Supply Chain Blog

Interim Management & Consultancy – What's the difference?

Posted by Michael Thompson on Thu, May 25, 2017
At Enchange, we have provided many supply chain interim managers for clients over the years. I was discussing our supply chain interim management services with a client recently and she asked whether she should be hiring interim managers or consultants.
 
We had a long chat and it turned out that interim managers were the right solution for her requirement.  The main reason in this case was that she insisted in retaining total control of the project and the key need was for expert resource to deliver a number of work stream projects.

So, for anyone else facing a similar dilemma here are seven key differences between interim management and consultancy:
  1. Notice  Interim managers are often placed at short notice.  Consultancy contracts usually take several months to agree and commence.
  2. Terms of reference  Interim management assignments nearly always commence with ‘implementation-driven’ terms of reference.  Consultancy contracts nearly always involve a process of analysis and usually include design work.  For an interim management contract, the analysis has usually been undertaken by the client.
  3. Project work  For project work, consultancy projects provide expertise not available in the company.  Interim management projects could normally be carried out by client personnel but resource is usually a constraint.
  4. Executive power  Interim managers are often called upon to demonstrate strong leadership from the outset of an assignment and can have a large degree of executive power.  Tough people decisions are sometimes made quickly.  It is unusual for a consultant to exercise executive authority.
  5. Client relationship  Typically interim managers become part of the client team quickly and identify totally with the needs of the client company.  Consultants, while always working closely with clients, often maintain an ‘arms-length’ relationship with client staff and identify totally with project deliverables.
  6. Contract duration  Interim management contracts are typically of longer duration than consultancy contracts.  However, the maximum duration for any assignment should not exceed 18-24 months.
  7. Fee rates are typically lower for interim management contracts.  At Enchange our rates for top quality interim supply chain managers certainly are lower.

 users guide to interim management

Tags: FMCG, Interim Management, Performance Improvement, Pharma, Michael Thompson, Supply Chain

Top 10 Times You Need Supply Chain Interim Management

Posted by Michael Thompson on Fri, May 12, 2017
Supply Chain Interim ManagementI have been talking to a number of supply chain executives during the last few weeks and something of a theme has emerged.
The theme is the immediate need for highly skilled supply chain resource, available at short notice, with the flexibility to switch off the resource at wil..….and at fee rates comparable to existing resource. “So nothing unreasonable there”, I thought.

What we actually discussed was supply chain interim management and how the placing of a specific skilled resource can have a dramatic postive impact on an organisation. We went on to discuss the typical roles that supply chain executives are currently demanding.  

With this and our recent experience with clients, I offer the following top 10 supply chain interim management roles:
  1. Resource gap. Bridging a gap prior to a full time appointment being made.  This was mentioned by everyone – “we need a planning manager …. now”.
  2. Backfill. To temporarily backfill a position because the incumbent manager is about to be seconded to a project or may be emabrking on maternity leave. “We have a large project that has started (ERP projects were mentioned a number of times) & we need an interim Head of Supply Chain”.
  3. Project Managing a specific project that would normally be carried out by company personnel but experienced resource is a constraint.  This is a common need and mentioned frequently.
  4. Temporary or part-time operational assignments the need for which will end, do not justify a full time employee or are designed to coach and train a new manager. 
  5. Holding the fort in a situation where company strategy is not decided and operational roles are unclear while the business must keep going forwards.
  6. Crisis. Managing a crisis when a unexpected event occurs, e.g. dismissal, death or unexpected departure.
  7. Post-acquisition or merger management prior to establishment of the full management team.
  8. Pre-sale management of a company or business unit in preparation for a sale.
  9. Urgent change management of strategy, cost, structure, organisation, process etc., when an external threat is recognised. e.g. sudden loss of market share, competitive move, unsustainable debt position, hostile take-over bid, etc.
  10. Turnaround management or ‘company doctor’ when a permanent position is inappropriate or the role may be perceived as too risky to attract a permanent candidate.
My discussions were with a relatively small number of people so I would welcome any further comments or indeed, requests for assistance.

 

Tags: FMCG, Interim Management, Performance Improvement, Pharma, Michael Thompson, Supply Chain

Santa & Opening Presents, S&OP & the Elves Respond

Posted by Michael Thompson on Mon, Dec 12, 2016

Dear Mr Santa,

I refer to the recent blog article, "Santa & Opening Presents; Why S&OP is Invaluable at Christmas".

As I mentioned in the consultation process just prior to S&OP implementation, I was prepared on behalf of our members to support the programme, provided and only provided it did not affect our rights as elves.

IncideAngryElfntally, I see that I am not alone in considering that S&OP is not really needed & refer you to Mike Thompson’s excellent series of blogs starting with “What has S&OP ever done for us”.

We were prepared to concede certain rights under the Working Time Directive but now things have gone too far. In particular I would like to draw your attention to our most serious grievances – there are more:
  1. Elves unemployed.  We cannot and will not accept that lack of work is a reason for redundancy.
  2. Season Bonus.  Pah.  When has a new green hat ever been proper recompense for 16 hour working days and such appalling shift patterns?  And let’s not forget that we only received the hats because of overstocking due to a poor sales forecast (see other S&OP blog).

Unless our legitimate grievances are dealt with immediately, you will leave us with no choice other than to consider industrial action.

In the meantime, and to demonstrate just how seriously we consider the current situation to be, we are no longer prepared to sing the Company Song.  “Yo Ho Ho” is old hat (excuse the pun). 

I look forward to your reply.

Yours sincerely,

Fred K. Ite

Shop Steward & Chief Elf

 

Tags: Christmas, Michael Thompson, S&OP, Forecasting & Demand Planning

1 Inventory Optimisation Success Story

Posted by Michael Thompson on Wed, Dec 02, 2015

Inventory optimisation with supply chain analyticsIn my last two blogs I offered three reasons why multinationals are still struggling with inventory optimisation. I also suggested two issues that needed to be addressed before this process can commence. This is the story of how one organisation managed to turn around decades of frustration trying to optimise their inventory. The organisation concerned is an FMCG multinational. Some time ago, they embarked upon a supply chain transformation programme including an overhaul of SAP & APO in over 150 markets.

Their Problem

Despite the success of the programme in many areas of the business, they were still suffering from volatile and highly variable short-term supply chain plans and an excess of finished goods inventory. This was despite many of their markets being stable and predictable. Data was ‘scattered’ across many ERP & MI systems.  The ways of working within the supply chain were traditional, with operating practices unchanged for many years.  So we have at least two of the ingredients I mentioned in my recent blog (3 reasons why multinationals are still struggling with inventory) - i.e. Complex IT Projects and Complexity. It subsequently transpired that they also suffered from the third reason - Poor Diagnosis.

Their Solution

Despite well-established global, regional and market level S&OP processes, and good KPIs across the business, there was still something of a blame culture as far as supply chain decision making was concerned. In essence they did not have the tools to clearly & unambiguously establish the facts - there was a devil but not the detail in which to find it. So working with this client, we developed an analytical toolset and suite of SKU-level dashboards, focussing on demand, planning, materials, production and execution. Company data was extracted into the toolset. Monthly reporting revealed the root causes of excess inventory - and it was not the forecast that was at fault. For the first time we were able to establish the facts. Facts that cut through emotional arguments and halted the blame game. New supply chain policies were developed and the required changes were really quite basic in nature. Crucially, Operations Management had the confidence to drive the required changes. 

The Results

Senior management had the tools to set informed policy. Regional planners had the tools, for the first time, to perform root cause analysis of supply chain issues and to model 'What If' scenarios.

Inventory was reduced by 40% in 12 of the markets that were piloted.

In this success story we had created the environment for change by cutting out the blame and establishing the facts. We had also developed a powerful supply chain analytics tool. It is a tool that Enchange continues to use.

Please do share your organisation’s inventory story.

Tags: Michael Thompson, Inventory Management & Stock Control, Supply Chain Analytics

2 issues to address before you can optimise inventory.

Posted by Michael Thompson on Wed, Nov 25, 2015

Inventory_optimisation_issues_fmcg.jpgIn my last post I dealt with the long-standing issue of inventory optimisation and some of the reasons that many organisations are still struggling with it. If it was just left to a technical challenge, optimising an organisation’s inventory, whilst never straight forward, would at least be doable to an extent.  However, we are dealing with people in organisations; often many people and each person has an opinion, an ego and a career to protect and progress. In working on supply chains for well over 20 years, I have found that many of these people issues can get in the way of sorting things out and this includes with respect to inventory optimisation. So here is my recipe for the two that must be addressed before any organisation can optimise its inventory. 

  • Cut out the blame.  Nothing quite lends itself to blaming others than the causes or perceived causes of poor inventory management - too much, too little (stock outs), never the right amount to satisfy anyone. Whether it is supply chain management ("if only we had a decent sales forecast"), sales management ("why can't the planners give us enough stock?"), purchasing management ("we should order more or we will be blamed again when the stock runs out") …. and so forth.  A decent Sales & Operational Planning (S&OP) process can cut through a lot of the blame culture but sometimes this is only a start. Something else is needed.
  • Stick to the facts.  I have found that the single most effective way to cut out blame is to stick to the facts. At its most basic every supply chain management team (or S&OP Team) needs a decent set of supply chain KPIs or metrics. These can change an emotional exchange (at a pre-S&OP meeting for example) into an objective decision making process.

Sometimes, however, we need something more. If it was just down to a decent S&OP process supported by KPIs, inventory optimisation would be much easier than it is in practice. This something else, I have found, can be a deeper and more thorough analysis, sometimes referred to as supply chain analytics.  I will deal with this in my next blog with a real example. In the meantime, please do share your organisation’s inventory story.

Image courtesy of Ambro at FreeDigitalPhotos.net

Tags: Michael Thompson, Inventory Management & Stock Control, Supply Chain Analytics, Integrated Business Planning

3 reasons why multinationals are still struggling with inventory

Posted by Michael Thompson on Wed, Nov 18, 2015
Last week I had another chat with a client about inventory.The essence of the client's problem was - "Why can't we get our stock right?  We either have too much …. or run out … and we have just spent a fortune on a new IT system …."

Sound familiar? I have had variations of the same discussion dozens of time and it boils down to this for most manufacturing-based organisations:

  • Inventory_stocklevel_supply_chain_question.jpgDo they know the ideal level of inventory that will deliver their target service levels?
  • Do they know what needs to be changed to achieve these targets?
  • Do they really understand what is actually happening with their supply chain? 
If they are honest, often the answer to at least one of these is "no". In the last 10 years or so, despite investments in sophisticated systems, there are still huge opportunities to improve supply chain performance, particularly for large global supply chains. Why is this? I believe that there are three reasons:  
  1. Poor Diagnosis.  In efforts, often motivated by internal politics and attempts to apportion blame, there is an incorrect diagnosis of poor performance.  Root cause is not always if ever addressed.  For example, the forecast is often blamed - “if only we had a decent forecast …”. In reality the issue often lies within the supply chain processes, incorrect supply chain policy, the set-up of the IT systems or how the tools are being used.
  2. Complexity.  Managing supply chain complexity, especially for multinational organisations, is a real challenge.  Many operate in 100’s of markets around the world, have a factory footprint of dozens of factories, 100’s of warehouses and serve 100’s or 1000’s of direct customers.  To protect themselves, supply chain managers in these businesses are buffering supply chains with inventory and lead-times.
  3. Complex IT Projects.  Often large IT projects (e.g. SAP/APO upgrades) automate traditional ways of working.  This can result in little improvement or sometimes things are made worse with increased noise and nervousness in the planning processes.

So what is the solution? I believe that before a ‘technical solution’ can be found (and there is always a technical solution), certain internal issues need to be addressed. I will deal with these in my next blog. 

In the meantime, please do share your organisation’s inventory story.

Image courtesy of niamwhan at FreeDigitalPhotos.net

 

 

Tags: Michael Thompson, Inventory Management & Stock Control, Supply Chain Analytics, Integrated Business Planning

Integrated Supply Chain Planning – 1 Reason Why It Is Difficult

Posted by Michael Thompson on Mon, Apr 14, 2014
In my previous two blogs on the subject, I outlined how producers (manufacturers) can achieve very significant improvements in the financial performance of their supply chains by a process of integration between the primary and secondary supply chains (Integrated Supply Chain Planning – The Number 1 Opportunity). I then described how to achieve focus when considering global supply chain integration programmes of this type by looking at different market profiles (Integrated Supply Chain Planning – 4 Opportunities and 2 Quick Wins).

This raises the following question.  If the opportunities exist (they do), and they are so significant (they are), and the process of achieving the success is well established (it is), why have more companies not simply gone ahead and implemented these changes?

The short answer is that some companies have. However, many haven’t.

There are several explanations but actually only one real reason.

To integrate the primary and secondary supply chains almost always involves the co-operation of two company departments – supply chain for primary and commercial (sales / trade marketing) for secondary.

Let’s look at the proposition from the point of view of the Supply Chain Department.  The key benefits relate to lower inventory and that’s a good thing for a Head of Supply Chain.  Integration benefits are long term and make for a more effective and responsive supply chain.

Now let’s consider Sales.  They will get fewer stock outs (higher sales - that’s good), more effective trade marketing (good again) and better deployment of product launches (also good of course).  So what’s not to like?
win_win_situation
The problem is this – the lower inventory applauded by Supply Chain, is also a one-off reduction in sales, very much loathed by Sales.  It is only a short term one-off hit to sales.  However, that matters.  If, for example, stock is reduced by 2 weeks, that is nearly a 4% reduction in annual sales.  Such a reduction is simply not palatable for most Sales Directors or CEO’s.  
So we have the competing interests of the Supply Chain and Sales Departments, long term vs short term considerations.  Moreover, for multinationals we also have the competing interests of each market (and Country Manager generally bonused on sales and profit), regional and global Heads of Supply Chain (whose bonuses will include working capital tied up in inventory), regional and global Heads of Sales (only the top line matters for them), regional Heads responsible for regional bottom lines and so forth.

To achieve integration of the primary and secondary supply chains on a global basis, just about all of the above stakeholders (and more) will have to agree.  And the only person who holds sway over everyone is often the global CEO.

So it may come down to this.  If you want to integrate your business with that of your distributor in, for example, Nigeria, you may need the approval of the Group CEO.  And that is the number 1 reason why it is difficult.   
However, for those who think about the long term and are prepared to grasp this particular nettle, the rewards are plentiful indeed.

 

Image courtesy of www.freedigitalphotos.net

Tags: FMCG, Route to Market, Pharma, Michael Thompson, Supply Chain, Sales, Distribution, Inventory Management & Stock Control, Integrated Business Planning

Integrated Supply Chain Planning – 4 Opportunities and 2 Quick Wins

Posted by Michael Thompson on Wed, Apr 09, 2014
In my previous blog on the subject (Integrated Supply Chain Planning – The Number 1 Opportunity), I outlined how producers (manufacturers) can achieve very significant improvements in the financial performance of their supply chains by a process of integration between the primary and secondary supply chains.
 
The key is data exchange between the producer and their key distributors.
 
Given that global multinationals operate in a large number of markets and generally with a large number of distributors, the question of how to achieve focus becomes very important when considering global supply chain integration programmes of this type.

The opportunities from such integration are dependent on the particular characteristics of each market.  These depend on the following:

  1. Direct vs indirect distribution
  2. Proportion of sales via Key Accounts vs Traditional Trade
  3. Distributors characteristics in each market – their number, degree of exclusivity and competency, for example.
 
Now let’s look at different market profiles.  The integration opportunities can be summarised as follows:

Integration opportunities for different market profiles      
We can see from the above that there are four integration opportunities of which two are quick wins:

  1. Where a market is serviced via direct distribution (i.e. the producer undertakes its own distribution), the long term solution is to establish internal direct data interfaces with key warehouses.
  2. Where Key Accounts predominate (e.g. hypermarket chains in Western Europe), the long term solution is to establish direct EDI interfaces with Key Account customers.
  3. With markets where there is an exclusive distributor there is scope for Quick Wins.  This can be achieved by establishing a stock replenishment process at key distributor stock locations and ensuring that distributor stock data forms a key input to the sales forecasting process of the producer.  The data exchange to enable this process could if needed be manual in the first instance (for the most important “Category A SKUs” for example). In the longer term EDI interfaces can be established.
  4. In markets where there is no exclusive distributor, Quick Wins are still possible provided there is a relatively small number of significant distributor stock locations – i.e. where there is a small number of key distributors.  Integration can be achieved via a similar process to that above in No 3.

For producers, analysing their markets in this fashion will identify where opportunities exist including for Quick Wins.

I would be interested to hear of readers experiences with this type of supply chain integration … as it is often not as easy as it seems …
… but not for the reasons you may think.

I will explore this in my next blog. 

Image courtesy of Enchange Ltd

Tags: FMCG, Route to Market, Performance Improvement, Pharma, Michael Thompson, Supply Chain, Distribution, Integrated Business Planning

Integrated Supply Chain Planning – The Number 1 Opportunity

Posted by Michael Thompson on Mon, Apr 07, 2014

Enchange has been working with many FMCG and Pharmaceuticals multinationals for years on projects to improve their primary supply chains.  
We have also been working with many of the same companies on Route to Market (RTM) projects.

For the sake of clarity, by “primary supply chain” we mean all processes (e.g. planning, sourcing, manufacturing, etc.) up to the point that finished goods are in the producers’ warehouse before the stock is sold to customers.  By “route to market”, we mean the processes by which finished goods leave the warehouse and arrive on retailers’ shelves, often via third party distributors.  Some people also refer to the latter as the secondary supply chain.

One particular client is involved in a number of global projects updating its primary supply chain including implementation of a new SAP and APO platform.

A few months ago we set ourselves a challenge at Enchange.  How, we wondered, could this client achieve a step change improvement in financial performance?  Bear in mind that they were already involved in a very large global project to do just this.

So we held a workshop.  Our conclusion?  There remained a significant gap in their supply chain improvement plans.  It was integration of the primary and secondary supply chains.  Once stock was sold to their customers, there was limited interest as far as the producer supply chain was concerned.

fmcg supply chain planningAnd therein lay the gap.  Or rather the opportunity.  If customer (e.g. distributor) data was formally integrated into the primary supply chain processes, there will be significant benefit for our client (the producer) and their distributors.
 
The key to this is data.

If there was greater and more reliable visibility of trade stock, the producer will be able to reduce its own finished goods stock.  Sales and stock data can be exchanged with the producer by EDI interfacing with distributor systems or by use of ‘virtual links’ where key data is presented by the distributor and extracted into the producer’s systems.  With this data a VMI type of relationship can be established whereby the producer replenishes distributor stock, rather than waiting for an order from the distributor.

The benefits for the producer will be finished goods inventory reductions and a reduction in month-end sales peaking.  Direct bottom line increases will also be possible following reductions in distributor discounts, the next time that contracts are negotiated.  Additionally improved trade stock visibility will drive improved product launch and trade marketing effectiveness including with promotions.

For the distributors there will also be benefits.  Stock can be also reduced and this will free up valuable cash and space.

So we presented these findings to our client.  The response was very positive.

The next question that was asked.  How can we focus our efforts with this approach?  I will deal with this in my next blog.

 

Image courtesy of Enchange Ltd.

 

Tags: FMCG, Route to Market, Pharma, Michael Thompson, Supply Chain, Forecasting & Demand Planning, Inventory Management & Stock Control, Integrated Business Planning

Supply and demand in Africa - it's a sport relief

Posted by Michael Thompson on Tue, Mar 25, 2014
If like me, you watched some of Sport Relief last Friday night, you may have been left with a number of emotions.

sport relief supply and demandFor those people outside of the UK not familiar with Sport Relief, it is a biannual event involving everyday folk, sports personalities and celebrities who take part in various events and challenges to raise money for charity. It culminates in an evening of television entertainment, the purpose of which is to raise as much money as possible for various causes in the UK and overseas including for needy children in Africa.

One of the more heroic contributors this year was Davina McCall. She swam, cycled and ran from Edinburgh to London in seven days - an ultra-triathlon. Her efforts alone have raised more than £2 million.

Iron Man finishing line Michael TompsonI can relate to Davina's adventure on a number of levels. Last year I completed the Ironman triathlon in France to raise money for the Tumshangilia School in Nairobi. My efforts pale in comparison of course.  However, I have some appreciation of the motivation, dedication, determination and ultimately immense satisfaction that she will have experienced.

So what has this got to do with supply and demand?  
Everything in a world of inequality, need and poverty, I would argue.  Here is just one example - children's education.

Hundreds of millions of children right now do not receive basic primary and secondary school education.  The demand is certainly there as anyone who has visited a school in Africa will no doubt testify. And in Africa, children love their schools.

However this demand far exceeds the supply of schools and teachers. The issue of course is money, or lack thereof.

The solution? It lies in the hands of a small number of some of the world’s powerful and influential people. Perhaps if they had some of the motivation, dedication and determination of say Davina McCall, this particular imbalance of supply and demand would be corrected. And what immense satisfaction that would bring to all concerned.

Sport Relief image courtesy of Twitter, Iron Man Finishing Line image courtesy of Michael Thompson.

Tags: Michael Thompson, Supply Chain, Forecasting & Demand Planning