Supply Chain Blog

New Opportunities in Route to Market (RTM): Manufacturers in Nigeria

Posted by Keith Marshall on Tue, Oct 19, 2010

Route to Market (RTM) is a term used for a series of innovative approaches to a manufacturers supply chain that encompasses all processes and activities dealing with Finished Goods (FG) .  Traditionally these processes have been identified as Secondary Supply Chain, Distribution and Trade Marketing among others and when you consider that when companies were managing this key part of their supply chain found that 30-40% of labour costs and numbers were attributable to this area of operations.

In the 90’s the view that “all non core activities were not the main business of the manufacturer and “we do not have the skills” led to manufacturers appointing Distributors as third party providers to take over this crucial part of their business.   In most countries with mature markets manufacturers have developed successful partnerships with their Distributors and would see this major change in business practice has led to competitive advantage resulting in improved customer service, reduced costs, increased sales and market share.  However in less mature markets the same positive results have not been so easily found due to poor standards of Distribution Partners and the general lack of infrastructure of these countries.

Nigeria route to market At about 150 Million people Nigeria is the most populated and due to its oil revenues potentially richest country in Africa with one in six Africans a Nigerian and over half of West Africans a Nigerian.  Nigeria has the largest consumer goods market in Africa and in Lagos one of the largest cities in Africa with plans to be the “Singapore” of Africa.

Clearly there is a massive market and opportunities for profits and growth for manufacturers in Nigeria in the present and future.  However success does not come easy in Nigeria as operating conditions are equal to some of the most difficult in the world.  Companies face an extremely daunting task trying to implement modern supply chain solutions and achieve customer service targets in a market with a low maturity level and a crumbling infrastructure that is going to take billions of Naira to improve.  Route to Market (RTM) manages the critical supply chain processes from the Factory Finished Goods to the Customer and develops a case for the selection, development and retention of local Distributors who act as partners to the Manufacturer in delivering a cost effective and customer centred RTM customer service solution.

Successful RTM customer service solutions begin with the careful selection of Distributor Partners where new selection criteria and assessment models are delivering a high level of Distributor recruitment and retention.  Integrating Distributor partners into the business are seen as a critical part of RTM and the Distributor’s development and continuous performance improvement.  IT is a key area of integration and the use of the rapidly expanding mobile phone network to enable real time sales and inventory information is making massive improvements in customer service and savings in inventory in trade and reducing stock shortages.  Integrating Distributors input to the S&OP process is improving demand planning trough to finial production planning bringing high levels of savings.

Distributor Partnership models are many and varied but all have the key objectives of making the Distributor feel a real part of the business and raising the standards of professionalism and business performance.  Funding models designed in association with banks to assist local Distributor development of warehousing, vehicles and IT is an ongoing support service that is placing Distributors on a sounder footing and enabling longer term planning and relationships to be developed to the benefit of Manufacturer and Distributor.

The blogger is a senior consultant with Enchange specialising in workable supply chain solutions for African companies.

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Tags: Route to Market, Distribution, Doing Business in Africa, Keith Marshall

Senior Management Commitment Works for Successful S&OP

Posted by Keith Marshall on Mon, Sep 20, 2010

Research and experience has shown that where companies view Sales & Operational Planning (S&OP) as a supply chain process and planning system it invariably fails to deliver the expected results and benefits. Conversely where S&OP is seen as the company planning system that all other company plans are subservient to it really does work and "does what it says on the tin" and delivers the benefits we always expected.

It is always stated in research papers, training and consultancy proposals that top management support is essential for successful S&OP. But we need to go further than that. The top management must really believe in S&OP and continually demonstrate their support by being totally involved throughout the process - not just for the first few months but continuously and were others may question the process the top management must be the champion and meet head on any issues that threaten the operation and validity of S&OP. Just lately I've heard the words "fanatical" and "obsessed" for managers describing their senior management's commitment to S&OP in companies where S&OP really works.

 

S&OP meeting

In the design of Senior Management KPIs S&OP performance should be a high rating objective not just to maintain the S&OP process but to further develop the accuracy and discipline of the process. These KPIs should then be cascaded through to each level of the organisation. The company strategy developed by senior management to meet the shareholders need must also reflect the paramount importance that the company pays to S&OP at the highest level.

Look at your MD's KPIs is S&OP there?
Look at your company's strategy statement - does it include reference to S&OP?

One area of danger to S&OP is the current trend of senior management career movement which seems now to be as little as 3 years in post especially with multi-national FMCGs. The good work of the previous senior management team cannot be left to the usual handover methods. S&OP should be part of a systematic and phased handover period between the incoming and outgoing managers. As well as the physical and process handover the belief and involvement must be through seamless continuity.

Senior management also have the responsibility to continually revitalise S&OP and update the way it works and the results it produces. This can be done by internal reviews, external benchmarking and use of consultants who have experience with many different companies across different industry sectors.

This is the second in a series of "Blogs" on the topic of S&OP by the author. Please feel free to comment and share experiences. Further "Blogs" will continue to provide more methods & approaches towards S&OP and explore what makes S&OP one of the most effective business processes.



Tags: FMCG, KPI, S&OP, Forecasting & Demand Planning, Keith Marshall

Forecasting – The Great Unknown?

Posted by Keith Marshall on Mon, May 10, 2010
The sales forecast is the main driver of the S&OP process. This is the critical input to the process and the successes of all subsequent planning actions are dependent on the accuracy of the forecast.

Working as a supply chain consultant for Enchange primarily in FMCG and Pharmaceutical companies, S&OP is probably the major area of project work. In these companies forecasting varies from a "good guess" to the use of the most sophisticated IT tools using mathematically designed algorithms and it has to be said that the accuracy gained from forecasting methods from both ends leaves much to be desired. So why can't we forecast accurately?

accurate sales forecasting

One favourite excuse is that the low level of maturity in the market provides a level of instability that does not allow the supplier to be able to forecast to a level of accuracy required. If customers don't know what they are going to sell in the month how can we be expected to forecast accurately? Other excuses stem from the dichotomy between supply chain "push" and "pull".
We were involved recently with a maker of specialist bathroom fittings that has a captive market and sells all it can make and therefore says why I should bother to forecast!

A pharmaceutical company that has an "ABC" product classification has stopped forecasting for all "A" products and used a replenishment method of managing factory finished goods inventory against set levels indicated by Green, Amber & Red values. When stocks of a product fall from the Green level to the Amber level a production order is raised and before falling into the Red level the order is being produced. However, for most companies we have to forecast and must forecast accurately to provide expected levels of customer service and manageable supply chain costs.

So how do we do this and provide an accurate input to our S&OP process? Well here goes - firstly we need to agree not to forecast all products - it's just not worth it so let's stick to the 20% of products that provide the 80% of our business (turnover & profit). Secondly let's consider all the internal and external inputs we can to the forecasting process. A recent brainstorming session with a client identified a possible 20 inputs which was up from the previous 8 inputs. For all inputs we need to verify the accuracy of information and the reliability of the person or organisation providing them. Thirdly not all inputs have the same importance we need to weight the inputs as to their significance to the volumes being forecasted. We now have a recipe to make the forecast and what we need to do now is to throw all the ingredients in to the pot (database) and see what comes out. If you get "gobbledegook" you will need to check the accuracy of your inputs and weighting. A good rule of thumb is to look at the "this month last year volumes" and the sales trends this year compared with last year.
Is forecasting a science or an art? Well it's a bit of both with what I think is a higher weighting towards science. What level of forecasting accuracy is achievable for my company? Well it's the value that provides the optimum levels of customer service you require at the supply chain costs you can manage.

Learn more about S&OP


Tags: FMCG, S&OP, Forecasting & Demand Planning, Keith Marshall

If S&OP Fails - You can bet it’s because of people

Posted by Keith Marshall on Wed, Apr 14, 2010

In 24 years as a Supply Chain consultant in the FMCG business sector I have been part of many Sales & Operational Planning (S&OP) projects - working with clients to implement them has been relatively simple process but the difficulty is working with clients to get S&OP to deliver real business results in both End Markets and Regional Clusters.

Implementing S&OP is not a difficult task; it is a straight forward supply chain planning process that gives the company the benefits of working from one plan or as they say "one set of numbers".  Here then is one of the biggest issues managers' face - they have to subordinate their individual plans to the company plan and deliver their plan in a common format and agreed time to fit in with the company S&OP planning timeframe.

"Simples" I hear you say, but no it isn't, as one manager involved with the supply chain said " I have been in my silo for a good while now and I like it here I achieve my KPIs and get my annual bonus and not really worried about other areas of the supply chain  as long as they don't affect me.  I'm doing well because I always put a bit more in my plan for a rainy day and avoid stock outs which are my customer service KPI". 

 

    As the Managing Director my view is that S&OP is a great innovation as its going to simplify and standardise the planning process into one company plan that we can all buy into and the planning process will be more accurate and timely.  But well it should be for all the meetings that are involved with S&OP and the time they take.  I found many of my managers complaining about this and I have told them as I always do, that it is up to them to prioritise their time I cannot tell them what meetings they should go to.  When the consultants who managed the project briefed us on what was required I designated my Projects Manager to lead from our side and to update me on a regular basis.  This has happened and things seem to be going well but I try not to get too involved with the nitty-gritty and just attend the final meeting each month when I am around.

As the Supply Chain Director S&OP should be the answer to all of my prayers.  The benefits to the company available from the process are fantastic but I just wish all the other managers involved felt the same way about it and didn't just regard S&OP as my responsibility. In the beginning we all agreed a planning timetable that scheduled meetings each month for a rolling 18 month period and with the initial enthusiasm attendance was 100%. With the consultants on site for the "go live" and support period things went well and S&OP seemed to be quite easily manageable but after a while certain managers began to lose interest.  I tried to get support from the MD who stated at the last senior management meeting that he is solidly behind S&OP but most times sends the Projects Manager to represent him. 

As the IT Manager I have fought tooth and nail to get the company one of the latest ERP systems available. This system provides supply chain visibility from the suppliers warehouse to our factory and each step through to the distributors and wholesalers.  With the implementation of S&OP I have designed a common set of reports and databases that ensures we are all dealing with the same data for use with S&OP.  In the initial stages I asked for the managers input but this was so varied and contradictory I designed the reports myself.  Now I find in most of the meetings managers are presenting reports in "home grown" spreadsheet formats rather than using the designed system ha! - so much for one set of numbers.

As the Factory Planner I welcomed S&OP as it would reduce the number of plan changes on a daily and weekly basis but this has not happened as the new forecasting and demand planning processes have been developed from a set of rules derived from an "algorithm" that works in theory but misses out the old hand of experience that I used to use. Therefore I feel that my teams combined 45 years of forecasting and planning experience is now wasted and the opportunity to combine the new ways of working with our experience has been lost.

This is the first in a series of artices on the topic of S&OP by the author.  Further blogs will provide a more positive approach towards S&OP and explore what makes S&OP one of the most effective supply chain business processes.  Please feel free to comment and share experiences.

Tags: S&OP, Forecasting & Demand Planning, Keith Marshall