Pathway

How to transform your supply chain?

The Next Important Step

Enchange can help you transform your supply chain, the overall business and personal ambitions!

To find out how we can help you and to enquire about our wide range of supply chain and related services please click here and contact us.

Image courtesy of Enchange.com

Tags: Customer service, FMCG, KPI, Supply Chain, Inventory Management & Stock Control, Supply Chain Analytics

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 – Hunkering down for Supply Chain Analytics

Posted by Dave Jordan on Wed, Aug 24, 2016

Have you ever “hunkered down”? I remember being asked to hunker down during a supply chain training course many years ago and I had no idea what I was supposed to do. Eventually I had to ask as failing to follow the hunker downwards request appeared to be causing a bit of a problem for the presenter.

This hunkering failure occurred during one of the many versions of the Beer Game in which I have taken part or run over the years. Anyone who has been involved with supply chain activities will probably have taken part in the Beer Game, or the Moussy Game as it is sometimes known in dry countries of the Middle East.

What does the beer game do? The rules are relatively simple and in summary the overall objective is to meet consumer demand for cases of beer in a complex, extended supply chain while controlling unplanned expense on back orders and inventory. The game involves four overlapping and inter-dependent supply chains, i.e. manufacturing, distribution, procurement and a retail outlet. There is a cost penalty for holding excess stock and any backlog unfulfilled orders.

Players rely on colleagues in the other departments to do the right things for the business but frustration soon surfaces. Usually, things do not go well and players feel frustrated because they are not getting the results they expect. Assumptions are made about consumer demand and erratic patterns emerge as backlogs mount and/or massive unnecessary stocks accumulate. It was at this stage in the game I was told to “hunker down……….”.

Does that sound like your own supply chain – not the hunkering bit? Frustration is common between departments who all aim to do the right thing but only have the necessary data and information to do the right thing for their specific area of responsibility at that specific time. Even after careful consideration and informed debate, the real effect of an adjustment can only be seen in the future.

supply_chain_analytics_fmcg_inventory_performance.jpgIF - a big if -  nothing else changes and all assumptions are correct and accurate then there is a chance the desired effect will develop. However, life is not like that and certainly not supply chain life. What can happen?

New launches kick-in and are successful, or not.

Competition by definition is designed to disrupt your plans.

The weather turns out rather different to the forecast.

The economy takes a turn up or down.

Factories, 3PLPs and distributors all suffer performance variability.

Customers and consumers change their needs and habits.

Etc., etc., etc., this list really is endless. Absolutely anything can happen to turn apparently sensible decisions into foolish, forecast failure.

Hey, what about all that IT we have? Doesn’t that help us understand what is going on? This should tell us what is really going to happen in supply chains? No, not necessarily. Common supply chain IT tells us what has happened, what is happening, where and when but not precisely why an event happened or what will happen.

Subtle differences perhaps but to up your game you need to hunker down with Supply Chain Analytics to gain a full unexpurgated understanding of how changes you make today will impact the future and more importantly, how you can change that future.

Yes, you can.

Image courtesy of Enchange at Enchange.com

Tags: Customer service, FMCG, CEO, Inventory Management & Stock Control, Supply Chain Analytics, IT

Frock Stocks & FMCG Supply Chain Inventory Decisions

Posted by Dave Jordan on Thu, Aug 04, 2016

Senior Management has been on quite a shopping spree over the last few months taking advantage of various big name high street stores that have lost their lustre and even their premises in some cases. The demise of these familiar UK brands has nothing to do with Brexit and the variable value of Sterling but in one case a run on the Green pound has been responsible…..

Of course this has had several knock-on effects and not least the amount of money “invested” in clothes and shoes is now significant and that money is largely sunk - the market for unwanted or out of style apparel being extremely limited. I hate to think how much money is hanging in the wardrobe but that raises a second issue.

The trusty old Grink pine wardrobe from IKEA has reached capacity. As a result, the small Allen Keys have been out causing blistered fingers in order to erect another Grink plus a wall mounted Plop shoe tidy. Another investment to store items that are not in regular use. In fact, if you consider that the vast majority of clothes and shoes are seasonal, at any one time most of the space is taken with things you would not dream of wearing. Fake leather Boots in August? A floral summer dress in December? (NB Northern hemisphere before someone comments!) A Superwoman onesie at any time!

FMCG_INVENTORY_STOCK_SERVICE_CONTROL.jpgWith so many clothes squeezed into the now two Grinks they are so full that finding anything in a reasonable time is difficult. Senior Management might well be correct that there is a perfect dress in there for a particular special event but can you find it? Sooner or later all recollection of what is in the wardrobes has been lost as the memory grey matter section diminishes.

Worse still, fashion trends do not stand still so what was a “must have” last year may be considered an insult to the designer where they to be worn the following season, luvvie!  

So, what have we got and what have many, many FMCG and pharmaceutical companies?

High working capital – all that money tied up on stock that may not be useful.

High storage costs –  you will be paying too much for storage whether you manage logistics internally or outsource to a 3/4PLP. (Don’t expect them to reveal that you are storing too much!)

FIFO - stock age is not monitored and write offs persist. Old stock is not liquidated before expensively assembled relaunches hit the shelves. You do not actually know what is there contributing to ongoing working capital.

High stock shrinkage – loss and damage have a higher incidence when stock is not correctly monitored and inventory levels are kept high – harder to miss.

Stock accuracy - cycle and annual stock counts are difficult to execute and usually provide unwanted shocks at reporting period ends.

Efficiency -  when warehouse capacity utilisation above 80%, operational efficiency stalls and soon plummets. Picking becomes a hazard and the warehouse simply does not have sufficient doors to move goods in and out.

When supply chain processes are inefficient and specifically inventory build decisions are not fully assessed and evaluated, you inevitably overstock as planners do not know what else they should do to protect sales and customer service. Conversely, when this happens you actually lose sales and offer poor customer service.

Does this provide the basis for a profitably growing business? Of course not but so many companies remain oblivious to the processes applied and decisions that are taken that bulk-out the supply chain.

Image courtesy of photostock at freedigitalphotos.net

Tags: Customer service, FMCG, Pharma, Inventory Management & Stock Control, Supply Chain Analytics

Postman Pat, Postman Pat, Postman Pat & his Supply Chain hat

Posted by Dave Jordan on Wed, Jul 06, 2016

I recently peeped outside of the FMCG and Pharmaceutical world and took a look at the amount of empty beds in the National Health Service in UK and how a little alternative thinking plus basic demand and supply planning expertise could improve bed utilisation. Today it is the turn of the Royal Mail and all those “black and white cat” postie types to be in line for my critique. 

Before you say that the Royal Mail is not a proper supply chain, it is a supply chain and a very complicated one at that. Apart from the reducing but still significant Christmas card peak, this is a business that cannot really forecast how many letters and parcels will be dropped into Post Offices and Post Boxes for delivery on a daily basis. Or perhaps they can or should? Is it any different from the daunting, daily, dynamic demand volatility experienced in Tesco, Asda and Aldi etc.?

Anyway, that is not the issue on this occasion but it is about the Royal Mail redirection service which should be a very straightforward formality. You move to a new address and pay the Royal Mail to keep an eye on your letters and parcels and forward them to your new abode. This is not as simple as it sounds as finding that gas bill in a plain brown envelope must be very close to searching for a needle in a haystack. Nevertheless, they have been doing this for ages and in large numbers so should be very proficient.

FMCG_MAIL_POSTAL_SUPPLY_CHAIN_SERVICE.jpgNot this time. They got it horribly wrong from day one and continued to do so as even “signed for” mail which must be capable of automatic sorting was sent to the old address. Luckily we are still in the locality and in contact with the remaining Neanderthal student residents who in their few conscious periods send vowel-free texts letting us know Postman Pat has left something in the heiress’s name. Before they have the chance to eat or smoke what has arrived we quickly pop down and rescue items that slipped through the redirect net. That net must have holes the size of Ronaldo’s ego.

After repeated telephone calls and emails and the release of only a minor amount of my pent up frustration from afar, Postman Pat has refunded all costs and is now carrying out the service – very efficiently now, incidentally – free of charge. What a waste of time, energy and other resources!

I have no idea what the inside of a sorting office looks like or what processes and procedures are in place or their daily challenges but failure to carry out core advertised service is very disappointing. Delivering enveloped and packaged mail is what they do best; if they cannot get that right then what chance do they have with other value added services?

Walk into a pub on a scorching day (ok, so that is not going to be in UK) to be told sorry, no beer. Step into a supermarket to find no bread, milk, tea or cheese! Pull up at the McDonalds drive-in to be told no fries today - actually no bad thing!

You have to get the basics right or your credibility with existing and potential new clients is severely limited. Some organisations bend over backwards to gain new business and rightly so but why don’t they bend further backwards to keep that business? In FMCG and Pharma I find business retention is far harder than finding it in the first place.

Image courtesy of Ohmega1982 at freedigitalphotos.net

 

 

Tags: Customer service, FMCG, Performance Improvement, Pharma, Forecasting & Demand Planning

FMCG: Will retailing the Amazon way see off the discounters?

Posted by Dave Jordan on Wed, Oct 14, 2015

Romania has not yet bought into online FMCG supermarket retailing in a big way. There have been some trials, tribulations and a few errors but online retailing here is this nothing like on the scale seen in UK, for example. As a tourist in Birmingham recently I awoke early due to the 2 hour time difference and decided on some breakfast retail therapy to pass the time.

Firstly, I had to negotiate the huge queue of students (going out or coming in?) and high-visibility vested workers waiting patiently for a very early dose of bakery products. Pizza slice, omelette in a bread bun and sausage rolls for breakfast? Aaaagggghhhh! There is even a Gregg’s loyalty rewards programme.

Anyway, avoiding the admittedly tempting smell of warm savoury dough I entered the large store of one of the UK’s dwindling retail giants. I say dwindling as Aldi and Lidl continue to erode their business base at a seemingly unstoppable pace. Being early in the day there were few shoppers around but the activity in the store was high due to the number of employees dashing about with trollies and scanners making up online orders.

Some moved frantically like Edward Scissorhands fulfilling orders at top speed while others dawdled along as if browsing in a shoe shop to avoid the rain. Do they assemble more than one order at a time or is it strictly a sort of online retail FIFO? What was clear was the appalling route planning.

Of all people, shop employees should now where all the products are displayed. Yes, the retailers do chop and change to try and trick us into spending longer instore and buying stuff we didn’t actually come in for but such changes are relatively infrequent. So why did these order pickers move around the store floor like balls in a faulty pinball machine?

Repeated returns were made to the same aisles to collect and scan further items for their orders. “Time is money“ and in this case time was what was being wasted. You may argue that the home deliveries all have time slots so rapid assembly is not vital but you could offer more slots to consumers or dare I say it, reduce the number of pickers employed.

As online shopping increases these huge outlets are potentially transforming into warehouses where the only activity is stock put-away and order picking. This may be on a smaller scale than by pallet load or case picking in a Distribution Centre but the exact same priority principles apply, i.e. ensure your know where the stock sits and that fast movers are readily available for rapid picking and order assembly. Maybe the retailers could learn a few things from logistics companies which will help to stem the discounter tide.

How far could we develop this approach? Are we likely to see any retailer go down the Amazon route where everything is online and consumers and retailers never the twain shall meet? Probably not but while in this flux between old fashioned aisle surfing by consumers and faceless fulfillment, the retailers may as well put a bit more thought into their order picking and assembly processes.

With that in mind I will just log onto GetGreggs.com (you saw it first here) and get a sausage & bean melt and a toffee finger doughnut delivered, now!

Image courtesy of jscreationzs at freedigitalphotos.net

Tags: Customer service, FMCG, Dave Jordan, Logistics Management, Inventory Management & Stock Control

FMCG Success Story: Focus on Customers - see the Benefits

Posted by Dave Jordan on Wed, Oct 07, 2015

 Once upon a time there was an FMCG company that I will refer to as “Foresight”. “Foresight” had spent many years and many Euros creating an acknowledged slick Supply Chain.

Top class regional and global buying
  • Flexible and cost effective factory network
  • State of the art ERP
  • Rigorous S&OP/IBP with top team buy-in.

With all those important boxes ticked they must be successful…..but they were not; not even close. In their peer group they were not number 1 and top & bottom line growth was getting harder and harder. Throw in an untimely and lengthy recession and the consumption of their product range plummeted – double digit style. A significant FMCG business and quite a few personal reputations were not looking pretty.

The problem was a surprising lack of focus on the customer end of the Supply Chain. Both International Key Accounts (IKA) and the Traditional Trade (TT) were being poorly serviced.

A lot of hard work upstream was being wasted through inefficiency and frankly, ignorance. The situation had existed for a number of years but as the same malaise was common in the industry nobody could see the benefit or indeed the need for “getting ones act together”. “Last amongst equals” was hardly a motivating and compelling business proposition for an international big name player.

Seeking external expert assistance “Foresight” started out on an adventure that would change the way they approached business at the customer end of the chain.

Customer Service.   This was something “Foresight” thought it was already good at providing but critical aspects were lacking:

  • Customer Service responsibilities were fragmented and lacked clear and unambiguous leadership.
  • Customer Service personnel had received no training in the subject - nobody really wanted to take responsibility.
  • Customer Service was actually limited to issuing and chasing invoices. Proactive interaction with customers and problem solution were not in the job descriptions.

This hardly projected an image of a caring “Foresight” and this was a huge risk considering the increasing power of the retailers…. 

Route To Market (RTM). “This is under control for TT and it seems to work”, however RTM was in the Sales black box and that box needed opening and shaking up and down vigorously!

  • The Distributor RTM network had been in place for several years and was decaying and the “Foresight” sales interaction with Distributors was far from a win-win relationship.
  • Several Distributors were simply incapable and/or ill equipped to represent such a major company. Some actually did not wish to be involved.
  • “Foresight” did not know who they could rely on in their network or how large and obvious opportunities could be targeted.
  • Bonus linked sell-in was the focus and the remaining steps to the consumer were ignored at “Foresight” level and left in the hands of some indifferent distributors.

The cures were not simple or quick but they were effective and the payback was fast and sustained. What happened?

The cures were not simple or quick but they were effective and the payback was fast and sustained. What happened?

“Foresight” now operates a centralised Customer Service department looking after customer needs in a standardised and caring manner. Phone calls are answered by someone who wants to help and the customer is not passed from pillar to post trying to find someone interested in their problem. Retailers now see CS staff face to face as they proactively take steps to understand the needs of both sides of the partnership. The Retailer office was once “sales only” and off bounds to other departments but not now and the benefit is clear and significant.

In RTM, “Foresight” carried out a comprehensive assessment of their distributor network making evaluations of all aspects of each distributor’s organisation. The strengths and weaknesses of each partner are now known and understood. “Foresight” now knows where there is receiver capacity to take more responsibility and a leading role in market deployment. Similarly, they also know to tread carefully with a number of distributors who are struggling financially or simply not equipped to meet expectations. “Foresight” efforts are now focused on those areas, providing maximum opportunity and reward. The “one size fits all” approach has gone and distributors are managed as individual and important partners.

In combination these changes have transformed the business and success has been quick to materialise.  “Foresight” enjoys a leading position in its sector while competitors scrap around trying to find growth that is there but they cannot reach.

For “Foresight” at least, they really are able to live happily ever after!

Image courtesy of David Castillo Dominici at freedigitalphotos.net

Tags: Customer service, FMCG, Dave Jordan, 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 SKU Complexity E-book: Free Download

Posted by Dave Jordan on Wed, Feb 18, 2015
FMCG COMPLEXITY S&OP EBOOK FREE resized 600

The English dictionary lists the definition of complexity as “the state or quality of being intricate or complicated: an issue of great complexity”.

Wikipedia defines complexity in great detail and starts with “In general usage, complexity tends to be used to characterize something with many parts in intricate arrangement”.

Sales & Marketing people routinely define SKU complexity as ‘those items vitally important to the future of the company, the country, the global economy and possibly the planet."

Supply Chain people define SKU complexity as “what Sales and Marketing insist on to make our lives difficult.”

The reality is somewhere in the middle of all these views.

Based on our work with over 100 global, regional and local companies we have produced an E-book which may help you understand and manage SKU complexity in your FMCG or Pharmaceutical Supply Chains.

How much complexity is really necessary?

 

Image courtesy of antpkr at freedigital photos.net

Tags: Customer service, SKU, FMCG, Dave Jordan, Humour, Supply Chain, Sales

FMCG Retailers: IKAs need to get their own Supply Chain act together

Posted by Dave Jordan on Wed, Jan 21, 2015

A sweeping generalisation I know, but generally Supply Chain Directors who serve International Key Account (IKA) customers are small in stature. This is not by way of genetics or natural selection; it is just the simple physical result of being bashed on the head by IKA clients complaining about poor service. The repetitive bashing compresses the spine resulting in decreased height and consequently, wider feet.

Of course, IKA clients are important and in many locations they can generate the vast majority of your turnover but frequently they have their heads in the clouds over the reality of service expectations. Certainly, there should be a clear contract or Service Level Agreement (SLA) which defines what is expected by both parties and the KPIs required to monitor performance. If service falls below the required level then a sensible way forward is to jointly discuss the causes and apply a fix. If a promised SKU is out of stock due to a Producer error then fair enough, apply the penalties and get the Supply Chain Director rubber hammer out.

Unfortunately, IKAs tend to be a just a little bit selective when it comes to FMCG service! The producer truck arrives outside of the allocated time slot – apply penalties and reject the shipment. Producer trucks on time, IKA delays in unloading – tough, just wait. Internal IKA promotion exceeds expectation, producer cannot replenish unexpected demand then the IKA referee gets out the whistle and awards a penalty. Producer needs to push a new promotion to increase turnover – more listing fees please.

You may say that this desire to operate at optimum efficiency and with stock always available is creditable as it provides final consumers with what they want, when they want. However, recently I experienced a classic “pot-kettle-black” situation with a big name IKA.

FMCG IKA SUPPLY CHAIN SERVICE resized 600I recently used the online ordering service one of the large UK retailers who seem to have missed the competitive approach of Aldi and Lidl. The order was to provide for a Christmas dinner for 6 guests so the order was comprehensive and long. Virtually everything that was required to eat, drink, pull and clean up was carefully ordered online and a low cost delivery slot selected for the evening before the event. As requested I had also specified alternatives should some items be out of stock or out of date.

With matchsticks keeping my eyes open as the driver was late I greeted the jolly man and he started to unload the delivery boxes (every student has at least one; how many of these do IKAs lose?). You can possibly see where I am going with this but let us look at what did not arrive:

No turkey stuffing.

No milk.

No bread.

No sparkling wine

No Christmas crackers and more importantly, no silly hats to wear at dinner.

Oh, and the posh soft cheese had been squashed to a few mm thickness.

No substitutions, no apology and no way of applying a penalty even though I would have to drive out unexpectedly the following morning to secure the important omissions. Just not good enough.

IKAs have moved themselves out of the cosy world of in-store retailing where they sit back and let consumers graze the aisles to select what is on the shelves. Now they are trying their hand at providing Supply Chain services and they are clearly not very good at it, yet. Out of stocks, missed delivery slots and damage leading to disappointed customers with apparently no responsibility and no way of recourse.

Well, there is though and that is to spend more of your money in Aldi and Lidl! Online ordering and home delivery are here to stay but get the basics right quickly or it is another nail in the coffin of large retailers and another dip for the share prices.

Image courtesy of marin at freedigitalphotos.net

Tags: Customer service, FMCG, Dave Jordan, Supply Chain, Sales