Supply Chain Blog

Supply Chains – A second look: What do all those initials really mean?

Posted by Dave Jordan on Wed, Feb 08, 2017

In common with many business functions Supply Chains adopt multiple initials and/or acronyms to describe various tasks and processes they manage on a daily basis. Those not familiar with SC-speak will often sit bemused as various initials are quoted and debated and then usually blamed for some tenuous lost sales claimed by Sales and Marketing.

Here I take a fresh look at just a small selection of those Supply Chain initials and acronyms.

SC – Super Colleagues. Well, I may be biased but that is what you usually find. Supply Chain people must react to wildly varying demands and impossible timings but more often than not they succeed to get stock to the right place at the right time.

SOP - Supports Outstanding Performance. If you do not follow an S&OP process and your business is doing well and is robust then a pat on the back is deserved. However, if your business is struggling then you might consider the benefits of S&OP which can make all the difference.

IBP – Irritating But Productive. Often considered to be a more mature version of S&OP, Integrated Business Planning can be similarly difficult to get started but when everything clicks, business benefits.

Supply_Chain_FMCG_Initials.jpgSAP - Spreadsheets Are Preferred. The use of spreadsheets is prevalent in many businesses and equally common is the number of CEO’s who believe spreadsheets are NOT being used in their workplace! They almost certainly are but what can you do about this?

IKA- Irritating, Keep Away. In mature Western European markets, big name International Key Accounts are firmly established but in many other parts of the world the reality is quite the reverse. Traditional Trade is a very important part of many developing businesses yet most fail to pay sufficient attention to the continued growth potential of the TT channel.

SKU - Sales Keep “Upping”. Introducing new SKUs really should be a cross business decision taken within the context of S&OP and with sound financial analysis. Sadly, this does not happen very often as businesses rack up lengthy SKU lists where the tail items do not even pay for themselves in turnover, margin or profit.

KPI - Keeping People Interested. The adage of “if you don’t measure then you cannot improve” is certainly true here. Take care to manage your KPI’s closely and frequently but make sure you have a set which ensures everyone knows how they impact collective team performance and results. Visibly reward against the relevant KPIs and your staff will keenly follow them.

ERP – Everyone Requires Products. The whole purpose of your Enterprise Resource Planning is to get your products to the right place at the right time and at optimum cost. Occasionally, priorities must be made between demanding customers and a good ERP will guide your decisions.

PLP -  People Loading Products. Think long and had before outsourcing your outbound logistics operations to a 3rd party as they may not be ready to take on your business, seamlessly.  Prepare thoroughly and ensure you know exactly what you want from them and the relationship. A big step that is difficult to reverse without pain so be careful!

WMS - Where’s My Stock? Your 3PLP partner should be left to run their own business as that is why you pay them. However, you need to be involved in the stock counting process or you will lose sales and experience costly year-end write offs.

4PLP - 4 People Loading Products. If you have successfully used 3PLPs for some time you might wish to take a look at what a 4PLP can offer to the business. This is certainly not for everyone but can be very cost effective.

RTM - Retail Takes Money. Whether your focus is on IKA or TT how you manage your distribution network will be a key driver of your success in the market place. It is a fact that companies spending time and effort getting their developing market TT distributor networks in good order are more successful.

FIFO – Find It, Fuss Over. When you (or your 3PLP) operate a tight warehousing operation you will know where your stock sits, how old it is and what needs to move out to avoid write off costs and the inevitable poor customer service.

OTIF - Often The Invoice Fails. If you fail to deliver orders on time and in full you invite the customer to challenge the invoice and delay payment until you have made financial adjustments.

There are many, many more examples of SC-speak but this set will do for a KO so TTFN!

Image courtesy of boulemonademoon at freedigitalphotos.net

 

Tags: SKU, FMCG, Route to Market, Dave Jordan, KPI, Traditional Trade, S&OP, Logistics Management, Distribution, Inventory Management & Stock Control

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 Traditional Trade Distribution: A letter to the Drinks Agony Aunt

Posted by Dave Jordan on Wed, Apr 15, 2015

Dear Drinks Agony Aunt,

I have reached the end of my patience. I’m drinking too much coffee, too much beer, I smoke like a chimney, I’m not eating properly and I just cannot sleep. I have not managed to watch or play any of my favourite sports and now even my kids call me Uncle Dad as I spend hour after hour at work. At times, a short step off a tall bridge without a bungee cord does not seem such a bad idea. These drinks Distributors are killing me. Literally!

FMCG Drinks Distribution Agony resized 600The world’s greatest drinks salesman is glowing bright yellow in the sky. Consumers are literally gasping for drinks yet we cannot get our products onto shelves and into coolers. We have given the Distributors some very focused incentives and we are spending thousands on quirky TV adverts with that irritating guy with the funny hair. There is no doubt our brand awareness is right up at the top level yet we just don’t sell as much as we could and should!

When the weather is this hot, consumers want a drink when they are thirsty and not when Joe Egg the Distributor can be bothered to turn up in his smoke belching van to replenish stocks. If our product is not sitting invitingly in a cooler the thirsty masses simply take an alternative product. Consumption is immediate, I have lost a sale and this drives me madder than Brian Mad of Madcastle.

Please, please help me. Tell me what I should do before I lose even more of my hair.

Yours,

Frustrated of FMCG Drinks

......and the answer.  

Dear Frustrated of FMCG Drinks,

Thank you for your letter, which was a delight to read. Believe me; you are not alone in having such feelings and concerns. There is nothing worse than seeing the world’s greatest drinks salesman shining down and not being able to meet the demand of the thirsty masses. This frustration plus the lack of return on valuable investment can leave even the calmest of souls agitated and depressed. However, do not despair. As I said you are not alone and this is not the first time I have seen this problem. You need professional help to receive the Route To Market/Distribution therapy you need.

Firstly, you must overcome 2 important barriers. The first is that you cannot assume your existing Distribution network is entirely suitable for the job in hand. Secondly, you must look at yourself in the mirror and realise that you are not perfect either. If you can do these 2 things then help is at hand.

Using this simple checklist and guiding definitions you can take a critical look at how you manage your Distributors and how they manage your business on your behalf. Some of the questions are searching and may cause you some discomfort but this is necessary in order to accurately evaluate what is going well and what can be improved.

Do not keep this to yourself. The effective management and exploitation of a robust and proactive Distributor network is a team effort requiring buy-in from all Board colleagues and peers. Keeping this problem to yourself will only increase the caffeine/beer intake and accelerate the hair loss!

I will always be pleased to help you and look forward to your feedback on a very positive experience with the checklist. Cure the problem, do not treat the symptoms!

Yours in a soothing, calming tone,

The FMCG Drinks Agony Aunt

Image courtesy of Stuart Miles at freedigitalphotos.net

Tags: Brewing & Beverages, FMCG, Route to Market, Dave Jordan, Traditional Trade, Distribution, RTM Assessment Tool

FMCG Distributors: 7 Ways to avoid inventory overstocking

Posted by Dave Jordan on Wed, Apr 08, 2015

If you still rely on Traditional Trade (TT) distribution for a significant part of your business then read on! Over-stocking Distributors happens by stealth and the consequences creep up on you until suddenly and without warning you hit a brick wall and sales figures fall off a cliff.

FMCG Traditional Trade Inventory Stocks resized 600Avoiding this career-limiting disaster requires vigilance and discipline plus top-down leadership ideally through a harmonious Sales & Operational Planning (S&OP) process.

Month, quarter and year-end push. Run your business on one set of numbers agreed at Board level and ensure NOBODY (particularly Sales!) operates an alternative private agenda. If you follow a decent S&OP process such period end pushes can be avoided. Let's face it; period-end sales pushes place huge strain on everybody in the organisation yet only the Sales people receive a bonus for these efforts...........!

Failed launches. Get real with new launch innovation volume projections. Brand Managers will always, repeat always, overstate how successful their new brand/SKU is going to be. They do not want to appear unambitious, nor do they want to run out of stock but this is what happens when self-interest decisions are taken outside of a healthy S&OP process.

Old label/formulation stock. New launches should not a surprise and with decent planning you can avoid having old label/formulation stock in the Distributor warehouse. As soon as you start pumping in an SKU with a new label the Distributor will stop selling the old one. "Well that's his problem" - no it isn't as it blocks his warehouse, his cash flow and your customer service. If you plan your launch volume ramp-up well you can avoid this by simply running a sink-market region where all stocks of the old label SKU are sold out, possibly with a discount.

Old and expired promotions. If promotions have failed and do not move then take quick action and don’t let them sit gathering dust. Dismantle co-packs and put the valuable and original SKUs back into stock and/or re-label special offer packs.

Returns from customers. Producer sales forces struggle with this and particularly when it concerns Key Accounts. You need a cast iron agreement on responsibility AND authority for customer returns. If this is contractually agreed then fine, take the stock back and redirect it in your system. If there is no definite agreement then you leave the door open to individual sales people taking unilateral and comfortable decisions to accept returns to get clients off their back. Unexpected and unmanaged returns cause havoc in logistics, warehousing and in ERP's.

Producer forecasting errors. No forecast is ever 100% perfect and nor should it be, by definition. However, if you measure your forecast accuracy BY SKU and take actions to improve accuracy then this source of overstock can be significantly reduced. Ignore calls to measure accuracy by brand or by category as the data is useless to the people supplying the products.

Damaged and expired. This is really an accumulation of items 1-6. Damaged and expired products will be present in any business. To ensure they do not appear in the ERP as good stock available for sale it is important to write off and dispose of them as soon as possible.

In order to prevent re-occurrence there needs to be a change in company behaviour coupled with a living S&OP process led by the most senior person in the organisation.

            Want to know more about getting your inventory level right in FMCG?

Contact Dave with your questions!

Image courtesy of  Stuart Miles at freedigitalphotos.net


Tags: FMCG, Dave Jordan, CEO, Supply Chain, CEE, Traditional Trade, S&OP, Sales, Inventory Management & Stock Control

FMCG Shades of Greys: Parallel & Counterfeit Trade

Posted by Dave Jordan on Wed, Feb 25, 2015

Probably sitting at number two in the most popular excuses offered when FMCG sales did not happen as planned is parallel or grey trade. Without doubt greys, “passing off” and counterfeits can have an impact on FMCG sales but I was surprised how they only became significant when sales bonus targets were not achieved. Sales not going too well? Drum up a story about greys flooding the markets.

Counterfeits are simply illegal copies of quality brand names and increasingly they are more and more sophisticated and recognition is no longer a check of the bottle mould stamp or a sniff of the fragrance. Despite co-ordinated attention from multi-national companies, well equipped underground factories still exist to rip-off brand owners and consumers.

FMCG GREYS SALES RTM resized 600Passing-off an inferior product by making it appear to be a top brand is also potentially illegal but often takes time to prove a case. When a product is called Tipton Tea in a yellow box it is clearly an attempt to steal Lipton consumers who are not vigilant. However, if the tea was from Tipton how do you persuade a judge to rule in your favour if the artwork is not identical? As ever, such litigation takes time and money and even then, success is far from certain.

Back to greys or parallel trade. This is genuine product being sold in a territory for which it was not originally intended by the producer. The quality is fine, multi-lingual packs mean the instructions for use are available and in a duty free zone like the EU, stock can legally cross borders. Oh, and they are cheaper than what is normally available in any particular market. Grey sources can often be from a bona fide distributor in another country sending stock over the border with a bulk discount at month end – a sort of shifty shades of grey but not illegal!

The real problem arises when there is nothing shifty about the origin and there is no discounting or margin misbehaviour. Someone can get the same product into your market at lower cost than you can and consumers do not care whose bonus they are affecting. Instead of moaning and groaning about greys why not take advantage of this learning opportunity as someone can do it better than you can; deal with it!

Assuming the source cost ex factory and distributor margin are consistent then you should study your arrangements for transport, warehousing and specifically Route To Market distribution. Get your Supply Chain (not sales) people onto this and fix the cost to serve problem. If distributor margins are causing the greys then that is purely a sales issue, i.e. self inflicted sales pain. Get your whip and sort this out.

If you are the CEO do not be seduced or blind-folded by the sales message that their hands are tied and there is nothing you can do about greys. There is, and failure to do anything about them could cost you your job!

Image courtesy of praisaeng at FreeDigitalPhotos.net

Tags: FMCG, Dave Jordan, CEO, Traditional Trade, Sales, Distribution, RTM Assessment Tool

Free FMCG Route to Market Improvement E-book

Posted by Dave Jordan on Wed, Feb 11, 2015

describe the imageDo you need to improve the availability of your products in the Traditional Trade?

Do you know the strengths and weaknesses of your distributor network?

Do you know what really happens after your products leave the warehouse?

Is your network managed as an extended supply chain or a sales irritation?

Practical, hands-on advice to FMCG producers on how to improve distribution operations including:

  • Choosing the right distributor.
  • Importance of communication.
  • Overstocking.
  • Unrealistic demand forecasting.
  • How your business can provide proactive support to RTM deployment.

Get our free e-book & put your FMCG distribution operations back on track now!

Buy local image courtesy of Stuart Miles at freedigitalphotos.net

Tags: FMCG, Route to Market, Dave Jordan, Supply Chain, Traditional Trade, Sales, RTM Assessment Tool

FMCG Route to Market Distribution: Free Distributor Assessment Tool

Posted by Dave Jordan on Wed, Jan 28, 2015

FMCG producers are often far too ready to blame their Distributors when sales do not go to plan and targets are not met. However, it is rarely all their fault particularly if producers are not clear on what is expected.

To help Producers understand the real state of their Distributors, Enchange has released a free - yes, free - tool to guide an assessment of Distribution networks. While focussed on FMCG the tool is applicable to all sectors using distributors.

Download the tool here.

The RTM Distributor Evaluation Tool has been designed to guide your evaluation of four key capability areas:

Partnership – is the relationship a one way street or do you actually talk to your distributors? Do you treat distributors as real partners aligned with your business objectives?

Planning & Logistics – how does the distributor Supply Chain stack up? Your Supply Chain maybe a Rolls Royce but what about theirs, can it do what you want it to do?

Sales Management – how does the distributor take orders and execute them? You would be surprised (and probably disappointed) at how some major producers are represented in front of customers.

Finance & Back-Office – how well is the distributor organised? How health are the finances? Does the distributor exploit IT or is it still a pen & paper based system?

The tool is not difficult or complicated and it will not take too long to run through the various questions and benchmarking statements. The important point is that the tool is completed as accurately and honestly as possible and certainly in collaboration with the distributors. I recommend you use someone unrelated to the distributor sales function or even a 3rd party to run the process to ensure you receive a reflection of reality.

Of course, the tool is not comprehensive but it can be used to provide a reasonable guide to how your current distributor network operates. Why not try it out; you may well be very surprised by the results!

Image courtesy of Enchange at Enchange.com

Tags: FMCG, Route to Market, Dave Jordan, Pharma, Traditional Trade, Sales, Distribution, RTM Assessment Tool

FMCG Route To Market: Traditional Trade Distributor Signals

Posted by Dave Jordan on Tue, Dec 16, 2014

We have invested in a new waste bin for the kitchen. Even with our strict regime of recycling as much waste as possible that small flip-up bin inside a cupboard just was not big enough. Yes, the lid dutifully popped up when the cupboard door was opened but usually this simply confirmed there was no more room in the bin.

Our new bin is a highly polished stainless steel tube of almost 1 metre in height and can get us through a few days before capacity is reached and a trip to the wheelie bin in the garden is necessary. It is up market too with a system that automatically opens the top of the bin whenever you approach with kitchen rubbish; that’s a bin with a proactive customer service ethic.

In other news. Senior Management and I prefer a pitch black bedroom. This is all well and good until I have to get up early and stumble across the floor and fumble for the bedroom door handle. If this is after a few pints of the foaming ale then I often switch the dog off and let the intruder alarm outside into the garden. On reaching the kitchen I switch on the lights....and the posh new bin 3 metres away as the crow flies and around a corner opens its gaping mouth waiting for rubbish.

FMCG_TT_DISTRIBUTOR_SIGNALSWhy does it do that? This is not meant to happen. The lights are standard bulbs so there is not even an invisible spike from a fluorescent tube starter motor floating around the room. Why is our posh new state of the art waste bin getting a signal to open up and prepare to swallow our daily trash? Even in my slowly improving fuzzy headed state I have no rubbish I need to deposit in the shining tube. The bin is reacting to a signal of some sort but it is producing an action that is not helpful or appropriate.

Where have I seen that before so many times? Let me think about that for about half a millisecond, yes your FMCG Traditional Trade (TT) Route To Market (RTM). You the producer and your exclusive TT distributor partners are trying to achieve the same objective of selling more of your brands. The relationship should not be competitive or one largely based on negative, backward looking penalisation which will do anything but raise your sales.

Let us briefly look at five signals that TT distributors send out and how they are (mis)understood within FMCG producers.

Information Signal

 

Typical Response

A Better Response

Sales running rate unlikely to meet monthly target.

Draft the penalty debit note.

What is the problem, what else can we do together?

Key SKUs are approaching out of stock.

Tell the distributor to improve forecast accuracy.

Oh, an opportunity. Can we get more stock to the distributor?

The promotion is not going as well as expected.

What are they doing wrong?

What are we doing wrong?

There is a new competitor product launch.

Oh, really? Too late to do anything about that now.

Let’s activate a very rapid spoiler promotion.

I have some ideas how we can grow the business.

Yeah, right!

You are closer to the market so let’s hear those ideas.

There are many, many more examples where producers either misunderstand or misinterpret the data and information emanating from TT distributor networks.

A little more care in this area will help to ensure your sales are not a complete load of rubbish.

Image courtesy of Franky242 at freedigitalphotos.net

 

Tags: FMCG, Route to Market, Dave Jordan, CEO, Supply Chain, Traditional Trade, Distribution

FMCG CEO 2014 Letter to Santa Claus (aka Father Christmas)

Posted by Dave Jordan on Thu, Dec 11, 2014

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 where 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 be 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 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 they broke down again and again. No, it is not a very reliable factory.

Does the warehouse problem count 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 to us. 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

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) Friendly Man Carrying Gifts & (RTM) Reindeer To Market

Posted by Dave Jordan on Tue, Dec 02, 2014
Client:   
Santa Claus aka Father Christmas, Kris Kringle, St Nick
Market: Most of the World
Scope:
Reindeer To Market (RTM) Distribution
Deliverable: Evaluation of RTM against sector benchmarks

Summary of Evaluation

Click here to enlargeMagnifying Glass

 RTM reindeer to market

The project delivered:

  • A detailed evaluation of the Christmas RTM deployment highlighting strengths and weaknesses.
  • A grading of each core element in terms of capability to deliver the presents in compariosn to benchmarks.
  • A framework development plan for parents and Santa Claus.
  • A clear business case for the continuation of Christmas.

Santa FMCG Christmas resized 600We would like to thank Mr. Claus for allowing us the opportunity to evaluate this important Reindeer To Market network. The network is in very good condition and we wish him every success on the 25th December.

Need help with your RTM deployment? Click here and we will give you a call.

Santa image courtesy of stock images at freedigitalphotos.net

The full assessment tool includes 10 individual elements and this can be found HERE.

Other seasonal yo ho ho posts:


Tags: FMCG, Route to Market, Christmas, Dave Jordan, Pharma, Traditional Trade, Distribution, RTM Assessment Tool