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

FMCG 3PLP partnerships: A happy marriage? Avoid divorce.

Posted by Dave Jordan on Thu, Nov 01, 2012

Marriage is quite a project, isn’t it? You take a look at what is on the market and get to know a few possibilities. You may search for a long time to find the right partner who will sweep you off your feet and eventually carry you over the threshold of your first house. That could be a long way into the future as there are the inevitable set-backs and mismatches, e.g. she likes One Direction and you like Motorhead.

As relationships develop there are investments in drinks, dinner, after-pub snacks, cinema tickets and possibly “test” holidays. This is when you see the inevitable reality of the toilet seat being continually left up or the New York skyline of cosmetics blocking out the light from the bathroom window. Get through that and the family interrogation and you might actually make a choice of partner, get engaged and plan to marry.

Here is where the money starts to flow. Payment s for the church, flowers, cars, the wedding breakfast, the evening disco plus the cost of cleaning your car after your “mates” treated it to a shaving foam respray. You are making a huge personal and financial commitment on this project so let’s hope the partnership lasts as divorce is equally expensive and causes untold disruption.

Finding a logistics 3PLP is quite a project isn’t it? You see what is in the market and how well they are doing; who has capacity, capability in your sector, eg FMCG and the best credentials. When you have a short list you operate a tender process so all candidates have an equal and fair chance to become your preferred partner.

You make a selection and celebrate with drinks and dinner with the parents; sorry I mean senior 3PLP partners and then jointly plan the transfer of responsibilities to the new 3PLP provider. The new relationship gets off to a flying start but in many cases sooner or later the “toilet seat” effect arises. The 3PLP is not performing as well as you expected and your business is suffering.

Do you

  A) Immediately stop the contract and find someone else?
  B) Find a way forward to jointly improve performance?
  C) Do it yourself?

C is certainly a possibility to consider but after you have sent so much time and effort finding the partner and then getting to know each other you really should avoid the discontinuity a 3PLP change brings.

  1. Talk to each other at the right operational and senior levels.
  2. If you do not have a Service Level Agreement (SLA) within the contract, construct one.
  3. If you have an SLA are the correct KPI parameters being measured? Are expectations clear?
  4. Agree very clear improvement targets and timelines and monitor progress frequently.

The key requirement here is to have an SLA agreed before you start collaboration. Without this vital pre-nup you may end up flushing away a huge amount of time and money.

Getting to Grips with 3PLPs in CEE

Tags: Route to Market, Logistics Service Provider, Dave Jordan, Performance Improvement, Supply Chain, CEE, Logistics Management, RTM Assessment Tool, Outsourcing

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

Get your FMCG Balkan Supply Chain ready for EU accession

Posted by Dave Jordan on Wed, Mar 21, 2012

The EU has not welcomed any new member states since Bulgaria and Romania joined the club in 2007 but there is quite a queue knocking on the door and expecting the ok over the next few years. The hopefuls include a number of Southern European Balkan countries plus Turkey and Iceland. The challenges in all aspects of life and business for these countries will be daunting even if they do not see this at present. The rose-tinted glasses tend to fall away within a few months of accession as very little changes and not very quickly either so be prepared.

Get your Balkan Supply Chain ready for EU successionJust after the clock ticks into the day of accession and the corks pop and heads start to ache these new countries are exposed to a whole new ball game of rules and regulations and expectations. While this might not appear to be the most important area for a majority of the population, Supply Chains need some work in advance of accession. If you try and keep doing what you usually do in FMCG, Brewing Pharma etc then you will rapidly come unstuck. This is not only related to rules and regulations but it is more about preparedness for the new opportunities the EU market provides.

Here are 5 important areas you need to consider now if you wish to at least maintain your performance status quo after EU accession and avoid a business dip.

1. Factories

Factories in non-EU countries have usually survived behind some measure of duty barrier or tax breaks which evaporate when Brussels gets involved. One minute your medium-sized factory is producing exclusively for the home market and the next minute someone in Euro HQ is well advanced with a revised regional souring strategy. If you are a low cost and high quality producer then you have a chance to survive but if your manufacturing metrics are weak and declining you might want to address this now before your volume is swallowed up elsewhere. The flexibility of a local factory essentially under local control could be replaced by distant external supply and the associated Customer Service challenges.

2. Transport

Do you have a transport contract with one or more professional providers? More likely you will use a variety of individual truck owners under spot buying arrangements. The quality of trucks will come into focus if you expect to export goods into the EU. Trucks have to meet EU regulations and what may be allowable in your home country will be “offside” in the EU. Talk to professional transport providers now to ensure your business does not receive an unexpected surprise. Depending on your business size you may consider a 3rd party logistics provider (3PLP) or if you are already more mature, a 4PLP.

3. Warehousing

Are you operating out of ancient facilities dotted around the country? Is stock loss/theft a major issue but too thorny to address? Whether you operate in-house or 3PLP warehousing you should reviews your network and in most cases start to improve the physical quality of the facilities and the associated processes and procedures. If major 3PLP players are already in your territory you might start discussions now as quality warehousing may be in short supply until companies decide whether or not to enter the market.

4. Systems/IT/Data

Are you using a state of the art ERP or do you rely on spreadsheets and local IT solutions that are difficult to expand? If you are part of a multinational you should be well on the way to harmonising systems to ensure you can “talk” to HQ in the same IT system and vice versa. Is your master data aligned and do you have a masterdata manager in place? One specific tip if you are moving to or changing your ERP; in the final few weeks before changeover you would be wise to add extra security at your storage locations! This is the last chance saloon for illegal “stock shrinkage”.

5. People & Organisation

And last but not least, people. Are you carrying expensive passengers and conversely are some key roles unfilled? You should review your organisation to ensure skills and experience are aligned with the business objectives in the new EU environment. For example, if you expect to ramp up exports in to EU-land then you had better make sure you have someone in that position and someone who knows the new import/export legislation like the back of their hand. To balance the head cut it is likely some current roles will melt away as local for local legislation is superseded.

Overall, you might consider appointing a Getting Ready Team to help guide the company into the new environment and provide regular status updates to senior management. What is clear is that if you do nothing then you will be in trouble so why not take advice from supply chain people who have done this before?


Tags: FMCG, Dave Jordan, Manufacturing Footprint, Supply Chain, CEE, Logistics Management, Outsourcing