I regularly rattle on about how poor sales forecasting or dire planning or the absence of S&OP causes untold grief to FMCG, Brewing and Pharmaceutical companies. Of course, these failings and many others certainly result in lost sales, write offs, delays and ultimately a simple waste of money. When such failings are repeated and senior management fails to take remedial action then you can add end of career to the list of likely outcomes.

If, and it is a ridiculously big if, companies had near perfect planning then they may indeed increase turnover and edge up the bottom line but they will make a huge number of people redundant. I’ll let that sink in for a bit as it is quite a statement.

Like hyenas waiting for an injured wildebeest to succumb and become lunch there are a large number of parallel business disposing of blue-chip company mistakes. Disposal or Residual Stock Management companies exist to minimise the impact of poor extended supply chain performance. Failed promotions, over ambitious launch targets and warehousing issues such as lack of FIFO push your pampered brands into outlets and even countries you would prefer to avoid. If you are lucky you will recover your costs but expecting any kind of normal profit is being overly optimistic.

To cap it all, it is usually the Supply Chain team who are suddenly responsible for making the disposal. “Disposal” is selling stock for cash so why doesn’t this come under the sales department?

How about linking such losses with bonus payments. Whether you consider disposal to be sundry sales or real turnover the bonus basis calculation might be:

Monthly turnover – Full sales value of disposals = your actual achievement

All the effort that has been expended converting raw materials into branded finished product is wasted. Additionally, once you decide to move some stock out cheaply you need to divert some of your staff to do a job which is likely to have a negative impact on results. Yes, you will save on the cost of destruction or land fill but the main damage could be in the devaluation of your brands through regular appearances at discount shops, car boot and garage sales!

Back to the redundancies statement. You may argue that any jobs lost in the disposal businesses would be compensated by your own recruitment but in today’s economic climate the larger companies will simple place greater burdens on existing staff. That’s life but an opportunity exists, nevertheless.

Wouldn’t it be a lot simpler if you spent some extra time and effort sorting out your S&OP and forecasting problems?

Image courtesy of Renjith Krishnan/ FreeDigitalPhotos.net