Supply Chain Blog

FMCG SKU Proliferation: You DON'T need lost sales in Q4

Posted by Dave Jordan on Mon, Nov 13, 2017
Extra SKUs sneak onto price lists when nobody is looking. Sales & Marketing colleagues prefer new launches with lengthy SKU lists different flavours, different sizes, different colours, new packaging etc. How many shelf facings do they want? How do these decisions get through S&OP meetings? (You do run an S&OP process, don't you?)

Do you know this SKU proliferation is likely to affect your customer service? Rather than delighting more and more customers you maybe disappointing them and wasting countless Euros at the same time. Introducing an SKU is a cross business decision, or should be! When considering new SKU introduction at your next Board or S&OP meeting then the supply chain people should ask some testing questions.

Cost per SKU. Have you ever sat down with your Management Accountant and calculated how much it costs to have an SKU on your price list? Sales staff will bemoan the rising listing fees but in reality the cost of an SKU is much, much more. Including, e.g.

  • An employee must spend time buying the different label, dyestuff, cap, box, etc.
  • The new raw material/packaging must be stored in a warehouse.
  • Someone must call it off at the factory.
  • The factory must schedule and make the SKU.
  • The finished product is stored in a warehouse.
  • Someone at the operating company must plan the SKU.
  • Transport into and ex-factory.
  • Transport to Distributor or Retailer etc, etc

All of these activities and many, many more ensure that the cost of having an SKU on the books is significant. In a very rough rule of thumb the cost of having any 1 SKU on the books of a medium-sized company is typically 30,000 Euros per annum.

Factory complexity. Time is money in factories as they try and make their assets sweat and get as much out of the gate as fast and cheaply as possible. Each colour or perfume change or label or pack size adjustment stops the production line and steals valuable time which you cannot recover.

Logistics. Each individual SKU requires a dedicated pallet or rack or bin location. The more SKUs you have the more money you are paying for space. When you have 16 variants of the same shampoo pack size you can understand why picking errors occur, lowering your customer service and causing lost sales.

Interim_Management_FMCG_Dave_Jordan_SKU_Complexity.jpgPlanning. At year-end low value SKUs really drag your business down as resources are applied to plan and deliver SKUs to market which may increase your volume number but not your profit line. Your scarce resource should be focussed on delivering those SKUs that make a real difference to profit rather than spending time on low value/slow moving SKUs which may actually have to be written off in the long term.

SKU rationalisation. Ok, so despite the above you are drowning under SKU complexity. Far too many organisations launch a new SKU and then fail to revisit the data assumptions on which it was first introduced. Firstly, if a new SKU is not even expected to deliver at least 30,000 Euros (or whatever your in-house figure may be) profit then DON'T LAUNCH IT! For all SKUs on your price list you should carry out an SKU Rationalisation exercise preferably quarterly but at least annually. SKUs that do not meet profit/margin/volume/GP criteria should be placed on watch. If they remain below your cut off points then it is time to propose a delisting.

The ideal time to carry out that rationalisation exercise is before you submit Annual Plan 2018 and certainly before the end of 2017. Your staff will be concentrating on the day to day operation so recruitment of an external resource to carry out the segmentation is advisable. The temporary recruit will be dispassionate and unbiased and will deliver a proposal which is right for the business and not just right for some. 

Of course, there will always be special cases like SKUs that constitute a range or a niche local jewel but as long as these are the exceptions then you have a chance of a fast flowing, efficient and reliable supply chain ready for 2018. 

Need more expert advise from readily available talent to address SKU Complexity? Please click here. 

Image courtesy of Supertrooper freedigitalphotos.net

Tags: Customer service, SKU, FMCG, Interim Management, Dave Jordan, S&OP, Sales

FMCG CEO 2016 Letter to Santa Claus (aka Father Christmas)

Posted by Dave Jordan on Tue, Dec 20, 2016

FMCG/Brewing/Pharma CEO Letter to Santa ClausDear Santa,

I have been a very good FMCG CEO this year, I promise. If you want, you can check with my shareholders. They know how good I have been this year. Apart from the out of stocks of course, oh and the little mistake when we had to write stock off and waste lots of our money. But that is not so bad is it? Other CEOs were naughty last year and they still got what they wanted from you.

I had better be honest because you will know if I am not telling the truth. We also had a problem starting S&OP and so our planning, forecast accuracy and sales were not very good. They were not really big problems so I hope you can forget about them this time, please. Next year I promise to do better, I do, honest.

I forgot about the Route To Market (RTM) mess we had in the peak sales months but that really was not my fault. I also promise to do something about RTM next year and make sure it works properly so people who buy our products are not disappointed again. I know it is bad when people come to buy our products and then spend their money on something else. I will talk to our distributors and Enchange and find out what we need to do.

I know, I know, when the new ERP computer system was switched on we were not really ready for the change but we did make it better as fast as possible. I did not think we needed any outside help for the new IT but I admit I was wrong. Next time I will get it right, hopefully without having any lost sales.

The factory thing was not my fault, I think. The factory man promised me lots of product but his machines kept breaking down at the wrong times and we had to wait for the fixing men to arrive. They took ages to get the machines working again and then they broke down again and again. No, it is not a very reliable factory, yet.

Does the warehouse problem count against me as well? We could not find our products when we wanted them and then when we did find them they were old and out of date and of no use. This was very sad but it will not happen again next year, I hope.

I have just read my message again to make sure I did not spell any words wrong and I see I was not as good as I thought. Actually, after reading this I am going to the chimney to take my stocking down and put it away in the Christmas storage box. I will try again next year, Santa.

Bye bye and Happy Christmas.

CEO FMCG

Image credit: HikingArtist.com

Tags: Route to Market, Christmas, Logistics Service Provider, Dave Jordan, CEO, Humour, Performance Improvement, Traditional Trade, S&OP, Sales, Inventory Management & Stock Control

FMCG & Shakespeare? Macbeth S&OP Soliloquy

Posted by Dave Jordan on Mon, Apr 25, 2016

As we one again celebrate St George's Day and the 400th birthday of William Shakespeare (also the date he died, coincidentally) what would the great bard think about Sales & Operational Planning (S&OP) in FMCG businesses? Let us take a look......

S&OP ala Shakespeare

Is this a plan which I see before me, 
The numbers are as we planned? Come, let me see.
They are not, I see two numbers, still.
Art thou not following S&OP, incredible!
Your “gut feeling” could be right? or is this but
A plan of the sales mind, a false creation,
Proceeding from the bonus-obsessed brain?
I see this yet, inform others
As this which you cannot ignore.
Thou shall assure me S&OP gets going;
And the S&OP instrument I want used!
Mine eyes see the foolish lack o' consensus,
Or else worthless at best; I see this ill,
And on thy supply plan remove doubts of “could”,
Which was not so before. There's no such thing:
It is the demand plan which conforms
Thus to mine eyes. I must see minutes recorded
Pre-SOP must go ahead, and ERP is in use.
The gaps could be deep; discussion eliminates
Take extra offerings, and work even harder,
Align by this meeting, calm the sales wolf.
More minutes you attach, thus with stealthy pace
With colleagues at your sides, a single plan design
Move on to the Board. Ensure a firm-set plan,
Fear not our quips, the way we talk, no fear.
Some small adjustments we may talk about.
And take the present plan and deploy as,
This now suits the Board. S&OP is done, and leads
Towards defeat of those where S&OP lives not.

For fans of the man himself, here is the original William Shakespeare work.

Is this a dagger which I see before me,
The handle toward my hand? Come, let me clutch thee.
I have thee not, and yet I see thee still.
Art thou not, fatal vision, sensible
To feeling as to sight? or art thou but
A dagger of the mind, a false creation,
Proceeding from the heat-oppressed brain?
I see thee yet, in form as palpable
As this which now I draw.
Thou marshall'st me the way that I was going;
And such an instrument I was to use.
Mine eyes are made the fools o' the other senses,
Or else worth all the rest; I see thee still,
And on thy blade and dudgeon gouts of blood,
Which was not so before. There's no such thing:
It is the bloody business which informs
Thus to mine eyes. Now o'er the one halfworld
Nature seems dead, and wicked dreams abuse
The curtain'd sleep; witchcraft celebrates
Pale Hecate's offerings, and wither'd murder,
Alarum'd by his sentinel, the wolf,
Whose howl's his watch, thus with his stealthy pace.
With Tarquin's ravishing strides, towards his design
Moves like a ghost. Thou sure and firm-set earth,
Hear not my steps, which way they walk, for fear
Thy very stones prate of my whereabout,
And take the present horror from the time,
Which now suits with it. Whiles I threat, he lives:
Words to the heat of deeds too cold breath gives.

For a view of the lighter side of all things supply chain please click here.

 

Tags: FMCG, CEO, Humour, Performance Improvement, S&OP, Sales

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: Driving success through Integrated Business Planning (IBP)

Posted by Dave Jordan on Wed, Sep 30, 2015

The sun is shining high in the sky and you are driving your Volkswagen Golf Cabriolet 2.0 TDi with the top down on a six lane highway. There is a long drive ahead for you and your three friends but with this car on this road things should turn out fine. The only emissions you are bothered about are coming from the quadrophonic surround-sound speaker system.You can see far ahead down the highway into the distance in the direction of your objective. You can see all the potential hazards in good time from your comfortable leather bucket seat. Traffic is starting to build up but you are ready and move down the gears gently before the road clears and you equally gently depress the accelerator and resume cruising. You can see a bumpy stretch of road ahead and position the car so the hazard disappears directly between the front wheels of the VW causing nil discomfort for those on board.You can see the policemen ahead with a radar gun and you diligently slow down and adopt a speed 1 click below the limit. You even give the officer a jaunty wave and onwards you drive. Ahead is a hazard caused by a broken down lorry so without any desperate braking you indicate early and move into the next lane to pass the vehicle that is not going anywhere soon.Your passengers are relaxed, comfortable and enjoying the ride. You are approaching your destination and looking forward to successful evening at the beach.That is how your FMCG S&OP or Integrated Business Planning (IBP) process should look. Planning and executing your actions in good time and well into the future. Perhaps this is how your process works?The same VW, same driver and passengers, sun, road and the same destination objective. Instead of relaxing back into the leather you are gripping the steering wheel like it was about to fall off. You are leaning forward in the seat looking at the road directly in front of the bonnet/hood (delete as geographically appropriate). Every single stone or bump or holes felt by the passengers as you try to avoid driving over hazards that present themselves at the very last second before they slip under the tyres.

Seeing everything so late you are lurching the car one way and then the other making the passengers uncomfortable and probably a little concerned. Clearly, you are not incontrol of the vehical or your destiny. Looking just over the bonnet at the road surface you also miss the broken down truck in the near distance and smash into the rear at speed. You and your company are having a terrible journey and you do not achieve your objective. You missed the radar gun earlier and now have a hefty fine and penalty points on your licence.Following a rigorous IBP process allows you to plan your innovation, promotional and routine and tactical sales activities in good time ensuring everyone is on board and knows what they have to do well in advance.

If you recognise your company in the chaotic driving example then you have quite an opportunity!Image courtesy of Bill Longshore at freedigitalphotos.net

Tags: FMCG, CEO, S&OP, Sales, Integrated Business Planning

FMCG: S&OP morphing into Integrated Business Planning (IBP)?

Posted by Dave Jordan on Wed, Sep 23, 2015

I speak to many FMCG companies who tell me they do not need Sales & Operational Planning in their businesses. As a formal process they may not be operating to S&OP norms but if they are getting their products onto shelves then some form of S&OP must be in place. This may not be optimum or efficient but at the end of the day their products are in front of consumers and ready for purchase or not, depending on how successfully your sales and marketing colleagues have stimulated the market.

This leads me to a frequent problem with S&OP – the name, not the process. Reluctantly sales people do get involved in S&OP process but in my experience they have rarely bought into the idea 100%. Nevertheless, they are there at the meetings and they are sharing data and information etc.

To everyone else in a company the “operational” term usually applies solely to those continually moaning Supply Chain types and sometimes in Finance. Colleagues in all other functions including marketing frequently do not see themselves as part of this process yet it is the lack of rigour and discipline in these sales supporting roles that undermines business performance.

This is why I increasingly prefer the term Integrated Business Planning (IBP) as it covers the whole company plus there is no “and” in the process name. The latter point may seem trivial but S and OP triggers a “them and us” mentality whereas there is no debate about the IBP process. We are in this together (not in the current UK government way) including HR who play the important role of providing the right people and the right training opportunities in order to support the overall business objectives.

The use of IBP does not change the objectives of the process significantly but perhaps the benefits are more clearly defined:

IBP helps to transform planning from a boring must-have into a decisive and continually improving competitive advantage by fostering one integrated planning platform across sales, marketing, supply chain and finance and yes, even HR:

  • A clear and unambiguous understanding of business performance drivers.

  • A dynamic understanding of the financial impact and interdependencies of different planning scenarios.

  • Optimisation and balance of the monthly business plan with longer term strategic planning and identification an allocation of skilled resources.

  • Balancing planning for profitability or volume or growth as per the business need.

  • Unambiguous quantification of financial risk and opportunity of planning scenarios.

  • Continually increasing business flexibility and surety of success.

  • One company working as one team.

Of all these desirable benefits the last is the one you really need to pursue. If you get this working within the framework of an IBP you will be hard to stop in the FMCG marketplace.

Image courtesy of Sheelamohan at freedigitalphotos.net

 

Tags: FMCG, S&OP, Forecasting & Demand Planning, Sales, Integrated Business Planning

FMCG: What does S&OP bring to the party? Sales success of course!

Posted by Dave Jordan on Thu, Sep 17, 2015

During my recent travels I met with two Sales (or Business Development Directors if you’re posh) from well known FMCG companies to discuss an assessment review of their Route To Market (RTM) networks. Surprisingly, neither was interested and gave a remarkably aligned reason for the rejection. “All this does is raise Sales In and we know how to do that already”. Oh dear!

No, Nein, La, Nu, He, Nem, Không có!!! Whatever language you choose to use, this understanding of an RTM assessment review is flawed. There is no doubt Sales Directors across the globe know how to increase Sales In and frankly it is not that hard is it? You can use promotions, discounts, extended credit, BOGOF, sale or return etc, etc. Unless you are regularly working on a knife edge with out of stocks (OOS) at the Distributor, pushing Sales In does not guarantee one single extra sale, not one single piece.

Without a focus on Sales Out any stock pushed into an RTM network is likely just to sit in Distributor warehouses as there is no obvious consumer pull or demand. The Distributor is sitting on plenty of valuable stock but without a pull from the trade all this extra pushed stock is wasted. One of the key drivers for a push strategy is the alignment of Sales In targets with Sales Team bonus payments. Once the stock has moved out of Producer hands it is considered a “sale” and this is simply not true in the cold light of day. Nothing is actually sold until a consumer has handed over their hard earned cash at the till.

FMCG_RTM_SALES_UPLIFTThe beauty of an RTM Assessment is that it addresses how to achieve a Sales Out uplift and every assessment with which I have been involved has achieved such an uplift! If you get close to your Distributors and develop a lasting relationship you will be able to get more out of the market – even in this recession which seems endless.

Partnership – treat Distributors as equals as they are an integral part of your Traditional Trade business whether you like it or not. Hold regular meetings at the right levels and ensure the discussion is a real two-way process.

Planning & Logistics – do not assume Distributors know how to aggregate demand by SKU to form a demand forecast. If their forecast is more accurate then this gently ripples right back to you own factory and procurement activities.

Sales/Order Management – provide training to ensure your face to the customer is professional and competent. Ensure orders are captured promptly AND that stock is available to promise.

Finance & Back Office – is the Distributor financially sound and capital efficient? Do they recruit and retain the right calibre of people and are they rewarded fairly and sensibly?

This is just a snapshot of a what a comprehensive RTM assessment review delivers and more can be found here.

If you are struggling to make your 2015 numbers you might find that Q1 2016 presents an extremely difficult start to the year. A thorough review of your RTM Distribution network could be just what you need to make up ground in the following months.

A real uplift in FMCG sales is there for the taking!

Image courtesy of samuiblue at freedigitalphotos.net

Tags: FMCG, Route to Market, Supply Chain, 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 Route to Market – the Warehouse to Customer journey

Posted by Dave Jordan on Wed, Sep 02, 2015

Your Supply Chain has been revised, optimised, transformed or even blue sky’d – yes, honestly have been present when this was used but managed to stifle a guffaw into a cup of hot chocolate. What a smooth running well oiled machine it has become. Processes and procedures have achieved ISO standards in all areas and KPIs shine like a halo above the Supply Chain Directors swelling head.

You source competitively and you have a robust Supplier Certification process in place. Raw and packaging materials arrive on time in full and the supplier relationships are good.

Manufacturing operates like a Rolls Royce with the full raft of certification and manufacturing excellence credits. You really are producing tomorrow demand today.

Sales & Operational Planning (S&OP) is alive and kicking and has the full buy-in of all functions, even sales and marketing. The top team has a monthly love-in with the Board S&OP meeting.

A proactive 3PLP partner is in place and operates your logistics to best in class cost and standards. Stock shrinkage is minimal and even fuel and tyre consumption are routinely monitored to keen costs keen and service on track.

Your Route To market (RTM) distribution partner operates at a Customer Service Level higher than the completion with universe coverage approaching 100%. This RTM news sounds too good to be true and certainly if you are not careful it can suddenly go really bad. No, I mean really, really bad with all sorts of body parts going over each other. Let me tell you a short factual tale......

FMCG_RTM_TT_SALES_SUPPLY_CHAINThis week I joined an FMCG sales agent on his daily journey to deliver temperature controlled products to traditional trade customers. I did not know what to expect as Cecil (not his real name) chugged away from the chill of the warehouse and towards the steaming metropolis. While many tasks were completed well the overall experience was a disappointment. Here’s why.

1.The chiller unit was not working correctly so product integrity was immediately at risk

2.The van air conditioner was not working so quickly both Cecil and I looked like we had run a marathon.

3.Orders were picked in the rear of the van while the door was open for several minutes and no air curtains were present. (Picking on the move, beat that Amazon.)

4.There was space to pick in the van as space was only 20% utilised.

5.Cecil made “on the hoof” decisions on the route plan as we repeatedly passed the same landmarks including a bus stop packed with female students.....

6.The van remained unlocked while Cecil was inside the outlets making the deliveries and collecting cash.

OK, this was one spot check in a full year of RTM deployment but I am sure a majority of these observations will be present in other areas and with other sales agents. This is the sharp end where sales are made and cash collected so however impressive you Supply Chain may be it is imperative that FMCG producers regularly experience the final face to face customer experience. Far too many sales managers are sat in offices appearing to work hard while actually following the cricket/rugby/football on the internet*.

* Delete as appropriate for you.

Image courtesy of palZiyawit at freedigitalphotos.net

Tags: FMCG, Route to Market, Supply Chain, Sales, RTM Assessment Tool

FMCG: ERP’s – how will you cope when yours fails?

Posted by Dave Jordan on Wed, Jul 15, 2015

Yes I know, the recent blog posts have been a little Blog Gold meets Classic Blog with a touch of All Our Yesterdays and the History Channel but here is a fresh new offering.

The last few months have been very busy both on the business and domestic fronts. The heiress has completed her Honours Degree in Fine Art so perhaps the annual student house move is a thing of the past. Business has seen me helping to improve the logistics operations of 2 regional FMCG companies based in North Africa and the far, Far East of Europe, almost in Asia actually.

During one of my UK trips I had a bit of a melt-down on communications for a variety of reasons and I needed to send some information urgently. No PC, no smart phone and certainly no scanner forced me to ask a question that made me feel old and backward in equal measure. In the Post Office I asked if I could use their fax machine!

The lady looked at me as if I had asked her to do something horribly illegal and then asked her senior colleague if they actually had a fax machine. This reminded me of the Not The 9 o’clock News sketch where Mel Smiths’ character enters an electrical store and asks for a “gramophone”. Click here to see the late, great Mel and the future Mr. Bean in action.

The Post Office fax machine was not even plugged and was very dusty having clearly not been used for some time. Despite this, my handwritten notes were despatched along the wire accompanied by the noise only people of a certain age will recognise. The noise that sounds like a cat being squeezed through a mangle while singing Bohemian Rhapsody – go and look mangle up on Wiki if you don’t know.

ERP_Supply_Chain_FMCG_work_aroundSo, job done and quite cheaply too as I was charged the price from when the machine was last used. Four pages transmitted for 3 groats; not bad eh?

Why am I telling you this tale of technological woe? Recently a major multi-national FMCG company celebrated 10 years use of their globally harmonised ERP system. Despite the complexity and lack of real technical knowledge in the originally hired consultancy the implementation had proven successful. Management by spread sheet was a thing of the past, all transactions were diligently recorded and performance KPI’s produced on a weekly basis.

Excellent! Well, it was excellent until the ERP suddenly ground to a halt unexpectedly and just before the quarter-end. No ERP exists without glitches and downtime for necessary patches and fixes but this was complexly unplanned and at a commercially sensitive time. The usual rush to ship out the month-end peak of sales was in full flow when the ERP stopped issuing invoices. No invoice = no shipment = no sale (= no sales bonuses!).

The ERP was clearly not going to run again until well into the following month so what to do? No problem, just type out the invoices using a PC or even handwrite them. Ok, so this might take longer and there maybe some errors but at the very least invoices will be issued, goods despatched and sales value accrued.

Or not actually! Nobody knew how to issue invoices manually. All the old heads had shuffled off into retirement leaving the company without the basic but necessary experience. Slick ERP’s are wonderful but if you do not have routinely tested fall-back options you will find yourself in trouble one day. You almost certainly have dummy fire drills and dummy product recalls so why isn’t this case with your critical business system?

High quality ERP’s remove the need and ultimately the capability of people to think. ERP operators input data, produce reports and monitor rather than have to make decisions. In fact, they are not allowed to make decisions and that can expose your business when the IT fails and it will.

Image courtesy of PANPOTE at freedigitalphotos.net

Tags: FMCG, Dave Jordan, ERP/SAP, Supply Chain, Sales