Supply Chain Blog

Supply Chain Analytics drives dramatic spare parts inventory reduction

Posted by Dave Jordan on Thu, May 31, 2018

What business would I like to run or even own? If you had a choice what would it be? A huge global FMCG player or a niche craft brewery in Bourton-on-the-Water? What about starting a pottery in your own home as per the ages old Barclays TV ad? If I had a choice I would buy the company that makes Allen Keys for IKEA.

Every single item you buy contains an Allen Key. Cupboards, shelves, beds, kitchens, chairs. I think you even get an Allen Key when you buy their 4-packs of fresh salmon! How many Allen Keys do they “sell” in a year? The number must be in the millions worldwide; surely, it’s time for a key return initiative?

SUPPLY_CHAIN_ANALYTICS_SPARE_PARTS_INVENTORYAnyway, not all the keys are the same size as IKEA also uses a huge number of different bolts, fixings, screws and nuts and taking their success into account that is quite some inventory. I know IKEA uses a lot of third party manufacturers, but this means huge spare parts inventories are scattered across the globe. I wonder how they manage? I suspect they use some form of Supply Chain Analytics and being IKEA, the package is probably called something like Levy Pupus (it’s an anagram).

While this is not IKEA, I do have an example of how Analytics unlocked working capital and made a significant difference to 1 company with a large spare parts inventory.

The Challenge

This engineering business sold components require for new-build constructions as well as ensuring spare parts availability for subsequent repairs and maintenance. Demand signal profiles were different for each stream and with large differences between individual components, inevitably this was difficult to manage. However, supporting both business streams at high service levels was a USP of the company and therefore vital for success. Perhaps inevitably, the operation was struggling to keep inventory levels under tight control.

The Solution

Analytics was used to segment the demand between the new construction and ongoing spare parts businesses. The team then used SupplyVue to further segment demand for spares into multiple similar granular boxes and analyse the flow of parts through the chain. This analysis reset the replenishment policies and parameters and the resulting inventory availability and stock levels. The analysis revealed inconsistent and poorly matched supply and inventory parameter settings across the portfolio. This provided a significant opportunity to establish a coherent and more appropriate set of policies for each spares segment.

The Impact

1. Pockets of gross excess inventory were identified, and the analysis indicated an 80% inventory reduction was achievable. This resulted in dramatically reduced working capital, lower storage charges AND better service.

2. In addition, the application of more repetitive based replenishment methods and parameters created a much more predictable and smoother demand signal for in-house manufacturing and 3rd party suppliers.

This may be a little more complicated than my desired IKEA key supply business, but it needed a powerful analytics tool to really understand what was going on in a complicated operation.  Analytics can be a once off diagnosis or you can purchase a licence and embed something like SupplyVue into your routine business management.

Why not try a free of charge Supply Chain Health Check?

Image courtesy of hadkhanong at freedigitalphotos.net

Tags: Spare Parts, Supply Chain Analytics, CEO, Inventory Management & Stock Control

FMCG Supply Chain: KPI Scorecards - Don’t look back in anger

Posted by Dave Jordan on Wed, May 30, 2018

UK has been my base for a few days and even in that short time I have started to genuinely think I must now be a different nationality if not from a different planet. When my denim jeans rip at the knees it is time to throw them out.  I do not have a badly drawn and inappropriately placed tattoo. Nothing on me is pierced or decorated with metal, precious or otherwise.

I do not have a preference for Ant or Dec – the “best” UK double act in a sea of tepid TV reality dross? What is Keith Lemon all about? So many TV channels yet so little talent and even less TV shows worth watching. I put litter in waste bins. I still know how to queue. Even my waistline is now considered trim. I own music recordings where the performers wrote the lyrics and play the instruments and don’t get me started on that things like the Kardashians. 

Nevertheless, there is something consistent. Something that has not noticeably changed since I packed my company leaving gift suitcases in 1991 and departed for the Saudi desert. Traffic Wardens.

FMCG_KPI_SCORECARD_SUPPLY_CHAIN.jpgBeing a Traffic Warden is a universally hated career choice and possibly third on the detest list after Tax Inspectors and Bankers these days with Politicians being universally disliked, of course. In the UK wardens patrol the streets looking for vehicles illegally parked even for a short time or even if the front bumper/fender overlaps the authoritative  yellow lines by a few mm.

Why do they exist; the role that is, not the people? What good are they doing for the general public and the fuel duty/road tax cash-cow motorist? Are they here to keep the Queen’s highways, byways and pavements clear of transportation obstacles to allow free flow of vehicles, people and prams? Or, are they here to generate as much revenue as possible for councils and police authorities?

Is their role to gently correct errors, show understanding and guide people on their future behaviour or are they here to discipline, penalise, visually allocate blame with a sticky yellow ticket and generally strike fear and hate into drivers? Should people hide and shy away from traffic wardens and treat them with mistrust or should they be seen as a welcome, integral part of day to day UK living.

Friend or foe? Beauty or beast? Pariah or paragon? 

So what does your Supply Chain team think about your monthly KPI Scorecard discussions within your IBP/S&OP process? Is it a meeting all about blame and backwards looking fault finding and discipline? Or is it what it should be, an open discussion about what needs to be done better by everyone in the current and coming periods?

You certainly must learn the lessons of past shortcomings but applying the learnings to the future is a far more positive and healthy experience for everyone. Supply Chain Analytics can assist you in reaching a much more mature approach to running your business effectively and without people being at each others throats.

Applying a “…don’t look back in anger” approach will lead you and the business to a much more profitable oasis within the market place.

Image courtesy of iosphere at freedigitalphotos.net

 

Tags: FMCG, Performance Improvement, KPI, S&OP, IBP, Dave Jordan, Supply Chain Analytics

An FMCG Success Story; Focus on customers and enjoy the consumer benefits

Posted by Dave Jordan on Mon, May 28, 2018

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 a slick inbound Supply Chain.

  • Top class global, regional and collaborative buying
  • Flexible manufacturing network
  • A state of the art ERP
  • Rigorous S&OP as the key business process

Slick inbound Supply ChainWith 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, top and bottom line growth was getting harder and harder. Throw in difficult economic conditions and the consumption of their product offering plummeted – double digit style. A large FMCG business and quite a few personal reputations were not looking pretty.

The problem was a surprising lack of focus at 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 actually, 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.

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:

  1. Customer Service responsibilities were fragmented and lacked clear and unambiguous leadership.
  2. “Customer Service personnel” had received no training in the subject - nobody really wanted to take responsibility.
  3. “Customer Service” was actually limited to invoice preparation. Proactive interaction with customers and problem solution were not in 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 upside down vigorously!

  1. The Distributor RTM network had been in place for several years and was decaying. “Foresight” salesman interaction with Distributors was far from an open win-win relationship.
  2. Several Distributors were simply incapable and/or ill equipped to represent such a major company. Some actually did not wish to be involved.
  3. “Foresight” did not know on whom they could rely in their network or how large and obvious opportunities could be targeted.

In-house Sales bonuses were linked to sell-in 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.

Customer Service Centre“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's” 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 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 clearly there but they cannot reach.

For “Foresight” at least, they really are able to live happily ever after!

 

Tags: Customer service, FMCG, Route to Market, Dave Jordan, Performance Improvement, Distribution, Brewing & Beverages