Supply Chain Blog

New Product Development (NPD) needs direct linkage to S&OP

Posted by Dave Jordan on Wed, May 30, 2012

There is enough disruption and discontinuity in supply chains without the necessary evil of new product development (NPD) and product change getting in the way.

Just when everyone has become used to ordering, storing, picking, delivering or merchandising that pretty blue bottle with the picture of a carrot on the adhesive label, someone decides it is a good idea to relaunch the brand/sku or replace the carrot label with a shiny shrink-wrap label featuring a potato. The vegetables of choice are irrelevant as I just did not want to highlight any particular sector but no doubt the farmers will be up in arms.

If your business operates a classic innovation funnel then well done to you. However, if you do not run one at all or you do and it is not linked to S&OP then you run the risk of:

  1. Out of Stock (OOS) and lost sales.
  2. Poor Customer Service
  3. Overstock.
  4. Write off and destruction costs.
  5. Losing your job.

The funnel is not rocket science although the people at the Brand Gym reckon an “innovation rocket” is far more effective for growth. The funnel can be depicted in many ways but all are simple, e.g.

Integrate NPD with S&OP

At each decision gate the relevant NPD leader must feed information into the S&OP process to avoid the 5 pitfalls listed above. Existing stocks can be run down in a controlled manner and new stocks ramped up to ensure continuity and more importantly, correspond to any breaking TV or other advertising campaign. Is there a bigger waste of marketing budget than appearing on TV when the product is not yet ready for consumers to buy?

Inevitably there will be write off when you relaunch or make a product change but as long as you co-ordinate within your S&OP process these amounts can be minimal and manageable. What the CEO does not want is an unexpected cash loss from write off appearing in the results unexpectedly. Marketing might well claim a successful launch but the profitability would be shot and could actually be negative once the obsolescence costs are allocated.

Depending on your accounting convention the cost of write off will end up in “supply support” or “supply chain others” when in fact the funds should be deducted from the marketing budget. If marketing people do not manage the innovation or change process closely then they should feel some of the pain. Far too often they crack open the celebratory bubbly while causing problems in other departments and for the company in general.

Change is inevitable and supply chains have to continually manage change as it will not and should not go away. However, wouldn’t it be a refreshing change if marketing went away for a while?

Tags: Dave Jordan, CEO, Performance Improvement, S&OP, Forecasting & Demand Planning

FMCG S&OP navigation with cheese and wine.......

Posted by Dave Jordan on Mon, May 28, 2012

Thursday evening and heading out to an organic bread, cheese and wine evening. Oh yes, very sophisticated these days! After temperatures in the 30’s recently the torrential rain and the “end of the world” sky literally dampened spirits as we joined the evening Pipera commuter traffic.

Virtually all the drivers had miserable faces and most drove one handed with a mobile phone crushed against their ear. Why do people hold a mobile phone in their right hand and hold it to their left ear? Driving whilst phoning is bad enough but adding some Olympic quality contortion just compounds the danger let alone the other challenges of driving in Bucuresti.

A sat-nav was glowing brightly in the gloom and for a change we set the language to English. An English digitized female voice pronouncing Romanian street names……You should try this sometime as it gets the evening off to a great start as you hear “Piat-ar Uniri-eye” or “Strayda Pip-pera Toonar-ee”.

Anyway, we were relying on the sat-nav to guide us to the cheese & wine location and it was taking us in the general direction or so we thought.

Cheese and wine? They clearly go together as does “pie ‘n’ a pint” or “bacon ‘n’ egg”, “mici & muştar” and S&OP. There you are, I got the supply chain segue in eventually; be patient!

Prepared for S&OP meeting resized 600Sales & Supply Chain Planning or Sales & Financial Planning or Sales & Marketing Planning just do not sound correct and in reality they are not. S&OP is about how the rest of the business supports those precious salesmen out at the sharp end of the market; be that FMCG, Pharma, Brewing or whatever.

Of course, the success of S&OP heavily relies on how well sales people forecast what they believe they can sell. One side of the bargain does not work without the other. You might have the slickest operational support functions yet your sales team could not sell water in the desert. Conversely, your “A” list salesmen may be continually let down by the inability of the rest of the company to get the right product to the right place, right time and at the right cost.

I still do not tire from telling frustrated CEO’s that S&OP is not a supply chain problem. The supply chain can only work with the available demand signal information and frequently that is far from accurate and reliable. Add in a little forecast bias due to month end peaking and bonus chasing and you can quickly see why many companies get into appalling difficulties on stock levels and write offs, etc.

If only there was a sat-nav to guide business through the myriad of scenarios that continually arise. Now there’s a thought……

How did the cheese & wine event go? We got horribly lost following the comedy pronunciation of the sat-nav and ended up looking as miserable as everyone else behind a disused ceramic tile factory.

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Image credit: HikingArtist

Tags: Dave Jordan, Humour, Supply Chain, CEE, S&OP, Forecasting & Demand Planning

Sales & Operational Planning needs communication not technology

Posted by Dave Jordan on Tue, May 22, 2012

In a recent post I took a look at how technology has changed over a relatively short time and how it is used in supply chains. For example, the cutting edge fax machine of the 1970’s is now joining the VHS and cassette tape players in the sad and lengthy queue to darkness and obsolescence.

Communication improves S&OPCommunication is so easy these days, isn’t it? You can speak to colleagues by mobile phone anytime, anyplace anywhere and soon, even while they are on a plane. If you do not want to speak you can send an instant text message from your laptop or tablet or smart phone. If you are slightly old fashioned you may actually sit down and type an email into a qwerty keyboard.

Those with fast fingers can tap out text messages by sms which only those in the know can understand, eg “ur 4cst acc is SAL, lol!

All this information and speech is criss-crossing the planet in milliseconds bringing (sometimes) important information to our ears and fingertips. Huge IT files that previously required faxing or even posting can now be seen in real time in virtual meetings with attendees from all corners of the earth.

One thing that has not changed is that celebrity scandal and bad news travel far faster than anything of any use or good irrespective of the technology of the day. When your FMCG factory has achieved 98% operational efficiency you might get a few lines in the company newspaper. When the factory has a break down and supply is delayed that news will be around the Sales and Marketing office faster than the plague!

So in this technological age why is it so hard for people to communicate over something relatively simple like Sales & Operational Planning (S&OP). Colleagues in the same offices will hide behind carefully crafted bottom-protecting emails rather than address the problem directly. “I sent you an email” is fast becoming the stock half-hearted excuse for failing to pass on information in time.

Just a thought. Next time you have some information that needs to be shared quickly as it will otherwise have an impact on sales or supply why not leave the cushioned comfort of your Ikea Splatt chair and go and have a conversation face to face? No technology, no arthritic thumbs from texting, no delivered/read receipt safely stored to be used as “evidence” later.

A good old conversation; how about that for an innovation?

Yes, it might be a difficult discussion but without a doubt honesty and openness is the best policy if you really want you and the company to succeed.

Y nt try b4 its 2 l8?

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Tags: Dave Jordan, Performance Improvement, Supply Chain, S&OP, Forecasting & Demand Planning

CEE Logistics 3PLP Tendering: Elvis Presley Sings Sense

Posted by Dave Jordan on Thu, May 17, 2012

Last week we watched a show featuring an Elvis Presley impersonator/tribute artist. We saw the usual early Elvis leather jacket look followed by the gaudy Las Vegas fancy dress outfit. Vocally, he was a very good match to recordings but not sure how close he was to the real Elvis performing live as he had already “returned to sender” before I left school.

We had all the usual lip curling, posturing and hip thrusting but I could see my wife getting embarrassed so I stopped and sat down. However, the physical similarities of this Elvis were less than impressive and if this guy was similar in appearance then my next job will obviously be as Meryl Streeps’ body double. His set did not last long either so all in all Elvis was a bit of a let down for non-hard core fans.

3PLPs in CEE EbookNevertheless, he did strike a chord when “love me tender, love me true” curled out of his mouth and I realised there a number of companies that do not. Only last week I heard about a major multi-national company with a German HQ who decided not to operate a logistics tender in CEE and simply rolled over the contract with the existing provider…..for the 4th time.

There is absolutely nothing wrong with long tern relationships and you certainly need time for both parties to get aligned with each other in expectations and service levels. A short 2-year contract with a new provider is insufficient and a 5 year commitment with performance based opt out clauses is fairer.

Even if the company in question was perfectly happy with service levels and cost isn’t there a case for taking a look at the market and seeing how you may be able to become even better? How many companies are actually genuinely delighted with their logistics services? Of course changing your 3PLP or 4PLP does cause discontinuity in the business and there is never a good time to make such changes.

So much has changed in supply chain and specifically logistics capabilities that you may be missing out on cutting edge technology and skills that are actually causing your business to lose ground versus competition. The problem is that without competitive tendering in a suitable time-frame you will find yourself locked in to a certain way of working that is difficult for senior management to break.

I do not think it is a coincidence that the company in question is struggling in the market and is clearly operating way behind peers in logistics efficiency.

So have a think about your tendering policy. That comfortable relationship you have with your 3PLP may really turn out to be a devil in disguise.

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Tags: Logistics Service Provider, Dave Jordan, Performance Improvement, Supply Chain, CEE, Logistics Management

SKU Complexity E-book: Free Download

Posted by Dave Jordan on Wed, May 09, 2012

The English dictionary lists the definition of complexity as “the state or quality of being intricate or complicated: an issue of great complexity”.

Wikipedia defines complexity in great detail and starts with “In general usage, complexity tends to be used to characterize something with many parts in intricate arrangement”.

Sales and Marketing people define SKU complexity as ‘those items vitally important to the future of the company, the country and possibly the global economy”.

Supply Chain people define SKU complexity as “what Sales and Marketing insist on to make our lives difficult.”

Based on our work with many blue-chip companies we have produced an E-book which may help you understand and manage SKU complexity in your FMCG, Brewing or Pharmaceutical Supply Chains.

 SKU EBook CTA Netsize copy resized 600

Tags: SKU, Dave Jordan, Performance Improvement, KPI, Cost Reduction

FMCG Drinks RTM: Effective beer distribution needs proactive partners

Posted by Dave Jordan on Tue, May 08, 2012

Inevitable, I guess. Large parts of the UK have implemented a hose pipe ban due to lack of water in reservoirs. Almost from the minute the ban was activated the rain has not stopped and now many places are under water with houses and businesses flooded. Apparently, the ground is now too hard for the rain to soak in and the run-off is “going to the wrong places”. Sounds rather like the wrong kind of snow and leaves on the track that brought British Rail to a halt a couple of years ago.

Here where I scribe in Romania we have seen temperatures above 30 degrees at the end of April which is about 10 degrees higher than last year. Are we due for a scorching summer in CEE this year? If so, will the beer producers be on top of their game to quench the thirst of the parched population? Well, I have no doubt beer will be produced in vast foaming quantities but will the associated Route To Market (RTM) be ready to maintain supply to multiple points of sale?

International Key Accounts (IKA) will probably have their act together to ensure they are well stocked should the hot weather hang around for a few weeks. Interaction with IKA can be easier than with distributors particularly if you are sending break-bulk to IKA logistics platforms. If Distributors are proactively managed as real partners in business development then you can be successful.

Route to Market AssessmentHowever, despite the distributor channel remaining sizeable, producers often fail to grasp the full opportunity their wide and deep coverage can provide. For large parts of Eastern Europe they provide significant sales outside the big cities and this rural reach should be valued as this population will not reduce that quickly particularly while the recession has its teeth firmly clenched on economies.

Before the season kicks in and the “best beer salesman in the world” is a daily feature in the sky you will benefit from taking a close look at how you interact with distributors and what you expect them to achieve. Treat them as idiots and you will get the associated response. Treat them as partners and an integral part of your business and you can jointly reap the benefits by keeping shelves and coolers well stocked.

Beer boys tell me that brand loyalty is more important but I don’t buy that and here is why. Imagine the sun is beating down, the hose pipe-ban continues, the ground is brown, dusty and dry and you have invited your mates around to watch the European Championship football. Your favourite beer is not available in sufficient quantities at the shop so what do you do?

A. Wait until your favourite brand is delivered.

B. Don’t buy any beer and treat the boys to a nice cup of tea.

C. Buy another brand and get it back home to the ‘fridge at top speed.

A no-brainer!

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

Who is the stooge in your S&OP process?

Posted by Dave Jordan on Fri, May 04, 2012

Laurel and Hardy, Morecambe and Wise, Abbott and Costello, Little and Large, Cameron and Clegg. These are examples of double acts where one party plays the straight/stooge and apparently serious man while the other plays the fool/jester. I admit I am not too sure who is who in the last example.

Having suffered 2 weeks of UK television recently it was difficult not to see the latest popular double act of Ant and Dec popping up at frequent intervals. My jury is out on these two as they appear to be part of a TV talent vacuum presided over by a man who looks like a dark-haired Max Headroom – youngsters, Google it. I always thought Simon Cowell was that nice bloke who rescues badgers from drains in Surrey!

S&OP Success Through TeamworkAnyway, the point is that these performers work through the contrast in styles and the way each party plays off the other to score points and generate laughs. For some reason the first name in the act title is usually the funny or less serious partner who generates the gags and generally puts down the straight man partner. This notation is also consistent with Sales & Operational Planning with Operational Planning being the collective remainder of your FMCG, Brewing or Pharma business.

Why do so few Sales people – senior and junior – get S&OP? In fact do any Sales people really get S&OP and recognise the process as one for common good in a company? If only there was a way of replacing sales bonuses with cross-discipline bonuses. While the straight man of the team endeavors to supply on time in full against the forecast the joker waits until the last few days of the month to sell anything including his granny to make the required number and secure a bonus. And thus, the cycle repeats again, and again, and again.

If you pump too much unwanted stock into the market sooner or later you will need to destock your distributors and/or International Key Accounts (IKA). Distributors have always been ripe for a bit of extra loading here and there to manipulate the sales figures but don’t fool yourself this does not happen with IKA. It does and with the modern power of IKA accounts you might find yourself with a very unwelcome stock return and a difficult to refuse request for compensation.

Frequently, when things go wrong in the market place the Sales people will chirp up with something like “that’s another nice mess you’ve gotten me into” as a prelude to their Teflon blame-storming.

S&OP requires a team effort to succeed as a process which will lead to better performance in the market place. No planning or forecasting process is ever perfect but a little more diligence and team playing from the funny man would bring immediate and lasting results.

Tags: Dave Jordan, Humour, Supply Chain, CEE, S&OP, Forecasting & Demand Planning, Sales

RTM: IKEA chaos theory and why you must optimise Sales Route Planning

Posted by Dave Jordan on Tue, May 01, 2012

Ok, I know I should not have gone there. It was a Sunday and well before the live football on the TV. The weather was cold and the air was full of drizzle and as I turned off the roundabout the scale of the folly dawned on me; the IKEA car park was bursting at the seams.

There were families pouring out of cars and equal numbers trying to squash brown flat-packs of “destroy it yourself” furniture and fittings called Grunt and Splat and Twong into impossibly small cars. What do these people do when they have loaded up? Do they give Granny and Grandad a few coins to take the bus home? There is no way you can fit all the people and the flat-pack must-haves back into some of these cars.  Maybe that is why they provide rope at the IKEA loading bay; it is to tie Granny and Grandad onto the roof of the car.

Oh well, here now so might as well join the hoards of people unable to control shopping trolleys, with absolutely no sense of direction and with varying levels of short-term memory deficiency. I hooked a yellow bag over my shoulder and I too became an IKEA shopper!

I know there is a science in store layout design whether it is a supermarket or a DIY store or an M&S type outlet. The store wants everyone to see everything they have available and they want it to be just at the right time when for example, the shopper has been sub-luminally convinced that the bright pink Plobo stool would look really nice in the kitchen.

Ikea Shop Floor FlowOh, but the chaos this causes in an IKEA store. Being a Supply Chain chap I would make the whole store strictly one-way with nobody allowed to double back to soft furnishings or for a forgotten low energy light bulb. In fact, if I had my way I would make the floors with a defined downhill gradient and ensure trolley wheels were oiled hourly to help people on their way, through the broken furniture bargain section, past the cheap fast food and out into the car park. What about a small battery pack on each trolley which delivered a persuasive tingle if you tried to push the trolley against the traffic? Too extreme, possibly!

Think of all the wasted hours and wasted effort of moving all the way through the store then insisting on reversing the route and getting in the way of everybody else. Then it struck me. I realised where I had seen this before and why I perversely enjoyed dodging the trolleys in the IKEA maze. This is what many FMCG, Brewing and Pharmaceutical companies suffer in their distribution route planning every single day. Wasted miles, wasted time and in all that time there are customers not being serviced.

RTM Assessment toolIf your sales are struggling along and the stream of excuses for monthly gaps appears endless you might take a close look at how much time your sales people spend selling to and guiding distributors. If they have adopted the IKEA system then you have just spotted a huge opportunity to improve your Route To Market performance.

Go and have a closer look. Get some IKEA rope, tie yourself to the roof a salesman’s car and see where some simple thought and logic can add to your bottom line.

Image credit: A littleSprite


Tags: Route to Market, Dave Jordan, CEE, Traditional Trade, Cost Reduction, Sales, Distribution, RTM Assessment Tool