Supply Chain Blog

FMCG 3PLP Outsource Tendering in CEE - Top 7 Hazards

Posted by Dave Jordan on Wed, Nov 26, 2014

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

FMCG 3PLP HAZARDS OUTSOURCE resized 600Just a quick reality check, do you really need to outsource? Before embarking on a complicated tender are you really 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 do. Assuming you have taken the correct decision let us take a look at 7 things that can go wrong.

Qualification. Get an idea for which companies are likely to be interested in and capable of being your 3PLP. 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 and follow this up with a face to face meeting where you can get a better feel for competence and commitment.

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

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 Interim Manager or Consultant who is rewarded on the tender process efficiency and has no longer 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.

Time Expectations. Don't rush the process despite the pressure from above (or below) to make a change. You will be reliant on your 3PLP 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. Any changeover time should fall in a slack period so avoid your seasonal peaks and major promotional periods.

People. If you are outsourcing your existing in-house Logistics function then you are either going to make a number of staff redundant or you will be looking for the new 3PLP 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.

If you are making existing 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 3PLP 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.

Beware of Distributor partners trying to step up to the mark as a 3PLP 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 might not appreciate being their new guinea-pig!

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 3PLP have the necessary staff with relevant skills, eg narrow aisle FLT drivers. Has the WMS been robustly tested.........Even some of the big name 3PLPs make mistakes at this crucial time.

FMCG 3PLP OUTSOURCIING HAZARDS resized 600Taking care of these 7 elements will help you move through the all-important implementation phase to a relatively steady business state without surprises.

3PLPs 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 as well!

 

 

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 1 courtesy of photostock at freedigitalphotos.net

Image 2 courtesy of Ambro at free digitalphotos.net


Tags: FMCG, Logistics Service Provider, Logistica Management, Dave Jordan, Supply Chain, CEE, Logistics Management, Outsourcing

Opening a new FMCG/Pharma warehouse? Top Ten Tips to success

Posted by Dave Jordan on Wed, Nov 05, 2014

I suppose it’s inevitable with age. Everything starts to fall apart eventually and it is amazing how it creeps up on you. You remember giggling silently when someone of a certain age walked in to a room and could not remember why or what they are supposed to be doing. I do this and like millions of others I have to return from whence I came to try and remember why I purposely strode into another room.

Packing for business travel used to be automatic and everything that was required was found and packed without resorting to lists. Recently I have found myself in Africa without toothbrush and paste but that was soon remedied via a hotel vending machine. I was not so lucky on arriving in Cyprus to find I did not have any undies. You try finding them in a budget hotel vending machine!

Now let us look at warehousing. A project to design, build and open a new warehouse is usually large and complicated but at least it is an indication something is going well in the business. Assuming the facility is built on time and to specification and all legal matters are in hand, here are some important aspects you need to remember in order to bring the warehouse on stream smoothly.

Project Network

A suitably qualified and experienced person should be leading the project and one of the key tasks is to maintain a very detailed network.  The network should be widely available and routinely updated to ensure potential issues are flagged up in real time. You do not need expensive software to do this but you do need rigorous project management discipline.

Job Descriptions

Every role should have a job description including the oft forgotten pallet repairer. Unless you are about to run an innovative warehouse you will have no trouble finding good job description templates on the internet. Once adjusted to suit your particular circumstance you need to ensure suitable role segregation has been defined.

Recruitment

Do not wait until the last minute to recruit staff. Get them in as early as you can so you are able to see how they operate against job descriptions and them working in teams. Companies frequently leave this too late thus placing training and commissioning in jeopardy. If you are transferring staff from an existing warehouse to a new facility you must ensure a controlled transition. An army of people turning up for work on a Monday morning in a new warehouse will not work.

FMCG_New_Warehouse_top_tipsTraining

Untrained people are dangerous and particularly in a warehouse situation if you are using narrow aisle high reach FLT’s. All employees require formal and documented training in their particular area before they are set loose in the warehouse. Do not skimp on training for specialist roles, e.g. for high reach truck training you need certified training by the supplier directly.

 

Dry Commissioning

Before you open for business you need to systematically test all your equipment to verify that it operates to desired specifications. You do not need a warehouse full of goods to do this and you should use this exercise to iron out any glitches.

Wet Commissioning

Now you do the same but under realistic conditions moving finished goods. Generate some test inbound receipts and customer orders. Go through the motions of the actual operation without running the risk of disappointing customers or injuring employees. Attempt to operate at high capacity so your process is well tested.

Ramp-Up Planning

However well you have prepared it is highly unlikely you will be at 100% logistical efficiency immediately. Set targets which see acceptable efficiency achieved within a reasonable time frame and display the plan widely so everyone is singing from the same hymn sheet.

IT & Comms

Do the telephones work? Is the IT network in place and accessible? Do the hand-held scanners communicate correctly and from all areas of the warehouse? Has the ERP been tested and tested and tested again?

Stock Count

A key part of the preparation phase is the receipt of stocks as if these are not counted and booked accurately you will soon be in trouble. Mass stock movements present opportunities for “shrinkage” and make no mistake somewhere along the line someone will be looking to exploit this discontinuity.

Communicate

Suppliers and customers need to know what you are doing and not least as the start up may pose them problems. With the ramp-up plan in mind you should make sure your suppliers and customers know what to expect and when you are capable of meeting their usual demands. They may not have much sympathy for you but being forewarned often helps to ease relationships into the new ways of working.

You will not get everything right and something always crops up to derail even the most well prepared, planned and activated project.

What will you forget? When I look at all the warehouse start-ups I have seen there is one item which is frequently missed. Remember to buy sufficient batteries to keep your FLT’s operating 24/7!

Image courtesy of lamnee at freedigitalphotos.net

 

Tags: FMCG, Logistics Service Provider, Logistica Management, Dave Jordan, Pharma, Supply Chain, Inventory Management & Stock Control

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

Paws for thought: FMCG Inventory Shrinkage and Control

Posted by Dave Jordan on Wed, May 29, 2013

Do you find yellow dog biscuits stuffed in your window frames?

Well, I’d expect such occurrences to be as rare as a squirrel with a nut allergy but I find it all the time. The house in Romania has mosquito nets on the windows as the summers are rather hot and the little blighters bite with pure human hatred.  The nets slide up and down between 2 small, vertical brushes on either side of the window to make them impregnable to blood seeking buzzers.

Within these brushes is where I find yellow dog biscuits. Not brown or red or any other colour, only yellow canine munchies. You might presume that our half Jack Russell-half Mr. Bean dog Mr. Patch is responsible. Is he hiding them away for a sneaky midday or midnight snack? Does he know about some impending global dog chow shortage? I doubt Mr. Patch is the culprit as some of these windows are 7 metres off the ground and our dog is yet to work out how to find and climb a ladder and then put the ladder away.

FMCG Stock inventory controlSo, how do the biscuits find their way into my window frames? Not surprisingly perhaps, the biscuit thieves are birds; magpies to be exact. I guess they are storing up for a rainy day or winter or some other event. They are known to be attracted by shiny objects but I cannot see the connection with a fairly bland crunchy snack. Also, as Mr. Patch eats inside the house they cannot be my/his biscuits so the magpies are stealing them from another poor dog in the area.

The house has many windows so the amount of stolen food is quite high and as I now regularly clear out the stash the amount really starts to add up.  Some pooch somewhere is not getting his or her full share to eat. That poor dogs’ human probably thinks their poodle is really content and eating well when in fact a magpie is regularly taking the yellow biscuits away. Of course, maybe the poodle doesn’t like the yellow ones but as dogs see in black and white and seem to eat anything I doubt this is the case.

Ok, what do we have here and what is this to do with Supply Chain? This is what is happening:

1.      1. The Supply Chain is not secure as stock shrinkage is occurring on an almost daily basis and nobody appears to notice.

2.      2. Stock is in the wrong location to serve the needs of the intended customers and consumers. When you have stock in the wrong places you will inevitably develop an overstock in your Producer network.

3.      3. Consumer demand is artificially high resulting in over-stocking and unnecessary spend along the chain.

4.      4. Ultimately, the consumer is receiving poor Customer Service.

About the only aspect impressive in this is the quality of the logistics in getting the stolen biscuits from a dog bowl into my window frames. I will keep a look out for any stolen jewellry but I fear I will only have biscuits to clear away.

Image courtesy of bplanet at freedigitalphotos.net

Tags: FMCG, Logistica Management, Dave Jordan, Supply Chain, Inventory Management & Stock Control

FMCG, Brewing & Pharmaceuticals: Try sharing 3PLPs

Posted by Dave Jordan on Mon, Oct 15, 2012

The proposal by the UK and other Commonwealth governments to share diplomatic missions and facilities around the world is perhaps initially surprising but for once in the world of diplomacy, it makes great sense. When most of the activities taking place in these outposts are extremely similar then there are strong cases for cost and efficiency savings. Even if the collaboration is limited to the mainly mundane consular activates which do not reflect policy of an individual state there will be significant synergies. Processes, systems, people, utilities and purchasing are all just a few of the areas where cost would be reduced.

Each country will still have its own policies and position on specific issues and within any combined mission there can and would be differences in approach and expectation. Equally there will be occasions when nationally sensitive issues are dealt with behind closed doors for at the end of the day they are different countries with varying priorities and values.

We have previously looked at the pros and cons of sharing one or more Distributor partners and the apparent reluctance to do so. By the time your product gets into the public domain in distribution there is very little confidentiality available. Confidentiality is always limited in FMCG, Pharma and Brewing as so many people are involved along the process of a new launch, for example. With the arrival of so much instant social media you can hardly keep anything out of the public eye – just ask a certain British princess. Still, few companies take the bold step of using the same Distributors.

If we retreat backwards along the Supply Chain the arguments for sharing 3PLP partners are even greater particularly in countries where quality partners are in short supply, eg CEE. Some companies do specify non-competitive clauses in their contracts but unless there are exceptional circumstances or a previous poor experience I think that is short sighted.

If a 3PLP provider exists who has a proven record of delivery in a certain country and/or sector then why not use that experience? Of course, the decision to share a logistics partner should not be taken lightly and many sensible and simple “Chinese Wall” safeguards need to be in place to prevent fall-out and business risk. Clearly defined procedures should address quality of employees, restriction of sensitive information and perhaps most of all, physical access.

This really can work and leave your resources free to win the sales battle in other areas. A little dose of diplomacy is all that you need.

 3PLPs in CEE E-Book

 

Tags: Brewing & Beverages, Logistics Service Provider, Logistica Management, Dave Jordan, Pharma, Supply Chain, CEE, Logistics Management, Sales, Outsourcing

FMCG/Fuel Forecast Accuracy: Forget Flying Fears

Posted by Dave Jordan on Wed, Sep 12, 2012

Sales Forecast AccuracyI have just arrived back from a great holiday full of sun, sand, sea and sacks of candy-floss which inevitably inspired me to write.

I was already in my late twenties when I first flew primarily due to an irrational fear of flying. As a conscious effort to overcome this I took a new job requiring “significant overseas travel” and soon found myself on a plane to Kuala Lumpur. Hundreds of flights later I find the experience boring rather than something to worry about. After all when you are at 30,000 feet, and there is absolutely nothing you can do to keep the plane airborne so why not simply accept the salty nibbles, the plastic bottle of wine and relax.

Severe turbulence is of course unpleasant and to be avoided but the only 2 occasions I have been seriously concerned occurred while initially on the ground. Flying out of Jeddah on a crowded flight the last person to board slipped as he placed a bag in the overhead locker. Various belongings dropped to the floor including a cardboard strip of 10 craft knives! For months my eye sight was badly affected by having one eye continually on the passenger and the other on the overhead locker until we reached Cairo.

The second incident happened at the start of the recent trip after the captain said we were ready to go. As wedid  start to slowly move a tanker truck raced to the side of the plane and seeing the aircraft move away the driver stood up, waved his hands madly and seemed to be saying “I haven’t refuelled you yet”.

I can only assume the fuel logistics man was at fault as we landed safely several hours later without a hint of engine coughing or swerving to get the last reserves of fuel from the wing extremes. If our plane was not short of fuel then I do wonder which one was!

In FMCG terms it is all about having enough product in stock in warehouses and a reserve just in case. If you have too little you will lose sales/crash and if you have too much you will waste money on unnecessary storage, potential write-off and destruction. Getting your sales forecast accuracy up to a high level will allow the remainder of the business to supply what is required to the right customer at the right time, cost and quality.

Any tools you use e.g. ERP, APO etc will not do this for you. Yes, they will facilitate decision making but the basic input data has to come from the sales force and often this is poor quality or non-existent. Successful companies include those having a sales force that understands the value of the rest of the business, the challenges they face and the importance of forecast accuracy. Companies with a dismissive sales approach to forecast accuracy will always struggle even if they have the best IT in the world.

Taking all constraints and eventualities into account, in flying terms it is good to know that sales people generally do not forecast the fuel of commercial airplanes.

Tags: FMCG, Logistica Management, Dave Jordan, Performance Improvement, Forecasting & Demand Planning, Logistics Management, Sales, Inventory Management & Stock Control

Job Opening: Supply Chain Director FMCG, Brewing, Pharmaceutical

Posted by Dave Jordan on Tue, Apr 12, 2011

The majority of Supply Chain Director-level openings paint a picture of dynamic, forward thinking companies already operating at top performance and requiring you just to “keep the ball moving”. This is not always the case so I wonder how an advert would look if a degree of realism was added.

The Company

A blue chip multi-national operation with strength and growth aspirations in Developing & Emerging markets.

The Role

Direct the entire length of the Supply Chain covering Source, Plan, Make and Deliver. You will also be expected to take on the role of Security, Safety, Health & Environment and QA with no extra remuneration. (Other non SC responsibilities may be added at any time without notice.)

Candidate Profile

  • A university degree; preferably in a technical subject.
  • Experience in running a complex and fast-changing Supply Chain.
  • You will have experience raising children as you will be required to clean up the mess made by colleagues.
  • Immense patience, e.g. when explaining the importance and difference of Forecast Accuracy and Forecast Bias to Sales & Marketing colleagues.
  • Good control of pain and movement to remove frequent knives from back.
  • Experience in using a crystal ball would be an advantage.
  • A thick skin; no wait, a very thick skin.

Supply Chain Director resized 600Key Responsibilities

  • For anything that goes wrong.
  • Running the Sales & Operational Planning process even though Sales & Marketing are not really interested and in fact, neither is the boss.
  • Explaining  what all those SC initials mean – again and again!
  • Converting the Sales “forecast” in to something vaguely realistic and actionable.
  • For “lost sales” when Sales manage to sell 3000% over agreed forecast.
  • Closing the month with the required numbers despite the appalling forecast and the month-end sales peak.
  • Delayed launch and promotion introduction despite Marketing failing to adhere to one single deadline.
  • Accommodating each and every sku introduction.
  • Storing the obsolete, failed launches, old promotions, gross overstock and slow moving stock.
  • All write offs and stock losses.

Pay and Benefits

  • You will be remunerated well but lower than colleagues.
  • Your medical benefit subscription will be the most used of the entire company.
  • Career advancement is very difficult and you will be overlooked for any GM or CEO opportunities.

Next Steps

If you are interested in joining one of the worlds’s biggest companies then please check out our other Supply Chain humour here.

(Internal HR note not to be published: If nobody applies please remove the requirement for experience.)

Tags: Logistica Management, Dave Jordan, Humour, Performance Improvement, Supply Chain, Forecasting & Demand Planning